Through the years, American consumer shopping habits have changed. The stereotypical, once-a-week trip to the supermarket has transformed into a multi-stop, multi-channel excursion, or rather excursions. These visits are more fluid, ranging from fixed purchases to impulsive buys that satisfy cravings, curiosity and checkbook demands. In brief, shopping has evolved as America has.
The all too familiar target of the marketing “mad men” — the nuclear family — has now found itself “sandwiched” between aging parents and unemployed millennials; the “silent Majority” now cues up to the voting polls with blacks, Hispanics and Asian Americans; and single parenting makes the headlines more frequently than singles bars. Welcome to a brave new check-out line, one that’s self-paying and self-bagging. Selfies extra.
But wait a minute, isn’t this article about chocolate products? Of course. But today’s chocolate products lineup reflects the aftereffects of the Great Recession, global competition, more scrutinized sourcing, local, domestic and international politics, sustainability commitments, traceability and more discerning taste buds. One need only look at an ALDI Foods parking lot; BMW’s and Mercedes are lined up next to Chevies and Fords, all of them vying for value and variety.
Of course, trendspotting sometimes becomes trend-wishing. Nonetheless, industry experts acknowledge the shifts going on within the chocolate industry.
As Rose Potts, corporate manager – sensory and product guidance at The Blommer Co. points out, “Consumers today are more fractured. What this means is there are many groups with very specific preferences. There is no average shopper.”
Hence, as she explains, “Millennials crave variety and this is served well with themed and seasonal offerings, such as fall flavors or special summer flavors, such as lemonade. Presenting new and exciting flavors in drops or inclusions is key to keeping them engaged. These items are premium products.
“Conversely, Baby Boomers who are neck in neck with Millennials in spending, are continuing to age,” Potts says. “As people age, they tend to consume less, but trade up to premium products. Also people tend to have children later in the United States; this means less children and less opportunities for more economical products, but more opportunity for the premium products. Less children may lead to purchasing of more premium products for the adults.”
|Consumers today are more fractured. What this means is there are many groups with very specific preferences. There is no average shopper.|
She also sees markets continuing to change globally as the most developed parts of the world will have the smallest retail sales growth. Underdeveloped countries will continue to have the most retail sales growth; as their collective economic status grows so does their taste for chocolate, especially premium products.
“Also, as the middle class has been shrinking and the economy has put the squeeze on all groups, we have ‘bookend’ growth in chocolate sales, which means the same customer may be shopping for value pricing at dollar stores, but also be looking to premium products to deliver high value, such as the upscale private label products,” says Potts.
Courtney Le Drew, Cargill’s Cocoa & Chocolate marketing manager, acknowledges the phenomenon.
“The economic climate is driving consumers back to basics — this has led to an increase in both budget and premium products,” she says. “Premium bars and confections are an affordable luxury and serve as one way consumers can treat themselves.”
Moreover, there’s a growing demand for dark chocolate products.
“As the concern about well-being is rising, consumers are becoming more discriminatory in how they consume calories. Increasingly, dark chocolate has received positive press about potential health benefits associated with consumption since it is made with higher cocoa solids inherent with antioxidants,” Le Drew adds. According to Innova Market Insights “there has been a 42 percent increase in global product launches tracked with cocoa/chocolate active health claims from 2012 to 2013,” she points out.
“I don’t think we are going to see anything like 2007, but more of a slow and steady uptick,” to growing dark chocolate demand, Potts says. “But as I said before, there is no average Baby Boomer or Millennial. No one particular chocolate product is probably going to have the steam behind it with a trend like we had seen in 2007 with dark chocolate.”
Has the cocoa butter/cocoa powder price relationship returned to ‘normal’?
Hugo van der Goes, v.p. commercial, Cargill Cocoa & Chocolate, says it’s important to consider a few factors before delving into a relationship discussion between cocoa powder and cocoa butter prices.
First, it’s critical to keep in mind that when cocoa liquor is pressed, powder and butter are always created, he explains.
“Second, cocoa butter has basically one main application — chocolate products,” van der Goes emphasizes. “Therefore, demand for cocoa butter can be analyzed by looking at worldwide chocolate consumption. On the other hand, cocoa powder is used in a large variety of different products including bakery, dairy and confectionary applications.”
That said, van der Goes admits that during the last ten years, and most definitely the last five, “there has not been a traditional price pattern. The market has become increasingly complex; more and more applications for powder are being introduced, and there are more regions in the world consuming both chocolate and powder-based food products.
“Cargill Cocoa & Chocolate believes that the balance between the two products will stay more dynamic,” he says. “This implies that the cocoa buyer needs to be closer to the market than ever before. As emerging countries continue to develop, and types of applications fluctuate, changes in supply and demand between powder and butter might occur more often. The relative growth difference between powder-based food applications and chocolate consumption will be one of the key factors to watch.”
In the interim, van der Goes believes that uncertainty about butter supply and demand may cause considerable fluctuations in the butter-powder price relationship.
“The balance between cocoa butter and powder has traditionally been one of the main price movement drivers, but the consumption of powder has emerged as another very important driver of forward prices,” he says.
Mark Metivier, director of sales – North America for ADM Cocoa, says his company has also seen a slight increase in the requests and development of higher cacao content products, particularly in the more upscale and gourmet offerings.
“Most of the activity has been in the 50-70 percent cacao content range,” he says. And while milk chocolate continues to be the leader in chocolate consumption, dark has shown a constant and steady growth pattern.
This shift toward dark chocolate also dovetails with another trend found in the chocolate sector — intense flavor. Dark chocolate with high cocoa solid content provides an intense flavor experience that consumers are responding to in a positive way, Le Drew says.
In addition to re-evaluating their chocolate preferences, consumers are also re-examining their sugar intake.
“Industry giants are pledging to lower fat, sugar and/or salt levels in their products,” Le Drew points out. “This is largely driven by stricter regulations in the United States.”
Interestingly, “no sugar added” claims have risen, while “sugar-free” and “reduced-sugar” claims remain stable. According to Innova Market Insights, the number of chocolate products tracked with a no added sugar claim increased 130 percent from the first half of 2011 to the first half of 2012.
“Most of the activities surrounding product development and sugar have been in the area of sugar reduction rather than sugar replacement,” Metivier says. “Consumers still seem to prefer the taste and delivery of natural sugar vs. sugar replacements.”
Natural sweeteners, however, are trying to position themselves as the ideal sugar replacement.
“When stevia entered the U.S. market it was the first of its kind — extremely sweet, zero calories, derived from a plant — and became very popular,” Courtney says. “Now, other natural sweeteners, such as monk fruit, are entering the market. The ‘no added sugar’ claim pairs well with the clean label trend; both trends will remain relevant in the marketplace as long as the overall focus on health and wellness continues to intensify.”
That doesn’t mean alternate sugar replacements have disappeared from the market. On the contrary, they are very much in play. As Potts points out, despite the growth of natural replacers, they still are a niche within the sugar-free segment.
Blommer’s Jeff Rasinski agrees. The company’s director of commodities and corporate procurement says Blommer’s sugar-free business has been “solid.”
“We have received inquiries and are currently making products for customers containing a number of sugar-free options: maltitol, sucralose, erythritol and stevia to name a few,” he says. “The overall quality of sugar-free offerings are improving and as customers look for low-carb alternative options, we should see continued growth in these categories.
In addition to health benefits, consumers want a clean conscience. Thus, on top of the incredibly intense and long-term commitments by all sectors of the cocoa and chocolate industry to improve cocoa farming communities as well as eradicate child labor abuses, consumers want additional re-affirmation from the manufacturers that they are doing all they can to ensure ethical sourcing.
“Certification is an important tool under the Cargill Cocoa Promise — and indeed there has been an increase in demand for certified products,” says Le Drew. “However, not all brands are calling out third-party certification programs to help them communicate their commitment.”
Still, Le Drew says “We have seen demand for sustainable cocoa — and cocoa and chocolate in general — continuing to grow. As a result, we have remained focused on scaling up our commitments and activities under the Cargill Cocoa Promise to enable more farmers to benefit from improved yields and incomes; more cooperatives and farmer organizations to get certified; and achieve more available volumes of certified beans and products. We’re confident we’re heading in the right direction to not only deliver products to meet our customers’ commitments, but also to support a sustainable long-term cocoa supply chain.”
A similar scenario is being played out amongst other cocoa and chocolate suppliers.
Kip Walk, corporate director – cocoa and sustainability Blommer, also affirms that there has been an overall increase in the demand for certified products.
“Some of this demand has been generated by the commitments major brands have made to a fully sustainable supply chain by 2020 and the natural year to year increase to meet those goals,” he explains. “However, we have also seen a spike in interest by retailers to provide certified products to their customers, which has generated a ripple effect throughout the vendors that supply products to those chains.”
As Walk explains, there continues to be an active and aggressive approach within the industry to expand the amount of certified and sustainable cocoa produced.
“What appears to be a new aspect to this approach is the focus more on the sustainability aspect of the supply chain and not one that is simply targeted at certification,” he says.
Understanding that those two are not always interchangeable and that the cocoa sector may need assistance in areas that are not traditionally covered in a certified program to truly provide the best opportunities to both current and future cocoa farmers remains the industry’s current challenge, Walk adds.
Of course, in the midst of addressing sustainability and certification issue, cocoa and chocolate suppliers need to respond to market needs, such as protein and more certifiable product lines.
“Evidence indicates that protein is a long-term trend, and not a fad,” Le Drew says. “Protein is not just about trying to build muscle, it’s also about weight control, satiety, healthier snacking and sport nutrition. Protein products have now become applicable to a wide audience, from aging Baby Boomers and individuals trying to maintain or lose weight to athletes and anyone seeking products that keep them fuller longer.
As a result Cargill Cocoa & Chocolate has introduced a protein line under the Wilbur brand and a range of certified cocoa products — both in response to market needs.
Chocolate and protein pair well together, and under the Wilbur brand, Cargill offer innovative protein coatings and drops including Wilbur Y854 confectionery protein wafers, Wilbur Y855 milk confectionery protein wafers, Wilbur Y938 white chocolate protein drops, and Wilbur Y985 cocoa confectionery protein drops.
In addition to the protein offerings, the company has also increased the range and availability of its certified sustainable cocoa and chocolate products for customers in North America.
ADM Cocoa has also introduced a variety of new products to meet customer needs and requests such as coatings containing proteins and fiber, the introduction of new fats and oils and several products to meet new and unique taste deliveries and applications, Metivier says.
“There has also been changes from hydrogenated to completely non-hydrogenated fats,” he points out. “Lastly there has been a general trend towards ‘cleaner’ label declarations by eliminating artificial ingredients where possible.”