Daily Management Review

As UK Consumers Pass On Pricey Gifts, Confectioners Anticipate A Boost From The Holidays


As UK Consumers Pass On Pricey Gifts, Confectioners Anticipate A Boost From The Holidays
This Christmas season, Mondelez, the owner of Cadbury and creator of Quality Street, is witnessing increasing candy sales in Britain due to budget-conscious consumers looking for less expensive presents.
Analysts and consumer companies report that this year's shoppers are purchasing gifts at a lower cost due to inflation and rising mortgage rates. Executives claim that despite price increases over the previous year, some people are choosing chocolate over toys and technology.
"Boxed chocolates have had a particularly strong start, with a year-on-year increase of 8.7% in value sales," according to Fran McCargo, customer category manager lead for Nestle UK & Ireland, referring to the August-November period versus last year's.
"Twistwrap chocolates have seen (sales) growth of 2.1%, to," she said, adding that Nestle was seeing more shoppers buy chocolates as holiday gifts.
According to her, customers normally spend less than 10 pounds ($13) on these things. Nestle's Quality Street tins, which cost five pounds apiece, and Mondelez's Cadbury selection boxes, which cost one and a half pounds each, are becoming increasingly popular.
In comparison, research firm Circana, formerly known as NPD, estimates that the average selling price of a toy in Europe is roughly 13 pounds. Earlier this month, a number of toy manufacturers informed Reuters that this year's demand was weaker.
"The deals with chocolates have been quite reasonable, it's not gone any higher (in price) - gifts and toys and other stuff, yes, but chocolates no," said Bonnie Johnson, a 42-year-old care home worker.
"It's a cheaper gift to be able to give to quite a lot of people," Johnson added.
Customers with loyalty cards can get discounts on Quality Street and Celebrations from retailers such as Tesco and Sainsbury's.
During the holidays, KitKat Santa, which costs slightly more than a pound, and Milkybar Festive Friends, which costs 1.25 pounds, are two other Nestle brands that usually sell well.
In an effort to lessen the blow of cocoa prices reaching 46-year highs this year, producers are also introducing additional "premium" chocolate goods that they can charge more for.
"It will help fourth-quarter earnings, as the Christmas period is the strongest for chocolate companies," said Vontobel analyst Jean-Philippe Bertschy.
According to Nestle, this year's underlying trading operating profit margin will be between 17.5% and 17.7%, up from 17.1% in 2022.
The company's most recent annual report states that the value of its confectionery division's revenue is approximately 8.1 billion Swiss Francs ($9 billion). Out of the 94.4 billion Swiss francs in total company sales made last year, that is.
According to Euromonitor International, the value of the world's chocolate market is $123.5 billion, with the holiday season being the busiest time of year.
Younger individuals are especially fond of less costly treats, according to Susan Nash, trade relations manager at Mondelēz.
According to a report by consulting firm McKinsey, 9 out of 10 British Gen Z consumers and 83% of Millennial shoppers will "trade down" to less expensive products this holiday season. Overall, 74% of respondents said they would buy cheaper gifts.
Doctor Evie Byrne, 29, reported that she and her pals reduced their "Secret Santa" gift exchange budget from twenty pounds to ten pounds this year.
"I guess we are down-scaling things slightly, without realising it," Byrne said while shopping at a Morrisons supermarket in Camberwell, southeast London.
Presenting luxury chocolate tins to loved ones has become a custom over the holiday season in Britain. Circana, a data organisation, estimates that the local chocolate gift market is valued at approximately 1.8 billion pounds. Because of rising prices, that has increased by 7% in the last 12 months.
According to Circana data, the toys market in Britain, which is estimated to be worth two billion pounds, has shrunk by over 4% this year.
Next year, after Christmas, chocolate manufacturers should expect more difficult trade conditions as they try to pass on rising cocoa costs. Executives assert, however, that chocolate continues to hold up better than other discretionary expenditures.
"Through challenging times, consumers often review their discretionary spending. However, they are less likely to reduce their spending on confectionery gifting," Nash said.