Sweet Retailing has caught up with leading market intelligence provider Mintel once again, to bring you an up to date snap shot of the UK confectionery market including both chocolate and sugar confectionery. Mintel has also predicted future growth and some of the challenges and issues for the UK confectionery market as we move forward. For more information about Mintel please visit www.mintel.com
UK chocolate market size
The UK chocolate confectionery market has proved itself to be one of the few recession-proof food and drink markets, with consumers not cutting chocolate out of their diets despite pressure on many household budgets.
In recent years, annual growth in the market has hovered around the 5% mark, a trend expected to continue in the years up to 2016. In 2011, the market reached £3,976 billion, a 21% increase over a five-year period.
While there has been a high level of investment in NPD and advertising, it is clear that rising prices have been, and look set to remain, the main driver of this growth. Apart from 2012, which may benefit from a halo effect around the London Olympics and European Championships, growth is expected to only be around 1% at 2011 prices, highlighting the continued impact of inflation.
However, there is a threat that rising chocolate prices with static or shrinking bar sizes will deter users, with 49% stating that they would cut back on chocolate consumption if prices continued upwards. The rising cost of the chocolate bars also masks the fact that, in terms of volume sales, the market actually declined slightly in 2011, despite the prevalence of a high number of promotions.
In some ways, rising prices are unavoidable for chocolate manufacturers which have had to deal with rising commodity prices in recent years. However, a favourable harvest in 2011 perhaps opens the door for operators to polish their value credentials by tackling rising prices head on, something which there is a strong consumer demand to see.
UK chocolate market sectors
Chocolate countlines continue to account for the largest share of the UK chocolate confectionery market at 44%. The two star performers driving growth in this segment during 2011 were Snickers and Twirl, both of which achieved robust year-on-year sales increases.
Along with tablet bars, chocolate countlines are often cited when the issue of rising prices of chocolate is discussed. Rising raw material costs have been passed onto consumers, often exceeding a 5p increase in under two years, whilst the size of the chocolate bar remains the same or even marginally shrinks.
Particularly in the post-recession landscape, and despite their positioning as an affordable treat, this has seen the number of UK chocolate consumers fall by 2% since 2008.
The relatively small growth from 2010 to 2011 is likely to have largely been driven by price increases, although there have been some success stories such as chocolate brands Snickers and Twirl.
The chocolate tablets segment saw a slight decline in sales in 2011, although it continues to hold a fifth of the total market share and houses the two largest chocolate brands in Dairy Milk and Galaxy.
As seen in UK sugar confectionery with the likes of Skittles, non-individually wrapped chocolates are showing robust growth and achieved a slight increase in market share in 2011 (up to 13%).
Whilst some established brands in this segment continue to thrive, particularly M&Ms, many chocolate countline brands are extending into this segment with small bite-size versions of their products which tap into consumer interest in sharing, on-the-go snacking and value for money.
Two high-profile examples of this in 2011 were: Kit Kat Pop Chocs (launched February) and Twirl Bites (September), both of which were able to build on their presence in the chocolate countlines segment. By comparison, wrapped confectionery had a more modest 2011.
UK sugar confectionery market size
Since 2006, the UK sugar confectionery market has enjoyed growth of 9.6%. However, the key role of inflation in fuelling this growth is borne out by the fact that the market value would have fallen by 16.8% over the period at 2006 prices.
Many products in the sugar confectionery segment have undergone notable price increases in the past decade. Confectionery manufacturers have had to tackle rising costs by passing on the increase to the consumer as well as devising new formulations of current products and looking for new formats altogether.
Whilst such inflation has fuelled value growth in the market, it is likely to have curbed volume growth. Ongoing consumer concerns about healthy diets and competition from other treats and snacks such as chocolate and crisps, which have enjoyed more active innovation and marketing support, are also likely to have played a role in curbing underlying growth.
Innovative NPD in sugar confectionery and the success of new formats such as sharing bags will be essential in engaging consumers to maintain volume sales and to support market value by combating discounting.
UK sugar confectionery market sectors
NPD and advertising support have helped drive sales of soft confectionery, which exceeded £700 million in 2011. This segment represents just under half of the total UK sugar confectionery market, with steady growth expected to continue in the coming years.
Consumer tastes appear to be shifting from traditional hard to soft confectionery as static sales of hard sweets have seen the segment lose market share despite a recent rise in NPD.
Soft fruits, which include gums, jellies and pastilles, have grown steadily since 2009 and represent 36% of the UK sugar confectionery segment in 2011.
Gum represents just under 20% of the total UK sugar confectionery market, and although the segment posted growth in 2011, its share fell slightly due to the growth rate falling behind that of the overall market.
Health has become a growing consideration with the large majority of gums now sugar-free (87%), and reporting to offer health benefits such as teeth whitening and plaque prevention.
Sales of regular chewing gum have steadied in 2011, but the market appears to be in a long-term downward trend as consumers look towards healthier options.
Similarly, the bubblegum segment has seen sales fall steadily over the past three years. The high sugar content and advertising restrictions on these confectionery products to children have had a strong negative impact on sales, and will remain challenges for the UK sugar confectionery market in the coming years.
Our 2011 update from Mintel is available to view here.