Chocolate Sector Update


What is chocolate?


European law dictates that chocolate must consist of a mixture of cocoa and sugar. It states: “Chocolate designates the product obtained from cocoa products and sugars, which contains not less than 35 % total dry cocoa solids, including not less than 18% cocoa butter and not less than 14% of dry non-fat cocoa solids.”


What is the market for chocolate in the UK?


In 2017, UK organic chocolate sales grew by 13% year on year, according to the Organic Trade Board, outperforming both the UK grocery market (+2%) and total UK organic sales (+7%). This performance was in stark contrast to the rest of the chocolate sector: the top 12 UK chocolate brands lost almost £80m in retail value in the year up to September 2017, according to The Grocer, which attributes the decline to pressures from the health agenda and changing shopping habits. Brand leader Cadbury’s Dairy Milk suffered a 4.2% slump in value, the largest absolute loss of the country’s chocolate brands, which have stripped a total of £78.3m from a category down 4% to £2.46bn (data from International Research UK (IRI) w/e 15.07.17). Meanwhile, own-label chocolate fell by 2.5% year on year.


What are the key trends in chocolate today?


Darker, higher cocoa solids chocolates are increasingly finding favour with UK consumers, as are chocolates offering greater provenance – single origin (all cocoa coming from a single country) and even single estate (all cocoa coming from a single grower). More manufacturers are sourcing Fine Flavour Cocoa from the 23 countries that grow it, according to the International Cocoa Organisation’s somewhat arbitrary definition.


There has been an explosion of artisan bean-to-bar manufacturers in the UK, including brands such as Love Cocoa, Pump Street Bakery, Damson, York Cocoa Works, Duffy’s, The Cocoa Tree and Dormouse Chocolates. These companies produce a modest amount of chocolate in a highly hands-on way, hence their elevated price points. However, as they grow in size and become more efficient their products will become more affordable.


Another trend is tree-to-bar manufacturers that produce in the country where the cocoa is grown. Examples here are Hotel Chocolat (St Lucia), The Grenada Chocolate Company and Madécasse (Madagascar).




What are manufacturers doing to ensure their production is sustainable?


The last decade has seen the major chocolate processors finally accept that they have some responsibility towards the cocoa farmers on whose products they depend. Initially there was widespread acceptance of independently verified schemes such as organic, Fairtrade, Rainforest Alliance and Utz. However, more recently, large processors have sought to replace these independent schemes with their own in-house programmes such as Mondelez’s Cocoa Life and the Cocoa Horizons scheme from Barry Callebaut. How well consumers will accept these schemes remains to be seen.


What impact are health concerns having on the sector?


Concerns about sugar have had a significant impact on chocolate’s fortunes, with makers under pressure to take action against childhood obesity. Public Health England (PHE) has urged suppliers to reduce the level of sugar in products popular with youngsters, while health campaigners Action On Sugar have called for the 2018 soft drinks levy to extend to confectionery.


PHE guidelines require the industry to follow three approaches:


  • Reformulating products to lower the levels of sugar present.
  • Reducing portion size, and/or the number of calories in single-serve products.
  • Shifting consumer purchasing towards lower or no added sugar products.


For chocolate, PHE recognises that reformulation is technically challenging, so emphasis is on the other two areas. Its recommendations specific to chocolate are:


  • Maximum of 51.6g sugar per 100g chocolate by 2017.
  • Maximum of 43.4 g sugar per 100g chocolate by 2020.
  • Single-serve products capped at 200 calories.


How have manufacturers responded?


Nestle announced in 2017 that it would cut 10% of sugar from its confectionery portfolio. KitKat was relaunched with extra milk and extra cocoa in order to reduce sugar levels. Similarly Milky Bar has been reformulated to make milk the first ingredient (it used to be sugar). Hotel Chocolat’s new mantra is “More Cocoa, Less Sugar”. Manufacturers are also exploring high-protein variants of bars such as Yorkie and Snickers.