Under the microscope
March 18, 2008
by Keith Nunes
On the surface — it’s candy, something consumers pop into their mouths for a momentary sensation of pleasure and soon forget about. But as the trend toward "premiumization" approaches its zenith, chocolate now is being compared to wine, with a private label bar likened to Two Buck Chuck and brands featuring high cacao levels and ingredients from exotic locales a product to be savored like a fine cabernet.
The developing trend of premiumization is illustrated by several strategic acquisitions, joint ventures and introductions by The Hershey Co., Hershey, Pa., during the past few years. In 2005, the company entered into an agreement to acquire Scharffen Berger Chocolate Maker, Inc., a premium dark chocolate maker based in Berkeley, Calif. Scharffen Berger is known for its high-cacao content, signature dark chocolate bars and baking products. Shortly thereafter in 2005, Hershey also acquired Joseph Schmidt Confections, Inc., another premium chocolate maker.
Hershey continued to forge ahead with its focus on premium in late 2006 by acquiring Dagoba Organic Chocolate L.L.C. Dagoba processes natural and organic chocolate bars, hot chocolate and chocolate-covered coffee beans.
The acquisitions have been followed by a spate of new product introductions focusing on the premium segment of the chocolate market. Most notably, in 2006, Hershey launched Cacao Reserve, a line of chocolates and drinking cocoa. The chocolate products featured cacao contents ranging from 35% to 70%, with some also carrying country-of-origin statements from Indonesia, Arriba, Santo Domingo and Sao Tome. The cocoa beverages come in blends such as Classic Mayan and Mildly Spiced Aztec.
Other companies have focused on the premium chocolate segment as well, with the Ghirardelli Chocolate Co., San Francisco, recently introducing a line of what it describes as "filled premium chocolate bars." Mars, Inc., which owns the Dove Chocolate brand, also has announced it is expanding into more premium chocolate varieties.
The prospects for the premium chocolate segment were further reinforced when Nestle S.A., Vevey, Switzerland, announced it will open its Chocolate Centre of Excellence some time during the first half of 2009. The facility, which will be located at the company’s chocolate manufacturing plant in Broc, Switzerland, will focus on the development of premium and luxury chocolate products.
The creation of the R.&D. center underscores how Nestle views the premium chocolate market. The strong growth of the dark and premium chocolate segment is a sign of how the trend of "premiumization" is developing, according to the company.
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Premium market growing
A study published by Mintel International, Chicago, in 2007 showed that the premium chocolate market is growing at a rapid pace, with sales through all channels increasing 129% between 2001 to 2006, and sales climbing to $2 billion in 2006 from $896 million in 2001. Dark chocolate has seen significant growth, increasing 49% from 2003 to 2006, increasing to $1.88 billion from $1.26 billion.
But Mintel also noted while dark chocolate has received a significant amount of attention, premium milk chocolate should not be ignored.
"While it is not as popular in Europe, American consumers still like milk chocolate," according to the research group. "Mintel’s survey found that among respondents who eat premium chocolate, 43% prefer dark and 42% prefer milk, making it clear that there is still a significant market for high quality milk chocolate."
To further complicate the situation, Mintel said there is no industry standard definition of premium chocolate. The topic is based partly on price, but also is based on consumer perception of what a premium product should be.
Fueling all aspects of the premium chocolate market are the positive health messages about premium, especially dark, chocolate, according to Mintel.
For the health of it
That the trend toward health and wellness has penetrated the premium chocolate market illustrates consumer desire for products that are perceived as healthy, but also have an indulgent quality. By marketing the heart healthy attributes of dark chocolate as well as antioxidant properties, confectioners have positioned their products in the sweet spot of consumer trends.
Through its CocoaVia product line Mars has been most aggressive in promoting the heart healthy aspects of chocolate. CocoaVia features a blend of cocoa flavanols and plant sterols from soy that may reduce L.D.L., "bad" cholesterol, levels and promote healthy circulation, according to the company.
The Hershey Co. also entered the health and wellness market with the launch of its Goodness Chocolate portfolio last year. The line consists of an Antioxidant Milk Chocolate, Extra Dark Chocolate and Whole Bean Milk Chocolate. In a similar fashion to Mars, Hershey is promoting the properties in flavanols to act as antioxidants. Hershey promotes the fact that cocoa beans are "one of the most concentrated known sources of flavanol antioxidants."
In November, Barry Callebaut, Wieze, Belgium, took the premium health and wellness market a step further with the introduction of a probiotic chocolate. The challenge they faced in the development process was to ensure the survival of probiotic strains during processing and distribution.
"Ensuring the sufficient distribution of the probiotic microorganisms in chocolate on an industrial scale is no easy task," said Han Vriens, Barry Callebaut’s chief innovation officer. "High pressures can have a negative influence on cell-counts of the integrated probiotic strains."
A subsequent consumer study conducted by Barry Callebaut in February found that approximately 25% of consumers in Western Europe and the U.S. want chocolate products that have extra physical or emotional health benefits. The range of scientifically proven attributes consumers would like to see in chocolate products includes an improved sense of emotional well-being, stress-reduction, heart health, tooth health and a product that boosts a person’s immune system.
"This data show that functional chocolate is quickly gaining in popularity," Mr. Vriens said. "Consumers are increasingly seeking chocolate that offers clinically proven physical or emotional health benefits.
"The cocoa bean contains hundreds of different components that have potential health benefits. Currently, our R.&D. team is working on a range of interesting new products, including a chocolate that is scientifically proven to improve emotional well-being by naturally enhancing a consumer’s mood."
Mintel forecasts the premium chocolate market will grow 73% and achieve sales of $3,554 million by 2011. But the research group noted if there were further, unanticipated medical research during the next few years that reinforced and expanded the healthful benefits of chocolate consumption, it would be likely that future sales of premium chocolate would be greater than initially forecast.