Eating chocolate has a ‘feel good factor' and is considered an affordable luxury in some countries, however, during the financial downturn, luxury chocolate shops in airports and duty-free gift purchases are likely to suffer a significant drop in chocolate sales.

Rabobank sees a sales dip in premium brand chocolates as one of many risks to producers in the report ‘Is

Chocolate Recession Proof?

From the late 1990s up to 2007, consumers traded up to luxury goods and this trend was dubbed ‘premiumisation'. Chocolate companies developed new strategies to supply the chocolate loving community with indulgences in higher priced products and premium brands.

Trading down

Unfortunately for those cashing in on the trading up trend, historic evidence suggests that chocolate is not immune to recession. Now a reverse trend of consumers trading down in the chocolate market is expected, says Rabobank report author and chocolate analyst Maria Castroviejo.

In 2009, Rabobank expects the global and European chocolate volume to decline moderately, and to shrink more so than in previous financial crises. "Given the trading up that took place over the last few years, there is greater room for trading down in value during this economic crisis than during previous ones," said Castroviejo.

Vulnerability in emerging markets

With the current financial situation, sales in emerging markets, particularly in Eastern Europe, are likely to decline significantly and may affect chocolate producers in Western Europe.

"In Eastern Europe, the impact of the recession is amplified by the deterioration of the local currencies," said Castroviejo. "Many of the largest Western European chocolate players are present in Eastern Europe, making them more vulnerable."

Benefitting from the current market conditions

Not all the chocolate manufacturers are likely to suffer. "Some companies may clearly benefit from the current environment as the market consolidates at the expense of the less differentiated players, and those who already had a weaker financial position before the downturn started," said Castroviejo.

For some chocolate makers, the new market conditions may represent an extra chance for growth which was not present before the financial crisis. Private labels or supermarket brands are gaining share in all fast-moving consumer goods categories and certain chocolate segments, such as tablets or seasonal chocolates.

"Some companies who were criticised for not having luxury products in their portfolios, are now doing better during the financial crisis because they have lower priced options for the current market trend on trading down," said Castroviejo.

 "Leading brands and strong private label suppliers are likely to come out of the current downturn in a stronger position than before," said Castroviejo.

European chocolate market

In 2008, 7.4 million tonnes of chocolate were consumed globally, and Europeans alone ate 3.8 tonnes. This means that last year more than 50 percent of the world's chocolate was consumed by Europeans in Eastern Europe, Western Europe and Russia. In 2008, Rabobank estimated global chocolate consumption had a retail value of around EUR 73 billion.

The recent report ‘Is Chocolate Recession Proof?' was produced by Rabobank's Food & Agri Research and Advisory (FAR). The full report gives further details about the 2009 European chocolate market and the implications of the economic downturn on volume, value and margins.

www.rabobank.com