Austrian Chocolate Market

Content
Content.............................................................................................................................................1

1. Austrian Coffee Market............................................................................................................2

1.1 Introduction............................................................................................................................2

1.2 Market Size and Forecast.......................................................................................................2

2. International business opportunities for a small UK business entering the Austrian market......6

2.1 Target market & positioning..................................................................................................6

2.2 Country Analysis (PESTLE).................................................................................................8

2.3 Industry Analysis (Porter’s 5 Forces)..................................................................................10

2.4 SWOT as a summary to identify opportunities...................................................................10

2.5 Recommendations on how to enter that market..................................................................11

References......................................................................................................................................13
 1. Austrian Coffee Market
1.1 Introduction
Chocolate and chocolate products include all chocolate confectionery with the exception of
biscuits, spreads containing cocoa or white chocolate. This includes primarily chocolate bars,
candy bars and pralines. The five major chocolate manufacturers in the world are Mondelez
International, Mars, Nestlé, Ferrero and Hershey.

Austria is a successful market in the EU. Its geographical location makes it a good centre for
investment in the local market and in the developing markets of Central and Eastern Europe. The
country has a population of just over 8 million and one of the highest per capita incomes in the
EU, yet enjoys the lowest numbers of days lost due to strikes and has Europe's highest
productivity growth rates. Its historic relevance to the area has made Austria a natural conduit for
investment in Central Europe, where it is the largest investor on a per capita basis. This
relationship has allowed for the development of over 15,000 joint venture between Austrian and
Central and Eastern European firms.

1.2 Market Size and Forecast

Chocolate forms an integral part of the global confectionery industry and is widely eaten in most
parts of the world. In 2012, the global confectionery market was valued at US$ 190billion. The
chocolate sector accounted for US$ 105billion of this, having grown by an estimated 25% in
value terms during the years since 2007 (Jonathan Thomas, 2017). In 2016, however, the global
chocolate market has reached a US$332 billion (€266.14 billion). From a consumer perspective,
the chocolate industry faces significant challenges in terms of maintaining its share of grocery
expenditure. The chocolate sector is expected to retain its position as the largest within the global
confectionery market, at least in value terms.

The Austrian Chocolate Confectionery market generated a revenue of US$969m (€776.77

million) in 2017 and it is forecasted to reach US$998m (€800.02 million) in 2018. The market is
expected to grow annually by 3.1 % (CAGR 2018-2021) (Statista, 2017).
In relation to total population figures of Austria (8.74 million persons), per person revenues of
US$113.09 (€90.66) are expected to be generated in 2018, a rise of about $2.79 from 2017
($110.30 or €88.42) (Statista, 2017).
The average volume per person in the market for Chocolate Confectionery amounts to 5.9kg in
2018. As shown in the graph below, in the market for Chocolate Confectionery, volume is
expected to amount to 52.3mkg by 2021 maintaining a volume growth of 0.3 % from 2017 to
2019 (Statista, 2017).
The average price per unit in the Austrian market for Chocolate Confectionery will amount to
US$19.26 (€15.44) in 2018. This maintains a steady growth from $18.75 in 2017.

In the global scene, while the Austrian market may not necessarily compare with the top
countries of the world, its performance is very encourage as it possess very great possibilities to
improve and even compete with the best markets in Europe. Currently, Austria is attractive to
businesses and companies due to the favorably government policies and labor and land
availability.

Within Austria’s wider confectionery market it is chocolate that heads the market share: worth
more than 70%, according to Leatherhead data. In 2011, Austrian confectionery sales across the
country totted up to just over $1 bn (€840 million). However in 2017, the confectionery
generated a revenue of USD $1.425 billion (€1.142 billion) with chocolate accounting for
slightly over 70% to reach its size of US $998 million (Kacey Culliney, 2012).

Austria is a nation well known for its undying love of all things saccharine. In Vienna, the art of
chocolate making is taken seriously and one can find many handmade delights available
throughout the city, and even try your hand at crafting it yourself.

1.3 Competitors
1. Zotter White Poppy Chocolate
2. Confiserie Heindl
3. Gerstner K&K Hofzuckerbäckerei
4. Mozart chocolate
5. Milka Milketten Chocolate
6. Xocolat
7. Demel on Kohlmarkt
8. Josef Manner & Comp. AG
9. Amicelli Chocolate
10. Zotter Chocolate
11. United Chocolates (HEINDL)
12. Lindt Chocolate
13. Patience Chocolate “Victor Schmidt”
14. Panuli Chocolate Mocca Beans
15. Ebner/Hanauer Chocolate
16. Salzburg Schokolade GmbH
17. Leschanz GmbH – Vienna Chocolate Factory
18. Schlosskaffee Family Fenkart KG
19. Rosenauer Wiener Schokolade Apple Strudel Chocolate
20. Rosenauer Viennese Imperial Chocolate
21. Wenschitz Chocolate
22. Bachhalm Chocolate Macchiato Orange
23. Ovomaltine Chocolate
2. International business opportunities for a small UK business entering the Austrian
market
Within Austria’s wider confectionery market it is chocolate that heads up the market share;
worth more than 70% (Kacey Culliney, 2012).

Market Share of Confectioneries in Austria

10%

8%

Chocolate products
Sugar confectionery
12% Cookies
Ice Cream

70%

In comparison with the UK chocolate market, penetration of dark and or premium chocolate
products is traditionally higher in Austria, like nearby countries such as France, Germany and
Switzerland. Chocolate continues to be the traditional favorite form of confectionery in Austria
and represents a stark challenge for manufacturers looking to penetrate the country’s sector
(Kacey Culliney, 2012).

2.1 Target market & positioning

The target market and positioning of the brand of coffee in Austria will be along these 4 targets:

 Age, gender, education, profession, family situation, income

 Personality, values, preferred activities
 Behaviors towards the purchase of chocolate, perception of chocolate, use of chocolate
 Geographic location

The segment aimed as target segment will be people living in Vienna. Target customers will be
in age group of year 10 to approximately 44. Children below 10 are essentially not part of the
target segment because it requires awareness to choose healthy food items for which reason
children above year 10 are selected. The age limit selected till 44 is for the reason that above this
age group most people are suffering from heart and diabetic deceases thus for them at a later
stage diet or low sugar items shall be introduced.

Target segment will be constituting of students and working class. An ideal Austrian chocolate
consumer may possess the following characteristics:

 25 – 40 years old
 Male and Female individuals
 Bachelor Degree/Master
 Middle Manager/Freelance
 Singles or couples
 Shop in organic/specialty stores
 Prefer dark Chocolate
 See chocolate as a healthy treat
 Are concerned about ingredient list and look at the label/certification

Price is an important factor in consumer choice. Austria is experiencing a paradigm shift

whereby price has become the focus instead of quality or the personal relationship between the
buyer and seller. Another important value that the Austrian consumer places in items is the
precision of use and efficiency.

Income per capita in Austria is high and the average consumer tends to be well-off, sophisticated
and highly diverse in his or her interests and tastes. Austrian prices are amongst the highest in the
EU due to the small population, high tax rate and high GDP per capita.

The chocolate brand forecasted to sell most are organic, direct-trade, bean-to-bar dark chocolate.
2.2 Country Analysis (PESTLE)
Austria is a landlocked country located in Central Europe, bordering European countries such as
Hungary, Slovakia, Germany, Slovenia, and Italy. Like the entire continent, the Austrian
economy was greatly affected by the global financial crisis that began in 2008-2009. The
Austrian economy grew moderately in 2011, and the country achieved good growth due to its
economic reforms, currency appreciation, and huge inflow of Foreign Direct Investment (FDI).
The Austrian economy is expected to reach $427 billion by 2018 with a good growth over the
next five years (Lucintel 2013).

The PESTLE chart is presented below:

Political factors: Economic factors:

 Excellent trading policies with EU
countries and the top nations of
 the world
 Austrian Market is easily a target for
funding, grants and initiatives
 Home market lobbying/pressure groups
 Absence of war and visible conflicts
 Government leadership and policies
 Internal political issues and growing
concerns about international companies
dominating the local market.
Social factors:
 Consumer attitudes and opinions
 Brand, company, technology image
 Consumer buying patterns
 Major events and influences
 Ethical issues
 Demographics (age, gender, race, family
size,)
 There is a good living standard in Austria
and chocolate consumption is an active
part of the lifestyle for people (within
ages 10 – 44)
 Austria has amazing economy that
supports and help indigenous businesses
grow
 General taxation issues
 Taxation changes specific to
confectionery market in Austria
 Seasonality/weather issues affect the sale
of chocolate products in Austria
 Market and trade cycles
 The exchange rate is excellent for UK
companies entering Austrian Market
(1GBP = 15.6ATS)
 Import/export ratios is relatively high
 Production level of chocolate is currently
at an acceptable level, forecast to improve
over the next few years.
Technical / technological factors:
 Competing technology development
 Associated/dependent technologies in the
production of chocolate has continued to
improve.
 High adoption rate of technological
growth has influenced consumer buying
mechanisms as more sales have been
recorded online in recent times.
 Possible health issues and ignorance are
bad for the growth of the market.
Legal factors: Environmental factors:
 There is possibility of future legislations This segment discusses the environmental
to limit foreign companies. factors that influences Austria’s Chocolate
 Current legislation of home chocolate market. They are:
market  Environmental issues
 Austria is a friendly nation for o International
international companies, this can be seen o National
in the number of international expansions o Local
that have extended to the country.  Environmental regulations
 Environmental regulations  Global factors
 Employment law  EU based factors
 Consumer protection

2.3 Industry Analysis (Porter’s 5 Forces)

Porter's 5 Forces for Austria Chocolate

Market
Supplier Power
5

Rivalry Buyer Power

Threat of Substitutes Threat of New Entrants

Force Product Assessment
1- Increase the number of the suppliers.
2- Supplier does not pose a threat of forward integration
Supplier Power 3- Undifferentiated raw materials (coca, nuts and etc).
4-The importance of the supplier products to the industry ( NO
Substitute)

1- Increase the volume of the buyers.

Buyer Power 2- Low switching cost.
3- lack of threat of backward integration

1- High initial capital is required

New Market 2- Need special requirements and regulation for the food industry.
Entrants 3- Wide range of products needs experience and knowledge.
4- Complicated supply channels.

1. The threat of substitute produces in the chocolate industry are high.

Substitutes 2. Threat of non- chocolate snacks, chips and fruits.

The industry's intensity of rivalry among competitors is high because

of:
1- Advertising battle
Competitive Rivalry 2- price wars.
3- Huge range of flavors.
4- Required high quality.
5- High fixes costs and storage.
2.4 SWOT as a summary to identify opportunities
Internal Strengths: Weaknesses:
 Strong demand for confectionery: the  The local chocolates are not
market has grown consistently at around export quality i.e. while they are
5% every year for the last four years. greatly appreciated by the people,
 Good brand position and quality which they do not usually taste as good
is consumer favorites as blends and flavors in other
 There is strong partnership with countries. This is why a lot of
retailers. international chocolate companies
 Developing good skills, process and have leverages in the Austrian
ways of working. Chocolate Market
 Price are such that they are affordable  Packaging is not attractive
and in the range of everyone’s purchase.  Chocolate varieties are limited
 Stores are available in almost every  Technological development of the
market market is still at an infant stage.
 More emphasis on sales promotion
External Opportunities: Threats:
 Market can be expanded graciously to  Many big players have major
other locations and states position in the market like
 Increase personal relationship with Cadbury Nestle etc
customers  In peak times, public purchase
 Increase product range as: generally branded chocolates and
o Jellies local manufacturers are ignored
o Toffees  Excessive competitions as a result
o Bars of huge investments on
o Lollipops advertisement by other brands.
o Gums
o Unsweetened baked chocolates

2.5 Recommendations on how to enter that market

There are several ways of entering the Austrian market. One option is to export directly to the
Austrian market and it might be advisable to find a local partner.

Another possibility would be to appoint a local distributer which will provide a direct access to
the Austrian market including all market knowledge. In Austria personal relationships are very
important. This requires an investment primarily of time and personal presence. Likewise,
product training for the agent's workforce is essential, as are regular updates on developments,
modifications, competitor activity etc. Therefore regular visits to the market, especially during
the early phase, are an important part of a successful interaction with the agent/distributor.
One option to enter the Austria market is to purchase an existing Austrian company. Finally
companies can also form a joint venture with an Austrian company or work under an Austrian
license agreement. Most British companies who decide to establish in Austria, including those in
the service sector, do so either by founding a 100 per cent subsidiary or by taking over an
Austrian firm.

Setting up a business in Austria is physically very easy. There is plenty of office and industrial
space available, both for short and long term let. There are however certain legal restrictions
which need to be overcome where the intention is to found a company on a permanent basis.
Apart from the requirement to register the company that also involves the need to pay surety to
the government, there is also the need to satisfy Austria's strict "Gewerberecht". These laws lay
out the professional requirements needed by business in order to operate on the Austrian market.
In certain areas it is often easier to ensure that the head of the business is an Austrian national
with the appropriate qualifications rather than attempt to have UK or other non-Austrian
qualifications approved, which can be a lengthy process.
References
Statista, 2017. Chocolate Confectionery. Retrieved from
https://www.statista.com/outlook/40100100/128/chocolate-confectionery/austria# (January
2018).

Jonathan Thomas (2017). The global chocolate confectionery market. Retrieved from:
https://www.researchgate.net/publication/314292970_The_global_chocolate_confectionery_mar
ket [accessed Feb 02 2018].

Lucintel. 2013. PESTLE Analysis of Austria 2013. Retrieved from

http://www.lucintel.com/pestle-of-austria-2013.aspx (January 2018).

Robert D. Hoffmann (2010). A family owned chocolate bar producer on the global market. Food
Industry: Structure and economy, The University of Copenhagen (25-10-2010).

Kacey Culliney (2012). Scope to develop Austria’s dark chocolate sector. Retrieved from
https://www.confectionerynews.com/Article/2012/09/21/Scope-to-develop-Austria-s-dark-
chocolate-sector-analyst (January 2018).