Sector Insight: Seasonal and boxed chocolates

Chocolate brands are tapping into a wider range of events and novelty products as they seek to arrest a fall in sales in real terms.

Market value rose between 2007 and 2008
Market value rose between 2007 and 2008

Halloween is approaching and pumpkins are at the ready, as celebrations to mark this ghoulish date have become the norm, especially for schoolchildren up and down the country. While some will be traipsing the streets in fancy dress demanding their bodyweight in treats, others regard it purely as another excuse for a party.

But whatever the degree of celebration, retailers and appropriate brands are well aware that tapping into this event provides a sales opportunity. None more so than chocolate manufacturers, which are glad of another occasion to drive sales of novelty products beyond Easter, Valentine's Day and Mother's Day.

In fact, Halloween chocolates form one of the fastest-growing seasonal sectors. Sales rose by more than 30% between 2008 and 2010, according to Mintel, albeit from a low base.

Overall, the seasonal and boxed-chocolates sector is faring well in difficult times. A box of chocolates remains a universally popular gift, and people seek out a little indulgence and an affordable treat, even in a recession.

Between 2007 and 2009, value sales grew by 2.1% to £1.3bn, according to Mintel. It is estimated that they will reach £1.32bn by the end of this year, with seasonal chocolate sales accounting for £488m.

Value sales are being boosted by rising cocoa prices, as demand rises in emerging markets, and cocoa farmers struggle to keep pace. However, when inflation is taken into account, the value of the boxed-chocolates market fell by 3.1% between 2007 and 2009.

While this sector has been more resilient than many faced with financial belt-tightening, the premium end has taken a hit. It has not been helped by widespread discounting that has meant shoppers expect to find reductions on products and have become more unwilling to pay the full price. So, while extensive discounting by retailers may have boosted volume sales, it risks devaluing the product.

Easter remains the key period for seasonal chocolates, accounting for more than half of value sales.

The excessive packaging associated with Easter eggs comes under the spotlight periodically, but research by Mintel suggests that consumers are ambivalent about this aspect of boxed chocolates - almost half neither agreed nor disagreed that they avoided excessively packaged products.

However Cadbury, by reducing its Easter egg packaging by 40% over the three years to 2010, has reduced its carbon footprint, saved transport costs and ensured more eggs could be stocked on retailers' shelves. Similarly, many other manufacturers have turned to recycled-cardboard packaging and looked for ways to reduce the amount of plastic used.

Shell eggs account for the biggest share of the Easter eggs category, although NPD has meant a wider variety of products has come on to the market. Novelty shapes such as Lindt's Easter Bunny have gained ground, while a milk-chocolate lamb was added to its range this Easter.

Boxed chocolates are the biggest segment of this market and, by the end of the year, are expected to account for £827m worth of sales. Almost two-thirds of consumers buy boxed chocolates as a Christmas gift, according to research by opinions website Toluna.

The increasing number of older and younger people in the UK has worked in the favour of seasonal and boxed chocolates. Parents of young children are more likely to buy chocolates as a gift at Christmas and Easter, while older consumers are key purchasers of premium and boxed chocolates. Nestle is one of the biggest players in the sector; its portfolio includes the long-established brands After Eight and Quality Street.

By 2015, Mintel predicts that the market will be worth £1.5bn, a rise of 15% on 2010. However, this apparently healthy rise equates to a 12% decrease over the five-year period when inflation is taken into account.

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