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Confectionery

Market Reports 2015

33rd Edition July 2015

ISBN 978-1-78304-315-6

Confectionery

© Key Note Limited. Key Note is the trading name of Key Note Limited. Registered in England and Wales - No.6751403 VAT No.942 935 989

Contents

Introduction & Definition 1 .................................................................................................................................................................. REPORT COVERAGE 1 ................................................................................................................................................................ MARKET SECTORS 1 ...................................................................................................................................................................

Chocolate Confectionery 1 ...................................................................................................................................................... Sugar Confectionery 1 .............................................................................................................................................................

Executive Summary 3 ..........................................................................................................................................................................

What’s KEY in the Market? 4 ............................................................................................................................................................... KEY DRIVERS 4 ............................................................................................................................................................................. MARKET TRENDS 5 ......................................................................................................................................................................

Consumption Trends 5 ............................................................................................................................................................ Price Inflation 6 ........................................................................................................................................................................ New Product Developments 7 .................................................................................................................................................

ECONOMIC TRENDS 9 ................................................................................................................................................................. MARKET POSITION 11 ................................................................................................................................................................. HOW ROBUST IS THE MARKET? 12 ...........................................................................................................................................

Market Size, Segmentation & Forecasts 13 ....................................................................................................................................... MARKET SIZE & SEGMENTATION 13 .........................................................................................................................................

The Total Market 13 ................................................................................................................................................................. Market Sectors 14 ....................................................................................................................................................................

FORECASTS 22 ............................................................................................................................................................................. Future Trends 22 ..................................................................................................................................................................... Future Economic Trends 23 .................................................................................................................................................... Forecast Total Market 24 .........................................................................................................................................................

MARKET GROWTH 26 .................................................................................................................................................................. International Perspective 27 ...............................................................................................................................................................

OVERVIEW 27 ................................................................................................................................................................................ Global Marketplace 27 ............................................................................................................................................................. Global Production 28 ...............................................................................................................................................................

OVERSEAS TRADE 30 .................................................................................................................................................................. General Overview 30 ............................................................................................................................................................... Exports 31 ................................................................................................................................................................................ Imports 32 ................................................................................................................................................................................

Competitor Analysis 34 ....................................................................................................................................................................... MARKET LEADERS 34 .................................................................................................................................................................

Dunhills (Pontefract) PLC 35 ................................................................................................................................................... Lindt & Sprungli (UK) Ltd 36 .................................................................................................................................................... Mars Chocolate UK Ltd 37 ....................................................................................................................................................... Mondelez UK Ltd 39 ................................................................................................................................................................ Nestlé UK Ltd 40 ...................................................................................................................................................................... Swizzels Matlow Ltd 41 ........................................................................................................................................................... Tangerine Confectionery Ltd 43 .............................................................................................................................................. Thorntons PLC 44 .................................................................................................................................................................... The Wrigley Company Ltd 45 ..................................................................................................................................................

OTHER COMPANIES 47 ................................................................................................................................................................ Kinnerton (Confectionery) Co Ltd 47 ....................................................................................................................................... Lofthouse of Fleetwood Ltd 47 ................................................................................................................................................ Magna Specialist Confectioners Ltd 48 ................................................................................................................................... OP Chocolate Ltd 48 ...............................................................................................................................................................

NUMBER OF COMPANIES 48 ...................................................................................................................................................... By Turnover 48 ........................................................................................................................................................................ By Employment 49 ................................................................................................................................................................... Regional Variation in the Marketplace 51 ................................................................................................................................

MARKETING ACTIVITY 52 ............................................................................................................................................................ KEY TRADE ASSOCIATIONS 53 .................................................................................................................................................. EXHIBITIONS/TRADE SHOWS 53 ................................................................................................................................................

Buying Behaviour 55 ........................................................................................................................................................................... CONSUMER PENETRATION 55 ...................................................................................................................................................

Consumption by Type 55 .........................................................................................................................................................

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By Sex 56 ................................................................................................................................................................................ By Age 56 ................................................................................................................................................................................ By Social Grade 58 .................................................................................................................................................................. By Frequency 58 ......................................................................................................................................................................

ATTITUDES TOWARDS CONFECTIONERY 61 ........................................................................................................................... By Sex 63 ................................................................................................................................................................................ By Age 64 ................................................................................................................................................................................ By Social Grade 66 .................................................................................................................................................................. By Presence of Children in the Household 68 .........................................................................................................................

Strengths, Weaknesses, Opportunities & Threats 71 ....................................................................................................................... STRENGTHS 71 ............................................................................................................................................................................. WEAKNESSES 71 ......................................................................................................................................................................... OPPORTUNITIES 72 ...................................................................................................................................................................... THREATS 72 ..................................................................................................................................................................................

PESTEL 73 ............................................................................................................................................................................................ POLITICAL 73 ................................................................................................................................................................................ ECONOMIC 73 ............................................................................................................................................................................... SOCIAL 74 ..................................................................................................................................................................................... TECHNOLOGICAL 75 .................................................................................................................................................................... ENVIRONMENTAL 76 .................................................................................................................................................................... LEGISLATIVE 77 ...........................................................................................................................................................................

Further Sources 78 .............................................................................................................................................................................. Associations 78 ............................................................................................................................................................................. Publications 78 .............................................................................................................................................................................. General Sources 80 ...................................................................................................................................................................... Government Publications 80 ....................................................................................................................................................... Other Sources 81 ..........................................................................................................................................................................

Understanding Consumer Survey Data 82 ........................................................................................................................................ Number, Profile, Penetration 82 .................................................................................................................................................. Social Grade 82 ............................................................................................................................................................................. Standard Region 83 ......................................................................................................................................................................

Key Note Research 84 .........................................................................................................................................................................

Confectionery 1


Introduction & Definition

REPORT COVERAGE

This Key Note Market Report examines the UK confectionery market. It covers allconfectionery products sold at retail in the UK within the context of the market’s twoprimary sectors: chocolate confectionery and sugar confectionery. Given the breadth ofthis market, each of these sectors is further divided into more specific subsectors so asto provide a more detailed analysis of the market. Nevertheless, there is an element ofoverlap between other confectionery-based markets, such as biscuits and ice cream;however these are not included within the scope of this report.

MARKET SECTORS

Chocolate Confectionery

The chocolate confectionery sector includes all chocolate-based confectionery. Thiscan be further divided into the following four subsectors, based on packaging, size andformat:

Countlines — single-serve bars and bags that are sold in both single units andmultipacks. Examples include Nestlé’s Kit Kat, Mars’ Snickers and Cadbury’s Buttons inthe 32-gram (g) format.Boxed chocolates and sharing bags — products that contain multiple pieces ofchocolate in a range of packaging formats, including inlaid boxes, containers (whereinchocolates are individually wrapped) and bite-sized sharing bags. Examples includeCadbury’s Roses, Thornton’s Premium Collection and Nestlé’s Peppermint AeroBubbles in share-size bags.Blocks and moulded bars — also known as slabs, these products are divided intosquares for individual consumption or sharing. Examples include Cadbury’s Dairy Milk,Nestlé’s Crunch Milk block and Green & Black’s branded chocolate.Other chocolate confectionery — seasonal products and novelties are included withinthis subsector. Examples include Ferrero’s Kinder Surprise, the Lindt Gold Bunny andthe Cadbury Flake Egg.

Sugar Confectionery

Sugar confectionery incorporates confectionery that is not made using cocoa. Thiscategory can be divided as follows:

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Fruit sweets — includes chews, gums and jellies. Examples include Rowntree’s FruitPastilles and the Haribo range.Chewing and bubble gum — chewing gum is designed to freshen breath and releasesflavour over a prolonged period of time. Bubble gum can also freshen breath but unlikechewing gum, it can also be stretched and blown into bubbles as it is made of feweringredients. There is a wide variety of flavours and products in this subsector, includingPeppersmith and Wrigley’s Hubba Bubba.Mints — soft and hard mints feature in this category. Examples include TicTac mintsfrom Ferrero and Fox’s XXX Mints.Other sugar confectionery — sugar candy, traditional sweets and toffees are some ofthe products included in this subsector. Examples include Werther’s Originals, SwizzelsMatlow’s Drumsticks and Love Hearts.

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Executive Summary

This Key Note Market Report examines the UK confectionery market. Between 2010and 2014, the market expanded at a year-on-year rate, with the total value of retailsales increasing by 2.1% in the latter year of this 5-year review period.

Growth was exhibited in both the chocolate confectionery and sugar confectionerysectors, although the former grew at a faster rate. Within the chocolate confectionerycategory, the countlines subsector continues to account for the majority of sales value,but its share of the sector fell in 2014 as a result of strong growth among competingproducts, such like sharing bags. Similarly, the fruit sweets sector is the largest in thesugar confectionery category, but despite exhibiting value growth in 2014 its sectorshare fell due to the competitiveness of other subsectors, like chewing and bubble gum,and other sugar confectionery.

It is important to note, however, that value growth across all sectors and subsectorscontinues to be primarily driven by inflated retail prices, rather than rising volume sales.Despite the onset of economic recovery, trade conditions remain challenging within thecontext of volatile global cocoa and sugar prices. Within the UK marketplacespecifically, the competitive and saturated nature of the marketplace is fuellinginvestment in marketing, promotional activity and new product developments (NPDs),thereby limiting potential profitability. Nevertheless, NPDs continue to unlock growthpotential, with the demand for innovative, fun, excitingly flavoured and seasonallythemed confectionery remaining high.

In addition to established market trends, a range of current issues continue to affectbuyer behaviour. The media’s ongoing focus on the negative health implications ofexcessive sugar consumption is the most notable example to emerge in recent months.Sugar has replaced saturated fat as the primary health concern and this is beginning tonegatively affect demand for sugar confectionery and most types of chocolate. Inaddition to this threat to volume sales, there is an ongoing political debate regardingfurther junk food advertising restrictions, while the sustainability of the wider industryhas been called into question as a result of a potential global cocoa shortage.

Despite these threats though, the UK confectionery market enjoys considerablerobustness as a result of the widespread popularity of sweets and chocolate. Whilevolume sales are likely to remain subdued and may even fall, the growing demand forpremium products combined with continued price inflation will ensure value growth.Between 2015 and 2019, therefore, Key Note forecasts total market growth of 8.6%.

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What’s KEY in the Market?

KEY DRIVERS

Price — is an influential driver for UK consumers at the point of sale (PoS). Accordingto the Department for Environment, Food and Rural Affairs (Defra) publication entitledFood Statistics Pocketbook 2014, as many as 41% of consumers cited price as theirprimary influence when food shopping, with a total of 88% listing it within their top fiveconsiderations. While confectionery is widely considered to be an affordableindulgence, the extreme saturation of products ensures that price can be a key factoraffecting which product a consumer chooses. Brand loyalty does exist in themarketplace, but this is likely to be eroded by rising prices, with many consumerswilling to experiment by trying new products. Of course, inflated retail prices have beenunavoidable since the financial crash, but it is important that rises are at least broadlyconsistent with competing brands and adhere to consumers’ perceptions of value-for-money. It is unsurprising, therefore, that there has been an influx of in-store promotions(ISPs) and price-marked packs (PMPs) in this market in recent years.Flavour — affects the UK confectionery market in two important respects. At a basiclevel, flavour is the primary means of developing product loyalty, with consumersconsistently returning to confectionery they have enjoyed and avoiding that which theyhave not. In addition, flavour is also a key brand loyalty driver, heavily influencingmanufacturers’ new product development (NPD) policies. Successful new flavourcombinations help to attract adventurous consumers to a new brand, while alsoretaining the loyalty of a regular customer wanting to branch out within an expandingproduct range.Convenience — has become an influential driver over the last few years, with Britonsliving increasingly fast-paced lifestyles. Sales of single-serve confectionery productshave benefited from this process, as they can easily be consumed on-the-go. Yet, it isimportant to note that snack foods and ice creams can also be consumed in this way,exacerbating competition between these markets. The convenience of online shoppingshould not be ignored either; although such sales only account for a tiny proportion ofthe total, the Internet is becoming an increasingly convenient means of purchasingmultipacks for household consumption.Health — is increasingly affecting consumer decisions at the PoS in the UKmarketplace. Defra’s Food Statistics Pocketbook 2014 indicates that 9% and 11% ofconsumers cited health as their primary or secondary considerations, respectively,when food shopping, with a total of 48% listing it within their top five influences. Incomparison, the 2012 edition of the same publication reveals that 8% and 10% citedhealth as their primary and secondary influence at retail, respectively, with a total of47% listing it within their top five factors at the PoS. While many Britons still perceiveconfectionery to be a harmless indulgence when consumed in moderation, healthconcerns are driving subdued volume sales in certain sectors, while converselyimproving the demand for products like dark chocolate, which is considered to be

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healthier than other forms of chocolate.

MARKET TRENDS

Consumption Trends

Total UK confectionery consumption averaged an estimated 126 grams (g) per personper week in 2014. Table 2.1 shows that this was the joint-lowest total of this 5-yearreview period and represented a decrease of 1.6% from 2013 and 3.8% from 2010. Amajor factor behind this trend is the decreasing size of single-serve confectionery;many manufacturers have decreased the volume of their products so as to bettercomply with public health commitments. In addition, health concerns at consumer levelare beginning to restrict potential volume sales growth, while other factors, such asrising retail prices and the hot summer weather’s driving effect on ice cream sales, havealso contributed to subdued volume sales performance.

Nevertheless, it is important to note that 126g per person per week remains asignificant quantity, while not all product categories have exhibited falling demand.Consumption of solid chocolate bars equalled an estimated 35g per person per week,which was the same as in the previous year and an increase of 9.4% from 2010. This isperhaps indicative of the enduring popularity of brands like Dairy Milk, combined withthe rising demand for dark chocolate. Similarly, although consumption of boiled sweetsfell slightly between 2013 and 2014, the estimated 35g per person per week that wereconsumed in the latter year represented an overall increase of 6.1% from 2010. Incontrast, while volume sales of filled chocolate bars, mints, chewing gum, and fudges,toffees and caramels remained consistent between 2013 and 2014, they havedecreased over the course of this 5-year period. Filled chocolate bars remain the mostwidely consumed confectionery product in the UK, averaging 50g per person per week,but consumption nevertheless declined by 12.3% between 2010 and 2014. The size ofleading products like Snickers and Mars bars has been significantly reduced overrecent years, while NPDs in other sectors and markets have also exacerbatedcompetition in this regard.

Table 2.1: UK Consumption of Confectionery by Type(average grams per person per week), 2010-2014

2010 2011 2012 2013 e2014

Chocolate bars — filled 57 58 50 50 50

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Chocolate bars — solid 32 31 33 35 35

Boiled sweets 33 35 36 36 35

Fudges, toffees and caramels 4 3 4 3 3

Mints 4 3 2 2 2

Chewing gum 2 2 2 1 1

Total 131 134 126 128 126

% change year-on-year - 2.3 -6.0 1.6 -1.6

e — Key Note estimates

Note: totals may not sum due to rounding at source.

Source: Family Food Datasets, Department for Environment, Food and Rural Affairs © Crown copyright/Key Note

Figure 2.1: UK Consumption of Confectionery by Type(average grams per person per week), 2010-2014

Note: totals may not sum due to rounding at source; 2014 data are Key Note estimates.

Price Inflation

Average confectionery retail prices have increased dramatically in recent years, as aresult of challenging domestic and global trade conditions following the financial crashin 2008/2009. Table 2.2 shows that the consumer price index (CPI) for sugar, jam,syrups, chocolate and confectionery reached 154 in 2014. This represented an

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increase of 2.7 and 23.9 percentage points from 2013 and 2010, respectively, withprices rising by a dramatic 53.9 percentage points since the 2005 base year. Yet,although this clearly exemplifies the impact of the financial crisis, price rises haveexhibited logarithmic growth since 2010, reflecting the returning stability in thismarketplace.

It is a testament to the widespread popularity of confectionery and the robustness ofdemand that volume sales have not declined more markedly in the wake of suchdramatic price inflation. Many manufacturers have, however, increasingly used ISPsand PMPs as a means of retaining the perception of value for money, despite theimpact of these strategies on profitability.

Table 2.2: Average Annual Consumer Price Index for Sugar, Jam, Syrups,Chocolate and Confectionery (index 2005=100), 2010-2014

2010 2011 2012 2013 2014

Price Index 130.1 139.9 146.9 151.3 154.0

% change year-on-year - 8.8 7.0 4.4 2.7

Source: Consumer Price Indices, May 2015, National Statistics website ©Crown copyright material is reproduced with thepermission of the Controller of HMSO (and the Queen’s Printer for Scotland)

Figure 2.2: Average Annual Consumer Price Index for Sugar, Jam, Syrups,Chocolate and Confectionery (index 2005=100), 2010-2014

New Product Developments

The UK confectionery market is extremely competitive. Not only are both marketsectors heavily saturated with products, but the market also faces fierce competition

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from other markets specialising in affordable indulgences — snack foods, biscuits andice cream among others. Within this challenging climate, NPDs are the primary meansof generating consumer interest, exploiting emerging trends and maintaining marketshare and brand loyalty. According to an article by The Grocer (dated 3rd October2014), as many as 912 new confectionery products launched in the UK in the 12months prior to the article’s publication. Recent NPDs in this market can be broadlygrouped into the following three categories: size variants, seasonal modifications andgenuine innovation.

Expanding the range of size formats in which a product is available is a common low-cost means of diversifying penetration into other subsectors and increasing the range ofpotential consumption occasions. Perhaps the most widespread example is expansioninto the sharing bags category; in February 2014, for instance, Chewits launched 180gsharing bags of Chewmix in an attempt to tap into the format’s increasing popularitywithin the take-home category. Other manufacturers have shrunk the size of theirsingle-serve products. As mentioned, one reason for this is to adhere to increasinglystringent public health commitments, with the decreasing size of the Mars bar a primeexample. Another potential reason is to make products seem less indulgent and moreaffordable. On 12th August 2014, for instance, The Grocer reported that Candyland-branded chew bars — Wham, Fruit Salad and Black Jack — were shrinking from 25g to16g, with the price falling from 20 pence (p) to 10p.

Seasonal modifications are another means of relatively low-cost and low-riskdiversification. Seasonal confectionery products have been a notable area of recentgrowth; increasingly, health-conscious consumers are more willing to indulge duringholidays, while the fun and exclusive nature of such products creates a point of interest(POI). The launch of Halloween-themed Starbursts in 2014 is one such example, whilea range of festive products were also launched. Even in the more mature Eastercategory, significant growth potential remains for innovation. On 28th July 2014, TheGrocer reported that annual Easter egg sales grew by £44m in 2014, partially reflectingthe growing demand for premium variants.

Genuine innovations are the least common form of NPD in this market. In addition tobeing hugely expensive, such products are by no means guaranteed to succeed. It istherefore common for leading manufacturers to launch new products as a sub-brandwithin a leading master brand, so as to exploit existing brand awareness and loyalty.Following on from the success of Dairy Milk’s Marvellous Creations sub-brand,Mondelez announced the launch of Dairy Milk Puddles — Dairy Milk chocolate with asoft filling — in April 2015. More recently, Mars announced the launch of Galaxy Duet— two bars of chocolate containing different fillings — while Haribo has also recentlylaunched Haribo Minions in an attempt to exploit the success of the Despicable Mefilms.

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ECONOMIC TRENDS

Economic trends, as outlined in Table 2.3, are an important indicator of performancewithin the UK confectionery market. The UK’s resident population totalled 64.5 millionpeople in 2014, following demographic growth of 0.7% from the previous year and 2.8%from 2010. The UK economy has also expanded in this 5-year timeframe, with grossdomestic product (GDP) increasing at a year-on-year rate of between 2.3% and 4.6% atcurrent prices. Improved productivity is a major factor behind this growth and has beendriven by falling unemployment; in 2014, there were 1.03 million people claimingJobseeker’s Allowance (JSA), representing a decrease of 27.5% from the previous yearand 31.3% from 2010. With regard to consumer spending power, average householddisposable income per capita reached £17,890 in 2014, which was 1.5% more than in2013 and 6.6% more than in 2010. Finally, the rate of inflation fell by 0.6 percentagepoints in 2014 to equal 2.6%, although this was still higher than the Bank of England’s(BoE’s) 2% target.

The overall economic outlook is increasingly healthy, and this has positive implicationsfor the UK confectionery market. At a basic level, for instance, demographic growth isincreasing the size of the consumer base, thereby driving potential volume sales.Sustained GDP growth, on the other hand, reflects the relative stability of the financialclimate, perhaps facilitating greater investment in marketing and NPDs among UKconfectionery manufacturers. At consumer level, rising household disposable income isgradually reducing the important of price at the PoS, with higher-income householdsincreasingly prioritising the purchase of premium-quality confectionery from brands likeGreen & Black’s, Lindt and Hotel Chocolat. Yet, it is important to emphasise the gradualnature of this process. Continued high inflation means that many Britons continue tostruggle financially, as reflected in the growing popularity of cheaper private-labelconfectionery products.

Table 2.3: UK Economic Trends (000, £m, %, million and £), 2010-2014

2010 2011 2012 2013 2014

Resident PopulationEstimates (000), Mid-Years

Female 31,954 32,188 32,390 32,556 32,747

Male 30,805 31,097 31,315 31,532 31,764

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Total population 62,759 63,285 63,705 †64,087 64,511


Gross DomesticProduct (£m)

Current prices 1,558,365 1,617,677 1,655,384 1,713,122 1,791,490


Annual chain-linkedGDP

1,591,494 1,617,677 1,628,338 1,655,447 1,702,153


Rate of Inflation (%)

Inflation 4.6 5.2 3.2 3.0 2.4

Percentage pointchange year-on-year

- 0.6 -2.0 -0.2 -0.6

Actual Number ofUnemployed Personsin the UK (million)

Actual number ofclaimants

1.50 1.53 1.59 1.42 1.03

% change year-on-year - 2.0 3.9 -10.7 -27.5

HouseholdDisposable IncomePer Capita (£)

Household disposableincome

16,776 16,875 17,378 17,623 17,890


† — does not sum due to rounding at source

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GDP — gross domestic product

Note: inflation is at retail price index (RPI); inflation data shown are annual averagechanges; claimant count measures the number of people claiming Jobseeker’sAllowance.

Source: Population Estimates for UK, England and Wales, Scotland and Northern Ireland, Mid-2001 to Mid-2010 Revised,December 2013/National Population Projections, 2012-based projections/United Kingdom Economic Accounts, 18th May2015/Consumer Price Inflation, April 2015/Labour Market Statistics, May 2015, National Statistics website © Crown copyrightmaterial is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

MARKET POSITION

The UK confectionery market is positioned within the broader category for sugar,confectionery and ice cream, wherein it is the largest component in terms of value.Table 2.4 indicates that consumer expenditure across this category totalled £10.48bn in2014, representing an increase of 1% from the previous year and 20.9% from 2010. Inturn the sugar, confectionery and ice cream category is positioned within the wider UKfood industry — a pillar of the UK economy. Consumers spent a total of £83.41bn onfood in 2014, and although this was 1.5% less than in 2013, it was still 14.1% morethan in 2010. Nevertheless, value growth in the former category has significantlyexceeded total industry growth in this 5-year timeframe, and this is reflected in the factthat expenditure on sugar, confectionery and ice cream accounted for 12.6% of totalfood expenditure in 2014, compared with 11.8% in 2010.

Table 2.4: Total UK Consumer Expenditure on Sugar, Confectioneryand Ice Cream and All Food (£m and %), 2010-2014

2010 2011 2012 2013 2014

Expenditure on sugar, confectioneryand ice cream

8,664 9,123 9,816 10,370 10,476


Expenditure on all food 73,121 75,897 80,052 84,725 83,414

% change year-on-year - 3.8 5.5 5.8 -1.5

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Expenditure on sugar, confectioneryand ice cream as a % of expenditureon all food

11.8 12.0 12.3 12.2 12.6

Note: figures are at current prices and are not seasonally adjusted.

Source: Consumer Trends, Q4 2014, National Statistics website © Crown copyright material is reproduced with the permission ofthe Controller of HMSO (and the Queen’s Printer for Scotland)

Figure 2.3: Total UK Consumer Expenditure on Sugar, Confectioneryand Ice Cream and All Food (£m), 2010-2014

Note: figures are at current prices and are not seasonally adjusted.

HOW ROBUST IS THE MARKET?

The UK confectionery market is fairly robust. Products in this market enjoy widespreadpopularity, and the extensive range of formats, brands and price-points has contributedto extensive consumer penetration. Confectionery has been considered an affordableindulgence for decades and the maturity of the market has helped to drive consistentperformance in the long term. Nevertheless, the market is not immune to threats,limiting robustness somewhat. The extreme competitiveness of the marketplace hasmade trade conditions challenging and restricted profitability throughout the supplychain, while increasingly prevalent health concerns among the consumer base arenegatively affecting demand. Most significant, perhaps, is the UK’s reliance on cocoaand sugar imports; input prices are prone to volatility as exemplified by the currentglobal shortage of cocoa. As such, the market cannot be described as completelyrobust, although the widespread popularity of confectionery and the maturity of themarketplace ensure fairly consistent performance in spite of these ongoing threats.

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Market Size, Segmentation & Forecasts

MARKET SIZE & SEGMENTATION

The Total Market

The total UK confectionery market was worth approximately £5.85bn in 2014,representing growth of 16.3% from 2010. The market has expanded at a year-on-yearrate over this 5-year review period; following impressive annual growth of 7.5% in 2011,market value then increased by 1.8% and 4.1% in 2012 and 2013, respectively, beforerising by 2.1% in 2014.

Confectionery is widely popular in the UK, with the affordable nature of most productsensuring consistent demand despite ongoing financial instability. In addition to thematurity of the industry, the robust nature of the market is reinforced by the variety ofavailable products, formats, brands and price points, maximising potential penetration.Yet, the established nature of the market has also resulted in significant saturation. Theextreme competitiveness of the marketplace has eroded brand loyalty, encouragingmanufacturers to invest heavily in marketing, in-store promotions and new productdevelopments (NPDs). But although this has restricted profitability, new avenues forgrowth continue to emerge, creating ongoing growth potential. In 2014, for instance, theongoing popularity of sharing bags (and take-home confectionery in general), thedemand for seasonal products, the growing range of fun and innovatively flavouredproducts and the retuning demand for premium confectionery all contributed to valuegrowth.

Inflated retail prices, however, remain a significant contributor to value growth in thismarket. With the exception of 2012, the rate of annual growth broadly correlates withfalling inflation, reinforcing the extent to which performance is based on pricing trendsand strategies rather than increased demand. In fact, value growth in 2014 disguisedthe subdued nature of annual volume sales, with health concerns, the shrinking size ofconfectionery countlines and the hot summer weather’s driving effect on competing icecream sales all contributing to this trend.

Table 3.1: The Total UK Market for Confectionery by Sectorby Value at Current Prices (£m at rsp), 2010-2014

2010 2011 2012 2013 2014

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Chocolate confectionery 3,732 4,001 4,065 4,248 4,344

Sugar confectionery 1,297 1,407 1,440 1,482 1,507

Total 5,029 5,408 5,505 5,730 5,851


rsp — retail selling prices

Source: Key Note

Figure 3.1: The Total UK Market for Confectionery by Sectorby Value at Current Prices (£m at rsp), 2010-2014


Market Sectors


The UK chocolate confectionery sector was worth an estimated £4.34bn in 2014,representing value growth of 16.4% from 2010. Following year-on-year growth of 7.2%in 2011, the sector then expanded by 1.6% and 4.5% in 2011 and 2012, respectively,before exhibiting growth of 2.3% in 2014. The chocolate confectionery sector accountsfor the majority of total confectionery market value in the UK, and sustained growthsince 2010 has helped to consolidate this status. In 2014, chocolate confectionery salesaccounted for 74.2% of total market value, which was the same as in 2010 and anincrease of 0.4 percentage points from 2012.

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Table 3.2: The UK Chocolate Confectionery Sector by Valueat Current Prices (£m at rsp and %), 2010-2014

2010 2011 2012 2013 2014

Value (£m at rsp) 3,732 4,001 4,065 4,248 4,344


Sector share of the total market (%) 74.2 74.0 73.8 74.1 74.2


Source: Key Note

Figure 3.2: The UK Chocolate Confectionery Sector by Valueat Current Prices (£m at rsp), 2010-2014


Table 3.3 indicates that countlines account for the largest proportion of chocolateconfectionery sales in the UK. An estimated £1.82bn was spent on countlines in 2014,equating to 41.8% of sector value in that year. The second largest subsector in thiscontext was boxed chocolates and sharing bags, wherein annual sales of £1.3bnaccounted for 30% of the sector. In comparison, the blocks and moulded barssubsector was worth £845m in 2014 — 19.5% of the annual sector total — and otherchocolate confectionery sales were worth £378m — 8.7% of total sector value.

Table 3.3: The UK Chocolate Confectionery Sector by Subsector by Value atCurrent Prices (£m at rsp and %), 2014

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Value (£m at rsp) % of Total

Countlines 1,817 41.8

Boxed chocolates and sharing bags 1,304 30.0

Blocks and moulded bars 845 19.5

Other chocolate confectionery 378 8.7

Total 4,344 100.0


Source: Key Note

Figure 3.3: The UK Chocolate Confectionery Sector by Subsector by Value Share(%), 2014

Countlines

The countlines subsector was worth an estimated £1.82bn in 2014. While thisrepresented growth of 1.8% from 2013, its value share of the chocolate confectionerysector nevertheless declined from 42% to 41.8% in this timeframe.

Despite the widespread availability and relative popularity of individually wrappedcountlines in multipack formats, single-serve impulse sales continue to account for themajority of this subsector’s value. The decline in sector share in 2014 can be primarilyattributed to subdued volume sales in the impulse category, with this area being

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hardest hit by the increasingly health-conscious nature of the consumer base. Theextreme saturation of the countlines sector has also resulted in significant promotionalactivity, further restricting potential value growth in 2014. Yet, it is important toemphasise that despite these setbacks, the countlines subsector still contains many ofthe confectionery market’s most popular products, including Mars bars, Snickers andKit Kat, providing a robust level of demand.

Boxed Chocolates and Sharing Bags

The boxed chocolates and sharing bags subsector was worth approximately £1.3bn in2014, following a 2.7% increase in value sales from the previous year. The subsector’sshare of the chocolate confectionery sector has consequently increased from 29.9% to30% in this timeframe.

The increase in sector share is attributable to two main factors. The first is thecontinued high demand for sharing bag size formats. Not only are these popular forsharing during social occasions within the household, especially among youngerdemographics, but they are providing individual consumers with a more substantialsource of indulgence. According to an article by The Grocer, published 28th July 2014,almost one in four people who purchase sharing bags end up eating them alone in onesitting. The second factor is the demand for premium products, which is graduallyincreasing in line with the economic recovery. Boxed chocolates are well posited toexploit this demand with premium options from emerging brands like Hotel Chocolatproving popular.

Blocks and Moulded Bars

The blocks and moulded bars subsector was worth an estimated £845m in 2014. Thisrepresented value growth of 1.6% from 2013, although the subsector’s share of thewider chocolate confectionery category decreased from 19.6% to 19.5% in thistimeframe.

The challenging nature of trade within such a competitive subsector is reflected inNestlé’s decision to discontinue its Wonka brand of moulded bars in 2014. Themanufacturer took the decision following subdued performance in the wake of theemerging popularity of Dairy Milk’s Marvellous Creations brand, which is successfullyexploiting the demand for fun and unusual flavour combinations. Nevertheless, theenduring popularity of products like Cadbury’s Dairy Milk and Mars’ Galaxy contributesto fairly consistent demand in this subsector. Value growth in 2014 was also bolsteredby the gradually increasing popularity of dark chocolate, which is perceived to behealthier than milk chocolate. Premium brands like Green & Black’s have beenparticularly successful in unlocking this demand, with consumers also admiring the

Confectionery 18


company’s ethical credentials.

Other Chocolate Confectionery

The value of the other chocolate confectionery subsector equalled approximately£378m in 2014, representing a value increase of 4.4% from 2013. As a result of thisimpressive growth, subsector share increased from 8.5% to 8.7% in this period.

The 0.2 percentage-point increase in sector share in 2014 is primarily attributable to thegrowing influence of seasonal sales. The four key holiday seasons — Easter,Halloween, Christmas and Valentine’s Day — are becoming a more prominent excuseto indulge among an increasingly health-conscious consumer base. Manufacturershave exploited this with seasonal modifications, like Cadbury’s Screme Eggs, aHalloween variant of the traditional Cadbury Creme Egg, ‘with a ghoulishly green softfondant centre’. In addition, and despite the maturity of the Easter category, the strongdemand for premium Easter products bolstered value growth; the popularity of Lindt’sGolden Bunny exemplifies this demand.

Sugar Confectionery

The UK sugar confectionery sector was worth approximately £1.51bn in 2014,representing value growth of 16.2% from 2010. Following impressive annual growth of8.5% in 2011, the sector then exhibited more modest expansion in the subsequent 3years, with value rising annually at a rate of between 1.7% and 2.9%. Throughout this5-year timeframe, sales of sugar confectionery accounted for approximately a quarter oftotal market value; in 2014, sector share of the total market equalled 25.8%, which wasequal to 2010, but less than at any point between 2011 and 2013.

Table 3.4: The UK Sugar Confectionery Sector by Valueat Current Prices (£m at rsp and %), 2010-2014

2010 2011 2012 2013 2014

Value (£m at rsp) 1,297 1,407 1,440 1,482 1,507


Sector share of the total market (%) 25.8 26.0 26.2 25.9 25.8

Confectionery 19



Source: Key Note

Figure 3.4: The UK Sugar Confectionery Sector by Valueat Current Prices (£m at rsp), 2010-2014


Table 3.5 indicates that the fruit sweets subsector is the largest within the wider sugarconfectionery category. In 2014, sales of the former were worth an estimated £628m,thereby accounting for 41.7% of the latter. The chewing and bubble gum subsector wasthe second largest in this context, with sales of approximately £399m, equating to asector share of 26.5%. In comparison, the mints subsector was worth £179m in 2014 —11.9% of total sugar confectionery sales — and the other sugar confectionery categorywas valued at £301m — 20% of the total.

Table 3.5: The UK Sugar Confectionery Sector by Subsector by Value at CurrentPrices (£m at rsp and %), 2014

Value (£m at rsp) % of Total

Fruit sweets 628 41.7

Chewing and bubble gum 399 26.5

Mints 179 11.9

Other sugar confectionery 301 20.0

Confectionery 20


Total 1,507 100.0


Source: Key Note

Figure 3.5: The UK Sugar Confectionery Sector by Subsector by Value Share (%),2014

Fruit Sweets

The fruit sweets subsector was valued at £628m in 2014. This represented a modestincrease of 1.1% from 2013 and, as such, the subsector’s share of the sugarconfectionery sector fell from 41.9% to 41.7% in this timeframe.

While fruit sweets continue to enjoy widespread penetration, the sector was the mostsubstantially affected by growing concerns over excessive sugar consumption in 2014.Children are a key demographic for leading brands like Haribo, but many concernedparents have attempted to limit their children’s consumption of such products overrecent months, with such products’ high sugar content perceived to be a keycontributing factor behind childhood obesity, diabetes and tooth decay. Despite thissetback, it is important to note that the subsector still exhibited value growth in 2014and continues to account for the largest proportion of the wider sugar confectionerysector. The prevalence of popular sharing-bag formats have contributed to this growth,as have fun products like Rowntree’s Randoms, which are exploiting the adventurousnature of the consumer base.

Confectionery 21


Chewing and Bubble Gum

The chewing and bubble gum sector was valued at an estimated £399m in 2014,representing growth of 2.3% from the previous year. Subsector share of the wider sugarconfectionery category increased from 26.3% to 26.5% in this period.

By a significant margin, Wrigley Extra is the most popular chewing gum brand in the UKmarketplace. The manufacturer consolidated this status in 2014 with an extensiveadvertising campaign and the launch of a new citrus flavour under its Ice sub-brand.Value growth in this subsector was also attributable to perceptions surrounding theadded benefits of chewing gum; in addition to freshening breath, Extra is increasinglyperceived to help keep teeth clean, for example, while Airwaves is widely believed toclear the sinuses. These factors were key to unlocking value growth in 2010, althoughthe fun nature of bubble gum also remains popular among younger demographics.

Mints

The mints subsector was worth approximately £179m in 2014, which was 1.7% morethan in the previous year. In both years, sales of mints accounted for 11.9% of overallsugar confectionery sales by value.

Fresh breath remains an important priority for many Britons and, as such, the mintssubsector enjoys fairly robust demand. Manufacturers have also been trying toemphasise that certain mints can help to reduce the build up of plaque, withPeppersmith listing its products in both the confectionery and dental aisles of selectretailers to reinforce this claim. The key challenges for the subsector include unlockinggreater demand among younger demographics and encouraging more Britons toconsume mints on a regular basis.

Other Sugar Confectionery

The other sugar confectionery sector was worth approximately £301m in 2014,representing growth of 2% from the previous year. Subsector share of the sugarconfectionery sector consequently increased from 19.9% to 20% in this timeframe.

The increasing influence of other sugar confectionery sales on the wider sector isattributable to two primary factors. First, products like Swizzles Matlow’s Drumsticksand Candyland’s Dip Dap continue to exhibit a resurgence in popularity, owing to thefun and retro appeal of these products. Secondly, seasonal sugar confectionery salesare becoming more pronounced, with manufacturers using seasonal modifications tofurther tap into this sense of fun, while also providing a sense of exclusivity as a resultof these products’ limited availability.

Confectionery 22


FORECASTS

Future Trends

Falling Consumption Per Capita

The average volume of confectionery being consumed per person per week in the UKis expected to fall in the near future. Penetrative health concerns and fierce competitionfrom markets such as snack foods, biscuits and cakes and ice cream are likely to bekey factors driving this trend. However, the effect of falling consumption per capita onvolume sales will be at least partially offset by an expanding UK population. On 8thAugust 2013, BBC News reported that more babies were born in the UK in the yearending June 2012 that in any year since 1972. Considering that children represent akey target demographic in the confectionery market, there is likely to be a noticeablespike as a result of this trend. Overall, therefore, consumption per capita is expected tofall, although volume sales could remain subdued as a result of an expandingpopulation.

Increasing Influence of Online Marketing and Sales

The Internet is expected to provide an increasingly important marketing and saleschannel for UK confectionery manufacturers over the next few years. While all theleading brands have developed a presence on social media, many are still working outhow best to engage potential customers as a means of driving sales rather than merelyaccumulating followers. Visual aids are seen as a potential means of achieving this andInstagram is anticipated to become an increasingly important platform in this regard, inaddition to Twitter and Facebook. It is perhaps no coincidence that increasingengagement on social media has increased in correlation with e-commerce sales in thismarket. Purchasing confectionery online is convenient, can represent good value formoney and arguably stops consumers from indulging in in-store impulse sales. WhileInternet sales still account for a tiny proportion of the total, this is clearly becoming anincreasingly important trend for the future.

Demand for Premium Confectionery

The demand for premium confectionery is expected to increase in line with the ongoingeconomic recovery and returning consumer spending power. Price is likely to graduallybecome less influential at the point of sale (PoS), whereas quality is likely to become agreater consideration. In addition to products made using high-quality naturalingredients, the latter also includes ethically produced confectionery. The chocolate

Confectionery 23


confectionery sector is therefore well positioned to exploit this rising demand, withbands like Green and Black’s and Hotel Chocolat already highly recognisable. Whilethe premium category is less established in the sugar confectionery sector, quality isstill expected to become an important consideration with consumers willing to pay extrafor sweets that are perceived to be more ‘natural’ and high-end traditional products,such as fudge and caramel.

Future Economic Trends

Economic forecasts are an important indicator of potential performance in the UKconfectionery market. Table 3.6 shows that the UK resident population is expected toreach 66.7 million people by 2019, representing demographic growth of 2.7% from2015 and 6.3% from 2010. The UK economy is also projected to expand between 2015and 2019, with gross domestic product (GDP) forecast to increase at a consistent year-on-year rate of between 2.3% and 2.5%. Economic performance looks set to drivefalling unemployment; by 2019, it is anticipated that approximately 730,000 people willbe claiming Jobseeker’s Allowance (JSA), representing a decrease of 11% from 2015and 51.3% from 2010. However, economic forecasts are not entirely positive. Despitebeing expected to fall as low as 1.2% in 2015, the rate of inflation is then projected torise back up above 3% between 2017 and 2019, widening the gap to the Bank ofEngland’s (BoE’s) 2% target.

High inflation therefore looks set to dilute the otherwise positive economic outlook. Theconsistency of GDP forecasts suggests that economic security is returning. Whencombined with falling unemployment, it appears as though the financial climate willbecome more stable for businesses and consumers alike over the coming years. In theconfectionery market this is likely to fuel investment in marketing and NPDs, while alsobolstering consumer spending power. However, the rising rate of inflation means thatthe latter will be primarily confined to higher- and middle-income households. As suchthe demand for premium confectionery is likely to increase among higher social groups,while lower-income households will continue to prioritise price at the PoS, potentiallyfuelling sales of own-label confectionery.

Table 3.6: Economic Forecasts (000, % and million), 2015-2019

2015 2016 2017 2018 2019

UK resident population (000) 64,938 65,386 65,825 66,266 66,697

GDP growth (%) 2.5 2.5 2.3 2.5 2.4

Confectionery 24


Inflation† (%) 1.2 2.5 3.1 3.2 3.0

Unemployment‡ (million) 0.82 0.72 0.72 0.75 0.73

GDP — gross domestic product

† — at retail price index (RPI)

‡ — actual number of claimants; claimant count measures the number of peopleclaiming Jobseeker’s Allowance

Source: National Population Projections, 2012-based projections, National Statistics website/Forecasts for the UK Economy: acomparison of independent forecasts, May 2015, HM Treasury © Crown copyright material is reproduced with the permission of theController of HMSO (and the Queen’s Printer for Scotland)

Forecast Total Market

Key Note forecasts that the total UK confectionery market will be worth approximately£6.46bn by 2019, representing growth of 8.6% from 2015 and 28.5% from 2010.Following modest year-on-year growth of 1.7% and 1.9% in 2015 and 2016,respectively, the market is then expected to expand by between 2% and 2.3% over thesubsequent 3 years. The primary reason for this stronger rate of growth will be thehigher rate of inflation rather than increased demand though.

The UK chocolate confectionery sector is projected to be worth approximately £4.81bnby 2019, representing a value increase of 8.8% from 2015 and 28.8% from 2010. Bythe end of this 10-year timeframe, it is expected that chocolate confectionery sales willaccount for 74.3% of the total confectionery market. As such, the sector’s market sharewill be higher than at any point between 2010 and 2018, reflecting chocolateconfectionery’s increasing influence in the wider marketplace in terms of value. Thesector is well positioned to exploit the growing demand for premium products —especially in the sectors for boxed chocolates and sharing bags and other chocolateconfectionery — and this is expected to drive value sales. Growing consumption of darkchocolate, which is perceived to be healthier than most other forms of confectionery, isexpected to be an additional sales driver as UK consumers become more healthconscious.

The UK sugar confectionery sector is forecast to be worth an estimated £1.66bn by2019, representing growth of 8% from 2015 and 27.8% from 2010. By the end of thisoverall 10-year review period, it is anticipated that sugar confectionery sales willaccount for 25.7% of total market value. As such, market share would be lower than atany point between 2010 and 2014. While milk chocolate often contains as much oreven more sugar than sugar confectionery, many consumers perceive the opposite tobe true, and this negative perception could harm demand. Maintaining the popularity of

Confectionery 25


sugar confectionery among children will be key to the sector’s performance over thenext 5 years, and recent NPDs, such as the introduction of Haribo Minions, look wellplaced to achieve this. Rising chewing gum sales are likely to be another source ofgrowth, although this will be at least partially offset by the low demand for mints amongyounger demographics.

Table 3.7: The Forecast Total UK Market for Confectioneryby Sector by Value at Current Prices (£m at rsp), 2015-2019

2015 2016 2017 2018 2019

Chocolate confectionery 4,415 4,500 4,607 4,635 4,805

Sugar confectionery 1,535 1,561 1,593 1,689 1,658

Total 5,950 6,061 6,200 6,324 6,463

% change year-on-year 1.7 1.9 2.3 2.0 2.2


Source: Key Note

Confectionery 26


MARKET GROWTH

Between 2010 and 2019, the total UK confectionery market is forecast to increase invalue from £5.03bn to £6.46bn. This represents overall 10-year growth of 28.5%.

Figure 3.6: The Forecast Total UK Market for Confectioneryby Sector by Value at Current Prices (£m at rsp), 2010-2019


Confectionery 27


International Perspective

OVERVIEW

Global Marketplace

The global confectionery market is a major multi-billion dollar industry that is dominatedby enormous multinational conglomerates, such as Mars Inc, Mondelez International,Ferrero Group and Nestlé. The fact that these companies — as well as many otherglobal leaders — are either based in the US or Europe reflects the maturity of theseregions within the global marketplace. Throughout Europe and North America,confectionery is seen as an affordable everyday indulgence, and the variety of productsavailable reflects this high penetration. Japan and Australasia also represent matureconfectionery markets, underlining the link between non-essential treats and economicdevelopment.

Nevertheless, these markets are saturated with products and growth potential issomewhat limited. In contrast, the demand for confectionery is surging in emergingmarkets, such as the People’s Republic of China (PRC), India, Brazil and Indonesia.While confectionery has been widely available in these countries for decades,demographic expansion, rising consumer spending power and the gradual globalisationof eating habits has driven growth potential in these markets.

Europe

European consumption of both chocolate and sugar confectionery increased in 2013,following decreases in the previous year. Table 4.1 shows that a total of 3.2 millionmetric tonnes of chocolate confectionery were consumed across Europe in 2013,representing an increase of 3.6% from the previous year and 3.4% from 2011.Consumption of sugar confectionery, on the other hand, totalled 1.6 million tonnes in2013, but although was an increase of 0.3% from the previous year, it neverthelessrepresented an overall decrease of 2.1% from 2011. Health concerns are beginning toaffect demand in mature markets such as the UK, but wider demographic growthacross Europe, combined with returning consumer spending power and growthpotential in less saturated Eastern European markets, ensured that consumption inboth categories exhibited growth in 2013.

Table 4.1: European Consumption of Chocolate and Sugar Confectionery byVolume (000 tonnes), 2011-2013

Confectionery 28


2011 2012 2013

Chocolate confectionery 3,071.1 3,064.7 3,174.7

% change year-on-year - -0.2 3.6

Sugar confectionery 1,672.8 1,632.1 1,637.5

% change year-on-year - -2.4 0.3

Note: figures include Norway and Switzerland.

Source: CAOBISCO Annual Report 2014

Global Production

Cocoa

Global cocoa production fluctuates in volume as a result of varying harvest conditions.Table 4.2 shows that total global production totalled 4.4 million tonnes in 2013/2014,representing a dramatic 10.4% increase from the previous year. However, productionforecasts for 2014/2015 suggest that global volumes will fall by 2.8% as a result ofdecreased output across Africa. The majority of the world’s cocoa supply originatesfrom this continent; in fact, Côte d’Ivoire and Ghana account for over half of the globaltotal between them. Total African production equalled 3.2 million tonnes in 2013/2014compared with 708,000 tonnes from the Americas and 454,000 tonnes from Asia andOceania. The European chocolate confectionery category is therefore dependent oncocoa imports, with the fluctuating total global supply contributing to price volatility formanufacturers.

Confectionery 29


Table 4.2: Global Production of Cocoa Beans by Region by Volume(000 tonnes), 2012/13-2014/15

2012/2013 2013/2014 f2014/2015

Africa

Côte d’Ivoire 1,449 1,746 1,720

Ghana 835 897 810

Nigeria 238 248 235

Cameroon 225 211 205

Others 89 92 91

Total Africa 2,836 3,194 3,061

Americas

Ecuador 192 220 230

Brazil 185 228 215

Others 246 259 263

Total Americas 622 708 708

Asia and Oceania

Indonesia 410 375 380

Papua New Guinea 41 40 42

Others 36 38 42

Total Asia and Oceania 487 454 464

Global total 3,945 4,355 4,232

% change year-on-year - 10.4 -2.8

Confectionery 30


f — forecasts

Note: totals may not sum due to rounding.

Source: ICCO Quarterly Bulletin of Cocoa Statistics, Vol. XLI, No. 1, Cocoa year 2014/2015

Sugar

Global sugar prices are highly volatile as a result of fluctuating global supply. Accordingto an article by FoodNavigator.com, published on 3rd March 2015, annual global sugarprices have fallen by 23% year-on-year as a result of a strengthening US dollar. Giventhat global production is likely to increase as a result of increased supply from India,prices are likely to stay low for some time to come. While this is challenging for farmers,it is likely to boost short-term profitability for UK confectionery manufacturers.

OVERSEAS TRADE

General Overview

The UK is a net importer of confectionery and operates within a vast negative balanceof trade as a result. Table 4.3 indicates that the value of UK confectionery importsexceeded that of exports by as much as £1.01bn in 2014, underlining the scale of thedeficit in this market. The combined export value of chocolate and sugar confectionerytotalled £748.1m in 2014, representing an increase of 1.9% from the previous year and45.2% from 2010. In comparison, the combined import value equalled £1.75bn in 2014,following growth of 8.7% from the previous year and 34.9% from 2010. In fact, the valueof both imports and exports has increased at a year-on-year rate in this timeframe, butso too has the size of the deficit, reflecting the UK’s increasing reliance on imports,despite the growing export market.

The chocolate confectionery sector is the largest in terms of both import and exportvalue. In 2014, the UK exported £556.8m worth of chocolate overseas, accounting for74.4% of total annual export value in this market. Although this was 0.2% less than inthe previous year, it was still 50.7% more than in 2010. Chocolate imports, on the otherhand, were worth £1.33bn in 2014, accounting for 75.6% of total import value andrepresenting an increase of 10.2% and 35.5% from 2013 and 2010, respectively.Overall, the negative balance of trade in the chocolate confectionery category hasgrown from £609.3m in 2010 to £769.5m in 2014.

UK exports in the sugar confectionery sector were worth £191.3m in 2014, accountingfor 25.6% of total annual export value, representing growth of 8.5% from the previousyear and 31.2% from 2010. In comparison, sugar confectionery exports were valued at

Confectionery 31


£427.2m in 2014, which was an increase of 4.2% and 33% from 2013 and 2010,respectively, and equated to 24.4% of total annual import value. Despite growth to bothimports and exports, the deficit in this sector has grown on a year-on-year basis,reaching £235.9m in 2014.

Table 4.3: UK Manufacturers’ Exports, Imports and Balanceof Trade for Chocolate and Sugar Confectionery (£m), 2010-2014

2010 2011 2012 2013 2014


Exports 369.4 429.9 511.4 558.1 556.8

Less imports 978.7 1,035.4 1,085.9 1,203.4 1,326.3

Trade balance -609.3 -605.5 -574.5 -645.3 -769.5

Sugar Confectionery

Exports 145.8 162.4 171.3 176.3 191.3

Less imports 321.3 349.0 366.3 409.9 427.2

Trade balance -175.5 -186.6 -195.0 -233.6 -235.9

Total

Exports 515.2 592.3 682.7 †734.3 748.1

Less imports 1,300.0 1,384.4 1,452.2 †1,613.4 1,753.5

Trade balance -784.8 -792.1 -769.5 -879.1 -1,005.4

† — does not sum due to rounding

Source: UKtradeinfo, HM Revenue & Customs © Crown copyright

Exports

The majority of UK confectionery exports are destined for other countries within the EU,highlighting the importance of the free trade agreement in this market. Total intra-EU

Confectionery 32


exports were worth £532m in 2014, accounting for 71.1% of total export value in thatyear. This trend was reflected in both market sectors as well, with intra-EU chocolateand sugar confectionery exports worth £395.7m and £136.3m, respectively, in 2014,and thereby accounting for 71.1% and 71.2% of category export value in that year.

Trade statistics reveal that in 2014 the UK primarily exported chocolate confectionery tothe following countries: the Republic of Ireland (£164.8m), the Netherlands (£56.4m),France (38.9m), Germany (£35.3m) and Australia (£23.9m). Key export destinations forsugar confectionery, on the other hand, included the Republic of Ireland (£61.7m),Germany (£15.5m), Belgium (£12.1m), Canada (£11.2m) and the US (£9.8m).

Table 4.4: UK Manufacturers’ Intra-EU and Extra-EU Exportsof Chocolate and Sugar Confectionery (£m), 2014

Intra-EU Exports Extra-EU Exports

Chocolate confectionery 395.7 161.1

Sugar confectionery 136.3 55.0

Total 532.0 †216.2



Imports

The vast majority of the UK’s confectionery imports originate from within the EU, withtotal intra-EU confectionery imports worth £1.65bn in 2014, or 94.1% of total annualimport value. In the chocolate confectionery sector, imports from within the EUaccounted for as much as 97% of total chocolate imports in 2014, while intra-EU sugarconfectionery imports accounted for 85.1% in that year.

In 2014, the UK primarily imported chocolate confectionery from Germany (£337.7m),Poland (£187.8m), Belgium (£177.8m), France (£154.2m) and the Republic of Ireland(£154m). In comparison, the main import partners for sugar confectionery in that yearwere Germany (£80.3m), the Netherlands (£64.8m), Belgium (£53.9m), Czech Republic(£38.7m) and Spain (£35.1m).

Confectionery 33


Table 4.5: UK Manufacturers’ Intra-EU and Extra-EU Importsof Chocolate and Sugar Confectionery (£m), 2014

Intra-EU Imports Extra-EU Imports

Chocolate confectionery 1,286.1 40.2

Sugar confectionery 363.4 63.8

Total 1,649.5 104.0


Confectionery 34


Competitor Analysis

MARKET LEADERS

The global nature of the confectionery market is underlined by the fact that the threelargest companies in the UK marketplace operate as subsidiaries of larger multinationalcorporations. Table 5.1 indicates that Mondelez UK Ltd is the largest company in thiscontext, generating an annual turnover of £1.83bn in the year ending 31st December2013. This was followed by Nestlé UK Ltd and Mars Chocolate UK Ltd, whichgenerated turnovers of £1.75bn and £833.5m, respectively, in their most recentfinancial years. Although these three companies are substantially larger than anyothers, it is worth noting that The Wrigley Company Ltd is also ultimately owned byMars Inc, while Dunhills (Pontefract) PLC is owned by Haribo International GmbH andThorntons PLC has recently been acquired by Ferrero SpA. Tangerine ConfectioneryLtd, which turned over £169.7m in 2013, is therefore the largest remainingconfectionery manufacturer still under UK ownership, reinforcing the influence ofglobalisation in this industry and underlining the challenging nature of trade conditionsfor small- and medium-sized enterprises (SMEs) in the UK.

Table 5.1: Selected Leading UK Confectionery Manufacturers (£000),Latest Financial Year

Turnover (£m) Year End

Company

Mondelez UK Ltd 1,832,722 31/12/2013

Nestlé UK Ltd 1,749,375 31/12/2013

Mars Chocolate UK Ltd 833,489 28/12/2013

The Wrigley Company Ltd 245,188 28/12/2013

Thorntons PLC 222,437 28/06/2014

Tangerine Confectionery Ltd 169,743 31/12/2013

Dunhills (Pontefract) PLC 158,194 31/12/2014

Lindt & Sprungli (UK) Ltd 105,576 31/12/2013

Swizzels Matlow Ltd 62,150 31/12/2013

Source: Key Note

Confectionery 35


Dunhills (Pontefract) PLC

Company Performance

Dunhills (Pontefract) PLC is a leading UK manufacturer of sugar confectionery,producing gums, jellies, chews, marshmallows and liquorice under the Haribo andMaoam brands. The company is now solely owned by German firm, HARIBOInternational GmbH, which initially introduced the Haribo brand to the UK marketplacein 1972. Pontefract is one of the parent company’s 15 manufacturing locations acrossEurope, with the organisation employing approximately 7,000 people worldwide.

The company continues to heavily invest in new product developments (NPDs) andadvertising as a means of maintaining brand loyalty and consolidating market share.This strategy has proved largely successful in recent years, driving healthy companyperformance. According to the company website, a recent brand awareness studyrevealed that 96% of key consumers knew the Haribo brand. Considering that thebrand’s slogan is ‘Kids and grown-ups love it so, the happy world of Haribo’, highadvertising penetration is perhaps indicative of the company’s success in maintainingbrand popularity among children, while increasing sales among older demographics.The company’s NPD strategy is also driving performance. In 2014, it exploited thesuccess of the Despicable Me films with the launch of Haribo Minions, with this NPDgoing on to win The Grocer’s prestigious award for Top Product Launch 2014.

Financial Performance

The impressive nature of Dunhills (Pontefract) PLC’s recent financial results exemplifythe company’s recent successful implementation of corporate strategy, as well as theongoing appeal of its brands. In the year ending 31st December 2014, turnover totalled£158.2m, representing growth of 16.6% from the previous year and 40% from the yearending 31st December 2010. Unlike turnover growth, pre-tax profit did not increase at ayear-on-year rate in this timeframe, as it fell by 32.1% in 2011. Nevertheless, pre-taxprofit of £24.8m in 2014 still represented an increase of 31.5% from the previous yearand 12.9% from 2010.

Table 5.2: Financial Results for Dunhills (Pontefract) PLC (£000), Years Ending31st December 2010-2014

2010 2011 2012 2013 2014

Confectionery 36


Turnover (£000) 113,157 122,270 135,694 146,312 158,194


Pre-tax profit (£000) 21,963 14,916 16,040 18,854 24,786

% change year-on-year - -32.1 7.5 17.5 31.5

Source: Key Note

Lindt & Sprungli (UK) Ltd

Company Performance

Lindt & Sprungli (UK) Ltd is the UK subsidiary of Chocoladefabriken Lindt & SprüngliAG — a leading manufacturer of chocolate confectionery based in Switzerland. TheLindt brand was established in 1845 and is now available in approximately 120countries worldwide. The UK subsidiary is headquartered in Feltham, Greater London,and operates through the following Lindt sub-brands: Lindor, Excellence, Creation,HELLO, Master Chocolatier Collection, Swiss Luxury Collection, Gold Bunny and LindtBear.

Company performance within the UK has been strong in recent years, with sales beingdriven by the returning demand for premium chocolate confectionery in the UK. Lindt’sLindor and Gold Bunny sub-brands have performed particularly strongly; the latter enjoywidespread recognition, while the popularity of the former has been exploited with newflavour variants, such as Coconut Truffles and Caramel Milk Truffles. The company hasalso had success in unlocking the demand for high-quality cooking chocolate. ItsExcellence sub-brand is well positioned in this regard, and the company has reinforcedthis message by providing a range of recipes on its website.


Recent financial performance at Lindt & Sprugli (UK) Ltd has been impressive. In theyear ending 31st December 2013, the company generated a turnover of £105.6m,representing growth of 16.1% from the previous financial year and 54.6% from 2009.Despite declining by more than a third in 2012, pre-tax profit also exhibited growth overthis 5-year period; in 2013 it totalled £8.7m, which was 322.2% more than in theprevious year and a dramatic reversal from the pre-tax loss of £1.2m exhibited in 2009.The strength of recent financial results reflects the company’s success in exploiting thegrowing demand for premium chocolate confectionery in the UK.

Confectionery 37


Table 5.3: Financial Results for Lindt & Sprungli (UK) Ltd (£000), Years Ending31st December 2009-2013

2009 2010 2011 2012 2013

Turnover (£000) 68,311 80,019 82,582 90,912 105,576


Pre-tax profit (£000) -1,170 2,436 3,232 2,064 8,714

% change year-on-year - † 32.7 -36.1 322.2

† — incalculable

Source: Key Note

Mars Chocolate UK Ltd

Company Performance

Mars Chocolate UK Ltd is a leading UK manufacturer of branded chocolate and asubsidiary of Mars Inc. The latter is a global manufacturer and distributor of brandedfood products that was founded in the US in 1911. The company, which has a presencein more than 74 countries worldwide and generates annual net sales in excess of$33bn, primarily operates through the following six business segments: Petcare,Chocolate, Wrigley, Food, Drinks and Symbioscience. Mars Chocolate UK Ltd, which isbased in Slough, is responsible for the company’s chocolate division in the UK. Itsbrand portfolio primarily consists of the following: M&M’s, Snickers, Mars, Bounty,Celebrations, Twix, Galaxy, Maltesers, Revels and MilkyWay.

Around the world, Mars operates through the five principles of Quality, Responsibility,Mutuality, Efficiency and Freedom. Within the UK, recent company performance hasfocused on adhering to its corporate social responsibility (CSR) commitments whileconsolidating brand appeal and market share. The company’s involvement in the PublicHealth Responsibility Deal (PHRD) has seen it reduce the size of many of its productsas a means of helping to fight against obesity, while Mars has also recently announcedthat its Mars brand of chocolate will now be made using Fairtrade cocoa. MarsChocolate UK Ltd also continues to invest heavily in main media advertising across itsbrand portfolio, while its Mars brand is notable for its high-profile sponsorship of the

Confectionery 38


England football team. The saturated nature of the confectionery marketplace has seenthe company diversify its NPDs into ice cream and milkshakes, although the recentannouncement of Galaxy Duet — a new filled chocolate product launching in August2015 — reiterates its commitment to innovation with regards to retaining confectionerybrand appeal.


In the year ending 28th December 2013, Mars Chocolate UK Ltd recorded a turnover of£833.5m, representing an increase of 1.8% from the previous financial year and 14.2%from the 53-week period ending 2nd January 2010. Throughout this 5-year reviewperiod, year-on-year growth ranged between 1.8% and 6.1%. In contrast, pre-tax profitfell in every year other than 2012. In the year ending 28th December 2013, it equalled£100.6m, which was 7.4% less than in the previous financial year and 26.9% less thanin the 53-week period ending 2nd January 2010. Most likely, this is an indication of theexpensive nature of retaining a leading market share in the UK marketplace, with thecompany investing heavily in advertising, promotions and NPDs in recent years.

Table 5.4: Financial Results for Mars Chocolate UK Ltd (£000), 53 Weeks Ending2nd January 2010 and Years Ending 1st January 2011, 31st December 2011, 29thDecember 2012 and 28th December 2013

†2009 ‡2010 2011 2012 2013

Turnover (£000) 729,623 743,651 788,697 818,461 833,489


Pre-tax profit (£000) 137,630 107,829 99,844 108,637 100,605

% change year-on-year - -21.7 -7.4 8.8 -7.4

† — 53 weeks ending 2nd January 2010

‡ — year ending 1st January 2011

Source: Key Note

Confectionery 39


Mondelez UK Ltd

Company Performance

Mondelez UK Ltd is the UK subsidiary of Mondelez International — a majormultinational manufacturer of food and beverages that is headquartered in the US.Globally, the company employs more than 100,000 people and generated net revenueof $34bn in 2014. Its brand portfolio consists of 67 leading brands — nine of which areworth more than $1bn — across the following five categories: chocolate, gum andcandy, biscuits, cheese and grocery, and beverages. Key confectionery brands includeCadbury, Cadbury Dairy Milk, Bassett’s, Trebor, Milka, Toblerone, Trident and Halls.Within the UK the company is headquartered in Uxbridge and employs approximately5,000 people across ten locations.

The demand for Mondelez confectionery brands remains high in the UK andpenetration has been consolidated with heavy spend on NPDs and advertising. Asrecently as 4th April 2015, for example, The Grocer reported that Mondelez waslaunching Cadbury Dairy Milk Puddles — a chocolate tablet bar with a soft filling — andaccompanying it with a £4m marketing campaign. However, recent companyperformance has not been entirely positive. The company faced a backlash on socialmedia following the announcement that Cadbury Creme Eggs would be made withregular chocolate rather than Dairy Milk. A few days later the company announced 250redundancies at its Bournville factory, as a result of a £75m investment in new andmore efficient production technology. In an article by The Guardian, published on 16thJanuary 2015, a spokeswoman for the company is quoted as saying:

“To secure the £75m investment and therefore the next generation of manufacturing atBournville, we will need to become cost competitive... During consultation, we agreedthat this would mean fewer people working in Bournville than there are today.”


Financial performance at Mondelez UK Ltd has been strong in recent years, despite achallenging year in 2010. In the year ending 31st December 2013, the companyrecorded a turnover of £1.83bn, which was an increase of 2.6% from the previousfinancial year and 224.7% from the year ending 12th December 2009. Pre-tax profit, onthe other hand, equalled £51.2m in 2013, representing growth of 76% from the previousfinancial year and 413.7% from 2009. Considering that turnover and pre-tax profit fell by6.8% and 65.6%, respectively, in 2010, the extreme nature of this growth over theentire 5-year review period is even more impressive.

Confectionery 40


Table 5.5: Financial Results for Mondelez UK Ltd (£000), Years Ending 12thDecember 2009, 11th December 2010, 55 Weeks Ending 31st December 2011 andYears Ending 29th December 2012 and 31st December 2013

2009 2010 2011 2012 2013

Turnover (£000) 564,369 526,241 1,217,255 1,786,221 1,832,722


Pre-tax profit (£000) 9,968 3,432 16,873 29,099 51,204


Source: Key Note

Nestlé UK Ltd

Company Performance

Nestlé UK Ltd is a domestic subsidiary of Nestlé SA — a major global food andbeverage manufacturer that is based in Switzerland. The conglomerate operates inmore than 197 countries; employs approximately 339,000 people; generatedCHF91.6bn (Swiss Francs) in sales in 2014; and owns more 2,000 brands. Within theUK and the Republic of Ireland, the company employs approximately 8,000 peopleacross 23 sites. Nestlé’s engagement in the UK chocolate confectionery sector consistsof 15 brands — including Aero, Kit Kat, Yorkie, Smarties, Milkybar, Rolo, After Eightand Quality Street — while it also operates in the sugar confectionery sector through itsRowntree’s brand.

In addition to long-term investment in innovation and marketing, Nestlé is also currentlyfocused on exploiting the online potential of its brands. In May 2015, it was announcedthat 600,000 Kit Kats were being rebranded as YouTube Break. The initiative plays onthe Kit Kat slogan of ‘Have a break, have a Kit Kat’, and represents the latest instalmentin a partnership between Google and Nestlé that has already resulted in the formernaming one of its operating systems (OSs) Android Kit Kat. Under the new scheme, KitKat branding will feature as a sponsor of YouTube’s trending videos, while saying‘YouTube my break’ into devices with voice recognition will also bring up a list ofYouTube’s top videos for the day. This reflects the company’s current focus ofexploiting the Internet as a new marketing and sales channel with regards to the UKconfectionery market. Yet, although the company is generally keen to explore its

Confectionery 41


brands’ growth potential, it is not afraid to discontinue brands that are not performing tothe required standards; in summer 2014, it decided to discontinue its Wonka brand afterless than a year as a result of falling sales.


In the year ending 31st December 2013 the company recorded a turnover of £1.75bn,representing growth of 6.1% from the previous year and 20.5% from the year ending31st December 2009. Turnover increased at a year-on-year rate in this timeframe,underlining the consistency of performance in this context. In contrast, pre-tax profit hasfluctuated significantly; in 2013 it equalled £25.2m, and while this was a significantimprovement from the pre-tax loss of £11.9m exhibited in 2012, it was still 65.9% lessthan in 2009. It is important to note, however, that even for the largest companies thecompetitive nature of trade conditions remains challenging. According to an article byThe Times, published on 18th April 2015, the strength of Nestlé’s financial results is atleast partially attributable to increasing product prices at retail.

Table 5.6: Financial Results for Nestlé UK Ltd (£000),Years Ending 31st December 2009-2013

2009 2010 2011 2012 2013

Turnover (£000) 1,451,200 1,502,600 1,611,238 1,648,870 1,749,375


Pre-tax profit (£000) 74,000 1,700 23,552 -11,891 25,235

% change year-on-year - -97.7 1,285.4 † †


Source: Key Note

Swizzels Matlow Ltd

Company Performance

Swizzels Matlow Ltd is a one of the largest independently owned manufacturers of

Confectionery 42


sugar confectionery in the UK. The company can trace its roots back to London in1928, before moving to New Mills in Derbyshire and becoming incorporated in 1956.Swizzels Matlow Ltd, which now employs over 550 people, manufactures confectioneryunder a variety of brands, including Love Hearts, Drumstick, Refreshers, Double Lollies,Fun Gums, Parma Violets and Squashies.

Company performance has been strong in recent years, despite a relative lack ofNPDs. Sales have surged as a result of the resurgent popularity of retro sweets, whilethe affordable nature of many Swizzels Matlow products has been exploited byinitiatives such as price-marked packs (PMPs). In addition, although the last majorpiece of NPD was the 2012 launch of Squashies, the company has given its productsfresh appeal with variants such as One Direction Love Hearts.


The strength of recent company performance is reflected in Swizzels Matlow’s financialresults, with turnover exhibiting growth between 2009 and 2013. In the year ending 31stDecember 2013, the company generated turnover of £62.2m, representing growth of13.3% from the previous financial year and 33.4% from the year ending 31st December2009. While pre-tax profit did not exhibit year-on-year growth in this timeframe, it stillincreased significantly overall. In 2013, it equalled £3.3m, which was 122.2% more thanin the previous year and 67.5% more than in 2009. The dramatic 70.5% fall in pre-taxprofit in 2012 correlates with the launch of Squashies, underlining the impact that NPDscan have on profitability.

Table 5.7: Financial Results for Swizzels Matlow Ltd (£000), Years Ending 31stDecember 2009-2013

2009 2010 2011 2012 2013

Turnover (£000) 46,593 47,520 49,852 54,839 62,150


Pre-tax profit (£000) 1,985 2,796 5,064 1,496 3,324

% change year-on-year - 40.9 81.1 -70.5 122.2

Source: Key Note

Confectionery 43


Tangerine Confectionery Ltd

Company Performance

Tangerine Confectionery Ltd is the UK’s largest independent manufacturer of brandedsugar confectionery and popcorn. The company is headquartered in Blackpool and alsohas factories in Liverpool, Cleckheaton, Pontefract and York. Tangerine ConfectioneryLtd operates through the Butterkist popcorn brand, as well as the following seven sugarconfectionery brands: Anglo Bubbly, Barratt, Henry Goode’s, Jameson’s, Lion, Princessand Taveners.

The company’s combined focus on producing both fun and high-quality sugarconfectionery has proved successful in recent years. In particular, Barratt’s umbrellabrand, Candyland, has strongly exploited the retro appeal of products like SherbetFountains and Dip Dabs, and this has led to significant NPD investment.

On 28th May 2015, The Grocer reported that Candyland was launching Softies — softgum versions of the Wham, Refreshers and Fruit Salad sub-brands — with TangerineConfectionery’s Senior Brand Manager, Gillian Clarke, quoted in the article as saying:

“Softies is our most significant piece of NPD in recent years and taps into the strongand positive associations sweet lovers have with our heritage brands.”

The fact that Tangerine Confectionery has launched fewer NPDs of this scale in recentyears is a reflection of the challenges of being independently owned within anextremely competitive marketplace. In 2014, the company was forced to close itsfactory in Blackpool in a financial restructuring process that resulted in the loss of up to100 jobs.


In the year ending 31st December 2013, Tangerine Confectionery recorded a turnoverof £169.7m, representing a modest increase of 0.4% from the previous financial yearand an overall 5-year increase of 9.8% from the year ending 31st December 2009.Growth was not exhibited at a year-on-year rate though, with turnover falling by 0.5% in2010. Similarly, pre-tax profit increased in every year other than 2011, when it exhibited

Confectionery 44


a dramatic 99.5% decrease. In 2013, it equalled £4.9m, which was 62.1% more than inthe previous financial year but still less than in 2010 (£5.8m). Overall, financialperformance between 2009 and 2013 has therefore been largely positive, althoughsubdued turnover growth and fluctuating pre-tax profit nevertheless exemplify thechallenging nature of trade conditions.

Table 5.8: Financial Results for Tangerine Confectionery Ltd (£000), Years Ending31st December 2009-2013

2009 2010 2011 2012 2013

Turnover (£000) 154,549 153,816 156,600 169,074 169,743


Pre-tax profit (£000) 705 5,825 30 3,029 4,910

% change year-on-year - 726.2 -99.5 9,996.7 62.1

Source: Key Note

Thorntons PLC

Company Performance

Thorntons PLC is a major manufacturer, distributor and retailer of chocolateconfectionery. The company, which was founded in 1911, is headquartered in Derbyand operates through over 600 UK retail outlets. In addition to popular chocolateranges, such as Continental, the company sells toffee and fudge, and has alsodiversified into gifts, flowers and greeting cards.

Despite attempts to increase penetration by exploiting widespread brand awareness,the company has struggled to exploit post-recession consumer demands while retainingits traditional premium image. As recently as 18th May 2015, the Financial Timesreported that the company’s Chief Executive (CE), Jonathan Hart, stepped down inJune 2015, after a poor year of trade in which his strategy of expanding sales in grocerymultiples failed to rejuvenate the business. Falling share prices have forced thecompany to consider its options moving forward and, on 22nd June 2015, it wasannounced that Thorntons had accepted an ownership offer of £111.9m from FerreroInternational SA. In a company press release published the same day, Chief ExecutiveOfficer (CEO) of Ferrero, Giovanni Ferrero, is quoted as saying:

Confectionery 45


“We delivered our best ever results in the UK in 2014, giving us confidence that now isthe right time to broaden our roots in this important market... We have long admiredThorntons and what they have achieved in the UK as demonstrated by theirtremendous customer loyalty, and we look forward to working with their experiencedteam.”


Subdued turnover growth within an expanding market reflects the challenging nature oftrade for Thorntons PLC in recent years. In the year ending 28th June 2014, thecompany recorded a turnover of £222.4m, representing an increase of 0.6% from theprevious financial year and 3.7% from the year ending 26th June 2010. With theexception of the 53 weeks ending 30th June 2012, when turnover fell by 0.5%, thecompany exhibited modest year-on-year growth of between 0.6% and 1.8% in thiscontext. Additionally, despite increasing by 15.4% between 2013 and 2014, pre-taxprofit of £6m in the latter year remains lower than in the year ending 26th June 2010.Given that pre-tax losses were recorded in both 2011 and 2012, though, returning tohealthy profit in 2013 and 2014 is still notable.

Table 5.9: Financial Results for Thorntons PLC (£000), Years Ending 26th June2010, 25th June 2011, 53 Weeks Ending 30th June 2012 and Years Ending 29thJune 2013 and 28th June 2014

2010 2011 2012 2013 2014

Turnover (£000) 214,553 218,255 217,144 221,052 222,437

% change year-on-year - 1.7 -0.5 1.8 0.6

Pre-tax profit (£000) 6,137 -1,071 -2,214 5,170 5,968

% change year-on-year - † † † 15.4


Source: Key Note

The Wrigley Company Ltd

Confectionery 46


Company Performance

The Wrigley Company Ltd is a leading UK manufacturer of sugar confectionery and hasbeen operating as a subsidiary of Mars Inc since 2008. The latter is a US-basedmultinational food manufacturer that has a presence in 74 countries worldwide andgenerates annual net sales in excess of $33bn. The corporation is divided into thefollowing six business divisions: Chocolate, Petcare, Food, Drinks, Wrigley andSymbioscience. The Wrigley Company Ltd, which is based in Plymouth, is thereforeresponsible for the company’s Wrigley division in the UK. Its extensive sugarconfectionery brand portfolio in this capacity includes Airwaves, Extra, Hubba Bubba,Lockets, Skittles, Starburst and Tunes.

Maintaining brand share in established markets and increasing brand penetration intoemerging markets is a major priority for Wrigley. The extreme scale of the globalbusiness facilitates huge investment in expansion, innovation and advertising, and thesuccess of this strategy has seen two of its leading brands — Extra and Orbit — cometo be worth more than $1bn each. In the UK marketplace, however, Extra is significantlymore popular than Orbit and, as a result, the latter has recently been discontinued, withits products now falling under the Extra umbrella brand. Following this strategic decisionat the end of 2014, a major new advertising campaign featuring Ashton Kutcher waslaunched to promote the Extra brand in January 2015.

In addition to high marketing expenditure, Wrigley is committed to bringing newproducts to market; flavour innovation is a major NPD priority in the chewing andbubble gum sectors, while the company has also exploited seasonal trends with thelaunch of Halloween-themed Starburst sharing bags. The saturated nature of the UKmarketplace has increased the risk involved in NPD investment, however, encouragingthe company to focus on initiatives such as the promotion of chewing gum as a meansof improving oral hygiene. This forms part of the global company’s wider commitmentsto CSR.


Recent financial performance has been largely positive for The Wrigley Company Ltd.In the year ending 28th December 2013, it turned over £245.2m, representing growth of6.7% from the previous financial year and 30% from the year ending 31st December2009. Growth was not exhibited at a year-on-year rate in this timeframe though, withannual turnover falling by 2.6% in the financial year ending 1st January 2011. Similarly,pre-tax profit fell by 10% in the year ending 31st December 2011, but increased inevery other year in this period. In 2013, it totalled £63.9m, which was 13.7% more thanin the previous financial year and 103.5% more than in 2009.

Confectionery 47


Table 5.10: Financial Results for The Wrigley Company Ltd (£000), Years Ending31st December 2009, 1st January 2011, 31st December 2011, 29th December 2012and 28th December 2013

2009 †2010 2011 2012 2013

Turnover (£000) 188,542 183,702 194,415 229,702 245,188


Pre-tax profit (£000) 31,413 44,754 40,257 56,223 63,919

% change year-on-year - 42.5 -10.0 39.7 13.7

† — year ending 1st January 2011

Source: Key Note

OTHER COMPANIES

Kinnerton (Confectionery) Co Ltd

Kinnerton (Confectionery) Co Ltd is a major manufacturer and wholesaler ofconfectionery in the UK. It is owned by Zetar Ltd — a group that is engaged in themanufacture of chocolate confectionery, as well as dried fruits and nuts. Kinnerton(Confectionery) Co Ltd operates through three manufacturing sites in the UK,employing approximately 800 people. The company primarily produces novelty, pannedand boxed chocolates, especially with regards to character licensing. In the 35-weekperiod ending 31st December 2013, the company recorded a turnover of £48.5m and apre-tax profit of £2.2m. This represented annual decreases of 35.5% and 44.6%,respectively, although this is hardly surprising given the short length of the company’smost recent financial year.

Lofthouse of Fleetwood Ltd

Lofthouse of Fleetwood Ltd is a major UK mint manufacturer, operating through theFisherman’s Friend brand. The company, which can trace its origins back as far as1865, is now capable of producing over 5 billion lozenges per annum from its site inFleetwood, Lancashire. Current strategy involves diversifying the range of flavours and

Confectionery 48


expanding into overseas markets, with the People’s Republic of China (PRC) becomingan increasingly important market for the brand. In the year ending 31st December 2014,Lofthouse of Fleetwood Ltd generated a turnover of £46.8m and a pre-tax profit of£4.2m. This represented an increase of 7.8% and 120.9%, respectively, from theprevious financial year.

Magna Specialist Confectioners Ltd

Magna Specialist Confectioners Ltd is a major UK manufacture of specialist chocolateconfectionery. The company was incorporated in 1972 and is based in Telford,Shropshire. In the year ending 26th April 2014, the company posted a turnover of£54.8m and a pre-tax profit of £2.2m. This represented an increase of 4.2% and 11%,respectively, from the previous financial year.

OP Chocolate Ltd

OP Chocolate Ltd is major UK manufacturer of moulded wafers and biscuits, enrobedcountlines, chocolate bars and mallows. The company is based in South Wales andhas a 75-year history; in 1991 it was acquired by Swiss firm, Cemoi International SA. Inthe year ending 31st December 2014, OP Chocolate Ltd recorded a turnover of £43.4mand a pre-tax profit of £1.5m. This represented an increase of 6.2% and 45.9%,respectively, from the previous financial year.

NUMBER OF COMPANIES

The increasing competitiveness of the UK confectionery industry is reflected in thegrowing number of registered manufacturers of cocoa, chocolate and sugarconfectionery in the UK. According to National Statistics (ONS) publication, UKBusiness: Activity, Size and Location 2014, there were 355 such enterprises operatingin 2014; using previous editions of the same ONS publication as a means ofcomparison, this 2014 total represented an increase of 4.4% from the previous yearand 22.4% from 2010.

By Turnover

Almost half of the registered confectionery manufacturers operating in the UK aremedium-sized businesses in terms of annual turnover. Table 5.11 indicates that 45.1%of enterprises generated an annual turnover of between £100,000 and £999,999 in2014, representing a 0.5 percentage-point decrease from the proportion of medium-

Confectionery 49


sized businesses in 2013 (45.6%). In comparison, almost a third of confectionerymanufacturers are small businesses in this context, with 32.4% turning over less than£100,000 in 2014 — the same proportion as in 2013. Finally, there were also 80 largeorganisations with an annual turnover in excess of £1m in 2014, accounting for 22.5%of the total and representing a 0.4 percentage-point increase from 2013 (22.1%). Mostlikely, the increasing proportion of large business is indicative of the ongoing economicrecovery, as well as the ongoing growth potential in a saturated domestic marketplaceand an emerging global marketplace.

Table 5.11: Number of UK VAT- and/or PAYE-Based Enterprises Engaged inthe Manufacture of Cocoa, Chocolate and Sugar Confectionery by TurnoverSizeband (£000, number and %), 2013 and 2014

2013 2014

Number ofEnterprises

% ofTotal


% ofTotal

TurnoverSizeband (£000)

0-49 55 16.2 60 16.9

50-99 55 16.2 55 15.5

100-249 85 25.0 80 22.5

250-499 45 13.2 50 14.1

500-999 25 7.4 30 8.5

1,000-4,999 40 11.8 45 12.7

5,000+ 35 10.3 35 9.9

Total 340 †100.0 355 †100.0


Source: UK Business: Activity, Size and Location 2013 and 2014, National Statistics website © Crown copyright material isreproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

By Employment

The majority of the registered confectionery manufacturers operating in the UK are

Confectionery 50


small businesses in terms of number of employees. Table 5.12 shows that 66.2% ofsuch enterprises employed fewer than ten people in 2014, compared with 67.6% in2013. This suggests a high level of mechanisation in this industry, as reinforced by thenegative correlation between the number of enterprises and workforce size. In 2014,there 100 medium-sized enterprises employing between 10 and 99 people, therebyaccounting for 28.2% of the annual total and representing an increase of 1.7percentage points from 2013 (26.5%). There were also 20 large businesses with aworkforce in excess of 100 people in 2014, equating to 5.6% of the annual total, andrepresenting a 0.3 percentage-point decrease from 2013 (5.9%).

Table 5.12: Number of UK VAT- and/or PAYE-Based Enterprises Engaged inthe Manufacture of Cocoa, Chocolate and Sugar Confectionery byEmployment Sizeband (number and %), 2013 and 2014

2013 2014


% ofTotal


% ofTotal

Number ofEmployees

0-4 165 48.5 175 49.3

5-9 65 19.1 60 16.9

10-19 40 11.8 45 12.7

20-49 35 10.3 35 9.9

50-99 15 4.4 20 5.6

100-249 5 1.5 5 1.4

250+ 15 4.4 15 4.2

Total 340 100.0 355 †100.0


Source: UK Business: Activity, Size and Location 2013 and 2014, National Statistics website © Crown copyright material isreproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

Confectionery 51


Regional Variation in the Marketplace

There is a significant level of regional variation with regards to the registered location ofUK confectionery manufacturers. Table 5.13 indicates that as many as 55 businessesof this type were based in the North West in 2014, equating to 15.5% of the UK annualtotal. London and the South West also contained 40 enterprises each, accounting for11.3%, respectively. At the other end of the scale, the North East and Northern Irelandboth only accounted for ten confectionery manufacturers each in 2014, representing2.8% of the total per region.

Table 5.13: Number of UK VAT- and/or PAYE-Based Enterprises Engaged inthe Manufacture of Cocoa, Chocolate and Sugar Confectionery by Region(number and %), 2014

Number of Enterprises % of Total

England

North West 55 15.5

London 40 11.3

South East 40 11.3

South West 35 9.9

Yorkshire and Humberside 30 8.5

East 30 8.5

East Midlands 25 7.0

West Midlands 25 7.0

North East 10 2.8

Total England 290 †81.7

Scotland 35 9.9

Wales 20 5.6

Northern Ireland 10 2.8

Confectionery 52


Total 355 †100.0


Source: UK Business: Activity, Size and Location 2014, National Statistics website © Crown copyright material is reproduced withthe permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

MARKETING ACTIVITY

In the year ending March 2015, main media advertising expenditure on confectionerytotalled £137.5m, representing a significant 11.8% increase from the year ending March2014. Marketing activity is an essential, albeit increasingly expensive, means ofgenerating product and brand awareness with an extremely competitive and saturatedmarketplace.

Table 5.14 reveals that although main media advertising expenditure varies significantlybetween sectors, it nevertheless increased in almost every instance between 2014 and2015. The only sector in which expenditure exhibited a decrease was chocolate barsand countlines, but despite falling by 3.3% in this timeframe the total of £73.1m was stillsubstantially higher than any other sector, and accounted for 53.2% of the industry totalin the year ending March 2015. Unsurprisingly, Nielsen figures reveal that majorbrands, such as Cadbury, Ferrero, Mars, Lindt and Nestlé, accounted for the majority ofthis spend, though another notable trend in the countlines sector concerned the budgetretailers. Nisa, Aldi and Lidl all spent money promoting chocolate countlines, with thelatter two advertising their own-brand confectionery in an attempt to erode brandloyalty.

The influence of retailers in promotional activity was even more pronounced in theboxed and tinned chocolates sector. Total expenditure in this category equalled £24.2min the year ending March 2015, representing a dramatic 58.3% increase from theprevious 12-month period. Retailer expenditure accounted for approximately a quarterof this total, with major grocery multiples keen to exploit brand loyalty amid risingconsumer spending power. In terms of branded expenditure — and in addition toNestlé, Mars, Ferrero and Lindt — Guylian, Hotel Chocolat and Bendicks all contributedto the total in this timeframe.

Main media advertising expenditure on sweets equalled £22.5m in the year endingMarch 2015, following a 12% increase from the previous year. While Aldi, ASDA,Tesco, Poundland and Wilkinson all contributed to this figure, branded expenditure fromthe likes of Haribo, Cadbury, Wrigley, Rowntree’s and Werthers Original accounted forthe vast majority of expenditure in this context.

In the year ending March 2015, main media advertising expenditure on chewing/bubble

Confectionery 53


gum and mints equalled £11.6m and £2.6m, respectively, representing respectivegrowth of 22.8% and 48.8% from the previous year. Wrigley was the sole advertiser inthe former category, while Ferrero (and its Tic Tac brand) was the sole advertiser in themints category. Finally, expenditure on other chocolate equalled £3.6m in the yearending March 2015, following dramatic growth of 279.4% from the previous year. Thisreflects manufacturers’ growing desire to exploit the rising demand for seasonalchocolate products in the UK marketplace.

Table 5.14: Main Media Advertising Expenditureon Confectionery by Sector (£000 and %),Years Ending March 2014 and 2015

2014 2015 % Change 2014/2015

Chocolate bars and countlines 75,571 73,110 -3.3

Boxed and tinned chocolates 15,275 24,176 58.3

Sweets 20,087 22,497 12.0

Chewing and bubble gum 9,465 11,626 22.8

Other chocolate 937 3,555 279.4

Mints 1,720 2,559 48.8

Total 123,055 137,523 11.8

Source: Nielsen

KEY TRADE ASSOCIATIONS

Association of Chocolate, Biscuit and Confectionery Industries of the EU (CAOBISCO)British Confectioners’ Association (BCA)Food and Drink Federation (FDF)The International Cocoa Organisation (ICCO)International Confectionery Association (ICA).

EXHIBITIONS/TRADE SHOWS

Anuga (Germany)Food and Drink Expo (UK)

Confectionery 54


ISM (Germany)The BBC Good Food Show (UK)The International Bakery, Pastry Ice Cream, Chocolate and Confectionery Exhibition(France)The International Food and Drink Event (UK)The Sweet and Snacks Expo (US).

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Buying Behaviour

CONSUMER PENETRATION

Consumption by Type

The penetration of both chocolate confectionery and sugar confectionery fell between2013 and 2014, underlining the threat that changing buyer behaviour, and theincreasingly health-conscious nature of the consumer base in particular, poses tovolume sales in this market. Table 6.1 indicates that 85.6% of UK adults consumedchocolate bars and other chocolate items in 2014. While this was substantially morethan any other category, it nevertheless represented a 2.2 percentage-point decreasefrom the previous year. Similarly, penetration of chocolate assortments and other boxedchocolates fell by 1.9 percentage points in this timeframe, equalling 48.2% in 2014.

With regard to sugar confectionery, penetration was highest in the category for othersweets (including those for children) although it also fell by the greatest margin in thisperiod. In 2014, 56.3% of UK adults purchased such products, representing asubstantial 4.9 percentage-point increase from 2013. As a result of this decline,penetration of mints was not much lower than that of other sweets (including those forchildren). In 2014, 51.6% of UK adults consumed mints, despite a 1.7 percentage-pointdecrease from 2013. Finally, penetration of chewing gum was smaller than any othertype of confectionery; penetration of 38.1% in 2014 was 1.9 percentage points lowerthan in the previous year.

Table 6.1: Consumption of Confectionery by Type (% of adults), YearsEnding December 2013 and 2014

2013 2014


Chocolate bars and other chocolate items 87.8 85.6

chocolate assortments and other boxed chocolates 50.1 48.2

Sugar Confectionery

Confectionery 56


Other sweets (including those for children) 61.2 56.3

Mints 53.3 51.6

Chewing gum 40.0 38.1

Source: Target Group Index (TGI) © Kantar Media, Quarter 2 (January 2013-December 2013 and January 2014-December 2014)2014 and 2015

By Sex

The penetration of confectionery varies substantially between the sexes in the UKmarketplace. Table 6.2 reveals that in every category women consumed moreconfectionery than men in 2014. The most substantial differentiation was exhibited inthe category for other sweets (including those for children), wherein penetration of61.4% among women was 10.5 percentage points higher than among men (50.9%) in2014. The smallest variation, on the other hand, occurred in the chewing gum category,with 37.3% of men consuming products in this category in 2014, compared with 38.8%of women.

Table 6.2: Consumption of Confectionery by Sex (% of adults), Year EndingDecember 2014

All Adults Men Women


Chocolate bars and other chocolate items 85.6 83.9 87.1

chocolate assortments and other boxed chocolates 48.2 43.4 52.7

Sugar Confectionery

Other sweets (including those for children) 56.3 50.9 61.4

Mints 51.6 49.2 53.8

Chewing gum 38.1 37.3 38.8

Source: Target Group Index (TGI) © Kantar Media, Quarter 2 (January-December 2014) 2015

By Age

Table 6.3 shows the penetration of confectionery by age in the UK in 2014. One of the

Confectionery 57


most notable trends concerns the older demographic of consumers aged 65 and over;the penetration of mints for this age group (56.4%) was significantly higher than in anyother, while the penetration for chewing gum (16.9%) was significantly lower. Incontrast, and by a substantial margin of over 10 percentage points, chewing gum wasmost popular among 15 to 19 year-olds, with penetration equalling 65.8% in 2014. It isalso worth noting that penetration of both chocolate bars and other items and othersweets (including those for children) was highest among the 35 to 44 year-old agegroup, equalling 88.1% and 61.9%, respectively, in 2014. Perhaps this is attributable tothe fact that adults in this category are relatively likely to be buying confectionery fortheir children as well as themselves.

Table 6.3: Consumption of Confectionery by Age (% of adults), Year EndingDecember 2014

All

Adults15-19 20-24 25-34 35-44 45-55 55-64 65+

ChocolateConfectionery

Chocolate barsand otherchocolateitems

85.6 87.5 85.5 87.5 88.1 87.0 83.8 81.6

chocolateassortmentsand otherboxedchocolates

48.2 43.8 42.8 52.3 51.6 47.9 46.0 47.6

SugarConfectionery

Other sweets(includingthose forchildren)

56.3 58.9 52.4 58.7 61.9 58.2 50.8 53.0

Mints 51.6 53.8 42.7 47.0 49.0 53.9 53.5 56.4

Chewing gum 38.1 65.8 55.5 51.2 44.1 35.6 26.4 16.9


Confectionery 58


By Social Grade

The relative lack of socially driven penetration trends in this market reinforces thewidespread popularity and affordability of confectionery in the UK. The most substantialvariation in 2014 was exhibited in the chewing gum category, with penetration peakingat 42.9% in social grade D and falling to a low point of 31% in social grade A. Thesmallest variation, on the other hand, occurred in the category for chocolate bars andother chocolate items; penetration was highest in social grade D (86.3%), but this wasstill only 2.2 percentage points higher than at its lowest point in grade A (84.1%).

Table 6.4: Consumption of Confectionery by Social Grade(% of adults), Year Ending December 2014

All

AdultsA B C1 C2 D E

ChocolateConfectionery

Chocolate bars andother chocolate items

85.6 84.1 85.1 86.0 85.6 86.3 85.0

chocolate assortmentsand other boxedchocolates

48.2 45.5 48.7 50.0 46.4 48.1 46.8

Sugar Confectionery

Other sweets (includingthose for children)

56.3 53.7 52.8 57.4 55.9 59.7 58.1

Mints 51.6 47.8 50.9 52.6 51.2 52.1 52.2

Chewing gum 38.1 31.0 35.4 38.0 39.1 42.9 37.3


By Frequency

The widespread popularity of chocolate in the UK is reflected in the extent to which

Confectionery 59


consumption has penetrated consumers’ regular routines. Table 6.5 indicates that asmany as 10.9% of adults consumed chocolate bars and other chocolate items at leastonce a day in 2014, while 19% and 18.4% of respondents claimed to have consumed itthree to six times a week and twice a week, respectively. While 22.2% of adultspurchase chocolate less than once a week, the consistency of regular sales ensures afairly robust demand base.

Table 6.5: Consumption of Chocolate Bars and OtherChocolate Items by Frequency (% of adults), Year Ending December 2014

Once aDay orMore

3 to 6Times aWeek

Twice aWeek

Once aWeek

LessThan

Once aWeek

Chocolate barsand otherchocolate items

10.9 19.0 18.4 13.7 22.2


Products within the chocolate assortments and other boxed chocolates category aremore likely to be purchased infrequently, perhaps reflecting the popularity of theseitems during special occasions. Table 6.6 reveals a negative correlation betweenpenetration and frequency of purchase in this context, with 3.2% of respondentsclaiming to have consumed such products twice a month or more in 2014, comparedwith 26.4% of adults that did so less than once in 3 months.

Table 6.6: Consumption of Chocolate Assortments and Other BoxedChocolates by Frequency (% of adults), Year Ending December 2014

Twice a

Month orMore

Once aMonth

Once orTwice in 3

Months

Less ThanOnce in 3Months

Chocolateassortments and otherboxed chocolates

3.2 5.8 10.7 26.4


Table 6.7 reinforces the extent to which sugar confectionery is less popular thanchocolate confectionery in the UK. It reveals a negative correlation between penetration

Confectionery 60


and the frequency of purchase, with just 2% of adults consuming other sweets(including those for children) once a day or more in 2014, compared with 26.9% ofrespondents consuming it less than once a week.

Table 6.7: Consumption of Other Sweets(including those for children) by Frequency (% of adults),Year Ending December 2014

Once aDay orMore

3 to 6Times a

Week

Twice aWeek

Once aWeek

LessThan

Once aWeek

Other sweets(including thosefor children)

2.0 4.7 7.3 12.6 26.9


Table 6.8 shows that 7.5% of UK adults consumed mints once a day or more in 2014,while a further 7% consumed them between three and six times a week. At the otherend of the scale, mints were an infrequent purchase made once a month or less or13.8% of respondents.

Table 6.8: Consumption of Mints by Frequency (% of adults), Year EndingDecember 2014

Once aDay orMore

3 to 6Times aWeek

Twice aWeek

Once aWeek

2 or 3Times aMonth

Once aMonth or

Less

Mints 7.5 7.0 6.0 5.9 10.1 13.8


Table 6.9 shows that 7.9% of respondents consumed chewing gum once a day or morein 2014, which was significantly more than the 3.5% that claimed to do so five or sixtimes a week. At the other end of the scale, 7.5% of consumers only purchasedchewing gum once a month or less in 2014.

Table 6.9: Consumption of Chewing Gum by Frequency

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(% of adults), Year Ending December 2014

Oncea

Dayor

More

5 or 6Times

aWeek

3 or 4Times

aWeek

Twicea

Week

Oncea

Week

2 or 3Times

aMonth

Oncea

Monthor

Less

Chewinggum

7.9 3.5 5.6 3.9 3.6 5.5 7.5


ATTITUDES TOWARDS CONFECTIONERY

Key Note recently commissioned an exclusive consumer survey from NEMS MarketResearch, so as to provide a more detailed representation of attitudes towardsconfectionery in the UK marketplace. In March 2015, a sample of 1,000 people wereasked to agree or disagree with 13 statements when thinking about confectionery. Theresults are shows in Table 6.10, and are then analysed in more detail below with regardto sex, age, social grade and the presence of children.

In terms of buyer behaviour, the results reinforce the breadth and consistency ofdemand in this market, with 68.5% of respondents claiming to consume confectioneryas a snack at least once a week. In addition to routine consumption habits, the marketalso benefits from confectionery’s status as an affordable treat, with 46.6% ofrespondents often buying confectionery on impulse. The ongoing importance ofaffordability is perhaps reflected by the fact that more respondents claimed to preferpurchasing sharing packs or multipacks than single-serve products in March 2015. Thefindings also reveal the fine line between brand loyalty and the desire to experimentwith new products, with 51.9% of respondents preferring to purchase their regularconfectionery as opposed to trying something new. Finally, although ethical concernscontinue to influence buyer behaviour, it appears not to be a priority for mostconsumers, with 21.8% of respondents claiming to always purchase Fairtradeconfectionery products.

Results from the survey also underline the influence of health on buyer behaviour in thismarket. First and foremost, and perhaps unsurprisingly given the extensive recentmedia exposure, the findings confirm that sugar has replaced fat as the primary healthconcern, with 60.2% of respondents admitting to being concerned about sugar levels inconfectionery, compared with 51.9% that are worried about fat. This is directlyimpacting upon volume sales, with as many as 44.6% of respondents claiming to havecut back on confectionery consumption due to health concerns. Yet, it is also important

Confectionery 62


to note that 43% of consumers see confectionery as a harmless affordable everydayindulgence. The demand for both low-sugar confectionery and dark chocolate appearsto have benefitted from the prevalence of health concerns though, with penetrationequalling 39.2% and 24%, respectively. Finally, the influence of government campaignsin driving buyer behaviour is reinforced by the fact that such initiatives have onlypersuaded 26.1% of respondents to decrease their confectionery consumption.

Table 6.10: Consumer Attitudes Towards Confectionery(% of respondents), March 2015

% of Respondents

Buying

I consume confectionery as a snack at least once a week 68.5

I prefer to purchase my regular confectionery brands rather than try newproducts

51.9

I prefer to buy sharing products or multipacks 50.8

I often buy confectionery on impulse 46.6

I prefer to buy single-serve products when I eat confectionery 44.5

I always purchase Fairtrade chocolate in preference to other chocolateproducts

21.8

Health

I am concerned about the high levels of sugar in confectionery 60.2

I am concerned about the high levels of fat in chocolate 51.9

I have cut back on my confectionery consumption due to health concerns 44.6

I see confectionery as a harmless affordable everyday indulgence 43.0

I prefer to purchase low-sugar and sugar-free alternatives 39.2

Recent campaigns through government bodies have persuaded me todecrease my confectionery consumption

26.1

I consume more dark chocolate than other types as I believe the highercocoa content is better for you

24.0

Weighted sample: 1,000 adults

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Base: adults aged 16+

Source: Key Note

By Sex

Unlike consumer attitudes towards buying confectionery, the influence of health at thepoint-of-sale (PoS) varies substantially between sexes. The most dramatic differencebetween the sexes concerned the perception that confectionery is a harmlessaffordable everyday treat. Whereas 49.9% of male respondents agreed with thisstatement, only 36.8% of females did likewise, representing a difference of 13.1percentage points. Similarly, 28.7% of women claimed to consume more dark chocolatebecause they believed it was healthier, which was 9.8 percentage points higher thanamong men (18.9%). Interestingly, the smallest variation in health perceptions wasexhibited in the preference for purchasing low-sugar products, with penetrationequalling 41.2% among women and 37% among men. Overall, Table 6.11comprehensively indicates that women are more influenced by health concerns whenpurchasing confectionery.

Table 6.11: Consumer Attitudes Towards Confectionery by Sex (% ofrespondents), March 2015

Male Female

Buying

I consume confectionery as a snack at least once a week 70.1 67.1

I prefer to purchase my regular confectionery brands rather than try newproducts

51.8 52.0

I prefer to buy sharing products or multipacks 49.5 52.0

I often buy confectionery on impulse 46.3 47.0

I prefer to buy single-serve products when I eat confectionery 43.0 45.8

I always purchase Fairtrade chocolate in preference to other chocolateproducts

20.1 23.3

Health

I am concerned about the high levels of sugar in confectionery 55.3 64.7

Confectionery 64


I am concerned about the high levels of fat in chocolate 46.9 56.5

I have cut back on my confectionery consumption due to health concerns 40.7 48.0

I see confectionery as a harmless affordable everyday indulgence 49.9 36.8

I prefer to purchase low-sugar and sugar-free alternatives 37.0 41.2

Recent campaigns through government bodies have persuaded me todecrease my confectionery consumption

21.5 30.3

I consume more dark chocolate than other types as I believe the highercocoa content is better for you

18.9 28.7



Source: Key Note

By Age

Consumer attitudes towards confectionery vary dramatically based on the age of therespondent. As many as 80% of adults aged between 16 and 19 prefer to buy single-serve confectionery products, compared with just 37.1% of respondents aged between55 and 64. This represents a dramatic difference of 42.9 percentage points. Similarly,81.7% of the younger category claimed to consume confectionery as a snack at leastonce a week, compared with 54.7% of the older demographic. Table 6.12 also revealsthat 20 to 24 year-olds are the most likely to purchase confectionery on impulse, withpenetration equalling 59%. In contrast, consumers aged 65 and over were 25.9percentage points less likely to be impulsive in this regard, with penetration equalling33.1%. Finally, with regard to buying trends, findings from the survey also suggest theemergence of a more ethically conscious younger demographic. The penetration ofconsumers aged between 16 and 19 that always purchase Fairtrade chocolate equalled38.4%, which was more than 10 percentage points higher than in any other age group.

In terms of health concerns, Table 6.12 reveals several notable trends. In general,respondents aged between 16 and 35 were significantly more likely than olderconsumers to see confectionery as a harmless affordable everyday treat. The fact thatas many as 54.4% of 55 to 64 year-olds claimed to have cut back on their confectioneryconsumption as a result of health concerns reinforces this trend. However, low-sugarand sugar-free products have penetrated the 16 to 19 year-old age group mostsubstantially, suggesting a different approach to health and confectionery between agegroups.

Confectionery 65


Table 6.12: Consumer Attitudes Towards Confectioneryby Age (% of respondents), March 2015

16-19 20-24 25-34 35-44 45-54 55-64 65+

Buying

I consumeconfectionery asa snack at leastonce a week

81.7 67.3 80.2 74.5 64.5 64.2 54.7

I prefer topurchase myregularconfectionerybrands ratherthan try newproducts

66.5 66.2 41.8 54.2 51.3 54.7 46.5

I prefer to buysharing productsor multipacks

39.1 53.8 57.9 61.8 56.7 52.0 31.3

I often buyconfectionery onimpulse

45.7 59.0 52.2 50.7 48.0 44.6 33.1

I alwayspurchaseFairtradechocolate inpreference toother chocolateproducts

38.4 17.0 28.0 19.2 18.1 19.9 19.4

I prefer to buysingle-serveproducts when Ieat confectionery

80.0 39.5 39.6 47.2 41.3 37.1 43.8

Health

I am concernedabout the highlevels of sugar inconfectionery

54.8 59.6 53.6 61.6 63.5 66.9 59.9

Confectionery 66


I am concernedabout the highlevels of fat inchocolate

50.9 56.3 48.5 48.4 54.7 58.2 50.4

I have cut backon myconfectioneryconsumption dueto healthconcerns

37.6 44.7 37.3 45.5 49.5 54.4 41.9

I seeconfectionery asa harmlessaffordableeverydayindulgence

48.8 50.0 53.7 44.1 40.9 38.3 32.5

I prefer topurchase low-sugar and sugar-free alternatives

49.7 38.3 35.2 38.0 39.1 43.2 38.2

Recentcampaignsthroughgovernmentbodies havepersuaded me todecrease myconfectioneryconsumption

9.5 24.8 28.3 26.0 23.6 33.4 27.9

I consume moredark chocolatethan other typesas I believe thehigher cocoacontent is betterfor you

23.2 24.7 26.1 19.6 24.4 23.8 26.2



Source: Key Note

By Social Grade

Consumer attitudes to confectionery vary by social grade. Respondents in grade A, forinstance, are significantly more likely to buy single-serve products than otherconsumers in grade D, with penetration equalling 57.1% and 35.6%, respectively.

Confectionery 67


Perhaps as a results consumers in grade A are the most likely to purchaseconfectionery on impulse (51.2%), whereas those in grade E are the least likely to doso (39.8%). Table 6.13 also reveals a correlation between social grade and thefrequency of consumption. In grades A and B, 73.1% and 73.3% of respondents,respectively, claimed to consume confectionery as a snack at least once a week,compared with just 59.1% of respondents in grade E.

Perhaps unsurprisingly considering the relationship between wealth and social grade,consumers in higher grades are more likely to see confectionery as a harmless,affordable everyday indulgence. There is some indication though that respondents ingrade A are the least likely to be concerned about sugar and fat in confectionery, withpenetration of 50.9% and 44.7% significantly lower than in other groups.

Table 6.13: Consumer Attitudes Towards Confectionery by Social Grade (%of respondents), March 2015

A B C1 C2 D E

Buying

I consume confectionery as a snack atleast once a week

73.1 73.3 69.6 69.6 66.9 59.1

I prefer to purchase my regularconfectionery brands rather than try newproducts

54.1 51.2 58.0 48.0 48.0 48.4

I prefer to buy sharing products ormultipacks

36.5 52.2 51.9 58.6 47.9 35.8

I often buy confectionery on impulse 51.2 50.9 48.1 45.4 47.7 39.8

I prefer to buy single-serve products whenI eat confectionery

57.1 49.9 49.7 37.6 35.6 45.8

I always purchase Fairtrade chocolate inpreference to other chocolate products

20.4 14.9 20.4 20.5 25.6 31.5

Health

I am concerned about the high levels ofsugar in confectionery

50.9 72.1 60.9 59.0 53.6 59.1

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I am concerned about the high levels offat in chocolate

44.7 57.2 51.0 52.2 52.8 50.7

I have cut back on my confectioneryconsumption due to health concerns

49.3 46.1 43.8 40.4 47.4 50.9

I see confectionery as a harmlessaffordable everyday indulgence

46.5 49.6 44.7 43.0 40.4 34.3

I prefer to purchase low-sugar and sugar-free alternatives

18.9 40.6 35.3 41.0 33.4 54.5

Recent campaigns through governmentbodies have persuaded me to decreasemy confectionery consumption

24.4 29.8 21.9 24.3 31.9 33.7

I consume more dark chocolate thanother types as I believe the higher cocoacontent is better for you

29.2 25.4 25.0 22.3 17.8 28.2



Source: Key Note

By Presence of Children in the Household

The presence of children in the household significantly affects consumer attitudes toconfectionery in the UK. Regardless of age, consumers with children in the householdare much more likely to purchase sharing products and multipacks than consumers withno children in the household. Table 6.14 also shows that consumers in households withno children are the least likely to consume confectionery as a snack at least once aweek, with penetration rising as the age of children decreases. As such, respondentswith children aged between 0 and 4 were the most likely to consume confectionery as asnack at least once a week, with penetration of 90.8%. Interestingly, the presence ofchildren had relatively little impact on health concerns, which is perhaps surprisinggiven the media’s focus on child obesity. In fact, consumers with young children werethe most likely to see confectionery as a harmless affordable everyday treat, whilerespondents with no children in the household were the least likely.

Table 6.14: Consumer Attitudes Towards Confectionery by Presence ofChildren in the Household (% of respondents), March 2015

Age of Children

Confectionery 69


0-4 5-9 10-15 No Children

Buying

I consume confectionery as a snack at least oncea week

90.8 84.4 71.1 63.8

I prefer to purchase my regular confectionerybrands rather than try new products

64.2 48.6 50.1 51.3

I prefer to buy sharing products or multipacks 62.8 64.2 72.9 43.7

I often buy confectionery on impulse 58.5 52.9 49.8 43.7

I prefer to buy single-serve products when I eatconfectionery

46.1 38.2 38.6 46.0

I always purchase Fairtrade chocolate inpreference to other chocolate products

25.2 34.7 23.6 20.3

Health

I am concerned about the high levels of sugar inconfectionery

69.7 68.2 57.5 58.6

I am concerned about the high levels of fat inchocolate

54.0 54.3 48.3 52.0

I have cut back on my confectionery consumptiondue to health concerns

45.6 48.6 36.3 46.4

I see confectionery as a harmless affordableeveryday indulgence

53.4 52.6 47.8 40.9

I prefer to purchase low-sugar and sugar-freealternatives

31.0 45.7 38.9 39.2

Recent campaigns through government bodieshave persuaded me to decrease my confectioneryconsumption

32.9 30.5 23.0 26.0

I consume more dark chocolate than other typesas I believe the higher cocoa content is better foryou

16.5 23.4 23.0 25.2



Confectionery 70


Source: Key Note

Confectionery 71


Strengths, Weaknesses, Opportunities & Threats

STRENGTHS

Confectionery is extremely popular in the UK, ensuring consistently high demand.Penetration is extensive, with the range of available products, formats and price pointsenhancing potential consumer appeal.Many Britons like to indulge their sweet tooth and consider confectionery to be aharmless and affordable treat.Brand awareness is extremely well developed in this market, with many leading brandsalso benefitting from brand loyalty.There are a range of potential consumption occasions, including mid-morning, afterlunch, mid-afternoon and after dinner.In addition to being consumed as a treat in its own right, chocolate is also commonlyused as an ingredient when baking at home.The calendar year is filled with seasonal occasions during which buying confectioneryis common; the main examples are Easter, Christmas, Halloween and Valentine’s Day.

WEAKNESSES

The UK confectionery market is extremely competitive; in addition to competitionbetween sectors and subsectors, the wider market is also in competition with snackfoods, biscuits and cakes and ice cream.As a result of this competitiveness, the confectionery marketplace is also highlysaturated with products. Manufacturers need to invest heavily in new productdevelopments (NPDs), in-store promotions (ISPs) and marketing in order to remaincompetitive, but this restricts profitability.Manufacturers are reliant on global cocoa and sugar prices, both of which have beenvolatile in recent years.Confectionery retail prices have inflated dramatically since the financial crisis in2008/2009, increasing the important of price at point of sale (PoS).New product developments (NPDs) are expensive and by no means guaranteed to bea success.Volume sales have been subdued in recent years, with many consumers increasinglyconcerned about the negative health implications of excessive consumption; yet, thedemand for low-sugar confectionery remains low despite the relative success of theseproducts in the US.Trade conditions are challenging for small- and medium-sized enterprises (SMEs)within an increasingly globalised marketplace.

Confectionery 72


OPPORTUNITIES

Sharing bags are an increasingly popular size format in this market.There is an opportunity to increase the UK’s confectionery exports overseas.Consumers enjoy seasonally themed products and the fact that they are only availablefor a limited time encourages impulse purchases.The demand for premium confectionery is increasing in line with the ongoing economicrecovery.The popularity of fun and excitingly flavoured confectionery continues to drive NPDpotential.There is a growing demand for confectionery that is perceived to have beenmanufactured using natural ingredients.Dark chocolate is increasingly seen as a healthier alternative to other forms ofchocolate confectionery.

THREATS

Health concerns are becoming increasingly penetrative in the UK, threatening thedemand for confectionery.There is currently a global shortage of cocoa as a result of increasing demand aroundthe world.The total supply of cocoa and sugar is dependent on the quality of harvests,threatening market stability.The popularity of private-label confectionery is limiting potential value sales.Globalisation is threatening the competitiveness of British confectionery manufacturers.Marketing restrictions could become increasingly stringent as a result of the ongoingobesity crisis.

Confectionery 73


PESTEL

POLITICAL

Improving public health is a key government priority given that over half of Britons arenow either overweight or obese in terms of body mass index (BMI). One recent politicalinitiative in this context is the Public Health Responsibility Deal (PHRD), which wasintroduced in 2011. The scheme encourages businesses and influential organisationsto sign up and pledge their commitment to improving public health. There are currently776 partners involved in the campaign, including influential confectionery manufacturerslike Mondelez, Mars and Nestlé.

Given the scale of the obesity epidemic, though, the Government arguably needs to goto greater lengths to encourage healthier lifestyles. One means of achieving this wouldbe the introduction of a sugar tax, but despite persistent calls for such a measure bycampaign groups like Action on Sugar, such an approach still appears unlikely. On 21stMay 2015, The Telegraph reported that George Freeman, the Life Sciences Minister,was against ‘heavy handed legislation’ in this context, although he did warn that therewould be penalties for food companies that continue to manufacture unhealthyproducts.

Another area of ongoing political debate surrounds the potential implementation ofgreater restrictions on junk food advertising to children. In 2008, junk food televisionadvertisements were banned from airing during programmes aimed at children underthe age of 16, in a bid to reduce childhood obesity. Yet, the proportion of overweightchildren has increased since this regulation was imposed, fuelling calls for a completeban on junk food advertisements until 9pm. According to an article published by BBCNews on 21st March 2014, a recent survey found that one in ten advertisements shownduring the X Factor (ITV) and The Simpsons and Hollyoaks (Channel 4) marketed fastfood, confectionery or supermarket junk food. Moreover, the issue is not just confined totelevision advertising; a Dispatches documentary that was aired in June 2014,questioned the effect that online junk food marketing in was having on children.

Overall, the issue of improving public health is increasingly high on the political agenda.Confectionery is seen as part of the problem and it looks more and more likely that newregulations will be imposed on manufacturers in a bid to reduce rising obesity.

ECONOMIC

The fierce competitiveness of the global confectionery marketplace has resulted in theemergence of two important economic trends. Specifically, manufacturers want to

Confectionery 74


exploit globalisation while retaining domestic dominance and the financial pressures ofachieving this have led to two high-profile lawsuits.

In February 2015, major US chocolate manufacturer Hershey Inc successfully bannedthe import into the US of Cadbury products from the UK. Hershey’s owns the license tomanufacture Cadbury-branded products in the US, and importing from Cadburyproducts from overseas therefore represented a trademark infringement. However,Hersey’s manufactures its products using a different recipe, which many critics argue isinferior. Moreover, an article by The Telegraph, published on 30th January 2015,suggests that similar lawsuits have been brought against Toffee Crisps, Yorkie barsand Maltesers, reinforcing manufacturers’ desire to dominate their domestic markets.

A longer-term dispute concerns firms’ potential complicity in child slavery in the IvoryCoast. The case was brought against Nestlé, ADM and Cargill in 2005 by three victimsof child slavery on cocoa farms, and alleges that the firms supported the use of childlabour in a bid to reduce costs wherever possible. According toConfectioneryNews.com, in an article published on 1st June 2015, the US Court ofAppeals allowed the case to proceed in late 2014, but it has since been out on holdagain before potentially being referred up to the US Supreme Court. While clearly along-term process, the potential economic ramifications of the lawsuit could beenormous, with one potential outcome being a trade embargo on chocolate from theIvory Coast.

SOCIAL

Health is the primary social concern currently affecting the UK confectionery market.More than half of Britons are now purported to be either overweight or obese, andconfectionery has been labelled as part of the wider junk food category, believed to bea root cause of the problem. Despite the scale of this issue, there is evidence to supportthe presence of a growing health trend in the UK, with a significant proportion of the UKconsumer base becoming more health conscious. Specifically, sugar content iscurrently affecting buyer behaviour, having replaced saturated fat as the primary healthconcern in 2014.

The transition was driven by the launch of the campaign group Action on Sugar in early2014. The initiative aims to target media penetration as a means of raising awarenessregarding the significant role of sugar consumption in the cause of obesity, diabetesand tooth decay, among other health issues. It has been hugely successful in thisregard, as reflected by headlines such as ‘Sugar is as dangerous as alcohol andtobacco, warn health experts’ (The Telegraph, 9th January 2014) and ‘Rotten teeth put26,000 children in hospital’ (The Sunday Times, 13th July 2014). The prolonged nature

Confectionery 75


of media coverage has ensured widespread consumer awareness, to the extent thatsugar concerns had already begun to negatively affect demand for confectionery by thesecond half of 2014.

Yet, although this is clearly a major threat to the future competitiveness of themarketplace, it is important not to exaggerate its influence. Obesity remains a majorhealth issue, while confectionery continues to be extremely popular throughout the UK.In addition, the media continues to confuse the consumer base with headlines such as:‘More evidence that chocolate may be good for the heart, say researchers’ (TheGuardian, 16th June 2015). As such, the impact of sugar concerns on UK confectioneryconsumption is likely to be a gradual, albeit ongoing, process.

TECHNOLOGICAL

Technological trends affecting the UK confectionery market can be considered in tworespects. On the one hand, manufacturers of confectionery machinery, such as Winklerund Dünnebier Süßwarenmaschinen GmbH and Hosokawa Bepex GmbH, continue touse technology as a means of enhancing the efficiency and performance of theirproducts. Yet while this has significant implications for confectionery manufacturers’profitability and employment requirements, technological development in this area is along-term trend that is not directly affecting the way in which consumers interact withbrands and make decisions at point of sale (PoS).

The development of online marketing and sales initiatives, on the other hand, isinfluencing consumers in both respects. Of course, e-commerce and social media areby no means new technologies, but their influence on the confectionery marketplacecontinues to grow. With regard to online confectionery sales, it is perhaps unsurprisingthat such fast-moving, affordable and impulse-driven products have been slow toestablish an online presence. Nevertheless, in an article published on 28th July 2014The Grocer reported that online confectionery sales had grown by 28.4% year-on-year to be worth more than £100m. Buying in bulk online can represent good value formoney, which is still an important driver for many Britons, while this trend also reflectsthe rise in take-home sales and the decline of conventional impulse sales. In the article,Marketing Director at Mondelez, Matthew Williams, highlights this development, and isquoted as saying:

“We work with all the multiples on websites and online sales, which is becoming anincreasingly important channel... When considering impulsivity it is important todistinguish between impulse purchase and impulse consumption. There is no reasonwhy impulse purchase can’t occur online.”

Social media has also developed as an increasingly important means of brand

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interaction. Manufacturers are beginning to realise that engaging followers is moreimportant than simply accumulating them. In addition to Facebook and Twitter,platforms such as Instagram are also becoming increasingly important marketingchannels; a presence across a variety of platforms enables brands to target a widerrange of demographics.

Cadbury has been particularly successful on the photo-led site, with Alastair Cotterill,Creative Lead for Instagram in EMEA (Europe, Middle East and Africa), quoted in anarticle by Retail Gazette (13th April 2015) as saying:

“We know that people are moved by emotions... Brands such as John Lewis andCadbury are already harnessing the power of mobile in delivering against real businessgoals.”

ENVIRONMENTAL

Sustainability is the key environmental issue currently affecting the confectionerymarket. An escalating global cocoa shortage is driving trade prices and placingpressure on companies throughout the chocolate supply chain. On 17th November2014, The Independent reported that Barry Callebaut Group — the largest chocolatemanufacturer in the world — had raised concerns regarding a potential shortage by2020, in a trend that drove cocoa prices up by 25% over the year prior to publication.

The complex variety of causes behind this issue suggests that any deficit will not beeasy to repair. According to The Guardian in an article published 21st November 2014,there are problems throughout the supply chain, from underpaid cocoa farmersdeciding to farm a different crop to rising consumption in emerging markets like thePeople’s Republic of China (PRC). Mature markets are by no means blameless either,with people in the US and UK arguably consuming an unsustainable level of chocolateper capita.

As the world comes ever closer to effectively running out of chocolate, prices willbecome even more expensive. The pressure that this will place on manufacturers willbe enormous and a proportion of rising costs are therefore likely to be passed on to theconsumer in a strategy that could have major implications for buyer behaviour in thecoming years.

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LEGISLATIVE

The ongoing implementation of new food labelling regulations is the most significantlegislative issue currently affecting the UK confectionery marketplace. EU Regulation1169/2011 became applicable on 13th December 2014, with its adoption becomingmandatory on 13th December 2016. It combines two existing directives — 2000/13/EC(labelling, presentation and advertising of foodstuffs) and 90/496/EEC (nutritionlabelling for foodstuffs) — to create a clear and more comprehensive legislativeapproach to food labelling in the EU. The main provisions of the regulation are:

nutrition information must be provided for pre-packed processed foodsorigin information must be provided for fresh meat from pigs, sheep, goats and poultryallergen information must be highlighted in the list of ingredientsthe legibility of labelling information must be improvedallergen labelling requirements also apply to non-pre-packed foods, including thosesold in foodservice outlets.

The Regulation is indicative of the European Commission’s attempt to improve foodtransparency and safety for consumers throughout the EU. Of course, not all theseprovisions are relevant to UK confectionery manufacturers, but adhering to those thatare nevertheless represents a significant logistical challenge. Allergens such as nutsmust be highlighted within the list of ingredients, while improving the legibility of foodlabelling information is likely to reduce the available space for branding.

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Further Sources

Associations

Association of Chocolate, Biscuit and Confectionery Industries of the EU

http://caobisco.eu

British Confectioners’ Association

http://www.the-bca.com

Food and Drink Federation

https://www.fdf.org.uk

International Cocoa Organisation

http://www.icco.org

International Confectionery Association

http://www.international-

confectionery.com

Publications

ConfectioneryNews.com

http://www.confectionerynews.com

Financial Times

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http://www.ft.com

FoodNavigator.com

http://www.foodnavigator.com

The Grocer

http://www.thegrocer.co.uk

The Guardian

http://www.theguardian.com

The Independent

http://www.independent.co.uk

Retail Gazette

http://www.retailgazette.co.uk

The Sunday Times

http://www.thesundaytimes.co.uk

The Telegraph

http://www.telegraph.co.uk

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The Times

http://www.thetimes.co.uk

General Sources

Kantar Media

http://www.kantarmedia.com

NEMS Market Research

http://www.nemsmr.co.uk

Nielsen

http://www.nielsen.com

Government Publications

Department for Environment, Food and Rural Affairs

https://www.gov.uk/government/organisations/department-for-

environment-food-rural-affairs

• Family Food Datasets

• Food Statistics Pocketbook 2012 and 2014

HM Treasury

https://www.gov.uk/government/organisations/hm-treasury

• Forecasts for the UK Economy: a comparison of independent forecasts, May 2015

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National Statistics

http://www.statistics.gov.uk

• Consumer Price Indices, May 2015

• Consumer Trends Q4 2014

• Labour Market Statistics, May 2015

• National Population Projections, 2012-based projections

• Population Estimates for UK, England and Wales, Scotland and Northern Ireland,Mid-2001 to Mid-2010 Revised, December 2013

• UK Business: Activity, Size and Location 2010, 2013 and 2014

• United Kingdom Economic Accounts, 18th May 2015

• Consumer Price Inflation, April 2015

Uktradeinfo

HM Revenue & Customs

https://www.uktradeinfo.com

Other Sources

BBC News

http://www.bbc.co.uk/news

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Understanding Consumer Survey Data

TGI tables, produced by Kantar Media, are generally based on one of the followinggroups: households — consisting of either one person living alone or a group ofpeople, usually members of one family, who live together and whose food and otherhousehold expenses are managed as one unit; adults — aged 15 or over; housewives— a member of a private household who is solely or mainly responsible for thehousehold duties.

NEMS Market Research is often commissioned by Key Note to conduct exclusiveconsumer surveys among a representative sample of adults aged 16 and over in GreatBritain.

Number, Profile, Penetration

Tables used in Key Note reports may give figures for the Number, Profile, and/orPenetration.

Social Grade

This is normally based on the occupation of the Head of the Household, or if the Headof the Household is retired, their former occupation. If this information is not available,

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social grade is based on environmental factors such as type of dwelling, amenities inthe home, presence of domestic help, etc.

The following table broadly defines the six social grades used. The relationshipbetween social grade and net income of the Head of the Household is a complex oneand readers should note that income is not determinant of social grade.

SocialGrade

Social Status Head of Household’s Occupation

A Upper middle classHigher managerial, administrative orprofessional

B Middle classIntermediate managerial, administrative orprofessional

C1 Lower middle classSupervisory or clerical and juniormanagerial, administrative or professional

C2 Skilled working class Skilled manual workers

D Working class Semi and unskilled workers

EThose at lowest levels ofsubsistence (no other earner)

State pensioners or widows

Standard Region

This is as defined by the Registrar-General.

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Key Note Research

Key Note is a leading supplier of market information, publishing an extensive range ofconsumer, industrial, business-to-business and services titles. With over 30 years’experience, Key Note represents clear, concise, quality market information.

For all reports, Key Note undertakes various types of research:

Online searching is carried out by product code or free search method, and covers theperiod from the last edition of the report to the current day.

Trade sources, such as trade associations, trade journals and specific companycontacts, are invaluable to the Key Note research process.

Secondary data are provided by Kantar Media (TGI) and Nielsen forconsumer/demographic information and advertising expenditure, respectively. Inaddition, various official publications published by National Statistics, etc., are used foressential background data and market trends.

Interviews are undertaken by Key Note for various reports, either face-to-face or bytelephone. This provides qualitative data (‘industry comment’) to enhance the statisticsin reports; questionnaires may also be used.

Field research is commissioned for various consumer reports and market reviews, andis carried out by NEMS Market Research.

Key Note estimates are derived from statistical analysis and trade research carried outby experienced research analysts. Up-to-date figures are inserted where possible,although there will be some instances where a realistic estimate cannot be made orexternal sources request that we do not update their figures.

Key Note Editorial, 2015

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