'Premiumâ¦not an attribute, an attitude'
I admit, it was bit strange not being in Hershey, Pa. for the PMCA’S 65TH Production Conference. For the past 10 years, I’ve been making reservations at the Hershey Lodge, always noting that I’d like to stay in the “Towers” section.
Bill Ryan, an early mentor of mine when I first took stewardship of the magazine in 2001, advised me to stay in that section of the Lodge to facilitate comings and goings. Ryan, who’s retired from the industry but continues to consult for ADM Cocoa, was right on the money. (Belated thanks Bill for that advice and much more!).
Hence, driving up to Lancaster from Philadelphia required a new set of MapQuest directions. As with every change, there’s always an adjustment period. But overall, the new venue passed muster and will only continue to improve as both parties become more familiar with each other’s needs and wants. What didn’t change at this year’s PMCA Production Conference was the caliber of presentations. In fact, I think this year’s group of speakers was one of the best slates that I can remember.
Thomas Linemayer, president and ceo of Lindt USA, and the keynote speaker for the organization’s annual awards dinner, provided attendees with an excellent overview of the premium market as well as his company’s positioning.
One of the comments he made that stood out for me was: “Premium is not an attribute; it’s an attitude.” It’s a truism that premium consumers ― about 20% of the buying populace seeks out premium products ― latch onto. Moreover, as Linemayr points out, everyone from baby boomers and highly educated and high-income buyers to ethnics and millennials are drawn to going premium.
This range of buyers in premium dovetails with different rationales for premium chocolate. Gifting accounts for about 15% of the premium chocolate purchases. These purchases, however, account for 40% of the category’s revenue. Self-consumption, however, represents 85% of purchases made in the premium sector, delivering 60% of the dollars.
What’s clear here is that premium chocolate purchases have become, as Linemayr says, “a daily affordable luxury,” one that encompasses self-reward as well as sharing.
Currently, in the food, drug store chain and mass merchandiser segments, premium purchases account for about 9.8% of all dollars spent. Within chocolate, nearly 17% of all growth comes from premium.
Despite the Great Recession, premium chocolate ― albeit buffeted by the economic storm ― still posted solid gains. Now that all of us have survived the downturn (I’m still waiting for my T-shirt), we are more willing to reward ourselves for working harder, shopping more scrupulously and saving more.
There’s nothing like a good piece of chocolate to deliver, as Linemayer says, the ultimate reward. According to Packaged Facts, premium chocolate category will grow at an annual rate of 5.3% between 2009 and 2014. Lindt USA, as well as its sister company, Ghirardelli Chocolate (which will be featured in Candy Industry’s May issue), have remained true to their “DNA,” which is a long and storied heritage involving creating and perfecting premium chocolate.
Anyone who wanders the candy aisle in today’s supermarkets can’t help but notice how the premium chocolate segment has shrunk, from 8 ft. to 4- and even 2-ft. sections. Sure, the economy was partly to blame. But the greatest factors involving the shakeout stemmed from consumers and retailers.
Excessive variety slowly gave way to value. Again, it’s important to recognize that value isn’t synonymous with lower price. Rather, it entails quality and consumer satisfaction first, both of which are framed by realistic pricing. As consumers tried a broad range of products, many encouraged by couponing, it became clear that many products weren’t delivering premium. Trial purchases weren’t followed by return purchases. Simply put, consumers don’t want “wannabe” premium products. And they’ve shown time and time again that they’ll pay for good chocolate, good flavors and innovative pairings with chocolate.
Finally, toward the end of his presentation, Linemayr showed a graph that detailed per capita consumption of chocolate and premium chocolate throughout the major global markets. The United States stood at 11.3 lbs. per capita, with premium a mere 0.3 lbs. All of the major chocolate consumptions nations, beginning with Switzerland at 23.7 and ending with Australia at 13.1, had much larger premium chocolate consumptions rates, from 4.3 lbs. (Switzerland) to 1.6 lbs. (Australia).
It’s debatable whether the U.S. confectionery industry can boost per capita consumption of chocolate in America to much higher rates (although it’s been there in the past). Nevertheless, it’s clear that there’s tremendous upside to per capita premium chocolate consumption. After all, who doesn’t want a better piece of chocolate? Large and small companies that can deliver that consistently will grow both the category and their businesses.