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MP15157

MAPS CONFECTIONARY AUGUST 1997

Overview

Table of Contents

Executive Summary

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EXECUTIVE SUMMARY

The economy is an important factor affecting the confectionery market. Although confectionery represents an affordable treat for many consumers, and consequently continues to perform relatively well during periods of financial restraint, the sustained recovery in the economy has enabled consumers to trade up to better quality products.

Children are very important consumers of confectionery and, although their pocket money and other income has generally risen during the 1990s, there was a fall of 3 percent in pocket money and a decline of 7 percent in total income for children in 1996, affecting their purchasing power in the market. Growth in the number of children is boosting the market and this is expected to continue, while forecast growth in the number of older consumers could help revive sectors which have been in slow decline, such as toffee and fudge. The trend towards snacking between meals and eating on the move, rather than more formal meals, is boosting sales of countlines in the chocolate sector, particularly chocolate biscuit countlines, which are well suited for inclusion as treat items in lunch boxes.

Increasing awareness of the importance of a healthy diet has led to the development of a health segment of the market, focusing on the low-fat content in the chocolate sector and a reduction in sugar levels for sugar confectionery. Low-fat chocolate in particular is still in the early stages of development technically and represents a very small share of sales, but in certain areas, notably chewing gum, sugar-free sweets are gaining popularity, helped by concern over the effects of sugar on children’s teeth.

Despite its maturity, the market continued to grow, although there was a slight fall in sales in1995. Total sales in volume terms are estimated at 880,000 tonnes in 1997, an improvement of 7 percent on 1991. Sales value is estimated at £5,115 million in 1997, representing a rise of 26 percent since 1991. The recovery from recession has been more beneficial to the chocolate sector, which has shown sustained growth, while the performance of sugar confectionery has been inconsistent, with practically no overall growth during the period under review. This has enabled the chocolate sector to increase its share of the total market from 64.8 percent by volume in 1991 to 67 percent in 1997.

Chocolate is generally more expensive than sugar confectionery, resulting in a larger share by value for the former. Within the sugar confectionery sector, however, there has been greater evidence of trading up by consumers, with the result that chocolate has improved its share of market value only marginally, from 70.7 percent in 1991 to 71.1 percent in 1997.

The total market is dominated by three multi-national companies, Cadbury Schweppes, Nestlé Rowntree and Mars, who between them account for 67 percent of sales value. The chocolate sector has proved buoyant with volume growth in each year of the period under review. Overall sales are expected to have increased by 11 percent since 1991 to reach 590,000 tonnes in 1997. The economic recovery has enabled consumers to indulge in some trading up with the result that market value has improved by 27 percent over the same period to £3,635 million. Chocolate biscuit countlines, boosted by the trend towards snacking, have shown the greatest growth, improving volume sales by 45 percent since 1991, increasing their share of the sector to 24.6 percent in 1997. Nevertheless, traditional chocolate countlines continue to form the largest segment by volume with 31.2 percent in the same year.

In value terms, boxed chocolates with 18.8 percent and moulded bars with 15.8 percent are more important. The popularity of chocolate biscuit countlines has led to an increase in sales of better value for money multi-packs, which has helped confine the segment’s share of value sales to 15.5 percent. Both forms of countline have improved their share of market value, with traditional countlines continuing to account for the largest share at 28.9 percent. Low-calorie chocolate is now being targeted at health conscious consumers, but with reports of poor taste delivery has not yet made much impression on the market, with sales accounting for just 1 percent of the sector total. Mars is a major force in the chocolate countline segment, with the Mars Bar and Snickers as the two leading brands overall, and Bounty and Milky Way also featuring prominently.

Grocery outlets are increasing their dominance of the chocolate market, accounting for some 52 percent of sales by value, with multiple grocers taking 36 percent. Nevertheless, impulse sales remain an important factor and other outlets, such as CTNs and petrol station forecourts, have substantial shares.

The effect of the National Lottery on impulse purchases of confectionery from CTNs and petrol station forecourts has been mixed. There have been reports of increased business overall (with accompanying growth in sales of impulse items such as confectionery in outlets selling lottery tickets, and a decline for those not selling them). There have been reports indicating a fall in sales through outlets selling lottery tickets, due to queues of people for the lottery putting off those who have popped in to make a quick purchase of other items.

Almost £82 million was spent on advertising chocolate in the main media in 1996. Of this 32 percent was spent on chocolate countlines, 18 percent each on chocolate biscuit countlines and boxed chocolates, with 17 percent on moulded bars. Mars was the leading spender with 36 percent of the total, followed by Nestlé Rowntree with 23 percent and Cadbury with 18 percent.

The consumer research found that 66 percent of adults purchased chocolate countlines, with a bias towards the young and those living in the north of Britain. Chocolate biscuit countlines had been bought by 71 percent, with a somewhat older, more downmarket profile, and the highest penetration levels found in the South West.

Imports grew by 11 percent in volume between 1993 and 1996, while exports increased by 15 percent, thus improving the substantial foreign trade surplus in this area. Imports represented some 14 percent of the total domestic market in 1996.

The improving economy is expected to help the market achieve a steady expansion, with a trading up to better quality products. The total market is forecast to grow by 7 percent to the 2001, with countlines continuing to be the major form, helped by the trend towards snacking. In volume terms the sugar confectionery sector has fluctuated, suffering badly in the hot summer of 1995. In 1997 the total volume was expected to be 290,000 tonnes, only marginally higher than in 1991. Manufacturers have successfully introduced added-value products, helping improve market value to £1,480 million in 1997, some 25 percent higher than in 1991, and representing growth of 6 percent in real terms.

Impulse sales are more of a factor for sugar confectionery, which has helped restrict grocery outlets’ share of sales to 38 percent. The importance of children buying sweets for themselves has helped CTNs take a 29 percent share.

There has been a general move towards better quality products, with more real fruit, stronger flavours, added vitamins and a reduction in sugar levels. The latter is a major trend, given the importance of children to the market, and the rising concern about the effects of sugar on children’s teeth. Between 1993 and 1996 there was a fall of 5 percent in the volume of sugar confectionery imports, while exports grew by 21 percent, greatly increasing the trade surplus. Imports represented 16 percent of domestic consumption. In general growth areas in the domestic market have seen falls in imports and rises in exports, indicating that British manufacturers are concentrating on the growth areas. The growth in the number of children is expected to be a major factor helping steady expansion of the sugar confectionery market, which is forecast to improve by 6 percent in volume to the year 2001. Improved product quality is expected to bring a higher rate of growth for market value.

Text © 1997 MAPS

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