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Year-end thoughts for 2022

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It seems that the world market raw material prices for confectionery are stabilising albeit at an elevated level. However, vulnerability remains high. Consolidation can be overshadowed by unexpected political, military, or weather events, as well as the appearance of pests or diseases.

The European price of sugar rose by 100 percent. There is reason to hope that Ukraine could be a good alternative source if the sugar’s growing, harvesting and shipping facilities are operational in 2023. Sugar is cheaper on the world market due to the punitive tariffs of the European markets. The price of cocoa increased by 10 percent, but at the same time the price of future contracts reverted to the previous levels. The price of milk powder increased by 100 percent from the price at the beginning of 2021 to the middle of 2022, but since then it has adjusted back to plus 40 percent; the current price level is decreasingly stable. The price of wheat has increased by 50 percent, but the current price level is stable. The price of vanilla is stable, but due to less flowering as a consequence of negative environmental effects and increasing demand, a staggered price increase of 3-5 percent per year is expected. Vanilla is grown almost exclusively in Madagascar, and an unexpected weather phenomenon could cause significant price shifts for this raw material as well.

Not only for confectionery, but also for many everyday foods, the National Health Product Tax (NETA) significantly increases the prices, in the case of which we are constantly asking the decision-makers to eliminate tax duplication, because the raw materials used are taxed at every point of the production chain. As a result of the import ratio, the forint exchange rate affects the consumer prices too. The atomization of traders’ losses due to price freezes drives up the price of non-price-freeze products, and sweets are particularly vulnerable to this. The increase in costs due to rising wages is also reflected in the prices. The rise in energy prices seriously affects all confectionery companies, but there are varying degrees in this. Businesses working with baking, typically those producing biscuits, wafers and crisps, are the most exposed, as the technology here is based on gas, which is practically impossible to replace with another energy source. Many companies have, for example, modernised their heating systems or installed solar panels (typically in island systems) that improve efficiency.

We expect that the turnover of Christmas confectionery will not fall short of last year, but the quantities purchased may decline. The hit product of the Christmas season is traditional Christmas candy. Jelly-filling is still the most popular, and products with marzipan, coconut, and hazelnut cream fillings are among the most sought-after. Many people have purchased Christmas candies from artisan producers, where there is a huge selection of flavours and a great desire to experiment. For example mulled wine, quince, fruit jelly and salty pistachio flavours have widened the selection of flavour offerings. At the end of 2022, traditional Christmas candy was included in the Hungarian Repository of Values, which currently features 148 items, and was declared a product of outstanding national value.

2022 Christmas Candy Contest

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With the cooperation of the Association of Hungarian Confectionery Manufacturers, the owners of the Christmas Candy of the Year Contest project, Ádám Kovács and Gergely Kovács, announced the results on November 24, 2022: the list of winners can be found here:  https://azevszaloncukra.hu/nyertesek/2022

The price of Christmas candy rose in 2022 to a lesser extent than the overall increase in food prices, and confectionery manufacturers expect that the average consumption of one kilo per household may decrease slightly. Experience shows that consumers have a hard time letting go of quality, which is why the Association is counting on a decrease in consumed quantity.

The raw materials used for Christmas candy have significantly become more expensive, but since Christmas candy is typically produced in the first half of the year, this does not yet fully affect the current season. The price of sugar, for example, was EUR 500-550 per tonne in September, and as a result of the unprecedented price increase in October, it rose to almost EUR 1,100. The price of glucose syrup, mainly used for jelly-filling Christmas candy, also doubled, but the price of other raw materials and packaging materials also increased significantly. Two-thirds of the Christmas candies on the market are the most popular jelly-filling types, the rest of the market is shared by coconut, caramel, marzipan, hazelnut cream and other specialty fillings. This year, the salted caramel flavor became particularly popular, but – as it can be seen from the Christmas Candy of the Year Contest – the specialties variants that offer a unique taste experience are also gaining popularity.

Organic, vegan and functional food Christmas candy products are also starting to have a more marked presence on the market too.

Energy prices do not spare chocolate, biscuits, wafers, pretzel sticks or chips either

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The Association of Hungarian Confectionery Manufacturers together with the European confectionery industry association, CAOBISCO, draws attention to the fact that the energy crisis has a significant impact on confectionery manufacturers. At their meeting on October 20-21, the heads of state and government of the 27 EU members may agree on how to reduce the price of natural gas, and this is also vital for confectionery production.

The European confectionery industry comprises 12,000 companies, 99% of which are SMEs and employ 225,000 people. Europe produces nearly 15 million tons of chocolate, biscuits and snacks at a value of EUR 60 billion per year. This makes the confectionery industry one of the most dynamic and largest manufacturing and exporting sectors in Europe, which builds on both tradition and innovation. In addition, it contributes greatly to the preservation and development of local communities. Domestically, the confectionery industry includes approximately 250 companies, employs nearly 5,000 people, has annual sales of HUF 230 billion, and profits of around HUF 9 billion.

The representatives of the confectionery industry support the diversification and stabilisation of energy supply, the development of energy production, the reduction of energy prices and the insurance of predictability.

In the confectionery industry, the extremely energy-intensive baking, heating and deep-freezing processes in particular cannot do without a reliable and affordable energy supply. Companies are increasingly worried that they will not be able to manage or simply pass on soaring energy prices to their customers. In particular, the price of natural gas and electricity endangers production, thus also the ability to continue delivering the desired products to consumers without interruptions.

In addition to energy, the costs of packaging, transportation, labour, machines, parts and basic raw materials have also increased. A typical example is the increase in the price of sugar, dextrose, glucose or isoglucose, and the delivery of these sugar products is also hampered due to limited supplies. If there is no sugar, there is no production. Due to energy prices and supply problems, many confectionery companies may soon be faced with a difficult decision: to temporarily stop or reduce their production, or to withdraw products from production this winter.

For the further development of the confectionery industry, and in order to maintain export performance, supply to the public, factories and jobs, the industry considers the creation of energy stability and price stability to be the most important and trusts in the results of the meeting on October 20-21.