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Supercharged chocolate Santas on the rollercoaster of commodity prices

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Suppliers are responding to changes in prices, costs and legislation with innovation, while consumers are adapting and experimenting, the Association of Hungarian Confectionery Manufacturers pointed out at its end-of-year press event, where it also revealed the flavour combinations that the ‘Christmas Candy (szaloncukor) of the Year’ will tempt you with.

Although we have seen lower confectionery sales in the last two years, the nominal value of trade is increasing, and consumers are turning their attention to quality products, said Sándor Sánta, President of the Association of Hungarian Confectionery Manufacturers, in his opening speech.

For example, the price of cocoa, one of the most important raw materials, has been on a rollercoaster ride this year – from USD 4,000 in January to over USD 10,000 in April, then through a series of steep falls and peaks to USD 6,000 and even USD 5,000, before jumping back to USD 8,000 in November, where it has stabilised for now. Alongside this, other commodities have also become much more expensive, with the price of sugar rising by around 50% worldwide. Although the latter has had little impact on domestic producers, chocolate price has risen by 10% year-on-year in Q3 of this year, compared with the food price inflation of around 3%.

Costs of production are also increasing, with wages and freight rates up over 10%, packaging materials such as paper and aluminium foil up over 50-70%, and natural gas prices have also been on a similar trajectory to cocoa all year. The weakening of the Forint is also having a negative impact on industry players, as their products, with the exception of biscuits, are largely made from imported raw materials.

However, confectionery manufacturers are responding to the mounting challenges with innovations. As the Christmas season approaches for example, chocolate Santas supercharged with surprising flavours and textures are appearing with caramel, gingerbread and rice flake toppings while in Western Europe, 3D printed chocolate figures are also being added to the offering.

Other products are also being updated with retro soft drink flavours, intense fruit flavour combinations and a blend of textures, and are being supplied in new types of packaging, such as smaller, bite-sized packs. They also come with free-from versions, although these are less sought-after by consumers who are usually open to trying new flavours, textures and formats – those who buy sweets and are in good health typically want to indulge themselves.

Sándor Sánta said that the biggest bite out of the domestic confectionery market, which is estimated at around HUF 380 billion at shelf price, will be taken in the November-December period, with a value of around HUF 50 billion. He predicts that 8-9 million chocolate Santas will be put in baskets this year, approaching 400 tonnes in quantity with a total value of just over HUF 2 billion. For Christmas, we could buy around 3.5 tonnes of Christmas candy (szaloncukor), worth more than HUF 15 billion.

Christmas candy – a Hungaricum and quality foodstuff

Although fondant is of a French origin and arrived to Hungary in the 19th century via German mediation, the Christmas candy has become an important product of the Hungarian sweet- and confectionery industry and, in its own way, is an indispensable part of Christmas, so this June it was included in the collection of Hungaricums.

Confectionery manufacturers can now apply for the award of the Foodstuff of Excellent Quality (KMÉ) trademark in the Christmas candy product category, said Beáta Olga Felkai, Deputy State Secretary of the Ministry of Agriculture. The KMÉ trademark is currently one of the highest levels of recognition in this field in Hungary, referring to both the safety and quality of food – for example, the National Food Chain Safety Office (Nébih) certification is a prerequisite for applying – as well as sustainable production processes.

Indonesia is one of the world’s leading producers of palm oil, accounting for 4% of the country’s gross domestic product and 30% of its agricultural output. This provides the livelihood of over 17 million people, said Seress Nuraini Novianti, a student and Scientific Students’ Conference candidate at the Budapest University of Economics and Business, who presented the results of her own research at the press event. Indonesia also accounts for 45% of European imports of palm oil, which is a key ingredient in confectionery and much cheaper than other vegetable oils. However, EU regulations to increase sustainability impose requirements that are harder for smaller producers to meet, and more than half of Indonesia’s palm oil producers (55%) are small-scale manufacturers.

Gábor Intődy, Secretary General of the Association of Hungarian Confectionery Manufacturers, also pointed out the challenges arising from changes in legislation, taxes and product fees. While 10% of the tax revenues from the public health product tax (NETA) will be managed by the highly transparent Active Hungary State Secretariat from 2025 onwards and will transparently serve prevention, healthy eating and the promotion of mass sports, the tax rate remains high and will also affect natural and sugar-free products. Another big question mark is how the state expects to collect 14% more from NETA in 2025 compared to the 2024 budget revenue plan of HUF 85 billion, totalling HUF 97 billion under the recently adopted state budget law. Meanwhile, sales volumes of products typically covered by the tax are on a steady downward trajectory.

The Extended Producer Responsibility (ERP) levy to promote the circular economy is also strikingly high by European standards, to the detriment of competitiveness. And the EUDR, the European Union’s regulation on deforestation-free products, will put small and micro-enterprises in particular on a difficult path, with significant administrative tasks, risk management and certification obligations – with fines of up to 4% of revenue or the burden of stock seizures. A majority of EU manufacturers, governments and trade associations have called for a one-year delay to the planned EUDR introduction in 2025, which is expected to be voted for by the European Parliament.

Last but not least, Ádám Kovács and Gergely Kovács, the founders and promoters of the award, announced the winners of the ‘Christmas Candy of the Year 2024’ competition categories at the press event. The main prize was awarded to the Stühmer’s pear jelly – champagne flavoured festive sweet.

Cocoa market capriccio

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Exchange rate fluctuations, speculators, alternative raw materials and climate change – what will our chocolate be made of in the future and how much will it cost? At its summer roundtable, the Association of Hungarian Confectionery Manufacturers analysed the trends disrupting the cocoa market.

While consumers are enjoying their summer holidays, confectionery manufacturers are already preparing for the Christmas season. However, the price of cocoa has soared fourfold since last autumn, so everyone in the industry is now facing the same question, said Sándor Sánta, President of the Association of Hungarian Confectionery Manufacturers. – What price tag will chocolate Santas and Christmas candy have on the shelves?

Although commodity markets are generally characterised by price movements in a trading range, the shock of unexpected changes in fundamentals can trigger unusual price movements, said Gábor Bukta, head of the analysis branch of Concorde Group, in his presentation at the event. This is not the first turbulent period in the cocoa market, with similar volatility already seen in the 1970s, when cocoa prices jumped to around $6,000 per tonne.

However, in a market that is always pricing the future, price movements are influenced not only by expected changes in supply and demand, but also by a number of other factors, including the actions of speculators in the stock market. The latter can even trigger extreme price shifts, but the effect is always temporary. Market participants know well what price increases or decreases are realistic and prices will either recover or find a new equilibrium level after the shock.

This will also be the case in the cocoa market. Although in recent months the price of cocoa has soared from $2-3,000 per tonne to $4,000, $6,000, $8,000 and even $10,000-12,000, and the International Cocoa Organisation expects an 11.6% drop in production this year, analysts who are keeping a close eye on commodity markets, including Bloomberg and J.P. Morgan, expect the price of cocoa to drop to around $6,000 in a year or two.

However, the turbulence in the cocoa market is not affecting the retail price of sweets, Gábor Bukta said. The cost of cocoa adds barely 20% to the retail price of chocolate. In addition, the cocoa content of products varies widely, and manufacturers also use futures to protect themselves against the risk of price fluctuations. The fall in quoted prices included in such contracts also implies a likely cocoa price of around $6,000 by 2025-2026.

Barley, malt, sunflower – cocoa-free chocolate

With only two countries, Ivory Coast and Ghana, accounting for half of the world’s cocoa production, together with Cameroon and Nigeria, this West African region produces more than 60% of the world’s cocoa beans – a geographical concentration that poses serious risks. Monoculture farming leads to deforestation and soil degradation, 50% of cocoa crops are threatened by climate change, while 24,000 litres of water are needed to produce one kilogram of cocoa. Farmers with high carbon footprints and low productivity on cleared land become impoverished, often employing child labourers in hazardous conditions.

That’s why Planet A Foods was the first to develop an alternative to cocoa, said Katrin Förster, the company’s business development manager, who joined the roundtable discussion via video link. The German start-up, founded in 2021, has set its sights on creating sustainable ingredients to help transform the food industry and significantly reduce carbon emissions. The company’s research lab in Munich is the birthplace of ChoViva, which gives you the taste experience of chocolate without cocoa. It is made from locally grown, 100% natural ingredients – oats and/or sunflower seeds – which are fermented and roasted in a very similar way as cocoa beans. Thanks to a short supply chain and an innovative production process, ChoViva’s carbon footprint is up to 90% lower and its water consumption up to 94% less than chocolate production.

Last year, Planet A Foods produced 2,000 tonnes of its product, which is now available in major retail chains, and the innovative ingredient is also attracting interest from big players such as Lindt.

Their aim is not to replace cocoa, says Katrin Förster, but to offer a sustainable alternative that is increasingly expected and appreciated, especially by younger consumers. At the same time, when developing ChoViva, the aim was to create a competitive taste experience, because this is one of the most important prerequisites for market success – and according to the company’s survey, more than 70% of customers are satisfied with the taste, which is already in the indulgent category. If it is available at the same price as products made from cocoa, 95% of respondents would be happy to choose this sustainable alternative. The company is therefore expanding its production capacity in Europe and North America, which will increase production to 10,000 tonnes per year.

Although the exclusive enjoyment value of cocoa, its beneficial physiological effects and the sophistication of the processing technologies make it almost irreplaceable in chocolate production, market players have been looking for alternatives in the past too, pointed out Dr. Ernő Gyimes, Associate Professor at the Institute of Food Engineering at the University of Szeged, in his presentation, which was delivered by Gábor Intődy, Secretary of the Association of Hungarian Confectionery Manufacturers.

During the aforementioned crisis in the late 1970s, for example, Estonians made chocolate with traces of cocoa using kama – a flour mixture of the national cuisine containing rye, wheat, barley and peas. But breweries have also tried to make fake cocoa from barley and malt, and the carob – the fruit of the carob tree – is a well-known chocolate substitute too.

There are three approaches when looking for an alternative to cocoa. Fermenting and roasting cereals, like cocoa beans, is an obvious process. However, three years ago, researchers at the University of Zurich developed a method to grow chocolate from a single cocoa bean under laboratory conditions, producing reproducible cocoa tissue in a bioreactor. Growers, processors and manufacturers are also exploring technologies to use the whole cocoa plant crop – not just the cocoa bean – to make either the raw material or the confectionery.

It is important to stress, and the innovators themselves emphasise this, that the alternatives are not intended to replace cocoa, but to add a new flavour to the palette. We must first and foremost strive to protect and preserve our environment so that future generations can live in a world where the cocoa bush grows and the unique and irreplaceable chocolate made from cocoa remains enjoyable and accessible.

Christmas candy with a delayed price effect

It has been our experience for decades that the demand for chocolate is persistent, accounting for a third of confectionery sales, and this will certainly continue to be the case, said István Takács, managing director of Szerencsi Bonbon, who predicted that the price of the top Christmas candy, szaloncukor,  will rise by around 10% by the end of the year. However, higher cocoa content products will become more expensive to produce and may therefore sell less once the delayed effect of the cocoa price explosion reaches the shelves. Meanwhile, manufacturers have to develop new products, but innovation is more difficult under these circumstances.

Dr. Róbert Török, director and chief museologist of the Hungarian Museum of Trade and Hospitality, also spoke about innovations and crises, and gave an overview of the history of chocolate consumption in Hungary dating back to the 18th century.

What cocoa is to the confectionery industry, cellulose is to packaging, which is also in short supply – said Péter Rosta, Professor of Industrial Design at the Faculty of Wood Engineering and Creative Industries at the University of Sopron. In the field of packaging, the task is not only to create designs that respond to modern needs – for which the university’s students have received prestigious national and international awards – but also to develop sustainable solutions.

A fruitful joint innovation by Csinta

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On 23 May, the Confectionery Innovation Award of the Association of Hungarian Confectionery Manufacturers was presented to Csinta, a manufacturer of pure fruit snacks, for its new family of chocolate-coated dried fruit bars. We asked Péter Redő, Managing Director of Aloha Kft. in Pomáz, about the history of the products, which have a contemporary flavour, and about their future plans.

Each year, the Association of Hungarian Confectionery Manufacturers awards the prize to Hungarian entrepreneurs who have combined tradition with innovation to develop a product in the previous year that preserves the best traditions of confectionery making while responding to today’s challenges.

The idea of dried fruit sheets was born ten years ago in the kitchen of the Redő family, who were then following a raw vegan diet, where they were testing – and tasting – a range of preparing fruits, vegetables and other natural ingredients every day. They also experimented with slowly drying a thin layer of plum pulp, and the result, a leather that concentrated the flavour of the fruit, was such a hit that they took a sample to the children’s school event: an Advent market.

“The reception was so enthusiastic, not only from the students but also from their parents, that we started to develop the idea further,” said Péter Redő, “In fact, in the first wave of innovation we implemented so many ideas that we had to narrow down the product range.”

Initially the Csinta fruit leathers were made exclusively by slowly drying fruit grown on organic farms at low temperatures. Today, the range has expanded to ten different types of fruit, half of which are currently made from organic-certified ingredients. The time-consuming process allows the company to produce smaller quantities of the highest quality products. The sheets are made by drying apple and other fruit pulps – only in their natural form, with no industrial additives, not even natural additives such as extracts or pectin.

While initially they also made spicy flavoured cones, with chilli and garlic, and cones filled with dried fruit from the sheets, which found a following, they had to withdraw them from the range because they were either aimed at a too niche market or the labour-intensive production cost was not recovered.

In the spirit of joint innovation, with the investor contribution and work of friends, and then with the addition of new employees and commercial partners, and with the development of production, the Csinta products have appeared in the offering of other online stores and national chains, in addition to the company’s own webshop, offering a healthy, high quality and versatile alternative for consumers looking for snack products.

The original Csinta range is primarily a children’s favourite. Péter Redő explains that the expansion of the product range was delayed until Christmas 2023 by his perfectionism. That’s when they launched a chocolate-coated version of the fruit bars, available in cherry, apricot and ginger flavours, to wow the adult gourmet audience with something special – again, in the spirit of joint innovation.

“The top-quality dark and milk chocolate is made by the Harrer Chocolate Workshop, a multiple award-winner of international competitions, and the innovative packaging was designed by our graphic design partner Carbon Group Communication”, said Péter Redő. “The packaging also includes a quote from a well-known thinker, so that the meeting of the fruit and chocolate and its natural harmony in addition to being enjoyed by the senses can also be an experience for the spirit to inspire new ideas.”

Sándor Sánta, President of the Association of Hungarian Confectionery Manufacturers, said at the Innovation Award ceremony that it is a great pleasure to see Hungarian companies that are able to think outside the box, to design and develop products and persistently try to make the world around them a better place.

The managing director of Aloha Kft., which focuses on value creation and cooperation, revealed that in this spirit, new developments will soon appear in their own product range – and in the offerings of other companies too as a result of cooperation.