Chocolate sales slow in face of rising costs, competition and health concerns, Mintel data shows

Chocolate confectionery sales grew 24% to $21 billion in the U.S. in 2014 from 2009, but the pace of growth slowed to only 3% last year, Mintel notes in recent research​. 

Consumers interest in chocolate appears to be on the rise though, prompting the research firm to predict steady growth in the category despite significant cultural and financial headwinds.

Health concerns​

Nearly three-quarters of U.S. consumers eat the confectionery as a treat, according to Mintel data, which places it in a precarious position as concerns about obesity and health rise in the U.S.

“The American obesity epidemic has had an impact across food and drink categories, including chocolate confectionery,”​ said Beth Bloom, a food and drink analyst with Mintel, who noted 36% of Americans were obese in 2012, according to the Center for Disease Control and Prevention.

“Some 15% of respondents who buy chocolate say they’ve bought less of it in the past year for health reasons. This rises to 20% among respondents 65+ and 22% among black respondents,” ​she added.

As the spotlight on health intensifies, chocolate manufacturers will need to responsibly position their products and will be pressed to offer better-for-you options, she said.

One way to do that is with mix-ins, such as fruit, which offer added health benefits and move chocolate farther away from a “sugar candy positioning”​ to one that is perceived as healthier, Bloom said.

Addressing rising costs​

Mix-ins also reduce the amount of chocolate necessary in a product, which can help ease some of the impact from rising commodity costs, Bloom said.

She explained that manufacturers should consider ways to mitigate the impact of rising commodity costs, because they are restraining the growth of chocolate sales.

“Rising commodity costs, including prices for corn and sugar, could potentially drive up prices within the category and limit the production capability of some manufacturers,”​ Bloom said. For example, she noted the price of sugar in the U.S. is 50% to 100% higher than other markets. The price of cocoa also rose 9% in the first 10 months of the year.

“Disease, climate change, a waning investment in cocoa farming, combined with a growing demand for chocolate in the world left cocoa supplies in question,”​ she added.

All this together contributed to Hershey and Mars announcing future price hikes. These increases are not escaping unnoticed. Bloom noted that 71% of consumers noticed the price jumps and 3% have stopped buying chocolate as a result.

Increased competition​

The number of new chocolate products launching is increasing – as is competition for manufacturers, Bloom said.

Mintel data shows an 18% increase in chocolate innovation between 2013 and 2014, but only 12% of them were in North America.

“Chocolate confectionery innovation within the U.S. has been focused on seasonal products. Some 42% of new product launches were classified as seasonal – largely comprised of new takes on familiar products, such as a change in shape or packaging,”​ according to Bloom.

That said, launches of plain or unflavored chocolate varieties declined almost 10% from 2010 to 2014, while options with peanut butter rose 2.9% and those with almonds increased 1.3%.

In addition, more products are being launched with premium ingredients and ethical claims, Bloom said. She noted the premiumization of products is one way to improve the perception of quality to justify price increases for higher commodity costs.

Ethical human claims, such as Fair Trade certified, also are up 74% from 2010 to 2014, although only 10% of chocolate buyers say it’s important to them, Bloom said.

“However,”​ she added, “this grows to 16% among respondents 25-34. As younger consumers age, they will likely take their interest in responsible purchasing with them, as well as pass it to their children, who will be the chocolate buyers of the future.”​

Growth potential​

Despite these headwinds, Mintel predicts chocolate sales will grow steadily through 2019 in the U.S. to $25 billion.

Bloom notes U.S. consumers taste for confectioneries is growing and driving up sales. From August 2013 to September 2014, 83% of adults said they ate chocolate and other candy compared to 74% during July 2009 to September 2010.

Chocolate also will grow based on the increased interest in snacking, Bloom said. In 2008 to 2009, 64% of consumers said they snack and 80% of chocolate consumers do so as a snack, she added.