Kraft, Nestlé look to invest in Israel as domestic chocolate demand grows, demand in traditionally strong markets such as U.S., Europe remains slow; Israel's chocolate market expected to grow 5%-10% in value terms during 2012, researcher says

LOS ANGELES , March 28, 2012 () – International confectionary manufacturers including Kraft Foods Inc. and Nestlé SA are looking to invest in Israel as domestic chocolate demand grows at a time when demand in traditionally strong markets such as Europe and the U.S. has remained slow, The Wall Street Journal reported March 27.

Due to its geographical location, Israel could also provide international confectionary manufacturers with a toehold in the Middle East.

According to market researcher Leatherhead Food International, Israel’s chocolate market is expect to grow 5%-10% in value terms during 2012. Over the last five years, the market increased nearly 40% on the same terms. At present, the Israeli chocolate market accounts for only 1.5% of total global demand.

Leatherhead analyst Jonathan Thomas said that international confectionary manufacturers could be bolstered by recent allegations that Strauss Group Ltd., the market leader in Israel, has been overcharging consumers for its products. Earlier this month, a consumer group reported Strauss to Israel's antitrust authorities for overcharging on its chocolate products.

Ika Cohen, who owns an Ika chocolate boutique located in Tel Aviv, Israel, largely attributed the increase in the Israeli chocolate demand to two main factors: “health and indulgence,” both of which have proven to be relatively resilient despite the global economic downturn.

Thomas said that both Kraft and Nestlé are targeting the Israeli market as a way to move into the Middle East region.

Kraft Foods’ Israel division said that it had increased its domestic product range in 2011. In addition, Kraft indicated that it has long-term plans to expand its Israeli business through its Milka brand and other products.

In February, Nestlé purchased an additional 4.99% stake in Osem Investments Ltd., an Israeli food maker, bringing its total holdings in the company to 58.76%. Since 1995, Nestlé has been Osem’s controlling shareholder

Rabobank Senior Soft Commodities Analyst Keith Flury indicated that there is a strong relationship between cocoa-product consumption and the growth of a country’s gross domestic product (GDP).

During the last three months of 2011, Israel's GDP grew 3.2%, according to Israel’s central statistics office. Israel’s central bank expects that the country’s GDP will increase 4.2% in 2012, upping an earlier expectation of 4%. The bank warned, however, that this expected growth rate is contingent upon a continuing global economic recovery and the stability of Israel's geopolitical situation.

The primary source is The Wall Street Journal, New York, New York, on March 27, 2012.

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