Taking Stock: What's next for confectionery industry?

Bernie Pacyniak

Although I realize some of you may be glued to the goings on at the Republican convention, I thought it appropriate to tear away from the politicking and synchronize my coordinates about where the industry’s headed with an industry expert.  

Lee Linthicum, head of food research at Euromonitor International in London graciously took some time to discuss global retail trends and share his perspective on what’s going on in the United States. Some of you may remember Lithicum’s presentation, “Finding the Sweet Spot: Opportunities and Challenges in Global Confectionery,” during the NCA’s State of the Industry conference in Miami Beach this past February.

In reviewing what’s happened within the industry since his presentation, Lithicum reaffirmed that many of the trends discussed in Miami Beach were still applicable. One of them — the fact that consumers are eating less sweets but spending more — remains very much in place.

“Consumers want confections, and they’re willing to pay more,” he says. Ah, music to every candy makers’ ears.  Nonetheless, they are shopping smarter, Lithicum adds.

In general, quality trumps quantity. Still, the value equation can take on various forms. Most of us in the industry would agree that the bar has been raised regarding manufacturing practices (GMPs). In addition, retailers worldwide insist not only on GMPs, but want guarantees regarding safety, traceability and now, sustainability standards.

Fortunately, for confectionery manufacturers, there are plenty of options to address these ever-escalating expectations. As Lithicum notes, the confectionery industry remains one of the most adaptable and flexible, with manufacturers having a broad range of tools — ranging from product development to packaging — to satisfy a fluid market.

In addition, the supplier community has been more than up to the task in addressing ingredient sourcing and traceability, new product development, manufacturing flexibility, safety and sanitation design and procedures.

One of the growing phenomena that will play a larger role down the road is ethical certification, Lithicum believes. Already a factor in chocolate, with organizations such as Fair Trade, UTZ and the Rainforest Alliance playing major roles, especially in Western Europe, the movement is gradually spreading to sugar confections.

While still in the early stages of finding acceptance here in the United States, the importance of certification will continue to gain a following —particularly because it offers appeal and differentiation to Millennials.

“Organic and certified confections still cost about two to three times more in the United States than they do in Europe,” Lithicum emphasizes. However, as many of the majors commit to certification as the new normal, that price differential in the United States should shrink.

It does pose a challenge, however, to mainstream premium players, such as Ferrero and Lindt & Strungli, Lithicum believes. Will those companies have to embrace certification of their mainstream premium products to capture a more discerning consumer?

“Consumers are savvier,” Lithicum affirms. Blame the recession and the Internet for that consequence.

And speaking of the Internet, Lithicum sees social media as having tremendous potential for injecting excitement and buzz into a brand, which often translates into sales increases.

He cited Kraft’s legacy chocolate brand, Lacta, and the smart phone app campaign that allows smart phone users to upload messages to friends and lovers when purchasing a Lacta bar.

Despite Greece’s precarious economic condition, the sale of Lacta bars has exploded during the past 18 months, he says. And, Lacta’s Facebook traffic accounts for 15-20% of all Facebook traffic in Greece, topping all entities on the social media circuit.

Hence, the opportunity for confectionery manufacturers to take advantage of social media as a means of spurring sales certainly awaits. At the same time, to curry favor among consumers, particularly among Millennials, it has to be clever. Me-too promotions won’t get past a generation weaned on the Internet.

Most importantly, Lithicum remains upbeat about confectionery. Its resiliency isn’t surprising, he adds, since the appeal for sweets remains as strong as ever.  Now that’s something to look forward to as we head toward the critical third and fourth quarters of 2012. How sweet it is and can be.