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

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.

Our hot summer with ice cream

The ice cream market, which stagnated during the years of the pandemic, has barely recovered, and it already has to deal with another, even more complex crisis, pointed out the Association of Hungarian Confectionery Manufacturers. Although turnover is expected to grow due to the increasingly longer and hotter summers, as a result of the energy and climate crisis, geopolitical conflicts, faltering supply, the public health product tax levied on all ice creams, including sugar-free ones, and skyrocketing prices in the wake of a weakening Forint, the ice cream  offering may become narrower, and innovation may slow down.

The whole world is contained within ice cream – from solid ice crystals, which greatly influence the enjoyment value, to fat droplets and liquid ingredients to gaseous air bubbles, it displays all consistencies – said Sándor Sánta, President of the Association of Hungarian Confectionery Manufacturers, at the organisation’s summer press conference presenting the trends in the ice cream market. Maybe that’s why we haven’t been able to resist the temptation of these cooling delicacies for a hundred years now.

At the same time, we are talking about a product that falls particularly in the impulse category, in the sale of which the presence of the point of sale is unavoidable and physical visibility is key. It is no coincidence that sales showed a temporary stagnation in the last two years of the pandemic. The world-wide ice cream market, which is worth about USD 70 billion, is otherwise expanding by an average of 5 percent per year, and in the HUF 230-250 billion domestic confectionery market it is the third largest segment with a 17% share.

To each his own

The taste of ice cream consumers in both the international and domestic markets is quite conservative. Globally, vanilla is consistently the top flavour, followed by chocolate and fruit on the podium. Customers are looking for traditional ice creams in take-away, boxed packaging, but the segment of handcrafted products is expanding the fastest. The turnover of free-from ice creams is also increasing, but their market share is not significant.

Hungarians’ favourite is chocolate, but in addition to the basic vanilla and strawberry flavours, domestic consumers are also looking for specialty ice cream flavours, most recently salted caramel was a great success. Although traditional products still account for more than 95% of sales, the domestic market is diversified by a growing variety in terms of flavour, format, size and packaging.

The most popular are 100-249 millilitre ice creams, which account for 30% of the market, but multipacks (already 21% of turnover) and ‘pint glass’ packaging are also spreading, and the share of take-away, boxed packaging already reaches 48%. Although the presence of large manufacturers is strong, the turnover of own-brand products has now reached 40% of sales – the more conservative taste of consumers is thus paired with surprising brand loyalty.

However, due to deep freezing, both the storage and transportation of ice cream is energy-intensive, which in the climate crisis is already a serious challenge. The situation is dramatically aggravated by the fact that fuel, sea and road transport, as well as ingredients and packaging materials are calculated in Euros, which, due to the rising inflation and the weakening of the Forint, has skyrocketed. The level of price increases in the food industry as a whole already exceeds 50-100%, but due to disruptions in global supply chains, confectionery and ice cream manufacturers are also struggling to procure raw materials that are at risk due to climate change, such as cocoa, coffee and vanilla.  

Comparing their procurement prices on an annual basis, the domestic ice cream manufacturers experience an even higher price increase, said Tischer Thomas, Development Director of Gelato Italiano in Környe, in his presentation. For example, carob seed flour, which binds water and thus helps the formation of ice crystals as a stabiliser, now costs 600% more, but the company already pays 100-170% more for almost all ingredients and packaging materials.

So far this year, the manufacturer has responded to the challenges by raising prices in the middle of the year, unlike their previous practice, and not increasing the production volume at the beginning of the season, so that they need a smaller workforce, less external storage and transport capacity, and they only procure ingredients and packaging materials for the existing orders of customers accepting immediate payment, said the executive. As a result, the delivery slows down, but the unfavourable processes could lead to such a drastic increase in the price of ice cream next year that the demand will decrease, and the manufacturers will be forced to narrow down their product range too and postpone their planned developments.

The flavour of tomato

The icing on the cake is that there may also be a shortage of sugar in Europe as a result of market anomalies. In our region, which consumes 16.5 million tons of sugar per year, 70% of the consumption is related to the food industry; to 15,000 companies that employ a total of 700,000 people, said Gábor Intődy, Secretary General of the Association of Hungarian Confectionery Manufacturers. Following the intervention of the World Trade Organisation and the regulation of the European Union’s sugar market, the number and production of European sugar factories decreased by almost half between 2006 and 2017, and our region thus changed from an exporter to an importer. Several other factors – declining beet plantations, the climate crisis, plant diseases, decreasing beet and corn yields – are also contributing to the dwindling supply of sugar and isoglucose (corn syrup), while imports are hampered by high tariffs and tight quotas.

However, there are also encouraging developments in the market. Tischer Thomas, for example, highlighted that pastry shops and restaurants have started re-ordering gastronomic ice cream products, whose turnover suffered from lockdowns during the pandemic. Therefore, despite the current difficulties, Gelato Italiano is not completely giving up on innovation and is preparing to expand its range of sugar-free products.

In his presentation, Sándor Sánta also gave a taste of the innovations in the ice cream market. For example, manufacturers are working on non-melting, colour-changing and glow-in-the-dark products, as well as developing an ‘ice cream in an ice cream’ combination that surprises the consumer with a second flavour emerging from ice microspheres that melt in the mouth. In addition, exciting new flavours such as tomato may appear on the product palette.

Ice cream, patented in the United States in 1923, has pulled through several crises in its history – as István Bobay, Museologist-Historian of the Hungarian Trade and Catering Museum pointed out at the press conference. However, as it stands now, it looks like we’ll have a few more hot summers before we can first taste tomato ice cream.

Data sources: Association of Hungarian Confectionery Manufacturers, Association of European Confectionery Manufacturers (CAOBISCO), Association of German Confectionery Manufacturers (BDSI), Committee of European Sugar Users (CIUS), Nielsen IQ, Allied Market Research


Chocolate bunny and hi-tech

The consumption of sweets at Easter could reach around 900 tonnes, predicted MÉSZ (the Association of Hungarian Confectionery Manufacturers) at its spring press conference, where the results of a recent survey conducted by the Association and the TÉT Platform revealed why we choose certain sweets and how industry players respond to our sweet preferences.

The turnover of the Hungarian confectionery market is expected to be around HUF 230 billion this year, said Sándor Sánta, president of the Association of Hungarian Confectionery Manufacturers, in his presentation on consumer and supplier trends. Chocolates and biscuits, and sponge cakes account for half of the market (26% and 24% respectively), with ice cream the third largest segment (at 17%). The remaining third of the market is shared in order by pralines, candy and crisps, with 12-10% market shares.

In Hungary, we consume an average of 10-11 kilograms of sweets per person per year, and chocolate accounts for about 3 kilograms in this basket. A third (33%) of the population eat sweets daily, and almost half (45%) on a weekly basis. A mere 6 percent of those surveyed said they do not eat sweets at all.

However, only a quarter of respondents (24%) shop consciously, with 28% admitting to giving in to their impulses when it comes to spending on sweets. At the same time, half of consumers (49%) look for quality, and only 14% admit to choosing based on a lower price, with more than a third (37%) alternating between these criteria.

Exactly three quarters of shoppers are looking for sugar-sweetened products, while more than half (54%) look for non-free-from products. A quarter of those surveyed choose sugar-free or sweetener-based products, while 16% and 10% choose lactose- or gluten-free products.

You can’t say we’re picky about ingredients. Only a third of respondents (34%) said they prefer products made from natural ingredients, two thirds said this was not important for them. The overwhelming majority (80%) are not influenced by the presence or absence of sustainability certificates, as consumers are often unaware of the contents of these badges.

Blonde chocolate and confectionary printing

Why do we like sweets so much? This question was offered an evolutionary explanation from the perspective of nutritional science by Emese Antal, dietician-sociologist and professional leader of the TÉT Platform Association. From the moment we are born, we identify sweetness as a source of beneficial, carbohydrate-rich energy that we can safely consume, so it is no coincidence that it accompanies us throughout our lives. Although a recent study shows that the number of people who prefer sweet tastes decreases with age and a higher level of education, it is also lower among urban populations.

The three main trends in confectionery innovation are the rise of healthy products – functional, free-from and energy-reduced – the emergence of special flavours such as blonde, or caramelised white chocolate, and the use of cutting-edge manufacturing technologies such as 3D printing. With the conscious dieter in mind, manufacturers are also experimenting with new ways of packaging products. Bite-size sweets have been on the domestic market for a few years now, and according to the survey responses, a fifth (21%) of consumers are already looking for them in shops.

Whether the public buys in small or large packaging, Hungarian confectionery manufacturers expect a stable Easter demand again this year, just like last year, when the confectionery market found its way back to normal after the slowdown in 2020 due to the epidemic, said Sándor Sánta. Consumption volume is expected to be around 900 tonnes, and retailers are forecasting a 10% increase in the sales value compared to last spring’s festive period.

However, forecasting and planning has not been so difficult for a long time. Although the pandemic has receded, the effects of the Russian-Ukrainian war, combined with disruptions in supply chains, trade restrictions, runaway prices and inflation, combined with volatile exchange rates, are creating serious challenges for industry players, who are already gearing up for Christmas production to ensure that enough chocolate and festive candy will be on the shelves of shops and in the warehouses of online retailers from November onwards.