The International Sweets and Biscuits Fair (ISM) held last month in Cologne, Germany, clearly illustrated the key confectionery trends, write market analysts Euromonitor. Particularly evident is the dichotomy between fun sugar confectionery aimed at children and premium luxury chocolates aimed at more adult consumption.
Product development - including new concepts, formats and packaging - was strong, writes Euromonitor. Novel products from Asia Pacific included fun-size jelly tubs containing yoghurt and/or fruit-based confectionery, while southern Europe and latin America continue to build on developments in pouches, sachets, rollers and squeezy tubes of liquid, paste and jelly sugar sweets.
Interactivity and flavour innovation is especially prevalent in more developed markets where children have higher disposable incomes and a host of alternative demands on their spending money, with which sugar confectionery increasingly competes. Not only does this include chocolates and gums, but also baked goods, snack bars and non-edible expenses such as mobile phone costs and computer games.
Euromonitor predicts that sugar-free looks set to be the explosive trend in 2003, particularly for more adult orientated sugar-confectionery, but also for children's products and chocolates. Although sugar-free is already a dynamic and established trend in gum, technological advancements could spell an end to laxative-effect bulking agents which have so far prevented progress in children's products, adds Euromonitor.
Equally, sugar-free chocolate is now indistinguishable from the 'real thing', although major manufacturers are still struggling to develop sugar-free variants which retain the unique taste and texture of their brands. Nonetheless, moving out of pharmacies and health-food stores into more mainstream distribution channels, sugar-free is definitely a trend to watch, stresses Euromonitor.
Another significant development was the wealth and variety of organic ranges and dedicated organic producers. Still largely driven by private labels, even discounters like Lidl have started carrying organic products. Moreover the launch of cocoa producer Barry Callebaut's organic range demonstrates that interest is growing among larger manufacturers too.
A key issue in organic production remains the supply of all the ingredients involved in the manufacture of chocolate and sugar confectionery, that is sugar, milk, cocoa and gelatine, among others. All the ingredients have to be certified organic, and it takes several years for the ground they are produced on to become suitable. In addition, distribution and production facilities all have to be certified to prevent cross-contamination. Consequently, even if in 2003 manufacturers choose to invest in organic product development, the raw material supply will remain finite in the near future.
Growing price pressure from retailers, and private label competition, especially in Europe, in addition to a somewhat uncertain economic climate mean that many companies have initiated cost-cutting strategies including portfolio rationalisation and searching for greater supply synergies. For many this must also involve a reassessment of the effectiveness of trade fair presence vis-à-vis other forms of brand support, whereas in happier climes such an either-or decision was never an issue, states Euromonitor.
The level of manufacturer presence at ISM 2004 will undoubtedly give a clearer picture of whether such cost-cutting is going to become a permanent company strategy in an increasingly consolidated and competitive industry.
In addition to a healthy 2 per cent value growth predicted by Euromonitor for 2003, the whole structure of the market is set to change as a consequence of Cadbury Schweppes' ambitious acquisition program. The company acquired Dandy and Kent in 2002, and the purchase of Pfizer's confectionery unit Adams is due to be completed later this year.
Meanwhile Nestlé has been restructuring its approach to confectionery, divesting sugar brands and boosting support for smaller brands such as Smarties, which has seen a host of NPD in recent months. Mars has also been renewing its brand support, building brand equity by increasing the number of confectionery brands extended into other food sectors such as bakery or ice cream.
Euromonitor predicts that with innovation and sugar free being key trends over the year, and developing markets, particularly China, offering exceptional opportunities for growth, leadership of the global confectionery market is set to be hotly contested over 2003 between Cadbury Schweppes, Mars and Nestlé.