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.”
Despite Brexit, for now the UK appears to be continuing to follow this legislation.
What is the market for chocolate in the UK?
The Grocer in September 20023 noted that “in a year that has been dominated by inflation, chocolatiers have suffered more than their fair share of cost hikes.” The price of cocoa butter has been the major factor – increasing in price by 58% in the year to July 26th 2023. When combined with other cost increases like energy, it’s left the category’s biggest players no choice but to hike prices, reduce pack sizes or do both.” 78% of chocolate lines experienced an increase in shelf price in the year to 1 August across Asda, Morrisons, Sainsbury’s, Tesco and Waitrose: the average price hike was 16% ,with 40% on certain SKUs. Cadbury’s Buttons shrank 23% from 240g to 184g.
Kantar shows the extent to which demand is falling. Take-home volumes are -6.5%. Value has grown only the back of an average 12.6% price rise (52 weeks ending July 2022). The introduction of HFSS rules in October 2022 banning chocolates from prominent in-store display will also have had an impact. All but one of the top ten chocolate brands – Lindor – has grown value due to substantial price rises, but volume tells a different story. Only M&Ms, Ferro Rocher and Cadbury brands such as Wispa have managed to gain any extra sales. Premiumisation continues, with brands such as Tony’s and Hip outperforming the market. Another trend is smaller bar sizes to give a lower unit price point without compromise in quality.
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).
Increased interest in vegan and plant-based products has lead to many new brands launching (Moo Free, Nomo, HiP) as well as established brands adding dairy-free products (Galaxy, Lindt). Most recently Cadbury’s has announced a plant-based version of its iconic CDM. The value of free-from chocolate soared nearly 50%, from £37.6m to £55.2m (Nielsen IQ for the 52 weeks ending August 13th 2022)
Blonde chocolate – white chocolate made using caramelised milk – is coming up fast. Cadbury’s have brought their Caramilk brand to the UK from Australia. A myriad of own-label and branded lines have followed. Blonde chocolate over-indexes with all age group between 28 and 64, according to Kantar Worldpanel data.
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, and Rainforest Alliance. 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.
Packaging materials are also coming under greater scrutiny with Galaxy moving to recyclable and compostable film. Smarties sharing blocks use new technology developed by Nestle to make the paper wrappers used both heat-sealable and recyclable.
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. Cadbury’s have reformulated CDM to reduce the sugar content by 30%, replacing it with soluble corn fibre. Hotel Chocolat’s new mantra is “More Cocoa, Less Sugar”. Manufacturers are also exploring high-protein variants of bars such as Yorkie and Snickers.
In August 2020 the UK government announced that the PHE was being abolished which has left a question mark over the future of the sugar reduction programme. Commercially reduced-sugar products have not done well. Nestle Wowsome has now been withdrawn and sales of Cadbury’s Dairy Milk 30% Less Sugar are now only £1.9m per year.
How does legislation on HFSS (High Fat Sugar & Salt) products apply to UK chocolate?
Update supplied by www.walkermorris.co.uk/
- Restriction of HFSS products by location
The restriction of HFSS products by location came into force on 1 October 2022. The Regulations ban the promotion of HFSS foods by their placement in key locations (store entrances, aisle ends and checkouts) when retail stores are over 185.8 square metres (or 2,000 square feet) and the equivalent key locations online. These restrictions apply to medium and large businesses (with 50 employees or more). Failure to comply with regulations may result in a business being issued with an improvement notice and subsequently a fixed monetary penalty if compliance is not achieved as required. You can read the most recent guidance here.
Enforcement of the regulations is down to trading standards or environmental health officers depending on local arrangements. The trading standards organisation, CTSI, has said that its enforcement approach will be “graduated and proportionate”. David Pickering, the lead officer for food, said “While these regulations are seen as an important public health measure, it will be for local trading standards services to liaise with their public health teams and adopt an approach that is in keeping with the public health priorities in their area.”
2. Restriction of HFSS products by volume
The restriction of HFSS products by volume price, which was due to come in on 1 January 2023, is expected to come into force on 1 October 2023. The Regulations ban the promotion of HFSS products through multi-buys such as buy-one-get-one-free. Government has faced strong pressure from the food and drink and advertising industry to shelve the plans, which they claim will hit companies and consumers already struggling in the cost of living crisis. However, Government is currently still holding firm on the plans to introduce the restrictions in the autumn.
3. Restrictions on the advertising of HFSS products
A ban on adverts for HFSS foods before 9pm and a sweeping ban on HFSS advertising online was due to come into force on 1 January 2023. However, Government announced in June that the plans were being delayed to January 2024 and then in December 2022, the policy was delayed further, and is now proposed to come into force in October 2025.
Alongside the announcement of the delay, the Department of Health and Social Care, in conjunction with the Department for Digital, Culture, Media & Sport, launched a consultation introducing the required secondary legislation. The consultation states that Government has formulated its final policy for introducing such advertising restrictions and is now seeking views on the draft Advertising (Less Healthy Food Definitions and Exemptions) Regulations 2022 to accompany the primary legislation. The deadline for responses was 31 March 2023.