Chocolate Industry in India

Check out more papers on Brand Chocolate Economic Growth

Summary “An Analytical Study of Chocolate Industry in India with Special Reference to Cadbury’s India” is a sweet CHOCOLATE story of chocolates in the hot and humid plains of INDIA, which enlightens us about the size & status of chocolate industry in India. The project gives information about the competitors, their market share, and their product basket and highlights success features. The project also presents data on types & categories of chocolates, a brief study of chocolate manufacturing process The project also covers a brief study of Cadbury’s India Limited – the biggest player in the Indian Chocolate Industry with reference to its presence, market share, product offerings, marketing strategies, strengths & weaknesses, success factors and Worm Controversy Management.

Also, the implication of pricing, distribution strategies and impact of external environment has been recorded. The project throws light on problems and challenges of the Indian Chocolate Industry, growth opportunities and strategies to be adopted for growth in this industry. Finally, the project gives information about home-made chocolates and Chocolate Boutiques and the ways in which Indian consumers and Chocolate players are experimenting and innovating chocolates and giving the Indian Chocolate Industry a new sweetness. Table of contents Sr. No Topic Page No 1 Project Objective 6 2 An Overview of Chocolate Industry in India 8 3 Types of Chocolates 12 4 Categories of Chocolates & Form of Consumption 14 5 Chocolate Manufacturing Process 15 6 Market Size (by value & by volume) 16 7 Major Players & their Market Share 17 Cadbury’s India Limited – A Study 18 9 Cadbury & The Worm Controversy 37 10 MARKETING – PROMOTION of CHOCOLATES in INDIA 46 11 Nestle India 50 12 Amul (GCMMF) 53 13 CAMPCO 59 14 Home-made Chocolates 62 15 Interesting Chocolate Facts 63 16 Problems & Challenges in Indian Chocolate Industry 64 17 External Factors affecting Growth of Chocolate Industry in INDIA 66 18 Growth Opportunities in Indian Chocolate Industry 67 19 Strategies for Growth & Success in India 69 20 Chocolate Boutiques & Designer Chocolates 70 21 Conclusion 72 22 Bibliography 73 Project Objective This project aims at understanding the overall Chocolate Industry in India, the product portfolios of different players in the market, various factors affecting the growth and success of chocolate industry in India, the challenges and opportunities which the market offers and the changing trends in the Indian Chocolate Industry. The project also covers a brief study of Cadbury’s India with reference to above points. An Overview of Chocolate Industry in India The chocolate industry in India as it stands today is dominated by two companies, both multinationals. The market leader is Cadbury with a lion’s share of 70 percent. The company’s brands (Five Star, Gems, Eclairs, Perk, Dairy Milk) are leaders their segments.

Till the early 90s, Cadbury had a market share of over 80 percent, but its party was spoiled when Nestle appeared on the scene. The latter has introduced its international brands in the country (Kit Kat, Lions), and now commands approximately 15 percent market share.

The Gujarat Co-operative Milk Marketing Federation (GCMMF) and Central Arecanut and Cocoa Manufactures and Processors Co-operative (CAMPCO) are the other companies operating in this segment. Competition in the segment will get keener as overseas chocolate giants Hershey’s and Mars consolidate to grab a bite of the Indian chocolate pie. Per Capita Chocolate Consumption (in lb) of first 15 countries of the world Rank Countries Per Capita Consumption (in lb) 1 Switzerland 22. 36 2 Austria 20. 13 3 Ireland 19. 47 4 Germany 18. 04 5 Norway 17. 93 6 Denmark 17. 66 7 United Kingdom 17. 49 8 Belgium 13. 16 9 Australia 12. 99 10 Sweden 12. 90 11 United States 11. 64 12 France 11. 38 13 Netherlands 10. 56 14 Finland 10. 45 15 Italy 6. 13 INDIA, stands nowhere even near to these countries when compared in terms of Per Capita Chocolate Consumption. The Indian chocolate industry is extremely fragmented with a range of products catering to a variety of consumers. We have the bars/slabs, jellies, lollipops, toffees and sugar candies. Given India’s mammoth population, it comes as a surprise that per capita chocolate consumption in the country is dismally low – a mere 20 gms per Indian.

Compare this to over 7 kgs in most developed nations. However, Indians swallowed 22,000 tonnes of chocolate last year and consumption is growing at 10-12 percent annually. The market size of chocolates was estimated to be around 16,000 tonnes, valued around Rs. 4. 16 billion in 1998. Volume growth which was over 20% pa in the 3 years preceding 1998, slowed down thereafter. Both chocolate and sugar confectioneries have abysmally low penetration levels, in fact, even lower than biscuits, which reach 56 per cent of the households. Market growth in the chocolate segment has hovered between 10 to 20%. In the last five years, the category has grown by 14-15% on an average and will expect it to continue growing at a similar rate in the next five years. The market presently has close to 60mn consumers and they are mainly located in the urban areas. Growth will mainly come through an increase in penetration as income levels improve.

However, almost all of this consumption is in the cities, and rural India is nearly ‘chocolate-free’. But the fact is that three quarters of Indians live in Rural Areas. “Average summertime temperatures reach 43 degrees Celsius in India. Chocolate melts at body temperature of 36 degrees. ” Per capita consumption of chocolates in India is minuscule at 20gms in India as compared to around 5-8 kgs and 8-10 kgs respectively in most European countries. .. Awareness about chocolates is very high in urban areas at over 95%. … Growth of other lifestyle foods such as malted beverages and milk food have actually declined by 3. 7 per cent and 11. 7 per cent, however the CHOCOLATES continue to grow at the rate of 12. 6%. Low priced unit packs, increased distribution reach and new product launches can be said to have fuelled this growth. The launch of lower-priced, smaller bars of chocolate in the last two years and positioning of chocolate as a substitute to traditional sweets during festivals, have boosted consumption. This is also because chocolate, which was considered to be an elitist food, has caught the fancy of buyers looking for a lifestyle item at affordable cost. Till recently, chocolate consumption had been restricted by low purchasing power in the market.

Chocolates and other cocoa-based snack foods were looked upon as food suitable only for the well-off. After economic liberalization in 1991, major changes have occurred in food habits, partly on account of rise in gross domestic product (GDP) growth and higher purchasing power in the hands of the middle-class representing a third of the total population. Availability of chocolate products has also exploded. A study had projected that sales of the Indian chocolate industry would rise from $125/$130 million in 1998 to $175/$180 million by the year 2000 and to $450 million by the year 2005 which ACTUALLY happened irrespective of various negative factors. Per capita chocolate consumption continues to be low at about 200g per person, being mainly consumed in urban areas. In the middle and higher income groups, 70 per cent of children, 43 per cent of young adults and 16 per cent of adults consume chocolate. Chocolate Consumption Structure – 2004 Children 55% Adults 12% Young Adults 33% Chocolate & Confectionery Market of India – 2004 Chocolate Counts Rs. 250 Cr. 10% Chocolate Bar Rs. 350 Cr. 14% Mints & Chew ing gums Rs. 325 Cr. 13% Sugar Boiled Confectionery Rs. 1600 Cr. 63% AC Nielsen ORG Marg report estimates the Indian Chocolate Industry’ worth at Rs 2,000-crore (Rs 20 billion) Types of Chocolates Depending on what is added to (or removed from) the chocolate liquor, different flavors and varieties of chocolate are produced. Each has a different chemical make-up, the differences are not solely in the taste. 1. Unsweetened or Baking chocolate is simply cooled, hardened chocolate liquor. It is used primarily as an ingredient in recipes, or as a garnish. 2. Semi-sweet chocolate is also used primarily in recipes. It has extra cocoa butter and sugar added.

Sweet cooking chocolate is basically the same, with more sugar for taste. 3. Milk chocolate is chocolate liquor with extra cocoa butter, sugar, milk and vanilla added. This is the most popular form for chocolate. It is primarily an eating chocolate.

Cocoa is chocolate liquor with much of the cocoa butter removed, creating a fine powder. It can pick up moisture and odors from other products, so you should keep cocoa in a cool, dry place, tightly covered. There are several kinds of cocoa ? Low-fat cocoa has the most fat removed. It typically has less than ten percent cocoa butter remaining. ? Medium-fat cocoa has anywhere from ten to twenty-two percent cocoa butter in it. ? Drinking or Breakfast cocoa has over twenty-two percent left in it. This is the cocoa used in chocolate milk powders like Nestle’s Quik. ? Dutch process cocoa is cocoa which has been specially processed to neutralize the natural acids in the chocolate. It is slightly darker and has a much different taste than regular cocoa. Decorator’s chocolate or confectioner’s chocolate isn’t really chocolate at all, but a sort of chocolate flavored candy used for things such as covering strawberries. It was created to melt easily and harden quickly, but it isn’t chocolate. Categories of Chocolates Commercial Chocolates are available in the following forms: 1. Bars or Moulded Chocolates 2. Counts 3. Panned Chocolates (Gems) 4. ?clairs 5. Assorted Chocolates Bars or moulded chocolates (like Dairy Milk, Truffle, Amul Milk Chocolate, Nestle Premium, and Nestle Milky Bar) comprise the largest segment, accounting for 37% of the total chocolate market in volume terms. .. Wafer chocolates such as Kit-Kat and Perk also belong to this segment. Panned chocolates accounts for 10% of the total chocolate market. … Wafer chocolates such as Kit-Kat and Perk also belong to this segment. .. Form of Consumption a. Pure Chocolates b. Toffees c. Cakes & Pastries d. Malted Beverages e. Wafer Biscuits & Baked Biscuits f. Chocolate Desserts Chocolate Manufacturing Process Workers cut the fruit of the cacao tree, or pods open and scoop out the beans. These beans are allowed to ferment and then dry.

Then they are cleaned, roasted and hulled. Once the shells have been removed they are called nibs. Nibs are blended much like coffee beans, to produce different colors and flavors. Then they are ground up and the cocoa butter is released. The heat from the grinding process causes this mixture of cocoa butter and finely ground nibs to melt and form a freeflowing substance known as chocolate liquor. From there, different varieties of chocolate are produced.

What is conching? Raw unprocessed chocolate is gritty, grainy and really not suitable for eating. Swiss chocolate manufacturer Rudolph Lindt discovered a process of rolling and kneading chocolate that gives it the smoother and richer quality that eating chocolate is known for today. The name ‘conching’ comes from the shell-like shape of the rollers used. The longer chocolate is conched, the more luxurious it will feel on your tongue. Market Size (by value & by volume) The Indian chocolate market is valued at Rs. 650 crores (i. e. Rs. 6. 50 billion) a year.

The Indian chocolate bazaar is estimated to be in the region of 22,000-24,000 tonnes per annum, and is valued in excess of US$ 80 million. Chocolate penetration in the country is a little over 4 percent, with India’s metros proving to be the big draw clocking penetration in excess of 15 percent. Next, comes the relatively smaller cities/towns where consumption lags at about 8 percent. Chocolates are a luxury in the rural segment, which explains the mere 2 percent penetration in villages. The market presently has close to 60mn consumers and they are mainly located in the urban areas. Major Players & their Market Share The major players in the Indian Chocolate Industry are: 1. Cadbury’s India Limited 2. Nestle India 3. The Gujarat Co-operative Milk Marketing Federation (GCMMF) – AMUL 4. Cocoa Manufactures and Processors Co-operative (CAMPCO) Bars Count Lines Wafer Panned Premium Cadbury’s Dairy Milk & Variants 5-Star, Milk Treat Perk Gems, Tiffins Temptation & Celebrations Nestle Milky Bar Bar One, Crunch Kit Kat, Munch Nutties Amul Milk Chocolate Fruit ‘n’ Nut FUNDOO Bindaaz Almond Bar Campco Campco Bar, Cream Krust, Turbo Treat Cadbury’s India Limited – A Study CADBURY’S INTERNATIONAL Cadbury is a very old trusted name. It all started in Birmingham in England when John Cadbury started his family grocery shop with side business of cocoa and chocolate products in around 1824. His two sons, Richard and George, expanded their family business of cocoa and chocolate. Bournville, a town near Birmingham, was build by them as a part of expansion of their business.

Cadbury family is also known for their contribution in social reforms and considered as liberals. This family was in the forefront of adult education movement in England. CADBURY’S INDIA LIMITED Cadbury was originally incorporated as a wholly owned subsidiary of Cadbury Schweppes Overseas Ltd (CSOL) in 1948. The company’s original name was Cadbury Fry (India) Ltd. In 1978, CSOL diluted its equity stake to 40% to comply with FERA guidelines. In 1982, the name was changed to Hindustan Cocoa Products. CSOL’s shareholding was increased to 51% in Jan ’83 through a preferential rights issue of Rs700mm. The current name was restored in Dec ’89. In 2001, Cadbury Schweppes made an open offer to acquire the 49% public holding in the company.

The parent holds over 90% of the equity capital after the first open offer. A second open offer has been made to buyback the balance shareholding, after which the company would operate as a 100% subsidiary of Cadbury Schweppes Plc Ever since the Cadbury is in India in 1947, Cadbury chocolates have ruled the hearts of Indians with their fabulous taste. The company today employs nearly 2000 people across India. Its one of the oldest and strongest players in the Indian confectionary industry with an estimated 68 per cent value share and 62 per cent volume share of the total chocolate market. It has exhibited continuously strong revenue growth of 34 per cent and net profit growth of 24 per cent throughout the 1990’s. Cadbury is known for its exceptional capabilities in product innovation, distribution and marketing. With brands like Dairy Milk, Gems, 5 Star, Bournvita, Perk, Celebrations, Bytes, Chocki, Delite and Temptations, there is a Cadbury offering to suit all occasions and moods. Today, the company reaches millions of loyal customers through a distribution network of 5. 5 lakhs outlets across the country and this number is increasing everyday. OBJECTIVES AND VALUES Our objective is to Grow shareholder value? over the long term Cadbury in every pocket Our marketing strategy is aimed at achieving this vision by growing the market, by appropriate pricing strategy that will create a mass market and to have offerings in every category to widen the market Our Managing For Value Process incorporates Setting stretched financial objectives. Adopting Value Based Management for major strategic and operational decisions and business systems. Creating an outstanding leadership capability within our management.

Sharpening our company culture to reflect accountability, aggressiveness and adaptability. Aligning our management rewards structure with the interests of our shareowners. VISION Life Full Of Cadbury Cadbury is an organisation which impacts and interacts with the consumers. Cadbury is present in most happy occasions in the life of our consumer. Our brands excite our consumer. Cadbury is an expression of a consumer’s life.

Cadbury Full Of Life Cadbury as a company is vibrant. Cadbury ia a fun and energising workplace. Cadbury is robust and alive. Business Cadbury dominates the Indian chocolate market with above 65 – 70 % market share.

Besides, it has a 4% market share in the organized sugar confectionery market and a 15% market share in milk/ malted foods segment. Changing product mix Contribution to turnover 1994 Contribution to turnover 2001 Chocolate 59% 65% Sugar Confectionery 9% 10% Food Drinks 32% 24% Categories/ Brands Chocolate Bars , Count lines , Panned confectionery , Wafer chocolates, Assorted Chocolates & Gift Chocolates Sugar Confectionery Googly , Mocka, Gollum, Frutus & Nice Cream Food Drinks Bournvita, Delite & Drinking Chocolate Cadbury’s Indian operations are not just the largest in Asia but also the cheapest. In India, Cadbury has the largest market share anywhere in the world and has been the fastest growing FMCG Company in the last three years with a compound annual growth rate of 12. 5 per cent. Plant locations Cadbury’s manufacturing operations started in Mumbai in 1946, which was subsequently transferred to Thane. In 1964, Induri Farm at Talegaon, near Pune was set up with a view to promote modern methods as well as improve milk yield. In 1981-82, a new chocolate manufacturing unit was set up at the same location in Talegaon. The company, way back in 1964, pioneered cocoa farming in India to reduce dependence on imported cocoa beans. The parent company provided cocoa seeds and clonal materials free of cost for the first 8 years of operations.

Cocoa farming is done in Karnataka, Kerala and Tamil Nadu. In 1977, the company also took steps to promote higher production of milk by setting up a subsidiary Induri Farms Ltd near Pune. In 1989, the company set up a new plant at Malanpur, MP, to derive benefits available to the backward area. In 1995, Cadbury expanded Malanpur plant in a major way. The Malanpur plant has modernized facilities for Gems, Eclairs, Perk etc.

Cadbury also operates third party operations at Phalton, Warana and Nashik in Maharashtra. These factories churn out close to 8,000 tonnes of chocolate annually. Raw Material Composition in 2004 Product Name Quantity (in Kgs) Cost (Rs) / Ut Total Cost (in Rs. ) Milk Powder / Liquid Milk / Cream 26232610 15. 79 414212911. 9 Dry Fruits 432340 162. 6 70298484 Edible Oil 2167450 51. 72 112100514 Glucose-Liquid 27061090 13. 17 356394555. 3 Cocoa Beans / Butter/ Powder 8478460 109. 95 932206677 Malt Extract 8679690 20. 39 176978879. 1 Total 2062192021 Cadbury’s India Limited Raw Material Composition in 2004 (in Rs. ) Malt Extract 9% Cocoa Beans/ Butter/Powder 46% Edible Oil 5% Dry Fruits 3% Milk Powder/ Liquid Milk/ Cream 20% Glucose-Liquid 17% FINISHED PRODUCTS DETAILS (as on 2004) Product Name Stock (%) Production (units) Sales Qnty (units) Sales (Rs. Cr. ) Chocolates / Coated Wafer & Confectionery 58. 57 23810373 22064912 518. 51 Malt Foods (Jar/Refill/Tin) 22. 02 3206253 3030579 194. 97 Excise duty 13. 69 – – 121. 23 Confectionery- Hard Boiled 4. 04 4425758 4023276 35. 79 Cocoa powder (Tin/Bags) 1. 7 33312 29904 14. 78 Total 99. 99 31475696 29148671 885. 28 Cadbury’s India Limited Finished Products – Sales Revenue – 2004 (in Rs. Crores) Cocoa powder (Tin/Bags) 2% Confectionery- Hard Boiled 4% Excise duty 14% Chocolates/ Coated Wafer/ Confectionery 58% Malt Foods (Jar/Refill/Tin) 22% Cadbury’s India Limited Sales in Rs. Million Years 1998 1999 2000 2001 Sales 3354 3892 4324 4716 Sales 3354 3892 4324 4716 0 1000 2000 3000 4000 5000 98 99 00 01 Years Rs. Million PRODUCT MIX – CHOCOLATES PRODUCT BASKET Category Brand Variants Bars Dairy Milk Plain Fruit n Nuts Double Decker Roasted Almond Chunky 5-Star 5 Star Count Lines 5 Star Chrunchie Milk Treat Chocolate Orange Wafer Chocolate Perk Perk Perk XL Other Chocki Mint, Strawberry & Chocolate Premium/ Gift Chocolates Temptation Rum, Cashew, Almond & Orange Celebrations Various Gift Packs Cadbury’s Dairy Milk (CDM): Cadbury’s Dairy Milk is the flagship brand of Cadbury’s not only in India but world wide. CDM is the single largest selling unit in India. It has annual sales to the tune of Rs 200 crore. CDM not only accounts for 30 per cent of the total chocolate market in value, but commands nearly 26 per cent in volume terms and close to 30 per cent of Cadbury’s annual turnover. Moving from a predominantly adult positioning in the days of the legendary dancing girl ad, to the teens and the tweens, when the Cyrus Broacha ads hit the airwaves, CDM has made a long sweet journey. In spite of the new categories being explored by Cadbury, its star brand remains Cadbury Dairy Milk (CDM) which continues to corner almost 30 per cent of the chocolate market. Cadbury’s Temptation: Cadbury’s Temptation is premium chocolate brand aimed for high value consumption.

Various variants available are Almond, Rum, Cashew & Orange. Cadbury’s temptation is priced at Rs. 40 Cadbury’s Celebration Cadbury India launched its premium Celebrations range, which contains traditional Indian dry fruits wrapped in Dairy Milk chocolate. This gifting option combines the pleasure of giving away dry fruits – which Indians traditionally consider a premium, healthy gift – with chocolate. Cadbury now has 90 per cent market share in this profitable segment. PRODUCT REVAMPING & INNOVATIONS Cadbury’s chocolate brands registered double-digit growth in 2002, touching an astounding 19 per cent in the second half of that calendar year. Getting the power brands right was the first priority, so genuine re-launches of the products were made. However, the growth rate was declining after that.

The growth went down from 19 per cent in 1999 to 12 per cent in 2000 to single-digits, with seven per cent in 2001. If it staged a smart recovery to nearly 10 per cent in 2002, it was largely on the back of Chocki and the revamped power brands. PRODUCT INNOVATIONS: ? 5 STAR: Consumer feedback suggested that the old 5 Star was too chewy, and people complained of it sticking to their teeth. It was made softer and melted easily in the mouth & introduced as 5 Star Crunchy ? PERK: Perk was made much lighter and the size of the bar increased to match Nestle’s Munch. Perk had been under fire from Nestle’s deadly duo of KitKat and Munch, but after the relaunch, its marketshare is two per cent more than KitKat’s. And, the five-year-old brand is now almost as big as the decades-old 5 Star in size, both in the region of Rs 50-55 crore. ? HEROES: Packaging innovation has played a vital role in revamping of various Cadbury’s brands. Heroes brand is simply a multi-pack with miniatures of all its most popular brands in a single outer case. NEW PRODUCT LAUNCHES Rich Dry Fruit Collection For Gifting Festive Season Cadbury Celebrations’ Rich Dry Fruit Collection – a range of premium chocolate gift boxes. Available in attractive packs, the Collection caters to a premium gifting consumer and is an ideal festive gift. It is a unique combination of the best Cadbury chocolate and premium dry fruits and comes in four different formats each of which is a mix of select premium dry fruits enrobed in rich Cadbury Dairy Milk chocolate. Cadbury’s Creative Launch A new ‘after dinner’ segment Cadbury Desserts “for sweet moments after dinner” “Khaane Ke baad Kuch Meetha Ho Jaye”. Rs. 20/- per packet of 44 gms Cadbury Dairy Milk (CDM) Desserts – with rich indulgent cr? e center, in exotic & traditional flavors of Tiramisu and Kalakand. CDM Desserts offer the perfect rounding off taste, after meal that adds special ‘Meetha’ moments to the family.

The rich tastes of CDM combined with the unique cr? me center in exotic flavors provide a special chocolate experience. CDM Desserts add delight to the after-meal moments, especially with the consumers whose current choice of sweets range from home made delicacies to fruits to meethai. PRICING After the roaring success of Nestle’s Munch and Chocostick, Cadbury’s empire struck back hard. The Rs 5 price point accounts for more than half of all chocolate sales. Nestle had seized the initiative at this price point, with its launch of Munch, now a roaring success (and the largest selling product at that price point). Today, Cadbury has four products at this price point: CDM, Perk, 5 star and Gems – and the five-rupee CDM bar is its single largest-selling SKU. “This is a potent price point in India, because the average purchasing power is abysmally low,” is what industry analyst have to say. Nestle kicked off one of the biggest success – the liquid chocolate category with its brand Chocostick priced at Rs. – three months ahead of competition. Cadbury did react with Chocki, priced at Rs 2, expanding the concept of sachetisation to new frontiers. Chocki has been the single biggest growth driver for Cadbury as well as the entire chocolate category.

The novelty of the format endeared itself to the existing customer. In less than one year, it constituted nearly 10 per cent of the total chocolate market, split equally between Cadbury and Nestle. Volume led growth strategy Cadbury has followed a well-planned strategy of fuelling volume growth by introducing smaller unit packs at lower price points. Simultaneously, the company seems to have astutely juggled with the larger pack sizes and raised prices to a degree higher than what appears at face.

The strategy has driven volumes in the last two years and we expect the volume growth to continue in the next two years. PRICE WOES Chocki, selling at a potent price point of Rs 2, was ideal for smaller towns, especially since it did not need refrigeration. But Chocki started to cannibalise other higher-priced chocolates in larger markets. The students of Bombay Scottish (an upmarket school in Mumbai) are not supposed to eat Chocki, they should not have even heard of the product. Distribution Chocolate needs to be distributed directly, unlike other FMCG products like soaps and detergents, which can be sold through a wholesale network. 90% of chocolate products are sold directly to retailers.

Distribution, in the case of chocolates, is a major deterrent to new entrants as the product has to be kept cool in summer and also has to be adapted to suit local tropical conditions. Cadbury’s distribution network used to encompasses 2100 distributors and 450,000 retailers. The company has a total consumer base of over 65 million. Besides use of IT to improve distribution logistics, Cadbury is also attempting to improve distribution quality. To address the issues of product stability, it has installed VISI coolers at several outlets. This helps in maintaining consumption in summer, when sales usually dip due to the fact that the heat affects product quality and thereby offtake. To avoid cannibalization of its higher priced products from lower priced ones, Cadbury is setting up two separate distribution channels – one for CORE business & other for MASS markets, with different stockists, wholesalers and retailers.

One set will be dedicated to Cadbury’s high-end products and traditional chocolates. The other will cater to the mass market brands namely Chocki, Halls, Eclairs et al – all products priced below Rs 3. But today, Cadbury’s distribution network reaches out to six lakh outlets each for its chocolate & confectionery brands (i. e. total reaching12 lakh outlets). Promotion Typically it is said that chocolates are being eaten when everyone is happy. And this is something advertising has always portrayed. But it is found chocolates are eaten under diverse conditions and moods – when people are anxious, when they are sad, when happy – a whole range of emotions. Condensing these views & thoughts, it can be said chocolate is a true soul mate. Someone who is with you through the ups and downs of life, helping you bounce back.

And that’s what Cadbury’s Dairy Milk (CDM) positioned itself as – a special friend. % Share of various Brands Ad spending of Cadbury Here, the 6 Cadbury brands shown in the graph comprise 85% of the advertising pie, whereas, rest of the 9 brands advertised by Cadbury comprise 15% of the advertising. Cadbury Dairy Milk Chocolate is the most advertised brand (with 22%). RE-INVENTING CABDURY Kya Swad Hai Zindagi Mein” redefined the way Indians looked at Cadbury Chocolates. (The commercial showed a beautiful young lady overcoming all obstacles on the cricket ground, crossing boundary, watchman, securities and embracing her lover who won the game by hitting a six). This theme introduced in around mid 90’s bought instant growth to Cadbury’s Dairy Milk. The Ad campaign ran successful for about four years and immersed deeper inside hearts of Indians. In March 2002, Cadbury launched its next advertisement campaign for its flagship chocolate brand, Cadbury’s Dairy Milk (CDM). The campaign featured a television (TV) commercial that was significantly different from the company’s earlier commercials for the brand. It featured Cyrus Broacha interviewing college students and asking why they liked to eat CDM. This was followed by college students ‘singing’ their excuses for eating CDM. Just as the commercial seems all set to end with the students and Cyrus singing the famous CDM theme, ‘Khane Walon Ko Khane Ka Bahaana Chaahiye’ (those who want to eat, will find excuses), a student comes up and questions Cyrus, The advertisement aimed at conveying the idea that no specific occasion is required for consuming CDM. This was a significant departure from CIL’s strategy of appealing to adults in India, who sought a rational justification for indulging in chocolate consumption. Cadbury roped in Preity Zinta for its PERK brand. Preity Zinta’s angelic dimples laid the foundation for what would become the Indian teenager’s favorite snack.

After this campaign, PERK’S sale surged Cadbury’s advertising has, over the past few years, aptly reflected India’s passion for chocolates. CADBURY ADVERTISEMENTS Dil ko jab kushi choo jaye… “… kuch meetha jo jaye.. ” Akhir barvi pass ho hi gaya. ” kuch meetha jo jaye.. Log Cadbury Kyon Khate Hai?. Khaane waalon ko khaane ka bahaana. ” Cadbury’s Dairy Milk?.. Asli swad zindagi ka CADBURY DESERTS “khaane ke baad kuch meetha ho jaaye. ” CADBURY CELEBRATIONS Looking wistfully at a photograph, Mr. Bachchan thinks, he recollects the photo-shoot when he had thrown the cap off his friend’s head. Aaj dil ne socha yun, kissi apne ko kya doon? Jo usse kahe tum apne ho, .jo apne aap mein khaas ho, o sirf taufa nahin ehsaas ho Jisme rishto ki mithas ho?. Cadbury’s Celebrations Rishto ki Mithas Cadbury And The Worm Controversy The discovery of worms in some samples of Cadbury’s Chocolate in early October 2003 created one of the biggest controversies in India against a Multi National reputed for being a benchmark of QUALITY. The controversy created an deep adverse impact on the company with their sales not only drastically dipping down, but at the same time allowing the competitors to establish their foothold and taking maximum advantage of Cadbury’s misfortune. The controversy, and the adverse publicity received in several countries, set back its plan of outsourcing model which would have resulted in significant revenue generation, several months back.

The “worms’ controversy” came at the worst time?. the next few months were the peak season of Diwali, Eid & Christmas. Cadbury sells almost 1,000 tonnes of chocolates during Diwali. In that year, the sales during festival season dropped by 30 per cent. The company saw its value share melt from 73 per cent in October 2003 to 69. 4 per cent in January 2004. In May, however, it inched up to 71 per cent. CDM sales volumes declined from 68 per cent in October ’03 to 64 per cent in January 2004 Clearly, the worm controversy took a toll on Cadbury’s bottom-line. For the year ended December 2003, its net profit fell 37 per cent to Rs 45. 6 crore (Rs 456 million) as compared with a 21 per cent increase in the previous year.

However, Cadbury’s reiterated that all through the 55 years of leadership in India, that it has remained synonymous with chocolates and have remained committed to high quality and consumer satisfaction. ” CABDBURY’S FIGHT-BACK ‘Project Vishwas’ “Steps to ensure quality & regain the confidence” Following the controversy over infestation in its chocolates, Cadbury India Ltd unveiled ‘Project Vishwas’, a plan involving distribution and retail channels to ensure the quality of its products. The company’s team of quality control managers, along with around 300 sales staff, checked over 50,000 retail outlets in Maharashtra and replaced all questionable stocks with immediate effect. The Vishwas programme was intended to build awareness among retailers on storage requirements for chocolates, provide assistance in improving storage conditions and strengthen packaging of the company’s range of products. Cadbury reduced the number of chocolates in its bulk packets to 22 bars from the present 60 bars. These helped stockists display and sell the products “safely and hygienically” 190,000 retailers in key states were covered under this awareness programme. The Big ‘B’ FACTOR The big factor that has pushed up CDM sales is the Amitabh Bachchan campaign. It helped restore consumers’ faith in the quality of the product. In early January, Cadbury appointed Amitabh Bachchan as its brand ambassador for a period of two years. The company believed that the reputation he has built up over the last three decades complements their own, which was built over a period of 50 years.

Yet, the entire credit of recovery could not be attributed to the brand mascot. Incisive action taken by the company also helped. Some of which were: 1. Responded to consumers concern over the issue rapidly. Also, the communication campaign worked effectively in giving out the central message. 2. The packaging was changed to include a sealed plastic wrapper inside the outside foil. Cadbury’s launched a new ‘purity-sealed’ packaging for its flagship product, Cadbury Dairy Milk.

The packaging is in response to foreign bodies, notably worms, being found in its products. Over the next few weeks Cadbury will work towards introducing either a heatsealed or a flow-pack packaging that offers a high level of resistance to infestation from improper storage. 3. New advertising & promotion campaigns were in place which accounted for an Ad spend of nearly Rs 40 crore (Rs 400 million) Cadbury invested nearly Rs 25 crore (Rs 250 million) this year on new machinery for the improved packaging. Addressing his audience, Mr. Bachchan says, “Mujhe aapse kuch kehna hai, jis kaam mein manushya ki antar aatma uske saath na ho, uss kaam ko karne se usse sab kuch mil sakta hai… man ki shaanti nahin mil sakti. Isliye jab Cadbury walon ne mujhe kaha ki unki baat main aap tak pahunchaoon, to pachpan saalon se Cadbury khaane wala main bhi thoda sa hitchkichaya…. … Maine unse ek sawaal poocha,ki kya iske baad main chain ki neend so paoonga ya nahin, to jawaab mein voh mujhe apni factory le gaye. ” Walking into the Cadbury factory, e takes a look at their complete manufacturing process and continues, “Aur mujhe apni international technology…. apne kade quality controls aur double protection… … packaging dikhayi. ” Saying which he takes a bite of the chocolate. Finally giving his personal assurance and approval he says, “Aaj kal mein badi chain ki neend so raha hoon. ” “Ab aapki favourite Cadbury Dairy Milk naye purity seal pack mein. ” CADBURY’S SINGING SWEETLY AGAIN All is well that ends well. And for Cadbury’s India, nothing can be sweeter than Regaining Back the Consumer Confidence. Thanks to quick action taken to recover the damage done by the worm controversy like Operaion Vishwas, adopting new packaging & massive advertising with Mr. Amitabh Bachchan as their brand ambassador, Cadbury’s regained its market share.

The survey conducted by the company says that consumers have long forgotten the controversy and are back to their merry chocolate-chomping ways. Sales were back to the precontroversy levels.

Consumer confidence in the product was back and there was a steady progression in sales . The company posted a high double digit sales growth in that year end. The recovery began in May 2004 when Cadbury’s value share went up to 71 per cent. Hires AT Kearney to curb costs Cadbury India appointed management consultancy firm AT Kearney to draw up a strategy to control costs in several areas, including sourcing of raw materials and packaging. This was partly an outcome of the worms’ controversy more than a year ago. Among other things, it changed the wrappers for its Cadbury Dairy Milk brand and introduced better coolers.

The consultancy firm will also look at the sourcing of direct and indirect materials like renegotiating with suppliers for longer term contracts and vendor management. Other costs (indirect expenses) like travel costs and hotels were also being studied. In other words, Cadbury is trying to reduce the cost per stock keeping unit (SKUs, or packs). The aim is to improve efficiencies. Earnings sensitivity factors Cocoa bean prices: Domestic as well as international prices of key raw material – cocoa have significant impact on margins. Excise duties : Changes in excise levied on malt and chocolate influences end product prices and thereby volume growth as well as margins. Changes in custom duties and foreign exchange fluctuation: As 20% of raw material is imported, changes in custom duties & foreign exchange fluctuations have significant impact on the final cost of the product. Competition from MNCs like Nestle as well as imported brands. Increasing competition puts pressure on advertisement budget and margins.

However on the positive side, it helps in expanding the market. Success factors of Cadbury’s India Limited 1. Global management processes: India occupies a high profile position in the global organization, with advocates in regional and global headquarters. Global management has allowed the local operation a high degree of flexibility in growing the business, understanding that asset utilization may be lower and returns slower to arrive, but expecting volume share to compensate for lower margins in the long run. 2. Local management processes: The Cadbury India team is all-Indian and has a deep understanding of local market dynamics. The business is set in a way that highlights localization across all facets – driving the belief that the only way to succeed in India is by developing localized business models. For example, the company tailored the chocolate formula in India to prevent melting in the country’s open-air high frequency store environment. 3. Customized business models: Local management has set up systems to test and develop products from the ground up with specialized interlinked cells that execute innovation and market testing hand-in-hand. Cadbury India is known as a key product innovator.

Besides Dairy Milk, the entire Cadbury product portfolio in India has been developed locally to suit Indian consumer tastes. Packaging, marketing and distribution have all been tailored to local market conditions. . Royalty Structure: Royalty to Cadbury Schweppes Plc. , is around 1 per cent of the turnover. But with that, the company gets unlimited access to latest technology, new products and so on. They can also introduce new products from the parent, if it is suitable for Indian market. 5. Subtle reengineering of raw material mix led to cost savings: Cadbury has reduced its dependence on cocoa, thus lowering its exposure to volatile raw material prices as well as cutting costs. It appears that they have subtly altered its recipe by using less of costlier cocoa and more of milk and sugar. Cadbury’s launch of Perk has also contributed significantly in reducing the proportion of cocoa in the overall raw material mix. Consequently, Cadbury saved about Rs. 94mn (1. 8 percent of net sales) in FY1999. MARKETING – PROMOTION of CHOCOLATES in INDIA Traditionally, chocolates were always targeted at children. But stagnancy in growth rates made the companies re-think their strategies.

Cadbury was the first chocolate company that took the market by storm by repositioning brands at adults, as opposed to children. I BUYING BEHAVIOUR Chocolates are consumed as indulgence and not as snack food, as prevalent in western countries. Almost 75% chocolates are impulse purchases.

Chocolates are bought predominantly by adults and gifted to children. On an average the wholesalers sells Rs50000/month of Chocolates (all brands included). Also the wholesaler usually deals in all kinds of FMCG goods, Foodstuff in addition to the chocolates. The items like chocolates are placed near the counter. Chocolates are kept in cardboard boxes and are also delivered in the same. … In a few of the cases the chocolates were kept separately (as per equipment provided by the manufacturer – e. g. VISI Coolers), In addition to marketing promotions companies have been focusing extensively on the promotions by the sales staff. Also the companies can devise there marketing strategies that are catering to specific segments and are thus more effective. II NATURE OF RETAIL OUTLET Chocolates are primarily sold through Kirana Stores, Gift stores, Medical Stores, canteens, Pan-Bidi stores, Bakeries, Sweet Shops etc.

This is true for chocolates also. The space allocated for the chocolates was less when compared to the total area of the shop. Of the space allocated for chocolates, Cadbury brands occupied more than Nestle brands. The chocolates category thrives on excitement. It’s all about giving the consumer a choice and taste which they enjoy. III STOCKING OF THE PRODUCTS In most of the cases, various brands of chocolates are kept together. In some of the cases the chocolates are stocked depending on the manufacturer’s provision. The chocolates are kept in Glass Jars and boxes – These are provided by the respective companies along with the product. The chocolates are kept there. But in most of the cases chocolates are stocked near the counter. Ideally the shopkeeper tries to keep chocolates within the reachable (sitting on the counter) distance.

Chocolates are kept at or below the eye level. This is to facilitate visibility of the chocolates for the customer who is visiting the store. Medium size retailers sell chocolates of about Rs. 400 – Rs. 800 per week while big retailers sell chocolate worth Rs1000 or more per week. CHOCOLATE ADVERTISING IN INDIA Growth of Chocolate Advertising on Television: Year 2003 – 2004 Company-wise Ad Spending The graph shows that Cadbury’s India Ltd. tops with 52% share of the advertising pie on television. Nestle India Limited grabs the 2nd position with 34% share, whereas, Parle Products gets the 3rd position with 8% of the advertising share.

Chocolate Ads shift focus from KIDS to YOUTH Indian chocolate market is almost totally depended on purchases of kids. In recent times, the chocolate majors, Cadburys and Nestle took major initiatives to bring in grown-ups into this market. While Cadbury is trying to sell indulgence to adults, Kit Kat is selling ‘ritualistic’ break to teenagers/ young adults. This is reflected in the changing advertising patterns across different channels. Out of 100 channels, eight channels account for 40 per cent of chocolate advertising. This pack of eight is headed by Cartoon Network, which is obvious, since the main buyers of this product category are children. But heavy advertising on channels like MTV, MAX, Star Plus, Zee, Zee Cinema, Discovery and Channel [V] proves the changing profile of the potential consumer for the advertisers, in this category, from children to teenagers/young adults as well as adults. NESTLE INDIA Background Nestle India was promoted by Nestle Alimentana, Switzerland, a wholly owned subsidiary of Nestle Holdings Ltd. , Nassau, Bahama Islands.

Nestle is one of the oldest food MNC operating in India, with a presence of over a century Nestle has a presence in 83 countries worldwide. It has a total number of 509 factories out of which 220 are located in Europe, 153 in America and 136 in Africa, Asia and Oceania The Swiss food giant has been in India for 90 years, with six manufacturing plants, 3,500 employees and almost $500 million in sales in 2002. Business Nestle has a presence in the following categories – Baby Food, Milk products, Beverages (Coffee, malted beverage), Chocolates & confectionery and other processed food products. Chocolates & Confectionery Nestle forayed into chocolates & confectionery in 1990 and has cornered a fourth share of the chocolate market in the country.

Chocolates contributes 14% to Nestle’s turnover. It has expanded its products range to all segments of the market. In fact, Nestle is the fastest growing company in chocolates in India. The Kitkat brand is the largest selling chocolate brand in the world. Other brands include Milky Bar, Marbles, Crunch, Nestle Rich Dark, Bar-One, Munch etc. New launches such as Nestle Choco Stick and Milky Bar Choo were made at attractive price points to woo new consumers. The company introduced two new brands, Charge and Crunch, in 1998. The company has discontinued products Chocostick, as it did not add value to the its portfolio.

Nestle achieved roaring success by grabbing the Rs 5 price point. From Jan – Sep ’05, Nestle chocolates witnessed a growth of 14. 8 per cent. New Product Introduction & Innovations The Company sustained momentum during the year by driving distribution through innovative consumer promotions and trade offerings and supporting key price points. High temperatures are a typical characteristic of Indian subcontinent. Chocolate starts melting at such high temperatures thus making chocolate unfit for consumption.

Hence, Nestle introduced an innovative LIQUID CHOCOLATE – CHOCO STICK at a price tag of Rs. 2/- which was in instant hit. NESTLE MUNCH, which is the largest selling unit in the wafer segment and the most widely distributed, continued to gain in volumes. NESTLE CHOTU MUNCH, which was launched at Rs. /- price point, was well received. A range of other innovative and renovated products were launched which included NESTLE Milk Chocolate, NESTLE Fruit & Nut, NESTLE Krunchy, NESTLE MILKYBAR STARZ, NESTLE CHOO, NESTLE Chocolate Eclairs, NESTLE Coffee Eclairs and various flavours for CHOCOSTICK, NESTLE CHOCOLATE PRODUCT PORTFOLIO NESTLE MAHAMUNCH A ROARING SUCCESS NESTLE MAHA MUNCH Ruk Na Paye?? Ruk Na Paye Nestle MAHA Munch? only Rs. 5 Amul (GCMMF) The Rs 2,748-crore GCMMF is in chocolate segment since quite some time. However, its market share is just 5% and the company did not look aggressive till recently. Amul chocolates used to come in not so attractive packages and very little marketing effort was seen. But things have changed and for good. Amul is now an important player in this growing chocolate industry. It has firmed up its measures with marketing and new product launches and revamping its packaging.

Amul just recently launched new chocolate brands in the market – Rejoice, Kite Bite and Nuts `bout You. Cadbury’s Worm Controversy & AMUL The breakup of Cadbury’s worms’ controversy accelerated & facilitated Amul’s marketing efforts. The direct impact of Cadbury’s loss was Amul’s GAIN. In Mumbai, which accounts for almost 10 per cent of the Rs 650 crore (Rs 6. 50 billion) a year chocolate market in India, the company raised its market share from 2 per cent in the beginning of October 2003 (time when worm controversy broke) to 15 per cent by the end of the month. The company sold nearly 20 tonnes in Oct 2003 in Mumbai, against only 2 tonnes in Oct 2002 20 % overall growth of Amul’s chocolate share can be purely contributed to the Cadbury’s worm controversy. In an attempt to boost sales, the company launched three new chocolates in Mumbai under the brands Fundoo, Bindaas and Almond Bar. While the first two were been priced at Rs 10 for a 30 gm stick, Almond Bar carried a price tag of Rs 10 for a 35 gm chocolate. Launch of Cooking Chocolate Though, cooking chocolate is available in the market, it is offered only as a commodity, not as a branded product. The Gujarat Co-operative Milk Marketing Federation (GCMMF), owner of the brand Amul, is strategized to capture a lion’s share in the chocolate segment by tapping the hitherto untouched sub-segments with the launch of its new brand Amul Chef in July 2003, making it the first ever branded cooking chocolate to be made available in the Indian market. The `premium’ variant of the cooking chocolate was priced at Rs 110 for 500 grams and the `classic’ variant was priced at Rs 100 for 500 grams.

Amul targeted various segments with its new product, including housewives from SEC A and B households, caterers, bakeries, restaurants, biscuit manufacturers, ice-cream parlours, and confectioners. Amul also aimed to capture a market share of 20 per cent in the first two months in Delhi and Mumbai.

The market size of cooking chocolate in Mumbai and Delhi alone is estimated at 50 tonnes per month. Brand New Products & Packaging to push Chocolate Business Amul revived its chocolate business with new products and renewed packaging. The company launched Chocozoo brand of chocolates in December 2004, to target the age group of four to 14 years. Besides introducing new products in the chocolate segment, Amul also revamped its packaging with the help of TMA, which is an international agency. Amul also launched occasion-related sub-brands.

Its Nuts ’bout U brand was launched on the eve of Valentine’s Day, while the Kite Bite brand was unveiled during the kite-flying festival in Ahmedabad. Amul has decided to segment the market with brands catering to the `impulse’ and `teen’ segments, as well as having brands catering to different occasions. Amul, which reaches out to over five lakh retail outlets, has over 2,600 distributors under its fold. GCMMF has also drawn up plans to make its chocolate business a separate division of the company. CAMPCO Central Arecanut and Cocoa Manufactures and Processors Co-operative A sudden withdrawal by the buyers of cocoa from the procurement operations due to crash in the international market came as a shock to cocoa cultivators in India. Karnataka and Kerala Governments enthused, at this stage, the CAMPCO to enter on the scene to rescue the farmers from distress. CAMPCO willingly took up the responsibility to enter the cocoa market and performed a savior’s role. As a strategy for survival in the International scene the CAMPCO played a major role in establishing a name for Indian Cocoa, which hitherto had not been achieved. It procured cocoa pods from growers and adopting scientific processing methods to market standards, released dry cocoa beans matching in quality in the world market equal to that of Ghana, Brazil and other cocoa cultivation nations. After entering into the Cocoa market, the Co-operative was able to export Cocoa Beans worth Rs 40 million to European countries in the initial phase of operations. India was not known as a Cocoa producer in the international Trading Community, since yearly production was hardly 5 to 6 thousand tonnes which is not even 0. 3% of the total world consumption. Through sustained efforts CAMPCO has been able to ensure reasonable prices to Cocoa growers. The Co-operative had to face the problem of a limited internal market and un-remunerative export market. With the setting up of the chocolate manufacturing factory at Puttur, 50KM from Mangalore, the Co-operative has been able to increase local consumption of cocoa based products and to export value added semi-finished products.

With a view to creating a permanent demand and a steady market for the beans, CAMPCO established a Chocolate Manufacturing Factory at Kemminje village in Puttur Taluk in Dakshina Kannada district, adopting foreign technical advancement in chocolate making. The Factory was set up in 1986 at an initial investment of Rs. 116. 7 Millions. CAMPCO CHOCOLATES CURRENT STATUS of CAMPCO However, the company does not have much visibility in the Indian market. No advertising are seen being aired on TV? at least not on the prime channels. The company seems to have restricted its marketing efforts in south India only. Campco, being a co-operative is functioning under pressures from various political parties and is surrounded by various controversies all of which arising out of internal disputes.

Home-made Chocolates Another area of chocolate industry in India is HOME-MADE CHOCOLATES. This segment is highly fragmented and operates independently. They are more pronounced for manufacturing distinct flavors and varieties of chocolates in various shapes and size. But, these chocolates are usually priced at a higher price than that available for branded products for the same quantity. House-wives from elite class usually indulge in this kind of business. They usually operate in local area and through their contact network. Some home-made chocolate manufacturers manufacture really attractive GIFT CHOCOLATES. Interesting Chocolate Facts Why is Chocolate in India different than most European chocolates? The temperatures in India are much higher than that of the European countries. To prevent the chocolate from melting and to enable shape retention under such high temperatures the recipe of the chocolate is adapted to the Indian climate.

Therefore the milk fat content in Indian chocolates is lesser than that of European chocolates and hence they taste different. Sometimes, white spots appear on Chocolates sometimes. Is that safe? When a chocolate gets exposed to temperature variances from a hot day to a cold night (which is very common all across India), the fat expression happens on the surface of the chocolate.

This means white spots emerge on the surface of the chocolate. This phenomenon is called ‘fat bloom’. It is entirely safe to consume chocolates however the feel and the taste of the chocolate may not be the same as is originally intended to. Are chocolates available for diabetics? Currently in India no manufacturer produces chocolates for diabetics, as the government regulations do not permit manufacture of such chocolates. The industry majors are liaising with the government authorities to enable manufacture of such chocolates in India. Chocolates for diabetics, though, are available in certain parts of the world. Chocolate: the new solution for blood pressure? Cocoa beans have antioxidant compounds called flavanols, and scientific research suggests they do good things to blood vessels.

Dark chocolate contains flavanoids, an antioxidant which helps the body by neutralising potentially cell-damaging substances known as oxygen-free radicals, a normal byproduct of metabolism. Problems & Challenges in Indian Chocolate Industry 1. TEMPERATURE: A peculiar problem that hinders the distribution to far-off places is the tendency of chocolates to melt under even moderate heat. The temperatures can reach as high as 48 degrees in summers, whereas chocolate starts melting at body temperature (about 37-38 degrees) . Manufacturers have to take precautionary measures to ensure the preservation of chocolates especially in summer. 2. UNAVAILABILITY OF CONTROLLED REFRIGERATION: India does not have controlled refrigerated distribution. Air-condition supermarkets are rare. Cadbury loses 1. 5 percent of annual sales of Rs. 6. 8 billion to heat damage. Companies revise ingredients to make chocolate withstand heat, and so Indian chocolates are more resilient to heat than Eurupean chocolates by a factor of 2 degrees. Ironically, the chocolate market has grown recently because smaller retailers have stuffed fridges and coolers supplied by the cola companies Coke and Pepsi with chocolates.

Nestle and Cadbury have tried to provide loans for retailers to buy fridges, but to hold down power costs the shopkeepers switch off the fridges at night. As a result the cocoa fat melts and migrates to the main body of the chocolate bar. When the cooling is switched on in the morning, the cocoa fat solidifies and turns white, presenting a bizarre, un-sellable white on black form. Nestle tried to provide fridges with see-through doors, but was appalled to see its chocolates sandwiched between dead chicken, butter and vegetables. Small coolers were provided to retailers to keep the chocolate from melting, but that didn’t quite do the trick. Electricity costs money and is not provided in a uniform way, so on and off the electricity goes and the product may suffer sometimes 3. RAW MATERIALS: Cocoa is the key raw material and accounts for around 35% of the total material cost (including packaging) of chocolates.

The price of cocoa has been hitting a new high of late. Cocoa prices are at a near 20-year high at $2358 per ton, up from $900 a year back. India does not produce cocoa to any noteworthy extent but is a large consumer of chocolates. Consumption of chocolates and other cocoa-based products, especially among the middle class, has been growing. 4. TRANSPORTATION: Chocolate needs to be distributed directly, unlike other FMCG products. 90% of our products are sold directly to retailers. Building such a direct network in rural areas is a daunting task since the infrastructure is poor in India in rural areas. 5. THREAT FROM IMPORTED BRANDS: Free availability of imported brands bought through illegal routes pose a threat to the domestic chocolate industry. Usually, these imported chocolates taste better than domestic chocolate due to recipe difference.

Hence consumers who are willing to spend a little more, prefer these imported chocolates. However, the premium brands, which come through official channels, do not pose a threat to the market, as these cater to a small niche market.

However there is a lot of dumping from neighboring countries like Dubai, Nepal, etc of inferior brand of imported chocolates. These are not only of low quality, but are brought very near to their expiry dates. Most of the cheap chocolate brands that are available do not meet Indian Food Regulations. External Factors affecting Growth of Chocolate Industry in INDIA ? Good monsoon ensures adequate availability of raw materials, which are mainly agricultural in nature. Raw material prices have significant influence on margins. ? Government policies in terms of licensing, duties, movement of agricultural commodities etc. also affect the introduction of products, time lag for a product launches, taxes, excise, etc all influence the business.

Market growth driven by overall economic growth and urbanization also contributes. An overall booming economy will consume tonnes of chocolates because consumer spending increases. Also, the absolute number of consumers in middle class & upper middle class increases. ? Rupee depreciation improves export realizations, however it also makes import of raw material (esp. cocoa) expensive. Growth Opportunities in Indian Chocolate Industry Untapped Market & Limited Consumption: The fact that chocolate is not a traditional food, high prices and domestic production problems will provide the main problems to market growth. As these markets develop, prices will fall making these products more accessible to the wider population. However the Indian market is still untapped and provides immense scope for growth, both geographically as well as product basket wise. Chocolates right now reaches about 70mn to 75mn consumers. It is estimated that chocolates have a potential market of about 116mn consumers.

Chocolate consumption in India is extremely low. Per capita consumption is around 160gms in the urban areas, compared to 8-10kg in the developed countries. The per capita chocolate consumption in India is still much below the East Asian standards. Hence per capita consumption has a immense scope for improvement. In rural areas, it is even lower. Chocolates in India are consumed as indulgence and not as a snack food. A strong volume growth was witnessed in the early 90’s when Cadbury repositioned chocolates from children to adult consumption.

The biggest opportunity is likely to stem from increasing the consumer base. Leading players like Cadbury and Nestle have been attempting to do this by value for money offerings, which are affordable to the masses. We also believe that the near term opportunity lies in increasing penetration rather than increasing intensity of consumption. In the past five years, the chocolate business grown by 14-15% on an average and is expected to grow further for at least next five years. Changing Attitudes & Consumption pattern: In the past, chocolate consumption had been restricted by low purchasing power in the market. Chocolates and other cocoa-based snack foods were looked upon as food suitable only for elitist consumption till recently. But with the launch of lower-priced, smaller bars of chocolate in the last two years and positioning of chocolate as a substitute to traditional sweets during festivals, have boosted consumption. Chocolates which were considered to be an elitist food hit the fancy of masses looking for a change in life style at affordable cost.

Rural expansion: Rural market and small town markets are seen as the key to spurring double-digit growth. Products such as liquid chocolate packs from the existing portfolio are expected to enable rapid acceptance.

Leverage India for offshoring: India is being leveraged for export of finished goods, as a superior destination for manufacturing best practices, and for BPO opportunities. All the above points bring us to a conclusion that there’s an immense scope for growth of chocolate industry in India not only in its offering pattern but also for increment in its total consumption value and size. Strategies for Growth & Success in India 1. Revamp the product to keep the excitement alive. 2. Companies should look at new avenues, while expanding the reach of its products. Distribution will hold the key. Companies need to reach out to smaller towns, where three-fourths of the population does not even know the product. 3. Merger & Acquisitions: Mergers & Acquisitions with companies that match the product portfolio & overall growth strategy should be considered which will not only strengthen the company to establish a stronger hold in the country but also ward off possible competition in the select category.

Such collaborations will also facilitate companies to use each other’s distribution networks. Chocolate Boutiques & Designer Chocolates They call it ‘choco fever’. Chocolate Boutiques are a complete chocoholic experience. Surrounded on all sides by scrumptious chocolates wrapped neatly in colourful foil and paper, any one will be gripped by this fever. It’s a world of chocolates where the flavour of Jamaican rum truffle melts in your mouth even as your hand reaches out greedily for a kiwi-flavoured concoction or where roasted almonds are a delight to eat while your mind flirts with hazelnut praline. Manufacturers are finding an increasing number of curious customers who’re pampering their taste-buds to apricot and peach chocolate, strawberry chocolate or better still wild berry in cognac flavoured chocolate. Manufacturers are now luring their patrons with chocolates in geometric shapes, animal figurines coloured in metallic hues and glitter. For the more adventurous, there are also chocolates with pan-supari, cardamom flavours and liqueur filling.

Products like nut-based praline chocolates, some unique flavors like tamarind and chilli chocolates, and champagne and Jamaican rum truffles are also demanded in the market. These manufacturers also cater to the older and the health-conscious choco-lovers, the high fibre, low fat and sugar ones are quite popular. Apart from the festive season, weddings and baby announcements also see heavy offtake of premium sweet delicacies. For those who are health conscious there is also a special range of sugar-free and diet chocolates. These are usually bought by corporates or individuals who want to make a special statement.

Extensive range of Baby chocolates are available which are beautifully wrapped in pinks and blues and embellished with decorations like baby bottles, satin ribbons, silk flowers, bibs and bows are also available and are getting very popular in elite classes. Designer chocolates are tailored for customers who’re looking at gifting chocolates with a personalized touch. Embossing of names, logos of companies and personalized message on the chocolates are fast becoming popular. There are 1,000 varieties of designs to choose from — ranging from good luck charms, X’mas figurines and animals — and nearly 50 kinds of gift packaging available to suit any particular occasion. From festive occasions to personal celebrations to corporate

Did you like this example?

Cite this page

Chocolate Industry In India. (2017, Sep 23). Retrieved March 29, 2024 , from
https://studydriver.com/chocolate-industry-in-india/

Save time with Studydriver!

Get in touch with our top writers for a non-plagiarized essays written to satisfy your needs

Get custom essay

Stuck on ideas? Struggling with a concept?

A professional writer will make a clear, mistake-free paper for you!

Get help with your assignment
Leave your email and we will send a sample to you.
Stop wasting your time searching for samples!
You can find a skilled professional who can write any paper for you.
Get unique paper

Hi!
I'm Amy :)

I can help you save hours on your homework. Let's start by finding a writer.

Find Writer