Market analysts Frost & Sullivan expects the South African chocolate market to grow 10% per annum in the next five years driven by rising incomes and locally-sourced premium products.
Frost & Sullivan values the market at R5.03bn ($544.6m) and if its growth forecast is realised the market will be worth almost $3bn by 2017.
Sarah O'Carroll, environmental & building technologies industry analyst at Frost & Sullivan , said: “The market is primarily driven by increasing disposable incomes and South Africa's growing middle class."
Retail expansion is also helping chocolate sales, with more options available at stores such as Pick ‘n Pay and Shoprite, she said.
Premium sets you apart from the crowd
“The changing market landscape in South Africa will enable continued growth in the premium and artisan chocolate segments of the market,” said the analyst.
A premium positioning may also help new entrants overcome a “highly consolidated” mass market, 85% of which is controlled by Mondelez with Cadbury, Nestlé and Tiger Brands through Beacon.
O’Carroll said that Lindt had raised the profile of high quality chocolate when it entered the market over 10 years ago and currently leads the premium chocolate sector, which is valued at R495m ($54m), ahead of Ferrero.
She added that there were a growing number of domestic artisan chocolate makers such as Ezulwini Chocolatier, Huguenot Chocolates, Honest Chocolate that could profit from the growth of premium.
“The demand for locally produced chocolate products is also increasing. Premium chocolate consumers are becoming more interested in locally manufactured products, “she said.
Ferrero appears to have spotted the trend. Last year, it announced it would increase its South African production by relying on locally-sourced ingredients and packaging instead of imports. See HERE.
O’Carroll added that chocolate was seen as an affordable luxury and sales would be largely unaffected by hikes in retail prices caused by rising raw material costs.
Other estimates and Mondelez
Euromonitor International’s estimates on market growth in South Africa are a little more conservative. The organization expects the chocolate market to grow 0.7% per annum in the next five years to $712m by 2017.
Mondelez International has labelled South Africa as one of its ‘Next Wave’ chocolate markets, a category that falls just below its three ‘Big Bet’ markets, India, Brazil and Russia.
Indonesia, China and Ukraine are Mondelez’s other Next Wave markets.