Chocolate giants push small companies into niche markets

By Catherine Boal

- Last updated on GMT

Related tags Chocolate Cadbury schweppes

The domination of the confectionery market by global heavy weights
such as Nestlé, Mars and Cadbury Schweppes is forcing small
companies to target highly specialised markets, according to a new
report.A number of high profile mergers and acquisitions in the
industry last year by large companies jostling to acquire more
market share could result in smaller companies being sidelined.

To compete, these firms may well find themselves forced to target specific sectors such as health-boosting confectionery or luxury items.

The Global Confectionery report, compiled by Leatherhead International, forecast: "The number of domestic producers is likely to shrink even further, as the multinational companies increase their global footprint. Further mergers and acquisitions are expected, especially in the developing parts of the world. The only way for smaller companies to survive will be to focus on niche sectors, and offer highly specialized products."

And the small UK luxury chocolate company, Hotel Chocolat, has been doing just that.

Established over 10 years ago, the private chocolate producer began as a catalogue business before targeting the burgeoning internet mail order market and encouraged consumers to order luxury chocolates as they would premium gifts.

But the profitability of the luxury and dark chocolate niche allowed the company to expand and in 2004 the first Hotel Chocolat high street store opened its doors.

Since then the business has shown steady growth with a 48 per cent increase in year on year sales and 20 more shops planned for 2006.

And the confectioner has extended its range to meet high consumer demand - creating gluten and wheat free products earlier this year.

According to Hotel Chocolat, its position in the confectionery market is very different from that of giants such as Cadbury Schweppes and Nestlé.

In a statement they said the company was founded with "a vision of making chocolate exciting again for UK consumers, bored by the mediocrity of what was available in supermarkets and on the high street."

According to Leatherhead, the top six confectionery firms - including large producers such as Nestlé, Mars and Cadbury Schweppes - own 65 per cent of the global chocolate market.

Trade journal, Candy Industry, place Mars as the leading supplier in 2004 to 2005 with confectionery sales of €7.43bn.

Nestlé take second place with €6.89bn, closely followed by Cadbury Schweppes with €6.68bn.

However, Leatherhead claim that, due to recent acquisitions, Cadbury is now the number one confectionery firm in terms of market share with 10 per cent of the global industry.

Last year, Cadbury moved into the specialised organic sector with the acquisition of Green & Black's - making it the UK's leading supplier of organic chocolate.

Dealing between the major players in the food industry has been rife with Wrigley buying the Kraft Foods sugar confectionery business at the end of 2004 for $1.48bn (€1.16bn) and Hershey's acquisition of Scharffen Berger Chocolate last year.

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