One important success factor is the ability to launch products in segments where there is consumer demand.
The growth in the confectionery market is stable and primarily driven by increased per capita consumption and population growth.
It is important to provide the market with innovations, and to develop and modernise existing products to retain, and attract new consumers. An increasing number of single-person households, combined with a more individualistic consumer outlook, mean that the need for differentiated products is increasing. A greater interest in health and natural raw materials are other important product development drivers.
Confectionery is one of the most impulse-driven categories in the retail trade, and the European confectionery market features strong consumer loyalty to local brands. Consumer research indicates that in their purchasing decisions, consumers put very great emphasis on other considerations apart from price, such as flavour, quality and curiosity about new products.
Concentration of food retailers is very high in those markets where Cloetta is active. Local connections, well-known brands and a continuous flow of attractive new products are important prerequisites for being an attractive supplier. Moreover, progress is towards increasingly large units, at the expense of smaller stores. In connection with the expansion of discount retailing, the progress of store chain private label brands has increased. However, they constitute a small portion of the confectionery market – around 10 per cent in those markets where Cloetta is active (Cloetta’s opinion based on a background of data from Nielsen).
To meet food retailers’ private label brands, it is important for confectionery companies to focus on building strong brands and to address new trends and customer needs. Product development, quality, awareness, communication and visibility decide the strength of a brand and determine consumer loyalty and preferences. The fact that a high share of the confectionery purchases is impulse driven also constitute a barrier for private label brands. Current price pressure in the confectionery market is primarily driven by the intense competition in food retailing and the expansion of discount chains in Europe, rather than food retailers’ private label brands.
A large part of Cloetta’s costs are attributable to the purchase of raw material and packaging, but also to finished goods which are outsourced to contract manufacturer. Cloetta’s raw material and packaging are traded globally, regionally or locally, but follows – with the exception of sugar – more or less the world market prices on exchanges around the world. Cloetta uses several suppliers for most of its raw material.