Six scenarios that could disrupt the confectionery market

By Beate Rosenthal and Nicolas Wüthrich

The confectionery market has enjoyed robust growth in the DACH region, at 5.1% CAGR between 2020-24, according to Euromonitor, but most of this was value growth. Expectations are for limited dynamics and a slowdown based on shifting consumer behavior and continued ingredient and labor cost challenges. We have identified a series of disruptive scenarios that could shift the market in either direction and therefore demand strategic foresight. In a series of interviews with CEOs of confectionery manufacturers in the DACH region, it became clear that the level of preparedness for those scenarios varies.

Across companies, most scenarios were confirmed, with differences in terms of the businesses' ability to proactively address key challenges and get prepared. The first three scenarios are expected to be the most likely, according to market experts.

1. Climate change impact on the ecosystem and supply chains: Extreme weather events and crop failures are becoming more frequent and are considered a high risk across the agriculture value chain, creating spikes and increasing volatility, for instance in cocoa, flavors, and more recently hazelnut, for confectionery companies. Early value chain integration and long-term contracts can only partly compensate, and analytics-heavy hedging has become a key skill.

We evaluate the relative preparedness of confectionery players as medium, driven by the substantial differences between companies able to hedge and effectively pass on price increases, as well as replace ingredients, e.g. with the help of ChoViva chocolate alternative.

2. AI-driven business models: Artificial intelligence has the power to transform everything, from R&D to marketing and supply chain management. Companies that invest in AI capabilities can achieve higher margins, better revenue impact with personalization, faster innovation cycles and stronger operational efficiencies. According to our study “GenAI-driven transformation”, only 28% of consumer goods & retail companies are AI-mature. Successful players are setting a strong basis, moving from decentralized experiments to scalable solutions and putting COE teams and governance in place.

We assess the relative preparedness of confectionery players as low to medium here. The biggest barriers today are internal AI capabilities, e.g. at the level that retailers require and a culture fostering experimentation and upskilling. In many companies, systematic scaling and governance are still in their infancy beyond supply chain automation and marketing experimentation.

3. Social selling and marketplaces: Gen Z's shopping habits are shifting toward social commerce platforms, with 53% of consumers buying products on social media in 2024, with ever more influencers and creators driving purchasing decisions. After launching in Germany, TikTok is now among the top 25 e-commerce stores, and food is one of the top platforms on TikTok shopping in established TikTok markets. Many confectionery brands in Germany are actively leveraging social media and creators in communication, while social shopping still lags behind other markets.

This leads to a medium level of preparedness for this scenario among German confectionery players, who have somewhat limited experience with new channels, especially at management level. Success will hinge on systematic influencer marketing and cooperations and business-case-driven decision making.

4. Hyper-regulation and taxation: While the regulation level for food has always been high, public health concerns are further impacting the industry, with countries across the world taking different directions. While Latin America stands out in labeling regulation, the recent MAHA (Make America Healthy Again) initiatives in the US against ultra-processed foods and artificial additives, as well as advertising restrictions in countries such as the UK, add pressure. In the EU, the short-term regulation impact might be lower, but any company with an international footprint needs to proactively address regulatory necessities. Many companies are already rethinking and diversifying their portfolios, and leveraging data and AI to better foresee regulation in product development.

We evaluate the relative preparedness of confectionery players as high, with companies having sufficient expertise to evaluate regulatory scenarios and, in many cases, the entrepreneurial agility to adjust.

5. Weight loss drugs becoming the norm: The widespread adoption of GLP-1-based weight loss drugs is a relevant scenario that is reducing demand for many indulgence-positioned categories. In Germany, the GLP-1 market is expected to quadruple by 2030. Research suggests that appetite suppression, reduction of food cravings, and fasting satiety could lead to reduced consumption by GLP-1 users of -6% on annual food spending, with a disproportionately high impact on confectionery and snacking. Industry reactions include reportioning and labeling certain meals as GLP-1 friendly.

We assess the relative preparedness for this somewhat less likely scenario as very low, with many confectionery general managers lacking research among this specific consumer group.

6. Automated manufacturer–retailer interfaces: Advanced technologies are increasingly changing buyer–supplier relationships, automating negotiations, assortment and shelf planning, and inventory management. While this brings efficiency and waste reduction, it also risks reducing visibility, especially for smaller brands, and shifting power dynamics in the value chain. Proactive companies are automating and replacing manual forecasting and adjusting organizational – and especially commercial – team structures toward their own points of difference.

The relative preparedness of German confectionery players for this rather less likely scenario is low unless category captaincy experience has led to shifts in the organization and, accordingly, advanced data use.

Specific to the German market, additional scenarios to consider relate to skilled labor shortages, especially in production, the role of the somewhat underserved and undermarketed aging and ethnically diverse population, and the general lack of German and European competitiveness in respect of energy, labor costs and bureaucracy.

Strategic call to action: Preparing for the future

All in all, potential market disruptions can have a massive impact on confectionery players in Germany, impacting the P&L mostly negatively. We can already see signs of further market consolidation, mostly driven by international corporates.

What does it take for confectionery companies to succeed in an ever-uncertain future?

• Being bold on strategic foresight, ensuring clarity on own differentiation strategy and scenario planning
• Proactively reformulating portfolios and products, keeping the balance between taste as #1 priority and indulgence and healthy positionings
• Embracing digital and AI with robust data and technology infrastructures and a robust mix of experimentation, scaling and governance
• Collaborating across the value chain for more agility and resilience, fostering partnerships internally and externally

The confectionery industry finds itself at a pivotal moment. By anticipating disruptive scenarios and acting decisively, market leaders can turn risks into opportunities and continue to delight consumers in a rapidly changing world.

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