Chocolate and wider confectionery segments remain at risk from inflation pressures, says latest study

Latest sector analysis has warned that the indulgent food segment, including chocolate and confectionery segments, as well as snacks and ice cream remains at high risk from rising inflation, writes Neill Barston.

There has been continued market turbulence impacting the sector due to factors including the ongoing war in Ukraine, and logistics and ingredients increases in a number of markets.

Significantly, further major market disruption has been caused in the past week alone in the UK, following the new chancellor’s budget, which represented the biggest tax cuts in the past 50 years, which prompted the pound to dramatically fall in value on stockmarkets – further worsening pressure on retail and wider supply chains.

As GlobalData noted, the ‘indulgent category’ is only anticipated to rise by  2.2% in volume CAGR 2021-2024, with the organisation asserting that chocolate and confectionery will be one of the categories that will be hit the hardest with volumes set to decrease from a 2016-2019 CAGR of 2.1% to a 2021-2024 CAGR of 1.5%. Moreover, its analysis notes that Ice cream is set to see a double digit increase in value over 2021-2024 but only a 2.2% rise in volume in the same period.

Jenny Questier, Senior Analyst at GlobalData, comments: “As these products are often positioned as treats and rewards and not staple parts of weekly meals, they are more likely to be compromised in consumers’ shopping baskets as household budgets continue to get tighter and consumers consider their health priorities.”

GlobalData’s forecasts show that all categories in indulgent food are gaining value over volume, suggesting that inflation and price increases are currently set to drive growth rather than increased sales in the next couple of years.

Questier added: “Ice cream specifically has associated manufacturing, logistics and storage costs around freezing that will have to be passed on to the consumer as energy costs continue to rise. Added costs combined with the seasonality of these products will further dampen peoples’ desire to purchase these in the future as they focus on essential items.”

According to GlobalData’s 2022 consumer surveys, the number of US consumers who claimed to spend a ‘high amount’ on chocolate and confectionery decreased by 12% in Q3 compared to the first three months of 2022. This means that as well as the long-term market forecasts predicting a change in spending habits, many consumers have already started to make these compromises.

“The current circumstances could be an opportunity for brands and manufacturers to look at product portfolios and innovation with a view to staying relevant and available to consumers. Price points in these categories especially will need to stay low to encourage spend, either by smaller pack sizes or perhaps even as part of cross-promotions in future with more essential products,” added the company analyst, of an international market being posed with a number of at least mid-term challenges.

 

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