Cadbury, the giant of New Zealand chocolate manufacturing, has had a tough few years.

Back in 2009 the firm raised the ire of Kiwi consumers when - in a cost-cutting exercise - it trimmed its chocolate block sizes by 50g and replaced cocoa butter with cheaper, environmentally dubious palm oil.

What had been intended as a strategic response to the onset of the global recession turned into a public relations disaster.

Under a barrage of consumer complaints, Cadbury was forced to cease its use of palm oil, which has been blamed for fuelling rainforest destruction in countries such as Indonesia and Malaysia.


The palm oil controversy came on the back of a major restructuring within the company that resulted in 268 workers in Auckland and Dunedin losing their jobs and the firm's Avondale factory closing.

After the closure, manufacturing of Minties was outsourced to Thailand, which reportedly changed the taste and texture of the iconic chewy lolly, and the firm's decision to halt production of the much-loved Snifters brand provoked some consumer discontent in 2008.

By 2010, the company had lost its title of "New Zealand's most trusted brand", which it had held for the previous six years according to an annual Readers Digest NZ survey, sliding way down the list to 36th place.

But managing director Alastair de Raadt, who took the helm of the Cadbury's New Zealand operation last year, reckons the company has overcome the brand damage caused by the palm oil debacle and is well-positioned for future growth.

"I base that on our market shares, which I think did dip in 2009, but our market shares have come back," de Raadt says.

That's something the company's biggest competitor in that space - locally owned Whittaker's, which claims to hold a 33-per-cent share of the block market - disagrees with.

"I think we're gaining ground on them," says Philip Poole, the Porirua-based company's marketing manager. "I'd be surprised if [Cadbury] didn't see us as a threat given that we've taken a bit of their market share of the block market and in the share pack market."

And he reckons chocolate lovers haven't forgotten Cadbury's palm oil blunder.


"There was a huge shift from Cadbury to Whittaker's and the great thing about that was the majority of people stayed with Whittaker's."

De Raadt admits that Whittaker's is a strong competitor.

"There's no doubt about it - it's a competitive marketplace and we need to stay on our toes."

Poole says Kiwi consumers like the fact that Whittaker's is locally owned, as opposed to the foreign-owned multinationals like Cadbury - which was acquired by New York-listed Kraft in 2010 - and Nestle, which also claims to be gaining traction in the block chocolate market.

Maurice Gunnel, manager of corporate services at Nestle New Zealand, says the firm increased its share of the block market from 3.5 per cent to 7 per cent last year as a result of innovation around its Milky Bar brand and improved distribution.

But while manufacturers are welcoming growth in the chocolate market, they say ingredient costs are still a challenge, despite the considerable drop in commodity prices that has taken place over the past year.

Early last year, Gunnell said Nestle had seen a 400-per-cent increase in its cocoa costs over the previous two years.

At that time a political crisis in the Ivory Coast, the world's biggest cocoa producer, had pushed international prices of the crop to over US$3200 ($3918) a tonne.

"We try to absorb what we can but last year the increases were of such a magnitude that we had to pass some of it on," Gunnel says.

De Raadt says 2010 was very difficult - Cadbury posted an $896,000 loss that year on revenue of $274 million, according to documents lodged with the Companies Office.

However, he says the firm grew both revenue and profits in 2011 and is now back in the black. The company carried out another restructuring last year that focused on its sales force and created a national, rather than regional, sales structure.

He says about 25 sales staff lost their jobs in the changes.

The latest restructuring, which also involved outsourcing the work around Cadbury's in-store product displays, improved productivity within the business, he says.

"That's been really important to get the company to a much stronger position financially, because it's only through that you can turn around and invest in your brands and invest in innovation."

The release of Cadbury's Dairy Milk Mousse was a huge success last year - the product already represents about 5 per cent of the $100 million block chocolate market, de Raadt says, adding the firm's 50 per cent share of the block category is holding firm.

Internal restructuring has allowed Cadbury to absorb most of the input cost increases, but he says the prices of some products went up in line with the rate of inflation last year. Ingredient costs remain high compared with four years ago.

"We've not made a decision yet as to what will happen with prices this year," de Raadt says.

Whittaker's is in the process of raising its prices but Poole couldn't say by how much.

De Raadt says it's hard to say if ingredient prices - which are being driven by international demand, particularly in booming emerging markets like China - will drop back to lower levels.

"There's always cost pressure there, without a doubt. The extent of it ... is hard to pick right now."

Chocolate industry players in Europe have been warning that major cocoa shortages, resulting from increased chocolate consumption in China, will become inevitable unless farmers of the crop improve growing techniques to boost bean production.

Some have suggested a cocoa cultivation area the size of the Ivory Coast needs to be created to compensate for the growth in demand.

"There's quite a bit of discussion that world demand [for cocoa] coming out of South Asia and East Asia will grow significantly over the next decade and that'll put pressure on primary material supplies."

De Raadt says Cadbury's parent company, Kraft, is working with cocoa farmers to try to address the problem.

* NZ confectionery market including seasonal products: $490m
* NZ chocolate market including seasonal products: $315m
* NZ block chocolate market: $100m
* NZ Easter egg market: $28m
Source: Cadbury
Warm weather takes edge off Easter egg sales

Warm weather has made for a tough job selling Easter eggs this year, Progressive Enterprises says.

Wayne North, the supermarket operator's category manager for seasonal products, says another challenge has been the fact that Easter is taking place two weeks earlier than last year, leaving less time for sales.

And a later scheduling of the holiday, closer to winter, boosts Easter egg sales as consumers tend to buy more chocolate during colder weather, he says.

North says that as of Wednesday, Easter egg sales at Countdown supermarkets were about 2 to 3 per cent lower than last year.

But consumers are increasingly leaving seasonal shopping to the last minute, he says, and there is a good chance of a late sales spike today.

Cadbury managing director Alastair de Raadt says the company, which holds an 80 per cent share of the $28 million New Zealand Easter egg market, has seen 5 to 6 per cent growth in its sales of Easter products this year.

Pulling off Easter is quite a logistical challenge for Cadbury, he says, with manufacturing of the products beginning in August.

"We've worked really closely with customers on the logistics because it's a bit of a mad scramble," he says.

"You've got to get all of that stock into the trade early, at the start of the year - it's a very small window."