Getting to Know Chocolate Consumers

2019 Getting to Know Chocolate Consumers

Exploring consumer demographics, consumption preferences and shopping habits

1 Copyright© 2019 National Confectioners Association For questions or comments, please contact: . Larry Wilson | Vice President, Industry Affairs All rights reserved. This publication may not be reproduced, stored in any National Confectioners Association information or retrieval system or transmitted in whole or in part, in any [email protected] form or by any means — electronic, mechanical, photocopying, recording or otherwise — without the express written permission of the National . Bill Guyton| Executive Director Confectioners Association. Fine Chocolate Industry Association [email protected]

Published by: Underwritten by: Conducted by: . Anne-Marie Roerink | President 210 Analytics, LLC [email protected]

The National Confectioners Association is the trade organization that advances, protects and promotes chocolate, candy, gum and mints, and the companies that make these special treats. As the leading association for the $36 billion U.S. confectionery industry, NCA helps ensure the public understands and appreciates the unique role that chocolate and candy can play in a happy, balanced lifestyle. Confections are produced in all 50 states, creating jobs for approximately 54,000 workers in more than 1,300 manufacturing facilities across the country. For every job created in confectionery manufacturing, another ten are supported in related industries. In total, more than 607,000 American jobs are supported by the U.S. confectionery industry. America's leading chocolate and candy companies support the Always A Treat Initiative, a commitment to transparency, portion guidance and choice, and consumer education. Learn more at CandyUSA.com.

Getting to Know Chocolate Consumers 2019© 2 TableTable of of Contents Contents

Study Highlights...... 4

Introduction...... 7

U.S. Confectionery Overview ...... 8

Chocolate and Lifestyle ...... 9

Chocolate Consumer Segments ...... 11

Chocolate Preferences ...... 13

Cacao Sourcing and Chocolate Certifications...... 19

Shopping for Chocolate ...... 24

The Fine Chocolate Consumer ...... 29 Food for Thought ...... 33 Methodology and Study Definitions...... 47 Respondent Profile ...... 48

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Study Highlights

Chocolate represents 60 percent of the $35 billion U.S. confectionery industry.

Ranging from iconic brands to products made by micro producers, chocolate is a consumer favorite — enjoyed across ages, incomes, ethnicities and regions. But much like food choices in general, chocolate habits and preferences are changing. For one, the very different confectionery preferences among

Millennials is fueling a surge in demand for flavor, ingredient and texture innovation. Additionally, megatrends, such commitment to wellbeing, convenience and transparency are driving innovation in sourcing, packaging, branding and more. This study aims to help the chocolate industry better understand the varying wants and needs among U.S. chocolate consumers.

Chocolate Size and Growth U.S. chocolate sales total more than $21 billion annually. The IRI measured universe, composed of multi-outlet chains, including grocery, drug, convenience, mass and other channels, represents about 70 percent of the total market. Based on these channels alone, household penetration for everyday chocolate is 91 percent and seasonal chocolate boasts an even higher household penetration, at 96 percent. Dollar gains in 2018 were slightly below those of non-chocolate, at +0.6 percent overall. However, premium chocolate, defined as items priced at $11 per pound or more, grew more than 19 percent. Chocolate Consumer Segments The consumer survey distinguished between three main Chocolate and Lifestyle types of chocolate and provided examples to help Consumer focus on wellbeing is increasingly influencing sales across the store as optimize the consumer understanding of each: more consumers make the connection between diet, sleep and exercise. Nine in . Mainstream chocolate, i.e. Hershey, Snickers or Baby 10 consumers believe they themselves are responsible for leading a balanced Ruth lifestyle, in which chocolate has a well-established role: . Premium chocolate, i.e. Lindt, Ghirardelli or Ferrero . Consumers enjoy chocolate as a treat, averaging 2-3 times/week; . Fine chocolate, made by small artisan chocolatiers, . 84 percent of consumers agree chocolate is always a treat, never a meal who source the best quality cacao, create small- replacement; batch products with unique flavors and textures and . 83 percent believe chocolate can be part of a happy, balanced lifestyle. educate consumers about the product and process

Not only do consumers feel chocolate belongs in a balanced lifestyle, it is also a Most consumers enjoy chocolate across the spectrum. beloved treat. Word associations are dominated by positive sentiment, such as In all, 90 percent of consumers enjoy mainstream yummy, tasty, delicious, good, decadent and heaven. chocolate, 70 percent premium and 27 percent consume fine chocolate.

Getting to Know Chocolate Consumers 2019© 4 Switching from all chocolate types consumed to the one chocolate type consumers feel best describes their typical consumption provides insight into three vastly different consumer segments. Preferences for certifications, flavors, cacao sourcing, etc. are significantly different among the mainstream consumer segment versus the premium and core fine chocolate consumer.

Chocolate Preferences Milk chocolate draws the highest outright preference, at 37 percent of consumers. Preference for dark rises with age, and fine chocolate consumers are the most likely to enjoy a mix of chocolate types. Among consumers who prefer dark, or all chocolate types equally, 36 percent say the cacao percentage has a significant influence on their purchase. Among core fine chocolate consumers, 73 percent believe the cacao percentage is important. Most consumers look for cacao shares between 66 and 80 percent, with core fine chocolate consumers leaning toward the higher cacao shares. Overall, peanut/peanut butter is consumers’ favorite added flavor, followed by caramel/toffee. Core fine chocolate consumers prefer almonds, followed by caramel/toffee and hazelnuts.

Manufacturer brands are very important to mainstream and premium consumers, though one significant finding is the above-average preference for store brands among Millennials. While brand loyalty is high in the mainstream and premium segments, experimentation and trial is core to fine chocolate consumption — even if they have a favorite chocolatier.

Across all chocolate consumers, 47 percent believe there is no difference in American-made versus European-made chocolate. Among the remaining 53 percent, Europe has a definite edge. Interestingly, core fine chocolate consumers are more likely to believe American-made chocolate is better, at 28 percent versus 19 percent of the total population.

Cacao Sourcing and Chocolate Certifications The vast majority of chocolate consumers, 84 percent, are indifferent to where the cacao was sourced. Among fine chocolate consumers, this percentage is much lower, at 61 percent. These consumers lean more toward preferring cacao from South and Central America.

Getting to Know Chocolate Consumers 2019© 5 Certifications are meaningful, in particular certifications in the areas of fair trade, The Fine Chocolate Consumer non-GMO and organic. In all cases, certifications are more meaningful to Forty-five percent of American consumers never or Millennials and of significant importance to fine chocolate consumers. However, rarely purchase fine chocolate, as defined by the when switching from the influence of the various certifications to the importance survey. An additional 41 percent do so just of actual corporate behavior in social and environmental responsibility, Boomers occasionally. Consumers who buy fine chocolate overindex. In other words, social and environmental responsibility matters to all frequently or almost exclusively make up the core generations, but the certifications to prove it are more important to Millennials. fine consumer segment. Ingredient claims, such as vegan, gluten-free or raw, also matter more to Millennials, as well as to premium and fine chocolate consumers. The core fine chocolate consumer is younger, more affluent, more likely to live in urban areas and greatly Shopping for Chocolate values social and environmental stewardship. They Supermarkets represent the primary store for groceries for about half of value both the behavior and the certifications that shoppers, but have not been able to capture the business of Millennials, who are come with it, and three-quarters are willing to pay more prone to shop at supercenters, specialty/organic stores and alternative more as a result. Experimentation is important. Fine channels. While most consumers purchase at least some chocolate at their chocolate consumers like dark, milk and white primary store, chocolate is purchased across a wide range of channels, led by chocolate equally, tend to try items from different convenience and drug stores and including festivals and farmers’ markets. chocolatiers (even if they have a favorite), and go Overall, 25 percent of shoppers have purchased chocolate online versus 60 out of their way to purchase it. They visit festivals, percent of fine chocolate consumers. Online consumers shop a variety of farmers’ markets and buy online far more often than websites to purchase chocolate, ranging from specialty chocolate sites (70 the general chocolate consumer. Core fine chocolate percent), general online retailers (53 percent) and gourmet foodie websites (45 consumers favor the term “fine” to describe this percent). Online consumers purchase all three types of chocolate online, but chocolate type versus a preference for “gourmet” premium and fine chocolate significantly overindex as an online purchase. among occasional fine chocolate buyers. Convenience, holidays and specialty items that consumers cannot find in their regular stores are the chief online purchase motivators. While mood, price and brand are the top purchase drivers for mainstream and premium chocolate, core fine chocolate consumers point to superior taste, along with the belief that it is more satisfying, as the top two purchase drivers.

Consumers most often enjoy a little piece of fine chocolate as dessert, followed by a treat in the afternoon or evening hours. Most consumers enjoy the chocolate just by itself, but coffee and wine are the top two beverages enjoyed in combination with chocolate.

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Introduction

Getting to Know the Chocolate Consumer Confectionery is a powerful industry, with annual sales of more than $35 billion. Chocolate accounts for about 60 percent of sales and is a perennial favorite with growth during good and challenging economic times. But as shoppers and the food landscape are changing, so are chocolate preferences. The very different confectionery and chocolate habits among Millennials, along with growing discretionary incomes, are fueling the surge in demand for flavor, texture and ingredient innovation. Premium chocolate sales are strong — outpacing overall chocolate growth. Understanding chocolate consumption and purchasing preferences through the eyes of the consumer will help the chocolate industry optimize innovation, marketing and branding to inspire sales gains for years to come.

Methodology Ranging from some of the world’s most iconic brands to products made by micro producers, chocolate offerings include mainstream, premium, and the ultimate tier of premium, fine chocolate. This study aims to understand both the interplay between the three offerings and their differences.

Getting to Know the Chocolate Consumer is based on a survey among 1,500 consumers conducted in December 2018. In the survey, the three offerings were defined and explained as follows: . Mainstream chocolate, i.e. Hershey, Snickers or Baby Ruth . Premium chocolate, i.e. Lindt, Ghirardelli or Ferrero Retail measurement and household panel data . Fine chocolate, made by small artisan chocolatiers, who source the overlay were provided by insights firm IRI. For best quality cacao, create small-batch products with unique flavors questions or comments, please contact: and textures and educate consumers about the product and process. Dan Sadler at [email protected]

The attitudinal survey data is complemented by retail measurement and household panel data provided by IRI. For more details, definitions used and a sample overview, please refer to the Methodology chapter.

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U.S. Confectionery Overview Chocolate Accounts for Majority of Sales 59% The total U.S. confectionery business rings up $35.8 billion in sales annually, with of sales chocolate accounting for the largest share, at $21.2 billion. Growth prospects are strong with NCA’s 2022 projections taking chocolate sales up to $22.7 billion and the total category to $38.4 billion (including the effect of price increases). Chocolate Confectionery sales Projected 2018 Projected 2022* Total category $35.8B $38.4B

Chocolate $21.2B $22.7B 31% Non-chocolate $11.1B $12.4B of sales Gum/mints $3.5B $3.3B

Source: NCA projections sourced from Department of Commerce, Euromonitor and IRI Non-chocolate

Chocolate Sales Are Growing In 2018, chocolate sales in the multi-outlet channels measured by IRI grew by 0.6 percent, slightly below the overall candy, gum and mint category growth of 1.2 10% percent. Premium chocolate grew the fastest, at 19.1 percent. Premium sales are of sales defined by items priced at $11 per pound or more in the IRI universe.

Chocolate subcategory 2018 $ growth Gum 25.0% Premium 20.0% $1.7B Annual Annual 15.0% +19.1% spend trips 10.0% Snack size Household per per Box/bag/bar <3.5 oz $1.1B | +2.3% penetration buyer buyer 5.0% $4.4B Gift box 0.0% 0.0% Everyday chocolate 91% $47 10.1 $337M -5.0% Seasonal chocolate 96% $84 14.6 -7.0% -10.0% Box/bag/bar >3.5 oz $5.2B | -0.5% Source: IRI All outlets, seasonal periods versus everyday -15.0% periods during 104 weeks ending April 22, 2018, averaged Source: IRI, MULO+C, 52 weeks ending 12/2/2018

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Chocolate and Lifestyle

Chocolate Is Part of a Happy, Balanced Lifestyle Responsibility for leading a balanced lifestyle After several decades of food sales trends jumping from a heightened focus on Own responsibility A responsibility I share with others low/no fat, to whole grain, to no trans-fat, to low carb, to superfoods, to gluten-free and high-protein, shoppers are increasingly moving to living a balanced lifestyle. 9% Nine in 10 consumers feel they themselves have the responsibility for ensuring they lead a balanced lifestyle through their own unique interpretation and execution of it — effectively demanding choice, not restriction. Only 9 percent believe it is a responsibility they share with others.

Chocolate already has a well-established role in a happy, balanced lifestyle. While 91 percent of households purchase everyday chocolate and 96 percent purchase 91% seasonal chocolate, both the government’s National Health and Nutrition Examination Survey (NHNAS) and the consumer survey found that consumers enjoy chocolate in moderation. The survey found that U.S. households enjoy chocolate an average of 2.6 times per week. NHNAS data shows that U.S. adults average less than 5 grams of sugar per day from candy (including chocolate and non-chocolate). This represents 4 percent of the total daily sugar intake. Household consumption of chocolate in a typical week

More than four in five consumers see chocolate as always a treat — not a food, nor Never 1x/week or less 2-3x/week 4+x/week a meal replacement. Given its role as an infrequent, little treat, 83 percent of 3% consumers agree that chocolate can be part of a happy, balanced lifestyle.

Agreement on a 5-point scale, where 5=completely Agree Disagree 31% agree (top 2 box) (top 2 box) 39% Chocolate is always a treat 84% 4% Chocolate can be part of a happy, balanced lifestyle 83% 4% when consumed in moderation

27%

Average of 2.6x per week

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A Beloved Treat Not only do consumers view chocolate as a well-integrated treat in a balanced lifestyle, it is also a much-loved treat. One way to test image is through word association: documenting the first thing that comes to mind when reading “chocolate.”

The word cloud below reflects chocolate word associations that were mentioned by at least two respondents. The larger the word, the more often it was mentioned. Chocolate word association is dominated by positive words, ranging from yummy and delicious to sweet, tasty, good, decadent, mouthwatering and heaven.

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Chocolate Consumer Segments

Consumers Engage Across the Full Chocolate Spectrum From white to dark and from world renowned brands to micro producers, chocolate spans a wide range of offerings. Many consumers engage across the entire chocolate spectrum, sometimes buying mainstream brands and other times purchasing fine chocolate — underscoring the importance of choice.

Types of chocolates consumed by the Younger Older household All Millennials Millennials Gen X Boomers

Mainstream 90% 87% 91% 89% 91% Premium 70% 71% 74% 70% 68%

Fine chocolate 27% 31% 27% 29% 24%

Moving from all chocolates types consumed in the household, to the one type that best describes the household’s typical consumption, gives a better indication of how the chocolate dollar is spent across the three areas. More than half of consumers consider themselves mostly a mainstream chocolate consumer, followed by 23 percent who mostly consume premium chocolate. Seventeen percent say they do not fall in any of the three and classify their consumption as a bit of everything. Millennials are significantly more likely to take to premium than generations before them, in particular younger Millennials.

Best description of Younger Older chocolate consumption All Millennials Millennials Gen X Boomers

Mostly mainstream 57% 53% 57% 57% 58% Mostly premium 23% 31% 24% 21% 21%

Mostly fine chocolate 3% 4% 3% 3% 3% A bit of everything 17% 12% 16% 19% 18%

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Zeroing in on Fine Chocolate While only 3 percent of consumers classify their typical consumption as being fine chocolate versus mainstream or premium, many more do purchase it. The difference, at least in part, is explained by purchasing fine chocolate for gifting versus own consumption. Additionally, the largest share of consumers, at 41 percent, say they purchase fine chocolate only occasionally.

Fine chocolate Younger Older consumption All Gen Z Millennials Millennials Gen X Boomers

Never 15% 20% 12% 13% 14% 19%

Rarely 30% 33% 30% 34% 32% 36% Occasionally 41% 35% 40% 39% 44% 39% Frequently 8% 8% 13% 11% 8% 4% Almost exclusively 3% 5% 5% 4% 2% 2%

Meet the Fine Chocolate Consumer Demographically, the core fine chocolate consumer is younger and more affluent, but more than anything they are very environmentally and socially conscious. Fine chocolate consumers are more likely to: . Be Millennials Consumption Segmentation . Live in urban areas The 11 percent of consumers who . Earn above-average incomes purchase fine chocolate with . Have above-average grocery spending regularity have very different . Like a mix of dark, milk and white chocolate versus preferring one over another chocolate habits and wants. . Believe the cacao percentage is important and lean toward the higher cacao percentages Throughout the report, information . Have an outright preference for specific cacao sourcing region, leaning toward South and will be broken down by the Central America following three consumer . Be socially and environmentally engaged, overindexing for the importance of fair labor segments: practices, traceability, transparency, organic, non-GMO and waste/water/energy reduction . Mostly consume mainstream . Be willing to pay a price differential for these types of certifications chocolate . Shop online at specialty chocolate/candy stores as well as buy chocolate at festivals and . Mostly consume premium farmers’ markets chocolate . Have an above-average appreciation for American-made chocolate . Core fine chocolate consumers

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Chocolate Preferences Dark, Milk, White or All of the Above Further demonstrating the importance of choice, Americans’ preferences for milk, dark or white chocolate vary widely. Milk chocolate has a slight edge, at 37 percent of the population, but dark follows closely behind. Seventeen percent say they like a bit of everything. Premium consumers overindex for dark chocolate, while fine chocolate consumers overindex for liking a mix. The outright preference for dark chocolate rises along with age.

Fine chocolate Younger Older Fine consumption All Millennials Millennials Gen X Boomers Mainstream Premium chocolate

Milk 37% 35% 41% 37% 32% 44% 27% 25% Dark 31% 23% 27% 31% 45% 23% 47% 32%

A bit of everything 27% 37% 27% 28% 20% 30% 21% 42% White 5% 5% 5% 4% 3% 4% 6% 1%

Besides age and type segmentation, differences can be found be region of the country, brand preference, ethnicity and other factors.

More likely to prefer milk (37%): More likely to prefer dark (31%): More likely to prefer a mix (27%): . Certifications have little influence on the . Premium segment (47%) . Fine chocolate segment (42%) purchase (46%) . Boomers (45%) . Believe American-made chocolate is . Northeast Census region (43%) . Believe European chocolate is better than better than European-made (38%) . Prefer manufacturer brands (43%) American-made (41%) . Younger Millennials (37%) . Younger Millennials (41%) . West Census region (38%) . Urban consumers (34%) . Hispanic consumers (40%) . Asian Americans (36%) . Men (32%)

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Cacao Percentage Importance Influence of the cacao percentage on the Among consumers who prefer dark or prefer dark, milk and white chocolate purchase decision equally (n=876), the survey probed into the influence of cacao percentage 34% on the purchase decision. While 30 percent say the cacao percentage has 22% 24% little or no influence, for 36 percent, it has a significant influence on what they buy. 12% 8%

The cacao percentage is much more important to consumers who mostly purchase premium chocolate (53 percent) and even more so to core fine 1-No 2 3 4 5-Overriding chocolate consumers, at 73 percent. influence at decision all factor

Fine chocolate Younger Older Fine consumption All Millennials Millennials Gen X Boomers Mainstream Premium chocolate

Little to no influence (1+2) 30% 27% 19% 34% 31% 42% 14% 7% Some influence (3) 34% 40% 37% 33% 33% 34% 33% 20% Significant influence (4+5) 36% 33% 43% 34% 35% 24% 53% 73%

71%-80% Cacao Shares Draw Widest Fan Base Among consumers who rated the influence of the cacao percentage on their ultimate purchase decisions a four or a five on the five-point scale, more than half prefer a share somewhere between 71 percent and 80 percent.

Preferred cacao percentage if cacao share is of significant influence on the purchase decision

26% 26%

17% 15%

6% 5% 5% 14

50-60% 61-65% 66-70% 71-75% 75-80% >81% Don’t know

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Fine Chocolate Consumers Go for 75% or More The desired cacao percentage varies by demographic and rises along with age. Fine chocolate consumers tend to prefer much higher levels, with one- quarter selecting between 76 percent and 80 percent and another quarter preferring cacao percentages upward of 81 percent.

Preferred cacao Younger Older Fine percentage All Millennials Millennials Gen X Boomers Mainstream Premium chocolate 50-60% 6% 5% 6% 7% 1% 4% 6% 6%

61-65% 5% 10% 10% 2% 1% 8% 2% 7% 66-70% 17% 15% 16% 17% 21% 20% 19% 17%

71-75% 26% 33% 29% 26% 22% 18% 32% 21% 76-80% 26% 20% 19% 25% 33% 29% 24% 26%

>81% 15% 15% 14% 17% 15% 17% 13% 24%

Don’t know/depends 5% 3% 6% 6% 6% 3% 4% 0%

Peanut/Peanut Butter Is the Top Added Flavor Peanuts/peanut butter, caramel/toffee and almonds are the top three most popular added flavors across the population. Premium and fine chocolate consumers voted almonds to the top of the list, whereas mainstream chocolate consumers are the driving force behind peanuts/peanut butter’s number one ranking.

Top 5 added flavors across all consumers 1. Peanuts/peanut butter 2. Caramel/toffee 3. Almonds 4. Mint 15 5. Hazelnut (two-way tie) Coconut

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Fine Chocolate Consumers Rank Flavors Very Differently While mainstream consumers boosted peanuts/peanut butter’s ranking, fine chocolate consumers overindex for less common flavors, such as coffee, spices, liquor and floral. Survey examples provided for fruit include raisins, orange, cherries and berries. Examples provided for spices include sea salt, cinnamon, chili and pepper. Examples for floral included lavender and rose.

Preferred cacao Younger Older Fine percentage All Millennials Millennials Gen X Boomers Mainstream Premium chocolate

Peanut/peanut butter 64% 63% 65% 66% 61% 69% 50% 44% Caramel/toffee 60% 57% 61% 60% 60% 59% 59% 58%

Almonds 59% 55% 60% 62% 57% 56% 62% 63%

Mint 41% 36% 43% 42% 44% 42% 38% 37% Hazelnut 39% 42% 44% 38% 36% 31% 47% 56%

Coconut 39% 35% 34% 41% 43% 36% 39% 45% Coffee 32% 37% 38% 31% 25% 25% 40% 46%

Fruits 30% 28% 32% 30% 31% 27% 31% 44%

Spices 22% 25% 25% 21% 19% 15% 30% 38% Liquor 20% 18% 22% 21% 18% 16% 26% 33%

Floral 6% 14% 8% 5% 4% 4% 7% 19% None 4% 3% 4% 3% 4% 5% 1% 1%

Top 5 added flavors among Top 5 added flavors among premium Top 5 added flavors among fine mainstream consumers consumers chocolate consumers 1. Peanut/peanut butter 1. Almonds 1. Almonds 2. Caramel/toffee 2. Caramel/toffee 2. Caramel/toffee 3. Almonds 3. Peanut/peanut butter 3. Hazelnut 4. Mint 4. Hazelnut 4.16 Coffee 5. Coconut 5. Coffee 5. Coconut

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Mainstream Chocolate Consumers Lean Toward National Brands Excluding shoppers who primarily buy fine chocolate, the survey probed into brand preferences among mainstream and premium consumers. Manufacturer brands draw a majority share among mainstream consumers but premium consumers are more likely to switch between national- and private-brand products.

Brand preference when purchasing chocolate Mainstream Consumer Premium consumer

51% 42% 40% 43%

15% 9%

Store brand/private Manufacturer brand A mix of store and

label manufacturer brands

Millennials are significantly less likely to prefer manufacturer brands, at 38 percent versus 49 percent of Boomers. Instead, 18 percent of Millennials prefer private brand versus just 3 percent of Boomers.

Store Manufacturer Brand preferences brand brand A mix All 10% 43% 46%

Younger Millennials 18% 38% 45% Older Millennials 14% 39% 48% Gen X 8% 45% 47% Boomers 3% 49% 48%

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Fine Chocolate Consumers Recognize American-Made Forty-seven percent of shoppers believe there is little difference between American- Opinion on American-made chocolate versus made and European-made chocolate. Among the remaining 53 percent, European- chocolate made in Europe, such as Swiss, Belgian made chocolate has the edge. or German chocolate

Premium chocolate consumers are far more likely to believe European-made chocolate American is better, at 45 percent. On the other hand, fine chocolate consumers are much more made is likely to credit American-made chocolate, at 28 percent versus just 16 percent of European- better premium consumers. made is 19% better Opinion on American-made 34% No European-made American- chocolate versus chocolate difference is better made is better made in Europe All 47% 34% 19% No difference

Younger Millennials 47% 29% 25% 47% Older Millennials 46% 33% 22% Gen X 50% 33% 17% Boomers 46% 40% 14%

Mainstream consumers 51% 28% 21% Premium consumers 39% 45% 16% Fine chocolate consumers 37% 35% 28%

Urban 45% 34% 21% Suburban 46% 36% 18% Small town 57% 24% 19% Rural 49% 34% 18%

Northeast 42% 40% 18%

Midwest 55% 27% 18% South 44% 35% 21% West 50% 35% 15% Lower income 50% 30% 21% Average income 50% 32% 19% Higher income 45% 37% 17% Prefer milk 48% 32% 19% Prefer dark 43% 45% 12% Prefer a mix 50% 24% 26%

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Cacao Sourcing and Chocolate Certifications Few Consumers Have Cacao Sourcing Preferences Cacao sourcing preference The vast majority of chocolate consumers, 84 percent, are indifferent to where the cacao for their chocolate of choice is sourced.

The sourcing country or region matters significantly more to fine chocolate consumers, of whom 39 percent have a specific area they 4% 2% 3% Central America prefer. South America is their favorite region, at Caribbean Africa 17 percent. 1% Asia The importance of where the cacao was sourced 6% South America is likely to rise in importance in future years, with 27 percent of younger Millennials having a regional preference versus just 10 percent of Boomers. 84% No preference

Preference for country or region for Younger Older Fine sourcing cacao All Millennials Millennials Gen X Boomers Mainstream Premium chocolate

Does not matter to me 84% 73% 83% 85% 90% 88% 75% 61% South America (i.e. Peru, Ecuador & Brazil) 6% 10% 9% 6% 4% 5% 10% 17%

Central America (i.e. Mexico) 4% 7% 4% 3% 2% 2% 6% 9%

Africa (i.e. Cameroon, Nigeria, Ghana 3% 5% 1% 3% 2% 2% 3% 5% & Ivory Coast) Caribbean (i.e. Dominican Republic) 2% 3% 2% 3% 2% 2% 4% 5%

Asia (i.e. Indonesia) 1% 3% 2% 1% 0% 1% 2% 2%

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Certifications Matter More to Millennials Four in 10 consumers say their chocolate purchases are influenced by Fair Trade/Fair Trade Certified and Non-GMO Project Certified. The certified organic/USDA organic seal is a strong third, at 39 percent of shoppers. The importance of certifications rises incrementally when moving from mainstream to premium to fine chocolate consumers. For most certifications listed, fine chocolate consumers are at least twice as likely to cite a strong influence. Certifications are also much more important to Millennials than they are for the generations before them. Organic certification, in particular, sees a big generational interest gap, of importance to 48 percent of Millennials versus just 28 percent of Boomers. Others with significant differences are the Rainforest Alliance and Certified B Corporation.

Half of Shoppers Willing to Pay More Fifty-one percent of shoppers are willing to pay more for chocolate with one or more certifications. Willingness increases along with perceived importance. . 26 percent are willing to pay more among those who say certifications have little influence. . 50 percent are willing to pay more among those with average influence scores. . 81 percent are willing to pay more among consumers who are highly influenced by certifications.

Influence of certifications on purchase decision, 4+5 rating on a 5-point scale, Younger Older Fine where 5=a lot of influence on my purchase All Millennials Millennials Gen X Boomers Mainstream Premium chocolate

Fair trade/fair trade certified 44% 50% 47% 42% 41% 36% 55% 63%

Non-GMO Project Verified 41% 47% 49% 39% 35% 35% 50% 68% Certified organic/USDA organic 39% 48% 42% 38% 28% 32% 44% 65%

Rainforest Alliance 36% 46% 42% 35% 29% 31% 46% 65% Direct trade 29% 34% 34% 28% 22% 23% 39% 62%

Certified B Corporation 24% 36% 30% 23% 14% 19% 34% 60% Willing to pay more 51% 67% 56% 47% 40% 43% 63% 74%

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Cacao Farming and Chocolate Production Practices While closely related, there is a significant difference in how consumers view the importance of the farming or production practice versus the on-pack certification. For instance, engaging in responsible labor practices is important to 62 percent of shoppers. While the Fair Labor certification was of greater importance to Millennials, engaging in fair labor practices without a mention of the certification is of greater importance to Boomers. Boomers also place greater importance on sustainable sourcing that avoids deforestation than Millennials, but this did not translate into an above- average interest in the Rainforest Alliance certification either.

The importance of cacao farming and chocolate production practices is the least important to consumers who mainly eat mainstream chocolate and the most important to fine chocolate consumers.

Importance of cacao farming and chocolate production practices, 4+5 rating on a 5- Younger Older Fine point scale, where 5=very important All Millennials Millennials Gen X Boomers Mainstream Premium chocolate

Engaging in responsible labor practices 62% 58% 61% 63% 66% 59% 65% 81%

Sustainable sourcing avoiding deforestation 56% 53% 53% 55% 57% 52% 62% 74% Traceability of ingredients 54% 52% 55% 52% 61% 50% 57% 74%

Transparency of production process 53% 52% 54% 51% 55% 47% 58% 73% Initiatives to reduce product/package waste 53% 55% 51% 52% 55% 49% 59% 76%

Initiatives to reduce water and energy usage 49% 51% 48% 48% 52% 46% 51% 75%

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Certification Segmentation Based on consumers’ influence scores across all six certifications listed, respondents were divided into three groups — reflecting low, average and high purchase influence based on product certifications and labels.

Certifications have little or no influence (33% of consumers) Certifications have significant influence (30% of consumers) . Do not purchase any fine chocolate (47%) . Fine chocolate consumers (62%) . Consumers in small towns (43%) and rural areas (39%) . Consumers who say cacao percentage highly influences purchase (54%) . Prefer milk chocolate (41%) . Shoppers who buy at least some chocolate online (48%) . Consumers who prefer store brand (46%) . Boomers (40%), in particular Older Boomers (46%) . Specialty/organic store shoppers (46%) . Consumers living in the East South Central Census region (40%) . Consumers living in urban areas (39%) . Eat mostly mainstream chocolate (40%) . Premium chocolate consumers (38%) . Younger Millennials (40%) and Older Millennials (35%) . Consumers living in the Middle Atlantic Census region (37%)

Social/Environmental Segmentation Likewise, respondents’ answers to the importance of various social and environmental practices were coded into three consumer segments. Demographic and purchasing differences were much less divided than those seen for shoppers who are or are not influenced by certifications.

Low social/environmental score (31% of consumers) High social/environmental score (32% of consumers)

. Do not purchase any fine chocolate (40%) . Fine chocolate consumers (55%)

. Consumers living in the East North Central Census region (36%) . Consumers with a specific area preference for cacao sourcing (48%)

. Consumers living in rural areas (35%) . Shoppers who have purchased at least some chocolate online (46%) . Consumers living in urban areas (39%) . Consumers living in the Middle Atlantic Census region (39%) . Prefer dark chocolate (37%)

Getting to Know Chocolate Consumers 2019© 22

Ingredient Claims Influence of ingredient-related claims on the chocolate Two-thirds of consumers have no interest in ingredient- purchase (scale 1-5, where 5=a lot of influence) related claims, such as vegan, gluten-free, nut-free or No or little influence (1+2) Significant influence (4+5) dairy-free. 67% 67% 71% 68% Interest is slightly higher among Millennials, but even 60% so, moderate at best. Interest levels among fine chocolate consumers are far above average, led by “raw,” at 46 percent. 18% 19% 18% 17% 18%

Dairy-free Nut-free Raw Vegan Gluten-free

Influence of ingredient-related claims on the chocolate purchase | Younger Older Fine Significant influence (4+5) All Millennials Millennials Gen X Boomers Mainstream Premium chocolate

Nut-free 19% 22% 22% 17% 16% 16% 24% 44%

Raw 19% 25% 22% 18% 11% 15% 22% 46%

Dairy-free 18% 26% 22% 17% 11% 14% 22% 43%

Gluten-free 18% 24% 19% 19% 11% 14% 21% 43%

Vegan 17% 26% 20% 15% 9% 15% 19% 41%

Getting to Know Chocolate Consumers 2019© 23

Shopping for Chocolate Channel definitions: . Supermarket: medium to large store with focus Weekly Grocery Spending on fresh and center store, such as Kroger, American households spend an average of $100 per week on groceries, with 49 Albertsons/Safeway and Publix. percent of shoppers spending between $96 and $150. Spending is highly related to . Supercenter: mass merchandiser with an household size, but higher spending is seen among fine chocolate consumers. extensive food and nonfood selection, such as Walmart, Kmart and Target. . Club: Requires membership, discounted pricing Primary Grocery Channel with limited assortment, such as Costco, BJs and With more than half of shoppers naming a supermarket as their primary outlet for Sam’s Club. groceries, supermarkets are easily the dominant channel. However, Millennials are . Organic/specialty: Emphasis on fresh much less likely to shop supermarkets, while overindexing for supercenters. In departments and organic selection, such as particular, Millennials with children are likely to primarily shop at supercenters, at 42 Whole Foods, Sprouts and Trader Joes. percent. . Limited assortment: small stores with limited SKUs, minimal décor and low prices, such as Online (0.3 percent) and other channels (0.2 percent) represent very small shares as a ALDI, Lidl, Save-a-Lot and Dollar General. primary source of groceries, but play a bigger role as secondary/fill-in trip destinations. . Online includes pure online food outlets such as Amazon Fresh and Peapod. . Other includes drug, ethnic, convenience, dollar and other outlets. Primary grocery channel for buying groceries

Supermarket Supercenter Limited assortment Club Specialty/organic

68%

51% 51% 46% 47% 43%

34% 35% 32% 22%

12% 8% 8% 8% 3% 3% 5% 2% 3% 4% 5% 3% 3% 3% 3%

All Younger Older Millennials Gen X Boomers Millennials

Getting to Know Chocolate Consumers 2019© 24 Buying Chocolate Buy most Buy some Mainstream and premium chocolate consumers buy Primary grocery store versus chocolate at chocolate Buy all some, if not all, chocolate at their primary store — buying chocolate primary grocery at primary chocolate making assortment optimization in the supermarket, store grocery store elsewhere supercenter and other grocery channels extremely All 45% 45% 10% important. Premium consumers are more likely to buy all chocolate at a store other than their primary store, Younger Millennials 61% 33% 6% at 14 percent. The go-to destination among fine Older Millennials 56% 36% 8% chocolate consumers is covered in the next chapter, Gen X 42% 49% 10% The Fine Chocolate Consumer. Boomers 33% 51% 16% Mainstream consumers 48% 43% 9% Premium consumers 25% 45% 14% The Chocolate Purchase Involves Many Channels Beyond the primary grocery store, chocolate is sold and bought in many different channels, led by convenience and drug stores, and including festivals and farmers’ markets. The latter are much more important to fine chocolate consumers, along with specialty chocolate shops. Other channels mentioned include online, boutique stores, dollar stores, World Market and fundraisers.

Younger Older Fine All places where you purchase chocolate All Millennials Millennials Gen X Boomers Mainstream Premium chocolate

Convenience stores 51% 60% 54% 54% 32% 59% 30% 26% Drug stores 45% 40% 41% 47% 49% 49% 28% 26%

Specialty chocolate shops 34% 33% 37% 34% 34% 25% 47% 56% Organic/specialty stores 27% 32% 31% 26% 22% 15% 47% 43%

Vending machines 27% 35% 26% 30% 13% 33% 12% 5% Department stores 26% 28% 25% 25% 27% 23% 28% 26%

Festivals 14% 10% 16% 14% 16% 12% 15% 26%

Farmers’ markets 10% 12% 13% 9% 8% 7% 14% 27%

Getting to Know Chocolate Consumers 2019© 25

Mood, Brand and Price Drive Chocolate Purchase One-third of consumers ranked “mood” as being the number one driver influencing their chocolate purchase. Brand and price were often ranked as number one as well, by 21 percent and 18 percent of respondents, respectively. While mood was ranked first the most, price was mentioned in the top three by a total of 66 percent of shoppers.

Ranking factors influencing the chocolate purchase

Rank 1 Rank 2 Rank 3 Total % top 3 ranking Mood 33% 12% 14% 60%

Brand 21% 26% 18% 65%

Price 18% 26% 21% 66%

Sales specials 7% 12% 14% 33%

Habit/routine 6% 8% 14% 28%

Nutrition/calories 5% 5% 8% 18%

Top 3 purchase drivers among Top 3 purchase drivers among Top 3 purchase drivers among core fine mainstream chocolate consumers premium chocolate consumers chocolate consumers

Based on number 1 ranking Based on number 1 ranking Based on number 1 ranking 1. Mood (36%) 1. Mood (25%) 1. Brand (29%) 2. Price (20%) 2. Brand (24%) 2. Mood (27%) 3. Brand (19%) 3. Price (17%) 3. Price (13%)

Based on total top three ranking Based on total top three ranking Based on total top three ranking 1. Price (71%) 1. Brand (61%) 1. Brand (66%) 2. Brand (66%) 2. Price (54%) 2. Mood (58%) 3. Mood (63%) 3. Mood (52%) 3. Price (58%)

Buying Chocolate Online Four in 10 shoppers have purchased at least some groceries and food online in the past year. Of these shoppers, 60 percent have purchased chocolate. This means 25 percent of consumers have purchased chocolate online in the past year. Online shoppers use a variety of different websites to order chocolate, led by specialty online candy/chocolate stores, shopped by 70 percent. More than half have bought chocolate from general online retailers, such as Amazon.com and Jet.com.

Chocolate e-commerce 70% Bought Specialty online chocolate store groceries/food Bought online in the past chocolate year? online? 53% General online retailer that also sells chocolate (Amazon.com/Jet.com) 41% 60% Yes Yes 45% Specialty online food store that also sells chocolate

25% Grocery store with online ordering capability

Who is the likely online chocolate shopper? (60% of online shoppers) . Fine chocolate consumers (86%) . Consumers with a cacao sourcing preference (74%) . Consumers who are highly influenced by certifications (74%) . Younger Millennials (74%) and Older Millennials (64%) . Consumers with a strong cacao percentage preference (72%) . Consumers with a high social/environmental responsibility score (69%) . Premium chocolate consumers (66%) . Shoppers living in the Northeast (66%) . Men (65%) . Shoppers living in urban areas (65%)

Types of Chocolate Purchased Types of chocolates bought online Mainstream Premium Fine Online (check all that apply) chocolate chocolate chocolate Online shoppers take full advantage of the assortment All 60% 66% 31% available across the various specialty and general websites and purchase across the full chocolate Younger Millennials 57% 63% 27% spectrum. Premium chocolate, in particular, is a popular Older Millennials 68% 67% 22% online purchase. Gen X 66% 65% 35% Boomers 24% 71% 38% Fine chocolate consumers predominantly purchase fine Mainstream consumers 73% 60% 17% chocolate online, but also purchase some premium and Premium consumers 43% 64% 32% mainstream. Fine chocolate consumers 22% 50% 72%

Online Purchase Motivations Convenience is the overarching driver for purchasing chocolate online. But other reasons, such as holiday occasions, lack of availability of specialty candy in stores, price and free shipping are other important factors.

Reasons for purchasing chocolate online All

Convenience 52% Holidays or special occasions 47%

Specialty chocolate I cannot find at my regular 47% store Price 46%

Free shipping with online order 43% Part of bigger online grocery order 41%

Customized orders 36%

Shipping it to someone else 34%

The Fine Chocolate Consumer

Word association Consumption choices and patterns are often highly related to how shoppers view the item. One way to test image is through word association: documenting the first thing that comes to mind when reading “fine chocolate.”

The word clouds below reflect fine chocolate word associations. The larger the word, the more often it was mentioned. Comparing the responses among shoppers who do not purchase fine chocolate, or do so rarely, to those who consume it frequently or almost exclusively is extremely telling. No/low-frequency consumers’ first impression centers on expensive, far ahead of any other associations. Core fine chocolate consumers do mention expensive, but are more likely to focus on positives, such as yummy, quality, unique, good, delicious, premium and handmade. This points to an important educational opportunity to elevate consumers from thinking “expensive” to “worth the splurge.”

ALL RESPONDENTS NO/LOW FINE CHOCOLATE CORE FINE CHOCOLATE CONSUMERS

Getting to Know Chocolate Consumers 2019© 29 Consumers Are Divided Over the Best Term Survey definition of fine chocolate: Excluding consumers who never or rarely purchase fine chocolate, the survey Fine chocolate is made by small artisan chocolatiers, continued with a series of questions for those who purchase fine chocolate who source the best quality cacao, create small- occasionally, frequently or almost exclusively. The latter two combined form batch products with unique flavors and textures and the core fine chocolate consumer segment. educate consumers about the product and process.

There are many ways to refer to fine chocolate and consumers are divided over the best term. Gourmet is the lead term, at 38 percent, but its preference among core consumers is much lower, at 29 percent.

Best name for fine chocolate n=782 Gourmet Artisan Fine Craft All 38% 27% 25% 10%

Buy fine chocolate occasionally 40% 27% 24% 10% Core fine chocolate consumers 29% 26% 33% 12%

Younger Millennials 33% 22% 33% 12%

Older Millennials 38% 28% 24% 11%

Gen X 39% 27% 24% 10% Boomers 38% 28% 24% 11%

Local Specialty Store Draws Majority Purchase Core consumers shared their favorite place to purchase fine chocolate. As can be expected, most examples focused on local specialty stores, ranging from Main Street to mall locations and online examples. Core consumers also reference vacation and trips as times when they purchase fine chocolate. . Local chocolatiers, bakeries, candy or gourmet stores. . Candy, chocolate or pop-up specialty vendors in the mall. . Local high-end/gourmet grocery stores. . Festivals and fairs, including craft fairs, wine festivals and chocolate fairs. . Farmers’ markets and Amish markets. . Supplier-direct websites, with dozens of specialty examples. . Gifting or gourmet websites representing a variety of makers. . Subscriptions or catalogues focused on gourmet and gifting.

Superior Taste Drives Fine Chocolate Occasional Purchase Total fine fine Core fine Whether a core consumer or an occasional buyer, fine Motivations for purchasing fine chocolate chocolate chocolate chocolate consumers agree that their main purchase chocolate buyer buyer consumer motivation centers on superior taste. Many also agree that fine chocolate is more satisfying and has an important Tastes better 68% 68% 69% role in gifting. More satisfying 44% 42% 51% Gifting 42% 43% 40% Core consumers emphasize fine chocolate’s ability to Supporting small businesses 34% 34% 35% satisfy and also are more likely to believe that it is better for them. Core fine chocolate consumers are also more It’s better for me 22% 19% 35% than twice as likely to emphasize social and environmental Social responsibility 18% 14% 32% responsibility as purchase drivers. Environmental responsibility 15% 12% 27%

Experimentation Is Important in the Fine Chocolate World Trying chocolates from different chocolatiers is common, whether consumers purchase fine chocolate occasionally or frequently. Loyalty toward one chocolate maker rises among core consumers, but even so, experimentation remains important.

Occasional Total fine fine Core fine

chocolate chocolate chocolate

Willingness to experiment buyer buyer consumer

Try items from different 57% 60% 44% fine chocolate makers/chocolatiers Stick to chocolates from a particular 22% 19% 35% chocolate maker/chocolatiers

Have a favorite chocolatier but also try 21% 21% 21% items from others on occasion

Dessert is the Top Consumption Occasion Total fine Occasional Core fine Across all fine chocolate consumers, dessert is the most Typical time for enjoying chocolate fine chocolate chocolate a piece of fine chocolate buyer buyer consumer popular time to enjoy a piece of fine chocolate, slightly ahead of the afternoon and evening hours. Dessert 33% 34% 32%

Core fine chocolate consumers have their treat a little Afternoon 31% 30% 34% earlier in the day, with 34 percent typically enjoying a Evening 30% 33% 19% piece of fine chocolate in the afternoon or even the morning hours. Morning 6% 3% 16%

Nearly Half Enjoy Their Fine Chocolate Treat by Itself About half of consumers enjoy fine chocolate by itself. That share is much lower among core fine chocolate consumers, who overindex for wine and tea in particular. If consumers pair their chocolate treat with a beverage, coffee is the most common choice, at 20 percent, followed by wine and water — providing great insight into cross- merchandising opportunities.

What do you most enjoy Total fine Occasional Core fine a piece of fine chocolate chocolate fine chocolate chocolate with? buyer buyer consumer Nothing, just by itself 49% 52% 38%

Coffee 20% 19% 21%

Wine 10% 9% 14%

Water 9% 9% 11%

Tea 6% 5% 11%

Spirits 2% 2% 2%

Food for Thought

A rising tide lifts all boats — Most consumers purchase chocolate across the entire range 1. of offerings, from mainstream to premium and fine chocolate. As such, industry support to help reinforce chocolate’s positioning as a permissible, beloved treat in a happy and Learn more balanced lifestyle is something that helps all manufacturers, regardless of size or product. CandyUSA.com Providing choice is key — There is no one chocolate consumer. Preferences for dark, milk or white, cacao percentages, the importance of social/environmental stewardship and 2. added flavors vary widely. With mood being the biggest purchase driver, continued innovation in flavor, texture, ingredients, packaging and branding, reflecting changing consumer preferences, will set the tone for future sales growth.

Elevating the profile of American-made chocolate — The vast majority of consumers either see no difference between American and European-made chocolate, or believe 3. European chocolate is superior. Elevating the profile of American-made items is another area of joint interest among U.S. chocolate producers.

Education can help draw more consumers into premium and fine chocolate — Consumer education about the product and process will result in greater appreciation of chocolate’s 4. many textures and flavors and may encourage more consumers to consider premium/fine chocolate to be worth the splurge. Subsequent experimentation, a key characteristic among premium and fine chocolate consumers, will increase consumers’ exposure to a wide variety of chocolate makers and product types.

Social and environmental stewardship matters — Consumers increasingly care about how their food is made, who made it and what’s in it. Using the Millennial response as a 5. barometer for future interest, certifications in the areas of fair trade, non-GMO, organic and responsible sourcing matter to half of these shoppers. People and planet are two more “Ps” to add to the traditional 4P marketing mix: products, price, promotion and place.

E-commerce is a quickly rising sales platform for chocolate — Consumers want what they want, when they want it. And if their local store does not offer it, e-commerce provides 6. the answer. Access, preferred consumer status and high top-of-mind awareness are key elements to online research resulting in trial and continued purchases.

Methodology and Study Definitions

Methodology Nine and four Census regions Shopper data was collected using an online survey, conducted in December 2018 among

a national sample of 1,503 consumers between the ages of 18 and 75. The margin of

error associated with the survey is 2.5 percent at the 95 percent confidence level.

Percentages may not always add to 100 percent due to rounding.

Definitions

Generations . Generation Z: ages 18 to 22 . Young Millennials: ages 23 to 28 Millennials: ages 23 to 38 . Older Millennials: ages 29 to 38 . Generation X: ages 39 to 54 . Young Boomers: ages 55-62 Boomers: ages 54 to 71 . Older Boomers: ages 63-72 . Matures: Ages 73-75

Food spending . Low weekly grocery spending: <$95 . Average week grocery spending: $96-$150 . High weekly grocery spending: >$151 Additional data tables:

In addition to the tables and insights provided in this Household income report, data based on Census region, area, ethnicity, . Lower-income households: <$35,000/annually household size, the presence of children, household . Medium-income households: $35,000<$75,000 income, store choice and spending are available. . Higher-income households: $75,000<$125,000 Furthermore, data can be presented by preferred . Affluent households: >$125,000 chocolate type, social/environmental segmentation and

other chocolate purchasing preferences. Shoppers

. Make the majority of decisions on food and beverages for the household, or Please contact Anne-Marie Roerink of 210 Analytics, at . Decide jointly on food and beverage decisions for the household together with [email protected] for further information. spouse, partner, roommate or kids

Respondent Profile

SHOPPER GROUP Percentage SHOPPER GROUP Percentage All respondents (n=1,500) 100% Household composition No kids living at home 58% Gender Kids ages 0-18 living at home 42% Men 46% Women 54% Household size 1 person 17% Age 2 people 32% 18-21 6% 3 people 25% 22-27 13% 4 people 17% 28-37 18% 5+ people 10% 38-53 42% 54-63 14% Household income 64-75 7% Less than $25,000 8% $25,001 - $35,000 12% Area $35,001 - $50,000 16% Urban 23% $50,001 - $75,000 22% Suburban 49% $75,001 - $100,000 17% Small town 11% $100,001-$125,000 10% Rural 17% $125,001-$150,000 6% $150,001-$200,000 5% Region More than $200,000 3% Northeast 14% Decline 1% Midwest 26% South 39% West 21%

Cultural heritage Caucasian 71% African American 10% Asian American 5% Hispanic/Latino 14% Other/decline to answer 0.3%