A sweet market to be in

25 June 2014

CAOBISCO is the EU association for confectioners. They and Swedish confectioner Cloetta provided Packaging Today with an overview and insight into developments within the confectionery industry.

An increasing number of single-person households, combined with a more individualistic consumer outlook, mean that the need for differentiated products is increasing. A greater interest in health and natural raw materials are other important product development drivers. Confectionery is one of the most impulse-driven retail goods group, and the European confectionery market features strong consumer loyalty to local brands. Consumer research indicates that in their purchasing decisions, consumers put very great emphasis on other considerations apart from price, such as flavour, quality and curiosity about new products

Competitive market
The global market for confectionery is dominated by international companies like Haribo, Lindt & Sprüngli, Nestlé, Mars/Wrigley,
Mondelez (former Kraft Foods), Perfetti and Ferrero, but in the local markets these meet tough opposition from players with locally
established brands such as Cloetta, Fazer, Orkla and Toms.

No player has a strong position in all of the European markets. Consolidation of the confectionery industry is taking place gradually, which is reflected in Perfetti's acquisition of Van Melle in The Netherlands in 2001; Orkla's acquisition of Finnish Panda in 2005; the merger between Mars and Wrigley in 2008; and Mondelez's (former Kraft Foods) acquisition of UK-based Cadbury in 2010. The industry as such has a long history and the rate of technological change is low. The industry itself has a long history, and there are few technological changes. Brands and product ranges that develop are required to retain and strengthen an already strong position.

Challenges (including info from CAOBISCO)
Promoting food safety

CAOBISCO and its members give the utmost importance to food safety. The production, processing, distribution, retail, packaging
and labelling of food stuffs are governed by numerous laws, regulations, codes of practice and guidance. Overarching legalinstruments and principles - like Regulation (EC)178/2002 laying down the General Principles and requirements of Food Law - have
been developed at EU level to form the base of the existing EU food safety policy. Consumers' trust is of paramount importance to the
industry. This is why the association's members put in place food safety and quality systems for their ingredients and products.

In addition CAOBISCO has developed a Guide to Good Hygiene Practices. It is an information tool based on the HACCP scheme,
the latest European legislation and the most recent standards and certification schemes. It provides clear and harmonised references
and examples of how companies can implement a preventive food safety scheme. It also includes information on food ingredients,
food contact materials, allergens and process contaminants.

Some recent and particularly notable topics are addressed by Caobisco the European confectionery association:

The new labelling rules
Regulation (EU) No. 1169/2011 on the Provision of Food Information to Consumers (FIC) will come into force as of 13 December 2014.
The association's members have been preparing for it for many years, providing clear nutritional information to help consumers make informed dietary choices. Examples of this include listing the energy per portion on the front-of-pack, comprehensive nutrition
information on the back-of-pack, and the inclusion of any nuts or allergen causing ingredients.

Regulation 1169/2011 foresees the adoption of a number of implementing acts, delegated acts and reports. CAOBISCO more
specifically monitors the provisions relating to origin labelling and has asked the European Commission to take a balanced, workable
and pragmatic approach for food business operators.

National Initiatives
CAOBISCO closely follows national initiatives recommending to FBO the use of additional forms of expression for nutritional
labelling (UK, France). Although these schemes are voluntary from a legal point of view, they de facto become mandatory for food
companies if leading national retailers endorse them.

There are deep concerns that more Member States would come up with their own nutrition labelling scheme. A proliferation of
national schemes would lead to:

- the fragmentation of the internal market and would be contradictory with the objectives of simplification and harmonisation of information to consumers across the EU, the main purpose of the FIC Regulation

- consumer confusion

- cost increases for food business operators struggling to manufacture and distribute across international boundaries with conflicting or confusing legislation in place

- potentially, a slowdown of growth and job losses as it ceases becoming cost effective to manufacture in the European Union and jobs are outsourced to remain globally competitive.

Industry efforts to mitigate acrylamide
CAOBISCO is paying particular attention to the latest tools that can help European food manufacturers to mitigate acrylamide
formation in certain products. The association actively contributed in the updating of the EU Commission pamphlet promoting mitigation tools for acrylamide reduction in Fine Bakery Wares and in the FoodDrinkEurope "toolbox", which offers more complete
information on those mitigation tools.

Several industry workshops have been organised in various EU countries, in conjunction with CAOBISCO member associations, to
train industry on how to reduce acrylamide levels in products to as lowest as possible. In addition there is ongoing research at a EU
wide level (in European Food Safety Authority) to understand more about the scale of the problem and what the next steps should be.

Innovation examples One important success factor is the ability to launch products in segments where there is consumer demand.

Inclusive Design is a process which seeks to develop product design to meet the needs of more people. Examples of this would include Nestle's updated "black magic" packaging The individual descriptions are much clearer visually and the way they are described. The cellophane tear is on the outside with the start of it clearly marked. Once opened, the divider sheets have gone and the indents to grab to get to the bottom level are bigger and easier to hold. The chocolates are contained in shallow compartments making them easier to grab.

There is still more work to be done and these will be implemented at the next package re-design as they will include re-engineering at the factory end.

Local connections, well-known brands and a continuous flow of attractive new products are important prerequisites for being an
attractive supplier to retailers. Moreover, progress is towards increasingly large units, at the expense of smaller stores.

In connection with the expansion of discount retailing, the progress of store chain private label brands has increased. However,
they constitute a small portion of the confectionery market - around 10% in those markets where Cloetta is active (Cloetta's opinion
based on a background of data from Nielsen).To meet food retailers' private label brands, it is important for confectionery companies to focus on building strong brands and to address new trends and customer needs. Product development, quality, awareness,
communication and visibility decide the strength of a brand and determine consumer loyalty and preferences. The fact that a high
share of confectionery purchases are impulse driven also constitutes a barrier for private label brands. Current price pressure in the
confectionery market is primarily driven by the intense competition in food retailing and the expansion of discount chains in Europe,
rather than food retailers' private label brands.

Consumer trends
There is a continued interest in natural and genuine raw materials. Additives of various types and chemically produced substances are
being questioned in favour of natural materials. E numbers are being replaced with the name of the additive in plain language. Natural sugar is preferred over chemical sweeteners.

Many people lead stressful lives and want an occasional break to take a moment for themselves, be happy, enjoy and treat themselves to something special. As a low cost luxury, confectionery is increasingly designed to be portable in smaller portions so consumers can enjoy them over a longer period of time. As consumers spend more time in the office or out, convenience and especially re-sealabilty of products continues to be a key area for focus of packaging companies. This not only acts as a portion control, but allows consumers to fit in their snacking or eating habits with their lifestyle.

Confectionery manufacturers take responsibility for their products and the health of their consumers seriously. For example, Nestle
continues to encourage consumers to choose healthier options and has promised that employee, customer and consumer
communications will deliver more information on healthier choices & calorie management, including Change 4 Life messaging via
internal communications, its Facebook pages and websites and customer communications. In addition, Nestle will encourage
sharing of relevant confectionery products - by 2015, all sharing or portionable products will include messaging highlighting this.

www.caobisco.eu www.cloetta.com

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