By Sarah O'Carroll, Industry Analyst, Frost & Sullivan, South Africa

South Africa's chocolate market has experienced much change over the last decade and the market is shifting once again. The predicted overall growth of the South African retail chocolate market far exceeds the global average and small artisan chocolate manufacturers are beginning to enjoy a larger chunk of the market as South African consumers become more sophisticated buyers?.

Currently, the retail chocolate market is valued at R5.03 billion and is predicted to grow at a rate of more than 10% per annum over the next five years. Consistent growth is expected to continue in the retail chocolate market, despite the increasing cost of chocolate products, due to rising raw material costs writes Sarah O'Carroll, Environmental & Building Technologies Industry Analyst at growth consulting company, Frost & Sullivan.

The market is primarily driven by increasing disposable incomes and South Africa's growing middle class. Growth in the country's retail footprint is also contributing to increasing chocolate sales, as consumers are presented with a wide range of chocolate product options at grocery stores such as Pick ‘n Pay and Shoprite. Festive and occasional sales play an important role in the market, boosting sales regularly throughout the year, as consumers buy cyclical chocolate products as gifts. The retail chocolate market is highly consolidated, with Cadbury, Nestle and Beacon controlling 85% of retail sales. These established market participants are expanding their product ranges, by capitalising on successful brands. Brand extensions are increasingly common as consumers identify with well established brands in the market, enjoying a wider variety of flavours and product sizes of their favourite chocolate products.

The market is, however,  restrained by consumer belief that consuming chocolate carries health risks such as weight gain and increased cholesterol. This is true for milk and white chocolate which have high calorie counts due to significant amounts of sugar and saturated fat. However research has shown that dark chocolate (containing at least 70% cocoa solids) can have several health benefits, including increasing mood levels and providing anti-oxidants.

South African consumers are becoming more sophisticated and are increasingly searching for premium chocolate products that are differentiated from common brands found in the retail sector. This has resulted in a surge in demand for high quality, premium chocolate products. The introduction of Lindt and Ferrero, a little over a decade ago, considerably raised the profile of premium chocolates in South Africa.  Growth in the premium segment of the market has been particularly strong in post-recession years, with the growth rate estimated to be close to 15% in 2011. Lindt and Ferrero hold the largest share of this market, valued at approximately R495 million.

Smaller artisan chocolate manufacturers are increasing in the market, offering niche high quality chocolate products. There are a significant number of chocolatiers particularly in the Western Cape,  including Ezulwini Chocolatier, Huguenot Chocolates, Honest Chocolate, DV Chocolates, Chocolate by Tomes, Von Geusau and Cocoa Fair to name a few.

The demand for locally produced chocolate products is also increasing. Premium chocolate consumers are becoming more interested in locally manufactured products. The ‘Proudly South African' campaign has increased awareness of local manufacturers and the need to support local entrepreneurs.

The changing market landscape in South Africa will enable continued growth in the premium and artisan chocolate segments of the market. Although Cadbury, Nestle and Beacon will maintain market domination, Frost & Sullivan expects smaller independent South African manufacturers to obtain a larger share of the market. Rising raw material prices and cocoa shortages may increase prices, but chocolate will continue to be an affordable luxury and a growing market in South Africa.

Contact:

Samantha James
Frost & Sullivan
Corporate Communications for Africa
+27 21 680 3574
Samantha.james@frost.com