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Last Updated: Wednesday, 24 March, 2004, 08:17 GMT
Fat profits: Choc tactics
Cadbury's Dairy Milk Crunchie
Cadbury has repackaged its other brands under the Dairy Milk umbrella

Brits are amongst the biggest consumers of chocolate in Europe - munching their way through 10 kilos each, every year.

But these are tough times for the chocolate business.

In an industry dominated by multinational companies such as Cadbury and Nestle, the competition is fierce.

Both the chocolate giants are fighting to keep hold of their lucrative chunks of this 4bn market.

And at the moment, market leader Cadbury is increasing its lead.


Nearly a third of all the chocolate the British eat is made by Cadbury, and the jewel in the crown is its Dairy Milk brand - worth about 250m every year.

KitKat lorry
KitKat: A design icon

Recently the company came up with the idea of repackaging all its major chocolate products and labelling them as part of the Dairy Milk brand - what it calls "Masterbranding".

Cadbury believes this is why the brand has grown by 13% in the last year.

"It's made a bigger stronger platform upon which to grow our brand and buy growth for the future," said managing director Simon Baldry.


In contrast, Nestle's sales have fallen by 1.7%, or 10m in the last year.

"I think we've let ourselves down a little bit in the last couple of years, so I think it's been a bit soft, but I don't think it's going to be quite so soft in the future," said marketing director Sam Hunter.

Nestle's major weapon in the fight is KitKat, described by Mr Hunter as a "design icon, just like the Coke bottle, just like the Ferrari".


Like Cadbury, Nestle has chosen to exploit the strength of its key brand by offering it in a number of new varieties, such as chunky, cubed and even orange flavour.

Consumer loyalty to such brands has been built up over generations, and nine of the top-selling ten brands have been around since the first half of the twentieth century.

Cadbury's Dairy Milk was introduced in 1905, KitKat in 1935.

This makes launching a new brand into the chocolate market quite an undertaking.


But Nestle, unperturbed, chose in 2002 to launch a direct competitor to Cadbury's Dairy Milk, called Nestle Double Cream.

The chocolate bar is made from Ecuadorian cocoa beans and double cream and is marketed as a premium chocolate.

Man eating Cadbury chocolate bar
Obesity concerns could threaten the chocolate firms' financial health

"I think Double Cream has got a tough task," said Chris Cleaver, director of the branding agency Brandsmiths.

"Cadbury's killer blow is that they are directly linked to our hearts and Double Cream has got to work hard to get there," he said.

Fat tax

But launching new brands is not the only challenge facing the industry.

The size of the chocolate market has been fairly static for the last decade, and now the industry is facing challenges from the health lobby over the question of obesity.

There has been talk of advertising bans, clearer labelling of fat and sugar content, and even a fat tax, all of which would hit the chocolate producers hard.

There have been rumours within the industry about the possibility of low fat, low sugar chocolate as a more healthy alternative.

But as yet, none of the big manufacturers has come up with anything concrete.

Changing tastes

The other major threat is the possibility that British consumers might be developing a more discerning palate.

Just as many have learnt to appreciate better wines and may now choose a cappuccino over an instant coffee, some are also beginning to appreciate the taste of so-called premium chocolate.

British high streets have seen more and more exclusive chocolate shops spring up over the last decade, and premium chocolate has now become the fastest-growing part of the market.

This has always been a highly competitive industry.

It looks like things are just about to get even tougher.

"Fat profits: Choc tactics" will be broadcast on Wednesday 24 March at 1930 GMT on BBC Two.

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