The Chocolate Consumer - Opportunities for Growth

The chocolateconsumer:opportunities forgrowthJohn A MorrisEuropean Head of Consumer Markets, KPMG LLPNCA 2013 State of the IndustryFebruary 2013

What we’ll look at today■ Market overview■ Drivers of growth■ The chocolate bar of 2030© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.1

Global confectionary valuesGlobal confectionary values – $102 billion in 2011MENA£4bnAustralasia£2bnLat Am£17bnWestern Europe£32bnEasternEurope£12bnAsiaPac£17bnNorth America£20bnSource: Euromonitor InternationalCharacterized by youthful populations and growing middle class© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.2

$ billionThe market is growing, albeit slowlyGlobal chocolate retail values1201008060402002007 2008 2009 2010 2011 2012Chocolate continues to resist recessionSource: Euromonitor International© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.4

What US shoppers are buying and where■ Bars 45%■ Blocks 30%Others32%Supermarkets20%■ Boxes 15%■ Other 10%Non-store1%Specialists5%Smallgrocerystores22%Discounters20%‘Everyday’ bars and blocks dominateMuch of it being picked up along with the wider grocery shopping© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.5

Drivers of growth■ Demographics■ Health■ Sustainability■ Seasonality■ Innovation© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.6

Demographics are driving demandRussiaRising wealth means giftsand luxury are importantChina1.4 billion middle classconsumers by 2030Mexico52% of the population isunder 20India45g of chocolaterepresents 18% of weeklygrocery spendTaste is diverging as fast-growingeconomies and empowered consumers demand morefrom their products© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.7

Health issues are driving product developmentMarsMars: Capping calorie content at 250NestléNestlé: Removing all artificial flavorsOhsoOhso: Launching pro-biotic chocolate barCavalierCavalier: Using stevia, not sugarRegulation will have an increasing effectSource: UK market examples© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.8

Sustainability will only increase in importance[Fairtrade cocoa global production]Source: Fairtrade FoundationFood origin is a significant driver for consumer purchasing© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.9

Innovation is critical with personalization a key trendHand picked to match individual preferenceSelect favorite base and added extrasBalancing operational costs with greater individualization will be vital© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.11

What might the chocolate bar of 2030 look like?Premiumqualityfor middleclassInnovativepackagingAttractive toyoung peopleNewdistributionchannelsLuxury versuscommodityThe personaltouchOutsourced?A new recipePrice versussizeFresh flavorsHealthbenefits© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no clientservices. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind anymember firm. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.12

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