A sweet tooth it seems is immune to economic hardship. As the global economic downturn surged in the last few years, many retailers suffered from the squeeze on disposable income. The confectionery industry, however, was surprisingly stable during those tumultuous times. Though lower consumer confidence may not have significantly impacted the revenues of confectioners, it does dictate the trends in the industry. The Duty Free Show of the Americas in Orlando, where confectionery manufacturers showcase their latest products, will definitely be a precursor to upcoming trends in the region and provide a good indication of the evolving preferences of consumers.
Despite the relative success of the confectionery industry under the pall of an adverse economic climate, factors relating to macroeconomic stability will be critical going forward, explains Andreas Fehr, Managing Director at Kraft Foods World Travel Retail. “Chile, Brazil and Columbia have stable or strong local currencies, which is one of the key drivers for sales in this [region]. In Latin America, we see further growth thanks
to the positive macroeconomic scenario. In recent years, Western countries have had debt problems, whereas commodity-rich Latin American countries have balanced budgets and a positive trade balance. The emerging middle class in Latin America and the growing number of first-time travellers will boost the business in the next 10 years,” says Fehr.
Regional growth patterns
In terms of where most growth is being seen in the Americas, Nestlé, Perfetti
Van Melle, Kraft and Paton’s are all of the view that Brazil is the hotspot for confectionery consumption, followed by Argentina, Mexico and Venezuela. Fehr points out that Brazil is the largest per capita consumer of sweets in the region. Roland Stieger, Head of Sales for Nestlé International Travel Retail, also underlines that a strong Brazilian economy has been a key driver for double-digit sales growth in the Americas for the company in 2010.
North American consumers, according to Fehr, are showing greater signs of budget constraints. Nevertheless, this may be only because they are veteran consumers and not due to a tightening of purse strings. He continues. “When talking about North America, we observe that value for price is a key sales driver. Since North Americans have goods so readily available, value for price is a decision maker. Traditionally, Cosmetics & Fragrances have draped the entrances of all North American duty free stores. Given that confectionery consumption is growing, a new trend [is taking shape where] confectionery [is being moved] to the front of the store. In North America, retailers are slowly allocating additional space to accommodate the increase in demand.”
Trends and preferences
James Kfouri, Chief Operating Officer at Paton’s talks about prevalent trends in the Americas region. “The major trend is destination packs for gifts or as a souvenir of your trip — this will be a growing trend as more and more people travel for leisure, especially from Asia and parts of South America. Gifting remains a high priority in global travel retail and confectionery is an ideal purchase.” Taking this into account, Paton’s has resorted to a unique approach for its travel retail marketing strategy. Souvenir packs of boxed nuts are individually designed for major cities in the US and Canada, featuring bright colours and images of local landmarks. Confectionery items cross segments as a result, doubling as conventional souvenirs.
Tastes differ according to the culture of each locality as taste buds evolve to what is domestically available. It is no different with sweets. Andreas Fehr explains how chocolate is received in different countries in the Americas. “Like in most countries in the world, milk is the most popular chocolate flavour. Dark chocolate sales are marginal in Latin America, but in Mexico it does fit local taste, which is not a surprise if we consider that the Mexicans first used cocoa as a bitter beverage. What we observed is a white chocolate increase from Brazilians. Apart from Mexico, where dark chocolate outsells white chocolate, dark chocolate is the least popular chocolate flavour,” says Fehr.
Perfetti Van Melle has seen a clear preference, on a country by country basis, for either mint- or fruit-flavoured Mentos. Mint is a good example of a taste subject to regional partiality.
Alan Brennan, Marketing Manager for Nestlé International Travel Retail, also points towards certain differences in preferences. “South Americans have a stronger taste preference for European manufactured chocolate versus that of consumers of North America who generally have a preference towards locally manufactured American confectionery.” This perhaps goes to demonstrate that tastes are nurtured by local products, and since South America has few confectionery industry giants, their influences are usually imported. There does exist a different argument for the travel retail market. Shoppers maybe more inclined to buy products that seem more exotic and less akin to what is available back home when they are travelling. Fehr suggests there is some evidence to this explanation. “Our assorted Toblerone Tiny bag is now the clear leader in Latin America. In addition, consumers in Latin America have become less brand-loyal and are ready to try new flavours and even brands as they get more exposed to a broader product offer.”
The availability of brands is also something that must be taken into consideration. This is where the correct strategy plays a vital role. Marketing campaigns targeted to certain geographical segments can produce great results irrespective of whether your chocolate is made from the local cocoa bean. John San Miguel, Travel Retail Marketing Manager for Hershey’s, provides a good example. “In travel retail, the Hershey’s brand remains to be the strongest brand in the US followed by Reese’s. In South America, more sales for the Kisses brand are usual,” he says.
Confectionery products generally cater to a universal demographic. They have proven to be income inelastic in recent times and the market is healthy, competitive and geographically indiscriminate. Brennan has strong words that reflect the state of the industry. “I firmly believe that confectionery has earned pole position in travel retail — it suits every age, race and creed; it is attractive, a perfect gift, a piece of pure indulgence and has a proven track record of impressive growth even through recession. It deserves to be placed right at the front of the store.”
Visitors to the 2011 Duty Free Show of the Americas will be able to discover a new line-up of products from confectionery giants. Some of the latest collections are as follows:
Paton’s Crunchy Macadamia Crunch Bar
Paton’s Crunchy Macadamia & Almond Crunch Bar
Paton’s Cranberries & Mixed Nuts Crunch Bar
Paton’s Dark Chocolate Coated Coffee Beans (initially exclusive to Dubai Duty Free with pictures of Dubai landmarks — Burj Khalifa, Emirates Towers and Burj Al Arab at night.)
Nestlé Swiss Selection
Nestlé Swiss Dark Orange
Smarties Mickey and Friends figurine Box
Smarties Minis Mickey and Minnie pouch
Kit Kat Milk Origin Box/Kit Kat Dark Origin Box
Kit Kat Chunky Hazelnut
Kit Kat Singles
Nestlé Sharing Mix Bag
Nestlé Sharing Mix Pillow Bag
Mini Snacking Range
Perfetti Van Melle
Mentos Mini Bag
Mentos Kidz Bag
Cool Friends Back Pack
Chupa Chups Flower
Chupa Chups Surprise Travel pack
Chupa Chups Crazy Plane
Pouch Bags Heaven and Hell
Trident Multi-pack Range
Toblerone Gold Minis
Cadbury Luxury Selection