UK’s cash-strapped Christmas shoppers choose cheaper chocolate for gifts

London — Quality Street maker Nesté and Cadbury owner Mondelez are seeing higher sales of confectionery in Britain this holiday season driven by cash-strapped shoppers seeking cheaper gifts.

Shoppers hit by inflation and higher mortgage rates are buying cheaper gifts this year, according to analysts and consumer companies. Some are snubbing toys and gadgets in favour of chocolate which, despite price rises over the past year, remains relatively inexpensive, executives say.

“Boxed chocolates have had a particularly strong start, with a year-on-year increase of 8.7% in value sales,” according to Fran McCargo, customer category manager lead for Nestlé UK & Ireland, referring to the August-November period versus 2022’s.

“Twistwrap chocolates have seen (sales) growth of 2.1%,” she said, adding that Nestlé was seeing more shoppers buy chocolates as holiday gifts.

Shoppers typically spend under £10 on such items, she said. Tins of Nestlé’s Quality Street, trading at £5, and Mondelez’s Cadbury selection boxes, trading at £1.50, are proving popular.

In contrast, the average selling price of a toy in Europe is about £13, according to data firm Circana, formerly known as NPD. Several toymakers said earlier in December that demand was lower in 2023.

“The deals with chocolates have been quite reasonable, [they have] not gone any higher (in price) — gifts and toys and other stuff, yes, but chocolates no,” said Bonnie Johnson, a care home worker.

“It’s a cheaper gift to be able to give to quite a lot of people,” Johnson added.

Retailers like Sainsbury’s and Tesco are offering discounts on Quality Street and Celebrations to customers with loyalty cards.

Other Nestlé brands that typically sell well during the holiday season include KitKat Santa, which costs just over £1, and Milkybar Festive Friends, which costs £1.25.

Margin boost

Manufacturers are also launching more “premium” chocolate products that they can sell at higher prices to help mitigate the impact of cocoa prices hitting 46-year highs this year.

“It will help fourth-quarter earnings, as the Christmas period is the strongest for chocolate companies,” said Vontobel analyst Jean-Philippe Bertschy.

Nestlé has said its underlying trading operating profit margin will be 17%-17.5% this year, compared with 17.1% in 2022.

The company’s confectionery business is worth about Sf8.1bn ($9bn) in annual revenue, according to its most recent annual report. That is out of total group sales of Sf94.4bn in 2022.

The global chocolate market is worth $123.5bn, according to Euromonitor International and the holiday season is the busiest period of the year.

Less expensive indulgences are particularly popular among younger adults, said Susan Nash, trade communications manager at Mondelēz.

Nine out of 10 British Gen Z shoppers and 83% of Millennial shoppers will “trade down” to cheaper products this holiday season, according to a survey by consultancy McKinsey. Overall, 74% of respondents said they would buy cheaper gifts.

Evie Byrne, a doctor, said she and her friends slashed their “Secret Santa” gift exchange budget to £10 this year, from £20 in 2022.

“I guess we are downscaling things slightly, without realising it,” Byrne said while shopping at a Morrisons supermarket in Camberwell, southeast London.

Giving high-end chocolate tins has become part of festive cheer in Britain, with the local market for chocolate gifts worth about £1.8bn, according to data firm Circana. That has grown 7% in the past year, driven by higher prices.

The British market for toys, worth about £2bn, has declined nearly 4% in 2023, Circana data showed.

After Christmas, chocolate makers are expected to face tougher trading conditions in 2024 as they attempt to pass on soaring cocoa costs. However, executives say that chocolate remains more resilient than other discretionary purchases.

“Through challenging times, consumers often review their discretionary spending. However, they are less likely to reduce their spending on confectionery gifting,” Nash said.

Reuters