Lean times make mean beans

Related tags Chocolate Barry callebaut

Lean times make mean beans
In cash-strapped times it's own-label and provenance that will attract consumers to chocolate, says Patrick McGuigan

With unemployment figures on the rise and the world's stock markets going the other way, chocolate makers must be rubbing their hands in glee. After all, the consensus is that in times of crisis people turn to chocolate for comfort.

But this is a crisis like no other and quite what impact it will have on the European chocolate market is not clear.

Some figures support the theory that chocolate is recession proof. Cadbury has just posted a very encouraging set of full- year figures; Chocosuisse, Switzerland's association of chocolate manufacturers, says that its members saw turnover rise 9.3% in 2008 to euro 1.8bn; and sales in Germany increased 5.4% to euro 4.7bn, according to its national association.

However, sales growth in France fell from 6.9% in 2007 to just 0.3% last year, according to Mintel. Meanwhile, chocolate supplier Barry Callebaut reported that year-on-year sales values in Europe were down 6.3% in the three months to November. The company blamed the results squarely on the economic downturn.

Even the International Cocoa Organization (ICCO) has hinted that chocolate is not impervious to the downturn. In its December review of the world cocoa market, it said that "demand for cocoa is suffering from an adverse global economic environment"

As Laurent Pipitone, senior statistician at ICCO, says: "Chocolate is not completely recession proof. It is relatively recession proof. Globally, we expect a decline in demand for cocoa this year. Consumers have less money to spend across all products, including chocolate. We expect them to go to cheaper products with a lower cocoa percentage."

Riding high

Despite this predicted fall in demand, cocoa prices remain high: $2,600/t in January, compared to $1,700/t two years before. This is due to two years of deficit in world cocoa production caused by increased demand and poor harvests in West Africa and Indonesia. The bad news is that this year's harvest is expected to fall short.

"Prices could go even higher," says Mario Snellenberg, export manager at Spanish cocoa supplier Nederland. "The news that comes out of the growing regions is not optimistic. Crops are down and disease is spreading in the Ivory Coast and Indonesia. It's hard to say whether higher prices on the shop shelves and the economic crisis will affect consumption."

As Snellenberg suggests, most manufacturers have managed to pass on price increases to their customers to offset the spiralling costs. At Barry Callebaut in Belgium, marketing manager Ann Dhoedt confirms that the firm increased prices last year, but will not reveal by how much. However, she argues that chocolate still remains an "affordable luxury". "There's a big difference between cancelling the purchase of a car and buying a piece of chocolate. We think growth will continue," she says.

One area that is already showing strong growth is supermarket own-label brands, says Dhoedt, as consumers move away from more expensive branded chocolate. That said, growth in the mature markets of Western Europe will also be driven by premium, indulgent products.

"Single-origin still has a lot of potential," she says. "It's been popular for a few years, but we are still seeing growth." This is backed up by consumer research carried out by Barry Callebaut in Europe and the US last year, which found 42% of people had tried origin chocolate up from 16% in 2006. The research also found that 33% of consumers had tried Fairtrade chocolate (a market recently buoyed by news that Cadbury is aiming for Fairtrade certification for its iconic brand Dairy Milk), while 24% had tried organic chocolate.

Dhoedt predicts the market for single-origin chocolate can evolve further by focusing more on provenance. "It's like wine. You could have origin chocolate from a certain country, from a region, from a certain plantation or even a year."

To this end the firm extended its range of origin chocolates last year with six new countries and four regions (Oceania, Amazonia, Savanna and Caribbean). It also launched limited edition "grand cru" chocolate, made with cocoa beans from a single plantation.

At Spanish chocolate supplier Chocovic, export manager Marta Casas also predicts a bright future for single-origin chocolate. The firm has launched two new varieties, from Mexico and Madagascar, to go with its chocolate from Venezuela and Ecuador. "The market has evolved and consumers are looking for more information. Cocoa varieties is another way to meet this."

Chocovic supplies a single origin-chocolate from Grenada in the Caribbean, but last year's crop was hit by hurricanes, so it is not available this year. In general, Casas says that there is enough supply from Latin America and the Caribbean to meet demand for single-origin, but as the market has grown competition for the best quality beans has increased.

Away from indulgence, chocolate sales could also be buoyed by a new generation of better-for-you products, such as probiotic or flavanol-rich chocolate.

Even reduced-sugar chocolate, which has been available for years, seems to be finally making an impact thanks to ingredient advances. According to Mintel, the number of reduced-sugar chocolate launches more than doubled between 2006 and 2009. Valérie Le Bihan, project manager at French sweeteners company Roquette, says the reputation of reduced-sugar chocolate has traditionally not been good. "Taste is the key. In the past, some sugar alternatives resulted in chocolate with unpleasant taste, which did harm to the image," she says. Culprits included mannitol and lactitol.

However, maltitol, marketed by Roquette under the SweetPearl brand, has solved many of these technical issues, she says. The polyol is widely used in sugar-free chewing gum, but can also be used as a 'one-for-one' replacement for sugar in chocolate without any 'off' tastes. In dark chocolate the ingredient has been found to actually intensify the cocoa taste, she adds.

Cargill's Zerose erythritol, which can be used to make sugar-free chocolate, has been recognised by the EU as having zero calories. According to head of marketing Henry Hussell, this presents opportunities for new sugar-free chocolate products. "By using Zerose in combination with Maltidex (maltitol), manufacturers can develop chocolate that has 30% fewer calories than standard products, thereby qualifying as a 'reduced calorie' product," he says.

Sugar-free is just one small part of the healthy chocolate market, however. Companies have launched a dizzying array of functional chocolate products in the past few years. In Spain, for example, Natra launched omega-3 and low-lactose chocolate targeted at own-label producers earlier this year.

Barry Callebaut has also invested in NPD, launching 'tooth-friendly' chocolate made with isomaltulose, flavanol-rich Acticoa chocolate for cardiovascular health and probiotic chocolate. It also launched a range of 'rebalanced' chocolates with less sugar and fat, and increased fibre.

"Three years ago consumers were not ready to accept chocolate in combination with health," says Dhoedt. "Today it's a very different situation. Consumers have heard of antioxidants and that they have something to do with dark chocolate."

Barry Callebaut's Acticoa chocolate is performing particularly well. Containing high levels of flavanols, an antioxidant found in cocoa, the chocolate is used in 30 products from manufacturers including Stollwerck and Thorntons. This number is predicted to at least double this year.

The company's probiotic chocolate, launched in 2007, is also being used by manufacturers in Italy, France and the US. Containing two strains of micro-encapsulated probiotics, developed in partnership with Lal'Food in France, 13.5g of the chocolate per day can help balance the intestinal microflora.

According to Lal'Food's technical development manager Anne-Laure Clair, challenges involved in developing the product included finding a way for the probiotics to withstand high processing temperatures, as well as remaining active during an ambient shelf-life of 12 months. The solution was to microencapsulate them in a coating of vegetable-derived fatty acids, normally used in supplements to protect against acid in the stomach.

However, Clair fears the European Commission's (EC's) plans to introduce nutrient profiling could hamper health claims for chocolate in the long run.

Silver lining?

However, by increasing the concentration of probiotics, it would be possible to make chocolate ingredients as drops, pearls or vermicelli that could be used in other functional products, such as health bars and breakfast cereals, thereby allowing the use of digestive health claims, she adds.

The threat posed by nutrient profiling is such that the European confectionery association Caobisco has recently written to the EC about the issue.

David Zimmer, secretary general, says: "A profiling system that discriminates against cocoa and chocolate products would be scientifically unjustified and would deprive consumers of meaningful information that would help them make informed and healthier choices. It would also hinder innovation and reformulation efforts."

A decision is due later this year. If, as expected, chocolate is excluded from making health claims, it would close an avenue for innovation that is flourishing.

On the bright side, the recession might have driven everyone to chocolate by then anyway.

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