Euromonitor Quarterly Statement Q3 2016

‘Post-Brexit consumers may move to lower-priced confectionery, reversing premium chocolate trend’

By Jenny Eagle contact

- Last updated on GMT

Related tags: Food, Russia, Value added

Picture credit: Mondelēz International. The company plans to expand in the US confectionery market.
Picture credit: Mondelēz International. The company plans to expand in the US confectionery market.
Brexit is unlikely to have a dramatic effect on confectionery sales, with the quarterly update showing a 2% reduction in volume sales by 2020, according to Euromonitor.

However, consumption per capita will continue to decline, accentuated by a “disorderly” Brexit. It claims given that value sales would see a larger decrease consumers may move to lower-priced confectionery, reversing the current popularity of premium chocolate.

'Disorderly Brexit'

‘A disorderly Brexit will accentuate the gradual per capita volume consumption decline that has been experienced in the UK for some time - per capita, consumers are experienced to purchase 300g less of confectionery by 2020 compared to an orderly Brexit.’

In its report, ‘Packaged Food: Quarterly Statement Q3 2016’, Euromonitor suggests the continuation of a bleak period for packaged food, with demand weakening in Western markets, and the BRIC countries of Brazil, Russia, India and China.

Manufacturers are looking for markets where they can achieve value growth rather than volume, resulting in a spate of acquisition attempts for companies with a strong presence in the US​,” said Jack Skelly, food analyst, Euromonitor.

Despite its low growth, the sheer size of the US packaged food market makes it attractive in times of permanently low growth around the world.

For example, Mondelēz tried and failed to acquire Hershey​ this year, but the US chocolate giant rejected a $23bn takeover. Analysts speculate the Oreo owner may now merge with Kraft Heinz or PepsiCo.

Mondelēz’s CEO, Irene Rosenfeld, said at the time: “Our proposal to acquire Hershey reflected our conviction that combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery and a strong portfolio of complementary brands.”​ 

Ferrero

Mintel claimed last month, Mondelēz International may need to aim for a “lesser but still important” confectioner, such as Ferrero​, to compete in the US confectionery space after ending its pursuit of Hershey.

According to Euromonitor, 2015 and 2016 have been bad years for confectionery particularly chocolate  in China. Value sales contracted by 3% in 2015 and are expected to decrease by 1% in 2016, in part affected by the country’s economic slowdown, and drivers such as consumer awareness regarding health issues.

As in the UK, Chinese consumers’ spending habits in confectionery are more affected by GDP per capita fluctuations than other food products.

We expect the economic situation to improve in China to over the forecast period, which would suggest 2015 and 2016 are minor blips in an overwhelmingly positive picture for the country​,” Skelly added.

Confectionery is one of the most price elastic food products - GDP per capita growth is a significant factor in determining chocolate’s volume gains and losses​.

A noticeable decline in Brazil, Russia and China remains ongoing. These markets were once seen as the great hopes of the food industry, however Russia is seeing a significant impact across food categories, including baby food, and continues to be revised downwards while Brazil has seen the largest downward revisions of any country​.

China is anticipated to return to growth, but this year highlights the fragility of global growth​.”

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