The Galloping Gourmet Chocolate – Statistical Data Included

Mike Beirne

Catering to consumers’ desire for affordable luxuries, specialty chocolate makers are getting their products to the masses–while trying to maintain their upscale image.

For some time Marie Read, a candy buyer for the 507-unit WaWa convenience store chain, has believed that American consumers are ready to see more specialty chocolate in the everyday places they shop, a hunch supported by the favorable reception accorded high-end chocolates like Toblerone, Tobler Chocolate Orange and Rocher during the few times each year she stocks those items. But what has really convinced her that she was on the mark was not happening in the stores, but in the warehouse, where the shipping and receiving crew was eating up a good bit of the Rafaello shipments before the white chocolate confections even reached the candy racks. Stores quickly ran out of the depleted supply of 99-cent three packs, so Reed had to order more.

“I wouldn’t have thought those guys would go for that kind of thing,” she said.

They’re not alone. Though the United States is still the land of milk-chocolate-loving palettes, American consumers’ taste buds are awakening to darker and less sweet specialty chocolates, just as they have to gourmet coffees, artisan breads and fine wines. So while the Big Three manufacturers– Hershey, Mars, Nestl[acute{e}]–continue to dominate the mass-market confection shelves, once in awhile a Belgian truffle or a Swiss chocolate gets tucked in between those brands.

“The world is a smaller place,” said Neil Leinwand, senior brand manager for Callard & Bowser Suchard’s Toblerone, a Swiss chocolate with distribution in 110 countries. “Consumers are more aware of what is out there internationally, and they’re asking for it.”

In a booming economy, consumers are more willing to splurge on high-end goods like gourmet chocolate, said Jim Walsh, CEO of Hawaiian Vintage Chocolate, which has ambitions of soon opening 250 franchises selling a chocolate experience similar to what Starbucks does with coffee. “What you see during a boom is everyone wants to discriminate and leave the mass market,” Walsh said. “They’ll do that with cars, lifestyle and even in decisions about where they want to live. It’s the same thing with chocolate.”

Dark chocolate is treated more like a niche by the mass-market manufacturers, but those giants are paying attention to the growth in specialty chocolate. Last year Hershey introduced Dark Chocolate with Almond into Nuggets, an extension that is fast becoming one of the bagged candy line’s more popular flavors. Mars repositioned its dark Milky Way as Milky Way Midnight, while Nestle rolled Nestle Mocha Crunch. The Big Three manufacturers improved production over years to mass-produce dark chocolate more economically and without the smoky aftertaste usually associated with the ingredient.

The numbers reflect all the activity. After a couple of flat years, sales of chocolate increased 7.3% in 1999, according to the National Confectioners Association, McLean, Va. While domestic chocolate, like those made by the Big Three, accounted for at least 85% of the category, specialty chocolate was the fastest growing niche, jumping anywhere between 14% and 25% in the last two years. Boxed chocolate consumption was also up, reflecting dark chocolate’s greater appeal to consumers 20 and older.

Not suprisingly, the niche is drawing a crowd. Swiss premium chocolate maker Lindt & Sprungli, for example, has acquired San Francisco-based Ghirardelli to help establish a beachhead for U.S. market penetration. Many specialty chocolate makers contend that it’s easier for them to take their quality and presentation and expand on it than it is for big domestic chocolate makers to start on the bottom and work their way up. Yet some of these high-end manufacturers scoff that Toblerone and Ferrero’s Rocher lack cachet because their distribution is in convenience, drug and grocery outlets.

“There are very few people who do not have to go to a grocery store,” said Andrea Kelly, group brand manager for Ferrero Rocher chocolate, Somerset, N.J., which subscribes to the Coca-Cola mantra of putting your product everywhere within the consumer’s reach. Hence, drug, grocery and mass sales of the candies have more than doubled in the year ended June 15.

“People across all economic strata have at least a couple of dollars to buy something that will be a treat for them,” said Kelly, echoing a trend in other categories like coffee, where consumers have demonstrated a willingness to shell out $4 on a latte, or ice cream, where they will splurge $3 on an ice cream cone. “You see it with coffee and even with books, where publishers are coming out with a soft cover as a sort of middle ground between hard cover and paperback. There is a desire by consumers to have more quality in their life, and there are a lot of people out there offering that.”

As for Rocher’s cachet, it is continuing with a TV ad campaign via McCann-Erickson, New York, in which white-gloved waiters hand party guests trays of the confections. Kelly’s team also handled a late-spring sampling event for a Revlon charity gathering and was invited to do the same by the Rolls-Royce Owners Club in New York. Typically, consumers who seek high-quality specialty foods are the ones who want premium chocolate, and they usually find it in gourmet food and gift shops. While they won’t regularly splurge $50 for a box of fine chocolates, they will treat themselves to an exquisite morsel or two for a couple of dollars. Recognizing this, supermarkets are creating fine-food boutiques to distinguish their stores and offer a place where customers can purchase specialty items.

In a world where candy is available everywhere, specialty chocolate packaging typically connotes quality and exclusivity, with appealing color and shine. Toblerone, for example, has long been recognized for product and packaging with a triangular cross section, and Callard & Bowser-Suchard is vying to make the brand more approachable with its “Made Exclusively for Everyone” campaign. Ads on billboards, taxi stops and painted walls seek to correct misconceptions that Toblerone is merely a holiday candy or only accessible through overseas travel. Messages like, “Now available at fine stores everywhere and all the best truck stops,” tested in Portland, Ore., San Francisco and Washington during spring, and will expand to other markets next year.

Twenty-five-cent Toblerone Minis shipped to convenience stores this year, augmenting the brand’s 35- and 100-gram candy bar lineup. C&BS also tapped into discriminating chocophiles during Easter with Milka L’il Scoops, a chocolate egg from Europe stuffed with chocolate or vanilla mousse, or Terry’s Chocolate Raspberry for the holiday Tobler Chocolate Orange also was repositioned for year-round consumption rather than just as a holiday treat.

Manufacturers are making gourmet chocolate more accessible to the masses at a time when the proliferation of recipe books and celebrity chefs appearing on cable TV is catering to a growing consumer interest in food. Gourmet chef and dessert maker Marcel Desaulniers, famous for his “Death by Chocolate” recipe, recently shared the secrets to one of his indulgent chocolate concoctions with a housewife on the Food Network’s Food Fantasy show. Elsewhere, Bernard DuClos claims to be the first to slap wine-bottle-like labels on Valrhona chocolate bars, noting cocoa content and bean origin.

“At first, people didn’t know what it meant,” said DuClos, COO and executive director of Valrhona in Los Angeles. “It’s like when the octane ratings came out on gasoline; people had to learn that high octane helps their Porsche drive faster. The higher the cocoa content, the better the taste, the less fat. And dark chocolate with 50% to 70% content is good for you. It was used as medicine years ago. Now people look at labels and if the ingredients read like a pharmacy they don’t want it. But when they see cocoa content, they know it’s natural, with no preservatives.”

His strategy 10 years ago was to convince chefs in top restaurants to use Valrhona in their dessert offerings. He got the cold shoulder during his early days of cold calling four- and five-star restaurants in New York, but persistence and samples paid off. Eventually Valrhona won mentions in the dessert menus of fine restaurants. The payoff came when the restaurant patron bumps into a Valrhona display while shopping at a fine food or specialty shop. That person will remember the fine German chocolate cake they ate during a recent dinner, and are likely to overlook the expensive price for a few ounces of chocolate.

After building awareness among fine diners, the general public followed. Duclos credits cooking shows and the availability of Viking stoves and Sub-Zero wine cellars from catalog and online retailers like Williams & Sonoma with planting the idea that consumers can execute recipes just like the experts on TV. To do so, he argues, they’ve got to use Valrhona, which controls the quality of its chocolate from the bean harvested on the plantation to the manufacture of the bar. And he, too, has witnessed firsthand a growing consumer interest in gourmet chocolate: At the Chocolate Show, an expo for upscale confections held every November in New York, onlookers shot questions at his booth about cocoa content and Venezuelan beans.

Indeed, before the 1920s, chocolate used to be marketed, at least to French consumers, by the bean, said Jim Walsh of Hawaiian Vintage Chocolate. The coveted bean then was the Trinitario grown in South America until the Great Winds triggered a fungus outbreak and wiped out the region’s entire crop. From then on, chocolate marketing changed from beans to brands.

Walsh, a botanist, is returning to the premise that beans drive the flavor. Fourteen years ago he tinkered with cocoa genetics and tested trees for compatibility with Hawaii’s environment. His efforts yielded a distinct variety of cocoa which is dried in the Hawaiian sun, aged for a year and roasted before being processed into chocolate that currently is available at specialty stores. Walsh intends to tell the Hawaiian Vintage Chocolate story through 250 franchises modeled after a shop operating near the University of Illinois campus in small-town Champaign.

“Champaign is a convenience-store market, but it’s a good test for us,” said Walsh. “Our problem is form. Chocolate usually is a bar, a truffle or a bon bon. So we have to embrace chocolate in other forms to make the store successful.”

The menu will include brownies, fondue, Hawaiian coffee, cake made to an Emeril Lagasse recipe, chocolate dipped pretzels, marshmallows, fruit and more. The stores will sell lifestyle with product and will be set up like a miniature chocolate factory where customers can see the cocoa bean being ground and the liquid turning into paste.

“The closer you get to the bean, the better it is, and we’re going to tell the story of chocolate and where it comes from,” said Walsh. An announcement about the franchises is in the offing. Locations will be by no coincidence in the same regions where the Hawaii Visitors & Convention Bureau beams a good share of its advertising–to the snowbirds in the Midwest. Besides, M&M/Mars founder Forest Mars once advised Walsh that the one thing to know about chocolate is it sells well above the 39th parallel. Elsewhere, it’s a struggle.

“We’re not going to be in Texas or Arizona,” said Walsh. “The Midwest is where Hawaii really appeals. Our focus is going to be on the lifestyle.’

After all, he said, “What could be a better connection than paradise? Besides, chocolate is supposed to be aphrodisiac.”

COPYRIGHT 2000 BPI Communications, Inc.

COPYRIGHT 2000 Gale Group

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