Inflation, Innovation and Imitation — The UK Confectionery Market

2811-1According to Confectionery 2014, a new Market Update from market intelligence provider Key Note, the UK confectionery market grew by 4.1% in 2013. This is an encouraging outlook considering the threats, demands and constraints of inflation, innovation and imitation currently affecting the UK marketplace.

Despite the onset of a gradual economic recovery, high prices, particularly in relation to chocolate, are being driven by increased global demand from rapidly developing countries such as the People’s Republic of China (PRC). In contrast, sugar has been in excess supply for years but low global trade prices have forced mass sugar mill closures, contributing to the development of unpredictable supply chains, and enhancing the real possibility of global supply shortages. Increasing production costs are being pushed onto consumers as manufacturers look to improve margins in a fiercely competitive and saturated marketplace. Yet the market continues to expand as manufacturers develop new means of tempting a UK consumer base to indulge its sweet tooth.

The already huge number of products available to UK consumers at retail is expanding as a result of increasing consumer demand for innovation. Yet new product development (NPD) is expensive and risky, and as such, is predominantly based around the extensive brand recognition and loyalty that exists in this market. Given high production costs, many manufacturers focus on innovation with regard to packaging.

Shop6_2This is encouraging a wide range of size variations and seasonal packaging, a technique which is easily imitated and decreasingly effective. More adventurous products are also easily imitated in style, as exemplified by Nestlé’s Wonka brand and Cadbury Dairy Milk’s Marvellous Creations, but taste and brand preferences allow for strong individual demand. These preferences are also allowing huge conglomerates to expand into other food markets, such as biscuits and ice cream, increasing their rivalry and blurring the lines between what constitutes confectionery.

Yet despite the complexities of this enormous market, and growing health concerns among the British public amid inaccurate claims that sugar is the new tobacco, the market continues to grow. While this is partially attributable to inflation, the huge popularity of new and exciting confectionery, and the extensive competition that can offer similar products at varying prices, is fuelling further market growth. Key Note therefore forecasts modest market growth of 11.7% between 2014 and 2018.

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