Chocolate market loses its sweet tooth

In 2010 the local chocolate market was anything but a box of chocolates. Although a world-renowned comfort food in depressing times, Romanians proved less inclined to indulge their sweet tooth and the market fell by as much as 24 percent, according to some reports. This year, manufacturers are preparing themselves to take the bitter with the sweet yet again, as the market is expected to continue falling, albeit at a slower pace.

Simona Bazavan

Retail chocolate sales consisting of chocolate bars and slabs amounted to about RON 605 million (approximately EUR 145 million) between December 2009/January 2010 and October/November 2010, according to data from Nielsen Romania.

The decrease in purchasing power took its toll on chocolate consumption which even without the effects of the recession registered low per capita figures compared to other European countries.

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Last year, the market fell by about 24 percent, Erwin Vondenhoff, general manager of Heidi Chocolat, told Business Review. Cristian Stancu, marketing manager at Supreme Chocolat, which manufactures the Anidor, Primola and Novatini brands, estimates the drop at around 15 percent. For 2011 he forecasts that the market will continue decreasing but at a slower pace, possibly between 5 and 10 percent. “2011 looks likely to be a difficult year for chocolate and biscuit manufacturers due to price increases for raw materials, but we hope that we will continue to post growth,” Stancu told Business Review.

As consumption went down, Romanian consumers stuck to their favorite brands and were less inclined to take chances on new ones. “This is not the time to launch a completely new brand on the market as consumers are not willing to try them out,” Vondenhoff said.

Last year Heidi Chocolat posted a RON 55 million turnover, 15 percent up on 2009, but the growth was mainly driven by investments in new chocolate assortments and exports, says Vondenhoff. “Exports went up by 160 percent last year which helped to boost turnover as the internal market fell drastically,” said the GM. This year the company hopes that exports will make up 40 percent of its total turnover. Romanian-made Heidi premium chocolate is exported to 32 countries.

“The US, Poland, Australia, Chile, China and Canada are among our top export markets and Germany remains our main destination,” said Vondenhoff.

The most popular Heidi chocolates are Grand’Or and the dark chocolate varieties. “We frequently launch new flavors, new recipes and alternative package sizes. Last year alone we launched 15

new varieties and this year we have launched four new chocolate assortments from the Gourmette variety,” the GM added.

Other chocolate manufacturers are Kandia-Excelent, which last year was the subject of one of the largest takeovers on the local FMCG market when US food giant Kraft Foods announced the sale of the Cadbury-owned Kandia-Excelent chocolate and cake business in Romania to Oryxa Capital investment fund. Cadbury acquired the Romanian manufacturer in 2007, but Kraft was forced to divest of it under EU competition rules following its contentious takeover of the UK confectionery giant. The sale includes Kandia-Excelent brands Rom, Magura, Kandia, Laura, Sugus and Silvana and others.

Some of the chocolate brands owned by Kraft on the local market are Milka, Toblerone, Poiana and Smash. In a financial report made public last week, Kraft announced for Central and Eastern Europe, Middle East & Africa (CEEMA) organic revenue increases in “high single digits”. According to the report, the growth was driven primarily by volume and other mixed gains. “Although economic conditions and category trends in the region remained weak, share gains in key markets and categories more than offset market weakness,” said the document, one of the brands mentioned being Milka chocolate.

Chocolate as posh nosh

There is the chocolate one finds in the usual retail networks and then there is the posh version one finds in a “chocolaterie”, a specialized shop. The difference between the two is pretty much like that between a regular wine and its expensive, and always fancily named, counterpart. And just like the French are world famous for fine wines, the Belgians are globally renowned for chocolate. If you find yourself in Bucharest in search of some Belgian pralines, the Leonidas chocolate shops are among the very few places to go. The outlet in Strada Doamnei was the first opened in Romania ten years ago by the M’Bey family.

The gloomy situation however, was no different on the premium and luxury chocolate segment last year, Jolyon M’Bey told Business Review.

The shop saw sales go down by 20 percent in 2010, but 2011 seems to promise better prospects so far. “Fortunately, we haven’t experienced the same decrease as last year during this period, but it is still too early to be truly optimistic,” he added.

The investment in opening the shop was about EUR 150,000, M’Bey told Business Review, and the first years were also the hardest, the owners remembering that it took about two years to grow a client base. The shop was opened through franchise and now the M’Bey family is the master franchisor for the Belgian Leonidas brand in Romania. Worldwide there are about 1,400 outlets, selling over 100 different kinds of Belgian chocolate.

Sales volumes reaching about 150 kg of chocolate are sold each month but the volume multiplies by as much as ten times during holidays such as Christmas and about five times each Easter. Valentine’s Day and 8 March hike sales, but to a lesser extent. Orders from companies also help. All the products are imported and prices vary from RON 10 to beyond RON 2,000. The most popular choice for customers remains pralines but the shop offers other premium products such as gingerbread and nougat and the American ice cream brand Ben&Jerry’s. More exotic offers are chocolate Venetian masks made with edible 24k gold that can cost up to RON 279 for a life-sized mask.

“In all these years we have brought products that we hoped would catch on but many didn’t as the market was not ready. Such was the case for Calisson d’Aix, made with marzipan and candied fruit from France or Spain,” the owner remembers. The customer profile has also changed over the years due to the rise in purchasing power.

“At the beginning it was easier to distinguish a profile, but more recently this has changed. Customers come from all social classes with the only difference that some of them buy more for their own consumption while others purchase the chocolate as a gift,” said M’Bey.

In addition to the quality of ingredients, among other factors, the difference between retail chocolate and a chocolaterie’s wares also lies in the product’s shelf life.

“The chocolate that one finds in a supermarket is made to last up to nine months while the chocolate from specialized shops like ours has a shelf life of only 28 days,” said M’Bey.

As for future plans, M’Bey says that they include further investment in the shop’s terrace and recently opened café, as well as in finding new partners interested in taking on the Leonidas franchise in Bucharest and other Romanian

cities. The investment in a Leonidas chocolate shop reaches requires an initial EUR 6,000-7,000 and doesn’t involve any further license tax or share of profits. 

simona.bazavan@business-review.ro