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Chocolate Confectionery market In Switzerland worth US$ 2B by 2023

The Swiss chocolate market remains positive, and the landscape is likely to be shaped by evolving consumer preferences and perceptions. All in all, the market of chocolates in Switzerland is expected to record a steady and constant growth.

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Definition / Scope

Chocolate is one of the most admired sweet treat, a brown food preparation of roasted and ground cacao seeds used in form of block, liquid or paste. It is also used as a flavouring agent [1].

Mainly three forms of chocolate: white chocolate, milk chocolate, and dark chocolate are widely consumed. The white chocolates are much sweeter than dark and milk chocolate. The amount of cocoa present also determines the sweetness of chocolate. Dark chocolate possess highest up to 60-85 % of cocoa. [2]

The chocolate brands in Switzerland are one of the earliest chocolate manufacturers across the world. The best Swiss chocolate brands are exported to several counties and are popular ones [3].

Market Overview

In 2018, the Swiss chocolate industry turnover rose by 2% to US$ 1,812m. The sector sold more chocolate worldwide in 2017 than in the previous year. The export business once again ensured the good result. Internationally competitive framework conditions are becoming all the more consequential, however, these are increasingly being put under pressure. It was an overall positive year for the Swiss chocolate industry. The total amount of Swiss chocolate sold domestically and abroad rose by 2.7% to 190,731 tonnes. The export share of total production increased from 65.7% to 67.1%. The export of large quantities of processed Swiss agricultural commodities went along with it. Thus, about 20% of the total production of Swiss sugar was exported in Swiss chocolate as well.

The location attractiveness of the country for the chocolate industry is also pertinent for the suppliers of Swiss sugar and other raw materials. This should be noted in view of the current claim by the Swiss sugar monopoly for the border-control price increase of sugar. The domestic sales of Swiss manufacturers fell by an overall 1.3% compared to the previous year. The declining domestic trend could be compensated however thanks to growth through export. In this respect, the sales volume increased by 4.8% to 127,923 tonnes, and turnover increased by 6.9% [4].

Increased consumption and production of cocoa products and the EU food law has provided an opportunity for the growth of the compound chocolate market in Europe. Additionally, increased advancement in technology and the chocolate crisis in the market offers great potential to the compound chocolate market [5].

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Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Market Risks

The market is increasing threat from substitute products and from increasing product recalls-a request from a manufacturer to return a product after the discovery of safety issues or product defects that might endanger the consumer or put the maker/seller at risk of legal action.

Substitute products as threats include the lookup for as energy bars, nuts and meat snacks that have attracted the consumers for healthy alternatives to chocolates. In addition, the increasing number of product recalls from leading chocolate vendors has been responsible for two major outcomes: in discouraging consumers from going for chocolates and the declining per capita consumption of chocolates [6].

Top Market Opportunities

In addition to modern trade and specialty stores, chocolate sales are also growing through online channels. Modern trade outlets and specialty stores are usually limited in suburban and tier-II cities, and online retailers have filled the demand-supply gap in these markets. The sales of chocolate through online channels is expected to increase at a healthy rate during the 2017-2023 forecast period [7].

  • Increasing demand and popularity of dark chocolate and organic chocolate: The popularity of organic chocolates is increasing in Europe with the rising consumer awareness on the negative health implications of consuming products containing synthetic ingredients. The preference and purchase volume of dark chocolate is increasing among consumers as it helps in improving the cardiovascular health, blood flow, and cognitive functions. Additionally, increasing consumer concerns regarding the origin and quality of ingredients used in chocolates have led to the growth of the organic chocolate market in many European countries[8] .

Market Drivers

Swiss chocolate industries have popularly captured the market because of following reasons:

  • Preference towards various flavors: The consumer’s favourability towards quality over quantity has introduced the products with nuts/fruit into the market. Pink grapefruit flavored chocolate is on the emerging trend. Also, the popularity of dark chocolate perceived to be healthier with low sugar content is on the rise [9].
  • Fall in price and the total cost in manufacture: The increased price of the cocoa was seen to fall down on average in 2017 that was on the rise during 2016. Similarly, the price of hazelnut and almost are also lowered as compared to previous years. Also, there was rise in the price of sugar trade in [10].
  • Export: The declining domestic trend was compensated in 2017 where 12.5 % of the Swiss chocolate export volume was to UK with maximum percentage accounting for Germany 16.5%.[11] .Also ,the the sales volume was surged by 4.8% to 127,923 tonnes, and revenue was also boost by 6.9% to 936 million US dollar [12].
  • Innovation: Barry Callebaut has introduced the “heat resistant” chocolate, for sale mainly in hotter countries. Its latest initiation in serving a variety of chocolate mixtures has led to the establishment of more than 1,200 small ice-cream parlors in Italy [13].

Market Restraints

Although the market size of the Swiss chocolate industry is on rise, still the market is restrained in various ways as:

  • Decrease in per capita consumption: There is a decline in consumption as the Swiss are concerned about eating sugary products. This can be taken as major market restraints in the domestic arena. The domestic sales of Swiss manufacturers fell by an overall 1.3% compared to previous year. Domestic turnover fell by 0.4%. The annual per capita chocolate consumption in Switzerland fell by 500 g to 10.5 kg [14].
  • Rise of health conscious consumers: The cutting down on sugary products is one of the main restraints for prospects of Swiss chocolates and its exports [15].
  • Healthy alternatives: The negative connotations about the health effects of chocolate has undermined the sales of chocolate products and the alternatives have been searched for as energy bars, nuts and meat snacks that have allured the consumers for healthy alternatives to confectionery [16].

Industry Challenges

  • War on sugar content: The dilemma encountered by Swiss chocolate-makers is playing out across the food sector as there is a gradual shift seen and the “war on sugar” compels to rethink over business model to the chocolate makers. Similarly, the health-conscious consumers curtail on the sugary product is seen. Also, the growing preferences over to handmade local small products to robot made chocolate are seen Cite error: Closing </ref> missing for <ref> tag.
  • Trend toward healthy eating: Consumers are being cynical about the sugar consumptions in food they eat and this is hitting really bad to chocolate market. Lifestyle related factors are gaining into attention and can pose a challenge to chocolate sales [17].
  • Super power nation as US : The market volume for the developed country like America is expected to reach US$27,541m in 2019 the and most of revenue is generated in US. This can pose a challenge to countries like Switzerland [18].

Technology Trends

Swiss entrepreneur valued the art of chocolate making since 19th century as they travelled to Italy to learn the skills [19] . The innovations are must for sustaining the growth in the chocolate confectionery as the snack-oriented market has excelled for healthier benefits. Barry Caillebaut and Nestlé Suisse introduced the Ruby Chocolate, made from cocoa bean (ruby) characterized by a "berry-fruitiness" and a pink hue. [20] The “conching” is another innovation technique that aid in homogenizing the product and creating the flavour that produce smooth and creamy texture [21].

Pricing Trends

Throughout 2017, the prices of nuts as a raw material for chocolate was lowered (by 12%). Also, the almond were available cheaply by 25% less. The price in sugar import was subjected to fluctuations from the beginning of October 2017.[22] . Further, the declining price of cocoa beans which is a key raw material in the manufacture of chocolate confectionery items is estimated to support the market growth in coming years [23].

Also, the revenue in the Chocolate Confectionery segment will account to US$1,812m in 2019. The average revenue per person in the market for Chocolate Confectionery amounts to US$211.10 in 2019. In the Food market, 4.1% of total revenue will be generated through online sales by 2021. The average volume per person in the market for Chocolate Confectionery amounts to 10.1kg in 2019 [24].

Regulatory Trends

The share of sales varied in various categories where bars accounted for 48.1 %, chocolate confectionery were about 22.3 % ,semi manufactures (incl. powder) for 19.3 %, mini formats were 5.9 % and other festive articles were only 4.4 %. Likewise, among sales in tonnes, domestic sale accounted for 62,808 and abroad sales were 127,923 tonnes.[25]

In 2017 CHOCOSUISSE supported the introduction of a new milk allowance as an accompanying measure to abolish the 'Choccie Act'. In the meanwhile, the dairy industry had decided to use part of this milk allowance for other purposes. Compromising on the quality and manufacturing, or on the effort to protect the Swiss brand on a worldwide scale, is not an issue for the chocolate industry despite the forthcoming challenges in the underlying conditions. Nevertheless, factory closures cannot be prevented. Indeed, the closure of a chocolate factory was recorded due to the relocation of the entire production abroad. The number of active CHOCOSUISSE member companies, therefore, fell from 18 to 17 by 2018. Also, the Swiss government provides chocolate law, a Schoggigesetz, and can compete against imports although they are being phased out under pressure from the World trade organization [26].

With regard to the exports, the sale volume rose by 4.8% to 127,923 tonnes and turnover increment by 6.9% to 936 million dollars was seen with Germany sales surged to 16% seen in 2017. There was gain in exports in various countries; 2% in UK, 8% in France, 6% in. The highest growth rates were seen with Australia and Russia. Besides, thrive in growth rates were seen in Spain, Singapore, Israel, Brazil, Sweden and China etc. In 2017 alone, export share of total production increased from 65.7% to 67.1% [27]. The previous year(2016), the total quantity of Swiss chocolate sold in the domestic and international market was increased by 2.3% [28].

Other Key Market Trends

With regard to the employers in the Swiss chocolate industry, 18 companies hired permanent workforce (4,608) in 2017 alone, of which 2,296 were women and 2,312 were men. It was few less in 2016 that is 4,542 where females were 2,284 a slightly more than male workers 2,258 [29].

Market Size and Forecast

The total market size for chocolate market in Switzerland in 2018 was US$1,812m. Alongside the developments pertaining to the European markets, the domestic markets are growing at a rate slightly lower than the European average and are expected to keep growing at about 2% CAGR through 2023 and is expected to reach above 2 billion by 2023. In global comparison, most revenue is generated in the United States (US$ 27,541m in 2019). In relation to total population figures, per person revenues of US$211.10 are generated in 2019. The average per capita consumption stands at 10.1kg in 2019.

In the Food market, 4.1% of total revenue will be generated through online sales by 2021.The average volume per person in the market for Chocolate Confectionery amounts to 10.1kg in 2019. The average price per unit in the market for Chocolate Confectionery amounts to US$20.80 in 2019 [30].

The milk chocolate segment accounted for close to 51% of the market share in 2017, followed by the dark chocolate and white chocolate segments. However, the market share of milk chocolate and white chocolate is expected to witness a significant drop over the forecast period which will be absorbed by the dark chocolate segment. The dark chocolate segment is expected to witness an increase of over 3% by 2022 [31].

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Market Outlook

The food industry has traditionally remained the largest application segment for dark chocolate, and the status quo is likely to remain unchanged during the forecast period. Demand for chocolate is also likely to remain robust in the beverages segment, as manufacturers are experimenting with different types of flavors. Use of specialty or premium dark chocolate in flavoring energy drinks and beers is gaining traction, and these factors are likely to push demand in the beverages segment during the forecast period [32].

Owing to its perceived health benefits, dark chocolate is considered a healthier alternative to conventional milk chocolate. Therefore, the demand for dark chocolate has increased significantly in Europe in the last five years. Dark chocolate is rich in fiber, antioxidants, magnesium, and iron. The high concentration of cocoa flavonoids present in dark chocolate helps in improving cardiovascular health, blood flow, and cognitive functions. Besides, dark chocolate has a lower level of detrimental effect on human teeth in comparison to other chocolate varieties. Many consumers also prefer it as an appropriate gifting option.

Milk and white chocolates, despite the growing popularity of dark chocolate, is far from its disappearance on the market in the future.

Since 2010, the “dark chocolate revolution” has been gaining traction in the UK, France, Germany, Switzerland, Belgium, the Netherlands, and Italy. The rising number of new vendors venturing in the dark chocolate space and the increasing number of new product launches featuring dark chocolate will not only drive the dark chocolate market in Europe but will also drive the region’s chocolate market at large [33].

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Technology Roadmap

The growing influence of online retailing is a key trend which is expected to impact the market. The advent of e-commerce has helped chocolate manufacturers expand their customer base and enhance their profit margins. Online and e-commerce channels facilitate business-to-consumer (B2C) and business-to-business (B2B) operations. The average amount of money spent per online transaction and the number of online transactions are increasing every day. The rise in the number of Internet users and the ready-to-buy attitude of customers are factors contributing to the popularity of the online channel [34].

Competitive Landscape

The competitive landscape of chocolate industry in Switzerland can be understood by analyzing the following key points, namely, Migros Genossenschaftsbund and its lead, Chocoladefabriken lindt & Sprungli to strengthen its impulse portfolio and Nestle Suisse’s pink chocolate.

  • Migros Genossenschaftsbund is expected to remain the leading player: Migros Genossenschaftsbund is popular for its good-quality products in affordable prices especially with Frey, its private label line. Through this, the company is expected to remain the leading company within chocolate confectionery and will continue to experience success. With its Frey brand, the manufacturer and retailer will continue to offer a wide range of chocolate confectionery covering all price groups- from economy to premium.
  • Chocoladefabriken lindt & Sprungli to strengthen its impulse portfolio : The second-ranked player, Chocoladefabriken Lindt & Sprüngli, is popular for its premium quality. The company is anticipated to continue capitalizing on the ever-growing popularity of premium chocolate. It will also continue to position itself as the specialist in “degustation” tablets.
  • Nestle Suisse’s innovation of pink chocolate: Innovation is key to sustaining growth, with chocolate confectionery facing increasingly intensive competition within snack-orientated purchases. In September 2017, Barry Caillebaut and Nestlé Suisse came up with the Ruby Chocolate which is pink in colour. It is a variety of chocolate made from the ruby cocoa be an and is naturally pink [35].

Competitive Factors

Premium chocolate continued to increase in popularity in Switzerland in 2017. The fact that Swiss consumers in general paid more attention to the quality of their food, increasingly demanded organic, fair-trade chocolate and/or chocolate with a high cocoa content. The focus was broadly on LATTE (Local, Authentic, Traceable, Trusted and Ethical) with consumers becoming more knowledgeable about the products they purchased and more demanding in terms of cocoa quality and single-origin varieties [36].

Several market players have adopted strategies of labeling their chocolate confectionery items in innovative ways as healthy diet options in an attempt to meet the increasing demand of qualitative chocolate and confectionary.

Key Market Players

Chocoladefabriken Lindt & Sprüngli, Migros Genossenschaftsbund, Nestlé Suisse, Chocolats Camille Bloch, Barry Callebaut, Milka Swiss Chocolates, Toblerone are some of the major market players in the chocolate market in Switzerland.

  • Chocoladefabriken Lindt & Sprüngli: Chocoladefabriken Lindt & Sprüngli more commonly known as Lindt, is a Swiss chocolatier and confectionery company founded in 1845 and known for its chocolate truffles and chocolate bars, among other sweets. Lindt & Sprüngli has twelve factories expanding through various regions in Europe and the US. Lindor, Seasonal confectionaries, Chocolate bars, Petits desserts, Liqueurs, Ice cream etc are some of its popular products. In 2017, company had a revenue of US $ 4.15 billion Cite error: Closing </ref> missing for <ref> tag.
  • Nestlé Suisse: Nestlé Suisse is a Swiss transnational food and drink company, headquartered in Vevey, Vaud, Switzerland. In 2017, it ranked No. 64 on the Fortune Global 500 and No. 33 on the 2016 edition of the Forbes Global 2000 list of largest public companies. Its products include baby food, medical food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks. Twenty-nine of Nestlé's brands have annual sales of about US$1.1 billion. The company had revenue of around US $ 91.24 billion in the year 2017 [37].
  • Barry Callebaut: Barry Callebaut is among the world's largest cocoa producers and grinders, with an average annual production of 1.7 million tonnes of cocoa. It is currently based in Zürich, Switzerland, and operates in over 30 countries worldwide [38].
  • Toblerone: Toblerone is considered to be one of the most famous chocolate brands in Switzerland, and was founded in 1908 at Bern, Switzerland by Theodor Tobler and Emil Baumann. It has a widely acclaimed international reputation on the list of Swiss chocolate brands with its unique Swiss chocolate in a triangular shape including almonds, honey, and nougats. Toblerone is owned by the Mondelez International Group which has annual revenue of around $25 billion and employing more than 107,000 people worldwide [39].
  • Milka Swiss Chocolates: Milka was established in 1825 by Phillipe Suchard as a patisserie at Neuchatel, Switzerland. It is regarded as the best chocolate brand in Switzerland for its history of making top quality milk chocolates for almost two centuries. It is one of the top 10 Swiss chocolate brands on the best list of Swiss chocolate brands and has an annual sales revenue of over $1.8 billion [40].
  • Chocolats Camille Bloch: Chocolats Camille Bloch is one of the leading chocolate brands in Switzerland established in 1929 by Camille Bloch at Bern, Switzerland. It manufactures Swiss chocolate bars and pralines for over eight decades. It was initially set to manufacture specialty chocolates such as liqueur chocolates from 100% natural materials. Chocolats Camille Bloch has an annual revenue of almost $90 million and has more than 200 employees working for this one of the top 10 Swiss chocolate brands [41].

Strategic Conclusion

The chocolate market in the Switzerland Chocolate confectionery is expected to record growth at constant 2018 prices, whereas retail volume sales are expected to decrease at a marginal CAGR. Swiss consumers of chocolate confectionery are expected to opt for higher-quality chocolate, although they are expected to purchase it in smaller amounts. Looking at the competitive landscape, Migros Genossenschaftsbund is expected to remain the leading player. Also, increased attention to quality of food has led to growing demand in organic, fair-trade chocolate and/or chocolate with a high cocoa content.

References

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Appendix

Acronym

  • CAGR: Compound Annual Growth Rate
  • US$: United States Dollar


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