From Bean-To-Bar: An Overview of Chocolate’s Enduring Success
Over 3000 years ago, the cacao tree was cultivated by the Maya, Toltec, and Aztec peoples in Mesoamerica, a region extending from central Mexico to parts of Central America. As a collective, the civilizations shared a common adoration for chocolate, viewing it as much more than a mere culinary treat. Once revered as the “food of the gods” by the Maya population, chocolate was deemed sacred, with the cacao tree holding profound importance. Chocolate then made its way to Europe in the 1500s, likely by the hands of Spanish friars returning from the Americas. Despite the product’s evolution from additions such as cane sugar, chocolate retained its status as a symbol of luxury, wealth, and power. It became a lavish indulgence reserved only for the royal and elite classes of Spanish society.
Fast forward to today’s consumerist world, and what was once a sacred commodity has now become one of the world’s most widely consumed and recognizable confectionery products. Whether presented in elegantly curated boxes for Valentine’s Day or distributed in industrial-sized packages for trick-or-treating, chocolate holds an irreplaceable spot in various cultural celebrations and is cherished for its enduring appeal transcending generations. Despite its simple composition of four main ingredients, chocolate has become one of the most differentiable products in the world, hosting thousands of products differing in packaging, branding, and marketing strategies. Exploring chocolate’s variations and consolidation within the market unveils a fascinating study in brand portrayal and strategy, emphasizing that regardless of the product’s uniform appearance underneath the wrapper, it is chocolate’s historic symbolism that ultimately shapes consumer purchasing decisions.
Underneath the Wrapper
Beneath the allure of golden packaging and captivating online advertisements lies the core of chocolate production: the humble cacao bean. Primarily sourced from West Africa, where approximately 70% of the world’s cocoa supply is harvested, the prices of chocolate’s primary inputs mainly lay at the mercy of harvest conditions. This year, the weather phenomenon known as El Niño has caused decreased rainfall and elevated temperatures along the west coast of Africa, leaving cocoa plants susceptible to numerous diseases and pests. As a result, Ivory Coast and Ghana, two of the world’s largest cocoa suppliers, have experienced a significant decline in production, catalyzing a dramatic surge in cocoa prices. In less than a year, the cost of a kilogram of cocoa has nearly doubled. March 2023 saw the price standing at a modest USD 2.75 per kilogram. Fast forward to February 2024, and that same kilogram of cocoa has soared to an astonishing USD 5.56 (Figure 1).
Figure 1: Price of Cocoa (I:CPNM) in USD per kilogram from 2019 to 2024
Being a highly concentrated industry, top producers such as Hershey’s, Mars International, and the Ferrero Group pass these escalating input costs downstream to consumers by raising the final selling price of their products. Chocolate is considered a discretionary good, meaning the demand for chocolate, particularly those of the premium variety, increases as disposable income levels rise; in such a scenario where the price of, for example, a Hershey’s bar increases, consumers would typically be expected to seek more affordable sugary alternatives. Despite this, chocolate has demonstrated resilience in the face of economic downfalls, showing little deviation in its per-capita consumption over the past few years.
Figure 2: Per-capita consumption of chocolate confectionery in the US from 2019 to 2024
The United States, renowned as one of the globe’s consumerist hubs, has showcased just that. Even before the surge in cocoa prices this year, U.S. retail chocolate prices increased 10% in 2023, nearly three times the consumer inflation rate. However, this sizable escalation in price has done little to deter Americans from indulging in their comforting, seasonal confectionery delights. In spite of the discretionary nature of chocolate products and its substantial price hikes, consumption of chocolate confectionery has exhibited remarkable consistency, with Americans continuing to savor an average of 8.95 kilograms of chocolate confectionery per capita, a figure nearly unchanged from the previous two years (Figure 2).
The product’s relatively low price elasticity serves as a testament to the enduring appeal of chocolate. Regardless of economic conditions, chocolate remains a steadfast indulgence for many, as its emotional value and cultural symbolism surpass surface-level price considerations. While substitutes exist for consumers looking to get a sugary fix, none possess the same societal relevance. Whether it be Valentine’s Day gifts, Christmas celebration exchanges, or the beloved tradition of trick-or-treating on Halloween, all these cultural moments would feel incomplete without the presence of chocolate.
Life is Like a Box of Chocolates…
For the most part, you always know what you’re going to get in a box of chocolates. Regarding raw inputs, the vast majority of chocolate producers use the following main ingredients: sugar, milk ingredients, palm oil, cocoa butter, and cocoa mass. Ingredient lists alter from bar to bar, such as adding dried fruits or hazelnuts, but the fundamental recipe remains consistent. The consistency in ingredients also poses a barrier to innovation within the industry, hindering its ability to respond to changing consumer preferences, especially those related to health consciousness. Additionally, acquisitions play a significant role in shaping the chocolate industry landscape, with larger companies often acquiring smaller competitors known for their unique products. This consolidation not only streamlines operations but also diminishes the imperative for extensive product innovation. For example, Lindt acquired Russell Stover Candies in 2014 for an estimated price of $1.4 billion USD, the Hershey Company acquired Ripple Brand Collective, the producer of barkTHINS, in 2016, and Ferrero Group purchased Nestle’s American confectionery business in 2018 for $2.8 billion USD. This leaves brand equity and consumer perception to emerge as primary drivers in the chocolate market. With the combined equity of their various product lines, established brands hold a firm grip on the chocolate production market. As seen in Figure 3, the US chocolate production industry houses four significant industry titans: Mars Inc., The Hershey Company, Ferrero Group, and Lindt & Sprungli.
Examining the chocolate market reveals an apparent dichotomy. Premium chocolates, spearheaded by companies like Ferrero and Lindt, are positioned as providers of superior and intentional consumption experiences. On the other hand, everyday chocolates, dominated by the two most prominent industry players, Mars Inc. and The Hershey Company, cater to casual and impulsive consumers, offering convenience without sacrificing taste or quality. High-end brands create distinct perceived value by meticulously overseeing every facet of their supply chain, from cocoa bean sourcing to chocolate bar packaging. These brands prioritize the ethical and sustainable sourcing of their raw materials, growing direct relationships with cocoa farmers and certified suppliers – a commitment tailored to meet the growing demands of eco-minded consumers. As a recent example, Ferrero’s innovative approach to responsible practices, dubbed ‘sacco conosciuto’ or ‘knowing what’s in the bag’, elevates the perceived value of their products by guaranteeing the origins of their ingredients can be traced back to their exact source. This commitment is then prominently showcased through the company’s marketing materials and is then boldly presented to consumers through the visually striking medium of packaging. Here, brands invest significant resources to ensure that superiority, excitement, and sustainability are effectively conveyed to the customer, creating an immersive and conscientious experience with every unwrapping.
‘Tis the Season
When it comes to chocolates, the art of packaging becomes a pivotal player, especially for premium brands striving to evoke a sense of indulgence. Presented in foiled wrapping to protect the product’s quality and a golden color palette to evoke a feeling of luxury, these chocolates are positioned as indulgent treats for special occasions. Through deliberate craftsmanship, paired with transparent bean-to-bar awareness and exquisite packaging, premium chocolates rise to prominence as coveted gifts and symbols of elevated quality, as evidenced by consumer behavior. According to Google Searches, the popularity of Lindt and Ferrero, two premium chocolate industry leaders, peaks during the world’s most prominent gift-giving holidays: Valentine’s Day, Christmas, and Easter (Figure 4). With these holidays accounting for a substantial 64% of total US confectionery sales, premium chocolate brands must find ways to remain faithful to their core identity while tailoring their packaging mix to maximize appeal during holiday occasions. Ferrero's iconic golden-wrapped products and Lindt's golden-foil mascots stand as shining examples of how industry giants adeptly navigate seasonal shifts in demand while upholding their distinctive visual appeal.Byintegrating these unique packaging elements, they forge a lasting bond with consumers – a crucial component of their comprehensive retail strategy.
Source: Google Searches
If you’ve recently visited a store selling chocolates over the past few days, you would have likely encountered aisles filled with Easter-themed treats like Lindt’s Golden Bunnies and Cadbury’s Mini Eggs. The appearance of these displays is no coincidence, as driving seasonal sales requires introducing inventory at the right time and the right stores. Instead of solely focusing on areas with the highest sales, many companies leverage store-level data to direct media dollars to retailers where they are most needed. By complementing this approach with eye-catching, luxurious, and seasonal packaging, retailers are positioned as top-of-mind destinations when shoppers are ready to buy their seasonal candy supplies. This strategy, known as the sell-through media buying model, allocates advertising dollars based on inventory turnover (the percentage of inventory sold relative to the amount of inventory received) rather than the actual sales performance of products. Through proactive measures, companies mitigate the surplus inventory often associated with seasonal demand surges, thereby diminishing the necessity for markdowns, and aiding in sustaining momentum throughout the year, bridging the gaps between seasons.
Happily, Ever, After
Beyond the allure of premium packaging, seasonal promotions, and consumerist trends lies a deeper connection between chocolate and culture. Despite sharing nearly identical ingredients and a uniform appearance beneath the wrapper, chocolate possesses the unparalleled ability to adapt and evolve within diverse cultural contexts, either as a simple chocolate bar or a coveted gift. Yes, its disparity in perception finds its roots in the intricate interplay of modern-day branding and marketing strategy. But its true allure lies deeper. It's in the way chocolate becomes part of our rituals and celebrations, from olden times to the present day. Chocolate has become intertwined with our most cherished celebrations, and in the end, its story is a testament to the cultural significance of a simple cocoa bean. So, whether it's shared among ancient Mesoamerican peoples or picked up in a bustling supermarket aisle, the story of chocolate will always remain more than just a tale of taste; it is a testament to the enduring power of tradition, symbolism, and the human experience.