Major players circle Israel but instability impedes investment, says analyst

By Oliver Nieburg

- Last updated on GMT

Major players circle Israel but instability impedes investment, says analyst

Related tags Middle east

The likes of Nestle, Ferrero and Kraft could look to the Israel as the domestic chocolate market booms, according to an analyst.

However, continued economic and political instability could put the major players off.

Growing market

Leatherhead Food Research analyst Jonathan Thomas told“I would expect the chocolate market in Israel to grow at a fairly similar rate to that observed over the last few years, i.e. somewhere between 5-10% per annum in value terms.”

Israel’s confectionery market was worth $440m in 2010 and has grown 27.5% since 2006, according to Leatherhead figures.

Chocolate accounts for almost half of the entire sector and has grown in value terms by almost 37% between 2006 and 2010.

Majors players

Thomas said that big players, already present in Israel, such as Kraft, Nestle, Mars and Ferrero were investing in countries nearby and could soon look to tap into chocolate growth in Israel.

“Kraft/Cadbury does have a fairly strong position in Egypt, while its rivals are increasing market share in nearby countries such as the UAE – so it is possible they may look to Israel for further growth,” ​he said.

Last month, Nestle acquired Israeli bakery firm Osem in a €75m deal.

Though Mars dominates the Israeli gum market, its presence in the chocolate sector is thought to be less extensive.

Cadbury supplies brands such as Milka, Toblerone and Cote d’Or on the market, while Ferrero competes in the countlines and boxed assortment sectors.

Market leader in overcharging allegations

The Strauss Group accounts for almost half of the Israeli confectionery market and its share grows to 60% in the chocolate sector.

Earlier this week, the company was reported to Israel’s Antitrust by a consumer group which accused it of exploiting its monopoly on the Israeli by overcharging for chocolate, which could spell opportunities for others, said Thomas.

“The fact that the market leader has been accused of overcharging may lead more people to seek out slightly cheaper products in response,”​ he said.

The potential

According to Thomas:“Entering the Israeli market could potentially be a route to market for the Middle East from a geographical perspective.”

However, he warned that tastes differed in many Arabian countries political and economic instability could deter many western companies.

In its latest Confectionery Update, Leatherhead said Israel benefits from a high percentage of teenagers and is one of the more developed markets in the Middle East.

Cater to kosher

“As is the case with many confectionery markets around the world, catering towards specific local tastes is important – in the case of Israel, kosher requirements will play a big part here,”​said Thomas.

He added that the appeal of premium chocolate continues to grow.

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