Marketing premium chocolate emphasizes worldly causes in tough times
THERE ARE MANY MOTIVES PACKED into a bar of chocolate. Some people find escape and indulgence; others get a mood-elevating taste of wellness, that's rich with antioxidants. For still others, purchasing chocolate satisfies their desire to help the environment and indigenous people.
Then they look at the price.
“At the end of the day, you're still talking about $2.99 for a 100-gram chocolate bar,” said Andrew Betts, natural foods category manager with Thrifty Foods, a 22-store retailer based in Victoria, British Columbia.
The market's been pretty tasty up until now. According to Packaged Facts, premium chocolate sales hit $3 billion in 2007 — up 20% from the previous year, and a 200% rise over 2003. Health and wellness is clearly a driving force, with sales of organic chocolate bars increasing 45% between 2006 and 2007 to $94 million total, according to Nutrition Business Journal. Data from SPINS shows that sales of Fair Trade chocolate grew by 26% in the same period.
To capitalize on this demand for chocolate that is perceived as a force for good, more manufacturers are using organic and Fair Trade-sourced cocoa. The number of Fair Trade licensees in the category, for example, grew by 27% last year. To provide even further differentiation, some companies have adopted specific eco-missions like preserving acres of rainforest, saving endangered species and offsetting pounds of carbon emissions. Endangered Species Chocolate, one of the best-selling of these niche brands, sells at grocery stores across the country, including D'Agostino's, New York, where it carries a $3.69 price tag.
Another popular example is the Rainforest Alliance organization, which conducts a farm certification and seal program aimed at ensuring the health of both workers and the environment in which cocoa is grown and harvested. Over the past year, the number of farms certified by the alliance has grown by 46%, to nearly 8,000 total.
“People are realizing that it's not just about the shelf cost of the product anymore,” said Rainforest Alliance spokeswoman Abby Ray.
Retailers are also taking advantage of premium chocolate's health appeal. Studies have shown that antioxidants and omega-3s found in chocolate can help preserve the health of the heart and brain, and so manufacturers are using packaging to emphasize cacao counts, which indicate the prevalence of these helpful compounds.
Some manufacturers are even starting to experiment with chocolate as a mood food. Belgian brand New Tree, for example, sells a line of functional bars with names like “Harmonizing,” made with extra fiber to aid digestion, and “Energizing,” which has a high cacao content for extra stimulation. A&P's Food Emporium banner currently sells these at a $4.99 price point.
Industry observer Curtis Vreeland, an analyst with Packaged Facts, sees chocolate's opportunity to succeed as a functional food as “a bit speculative at present.” Especially in the down economy, shoppers will be less willing to try new concepts in premium chocolate, he said. However, those who are loyal to a particular brand or type of chocolate will probably stick with it regardless, seeing it as a worthy splurge.
“Premium chocolate is a classic affordable indulgence,” said Vreeland. “Even during these tough economic times, consumers will stick with their favorite brands and not trade down. But they may buy less.”
Organic and Fair Trade are the most visible, most established eco-labels in the chocolate category, and therefore enjoy the most loyalty, according to Packaged Facts. However, organic options appear to be reaching a saturation point, and retailers might want to differentiate and merchandise around other specialty messages like Fair Trade. These often carry compelling, feel-good stories from exotic locales.
“Fair trade products put a human face on the product, to help the consumer connect with the important role the grower plays in the supply chain,” said Vreeland.
Some experts believe retailers should be careful not to differentiate too much. Cybele May, who writes about and reviews chocolate on her popular blog, candyblog.net, said much of the market for premium chocolate is still underdeveloped. Mainstream consumers may know about organic and Fair Trade, but many are reluctant to pay upwards of $3 for one bar, let alone experiment with a niche brand that's positioned as healthful or sustainable.
“Getting consumers involved in all of this has been a very long road, and while there's some awareness, due I think to similar conditions and concerns for coffee, it's hard to make that decision when presented with too much information or a lack of options,” said May.
The extent to which retailers can experiment with new concepts in premium chocolate varies between mainstream and natural and organic supermarkets.
Whole Foods Market, Austin, Texas, offers a wide selection of premium chocolates, from Equal Exchange Fair Trade chocolate to Vivani dark chocolate infused with green tea. One of its latest additions is Theo Chocolate, which makes a line of Fair Trade-certified bars that carry the name of the country where the beans were harvested, as well as cacao content.
At Thrifty Foods, which offers a more mainstream product mix and integrates its natural and organic selection with conventional items, category manager Betts only offers Fair Trade and organic bars, because they are the ones his customers know best. Some of his strongest sales, he said, come during the holidays, when shoppers are more willing to pay for premium chocolate as a gift, or as part of a bundled basket.
So far, Betts' premium selection, while small, has proved to be a sweet seller. He's not so sure about this year, however.
“If times are tough, [premium chocolate] is probably going to be the first thing to go,” Betts said. “I haven't really seen any sales decrease on our Fair Trade chocolate, but I'm not optimistic about what this year holds.”
- Stick with what works. Play up the Fair Trade and organic chocolates that your customers are loyal to.
- Try to trim prices on high-end bars that cost upwards of $3.
- Capitalize on holidays and gift basket opportunities. This is when consumers will be most likely to spend the extra money.
Sweet Surrender Bonus: Moving Mainstream
To take advantage of chocolate's recent health and wellness streak, mainstream manufacturers have been investing in premium brands. In 2005, Cadbury Schweppes bought Green & Black's, a hot-selling organic chocolate company. Around that same time, Hershey's bought high-end Scharffen Berger, followed a year later by organic brand Dagoba. Mars has gained considerable market share with its Dove dark chocolate line, as well as its CocoaVia line of “heart healthy” chocolate snacks.
With the recession in full swing, however, these lofty buys could go limp. According to The Wall Street Journal, consumers have started trading down on chocolate. This means that instead of buying Scharffen Berger or Dagoba bars, which can run upwards of $3 and $4 on shelves, shoppers are opting for Hershey's less expensive fare, like Kit Kat bars and Reese's Peanut Butter Cups.
Companies with a diverse range of chocolates say they'll weather the storm. Hershey's expects to grow by 2% to 3% in 2009.
As the premium chocolate category becomes more crowded, processors have reached out to embrace any number of issues that help differentiate their products from the others. Here's a sampling:
- Endangered Species Chocolate — Donates 10% of its profits to help support endangered animals such as the black panther and sea turtle.
- Shaman Chocolates — All profits go toward supporting the Huichol Indian tribe in central Mexico.
- Climate Change Chocolate — Provides on-package tips for reducing energy consumption, and each purchase buys an offset of 133 pounds of carbon.
- Tcho — Raises awareness of poor working conditions in harvesting countries by using only “slavery-free” chocolate.
Saving the Rainforests
Organic and Fair Trade certification enjoy a great deal of visibility in the chocolate category and elsewhere, but there's a third program that's been making inroads lately. Rainforest Alliance, an organization that advocates healthy working environments and ecosystems in Third World countries, is rapidly expanding its farm certification. In 2007, sales of cocoa certified by the alliance reached $4.5 million, according to spokeswoman Abby Ray. In the past year, the number of farms the organization certified grew from 4,211 to 7,805.
“Not only does [the certification] improve relations with consumers, but it ensures that companies will have long-term sustainability in the goods they're using,” she said.
Part of the alliance's popularity stems from its effectiveness. Greenerchoices.org, a website run by Consumers Union highlighting effective eco-friendly products, listed Rainforest Alliance's seal alongside those of Fair Trade and organic as a “meaningful label” in the chocolate category.