Maintaining sales despite recessionUnless you’ve been living in total isolation, it’s hard not to marvel at the number of new artisanal chocolatiers cropping up these days. Moreover, the great majority of these budding chocolate artistes are focused on using only all natural and/or organic ingredients, a formula that affirms the premiumization trend reported on in our inaugural issue of Sweet & Healthy.
It’s also a formula that establishes a higher price point, one that many gourmet chocolatiers are probably finding more difficult to maintain. One of headlines in this week’s Sweet & Healthy e-newsletter points out that even the most ardent organic and/or all-natural consumers are being a bit more selective in their purchases.
Julie Schmidt’s article in yesterday’s USA Today reported that almost 70% of all U.S. shoppers purchased something organic during the last three-month period. She also referenced an Information Resources, Inc. survey of 1,000 consumers conducted in May, which revealed that slightly more than half (52%) of those polled have cut back on their organic purchases because of cost.
At first glance, that percentage could be cause for panic, particularly for those entrepreneurs operating on a shoestring (and who isn’t these days, eh?). But if you’ve been monitoring the news at all, I’m sure the recent announcement that Hershey Co. is raising prices by 11% flashed across your computer screen either late last Friday or early Monday morning.
Ironically, that 11% increase translated into a 10% drop in Hershey’s stock price once the market absorbed the news on Monday. And while the stock has made some modest gains since then, underscoring the reality of rising commodity costs within all sectors, the important news for organic and natural chocolate producers is that even mainstream items are costing more.
Consumers who already are paying a bit more for “premium” products might be less reluctant to “downgrade” once they see that even lower-priced treats cost more. On the other hand, they simply may be looking for ways to dial down their cash register ring by buying less.
It’s important to give consumers options when they’re faced with belt-tightening budgets and you’re dealing with escalating ingredients costs, many of which won’t go away.
As Hershey president and CEO David West emphasized in his company’s press release on Friday, “Market prices for ingredients such as cocoa, corn sweeteners, sugar and peanuts are up 20% to 45% since the beginning of this year.” He went on to stress that the company expects commodity costs “to be more than double the 2008 increase.”
So what’s an organic or natural confections producer to do?
First, don’t cut back on quality. It’s a point of difference that discriminating consumers (and there are more of them every day) are willing to pay. Just how much is the $32- to $100-a-lb. question each chocolatier must determine him- or herself.
As I mentioned before, give the consumer options -- everything from less packaging and product to more product and pizzazz. One never knows which approach will work best with your consumer. It’s also important for confectioners to explain to their customers what’s happening in the supply chain pipeline.
Also, take a closer look at your own supply chain pipeline. Work with your suppliers; there might be opportunities to hold back those ingredients costs with some creative substitutions. That doesn’t mean lowering standards. But it could mean introducing new items that cost less to produce.
Finally, look at squeezing costs in your own operations, and re-examining scheduling, processing and packaging. Whatever you decide to do, continue to make the best possible product you can. The consumer will acknowledge your effort by being loyal. And that you can count on.
Barry Callebaut expands Chocolate AcademiesThe world’s leading manufacturer of high-quality cocoa and chocolate products -- including organic and reduced-sugar offerings -- Barry Callebaut, will open a new Chocolate Academy in Chicago next month, featuring Chef Jerome Landrieu as technical advisor.
The 8,500-sq.-ft. facility will be Barry Callebaut’s 12th Chocolate Academy location. Landrieu will help direct educational seminars, demonstrations, courses and workshops for artisans and culinary professionals around the world.
In addition, Barry Callebaut recently announced the opening of another Chocolate Academy in Mumbai, India. The academy will feature classes taught by trained master chocolatiers and encourage the exchange of confectionery expertise between professionals. Barry Callebaut also operates Chocolate Academies in Belgium, Canada, China, France, the Netherlands, Poland, Russia, Singapore, Switzerland, and the United Kingdom.
In related news, Barry Callebaut has announced plans to open its first innovation center in the United States. The facility will be located in Pennsauken, N.J., and consist of a laboratory for R&D as well as a special pilot plant to mimic actual production processes in the factory. The focus of the innovation center will be to research and develop new chocolate products and applications for customers based in the United States. Some of the R&D being done in European facilities will be transferred to the new center in Pennsauken.
For more information about Barry Callebaut, visit www.barry-callebaut.com.
Thompson takes seat on NCA BoardSeattle Chocolate Co. CEO Jean Thompson has been elected to the Board of Trustees for the National Confectioners Association (NCA). Her appointment commences in October 2008 and continues through October 2011.
“At Seattle Chocolate Company, we’ve been eagerly focused on our own development and distribution for the past six year,” Thompson said in an NCA release. “We are ready and eager to give back to the industry, learn from our peers, and bring a small, premium chocolate company’s perspective to the table.”
NCA board members are chosen for their leadership skills and ability to set policies and positions for the good of the entire confectionery industry. As such, the board is made up of executives from companies of varying sizes, product ranges and domestic and international product sales.
Seattle Chocolate Co. is the maker of a variety of product offerings, from truffles to bars, all of which are 100% natural and certified kosher. For more information, visit www.seattlechocolates.com.
All Things Organic to co-locate in 2009The Organic Trade Association (OTA), in partnership with Diversified Business Communications, has announced that it will co-locate its 2009 All Things Organic Conference and Trade Show with two of Diversified’s Cultural Food brand events – Expo Comida Latina and All Asia Food. The joint events will take place June 16-18 at McCormick Place in Chicago.
“This is an exciting time to be involved in the organic and ethnic and specialty product sectors, particularly as organic and specialty/ethnic foods are the two fastest-growing segments of retail food sales,” said David Gagnon, OTA’s interim executive director, in a release. “These co-located events will offer national and regional forward-thinking retailers, foodservice professionals and manufacturers access to valuable educational opportunities and sourcing options that will help them stay competitive in the changing landscape of food consumption in North America.”
All Things Organic will mark its ninth year in 2009. For more information about the upcoming event, visit www.organicexpo.com.
General Mills buys Lärabar producerGeneral Mills, Minneapolis, Minn., has acquired Denver-based Humm Foods, the manufacturer of Lärabar and Lärabar Jocalat energy bars. The brands will become part of Small Planet Foods, the natural and organic products group of General Mills.
“Lärabar is an exceptional brand that is experiencing rapid growth because of the quality and uniqueness of Lärabar products,” says Michele Meyer, president of Small Planet Foods. “We are especially pleased that Lara Merriken, the founder of Lärabar, will continue with the business.”
Merriken founded Humm Foods in 2002 when the idea of creating an all-natural, nutrition bar made of fruits and nuts came to her whiles he was hiking in the Rocky Mountains. Since then, she has successfully established Lärabar as a leader in the single-serve, natural-health bar segment.
Organic sales suffering from slow economyAlthough sales of organic food and beverages remain strong due to a core of loyal consumers, high gas and food prices definitely are eating away at the category. That’s according to an Aug. 18 article in USA Today. The story states that new organic customers are tough to attract, especially given that organic products can cost 10% to 20% more than their non-organic counterparts.
USA Today goes on to quote the CEOs of several organic food businesses, who admit to slower sales growth rates and cautious consumer spending as of late. The article also references the Organic Trade Association, which reports that sales of organic foods and beverages are predicted to reach $24 billion in 2008 and average upwards of 18% in annual growth through 2010.
Recent studies by The Harman Group and Information Resources, Inc. also found that consumers are purchasing fewer organic products due to expenses incurred by a slow economy, USA Today points out. In addition, the paper notes, some retailers are coming out with their own private label organic brands, creating further competition for manufacturers.
For more information about sales of organic goods, check out next week’s installment of Sweet & Healthy.
Explorer's Bounty ChocolatesDark chocolate just got a whole lot sweeter, thanks to Explorer’s Bounty. The Miami, Fla.-based company recently introduced a line of premium, artisan-panned dark chocolates made with 70% cacao. Not only are these new products certified organic by the U.S. Department of Agriculture (USDA), but they are rich in natural flavonol and contain no genetically modified organisms (GMOs). Varieties include Chocolate Covered Espresso Beans, Chocolate Covered Cocoa Nibs, Chocolate Covered Cashew Nuts and Chocolate Covered Macademia Nuts.
Explorer’s Bounty’s chocolates are organically grown using sustainable farming practices and adhering to Fair Trade practices as part of the company’s commitment to local and global community well-being. For more information, visit www.explorersbounty.com.