Value sales of chocolate confectionery are estimated to have risen more than 11% from 2003 to 2007, when the market was worth £2.1bn, according to Mintel. However, this is a difficult market to measure - manufacturers are reluctant to reveal sales and distribution channels are fragmented. In its data, Mintel includes chocolate bars, countlines where chocolate is a main ingredient, and selflines (bags and tubes), along with Kit Kat (but not multi-packs of the two- and four-fingered variants). The latter is often classed as a biscuit, but occupies something of a grey area as it is often sold alongside regular chocolate bars.
While adults may justify their intake with more sophisticated health arguments, this sector is closely associated with children - a link that has brought problems. As the population ages, the number of children is on the decline. On top of this, Ofcom's advertising restrictions now limit how manufacturers of foods deemed unhealthy for children can target young consumers. In schools, meanwhile, unhealthy snacks have been banned from vending machines.
Many sectors in competition with chocolate for a share of the children's snacks market, including sweet biscuits, cereal bars, fruit, dried fruit, seeds and nuts, are experiencing growth as a result.
The popularity of dark chocolate is growing, its high antioxidant content justifying consumption in a similar way to red wine. This makes it a more permissible treat for many adults, even those watching their weight and diet. This has helped sales of dark variants outperform overall chocolate blocks by growing 96% since 2005. The 'quality over quantity' argument has also benefited fairtrade and organic brands.
Manufacturers have faced a number of PR issues in the past couple of years. Cadbury was hit by the salmonella crisis in 2006, which led to it taking 1m bars off the shelves, and it mislabelled some bars by omitting nut allergy warnings, leading to a further recall. Mars was forced into a U-turn after it sparked a consumer outcry by introducing animal rennet to some of its products, making them unsuitable for vegetarians.
The brand and choices on offer to chocolate-loving UK consumers is wide and varied. This means it can be a difficult market for new brands to crack, but not impossible.
Green & Black's is one brand that made inroads, building a strong and loyal following for its high-quality chocolate. Cadbury's purchase of the brand in 2005 gave it a good footing in the growing luxury sector, as well as its core milk chocolate market. Despite Cadbury's contamination scare, it has tried to rebuild confidence among consumers and was behind one of the most talked-about TV ads of the past few years - the 'Gorilla' spot, created by Fallon for Cadbury Dairy Milk. The manufacturer also resurrected its 'Flake girl' concept this year with ads starring singer Joss Stone, although the previously heavily seductive tone was played down.
At the start of this year Cadbury announced a £44m investment to support cocoa farmers in Ghana and protect the company's future cocoa supplies.
Mars is number two in the market and has a strong record on NPD, most recently with brands including Mars Planets. It, too, has extended into the luxury end of the sector with its Seeds of Change organic chocolate bars, and reacted to obesity concerns by introducing calorie-controlled portions of some of its leading brands under the 'A little bit of' banner, as well as low-calorie countline Mars Delight.
There are a number of players in the growing luxury and ethical categories. Divine Chocolate is an independent Fairtrade company, 45% of which is owned by a bean-growing Ghanaian
co-operative. Originally known as the Day Chocolate Company, it changed
the name of its brand for better awareness. It also redesigned its packaging early last year to reflect the origins of its ingredients.
Brands including Lindt, Guylian and Kshocolat operate at the luxury end and Thorntons continues to operate shops selling its chocolates as well as branching out into café formats.
The popularity of chocolate bars remains stable, but other chocolate confectionery have fared less well over the past couple of years. Almost 89% of consumers have eaten chocolate bars at least once in the past year, according to TGI, but those most likely to consume the greatest volumes are becoming fewer as moderation is adopted.
Although food inflation means that many predicted growths in these sectors turn into a decline in real terms, chocolate is not affected in this way. Mintel predicts a 17% value rise over the next five years to take the sector to £2.6bn - growth of 2% in real terms.
Analyst comment
Peter Christou, market analyst, TNS
It is said that life without chocolate is like a beach without water. In fact, in the UK only 4.9% (1.2m) of house-holds did not make any purchase of everyday chocolate (snacking bars, large block and multipacks) in the year to 20 April. The total everyday chocolate market is worth more than £957.7m and growing at 10.6% year on year, driven through some average price rises, but mainly by consumers purchasing more often - on average, once every two weeks.
The current national health debate could hit the chocolate market hard and manufacturers are facing stiff competition to maintain share. One trend, which Cadbury has taken advantage of, is nostalgia. Having withdrawn the brand in 2003, it relaunched the 'retro'
Wispa at the end of 2007; this helped boost sales, making more than £2m in the short time it was available. Other manufacturers are also planning to help us recapture our youth, with Nestlé reportedly planning to revive Drifter.
Milk chocolate is the biggest category within the market (85% of total chocolate), but the one to watch is dark chocolate. It accounts for about 10% of everyday chocolate sales and has posted year-on-year growth of 25% as wider awareness
of its health benefits has driven an increase in household penetration. Almost half of all households bought some form of dark chocolate in the past year, with an average of 8.6 packs purchased.
An upmarket shift is another key development affecting the sector, tying in with trends across many markets. Brands such as Green & Black's (18.1% growth), Nestlé Heaven (51.3%) and Lindt Lindor, which has become a £1.5m brand in just over a year, are all driving the growth of premium chocolate.
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