Chocolate hit as Dairy Milk sales go sour

A year has been a long time for Britain’s two biggest chocolate brands. One year ago, we reported how Cadbury Dairy Milk sales were soaring, as Galaxy was in decline. Now Galaxy is heading for the stars, with growth of more than £8m, but Dairy Milk has fallen back to earth with a bump, down £26.5m.

Good old-fashioned marketing clout and NPD have contributed in a big way to the success of Galaxy. The launch of a new bar took salted caramel chocolate into the mainstream in February. In August, Galaxy launched new sub-brand Duet, which comprises two chocolate fingers each containing a different filling.

Duet was backed with a TV push as part of a £12m media investment in Galaxy that meant the brand has been on TV for 35 weeks, making it the most-advertised chocolate brand in the UK, claims Mars. The supplier adds the brand has also benefited from the strength of price-marked packs, with its £1 price-marked blocks enjoying “impressive growth”.

The £1 promotional price point is a favourite for retailers and consumers, according to Nielsen analyst Gemma Cooper. “It has been a key factor in the outperformance of sharing formats such as large blocks and bags,” she adds. “Future pack and product innovation are likely to be developed with this price point in mind.”

In terms of overall average prices, shoppers are paying roughly the same for a kilo of Galaxy chocolate as they were a year ago. In contrast, the average price of a kilo of Dairy Milk is up about 5%, with the brand trading at a premium to Galaxy.

“We’ve taken the decision to increase prices or reduce sizes for some products within our portfolio because of a number of economic factors including ingredient costs,” Mondelez marketing director Matthew Williams told The Grocer earlier this year. “We believe our confectionery still represents a very affordable treat.”

It seems consumers agree, to an extent. In contrast to the 9.7% slump in volumes for Dairy Milk, Mondelez’s other big chocolate brands are performing well, with combined growth of Twirl, Wispa and Heroes more than making up for lost CDM sales. Promotions have benefited countline sales of Twirl and Wispa, says Mondelez, although the major success has been multipack and bag formats. Little wonder, then, that Cadbury Heroes have this year been extended with a 92g bag for the independent channel, although Mondelez says the strongest part of the Heroes range has been its 185g carton.

Mondelez has less cause to celebrate the performance of Cadbury Creme Egg, as the brand has dropped out of the top 20 table this year following a 9.2% fall in value sales to £50.2m. The supplier says this was a result of a general decline in ‘self-eat’ lines at Easter, primarily the result of a shorter season.

“Because ‘self-eats’ are frequently purchased through the season, the length of the season will have an impact,” says Mondelez trade communications manager Susan Nash, adding that, with Easter 2016 being even shorter, the business will be investing £4m in a TV push for the brand in a bid to improve sales next year. 

It hasn’t all been good news for Mars, either, with combined sales of Maltesers and Mars bars - which this year became Fairtrade-certified - down more than £10m. This decline was more than offset by one brand alone, however, as M&M’s sales soared by almost a quarter. M&M’s was on TV for 26 weeks as the business pushed limited-edition packs giving consumers the chance to win trips to the US. Another Mars success story has been Celebrations, which has been extended with a new sharing pack this year and supported with a TV campaign for Christmas.

The picture has also been mixed for Nestlé’s major chocolate brands, although Kit Kat has performed better than the top 20 confectionery table suggests. While the brand’s four-fingered and Chunky countlines are in slight decline, sales of the brand’s two-finger products - which are classified as biscuits (see p91) - are in double-digit growth. Nestlé will be hoping the launch this August of the Snap & Share sharing block format can bring growth back to Kit Kat confectionery.

NPD has driven modest growth in Nestlé’s Aero, which was extended in June this year with Aero Mousse in single and sharing bars supported by a £3.6m media investment. The introduction of a new four-pack multipack has also been a success, says Nestlé.

Nestlé, Mars and Mondelez have long been the ‘big three’ branded chocolate suppliers in the UK, but the acquisition of Thorntons by Ferrero this year has made the Italian confectioner a fourth major force in the market. Looking only at chocolate brands in the top 20, its sales are now just £60m shy of Nestlé’s.

Clearly there is work to be done with Thorntons’ retail sales, down more than £11m in the past 12 months, but the performance of Ferrero’s other brands suggests it will have what it takes to turn things around. 

Kinder Surprise continues to boom, with big investment in TV advertising working alongside canny NPD to drive 16.8% growth. Among the successes were limited-edition Kinder Surprise eggs tied in with the powerhouse Minions franchise, and the business has high hopes for new launch Kinder Joy following strong sales in Ireland. 

While some confectioners will be troubled by the war on sugar and increased consumer interest in health, Ferrero says it has benefited. “The greater focus on health is likely to be encouraging consumers to opt for premium products and smaller portions over not buying confectionery at all,” says customer development director Levi Boorer. “We’ve achieved growth by offering consumers unique premium products as well as remaining committed to portion control. We individually wrap our chocolate servings and promote our products as a treat to be consumed and enjoyed occasionally.”

Nestlé, meanwhile, says it is “constantly reviewing” its range to enhance nutritional value, adding that it provides information on nutritional values and portion size. 

For confectioners, the clearest indication of changing consumer and retailer attitudes has been the increasing use of checkout bans. While analysts say this has affected sales of singles, the major players are putting a brave face on the situation, with many claiming it has had only a limited effect on their business.

“The thing to remember about confectionery is that 70% of sales come through from the main aisle,” says Galaxy marketing director Emma Thornton. Still, the ongoing removal of confectionery from tills has forced Mars to act. “We’re still absolutely committed to impactful innovative point of sale at various points in store and we’ve also upped our investment in feet on the street and field sales capability.” 

In contrast to the sugar confectionery category (see p109), however, shoppers have been less likely to reach for the chocolate than they were a year ago. Total category volume sales are down 3% year on year and while some of this could be attributed to packs getting smaller, unit sales are also down 1.4%. And although price increases have kept category value static, value will fall should volumes continue to decline.

So far, chocolate has escaped the kind of attention sectors such as soft drinks have attracted from the sugar police, says Nielsen’s Cooper. But that could change, she warns: “Confectionery is likely to be a key battleground as the war on sugar intensifies.”

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