Israel's Chocolate Sales in a Funk as Parents Grow Anxious About Sugar

Even the iconic Milky brand suffers a decline, but the biggest casualty has been Tnuva’s upstart Yolo

Adi Dovrat-Meseritz
Adi Dovrat-Meseritz
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Workers at the Strauss factory holding "Milky" product in Karmiel, in 2018.
Workers at the Strauss factory holding "Milky" product in Karmiel, in 2018. Credit: Avi Ohayon
Adi Dovrat-Meseritz
Adi Dovrat-Meseritz

Are Israelis losing their taste for chocolate desserts?

Sales of products like Milky, the best-selling chocolate pudding, have been in a funk for the last three years. Sales of all chocolate desserts are down 3.1% so far this year in unit terms and 2.4% in shekel terms, according to data from the retail research firm StoreNext. That follows a year of stagnant growth in 2018 and a 3.8% drop in 2017.

Chocolate desserts, a category with annual sales of about 435 million shekels ($126 million), are only one of only two categories of dairy products to show no growth this year – the other is milk-based drinks that are usually chocolate flavored.

Nearly every chocolate dessert product has seen sales drop off. StoreNext, which bases its figures on actual sales at supermarket chains, found that Milky sales had fallen 2.5% so far this year. That’s relatively modest, although with nearly half the market, it amounts to a large decline in shekel terms.

Strauss’ popular Dany dessert saw sales drop 11.4% in shekel terms while its Splendid chocolate bars – a line it introduced just three years ago – have seen sales plunge 43.3%. Overall, Tnuva, Israel’s biggest dairy maker, has suffered the worst drops: Sales of its puddings Carlo, Buddy and Maadan Tnuva are down 7%, 5.8% and 22.6% respectively.

Industry sources say the reason for the decline in health related, since the products include large amounts of sugar.

“In the 1970s, Strauss marketed Dany to mothers with the slogan, ‘For him [your child] it’s Dany – for you it’s milk,’ meaning the products were something healthy. Nowadays parents realize that this isn’t right and it’s just a sweet,” said one executive who asked not to be named.

Unexpectedly, sales of sugary snack products and chocolate candy remain strong, apparently because when Israelis want to indulge in something unhealthy, they prefer a straightforward snack. “The dairies now need to convince consumers to buy [desserts] as a sweet,” said in the industry executive.

The market trend in Israel mirrors similar developments in other developed economies. Consumers have abandoned brands and even entire food categories, such as milk, once seen as household staples. Last week Dean Foods, the largest milk company in the United States, filed for bankruptcy protection.

The chocolate downturn has been especially punishing from Tnuva’s perspective because it has left its Yolo dessert teetering on the brink of failure. Launched last March amid great fanfare by the company and an investment in product development and marketing in the tens of millions of shekels, Yolo was designed to challenge market leader Milky.

Before Yolo reached the stores, Milky controlled 92.8% of the 220 million shekel sub-market for desserts with whipped cream. At its peak, right after launch, Yolo captured as much as 16% of the market, pushing Milky’s share to a mere 80%.

But the success was short-lived as apparently many consumers tried it once and then returned to Milky. Strauss, meanwhile, slashed the price of Milky to just 2.50 shekels a container, while Yolo’s price was raised from an initial 3 shekels to 3.67 shekels today. Eight months, later Milky has a 90.8% share versus Yolo’s 2.8%, StoreNext figures show.

Combined with its other dessert products, Tnuva still lifted its overall shares of the dessert products market by six percentage points to 23.7%.

Strauss remains the leader with 60.8%, despite a 4.5-point drop. Tara, the distant No. 3 dairy, saw its total shares increase half a point to 10.2%.