Commodity price rises send confectionery on sugar rush

There’s no sugaring this pill - the price of sweets is rising a lot faster than the price of chocolate.

While the retail price of chocs has kept in line with inflation - with SKUs up 3% year-on-year on average - the price of a typical sugar confectionery item has soared by 11% over the same period, from an average of 98p to £1.10 [BrandView 52w/e 3 June 2012].

And the increase in the price of sugar confectionery is accelerating - prices rose by 6.5% between June 2010 and June 2011, but just 3.3% in the 12 months preceding that. The growth in the cost of chocolate, meanwhile, has slowed from 5.8% in 2010-2011 to 3.4% over the past 12 months

Ingredients cost hikes have played a role in the rising price of sweets, including a sharp increase in the cost of sugar in early 2011, rises in maize starch and fluctuations in the price of gelatine. To a lesser extent, it is also a result of value being added to the market at Christmas, with the typical price paid for a sugar SKU up from £1.02 in December 2010 to £1.27 in December 2011.

The increase in price has come despite greater promotional activity, with the number of promotions on sugar confectionery up from 1,425 a year ago to 1,889 now. At the same time, the typical saving has risen 0.5 percentage points to 26%.

This has helped some major branded suppliers keep prices at the same level or even lower than last year, but the price of own-label sweets - already the most-promoted part of the sugar confectionery market - has soared by 17% year-on-year, from an average of 69p per unit to 83p. However, with the volume price of own-label goods virtually static year-on-year, the increase may also be a result of pack size changes and other product development.

In chocolate, too, own-label price rises are outpacing the overall market, rising 6% year-on-year from £1.45 a unit to £1.54. The major brands, meanwhile, have kept a tight rein on prices - the average unit price of Mars, Cadbury and Nestle SKUs have risen 4% year-on-year.

This will have been helped by chocolate producers having a slightly easier ride on the commodity front, with the price of some key chocolate ingredients, including cocoa, butter oil and milk products falling.

Nonetheless, there has been an increase in promotional activity in the chocolate market, with the number of deals up from 6,152 last year to 7,191, while the typical saving has risen from 26.9% to 29.1%

The average saving in the gum market, meanwhile, has fallen - from 27.1% to 24.3% - along with a drop in the number of promotions from 159 to 106. This is perhaps an indicator of renewed confidence in gum, which is back in value growth after a troubled few years.