American still have a sweet tooth–good news for chocolate manufacturers like Hershey (HSY) and Mars.
But more problematically, like many other consumer goods categories, shoppers are increasingly turning to online channels to buy their chocolate. And that’s where the industry’s problems arise.
As the Wall Street Journal points out, chocolate companies are struggling to find a way to ship their goods directly to compete with Amazon.com (AMZN). But unlike shipping mass quantities of chocolate to stores–via refrigerated trucks–the industry is forced to ship bulky boxes because a cooling container is often needed to ensure the candy won’t melt. The publication points out a $4.25 bag of Hershey kisses can cost $20.20, before taxes, when factoring in shipping, expedition and a foam cooler with liquid ice packs.
And while online sales of chocolate are increasing, chocolate companies concede pricing remains a top concern while packaging firms are trying to develop a solution to meet the industry’s needs for cold, yet slim, packages.
Take a look at the Easter holiday as an example of why the industry needs to sort this out soon. Americans are expected to spend $17.3 billion for Easter, more than ever before, with $2.4 billion of that on candy. But consumers also indicated they are far more likely to shop online for their Easter goods this year, with as many as 21.4% saying they plan to shop online, according to a survey by the National Retail Federation. Online shopping for Easter only accounted for 11.1% of spending in 2008.
Fortunately, though some spending is gravitating online and high shipping costs may make it difficult for candy makers to compete, the industry is in a position of strength at a time when consumers are saying they want to eat cleaner and healthier foods. Chocolate sales are still a growth driver in the food aisle, up 24% over a five-year period ending in 2014 to total $21 billion in the U.S. The market is expected to reach $25 billion by 2019.
