Whether it’s a CVS, Walgreens, Walmart, or nearby vending machine, consumers can always expect to find a Reese’s, bag of M&Ms, or Snickers. The tastes, packaging, and experience from these common chocolate bars have been ingrained in our minds since we were little.
A lighthearted commercial Kit Kat Large uses of “Dancing Babies” so people will remember the happy memories of them eating Kit Kats and to increase brand loyalty, the driving factor for the success of the Big Five companies (7).
Up until the 1970s, the Big Five companies: Cadbury, Ferrero, Nestle, Hershey’s, and Mars faced little competition from smaller chocolate makers and if they did their strategy was to acquire them or bully them out of the market. The companies leveraged being first to enter the chocolate market when the “industrialization of the manufacturing process, retail, and transportation” of chocolate started (8). It is no surprise, these companies split over 70% the U.S. confectionery market share (5). However, after the 1970s and 1980s, the competition increased in the chocolate confectionery market due to the rise of craft chocolate makers who “returned to small-scale manufacturing and single origin fine cacao” (8) This paper will discuss why the craft chocolate makers were able to break through despite the firm grasp the Big Five has held on the chocolate market including reasons such as increasing the transparency of the manufacturing process and ingredients, embracing variations (new and old) in recipes, flavors, and richness, and because of a shift in the typical consumer’s attention to the ethics of the companies they are purchasing from.
Craft chocolate, not Kraft chocolate
There have been warning signs that hint the pendulum swing occurring in the chocolate bar market since the 1970s. By pendulum swing, I am referring to the transition from the pre-industrial chocolate which was rich, handmade with fine cacao in Mayan and Aztech households to the dip in quality and diversity that occurred after the invention of the cocoa press and dutch process chocolate and with the rise of industrial chocolate (2, 11). The year 2017 was a “positive year for many confectionery players outside of the Big Five” (14). Companies like Hershey with +1.25% and Mondelez with +2.3% net sales growth were outpaced by rest of chocolate industry growth of +3.3% (14). Furthermore, net profit took a large spike for companies in the Big Five (10). These companies’ savvy advertising techniques, meticulous taste testing of flavor profiles, and their economy of scale are not as scary to new chocolate makers or enticing to consumers.
Pop up, craft chocolate makers have “exponentially risen over the past few decades to approximately 200 today” in North America (10). These include Scharffen Berger Chocolate Maker, Soma chocolate, and Rogue Chocolatier (1). What uniquely separates these companies are their attention to the combination of flavors, origins of cacao beans, initiatives the companies support, and experiences they create for the consumer.
Founded in 1996, Scharffen Berger was the first Modern bean-to-bar chocolate company in North America. One of its slogans Romancing the Bean highlights the companies finest chocolate bars paired with luxurious wine. This company was one of the first to start selling bars made with cocoa from Madagascar. (12) Note Scharffen Berger was acquired by Hershey in 2005 after its success as craft chocolate maker.
This stainless steel instrument is a grindometer. A worker at the Dandelion Cafe is using it to measure particle size in suspensions in order to arrive at the smooth sweet chocolate texture the chef desires. This is a prime example of DIY small machines that allow for craft chocolate makers to produce high-quality products by controlling the whole chocolate making process.
Just like the culture change beer and coffee are experiencing with new small breweries and niche coffee shops, the chocolate market is growing with new ideas and diverse flavors (13).
A great example of this change in culture around chocolate is Dandelion Chocolate. The cafe sits in the hip Mission District of San Francisco. Here is a sign showing the advertising the company is using to draw consumers in and convince them of their unique chocolate bar’s taste (3).
These craft chocolate companies describe their process as “Bean-To-Bar Chocolate”, meaning all produced in-house. Cases like these are reshaping the chocolate retail market slowly as the market shifts back to pre-industrial chocolate making and the frequent use of vintage machines to produce Mayan and Aztec inspired tastes and chocolate forms as opposed to “industrial chocolate: low cost and taste consistency” (4).
The dynamics of the selling point for chocolate companies have changed and the new millennials and advancements in communication with social media are at the core pushing this transformation. Over the past two decades, the Big Five chocolate companies have been facing large scrutiny for their negligence or responsibility for some of the worst forms of child labor and forced labor in its supply chain and industry. “On average, cacao farmers earn less than $2 per day” in Western Africa (1). While these large companies profits reach the billions, these countries fall into a trap of poverty and dependence on the commodity. To combat this scrutiny in the eyes of the public, these companies set up plans to address these issues. Mars, Hershey, and Ferrero promised that by 2020 they would purchase 100% of their cacao from “certified producers (6). While the other large companies aimed to invest in cacao non-profits to train and assist farmers in these regions such as Western Africa.
From these companies’ ambitious responses and promises, it is clear that they are worried about the perception of the manufacturing processes they use. However, we have yet to see how the chocolate market will respond or if they will reach these goals. The advantage heavily favors craft chocolate makers who produce the chocolate from scratch. The maker “roasts, grinds, and smoothens them into chocolate in a single facility” (6). The success of these small companies are driven by consumers who can trust the chocolate is made carefully and without ethical concerns.
This brings me to my last topic, the implications of the saturation of the chocolate market with more craft chocolate makers. As the pendulum swings to more traditional small chocolate chains, I suspect more pressure on the large-scale companies that depend on in-store purchases to change their marketing model and increase transparency of their manufacturing processes beyond ensuring their cacao comes from certified cacao farms. E-commerce will be the biggest cause of this transformation. The Big Five market share for in-store purchases will shrink, they will be forced to consolidate their large product/brand offerings into one brand, and companies will explore different recipes to pair with chocolate. Additionally, with the increase in the number of companies, I believe there will be a stronger necessity for a standardized, international regulation of cacao quality and a metric to quantify rich, milk, or real chocolate. All in all, the rise in craft chocolate makers will lead the charge for more ethical cacao farming and increased standard of living in regions that grow cacao.
- “Child Labor and Slavery in the Chocolate Industry.” Child Labor and Slavery in the Chocolate Industry | Food Empowerment Project, http://www.foodispower.org/ slavery-chocolate.
- Coe, Sophie D. and Coe, Michael D. The True History of Chocolate. Thames & Hudson Ltd: London (1996) Print
- “Dandelion Chocolate.” Dandelion Chocolate, http://www.dandelionchocolate.com/.
- Giller, Megan. Bean-to-Bar Chocolate: Americas Craft Chocolate Revolution: the Origins, the Makers, and the Mind-Blowing Flavors. Storey Publishing, 2017.
- Hershey. “ The Hershey Company Fact Book.” Thehersheycompany, Oct. 2017, https://http://www.thehersheycompany.com/content/dam/corporate-us/documents/investors/2017-fact-book.pdf.
- “Inside Big Chocolate’s Child Labor Problem.” Fortune, fortune.com/big chocolate child-labor. O’Keefe, Brian. “Inside Big Chocolate’s Child Labor Problem.” Fortune, @2018 Time Inc., fortune.com/big-chocolate-child-labor.
- Kit Kat Dancing Babies Commercial, YouTube, 18 Jan. 2013, https://www.youtube.com/watch?v=0o2qeU4RSuA.
- Martin, Carla D. “Lecture 1: Introduction” and “Lecture 3: Chocolate Expansion”
- Martin, Carla, D. “Sizing the craft chocolate market,” Fine Cacao and Chocolate Institute (blog), August 31, 2017, https://chocolateinstitute.org/blog/sizing-the-craft-chocolate-market/.
- “Mondelēz Revenues Slide 13% in 2016 as Analysts Casts Doubt on Kraft-Heinz Merger.” Confectionerynews.com, 7 Feb. 2017, http://www.confectionerynews.com/Article/2017/02/07/Mondelez-2016-results-Sales-sliDe-13-organic-growth-target-missed.
- Presilla, Maricel E. The new taste of chocolate: a cultural and natural history of cacao with recipes. Random House Digital, Inc., 2009
- SCHARFFEN BERGER|Artisan Chocolate, http://www.scharffenberger.com/ en_us/home.html.
- Shanker, Deena. “The Rise of Craft Chocolate.” Bloomberg.com, Bloomberg, 7 Feb. 2017, http://www.bloomberg.com/news/features/2017-02-07/the-rise-of-craft-chocolate.
- “The Candy Papers: Confectionery Industry Year in Review 2017.” Confectionerynews.com, William Reed Business Media Ltd 2018., 12 Dec. 2017, http://www.confectionerynews.com/Article/2017/12/12/The-Candy-Papers-Confectionery-industry-year-in-review-2017.