Savoring the Snack and Candy Markets
Sustainability proves a selling point for candies, and environmental concerns benefit chocolate introductions in particular.
Chocolate consumers have been inundated with positive health news surrounding the confection in recent years. But, even in the wake of those reports, it is unclear just how much of an impact will be seen on sales.
Lucintel, a global management consulting and market research firm, predicts the U.S. chocolate industry will experience moderate growth through 2018 and reach an estimated sales total of approximately $19.3 billion. Fueling that growth will be innovation in dark and milk chocolate, with new flavors and lower-calorie and possibly even sugar-free chocolate varieties.
In its detailed analysis on the U.S. chocolate industry, “U.S. Chocolate Industry 2013-2018: Trend, Forecast and Opportunity Analysis,” Lucintel did note some major challenges the industry is likely to face: rising prices of raw materials, especially for cocoa beans; intermittent raw material supply; and lack of efficient distribution channels in emerging markets, to name a few. Nevertheless, the market for chocolate remains robust. In the U.S., alone, some 73.9% of the population (roughly 234 million consumers) indicated a taste for chocolate, per Lucintel data.
Research released late in 2013 suggests chocolate could benefit even the common cough. The research involved 300 consumers with a persistent cough taking part in a clinical trial at 13 National Health Service hospitals in the UK; those patients were given the naturally occurring chemical theobromine, derived from the raw ingredient of chocolate, twice a day for 14 days. Some 60% of patients experienced some measure of relief. The researchers suggested a bar of dark chocolate every day may contain enough of the active compound to affect a chronic cough, though it would not be a cure, as symptoms would return once the treatment ended.
Name the Source
The Hershey Company announced in early 2014 that 18% of all the cocoa it sourced globally in 2013 was certified, a number nearly double the company’s original goal for 2013 (10%) and placing Hershey firmly on track to meet its goal of sourcing 100% certified cocoa by 2020. The company’s next certification target is 40-50% of all cocoa purchased globally by 2016.
“We are proud of our substantial progress in our first year of this important initiative to advance the well-being of cocoa-producing communities,” said Terence O’Day, senior vice president and chief supply chain officer at Hershey. “This is just one of many initiatives through local NGOs, national governments and development agencies to address child labor and improve the livelihoods of cocoa farmers around the world.”
In terms of specific brands, Hershey’s Scharffen Berger achieved its goal of sourcing 100% of cocoa from certified farms by the end of 2013, and all of the brand’s products use cocoa 100% sourced from Rainforest Alliance Certified farms, joining both Hershey’s Bliss chocolates and Hershey’s Dagoba organic chocolate, which reached this milestone in 2012.
Hershey’s wholly owned subsidiary Hershey Netherlands B.V. took the company well into China in 2013, with its agreement to acquire 80% of the Shanghai Golden Monkey Food Joint Stock Co. The move added to Hershey’s investment over the past several years and gave the company one of China’s fastest growing confection companies, with a portfolio that spans candy, chocolate, protein-based products and snack foods. The move was one of several big announcements from Hershey in 2013, including one that would see the company launch its first new brand in 30 years.
While Lancaster would not officially launch in the U.S. until January 2014, Hershey announced the line of caramel soft crèmes were actually inspired by similar candies made by Milton Hershey more than 120 years ago in his original candy company. The Lancaster brand already debuted in China, and Lancaster Soft Cremes will be available in the U.S. in three flavors: Caramel, Vanilla and Caramel, and Vanilla and Raspberry.
Covering the Chocolate Spread
In 2013, Hershey launched a line of spreads, a move clearly targeting the popular Nutella chocolate hazelnut spread. Hershey’s Spreads are available in three flavors (Chocolate, Chocolate with Almonds and Chocolate with Hazelnuts), all “designed for spreading on toast, waffles, crackers and fruit,” per the company. It joins an increasingly crowded market for chocolate spreads, but one that appears perfectly capable of adding more competitors.
In a recent earnings call, Hershey CEO John Bilbery, explains: “When we look at something like our Spreads launch, which is currently underway, what we saw is, this is a $3.4 billion category in spreads. The fastest growing sub-segment of that are chocolate spreads.”
The chocolate spreads category grew 13% in 2012, to an estimated $300 million, according to Euromonitor, which expects the growth to continue expanding through at least 2018, according to Euromonitor. Nutella is the segment’s giant: it accounts for approximately a 70% of the U.S. chocolate spreads market; however, it did encounter a strong competitor from J.M. Smucker’s Jif Hazelnut Spreads, which launched in 2012 and already accounts for more than 20% of the market share.
One of Hershey’s own signature products (Reese’s Peanut Butter Cups) will see a notable competitor with an established brand and a very similar concept early in 2014. Nestlé is offering its most radical ever take on its 90-year-old Butterfinger brand. Butterfinger Peanut Butter Cups will have a creamy-smooth, peanut butter center and a milk chocolate coating, as well as a dose of Butterfinger for crunch.
In an interview with USA Today, Butterfinger brand manager Jeremy Vandervoet admitted, “People prefer Butterfinger in small doses,” which prompted Nestlé executives to ask, “How do we go beyond the bar to give people smaller doses of Butterfinger?” The answer involved Butterfinger bits mixed in peanut butter and enrobed in chocolate, and it required more than two years of development.
Mars North America likewise took a familiar brand into somewhat new territory in 2013, though its M&Ms Chocolate Bar was not entirely a new concept: The company had a similar notion a decade ago with the launch of M-azing, which combined milk chocolate and mini M&Ms in two varieties -- peanut butter and crunchy. This time, the company went a somewhat safer route and formulated the M&Ms Chocolate bar to have milk chocolate and M&Ms.
This is not to suggest Mars North America has rested on its laurels when it comes to its M&Ms brand. Far from it, the company continues to introduce new takes on the little icons, which have seen pretzel, coconut, mint and dark chocolate in the last several years alone. The year 2013 would prove no different, as the company added a limited-edition M&Ms Brand Birthday Cake Chocolate Candies. Available in two sizes (1.4oz singles and an 8oz pouch), the product is positioned as “the first chocolate-based product in this fast-moving flavor profile.”
Mars North America would opt to leverage nostalgia in a Snickers launch; its Rockin’ Nut Road Bar featured marshmallow-flavored nougat covered with almonds and smothered in dark chocolate. While the concept may not be new (indeed, the product first saw life as a limited-edition item in 2008), Rockin’ Nut Road did prove successful enough to return to shelves, as Mars attempted to capitalize on a couple of major trends in this one launch: Dark chocolate, buoyed by perceived healthful benefits, is among the fastest growing major chocolate confections segments, and almonds’ popularity continues to rise. In fact, per capita consumption of almonds is up more than 70%, according to U.S. Census and 2010 Almond Board of California position report.
While major chocolate manufacturers have not been quick to jump on the gluten-free trend, the trend is slowly making its way into chocolate. Enjoy Life Foods has had a range of gluten-free chocolate pieces for years (for that matter, the company’s products are free of all of the top eight common food allergens). And, in 2013, it introduced Dark Chocolate Baking Morsels, featuring 69% cacao and “clean” ingredients of unsweetened chocolate and natural cane sugar.
Likewise adding to the gluten-free chocolate landscape is a line from Endangered Species Chocolate, whose six-item natural filled bar line is also free of dairy. The range includes Almond Butter Creme, Sea Salt and Lime Creme, Coconut Creme, Blueberry Vanilla Creme, Raspberry Orange Creme and Lavender Mint Crème -- all surrounded by 72% dark chocolate. In addition, the bars are non-GMO-verified and feature certified-sustainable, single-source organic palm oil.
“Being an eco-conscious company, we wanted to be on the forefront of using sustainable palm oil in our filling for these products,” says Whitney Bembenick, research & development manager for Endangered Species Chocolate. “By utilizing it as the dairy-free créme base in our filled bars, we’re able to develop new and innovative vegan-friendly flavors, such as our Sea Salt and Lime Creme bar. These flavors are commonly used in many types of cuisine, but pairing them together with the richness of our dark chocolate and smooth créme results in a bright, fresh experience for the pallet. This flavor profile would not have been achieved without the use of sustainable palm oil.”
Chocolate Extends into Snacks
Chocolate even saw its usage expand in 2013 into snacks, specifically in a potato chip from Frito-Lay. Lay’s Wavy Potato Chips Dipped in Milk Chocolate. The chocolate-dipped chips could only be found in Target stores, and their initial rollout extended only through the holidays. PepsiCo’s Frito-Lay division not only added innovative flavors to its snacks; the company also experimented with new shapes for one new launch in 2013.
Ruffles Crispy Fries Potato Strips were an effort to merge one of the company’s powerhouse brands with one of America’s most popular side dishes. Available in original and cheese-flavored, the product is described as the first-ever French fry-shaped snack sliced from real potatoes. Frito-Lay also leveraged its Stacy’s Snacks brand to introduce Stacy’s Bake Shop Bakery Crisps, a sweet and savory line of artisan bakery break snacks. The crisps are made from real bakery breads, sliced thin and twice-baked to achieve a signature crunch, and the line’s flavors also set it apart from other snacks on the market: Herbed Baguette featuring garlic and rosemary flavors, Pretzel Bread, Banana Nut with bananas and pecans, and Vanilla Pound Cake.
The year saw a host of new takes on the traditional chip on store shelves. Fresh pasta dough gently baked and drizzled with olive oil and sprinkled with salt crystals served as an inspiration for Pasta Chips, an idea born out of the hills of Tuscany and made from real pasta. Produced by Vintage Italia, the chips are made with semolina flour, ancient grains and Italian herbs, and they feature 4g of protein, are free of cholesterol and contain 60% less fat than potato chips. The line also features flavors inspired by Italian favorites: Marinara, Alfredo, Spicy Tomato Basil, Garlic Olive Oil and Mediterranean Sea Salt.
B&G Foods gave its bagel chip brand New York Style Bagel Chips a major makeover, with New York Style Bagel Crisps, New York Style Pita Chips and New York Style Panetini being the brand’s largest revamp in its almost 30-year history. Accompanying the revamp was the debut of New York Style Sweet Swirls in two flavors: Cinnamon and Chocolate. The small, crunchy bites promise 130 calories per serving and join the revamped Bagel Crisps (in Roasted Garlic, Sea Salt, Sea Salt + Black Pepper, Cinnamon Raisin, Everything, Sesame and Plain Varieties); Pita Chips (Parmesan Garlic Herb, Garden Fresh Ranch, Red Hot Chili Pepper and Sea Salt); Mini Bagels (Roasted Garlic, Sea Salt, BBQ and Cheddar); and Panetini (Garlic, Garlic Parmesan and Three Cheese).
El’s Kitchen took the gluten-free trend into bagel chip territory with Snaps Bagel Chips. Promising 100 or fewer calories per serving, Snaps were originally a component of El’s Medleys Snack Mix, but consumer feedback prompted the company to launch the products on their own, in three flavors: Cinnamon and Sugar, Garlic and Herb, and Simply Sea Salt.
The year also saw the introduction of what was described as the first half-corn, half-potato chip. RW Garcia, a maker of artisan and all-natural, corn-based snacks, combined white corn and red potatoes in Tortatos. Two years in development, the chip combines the inherent sweetness of white corn with the flavor of red potatoes, resulting in a snack with 25% less fat than traditional potato chips. The line includes four flavors: Original, Salt and Pepper, Salt and Vinegar, and Barbecue.
This line enters a widely popular snack marketplace. According to the NPD Group, the typical American consumer enjoys more than 1,000 snack-oriented convenience foods in any given year, with women accounting for 3.1 snack-oriented convenience foods every day, while men consume an average of 2.7 per day.
Nevertheless, eight out of every 10 in-home snack occasions are considered a “snack-oriented convenience food” vs. other foods, regardless of the time of day. A typical year sees more than 365 billion occasions for Americans to consume snack-oriented convenience foods, according to NPD Group. The leading motivator for those snack choices, hardly surprisingly, is taste across all age groups. Women were found to be more likely to opt for a snack to meet specific need-states (chocolate, sweet, crunchy, healthy), while children almost exclusively sought something fun.
“An individual’s mood and situation has a strong effect on what will be snacked on,” says Darren Seifer, NPD food and beverage industry analyst. “Connecting marketing messages to the emotional nature of snacking -- think taste, cravings and indulgence -- will help drive product selection.”