April 25, 2008
New Line of ‘Super-Premium’ Chocolates Due From Nestlé
By Bernice Hurst, Managing Partner, Fine Food Network
At a time when the high-end chocolate sector is the fastest-growing segment of the global confectionery market, with annual growth of 8 percent, a new player has decided to get in on the act. As reported by just-food.com, Nestlé, the second-largest chocolate company in the world, plans to make some up-market moves with “a swathe” of new products currently under development.
Although it has 13 percent of the world’s chocolate sales under brands such as Butterfinger, Nestlé Crunch, Baby Ruth and Kit Kat, according to just-food, super-premium offerings represent only four percent of Nestlé’s own total. But, a spokesperson told the website, “there is a clear market for premium and super-premium chocolates in industrialized countries.”
Over the past few months, Hershey and new partner Starbucks, Ghirardelli and Mars have all decided to go for a chunk of the market. U.K.-based Cadbury plans to take its organic chocolate, Green & Black’s, nationwide in the U.S. this year. More experienced at the top end are Lindt & Sprüngli and Godiva, sold by Campbell’s in December 2007 to the Turkish Ülker Group.
In the face of such competition, food industry consultant, James Amoroso, told just-food.com that he finds it “difficult” to think of a “unique brand positioning” in the U.S. for a premium chocolate from Nestlé. It would have been better, he says, to have purchased Godiva to take advantage of what he says is “a century of competence in premium-quality chocolate – the company makes it for the Swiss mainly – and it has got the marketing muscle and the patience required.”
Instead, Nestlé is working with Belgian master chocolatier Pierre Marcolini to develop what they describe as “a number of premium and super-premium top line chocolates with artisan qualities.” The company’s intention is to launch them in developed countries throughout Europe and Asia as well as the U.S. where consumers have greater spending power. No timescale or detailed description of the new products has been revealed. “We prefer to surprise our competitors,” Nestlé told just-food.
Discussion questions: Given the perception of the Nestlé brand by consumers in the U.S., how would you brand their new line of upscale chocolate products? What’s a smart strategy for them to tap growth in the gourmet chocolate sector?
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If I were Nestle, whose headquarters are in Vevey, Switzerland, I think I might borrow from Hallmark’s famous slogan and say something like, “When you care enough and have enough money to savor the very best chocolate, select ‘Viva VeVey!’”
The biggest risk for Nestle premium chocolates: the marketing cost. Think about the huge expense of national ad campaigns and shelf space placement (or company-run store locations). Nestle may lose money for years on the high-end brand, or experience ultra-low sales volume. Or both.
I’ve not much to add, except perhaps to expand on Anne’s remarks: I remember the jingle as a parody on “WKRP” performed hilariously by the (underappreciated) Jan Smithers (a.k.a.: Bailey Qarters)… I’m not sure whether that makes me think better or worse of Nestle’s idea but it sure was funny!
Nestle could employ the same boutique strategy as their Nespresso brand. These shoppes are an oasis for relaxing and meeting friends with your favorite espresso.
Just imagine decadent swiss chocolates served to you on silver platters as you recline on your chaise lounge taking a respite from your hurried day. After your chocolate indulgence, you decide to linger for your favorite espresso, when suddenly from across the shoppe you see….
To be continued….
As one commenter said, luxury is a different business than mass market. Like Starbucks in its prime, jingles and advertising in general are neither effective nor necessary. The expensive price tag will say it all. More importantly will be the sales outlets they select. Will the typical Nestlé supermarkets be able to reach the right customer or will Nestlé need to open its own boutiques?
It is interesting that Nestlé has waited until now to enter a market that has been booming for some time and has allowed the majors (Hershey, Ghirardelli, Mars) to establish positioning. However, Nestlé’s strategy may prove to be brilliant. It is well known that profits typically go to the company that lets others pave the way in establishing consumer acceptance and desire for a product. Premium chocolate has reached the commodity stage and Nestlé certainly knows how to maximize commodities.
Nestlé will likely brand their premium chocolates with a name other than Nestlé. I think they should both launch their own brand and look to acquire one or more significant names as Hershey did with Dagoba, Joseph Schmidt and Scharffen Berger. Developing their own brand is important so they develop competency in developing and managing premium chocolate. Competency in premium product management is different than competency in mass product management and will make them better stewards of any artisan chocolate brands they may acquire.
I have the feeling that Nestle has enough clout that if it wants to get into the super-premium market, it can find a way in, despite the crowding of the category. And yes, I agree the company should probably have made its move before now, and probably by acquisition.
In fact, I think acquisition is still the way to go.
If I were Nestle, I’d wait for the market to start its consolidation phase, find an attractive candidate (or two or three), and then make my move. With my much stronger capital position, I could turn that brand around, or consolidate the acquired group of brands around the strongest performer and give it the marketing and operations boost it needs to get significant market share and stay competitive over the long term.
In the US, Nestle is not associated with fine chocolates. Their new line of premium chocolates should have a name, branding strategy and core story that differentiate it not only from the competition, but from their current chocolate brands.
Then there will be the battle for shelf space. It will be interesting to see how the #3 player in the chocolate category competes against Mars and Hershey to get their products into stores.
I’m wondering if the market in the US is big enough (incidence compared to Europe). And while I too remember the song (still makes me want some hot chocolate, Anne), the Nestle name should not be prominent on the product–it does not have the cachet in the US for an upscale product.
There is a tendency for everyone to jump into the growth segments of a market. Premium chocolate is clearly growing rapidly and Nestle is looking to take advantage.
We do a lot of work in this category. Right now, Lindt, Ferrero and Ghirardelli have the high ground. Mars has Dove which has a strong position. Hershey has introduced several brands but struggled to find a position. Recently, they introduced Bliss.
Nestle has concentrated on its food business in the U.S. and has been a weak third player in the domestic candy business. They do have the Swiss heritage which should help them in premium chocolate and they certainly have the power to make a strong entry.
However, they may find it is already a little late in the game. Retail shelves are being flooded with more premium chocolate items than the segment can support and it will not be long before the growth starts to cool and attrition sets in.
Sure, I think Nestle can make a success of a premium line of chocolate. And I have no doubt that they will know how to effectively market it. They have an established, respectable name synonymous with quality. A new sub-brand name seems like the most logical way to go. Just try to resist putting rice crisps in everything.
Okay folks, I am going to age myself here, but who remembers the commercial jingle “N – E – S – T – L – E – S, Nestle’s makes the very best – Chocolate”?
My point is simple–they could have owned this at the front end of the premium chocolate trend curve, but didn’t. A great product with a throwback to this ad campaign that so many boomers would remember would have been a no-brainer. I think it’s going to be really hard for them to win mindshare this late in the game.
Nestle has already created a community of affluent coffee drinkers under their Nestle Nespresso brand. Their model for premium chocolate may be slightly different, but their success will be similar.
It is the same customer, and Nestle will leverage that relationship.
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If I were Nestle, whose headquarters are in Vevey, Switzerland, I think I might borrow from Hallmark’s famous slogan and say something like, “When you care enough and have enough money to savor the very best chocolate, select ‘Viva VeVey!’”
The biggest risk for Nestle premium chocolates: the marketing cost. Think about the huge expense of national ad campaigns and shelf space placement (or company-run store locations). Nestle may lose money for years on the high-end brand, or experience ultra-low sales volume. Or both.
I’ve not much to add, except perhaps to expand on Anne’s remarks: I remember the jingle as a parody on “WKRP” performed hilariously by the (underappreciated) Jan Smithers (a.k.a.: Bailey Qarters)… I’m not sure whether that makes me think better or worse of Nestle’s idea but it sure was funny!
Nestle could employ the same boutique strategy as their Nespresso brand. These shoppes are an oasis for relaxing and meeting friends with your favorite espresso.
Just imagine decadent swiss chocolates served to you on silver platters as you recline on your chaise lounge taking a respite from your hurried day. After your chocolate indulgence, you decide to linger for your favorite espresso, when suddenly from across the shoppe you see….
To be continued….
As one commenter said, luxury is a different business than mass market. Like Starbucks in its prime, jingles and advertising in general are neither effective nor necessary. The expensive price tag will say it all. More importantly will be the sales outlets they select. Will the typical Nestlé supermarkets be able to reach the right customer or will Nestlé need to open its own boutiques?
It is interesting that Nestlé has waited until now to enter a market that has been booming for some time and has allowed the majors (Hershey, Ghirardelli, Mars) to establish positioning. However, Nestlé’s strategy may prove to be brilliant. It is well known that profits typically go to the company that lets others pave the way in establishing consumer acceptance and desire for a product. Premium chocolate has reached the commodity stage and Nestlé certainly knows how to maximize commodities.
Nestlé will likely brand their premium chocolates with a name other than Nestlé. I think they should both launch their own brand and look to acquire one or more significant names as Hershey did with Dagoba, Joseph Schmidt and Scharffen Berger. Developing their own brand is important so they develop competency in developing and managing premium chocolate. Competency in premium product management is different than competency in mass product management and will make them better stewards of any artisan chocolate brands they may acquire.
I have the feeling that Nestle has enough clout that if it wants to get into the super-premium market, it can find a way in, despite the crowding of the category. And yes, I agree the company should probably have made its move before now, and probably by acquisition.
In fact, I think acquisition is still the way to go.
If I were Nestle, I’d wait for the market to start its consolidation phase, find an attractive candidate (or two or three), and then make my move. With my much stronger capital position, I could turn that brand around, or consolidate the acquired group of brands around the strongest performer and give it the marketing and operations boost it needs to get significant market share and stay competitive over the long term.
In the US, Nestle is not associated with fine chocolates. Their new line of premium chocolates should have a name, branding strategy and core story that differentiate it not only from the competition, but from their current chocolate brands.
Then there will be the battle for shelf space. It will be interesting to see how the #3 player in the chocolate category competes against Mars and Hershey to get their products into stores.
I’m wondering if the market in the US is big enough (incidence compared to Europe). And while I too remember the song (still makes me want some hot chocolate, Anne), the Nestle name should not be prominent on the product–it does not have the cachet in the US for an upscale product.
There is a tendency for everyone to jump into the growth segments of a market. Premium chocolate is clearly growing rapidly and Nestle is looking to take advantage.
We do a lot of work in this category. Right now, Lindt, Ferrero and Ghirardelli have the high ground. Mars has Dove which has a strong position. Hershey has introduced several brands but struggled to find a position. Recently, they introduced Bliss.
Nestle has concentrated on its food business in the U.S. and has been a weak third player in the domestic candy business. They do have the Swiss heritage which should help them in premium chocolate and they certainly have the power to make a strong entry.
However, they may find it is already a little late in the game. Retail shelves are being flooded with more premium chocolate items than the segment can support and it will not be long before the growth starts to cool and attrition sets in.
Sure, I think Nestle can make a success of a premium line of chocolate. And I have no doubt that they will know how to effectively market it. They have an established, respectable name synonymous with quality. A new sub-brand name seems like the most logical way to go. Just try to resist putting rice crisps in everything.
Okay folks, I am going to age myself here, but who remembers the commercial jingle “N – E – S – T – L – E – S, Nestle’s makes the very best – Chocolate”?
My point is simple–they could have owned this at the front end of the premium chocolate trend curve, but didn’t. A great product with a throwback to this ad campaign that so many boomers would remember would have been a no-brainer. I think it’s going to be really hard for them to win mindshare this late in the game.
Nestle has already created a community of affluent coffee drinkers under their Nestle Nespresso brand. Their model for premium chocolate may be slightly different, but their success will be similar.
It is the same customer, and Nestle will leverage that relationship.