The global chocolate powder drinks market is forecast to see a net growth of around US$800 million in 2014-2019, contrasting to malt-based drinks’ US$500 million. However, considering the potential growth and compared to the possible sales from coffee and tea anticipated, chocolate powder drinks is definitely a niche category and mostly neglected by major hot drinks manufacturers, despite the fact that they may have a couple of hot chocolate powder drinks brands as a complementary product.
Euromonitor International’s latest data show that Nestlé continues to be the world’s market leader in chocolate powder drinks, accounting for over one third of retail value sales in 2014. Mondelez and PepsiCo are placed in second and third position, competing with each other closely.
In terms of geographic growth, Brazil, the largest market for chocolate powder drinks, is predicted to generate around US$340 million sales in 2015-2019, top of all major growth markets. Meanwhile, PepsiCo’s Toddy is evolving to become a major brand in Brazil’s food and beverages market. This article gives an overview of the global market and discusses the state of play of major brands, with particular emphasis on Toddy.
Global market landscape
The global chocolate powder drinks market is worth around US$6 billion and emerging markets account for over half of retail sales. Nestlé’s strong leadership is underpinned by its range of brands including Nesquik, Nescau and Dancow. Nesquik is the world’s largest brand, with retail sales of US$850 million in 2014, followed by its sister brand Nescau, at US$620 million.
Nesquik is a highly versatile brand, present in a variety of categories including canned food, ice cream, dairy, confectionery and chocolate powder drinks. The brand registered shares in nearly 50 countries and holds prominent positions in chocolate powder drinks in many markets. There is no doubting its high brand awareness globally and there is no close rival brand for Nesquik in this sense. While Nesquik’s largest market is Mexico, the brand failed to perform in Brazil, where its sales diminished in 2014 in the face of competition from sister brand Nescau and PepsiCo’s Toddy. In major developed countries such as Western Europe and the US, Nesquik also underperformed the market. Euromonitor International’s latest Health and Wellness database shows that the fortified and functional version of Nesquik might have encouraged some parents to purchase Nesquik for their children, but, the global increased sales deriving from this is not sufficient to boost its overall sales. In terms of share of throat, the diversity and variety of beverages available, particularly in developed markets, represents strong competition to child-specific brand Nesquik powder.
With around 7% of the global hot chocolate market share, Mondelez has a wide range of brands covering an extensive price range, including mass market Cadbury Drinking Chocolate, O’Boy, and organic variant Green & Black. Thus far, organic drinking chocolate remains rare and niche. While this situation may offer an opportunity for the entrants of several organic brands, the price premium of organic products may limit volume consumption. Mondelez’s Tassimo multi-beverage machines offer Cadbury, Suchard and Tassimo Milka Hot Chocolate in T– Discs. It is unknown if Mondelez will introduce Green & Black in T-discs in the short-to-medium term; but, in the long-term it looks very likely. Euromonitor International’s latest data show that the Tassimo beverage machine achieved strong double-digit growth in retail value sales of coffee pods in 2014.
Toddy looks promising
PepsiCo sits far behind The Coca-Cola Company in the global soft drinks market. However, it has mentioned that at corporate level it is not really directly competing with Coca-Cola, as packaged food is its priority category and health and wellness packaged food and beverages its key development area. Unknown to many industry observers, PepsiCo’s several local chocolate powder drinks brands in Brazil, including Toddy and Mágico, are making obvious share gains. Chocolate powder drinks are mainly consumed at breakfast by both children and adults in Brazil, unlike the situation in some markets where the drinks are mainly designed for children. Fortified vitamins and minerals are all applied to leading brands such as Nescau and Toddy in Brazil to attract health conscious middle-class consumers.
In chocolate powder drinks, Toddy, ranks third in the world and second in Latin America. The brand started to show its potential beyond its traditional zone in 2012 when it registered share in biscuits in Brazil. Its worldwide sales of biscuits were close to US$120 million in 2014 - a star performer in the category. Toddy is also present in breakfast cereals and malt-based drinks. Indeed, chocolate as a favourite flavour and the beloved brand or drinking chocolate brand, stretching to other categories does create some new opportunities. Apart from Brazil, Toddy also registered market share in Argentina (biscuits and breakfast cereals), Chile (chocolate powder), and Venezuela (malt-based drinks). Thus far, Toddy appears to be a robust, viable to multi-category opportunity and promising brand. From an overall food and beverages perspective, Toddy has been well marketed and is starting to show its potential. As a side note, Coca-Cola is also present in Brazil’s other hot drinks category, with a local brand Mate Leão in other plant-based drinks, with sales reaching US$130 million, nowhere near Toddy’s hot chocolate sales at US$300 million. This is perhaps one of the very few things that PepsiCo has achieved in outperforming Coca-Cola in the race of beverages.