Consumers in the US view chocolate as an “indulgent pleasure” that they are not willing to give up despite the tight economic environment, according to Mintel.
New research from the firm predicts the chocolate market will continue to grow annually by 4 per cent for the next six years.
The market researcher places chocolate in the same bracket as cigarettes and alcohol, all of which, it said, “seem relatively recession-proof”. Sales continue to remain strong and steady, following a historic performance from these sectors during times of economic recession, it said.
"People might be cutting back or switching to store-brands, but they definitely aren't giving up their small daily indulgences," said Marcia Mogelonsky, senior analyst at Mintel.
Mogelonsky said that most Americans can still afford these products, no matter how much their finances have been cut. "Because people are being so cautious with their spending, they feel they are entitled to small rewards and they won't give them up easily."
According to the latest figures from Mintel, the retail market for chocolate has shown fast growth, with sales rising 22 per cent from 2002 to 2007, to reach $16.3bn (€11.5bn).
The market researcher highlighted innovative, dark and premium chocolate as particularly popular with consumers. Sales for these products are expected to remain strong as “Americans continue indulging in this favorite treat”, said Mintel.
Data released by Mintel in July indicated that the popularity of dark, premium and innovative chocolate also extends to Europe. Much of the interest stems from the healthy image of dark chocolate.
Overall sales for dark chocolate hit £85m (€106m) last year, almost doubling - by 96 per cent - between 2005 and 2007.
"Although dark chocolate is still high in sugar, it is rich in antioxidants and is lower in fat than milk chocolate... and this has really struck a chord with Britain's chocoholics," said Mathilde Dudouit, senior market analyst at Mintel.
Mintel anticipates the growth rate will continue its steep curve this year, with a further five per cent growth expected in 2008 alone, pushing the British chocolate market to £2.23bn (€2.8bn) in value by the end of the year. Sales of all chocolate are set for a further 17 per cent growth in the five years to 2013, Mintel said.
Upward spiral of ingredient costs
The positive predictions for the chocolate market come amidst an overall price squeeze, as costs for cocoa have been steadily rising since the beginning of the 2006/07 cocoa season, with costs doubling by June 2008.
In July, cocoa futures continued their upward spiral and swelled to £1,703 (€2,160) in London, the highest for 22 years, according to the International Cocoa Organization’s (ICCO) monthly report.
The story was similar in New York, where futures achieved a 28-year high, reaching $3,245 (€2,203) per tonne, after last month crashing though the $3,000 (€2,114) barrier as demand outstripped supplies.
Meanwhile, the ICCO daily prices averaged $2,954 (€2,005) per tonne, down by $68 (€48) compared to the average price recorded in the previous month.
Overcoming cost pressures
Major confectionery companies, such as Barry Callebaut, have seen profits suffer under increased input costs, leading them to respond with actions such as raising retail prices.
Cadbury recently signalled it would take all measures necessary to deliver its 2008 performance promises, and is not taking any chances on factors that are affecting the food industry, such as high costs.
And in June, confectionery giant Mars linked up with the US government and IBM in a $10m (€7m) five-year project to sequence cocoa’s double helix genome to find solutions that will relieve the risk to the cocoa supply chain, which is currently impacted by shortages, as well as to produce better chocolate.