Rabobank: How to succeed in the hybrid chocolate market

Value-premium split forces Western European chocolate makers to restrategize, says Rabobank. Photo Credit: stevendepolo

Western European chocolate consumers are shunning mid-market products in favor of value or premium chocolate. Rabobank suggests how companies should adapt.

The bank’s report ‘Finding the Sweet Spots’ said that firms should position themselves in either the premium or value segment and prune their portfolio of midmarket goods.

Squeezed middle

Rabobank analyst Marc Kennis said: "Consumers have increasingly been trading down to the value end of the food spectrum for everyday, value-for-money items, while occasionally splurging on food products at the premium end."

The bank said that the trend had been driven by the financial empowerment of women and the growing importance of Millennials- the generation aged 13-31.

Growth projections

Europe’s €29bn ($40bn) confectionery market has been growing at an average of 2.3% from 2008 to 2013, according to the bank.

Kennis told ConfectioneryNews that in chocolate, the value segment was bigger yet the premium chocolate segment was projected to grow faster.

Which markets?

The analyst said that it made more sense for mid-market manufacturers to move into the faster growing premium sector, but added that it would largely depend on the countries where the company was active. “This is happening more in some countries going forward.”

Kennis said the hybrid trend was explicit in Germany and Turkey, while in France there were hardly any mid-market products in seasonal chocolate.

He said that the UK was the notable exception, where the market was partly driven by promotions and price points between value and premium were not as pronounced as in other nations.

Brands vs private label

“What you see in chocolate is that the high end will be dominated by brands,” said Kennis, while value will be targeted by private label.

The premium segment is not highly consolidated and there is room for mid-market players to make the step up, particularly through acquisitions, continued the analyst.

Rabobank said social media would be instrumental in future marketing strategies for the premium segment since the hybrid trend was driven by the young Millennial generation.

At the value end, the bank said companies should match lower price points offered by discount retailers and consider adapting packaging and portion sizes to address continuing consumer budget constraints.

The bank added that innovative packaging could also up the value proposition of a midmarket product, taking it into the premium sector.

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