Parth Shah

Global Chocolate Industry

GLOBAL CHOCOLATE INDUSTRY

Table of Contents

1.0 INTRODUCTION ........................................................................ 2

1.1 BACKGROUND .......................................................... 2
1.2 OVERVIEW: GLOBAL CHOCOLATE MARKET ................ 2

2.0 MAIN FINDINGS: GLOBAL CHOCOLATE MARKET ........................ 3

3.0 GLOBAL CONSUMPTION AND MARKET FORECAST ........................ 4

3.1 BY VARIETY................................................................ 4
3.2 BY GEOGRAPHY ........................................................ 6
4.0 SWOT ANALYSIS: DRIVERS, RESTRAINTS, OPPORTUNITIES ............ 8

5.0 KEY MARKET PLAYERS AND MARKET SHARE ANALYSIS............ 10

6.0 CONCLUSION ........................................................................... 12

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Global Chocolate Industry

1.0 Introduction
1.1 B ACKGROUND
Chocolate is certainly one of the most lucrative elements of the
international confection market. The chocolate industry has been
demonstrating a multibillion dollar market since the past few decades and
is anticipated to undergo further growth within the years to come. Growing
health consciousness amongst adolescents as well as adults, and the
growing comprehension of the health benefits of consuming chocolates
will play an important role in boosting the sales of the global chocolate
market.

1.2 O VERVIEW : GLOBAL CHOCOLATE INDUSTRY

The global chocolate market which was worth $83.2 billion in 2010, has
grown by a compound annual growth rate of over 2.7% to reach a
staggering $98.3 billion in 2016. This almost a $100 billion industry owes
it to many factors for the incredible growth that it has experienced within
the last decade. Some of the chief drivers of the industry are increasing
health consciousness, health benefits, enormous diversity of uses, and
sales during festivities.

Nonetheless, this is an exciting period for the worldwide chocolate

industry. Not only is this due to the changing trends amongst the youth,
but also as a result of the complications that the market faces. Although
there is an incessant slowdown in the Western market, Asian markets such
as China are growing, even if the growth is at relaxed rates. Other
challenges that the industry faces include the availability and supply of
raw materials in addition to the reliance on unstable economies as sources
of Cocoa. Corporations are gradually dealing with the challenges they
come across, but can anticipate a low growth environment for a few years.

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Global Chocolate Industry

2.0 Main Findings: Global chocolate

market
 Fierce competition in the Global Chocolate Industry
 Milk chocolate holds the largest market share in the chocolate
industry during 2016
 Consumers are considering healthier options and this will lead to a
noticeable growth in the production and consumption of Dark
Chocolate by the year 2021
 Europe registered the highest production as well as per capita
consumption of chocolates worldwide
 Asia-Pacific region will see the greatest growth in the consumption
of Chocolates by the year 2021
 Growing urbanization and extensive accessibility of chocolate will
continue to be another major factor powering the market growth
 A comprehensive variety of new uses of chocolate in food and
confection products are projected to accelerate the demand
 unreliable economy of the cocoa supply is probable to increase
chocolate prices
 profitable growth prospects remain in customized, hand-made
chocolates
 Advancements in organic chocolates could change the market
scenario during the years to come
 Mars Inc. (USA), Mondelez International (USA) and the Ferrero
Group (Luxembourg/Italy) account for half of the market share of
the Global chocolate market
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3.0 Global consumption and market

forecast
3.1 B Y VARIETY

The global consumption of chocolate can be divided into three segments

for this group:

 White Chocolate

 Dark Chocolate

 Milk Chocolate

As is acknowledged, the reason why chocolate has been a multi-billion

dollar industry is owed on the major part to the exclusive taste that it
provides. Chocolate is believed to be the crucial comfort food type and
flavour in the world. It may be made in the form of slabs, liquid or paste.
Furthermore, it is widely known that Cocoa is the main ingredient in the
production of chocolate. Cocoa itself contains naturally-occurring
phytochemicals that act as anti-oxidants and improve health.

All the aforementioned varieties of chocolate encompass benefits and

drawbacks.

Although White chocolate has a significant amount of calcium, it contains

very high amounts of saturated fats. Milk chocolate pose the same
benefits, but with reduced amounts of saturated fats. On the other hand,
Dark chocolates are by far the healthiest.

Following is a graph depicting the current segmentation of the market by

variety as well as the forecast for 2021:

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Global Chocolate Industry

% CONSUMPTION OF DIFFERENT VARIETIES OF CHOCOLATES

- 2016

MILK CHOCOLATE DARK CHOCOLATE WHITE CHOCOLATE

% CONSUMPTION OF DIFFERENT VARIETIES OF

CHOCOLATES - 2021

MILK CHOCOLATE DARK CHOCOLATE WHITE CHOCOLATE

Dark chocolate is rich in antioxidants, which are believed to prevent or

delay certain types of diseases, including cardiac disease. These perceived
health benefits have been driving strong growth for products with the
heavier cocoa weighting. This is the reason for the compound annual
growth rate (CAGR) of over 8% for Dark chocolates.

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3.2 B Y GEOGRAPHY
The global consumption of chocolate can be divided into four regions for
this group:

 North and South America

 Europe

 Asia-Pacific

 Middle East and Africa

% CONSUMPTION BY DIFFERENT REGIONS - 2016

North and South America Europe Asia-Pacific Middle East and Africa

% CONSUMPTION BY DIFFERENT REGIONS - 2021

North and South America Europe Asia-Pacific Middle East and Africa

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In 2016, Europe was accountable for delivery of over 2 and a half million
tons of chocolate, of which Western Europe registered the highest per
capita consumption in the area. Moreover, various chocolate producers
with a global presence, in conjunction with many private establishments
function from this part of the world. These two elements are accountable
for the supremacy of this market segment.

Germany, Italy, France, Spain, and the UK register the highest

consumption of chocolate in the EU. This can be seen from the
representation below:

Per capita consumption of chocolate globally - 2016

Switzerland Germany Russia UK USA Austira Poland France China

This area displays a fondness towards premium ingredients and unique

flavors in the industrial chocolate markets. It is essential for the
manufacturers working in this region to adhere to the continually
developing tastes and preferences of the consumers while catering to
specific end-user segments. Additionally, organic and Fairtrade products
are attaining importance at retailers, and the market is also shifting so as to
adopt new techniques to enrich the flavour.
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Nonetheless, Asia-Pacific region, chiefly China and India, is however

estimated to surface at a reckless pace over 2016-2021. This development
is attributed to the increasing influence of the Western lifestyle as well as
cognizance of health benefits of chocolate. Seasonal and festive sales are
expected to hold a strong foothold in developing Asian countries,
especially India.

4.0 SWOT Analysis: Drivers,

Restraints, and Opportunities

While urbanized countries embody recognized and flourishing markets for

chocolate production and consumption, a change in consumer flavor
preferences and growing expenditure on chocolate and related products are
known to be the key drivers to market growth, conspicuously in
developing countries.

Growing urbanization and extensive accessibility of chocolate will

continue to be another major factor powering the market for chocolate
internationally.

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Antioxidants-enrichment, blood pressure-suppressing character, and anti-

aging properties of chocolate will continue to be the key factors boosting
the acceptance of chocolate as a health enhancing product. Dark chocolate
that contains a larger proportion of cocoa is exclusively endorsed to
prevent or slow down aging and Cardio Vascular Diseases. These
advantages of chocolate will continue to energize the demand for
chocolate in the global market.

Research findings also indicate that chocolate consumption helps in

looking younger. It is also endorsed as a stress relieving agent. These
factors will further help in the growth in demand for chocolate.

A comprehensive variety of new uses of chocolate in food and confection

products are projected to accelerate the demand, while wide acceptance of
bakery products, functional foods, ice creams, chocolate-flavored milk and
drinks will sustain the demand during the upcoming five years.

However, Chocolates are, even now, fundamentally considered as an

affordable luxury in few parts of the world. Price-sensitivity may hold up
the penetration of chocolate industry in few of the rural parts of the world.
Furthermore, the unreliable economy of the cocoa supply is probable to
increase chocolate prices, which can be considered to be a chief hurdle for
market progress.

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Regular consumption of chocolate during festivals are likely to accelerate

the sales of chocolate in the approaching years. Gifting chocolate baskets
and bouquets are amongst other prevalent building trends amongst
customers in the market; this will favor the market over the forecast
period. Also, profitable growth prospects remain in customized, hand-
made chocolates and other similar products.

Other niche products, for example: chocolate drinks, fudge, mousse, rolls,
and sandwich are identified to be attractive revenue generators.
Furthermore, a diversity in gourmet chocolate is also likely to help create
significant prospects in the worldwide chocolate market. Advancements in
organic chocolates could totally alter the market scenario during the years
to come.

5.0 Key Market Players

The list of some of the major players in the international chocolate market,
include:
 Nestle SA
 Ferrero Group
 Hershey Foods Corporation
 Mondelez International
 Mars Inc.
 Meiji Co Ltd
 August Stock KG
 Ezaki Glico Co. Ltd.
 Arcor
 Kraft Foods
 Moonstruck Chocolatier Co.

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Market share of leading chocolate companies worldwide in

2016
(US$ millions)
Mars Inc (USA)

Mondelēz International (USA)

4% 3% Ferrero Group (Luxembourg / Italy)

5% 22%
Meiji Co Ltd (Japan)
6%

Nestlé SA (Switzerland)
9%
Hershey Co (USA)

15% Pladis (UK)

11%
Chocoladenfabriken Lindt & Sprüngli
AG (Switzerland)
12% 13% Ezaki Glico Co Ltd (Japan)

Arcor (Argentina)

As can be seen from the analysis provided above, half of the global
chocolate market’s share is owned by the three major brands in the
international chocolate industry – Mars Inc (USA), Mondelez International
(USA) and the Ferrero Group (Luxembourg/Italy).

The market leader, Mars Inc. is a gigantic consumer conglomerate that

sells everything from candy to pet food. Mars Inc. is the owner of M&M’s,
Snickers, Dove, Milky Way and Twix. It also took full control of Wrigley,
thus giving the company full control over Skittles, Starburst and Altoids,
as well as Doublemint. It also owns several pet focused brands, including
Pedigree, Royal Canin and Whiskas, and has a food and drink segment.

With the changing health trends in people all over the globe wanting to eat
healthier, Mars Inc. will launch a new “lifestyle” campaign to promote its
Goodness Knows, Mars protein, and Snickers protein variants in 2018.
This move is synonymous with the expected shift in consumer mindset
which will open up new avenues for the key players in the global
chocolate market.

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The company’s Goodness Knows brand will be backed by a media

investment of more than £4.6m and will be see on TV for more than six
months in 2018.

Lauren George, brand and trade PR Manager at Mars Chocolate UK &

Wrigley UK, said: “More and more consumers are snacking on the go and
the category is now the third biggest shopping mission in store.” The fact
that Mars Inc. is willing to invest in the idea depicts the importance of this
wind of change, how competitive the environment in the chocolate
industry is becoming, and the steps taken by a key player to retain its
position as a market leader in the Global Chocolate Industry.

5.0 Conclusion
During the approaching years, the global chocolate industry could see a wind of
change, whose breeze is already being felt. With the decline in growth of global
chocolate industry, due to changing consumer mindsets a lot is at stake for the
organizations to stay competitive in the industry.

With the world moving towards a health conscious future, chocolate

manufacturers will have to change their business models and marketing mix in
order to accommodate the changing trends. Introduction of new varieties of
Dark chocolates, which are claimed to comprise of exceptional health benefits,
could be turn out to be a lucrative move for many organizations.

Targeting consumers in the Asian-Pacific market would be a wise move, as it

would offer the maximum growth by region in the next five years to come. In
order to gain an advantage over the competitors, key players in the global
chocolate industry can follow other trends that are followed by consumers. For
example, the production of organic chocolates, which would attract a niche, yet
growing consumer base for the organization.

The industry needs to tackle the issues of relying on unstable economies for the
supply of cocoa. Not only will this create a surge in production and sales price,
but it would also decrease the competitiveness in the market. Thus, any
organization willing to be competitive needs to be able to locate several vendors
of cocoa, so that, in scenarios of unavailability from one seller, they can still
continue their operation without inconvenience.

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