Chocolate Confectionery Industry Insights - Case Study Example

Task Review of Related Literature) The chocolate confectionery market of United Kingdom (UK) has shrunken in size during the past years largely due to the lobbying by health groups against confectionery consumption in general. While dark chocolate has been touted as a good source of antioxidants, what prevails now is the general consciousness of the public regarding the dire effects of too much sugar in one's diet and the accepted fact that eating big chunks of chocolate bars often leads to obesity. The UK confectionery market as a whole was estimated to be worth 4.41 billion in 2006. (Red Orbit 2009) The market study conducted by Research and Markets, an Irish research company, gives substantial data based on the results of the survey they conducted. They generated a comprehensive report on the subject. Some of the main points therein are as follows: "42% of adults stated they purchased confectionery to eat straightaway when on the move, and 57% of those working full time eat chocolate bars while at work;" (Market and Research, 2009, p.1) "49% said they often ate chocolate as a snack when relaxing at home, and 41% stated they bought confectionery to keep at home to eat later;" (Market and Research, 2009, p.1) The most common pack formats are the singles chocolate bars, followed by the standard boxes for the boxed chocolate assortments. The seasonal formats come next; they include the tinned or jar confectionery for seasonal occasions, Easter eggs, novelties and selection packs. There is also a high demand for snack size formats; (Market and Research, 2009, p.2) 44% of adults aged 18 and above buy chocolates and sweets mostly for the children in their family and not for themselves, while 77% of adults confirmed their preference of specific brands in purchasing chocolates and sweets. (Market and Research, 2009, p.3) Almost 40% of the year's sales of chocolates pertain to the first quarter of the year, thanks to the celebration of Eater season, Valentine's Day and Mother's Day. Around 8% of UK chocolate confectionery is sold during the two weeks right before the Easter weekend. From September to December, the highly saleable items are the boxed chocolates (bulk and ordinary), novelties and selection packs. (Market and Research, 2009, p.2) 81.9% of confectionery volume consumed in UK comes is produced locally; (Market and Research, 2009, p.2) UK exports confectionery (of the total volume, 54% is made up of chocolate confectionery while 46%, of sugar confectionery). Among the important categories are chocolate blocks, slabs and bars (24%), boxed and assorted chocolates (15%), and medicated confectionery (12%). (Market and Research, 2009, p.3) Confectionery companies produce chocolate confectionery and/or sugar confectionery. The top chocolate confectionery companies and their market shares are Cadbury (33.1%), Mars (27.4%) and Nestle (22.2%), while those in the sugar confectionery sub-industry are Trebor Bassett (23.6%), Wrigleys (17.3%), Nestle (12.3) and Mars (7.2%). Trebor Bassett is a subsidiary of Cadbury. (Market and Research, 2009, p.3) On the other hand, below are the top 10 Confectionery brands in UK based on the supermarket sales for the 52 weeks to 20 April 2008, as compiled exclusively for Marketing by TNS Worldpanel: Sales (in million s) % change Rank Brand 2008 2007 1 Cadbury's Dairy Milk 200-205 195-200 2 2 Wrigley 80-85 75-80 6 3 Galaxy 75-80 70-75 12 4 Maltesers 70-75 65-70 8 5 Lindt 60-65 60-65 5 6 Nestle's Quality Street 60-65 60-65 3 7 Thorntons 55-60 55-60 0 8 Cadbury's Roses 55-60 45-50 22 9 Haribo 50-55 45-50 8 10 Mars Bar 50-55 45-50 7 Source: Marketing Magazine The foregoing data generally pertain to adults - the participants in the surveys done by Research and Markets were all adults and it is assumed that those who purchased groceries from the supermarkets covered by the Marketing Magazine compilation were, as well, all adults. Meanwhile, the Office for National Statistics has the following tabulation that details the children's average weekly expenditures UK, based on gender (Office for National Statistics 2009): Source: Expenditure and Food Survey, Office for National Statistics Another group that comes up with a list of the biggest players in the confectionery industry is Candy Industry. It actually publishes yearly a list of the top 100 global confectionery companies based on sales. The table below gives the first ten in this list of 100 for the year 2005 (International Cocoa Organization 2009): Company Total Sales 2005 US$millions Mars Inc 9,546 Cadbury Schweppes PLC 8,126 Nestl SA 7,973 Ferrero SpA 5,580 Hershey Foods Corp. 4,881 Kraft Foods Inc. 2,250 Meiji Seika Kaisha Ltd. 1,693 Lindt & Sprngli 1,673 Barry Callebaut AG 1,427 Ezaki Glico Co 1,239 Reference: Candy Industry, January 2006 Profit opportunities were illustrated by the following table, based on the projected volumes of the different product segments (Global Business Insights 2009): Chocolate straightlines are small, uniform bits that are often enjoyed as snacks, especially by people on the move, like a bag of Cadbury's Chocolate Buttons. "Chocolate countlines are chocolate-covered bars designed to be eaten in one go," like Mars Snickers bars. Meanwhile, chocolate moulded bars are "your normal bar of chocolate." (LinkedIn Corporation 2009) Task 2: Results The survey conducted to gather primary data for this paper was participated in by 186 females and 150 males who made up 55% and 45%, respectively, of the group. These 336 respondents were among those who were randomly selected to provide unbiased answers for formulated questions regarding the subject industry segment of this paper, the chocolate market. Based on the results of the survey, no particular age bracket stands out as majority in the group. Except for the 10-19 and 60-69 age brackets which formed only 12.80% and 7.12% of the sample group, all the other brackets were almost equal in terms of representation therein. The people aged 20-29, 30-39, 40-49 and 50-59 composed 21%, 21%, 18% and 19%, respectively, of the group. On the other hand, 60% of the respondents were living with their families while 24% of them were singles and had no families yet. The rest of the respondents belonged to the so-called "third group" whose ages span from 45 to 75 and the retirees' group. These two together made up only 16% of the entire sample group. Age Profile Household Profile Age Pre-/no Family Third age Retired Brackets Total % family 0-9 0 0.00% 0 0 0 0 10-19 43 12.80% 43 0 0 0 20-29 72 21.43% 36 36 0 0 30-39 72 21.43% 0 72 0 0 40-49 61 18.15% 0 49 12 0 50-59 64 19.05% 0 43 21 0 60-69 24 7.14% 0 3 3 18 Total 336 100.00% 79 203 36 18 Percentages 24% 60% 11% 5% Meanwhile, the socio-economic classes of the respondents were also taken into account to possibly make out any relationship between them and the respondents' choices of brands, packaging, and other variables. The following tabulation shows the prevailing socio-economic classes in the sample group: Socio-Economic Class of Respondents Female Male Total No. % No. % No. % AB 18 9.68 11 7.33 29 8.63 C1 43 23.12 42 28.00 85 25.30 C2 53 28.49 40 26.67 93 27.68 D 63 33.87 44 29.33 107 31.85 E 9 4.84 13 8.67 22 6.55 Total 186 100.00 150 100.00 336 100.00 The bulk of the respondents belonged to classes C1, C2 and D. These three composed 85% of the group; the classes AB and E represented only 9% and 6%, respectively, of the same group. The survey conducted with the participation of these 336 respondents included an attempt to identify the specific brands that stand as the common favourites of the market. The majority of the respondents, though, turned out to have no definite choices among the available brands. To validate the results of the survey conducted for this study, a comparison has been done between its results and those of similar surveys that were undertaken and documented by other research groups. While 77% of the participants in the survey of Market and Research have voiced their preference for particular brands, the survey for this study reports that only 63.39% of the respondents could remember the brands of the chocolates they last purchased and 36.61% of them did not know or was not even aware of the brands they bought. If the brands of the respondents' last purchases can safely be assumed to be their favourite brands, then a summary of them can be comparable to surveys that ranked the same chocolate companies in terms of sales volume, as follows: Chocolate Brands/ Ranking Companies Survey 1 Survey 2 Survey 3 Survey 4 Cadbury 1 1 1 2 Master Foods 2 Nestle 3 3 6 3 Ferrero 4 4 Thorntons 5 7 Lindt & Spungli 6 5 8 Kraft Suchard 7 6 Legend: Survey I - for this study II - by Market & Research (named only top 3) III - by TNS Worldpanel for Marketing Magazine IV - by Candy Industry Note: Market & Research only named the top 3 chocolate companies, while both TNS Worldpanel and Candy Industry named the top companies for the entire confectionary industry (includes both chocolate and sugar sub-industries). Among the seven chocolate brands or companies named by the respondents in the survey for this study, Cadbury was the consistent top choice identified in the other surveys. Other common favourites turned out to be Nestle, Lindt & Spungli, Ferrero, Thorntons and Kraft Suchard. Just as the brands of the respondents' last purchases were assumed to be their favourite brands, the kind or packaging of the same respondents' last purchases are herein similarly assumed to be their most preferred kind of chocolates. A tabulation of them is, then, comparable to cited quotes that name the most saleable kind or packaging of chocolate products in the UK market, as follows: Chocolate Products/ Ranking Packaging Survey 1 Survey 2 Projection Individual bar, countlines & moulded bars 1 1 1 Bag/roll-wraps/tube or straightlines 2 5 4 King-sized bar 3 Other assorted 4 3 Boxed tray assorted 5 2 2 Larger block 6 Seasonal (e.g. Easter egg) 7 4 3 Legend: Survey I - for this study II - by Market & Research (named only top 5) Projection - by Global Business Insights The tabulation shows that the surveys conducted for this study and that of the Market & Research both named chocolate bars - individual bar, countlines & moulded bars - as the most saleable of all chocolate products or packaging. The chocolate market value projection by the Global Business Insights group further concurred with this statement. While recent printed industry news have talked about the decreasing revenues of chocolate manufacturers due to the current health trends that decry the ill effects of too much consumption of sugar on people's health conditions, the survey conducted for this study arrived at results that are not consistent with the industry news. Scripts Yes No Total I do not eat chocolate. 54 282 336 16% 84% 100% I try to eat healthy. 35 301 336 10% 90% 100% As shown above, the percentages of respondents that represented the health-conscious sect of the market were computed at only 16% (those who do not eat chocolates) and 10% (those who try to eat healthy. These percentages both give wide berths still to the chocolate manufacturers, wholesalers and retailers. Thus, such moves of confectionery firms as reducing portion sizes of chocolate bars, giving more comprehensive and clearer information on the ingredients used right on the labels of their products, and offering healthier alternatives such as similar-tasting chocolate products with reduced sugar contents and calories are all hoped to win back the lost portion of the market. List of References Office for National Statistics (2009) Children's Spending [online] available from < http://www.statistics.gov.uk/cci/nugget.aspid=1103> [accessed 20 January 2009] Office for National Statistics (2009) Consumer Trends Quarter 3 2008 [online] available from [accessed 20 January 2009] Global Business Insights (2009) Chocolate Confectionary Industry Insights [online] available from [accessed 20 January 2009] Simms, J. (2008) 'Biggest Brands: Top 10 Brands by Product Category 2008.' Marketing Magazine [online] available from [accessed 20 January 2009] Research and Markets (2009) Confectionery Market Assessment Brochure [online] available from [accessed 23 January 2009] Red Orbit (2009) The UK Confectionery Market Has Seen a Slowing Rate of Growth This Year [online] available from [accessed 23 January 2009] International Cocoa Organization (2009) The Chocolate Industry [online] available from < http://www.icco.org/about/chocolate.aspx> [accessed 23 January 2009] LinkedIn Corporation (2009) What's the difference between chocolate countlines, chocolate straightlines and molded bars [online] available from [accessed January 25 2009) Read More