Chocolate firms find life is sweet amid economic gloom
- 6 December 2011
- From the section Business
Chocolate-makers around the world are reporting buoyant sales despite the economic gloom.
One UK company has reported a 25% surge in profits. In Syria, one of the largest producers has increased sales over the past six years from 150 packs a day to more than a million.
One of its biggest successes is a 2ft-long wafer exported to Iraq called Today King Size.
Analyst Marcia Mogelonsky from Mintel said: "Unlike a lot of other foodstuffs chocolate is somewhat recession-resistant.
"Consumers will turn to chocolate as a reward or a treat. And because there are so many new chocolates coming on the market there's always something new."
In the past year more than 500 new products have been launched in the UK - some of them seasonal. The value of sales rose by 5% over the last year.
Some of those sales were picked up by the company Hotel Chocolat, based in Hertfordshire.
Pre-tax profits rose by 25% year on year. This is down to a 12% increase in sales and efficiencies at the manufacturing headquarters in Cambridge.
The co-founder of the company, Peter Harris, said: "We see ourselves as affordable luxury. And we try to show originality and innovation. We have also invested in the business to expand further."
Part of that investment came from customers via a Chocolate Bond. For a £2,000 or £4,000 investment customers receive a monthly selection of chocolates.
The bond raised £4m and has funded new stores. The first Scottish store opens next week in Edinburgh. And the second US store opened in New York last month.
The company also has a Chocolate Tasting Club, which expanded into Scandinavia 18 months ago. Members are sent a selection every month.
Terry Waters, managing director of the club, said: "We have around 12,000 members in Sweden, Norway and Denmark now.
"We also launched in the US just over a year ago and we are planning to launch a small test trial in Germany soon."
Not every manufacturer is enjoying a boom though. Thorntons' pre-tax profits fell by 37% and the shareholder final dividend dropped from 4p to 0.25p.
It has launched a restructuring which includes closing up to 180 of its stores. This will leave it with 200 shops.
Chief executive Jonathan Hart said: "The big challenge we have in our business is our own stores.
"For some time now we have found ourselves with a retail estate that is too large. The price of being in the High Street continues to increase year on year and that has served to squeeze our profitability quite significantly."
Thorntons will increase supermarket sales and its online service to fill the gap left by the closed stores.
There are challenges to come for all manufacturers - a decline in the number of cocoa farmers and the quality and quantity of cocoa beans.
Cocoa growers are struggling to make the business profitable. The average earning is £2 a day and many farmers are turning away from cocoa to rubber and palm oil.
Experts say poor pay means some farmers employ children.
Nestle has announced an investigation into reports of children working on farms supplying its factories.
Christoph Inauen, head of sustainability at the Swiss chocolate company Halba, said it was impossible for any chocolate manufacturer to guarantee child-free farms.
"Different studies show that around 250,000 children are working on cocoa plantations. I was working in Mali and Burkina Faso and some of my neighbours sold their children for around £20 to £30 to work on cocoa plantations. It is not possible for manufacturers to police this," he said.
Added to this is the pressure for more cocoa as demand rises.
The world's largest chocolate producer, Barry Callebaut, predicted there would be a demand for a million more tonnes of cocoa beans in the next 10 years.
Hans Vriens, the company's chief innovation officer, said it would mean paying more for products with less cocoa content.
"In the coming years prices will go up. For customers it's going to mean smaller portions of more complicated products with one or two fillings and decorations - more praline-type products with more taste and variety."
Analyst Marcia Mogelonsky said some customers may be happy with this but others might feel a little cheated.
"It will depend on the quality of the chocolate. For most people who eat chocolate that is the main thing. For those who really love the stuff they may not be happy with this development," she said.