Hershey is to acquire the luxury chocolatier Scharffen Berger. In line with the quality-seeking trend in the consumer space, it is increasingly important that manufacturers target the premium market. Hershey is not alone in buying a niche operator that has already established itself in this segment – the key now is to ensure Hershey avoids diluting Scharffen’s upscale positioning.
Scharffen Berger is regarded as one of the fastest-growing premium dark chocolate companies in the US. Typical of many smaller, artisanal makers of confectionery in Europe and the US, its products are known for their high cocoa content, and they are sold both online and in selected retail outlets across the US, including three dedicated Scharffen stores.
Contemporary consumers are becoming increasingly experimental and sophisticated in their tastes, which explains why Hershey, in announcing the deal, referred to the US premium chocolate segment as a “strategic opportunity”. The company has clearly recognized that mass market consumers are trading up and therefore increasingly seeking out distinctive, artisanal chocolate. The growing preference for high-cocoa dark chocolate among consumers is also a notable trend, and this would enhance Scharffen’s attractiveness to suitors.
However, with more exposure to higher quality goods, consumer expectations are rising and, in consequence, consumers are becoming harder to please. These rising expectations create problems for mid-market offerings, which can appear bland by comparison. It can therefore be difficult for brands associated with mass-market manufacturers to convey the appropriate exclusive image required to command a price premium reflective of their upscale credentials.
Therefore, in response, many industry players are justified in seeking out smaller niche players that have already successfully capitalized on the premium segment. For instance, PepsiCo recently bought UK juice and smoothie brand PJ Smoothies in order to establish a presence in the juice market. Similarly, Cadbury Schweppes recently completed the acquisition of UK organic chocolate maker Green & Black’s to strengthen its foothold in the premium confectionery market.
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Hershey will be looking to emulate these deals by leveraging a brand that has already carved a niche for itself in the premium segment. To ensure the Scharffen acquisition fulfils its potential though, Hershey would be wise keep the parent name at arm’s length, much as Cadbury Schweppes has done with Green & Black’s.
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