Opening analysis by Sarah Hardcastle It's an unthinkable prospect. After decades of growth, could the confectionery market be on the brink of decline? Certainly all the signs point to a slowdown in the last year. According to the Biscuit, Cake, Chocolate and Confectionery Alliance ­ the industry body to which UK confectionery manufacturers submit sales data ­ the total confectionery market (both UK and imported confectionery) was worth £5.5bn in 1999 and was static in terms of growth in 1999 compared to 1998. TN Sofres Impulse paints a grimmer picture. The research company's measurement of 85% of the market values it at £3.8bn with an overall 3% decline, led principally by sugar confectionery (8% down). The overall volume fall is steeper at 5.6%, led by countlines (4% down) and sugar confectionery again (11.8% decline). What's causing this to happen? Philip Jenkins, managing director of Sugro UK, reckons that a lot of disposable income that used to go on confectionery impulse sales is now going on frivolitiels such as Pokémon and mobile phone cards. "We see clear evidence in independent retailers that children and teenagers in particular are spending their money on mobile phone cards and Pokémon cards. "It has to come from somewhere, and it's coming from money that would previously have gone on confectionery sales. "Pokémon is a fashion, and will eventually disappear. Mobile phone cards are more worrying because they're here to stay." Cadbury Trebor Bassett trade channel manager Veronic Winn feels the same: "Confectionery is facing increasing competition from other categories, in particular mobile phone cards. "As people are spending extra money on them, they have less to spend on confectionery. That's definitely having an impact on the marketplace." The huge diversity of snacking products now widely available to meet the growth in snacking is also affecting confectionery sales believes Nestlé Rowntree sales communciations manager Graham Walker. "Competition for share of purse has certainly stepped up. "Increasingly we're looking at snacks and confectionery as part of one big impulse category and are looking at ways to manage it in a broader sense. "One approach we're developing for convenience stores is to link up categories that sit naturally together, such as wine, cards, flowers and gift chocolates, to create a gifting fixture that'll encourage consumers to shop across it, spending more. "Another area of opportunity is newspapers and magazines. "As a third of all impulse confectionery is bought with them, these categories should be sited together for shoppers' convenience and to encourage sales. "By developing these natural synergies, the chances of purchase and weight of purchase are greatly increased, we believe." Another factor that could be starting to impact on sales is the dearth of fundamental new product innovation by the major brands, particularly in the chocolate sector, in the last couple of years. "How many exciting launches have there been recently?" asks Sugro's Jenkins. "As far as new brands are concerned, there's been very little that's really captured people's imagination." In the last year, the vast majority of product launches have been brand extensions, limited editions and me-too' versions. Even huge successes such as Celebrations and Miniature Heroes, which have created a new twist wrap sharing category in chocolate, are based on miniaturised versions of existing brands. The marketplace is unlikely to see a change of direction from the leading manufacturers, says Nestlé Rowntree's Walker. "It costs so much to create, launch and sustain a completely new brand, and there's such a high risk attached to it, manufacturers find it easier and more cost effective to develop existing brands. "Limited editions provide the element of excitement and novelty that consumers want, and a short-term sales uplift for retailers. "Extensions build on the brand and it's much easier to get consumers to buy them than something completely new. We will certainly be continuing to develop our existing brands in this way. "We can't rule out creating completely new products but we will be a lot more selective, only launching new brands where we've identified a definite need." Nestlé Rowntree has been especially adept at mining the possibilities of its brands. Kit Kat Chunky has been an outstanding success, boosting total brand sales to well over £250m this year. Its new strawberries & cream flavoured Polo Smoothies take the Polo brand into hanging bags ­ one of the fastest growing formats in the market ­ for the first time. Walker says the entire Polo franchise is under review, with a lot more developments in the pipeline. In time for the peak selling Christmas season, Quality Street is being repositioned in the twist-wrap "informal sharing" category in a translucent plastic 600g and 700g tub, plus a cone pack in two sizes. After Eight has a new truffle variant. Rowntree is being repositioned, turned into an umbrella brand for new sugar products such as Fruit Pastilles Body Parts and Bursting Bugs. "Sugar confectionery is one of the key areas we want to develop," says Walker. Cadbury Trebor Bassett, now the largest confectionery manufacturer, with 31% total market share, is also strenuously developing the sugar confectionery sector with umbrella brands Bassett's Fundays ­ which the company says has grown 15% to £3m since launch last year ­ and Bassett's & Beyond, now worth £56m since its debut a year ago. Winn says more launches are planned for these two brands. "Sugar confectionery is the area to watch." Miniature Heroes, the company's answer to Celebrations, launched last September, has gained £30m sales in nine months. "With Roses, we now lead the twist wrap market," claims Winn. Its three major launches this year, Wispa Bite, Trebor Mighty Mints and Snowflake, are all extensions. A white variant of the Flake brand, Snowflake has benefited considerably from all the publicity it received surrounding the Anthea Turner/Grant Bovey wedding. Mars sales director Chris Page believes too many extensions and limited editions confuse the market. "We think the way forward is to innovate around really strong brand propositions creating new formats that meet specific needs. "For example, we're about to launch Mars Five Little Ones, which is five miniature Mars bars in a tube, targeted at women for sharing. "We've also taken Twix, one of our biggest brands, into the biscuit market with Twix Top aimed at lunchboxes. And we've just launched Galaxy Silk Collection, a boxed milk assortment of our Galaxy brand. "Its quality and design is far superior to anything on the market." Page says the development of sugar confectionery is a priority for Mars. "Across the market, the investment that used to go into chocolate is now going into sugar. "It has a great deal going for it now, because consumers value low fat and no fat, and sugar products fit into that. Also the market is increasingly moving towards bite size products, which again fits sugar products. "Our Starburst and Skittles brands are doing extremely well, and we will be putting a lot more investment and innovation into these and other sugar brands in the future." {{FOCUS SPECIALS }}