Growth in Saturated Markets: Dreams in Chocolate and Ice Cream!

Selling chocolate in Europe is tough because growth in saturated markets is tough. Three case studies show how chocolate and ice cream manufacturers grow successfully by diversifying their assortment.

I love summertime, the sun, spending time outdoors, happy people, and everything that comes with it. I love summertime even though my chocolate consumption drops with increasing temperatures. Luckily, I love ice cream too – during summer even more than chocolate. And it looks like I am not the only one. Chocolate manufacturers have long complained about shrinking turnover as soon as the mercury rises above 25 degrees celsius.

Having my obligatory three scoops, I ponder why the big players in the chocolate confectionary business aren’t doing the same to tackle growth in saturated markets as  Zucker und Zimt and Goldhelm, my favourite local ice cream and chocolate places  in Erfurt, the regional capital of Thuringia.

The chocolate business in Europe is tough as the market is saturated and doesn’t grow anymore. An increasing number of market players compete for ever more demanding, sophisticated, and unpredictable consumers. And yet, there are a few interesting success stories in this market: chocolate manufactory Goldhelm, ice cream and chocolate manufactory Zucker & Zimt, and Swiss chocolate manufactory Läderach

growth in saturated markets

Handmade Goldhelm chocolate (Photo: Goldhelm)

Goldhelm Chocolate Manufactory

Trained sign and letter painter Alex Kühn moved into the chocolate business in 2005. With a 10,000 € bank loan he wanted to live his dream of gourmet chocolate with top quality ingredients in Thuringia’s local flavours. It was risky business to enter a market dominated by a few big players serving consumers standard chocolate for 0.99 € per 100 g.  

And it took him and his chocolatier Roland Kraft around five years before the business reached some stability. In the meantime, they developed around 1,000 unique chocolate and ice cream recipes and acquired a big following – not only in Erfurt and Thuringia but across all of Germany. And they proved that it’s possible to sell chocolate at eight times the price of a standard supermarket chocolate in a region with significantly lower income than other German cities and 20% below the average German income.

How did they do this? The first success ingredients were the founder’s passion for good chocolate and direct consumer contact to help him to understand what they like. Alex Kühn started out in a tiny place in a historic building, part of one of the main tourist attractions of Erfurt. Thus, as always in retail, the location was another important success factor.

Developing his own unique, innovative and special recipes, incorporating local flavours, using top quality ingredients and emotionally engaging names for his creations helped too. One of my personal favourites is called ‘Three Nuts for Cinderella’ – named after a famous Czech/German fairytale. Other flavours feed into a local (and tourist) GDR nostalgia, replicating flavours everyone in Eastern Germany knows and loves.

growth in saturated markets

Goldhelm ice cream selection (Photo: Goldhelm)

However, none of this would have worked without an uncompromising strive for top notch quality using premium ingredients. Goldhelm chocolate does not only contain wild cocoa harvested by farmers cooperative Mateo Pumacahaua in Quillabamba, Peru. It also uses much more of this extraordinary ingredient than other chocolate brands do. Goldhelm milk chocolate contains 41% cocoa, and its dark chocolate 73 %. Lindt & Sprüngli, probably the best-known premium chocolate brand, only uses 30% cocoa in its milk chocolate and 48% in its dark chocolate.

Many Goldhelm ingredients are local and homemade. Their ‘Thüringer Rennsteig’ chocolate contains homemade fin spruce liqueur, the Riesling comes from Goldhelm’s own vineyard, and in the near future, organic milk and local fruit will be sourced at their own farm near Erfurt.

This means we can add authenticity, creativity, and local ingredients to the growing list of success factors. Emotionally engaging product names and stories, packaging and marketing that makes you smile contribute too. Goldhelm ticks off most of the current trends in the food industry, they already started living them 13 years ago.

Alex Kühn is on his way to creating a sweet empire made in Erfurt. Besides the historic chocolate shop on Krämerbrücke, he now operates a café nearby where you can indulge in chocolate and sweets as well as in breakfast, lunch, dinner, cakes and ice cream. Speaking of which, he opened an ice cream parlour next to his original chocolate shop where he makes ice cream that interprets his chocolate creations for ice cream lovers using the same top quality ingredients. He opened a store in Leipzig in 2018, and sells his creations to 210 coffeeshops, cafés, restaurants, hotels, chocolate specialty and concept stores across Germany and Austria. Goldhelm currently employs about 80 team members. Pretty impressive for a career changer starting with 10,000 €, an idea and a deep passion for chocolate.

growth in saturated markets

Zucker & Zimt ice cream (Photo: Zucker & Zimt)

Zucker & Zimt Ice Cream Manufactory

While Goldhelm makes my favourite chocolate, Zucker & Zimt is my favourite ice cream manufactory, no doubt about it. Zucker & Zimt is the ice cream section of local artisanal bakery and confectionary Café Moritz in Eisenach. Instead of just adding ice cream to their assortment, the owners decided to give it its own innovative store format.

The ice cream is made from natural, local and seasonal ingredients without artificial flavouring, colouring or additives. The recepis are creative with local Thuringian flavours. They started with a small self-service store at the market square. Like Goldhelm, they found a way to overcome the seasonality problem by selling ice cream and cupcakes during summertime and cupcakes, pralines and chocolate confectionery of the same high quality during wintertime.

confectionary

Zucker & Zimt confectionary (Photo: Zucker & Zimt)

It didn’t take them long to expand into other Thuringian cities, today there are 4 Zucker & Zimt stores and cafés across the region. Another Zucker & Zimt café has appeared right next to the original ice cream parlour and sells cakes, cupcakes, cookies alongside the yummy ice cream. A scoop costs between 1.40 € and 2.00 €, depending on the ingredients, which is quite expensive. Even in Munich (the city with the second highest average income in Germany), it’s tough to find ice cream over 1,80 € per scoop. But the best proof that it’s worth the price is the long queue of ice cream addicts that never seems to vanish.

I do selfishly hope that the success story continues and would love to one day see a Zucker & Zimt store in my hometown Munich.

growth in saturated markets

Läderach’s fresh chocolate boards (Photo: Läderach on Facebook)

Läderach Chocolatier Suisse

Läderach is a family-owned chocolate business founded in 1962 in Glarus, Switzerland. Initially, the company exclusively distributed its products through classic wholesale channels. In 1981, Läderach opened their first own retail store in Glarus.  In 2004, the company took over 40 Merkur confectionary stores to extend the distribution of their products across Switzerland. This was an important milestone as it triggered growth and expansion in production to supply all the new stores with chocolate.

It also triggered a push for innovation for the entire company. The Merkur stores were far too big for Läderach’s existing assortment. It took nine years to expand that assortment in order to fill all that retail space with exclusive Läderach products. And this ‘side effect’ is at the same time one of the success factors and the unique selling proposition of the company: freshness.

growth in saturated markets

Läderach Mini Mousses (Photo: Läderach on Facebook)

The massive retail space allowed a space-intensive presentation of fresh, unpackaged chocolate boards sold over the counter by weight. The result is a stunning chocolate scent in the stores and an impressive display of fresh, hand-made, non-industrial chocolate with a limited shelf life.

And besides pralines and other chocolate confectionary there is a second important product range that communicates the same message: the Mini Mousses, Läderach’s high-quality answer to Storck’s Dickmanns. Mini mousses have limited shelf life too, they have to be indulged within a few days of purchase. That’s a disadvantage in logistics and merchandise availability, but allows the production of the most delicious, fluffy and soft chocolate marshmallow that tastes like hand-made by Grandma. And during strawberry season some of the stores even sell fresh chocolate-covered strawberries.

chocolate strawberries

Läderach’s fresh chocolate strawberries (Photo: Läderach on Facebook)

By now, the third generation manages the company. One brother holds the position of CEO, the other heads  product development and creation, and became the first Swiss chocolatier ever to win the World Chocolate Masters in 2018. Läderach only began promoting their own brand in 2006. Currently, the company operates 65 own points of sale across Switzerland, Germany, the Middle East and Asia, employs 800 staff members, and is situated among the top chocolate manufacturers worldwide.

Building a chocolate mass factory in 2012, producing the main raw material used in its chocolate confectionary, allowed the company to control its entire supply chain. In 2015, Läderach began to introduce a new enterprise resource planning system that allowed them to standardise processes and to backtrack individual products. Läderach cooperates with the Rainforest Alliance, the World Cocoa Foundation and Cabruca, a cooperative of organic cocoa farmers. They support sustainable cocoa farming that is attentive to farmers, human rights and the environment.

Ingredients for Growth in Saturated Markets

Goldhelm, Zimt & Zucker and Läderach have different backgrounds, sizes and growth strategies. But they share a few commonalities that make them successful at growth in saturated markets:

  1. Direct contact with consumers in own stores, cafés, and ice cream parlours. This allows for small-batch testing of new creations and reduces time to market for new products.
  2. Top quality products with the best ingredients
  3. High but fair pricing
  4. Innovative, creative products with natural taste, celebrating their local roots
  5. Hand-made products or semi-automated production, supported by a product design that celebrates different shapes and sizes.
  6. A clear USP and authenticity across the entire business model
  7. A product range that meets seasonal consumer demands
  8.  Sustainability
  9. Control of the entire supply chain

And there are more consumer trends to harness in the chocolate and ice cream business that offer plenty of growth opportunities in this saturated market environment. Think healthy and functional chocolate, low carb, sugar-free, or protein-rich chocolate, and chocolate with amino and lactic acid bacteria.

 


About the Author:

Heike Blank has worked for big organizations such as VF Europe and s.Oliver but also for niche brands such as Ecko Unltd. and Zoo York in top executive positions. Her extensive experience with opening and managing own retail, partner stores, concessions and shop-in-shops in 23 countries in Europe, the Middle East and Asia make her an expert in expansion. Connect with her on LinkedIn and read more of her work here.

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