Lausanne, Switzerland, April 14 - Nestle SA aims to sharpen its premium chocolate focus as aging populations in many countries boost the demand for darker chocolates, said the food company's head of chocolate operations, Petraea Heynike.
"Dark chocolate is a still-accelerating trend. Even countries which have no dark chocolate tradition are successfully introducing such products," Heynike told Dow Jones Newswires on the sidelines of the company's annual general meeting in Lausanne last Thursday.
"Premiumization, the move towards refined chocolate, is another important trend. In our strengthened focus on premium, we want to increase our use of high-quality raw materials and production methods," she added.
In the global chocolate market, worth about 90 billion Swiss francs ($90.37 billion) and growing about 5% annually, Nestle takes the number-two position with a market share of around 12.5%, second to Mars Inc. with 14.8%.
Nestle is the global leader in dark chocolate, and has rolled out more than 200 new chocolate products in the past few years, according to Heynike, a South African national who took charge of Nestle's chocolate business in March 2006.
Recent moves to push into the premium segment are the inauguration of Nestle's first premium chocolate research center in western Switzerland, and a pact with Belgian luxury chocolate company Pierre Marcolini. Under the agreement, Nestle will receive creative input from Pierre Marcolini while helping the Belgian company to expand.
However, Nestle remains underrepresented in the top price segment, where annual growth rates range between 7% and 8%.
Sales from Nestle's premium chocolate portfolio comprising local brands such as Perugina in Italy, Cailler in Switzerland - predominantly non-dark chocolate - and Black Magic in the U.K., amounted to just 36% of the confectionary division's total of CHF12.2 billion last year.
Heynike didn't comment on whether Nestle's premium chocolate strategy could involve takeovers or a launch of a global premium brand. The company has two global but non-premium brands, Kitkat and Nestle.
Simple recipes may be one way to go forward, Heynike said. "I believe in simplicity. A lot of consumers go back to products they are familiar with, products that are sometimes ingrained in their memory from early childhood."
Simplicity wasn't always Nestle's answer to market challenges. Some years ago, Nestle's launch of new Kitkat flavors flopped because there were too many varieties of the same product. However, this should be a thing of the past, Heynike said. "Now we have relaunched Kitkat with great success. Dark Kitkat, for instance, was a limited edition initially and is now being launched on a large scale."
The above-average growth of the premium segment has to do with an emergence of refined consumer tastes, partly due to physiological reasons.
"Human taste buds start losing their sensitivity the minute you are born. The taste of dark chocolate with its intense flavor is appreciated with (the) progressing age of the consumer," Heynike said.
Nestle stresses the health benefits of dark chocolate, relying on data from its research and development. "Dark chocolate is rich in health-enhancing antioxidants and this is something we pitch in our marketing," Heynike said.
At the same time, Nestle tries to convey a message of moderation by showing consumers eating small portions of chocolate only, Heynike said. "We also take care to promote moderate chocolate consumption within a balanced diet," he added.