[London / New York, 13th Archyde.com]–The latest data and interviews with major maker executives have revealed that Western consumers who are struggling with rising living expenses are cutting their spending on chocolate.
Melissa Poole, vice president of investor public relations (IR) at Hershey, a major US chocolate company, told Archyde.com that chocolate prices in the United States have risen “from the high single digits to the low double digits” in recent months. On the other hand, sales on a volume basis have decreased by 2-3%.
Hershey had long expected demand to slow, but “consumers have barely reduced consumption” until sales have recently fallen.
At the end of the pandemic of the new coronavirus, chocolate sales, like many other consumer goods, increased, especially in the United States. In addition to being supported by the benefits from the government associated with the economic stimulus measures, the background was that the “lifestyle of insatiableness” such as bulk buying was established.
However, it is said that some consumers’ behaviors have changed since they came here. For example, instead of buying a product containing many packs at a store, it is a change to choose a candy bar sold separately.
According to market research firm IRI, US chocolate sales fell 1.5% year-on-year on a volume basis in the 13 weeks leading up to June 12. Meanwhile, prices have risen by 8.2%.
“Chocolate consumption will become price-sensitive. Consumers will continue to buy chocolate, but will endure smaller sizes. The volume is declining,” said Daniel Sadler, principal of IRI. That’s why. “
IRI data also found that retailer private-label chocolate sales, which are cheaper than those from well-known manufacturers, have increased by 8% over the past six months.
According to a survey by consulting firm McKinsey, 40% of UK consumers switched to cheaper confectionery in 4-6 weeks until mid-May.
Cheap chocolate has a low cocoa content, so demand for cocoa will decrease even if the sales volume is the same.
Russia’s invasion of Ukraine has also hit demand, according to industry insiders and experts. Both countries typically account for 5% of global cocoa demand.
In recent months, Hershey has been using a new packaging warehouse in Pennsylvania to streamline and simplify the delivery of products to discount stores and “$ 1 shops” visited by price-sensitive customers.
Hershey’s Pool said the company has also used a method called “shrinkflation” to keep prices unchanged and reduce the size of packages for some products. This is to retain customers who can only pay $ 3 for a bag of chocolate products and can’t afford $ 5 or 6.
According to Poole, this technique takes time and planning and isn’t used “as often as you might imagine.” “Because of the high inflation, we often rely on raising the list price,” he said. Products with a list price of less than $ 2 accounted for 25% of Hershey’s total products in April, but have now dropped to about 20%.
But over the past year and a half, Hershey has been shrink-flating some seasonal products, Poole said.
A spokeswoman for Mondelez International, a US food giant that makes chocolates such as “Cadbury,” said in an email that “we have decided to reduce the weight of some products slightly.” “Cadbury Daily Milk” sold in the UK is now said to be smaller in size.
Shrinkflation, just as consumers move to cheaper chocolate products, has the effect of reducing cocoa demand even if sales volumes do not change.
According to industry insiders and experts, chocolate makers originally expected demand to increase by about 2.5% this year, but have now lowered it to 1%. If inflation persists and the war between Russia and Ukraine continues, we expect growth to be zero next year.
(Maytaal Angel reporter Jessica DiNapoli reporter)