Confectionery in Hungary

Prospects

Chocolate confectionery records growth in both volume and value terms, but future performance will be affected by changes in the economic environment

Over the review period, chocolate confectionery in Hungary managed to record growth in both volume and current value terms, with the latter being more dynamic thanks to growth in disposable incomes. Consumers became more willing to spend on quality products by looking for chocolate products with more-sophisticated packaging and design, such as products sold by Lindt or Chocco Garden as well as artisanal chocolate products.

Health and wellness trend leads to changes in pack sizes and greater premiumisation

Health awareness is gaining traction among Hungarian consumers, pressuring manufacturers to capitalise on this emerging opportunity. Nestlé Hungária introduced its KitKat brand in a new bites format, sold in functional resealable packaging to facilitate on-the-go consumption and portion control.

Chocolate producers are expected to face challenges due to workforce shortages

With unemployment as of 2018 at only 4%, the lowest in the last two decades, the labour market in Hungary has been hit by workforce shortages, which also affect the local food industry, including chocolate manufacturers. Since the number of Hungarians opting to work abroad has been on the rise, producers have had problems finding employees and this situation is expected to continue.

Competitive Landscape

Despite a challenging environment, the position of international firms remains stable

Indulgence remained an important factor for Hungarian consumers over the review period, primarily favouring well-known chocolate brands made by international players. Thus, producers managed to overcome challenges, such as growing health-consciousness resulting in more consumers focusing on products containing less sugar and fat, while the majority were still willing to enjoy chocolate products regardless of health concerns.

Both the retro trend and demand for innovative products encourage product introductions and the expansion of new local chocolate producers

Despite the robust presence of international brands and products within chocolate confectionery, several new Hungarian-owned companies decided to enter the category locally. Their efforts were supported by the retro trend through which a proportion of local consumers stuck to traditional chocolate flavours and brands.

Private label chocolate confectionery maintains its position despite the strong presence of branded products

Over the review period, private label chocolate confectionery products managed to keep their positions despite a wide selection of branded products being available and frequent advertisements from key players, such as Mondelez Hungária, Ferrero Magyarország and Nestlé Hungária, among others. Instead of TV spots, producers of private label chocolate confectionery invested in widening their product portfolios to gain more shelf space.

Prospects

Bubble gum to continue to struggle to post growth, but the retro trend and possible new entries may help support category sales

Bubble gum faced challenges over the review period, as a lack of visibility, competition from chewing gum and a lack of relevant innovations resulted in a strong decline in category sales; however, bubble gum may eventually be seen as a niche area by players where innovative, new products could make their debut over the forecast period, resulting in lower declines. The continuation of the retro trend may help such efforts; however, introducing new products may be challenging due to the dominance of existing brands and the high costs of marketing and advertising, which are needed to create awareness among local consumers.

Gum among the categories with the highest price increases, and set to continue to be among the less dynamic snack categories due to maturity

Over the review period, gum was among those categories that recorded the largest price increases. Price rises were supported by the category being less fragmented, having a lower number of players and products compared to other categories within snacks.

Competitive Landscape

Wrigley’s dominance is unquestionable, and the player will make further efforts to ensure its leadership

Wrigley Hungaria continued to strongly dominate gum in Hungary in 2018, as it had during all the review period. Although there was some competition, mainly from recently launched local businesses such as Chocco Garden, which launched its Crazy Gummy brand over the review period, the leading position of the international company is not in danger over the forecast period as a result of a wide selection of well-known products sold under its Orbit and Airwaves brands.

Success of private label products does not affect gum, while standard products are expected to remain significant

The position within gum is different compared to other snack categories, as the presence of private label products, which have seen huge success in Hungary due to price-sensitivity, improving quality and the expansion of product portfolios, is negligible in the case of gum. Due to the dominance of existing and trusted brands, including Orbit, Airwaves and Twinner, standard products are expected to remain popular since it is unlikely that producers of economy food products will make any extra effort to gain tiny shares from sales of gum.

Less-fragmented category and the retro trend likely to lead to new entries

The fact that gum is a less-fragmented category than other snack categories may lead to new players in Hungary with the potential for growth. As of 2018, there were already signs of this, such as the entrance of Chocco Garden, which is a newly formed Hungarian company that introduced its Crazy Gummy gum product over the review period.

Prospects

Consumers also look for healthier variants within sugar confectionery

As in other packaged food categories, sugar confectionery saw growing demand for healthier products in line with rising health-consciousness among consumers, with natural ingredients and fortification being among the key areas of development in 2018. Thus, the brand Verbena expanded its product portfolio in the area of sugar-free confectionery and launched a new product with Eucalyptus and Menthol flavour, containing vitamin C.

Competition pushes flavour and packaging innovations

Due to strong competition via a wide range of products within sugar confectionery, as well as competition from other snack categories, several category players introduced existing products in new flavours and/or limited-edition variants to gain interest in their products. A good example is Ferrero, which offers its Tic Tac mints in special fruit flavours from time to time, in addition to its traditional mint-flavoured product variant.

Category is less affected by economy products, while producers still struggle to boost prices

Although sugar confectionery is less affected by the presence of economy brands in Hungary compared to other snack or packaged food categories, sugar confectionery recorded only modest price growth in 2018. This trend is expected to continue over the forecast period, which is due to a large number of consumers remaining price-sensitive despite favourable economic conditions projected for the short term.

Competitive Landscape

Well-known international producers remain key players

International manufacturers of sugar confectionery remained the key category players within sugar confectionery in Hungary over the review period. Ferrero Magyarország held the leading value share in 2018, which was thanks to its popular Tic Tac mint brand.

International brands to continue to be popular

Haribo Hungária was also among the leading players over the review period, which was thanks to the success of pastilles, gums, jellies and chews in Hungary. In addition, frequent promotions as well as new product launches, such as Tic Tac Mixers from Ferrero Magyarország offering a flavour-changing experience from cherry to coke and from coconut to pineapple, or Haribo’s new Milchbären and Fruitmania Berry products.

Local players may challenge international firms

Locally owned companies, especially some established towards the end of the review period, such as Chocco Garden and Happy Chocolates Factory among others, which primarily produce chocolate confectionery products, may also decide to enter sugar confectionery in the future to boost their competitiveness, expand their product portfolios and also to increase the visibility of their brands. Possible new category entries may lead to investments resulting in the launch of products with healthy features in the wave of growing health-consciousness.

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