ANALYSIS OF THE CHOCOLATE MARKET IN UKRAINE

Chocolate and chocolate products have always been popular among the population of Ukraine. In terms of popularity among confectionery products, chocolate is in second place, second only to flour products. However, the Ukrainian chocolate market remains unstable and is constantly changing.

Ukrainian chocolate market: production

According to Vyacheslav Moskalevsky, General Director of ROSHEN Confectionery Corporation, demand for chocolate products has been falling since mid-2013. At that time 328 thousand tons of chocolate and cocoa products were produced, which is 2.7% less than in 2012. Already in 2014, 230 thousand tons of chocolate products were produced. This is 29.7% less than in 2013. In 2015, chocolate production decreased by 21% compared to 2014. A total of 182 thousand tons of chocolate products were produced.

Chocolate production continued to fall in 2016. Although there were months when there was an increase in production. For example, in August 2016, chocolate production increased by 9.7% compared to August 2015. In total, 15.1 thousand tons were produced in August. However, already in September 2016, the figures fell again. During the month, 17 thousand tons of chocolate were produced, which is 0.4% less than in September 2015. In January-September 2016, 113 thousand tons of chocolate products were manufactured. This is 5.7% less than in the same period of 2015.

Among the reasons for the decline in chocolate production played a role:

• hryvnia devaluation;
• decrease in purchasing power population;
• closing of the Russian market;
• price increase for cocoa beans and sugar;

The production of chocolate and chocolate products is highly dependent on the situation in the regions where cocoa beans germinate. The Republic of Côte d’Ivoire (West Africa) is one of the most important suppliers of raw materials to Ukraine. Droughts in 2015 had a negative impact on the quality and value of the new crop.

Another reason for the price rise is the increase in chocolate consumption in developing countries: India, China, Saudi Arabia. Increased demand allows cocoa bean suppliers to raise prices.

Chocolate market research: exports and imports

The situation with export and import of chocolate products has changed. In 2016, the trend towards a decrease in exports of Ukrainian chocolate intensified. In 2015, chocolate products worth 158.9 million dollars were exported. In January-September 2016, Ukraine exported chocolate for 88 million 595 thousand dollars, which means a significant decline. The most was sent to:

• Kazakhstan – $16.7 million.
• Georgia – 6.7 million dollars.
• Belarus – $6.3 million.

Ukrainian chocolate is mainly exported to the countries of the former Soviet Union. The closure of the Russian market has significantly reduced Ukraine’s export opportunities. Until new markets are established, the chocolate products produced will have nowhere to go. In 2015, the EU banned Ukraine from exporting confectionery products with nuts. In 2016, this ban was lifted, which allowed for the export of more chocolate and candies.

The number of imports is also decreasing. In 2015, Ukraine imported chocolate worth USD 70.5 million. In the first 9 months of 2016, chocolate was imported for USD 45.1 million. The largest suppliers were:

• Poland – $16.5 million;
• Germany – $7.4 million;
• Netherlands – $7.3 million.

One of the reasons for the reduction of “net” imports is the spread of international chocolate companies in Ukraine. They produce products of foreign brands in the country.

Ukraine has also launched an investigation into chocolate and cocoa bean products imported from Russia. The Ukrkondprom association (acting on behalf of the Roshen confectionary corporation, the Kharkivchanka Confectionary Factory, the Kharkiv Biscuit Factory, the Poltavakonditer PJSC) accused Ukraine of importing chocolate from Russia to Ukraine at dumping prices between 2012 and 2014. On May 26, 2016, a complaint from the Ukrkondprom association was considered. The main argument was that in 2014 Russia exported chocolate to Ukraine at prices significantly lower than domestic prices.

To be in demand it is necessary to know what consumers want. You can order a desk marketing research in the branding agency KOLORO.

 

Portrait of a chocolate consumer

According to research, Ukrainians consume an average of 2 kg of chocolate and chocolate products per year. This is 2 times less than in the West, where the population consumes 5-6 kg of chocolate per year. There is a tradition of eating sweets as a reward after a hard day’s work or to relieve nervous tension. Even in conditions of reduced spending, consumers try to keep a certain amount of sweets in their diet.

The price increase forced consumers to switch to cheaper types of sweets. Vyacheslav Moskalevskyy said that it is difficult for consumers to pay more than UAH 70 for a box of chocolates. Basically, consumers try to buy candies priced at 30-60 UAH per box. Expensive, beautifully packaged candies are bought as a gift for holidays. On weekdays, for themselves, people buy loose chocolates. They are cheaper than bar chocolate. Analysis of the candy market shows that among confectionery products, they occupy the third place in popularity.

Analysis of the chocolate market also shows the opposite trend – an increase in demand for expensive bitter chocolate. It is favored by those who do not want to give up sweet products for a healthy lifestyle.

For children, parents buy chocolate with healthy ingredients: nuts and dried fruit. Products with a high milk content are popular as an additional source of calcium.

In our article you can read about the peculiarities of creating a confectionery brand.

 

Chocolate research: market leaders

1. ROSHEN. Confectionery Corporation is a part of Ukrprominvest Group and has been in existence since 1996. The company’s factories are located in Ukraine (Kiev, Kremenchug and Vinnitsa factories), Lithuania (Klaipeda factory), Hungary (Bonbonetti Choco Kft) and Russia (Lipetsk confectionery factory). Roshen Corporation was ranked 22nd in the Global Top-100 Candy Companies in 2015. The company’s products are exported to the USA, Canada, Estonia, Armenia, Moldova and other countries.
2. AVC. The company was founded in 1991 to supply cocoa products to confectionery factories. Then it started to produce sweets. It is among the 20 largest companies in the world. In the rating of Global Top-100 Candy Companies 2015, it is ranked 62nd. AVC Corporation includes Lugansk Confectionery Factory, Mukachev Confectionery Factory, Dnepropetrovsk Confectionery Factory, LLC “Pchela”: production of glaze”. Donetsk confectionery factory, which had been a part of AVC since 1996, suspended its work because it is in the ATO zone. Because of this the work of Lugansk confectionery factory was also stopped. AVC owns such trademarks as: “Gulliver”, “Royal Masterpiece”, “Royal Charm”, “Chocolate Night”, “Golden Evening” and others.
3. «КОНТИ». Компания была основана в 1997 году под названием Производственное объединение «Киев-Конти». В 2011 году, компания стала Частным Акционерным Обществом Производственное объединение «Конти». У потребителей особой популярностью пользуются их развесные шоколадные конфеты. В рейтинге Global Top-100 Candy Companies «Конти» занимают 38 место.
4. Biscuit-Chocolate Corporation consists of two factories: Kharkiv Biscuit Factory PJSC (production of flour confectionery) and Confectionery Factory Kharkovchanka PJSC (production of sweets and chocolate). Sweets from Kharkiv enterprises are exported to Georgia, Latvia, Lithuania, USA, Canada, Israel and other countries.
5. “ZhL” (Zhytomyr Confectionery Factory). The company was founded in 1944. In 2011, it merged with Budstyle XXI (Kyiv) and transformed from CJSC Zhytomyrski Lasoschi into ALC ZhL. Recently, the ZhL factory won a tender for the production of products for the private label of the ATB supermarket chain. ZhL products are exported to more than 20 countries: China, New Zealand, USA, Germany and others.
6. “Mondelis Ukraine (before 2014 Kraft Foods Ukraine). The company produces Korona and MILKA chocolate, PICNIC chocolate bars and other sweets. It is one of the world’s largest producers of chocolate products and snacks. The company develops its business in the markets of Moldova, Belarus, Armenia, Georgia, Azerbaijan, Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, Turkmenistan and Mongolia.
7. Lviv confectionery factory “Svitoch“. The history of the company began in 1962. Then 3 confectionery factories united into one under the name “Chervona Trojanda”. In the same year, the name was changed to “Svitoch”. (The controlling stake belongs to Nestle Corporation. In 1998, the company became part of Nestlé S.A. In 2015, the company’s net profit amounted to 271 mln. UAH. against UAH 22 thousand in 2014 (according to interfax.com.ua). The brand’s chocolate bars and loose candies are popular on the Ukrainian market. Svitoch exports its products to Moldova.

The success of a brand of chocolate products largely depends on its positioning. KOLORO branding agency guarantees an individual approach to each client!

Trends in chocolate packaging design

1. Brevity. Consumers are tired of too many details in design. Packages with many images and inscriptions carry too much information. Therefore, the design of chocolate labels and packaging should indicate the main features of the product at a glance. For example, Slovakia has launched a premium line of chocolates designed in a minimalist style. The designers came up with two-color packaging: for milk chocolate – brown with blue, for dark chocolate – two different shades of brown. The premium nature of the product is indicated by the gold embossing on the wrapper. When looking at the packaging, the customer can immediately recognize the type of chocolate in front of him.
2. Playfulness. Many people associate chocolate with pleasure, entertainment and childhood. Therefore, one of the trends in chocolate packaging design has become relaxed and unusual. Images of funny stylized animals are placed on the packaging. Bright, unrelated to chocolate colors are used in the design. For example, on the packaging of Benetto chocolate there are birds in human clothes. And on the packaging of Fat Pig Chocolate there is a pork belly on a bright pink background.
3. Vintage. Designers remembered that for a long time chocolate was a gourmet treat not available to everyone. To emphasize the elite nature of the product, the design of chocolate packaging uses elements of past epochs. For example, for the design of Alice Chocolate they used a design popular in the 18th century: white packaging with a dark embossed silhouette.
4. Multisensory experience. When developing packaging design, designers often focus on the human visual experience. One of the new trends is to engage all the senses. Before eating chocolate, people hold the packaging in their hands and feel its texture. This also influences the perception of the quality of the product. Moonstruck Chocolate has released chocolate in unusual packaging: with cut-in illustrations and embossing. According to customers, such packaging “captures the imagination”.
5. Maximum convenience. Chocolate products are often consumed on the go, at work or after a workout. In such cases, large packages are inconvenient. In addition, chocolate bars can melt. For the convenience of consumers, unusual packaging designs are developed. For example, Chocolates with Attitude produces sets of 12 small boxes. Each of them can be taken with you to eat on occasion.

Examples of playfulness (left) and multi-sensory experience (right) in chocolate packaging design

Forecast of chocolate products market development in Ukraine

The opening of the European market will increase the number of exports. In February 2016, the Ministry of Agrarian Policy drafted a bill to bring Ukrainian products in line with European standards. For example, Europe allows the use of up to 5 percent of vegetable fats in chocolate production. This can be palm oil, shea butter or mango butter. It is also necessary to reduce the fat content of Ukrainian chocolate. According to the current standards, there should be 31-33% of cocoa butter in chocolate. The new standards stipulate 18% content.

The requirements for chocolates have changed. According to the new rules, they must contain at least 25% chocolate. This will make production more expensive. Now manufacturers use chocolate glaze: a mixture of cocoa powder and vegetable fat. Confectioners will have to stop producing such products or indicate on the packaging that they are not chocolate.

Demand for Ukrainian chocolate from emerging marketsis growing. The presence of Ukrainian chocolate products in the Asian market is likely to increase. World chocolate prices will increase. This is due to the fact that chocolate consumption is growing, while the cocoa bean harvest is decreasing. To cope with the shortage of raw materials, leading chocolate producers have launched support programs for farmers who grow cocoa trees

If demand for chocolate products falls, consumption of premium chocolate will be least affected. Mid-price segment chocolate may suffer. If prices continue to rise, consumers will buy economy segment chocolate instead or switch to other sweets.

The three main producers will continue to fight for a place in the market. If companies whose production facilities were in the ATO zone do not increase capacity at other production facilities, they may be squeezed out by competitors and take market share.

Chocolate market research: results

1. In Ukraine, there is a constant decline in demand for chocolate products. It started back in 2013 and was caused by a decrease in the purchasing power of the population.
2. Exports and imports of chocolate products fell . The reason for this was the closure of the Russian market for Ukrainian chocolate. In addition, not all Ukrainian chocolate products meet European requirements. Therefore, in order to enter the European market it is necessary to change the standards of chocolate and chocolate products production.
3. The most popular among consumers are loose chocolates. This is due to their low price. In an attempt to cut losses from falling sales, companies are raising prices on other products, particularly in the premium segment.
4. The growth of chocolate consumption in the world. Ukrainian manufacturers are constantly getting into the Global Top-100 Candy Companies due to the quality of their products. Therefore, they have a chance to conquer the world chocolate markets.

In order to stay first in your field, you need to be aware of the main trends. KOLORO branding agency will help you in this!