When Nestlé launched its Double Cream missile right at the heartland of Cadbury’s block chocolate business last year, Cadbury responded with a volley of 50%-extra-frees on Dairy Milk.

All’s fair in love and war and all that, but the exchange of fire was indicative of the increasingly aggressive promotions that confectionery manufacturers are willing to run to seize market share. And their tactics, coupled with the retailers’ relentless siege on price, have started to nudge the category perilously close to the edge of deflation.

It has to stop, says Nestlé Rowntree sales director Peter Basham in an impassioned plea to confectionery manufacturers to stop driving volume at the expense of value.

If it does not, he warns as he unveils the company’s new strategy to “reignite” confectionery, the category will hurtle down the deflationary spiral that has turned biscuits into a ‘kill’ category.

The current statistics do not paint a pretty picture. In 2001 an external trade audit carried out for Nestlé revealed that £100m had been wiped from the category that year alone. That reflects a fall in the value per tonne of 4% since 1992 - a period when sales volumes increased by 9%.

Basham accepts that the industry has done little to help its cause. “The industry hasn’t been very clever and all the signs are that we’re heading for commoditisation. These days too much is done on the deal. Confectionery used to be special - Bounties used to be exotic, a dinner party would end with the After Eights - but that is being lost. We are getting brand promiscuity and losing brand loyalty. The category is in trouble.”

It need not be the case, he insists. Holding up Häagen-Dazs, Kettle Chips and Lindt as premium brands worthy of emulation because they have retained their value, he argues that the category could grow by £1bn in the next seven years.

But first it has to sort its act out - and Nestlé wants to lead the way.

Basham admits that before the strategic rethink there were fundamental flaws in the Nestlé game plan. “The audit showed we were good at some things like investing in the business and launching new products, but they were disparate strands. There was no overarching vision. We were also not very creative at driving value into the business.”

There are no quick fix solutions, argues Basham, but consumer shopping habits suggest that driving volume is not the best tactic. “If you get inside the mind of the shopper you find that the decision tree starts with: ‘What do I want the product for?’ Then it moves on to ‘What’s available?’ And only when the shopper is at the fixture is it about value.”

Nestlé is now carrying out a £500,000 consumer study to glean more insights into shoppers’ behaviour and is investing more heavily in point of purchase.

This year alone it is spending £5m on new display units such as a Kit Kat Breaking News unit positioned alongside news stands, a Time for Me unit for products aimed at women, by the glossy magazines, and a chiller unit attached to the chilled drinks cabinet.

The strategy is already paying off, says Basham. Sales have gone up 25% in stores that have Breaking News units - although replenishment is proving an issue with such small display units, he admits.

Focusing on point of purchase has allowed Nestlé to tackle another problem. “There’s a need for a change to value not volume. If we put more money into point of purchase and occasions, we could drive up frequency again.”

But, he concedes: “It’s going to take a lot of new thinking and innovation.”

So what exactly is Nestlé’s game plan? Following the audit, it spent two years thrashing out a six-point action plan dubbed ‘the tool box’. High on its list of priorities are innovation and renovation, says Basham. New product launches have been responsible for 15% of all growth in the category and, he says, future growth depends on more new products like the successful Chunky Kit Kat and the Milky Bar biscuit bites. Another new Kit Kat product launch is planned for the autumn, though Basham refuses to divulge details.

Existing brands will be substantially renovated to ensure they continue to pass the 60/40 quality test so that they are 20% better in quality than the nearest rival.

Another goal is to improve visibility and communication of key brands. “There has to be brand visibility in all outlets,” explains Basham. With this in mind, at 3pm on March 21 this year, Nestlé encouraged the nation to take ‘Britain’s biggest break’ - with a Kit Kat of course - and later in the year ran a Win a Million competition again with Kit Kat.

More events aimed at “full value rather than deep cut promotions” are planned.

Basham concedes that the recent witch-hunts against “unhealthy” brands have not done confectionery any favours, but, he says, Nestlé is protected by the fact that it produces a range of foods which together can contribute to a healthy lifestyle.

It is also reviewing its labelling and reformatting a small number of brands to remove or reduce hydrogenated fat content.

A bigger strategic priority in the action plan is improving availability. “We are seeing 1,000 independent outlets close every year,” he reasons. “We need to take the brands to where the people are.”

If the the right products in the right formats hit the right consumers, Nestlé will be able to dramatically increase brand penetration, he says.

Having already launched limited edition ranges like Quality Dad and Quality Mum Quality Street to coincide with Father’s and Mother’s Days, Nestlé plans to widen the net to run tie-ins with other holidays and national events.

Nestlé’s gameplan is laudable. But manufacturers must resist retailer demands to lower prices. This will be the biggest challenge, says Basham.

But, he insists, retailers will gain, too. “Retailers are not going to improve the bottom line by driving the price of Kit Kat through the floor.

“Yes, we want to do fewer promotions but we don’t want to invest less. It’s about working with the retailers to make the category more exciting. Why can’t we develop products together?”

Basham is under no illusions about what could happen to confectionery if retailers and other manufacturers fail to drive more value into the category.

Nestlé, he stresses, will do everything in its power to defend its heartland if it finds confectionery heading down the same deflationary spiral as biscuits.

He is determined to find ways to drive value back into its ranges, no matter how tough the downward pricing pressure becomes in an increasingly competitive grocery arena.

Need for a change to value