Fall 2006
Chocolate Decadence By Bernadette Starzee

Projected Retail Sales of Gourmet Chocolate

2005-2010 (in $ billion)

Year | Sales | Change
2010 | $1.77 | 6%
2009 | $1.67 | 6.2%
2008 | $1.57 | 6.4%
2007 | $1.48 | 6.6%
2006 | $1.39 | 6.8%
2005 | $1.3

Source: Packaged Facts

Gourmet Is In

Gourmet chocolate is gaining favor in the United States, growing at a faster rate than the general chocolate category. “Americans are finally figuring out there is some really good chocolate out there,” says Erika Fowler-Decatur, who co-owns Ithaca Fine Chocolates, an Ithaca, NY-based premium chocolate maker, with her husband, Michael Decatur.

The “Gourmet Chocolate in the U.S.” report, published in May 2006 by Packaged Facts, the publishing division of MarketResearch.com, estimated sales of gourmet chocolate at $1.3 billion in 2005, which represented 10 percent of overall chocolate sales. The Packaged Facts report looked at sales in both mass retailers and specialty stores.

According to Packaged Facts, gourmet chocolate is distinguished from general chocolate by its cocoa (also called cacao) origin, its cocoa content, the craftsmanship of chocolate making and the type of packaging. Gourmet chocolate has expensive ingredients, such as cocoa butter and high-quality cream and nut fillings.

The report said that gourmet/specialty stores—including gourmet food stores, chocolatiers and gift shops—are the largest channel for selling premium chocolates, accounting for 54 percent of total dollar sales in 2005.

From 2001 to 2005, the compound annual growth rate of gourmet chocolate in mass merchandise channels was 10.5 percent, compared with a mere 1.8 percent increase for the general chocolate market. Packaged Facts projects that total gourmet chocolate sales will reach $1.8 billion by 2010, representing a 6.4 percent compound annual growth rate over the next five years.

Higher margins have lured large chocolate manufacturers to the gourmet end of the spectrum. Hershey Foods, for instance, entered the gourmet chocolate market with the purchase of the upscale Scharffen Berger Chocolate Maker Inc. Mars, best known for brands like M&M’s and Milky Way, recently introduced a gourmet line, Ethel’s, and opened several gourmet chocolate lounges. Target has come out with its own upscale chocolate line, called Choxie. But, Packaged Facts reported, the gourmet chocolate industry remains largely the domain of smaller companies, including many from Europe.

It’s getting darker

Across the United States, more consumers are requesting dark chocolate. “The darker, the better,” says Tish Boyle, editor-in-chief of Chocolatier magazine. “There is more emphasis on cocoa content.”

Over the past couple of years, medical research has found that dark chocolate, which contains a greater concentration of cocoa, may help decrease blood pressure and LDL (bad) cholesterol, and improve circulation. Raw cocoa contains flavonoids, which are rich in protective antioxidants. A glut of publicity surrounded these findings, and it was not lost on chocolate lovers, who have embraced the news that dark chocolate is not only really good, but may actually be good for you. Increasingly, chocolate makers are including information about the percentage of cocoa in their chocolate, on the package. Dark chocolate content ranges from percentages in the 50s up to about 82. In milk chocolate, which contains milk solids and more sugar, the cocoa content is lower than in dark chocolate, but cocoa content is still a selling point for some milk chocolate products.

“Dark chocolate has been really popular,” says Susie Hitchcock-Hall, proprietor of Susie’s South Forty Confections, in Midland, TX, which wholesales gourmet chocolate items and has two retail stores in Texas. “The health benefits make it legal,” she says, implying that you can now eat it without guilt.

L.A. Burdick, in Walpole, NH, makes high-end dark, milk and white chocolate bars, among other delectable items. It sells them from three retail stores, one in Walpole and two in Massachusetts. “Of the three, 80 percent of our orders are for dark chocolate,” says owner Paula Burdick, who co-owns the company with her husband, Larry.

Susanna Fasolino, who manages Bon Bons Chocolatier in Huntington, NY, says her customers are asking for dark chocolate more than ever. “There’s a raised consciousness about the health benefits,” she says.

At Le Chocolat Bar, a combination chocolate and gift shop in Naperville, IL, most chocolate sales are in the 70-percent-cocoa range, says proprietor Cathy Bouchard. “And 82-percent accounts for about a quarter of our sales,” she says.

Le Chocolat Bar’s clientele is knowledgeable about chocolate, and Bouchard has a lot to do with that. Nearly every week, she hosts hour-and-15 minute seminars, in which she educates private groups and the public about the health benefits and other properties of chocolate. “They learn why they should be eating chocolate in moderation every day,” she says. “It’s taken a while, but Americans are starting to catch on to the health benefits of chocolate.” The seminars include plenty of delicious samples.

Because people are trying more than ever to be health-conscious, Michael Gordon, who owns Chocolate Potpourri Ltd. in Glenview, IL, says smaller chocolate bars and smaller packages of items like toffee or truffles are popular, both on their own and in gift baskets. “People want to be able to open it up and eat it without having to worry about having an open package lying around,” he says. “They want controlled portions.”

As Chris Samuel, vice president of marketing for the chocolate maker Green & Black’s, whose U.S. headquarters is moving to Parsippany, NJ, puts it, “Less is more. Chocolate with higher levels of cocoa is more satisfying.”

All natural is all the rage

Packaged Facts found that the organic chocolates segment grew at a rate of more than 50 percent over a one-year period ending in July 2005, when compared to the previous year. “There was organic chocolate 10 or 15 years ago, but it was pretty bad,” says Boyle, of Chocolatier magazine. “Now there’s good organic chocolate, and consumers are responding to it. Many companies are also using organic materials, like Japanese rice paper or wooden boxes, in their packaging.” Because of the importance of the all-natural category, Chocolate Potpourri Ltd. launched the Veritas Chocolatier line two years ago. Veritas means “truth” in Latin, and the all-natural line includes almond toffee squares, fresh cream truffles, and chocolate bars hand-sprinkled with fresh roasted almonds, dried tart Michigan cherries, crushed Arabica espresso beans and roasted cocoa nibs.

Green & Black’s came across the pond from England three years ago with its high-end organic chocolate, which features bars of dark and milk chocolate mixed with all-natural ingredients like hazelnuts, brazil nuts, ground espresso, ginger, almonds, raisins and mint. Samuel says organic chocolate is becoming more popular partly because “people are concerned about having things like pesticides in their chocolate.”

San Francisco Chocolate Factory recently introduced the GAIA organic line, with all-natural ingredients and 100-percent recyclable packaging. It features bars made of chocolate, dark chocolate and dark chocolate espresso.

Ithaca Fine Chocolates makes “Art Bars,” which are Swiss chocolate bars that feature art reproductions on the wrapping and on a collectible card inside. The packaging consists of recyclable materials, from the art cards to the display boxes. The inner foil is aluminum free. “We wanted to make the least possible footprint on the environment,” says Fowler-Decatur, who notes that the chocolate appeals widely to chocolate lovers, art lovers (a portion of sales is donated to art education), and those who are concerned about the environment.

Single-source chocolate

Another emerging trend in the world of gourmet chocolate is the single-origin product. “There has been an explosion in the number of manufacturers that are coming out with single-source chocolate products,” says Bouchard. According to Boyle, single-origin, or single-source, chocolate can be divided into two categories: terroir and varietal. “A terroir chocolate is one that is made using beans from a particular country, region or plantation,” she says. “A varietal chocolate is made using a single species of cocoa bean.”

At her tasting seminars, Bouchard spends time educating her customers about the properties of single-origin chocolate. “Cocoa plantations, like vineyards, have different flavors,” she says. “If you find a flavor you like, you might want to stick with chocolate from that plantation, just like you might with wine.”

L.A. Burdick has had trouble keeping up with demand for its single-source chocolate from Grenada, in the West Indies. “It flies out the door,” says Burdick, who acknowledges that she wondered in the beginning whether her customers would take an interest in the fact that the chocolate was single-origin. “But they have gobbled it up,” she says.

Fun with chocolate

It’s OK to have fun with chocolate. One of the many premium 3.5-ounce bars from Bloomsberry & Co. is the popular Emergency Chocolate, which promises “immediate relief of chocolate cravings, lovesickness, exam pressure, mild anxiety and extreme hunger.” According to Kerry Francis, national vice president of sales and marketing, “It’s a perfect gift for a lot of occasions, from a birthday to a divorce.”

Chocolate Is The New Black, a dark chocolate bar, speaks to the current trend toward dark chocolate. Christmas Survival Chocolate, in a red and green wrapper with instructions to administer in cases of severe festive fever, is a holiday option.

Chocolate’s partners

Chocolate goes well with many things—from almonds to coconut. But habaneros, cumin, curry and wasabi? “There’s a trend toward pairing chocolate with exotic spices,” says Boyle. “It doesn’t necessarily work, but it’s done for the gimmick or impact of it.”

Cape Cod Provisions LLC in Pocasset, MA, wholesales gourmet chocolate combined with fruit under two brand names: Cape Cod Cranberry Candy and Harvest Sweets. New truffle varieties include banana, lemon and orange, all paired with dark chocolate. “Citrus and tropical flavors are in, and they happen to go very well with chocolate,” owner Sue Faria says. Other popular offerings from the company combine chocolate with cranberries, key limes and almonds.

“People are trying to eat healthier, but they also want to reward themselves,” says Faria. “A dark chocolate bar with cranberries and almonds is a healthier treat than, say, a Snickers bar.” Nuts, like dark chocolate, have recently been embraced for their health benefits.

Ithaca Fine Chocolates’ dark chocolate with coconut has emerged as a favorite, says Fowler-Decatur. “The coconut adds a subtle sweetness, for people who don’t find the dark chocolate sweet enough,” she says. Fasolino, from Bon Bons Chocolatier, reports a lot of requests for dark chocolate with almonds.

Pairings with coffee and wine

As chocolate moves upscale, like coffee and wine, it’s being cross-marketed with those same products. Gourmet chocolates are popularly sold in upscale coffee shops. According to Boyle, chocolate shops sometimes have tastings of chocolate along with wine or champagne. San Francisco Chocolate Factory offers Coffee Lovers’ Chocolates, a line available in gift tins that features chocolate-covered espresso and coffee beans. Similarly, there are the Wine Lover’s Chocolate gift tins, which are meant to be paired with specific reds, such as Pinot Noir or Merlot. The Merlot complement is currently San Francisco Chocolate Factory’s biggest-selling item.

“The trend of pairing chocolate with wine is gaining momentum,” says the company’s general manager, Robert Kopf. “It has yet to reach critical mass.” A few times each year, San Francisco Chocolate Factory hosts a wine-and-chocolate tasting event in its retail store, in San Francisco. In addition, the company provides samples to wineries for their tastings.

Seasons of chocolate

Consumers buy gourmet chocolate both for themselves and as gifts. According to the 2006 Gourmet Chocolate in the U.S. report, Information Resources Inc., which tracks only mass retailers, reported that more than two-thirds of sales of gourmet chocolate were for non-seasonal products in those types of stores. Within the non-seasonal category, 79.4 percent of sales were of 3.5-ounce bars or larger. Smaller bars accounted for 15.1 percent, and non-seasonal gift boxes accounted for 5.5 percent of sales. Seasonal sales represented 28.9 percent of retail gourmet chocolate sales, according to Information Resources.

According to the report, Christmas is peak season both for sales and new product introductions. Valentine’s Day is the second biggest holiday for gourmet chocolate.

Specialty stores can expect to experience a greater seasonality in chocolate sales than the mass retailers. “Seventy percent of our sales are in the fourth quarter,” says Hitchcock-Hall, of Susie’s South Forty Confections.

Who’s buying it

According to Packaged Facts, women and younger adults are driving the sales of gourmet chocolate. The target tends toward the upscale, educated and urban. Baby boomers are also an important target market, the report says, because they tend to have high discretionary income and to be health-conscious.

Generally speaking, Samuel says, the demographic for Green & Black’s high-end organic chocolate skews toward those 25 to 54 years old, and toward women more than men. But, he says, the market is more about attitude than demographics. “We appeal to people who have an interest in gourmet food and organic food,” says Samuel.

Though women make more chocolate purchases year-round, retailers report that men do most of the buying for Valentine’s Day.

Selling it

The key to selling gourmet chocolate, chocolate retailers say, is letting people taste how good it is.

“While customers look for what they want, we want them to start sampling,” says Hitchcock-Hall. “They eat their way through the store as they browse. Even if they don’t buy something, we know they’ll be back. If you let customers sample, you sell.”

Marion Descoteau, who performs many jobs in L.A. Burdick’s Walpole store, says the store always puts samples out. “Tastings are very important,” she says. “If people look at a product but don’t know what’s in it, they might pass it by. We always put out samples of new products, and samples every day for people who might be new to our stores.”

Manufacturers typically will provide retailers with samples, either free of charge or at a discount. As the Packaged Facts report pointed out, tasting sessions can be a tool to educate consumers about the fine properties of gourmet chocolate. “The more you educate yourself about the product, the better you will be able to sell it,” says Chocolate Potpourri’s Gordon. “Your best resource is the manufacturer. You will find that manufacturers are more than happy to educate retailers about the product.”

Since gourmet chocolate is often an impulse purchase, the way it is displayed is crucial. “If you weren’t considering purchasing chocolate, you might be swayed by a strong display,” says Samuel, of Green & Black’s.

In the Packaged Facts report, Susan Fussell, senior director of communications at the National Confectioners Association, says gourmet chocolate can perform even better when retailers merchandise bite-sized items near cash registers and gift bars near stationery.

L.A. Burdick places glass cases on either side of the registers, containing many different chocolate products that can also be found elsewhere in the store. Packaging is displayed, too. “We have different kinds of boxes, including wooden boxes, and different color ribbon for the holidays,” says Descoteau. Everyday ribbon is chocolate brown, gold and cream-colored; for Mother’s Day, it’s a deep pink. “Beautiful and unique packaging catches people’s attention,” Descoteau says.

Gordon recommends bringing in a complete line of gourmet chocolate from a few manufacturers, rather than one item each from 30 different manufacturers. “A full line from a few manufacturers has better presence on a shelf,” he says. “Once someone tastes something from a manufacturer and likes it, he will be more apt to try different things from the same company. If you have other options from that manufacturer, it will give people an opportunity to try something different from a brand they already know and like.”

Pairing chocolate with a keepsake container makes an attractive gift, says Hitchcock-Hall. “Look for things to put candy in, to bring the gift up a notch,” she says. “For instance, you might put chocolate in a filigree glitter basket. We have had success with putting chocolate in containers that have the names of local high schools and colleges.” Other popular packaging ideas for Susie’s South Forty Confections are cowboy boots and a Texas flag gift tin. “After they eat the candy, people will have a keepsake box,” Hitchcock-Hall says. When placing chocolate in a store with many other types of gifts, be careful not to put it too close to scented items, says Fasolino. “Chocolate absorbs odors, and people might not find it appealing if it smells like a rose,”she says.

During holidays, like Mother’s Day, L.A. Burdick will group all the special holiday items together on a table that is the focal point of the room, says Descoteau. The store also sends out fliers before important holidays.

Gift baskets are very important, says Bouchard, of Le Chocolat Bar. “You can put in baking chocolate, a can of cocoa, truffles, caramels, maybe a book on chocolate,” she says. “We have these beautifully packaged items around the store. We walk around and pull together a gift basket, and the customer can be out the door in 15 minutes. If you take a chocolate basket and give it to a woman for any occasion, she is going to love whoever gave it to her.”

From all indications, gourmet chocolate is big business. After all it is delicious, decadent and very much in demand.

Bernadette Starzee

Starzee frequently writes about business, sports and lifestyle topics. She can be reached at b.starzee@att.net.

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