1. Summary“An Analytical Study of Chocolate Industry in India with Special Reference to Cadbury’sIndia” is a sweet CHOCOLATE story of chocolates in the hot and humid plains of INDIA,whichenlightens us about the size & status of chocolate industry in India. The project gives informationabout the competitors, their market share, and their product basket and highlights successfeatures.The project also presents data on types & categories of chocolates, a brief study of chocolatemanufacturing processThe project also covers a brief study of Cadbury’s India Limited – the biggest player in theIndian Chocolate Industry with reference to its presence, market share, product offerings,marketingstrategies, strengths & weaknesses, success factors and Worm Controversy Management. Also,theimplication of pricing, distribution strategies and impact of external environment has beenrecorded.The project throws light on problems and challenges of the Indian Chocolate Industry, growthopportunities and strategies to be adopted for growth in this industry.Finally, the project gives information about home-made chocolates and Chocolate Boutiquesand the ways in which Indian consumers and Chocolate players are experimenting andinnovatingchocolates and giving the Indian Chocolate Industry a new sweetness.
2. Table of contentsSr. No Topic PageNo1 Project Objective 62 An Overview of Chocolate Industry in India 83 Types of Chocolates 124 Categories of Chocolates & Form of Consumption 145 Chocolate Manufacturing Process 156 Market Size (by value & by volume) 167 Major Players & their Market Share 178 Cadbury’s India Limited – A Study 189 Cadbury & The Worm Controversy 3710 MARKETING - PROMOTION of CHOCOLATES in INDIA 4611 Nestle India 5012 Amul (GCMMF) 5313 CAMPCO 5914 Home-made Chocolates 6215 Interesting Chocolate Facts 6316 Problems & Challenges in Indian Chocolate Industry 6417 External Factors affecting Growth of Chocolate Industry in INDIA 6618 Growth Opportunities in Indian Chocolate Industry 6719 Strategies for Growth & Success in India 6920 Chocolate Boutiques & Designer Chocolates 7021 Conclusion 7222 Bibliography 73Project ObjectiveThis project aims at understanding the overall Chocolate Industry in India, the productportfolios of different players in the market, various factors affecting the growth and success ofchocolate industry in India, the challenges and opportunities which the market offers and thechanging trends in the Indian Chocolate Industry. The project also covers a brief study ofCadbury’sIndia with reference to above points.An Overview of Chocolate Industry in IndiaThe chocolate industry in India as it stands today is dominated by two companies, bothmultinationals. The market leader is Cadbury with a lions share of 70 percent. The companysbrands (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 appearedonthe scene. The latter has introduced its international brands in the country (Kit Kat, Lions), andnowcommands approximately 15 percent market share. The Gujarat Co-operative Milk MarketingFederation (GCMMF) and Central Arecanut and Cocoa Manufactures and Processors Co-operative(CAMPCO) are the other companies operating in this segment. Competition in the segment willget
3. keener as overseas chocolate giants Hersheys and Mars consolidate to grab a bite of the Indianchocolate pie.Per Capita Chocolate Consumption (in lb) of first 15 countries of the worldRank Countries Per CapitaConsumption (in lb)1 Switzerland 22.362 Austria 20.133 Ireland 19.474 Germany 18.045 Norway 17.936 Denmark 17.667 United Kingdom 17.498 Belgium 13.169 Australia 12.9910 Sweden 12.9011 United States 11.6412 France 11.3813 Netherlands 10.5614 Finland 10.4515 Italy 6.13INDIA, stands nowhere even near to these countries when compared in terms of Per CapitaChocolate Consumption. The Indian chocolate industry is extremely fragmented with arange ofproducts catering to a variety of consumers. We have the bars/slabs, jellies, lollipops, toffeesandsugar candies.Given Indias mammoth population, it comes as a surprise that per capita chocolate consumptioninthe country is dismally low - a mere 20 gms per Indian. Compare this to over 7 kgs in mostdeveloped nations.However, Indians swallowed 22,000 tonnes of chocolate last year and consumption isgrowingat 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,sloweddown thereafter.Both chocolate and sugar confectioneries have abysmally low penetration levels, in fact, evenlower than biscuits, which reach 56 per cent of the households. Market growth in the chocolatesegment 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 theurban areas. Growth will mainly come through an increase in penetration as income levelsimprove.However, almost all of this consumption is in the cities, and rural India is nearly
4. ‘chocolate-free’. But the fact is that three quarters of Indians live in Rural Areas. “Averagesummertime temperatures reach 43 degrees Celsius in India. Chocolate melts at bodytemperature of36 degrees.”Per capita consumption of chocolates in India is minuscule at 20gms in India as comparedto around 5-8 kgs and 8-10 kgs respectively in most European countries. ... Awarenessaboutchocolates is very high in urban areas at over 95%. ...Growth of other lifestyle foods such as malted beverages and milk food have actuallydeclined by 3.7 per cent and 11.7 per cent, however the CHOCOLATES continue to growatthe rate of 12.6%.Low priced unit packs, increased distribution reach and new product launches can besaid to have fuelled this growth.The launch of lower-priced, smaller bars of chocolate in the last two years andpositioning of chocolate as a substitute to traditional sweets during festivals, have boostedconsumption. This is also because chocolate, which was considered to be an elitist food, hascaughtthe fancy of buyers looking for a lifestyle item at affordable cost.Till recently, chocolate consumption had been restricted by low purchasing power in themarket. Chocolates and other cocoa-based snack foods were looked upon as food suitable onlyforthe well-off.After economic liberalization in 1991, major changes have occurred in food habits, partly onaccount of rise in gross domestic product (GDP) growth and higher purchasing power in thehands ofthe middle-class representing a third of the total population. Availability of chocolate productshasalso exploded.A study had projected that sales of the Indian chocolate industry would rise from $125/$130million in 1998 to $175/$180 million by the year 2000 and to $450 million by the year 2005whichACTUALLY happened irrespective of various negative factors.Per capita chocolate consumption continues to be low at about 200g per person, beingmainly consumed in urban areas. In the middle and higher income groups, 70 per cent ofchildren, 43per cent of young adults and 16 per cent of adults consume chocolate.Chocolate Consumption Structure - 2004Children55%Adults12%Young Adults33%Chocolate & Confectionery Market of India - 2004Chocolate CountsRs. 250 Cr.10%Chocolate Bar
5. Rs. 350 Cr.14%Mints & Chew inggumsRs. 325 Cr.13%Sugar BoiledConfectioneryRs. 1600 Cr.63%AC Nielsen ORG Marg report estimates the Indian Chocolate Industry’ worth at Rs2,000-crore (Rs 20 billion)Types of ChocolatesDepending on what is added to (or removed from) the chocolate liquor, different flavors andvarieties of chocolate are produced. Each has a different chemical make-up, the differences arenotsolely in the taste.1. Unsweetened or Baking chocolate is simply cooled, hardened chocolate liquor. It is usedprimarily 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 sugaradded. 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 canpick 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 butterremaining.� 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 inchocolate milk powders like Nestles Quik.� Dutch process cocoa is cocoa which has been specially processed to neutralize the naturalacids in the chocolate. It is slightly darker and has a much different taste than regular cocoa.Decorators chocolate or confectioners chocolate isnt really chocolate at all, but a sort ofchocolateflavored candy used for things such as covering strawberries. It was created to melt easily andhardenquickly, but it isnt chocolate.Categories of ChocolatesCommercial Chocolates are available in the following forms:1. Bars or Moulded Chocolates2. Counts3. Panned Chocolates (Gems)4. Éclairs5. Assorted ChocolatesBars or moulded chocolates (like Dairy Milk, Truffle, Amul Milk Chocolate, Nestle Premium,and
6. Nestle Milky Bar) comprise the largest segment, accounting for 37% of the total chocolatemarket involume terms. ... Wafer chocolates such as Kit-Kat and Perk also belong to this segment. Pannedchocolates accounts for 10% of the total chocolate market. ... Wafer chocolates such as Kit-KatandPerk also belong to this segment. ..Form of Consumptiona. Pure Chocolatesb. Toffeesc. Cakes & Pastriesd. Malted Beveragese. Wafer Biscuits & Baked Biscuitsf. Chocolate DessertsChocolate Manufacturing ProcessWorkers cut the fruit of the cacao tree, or pods open and scoop out the beans. These beans areallowed to ferment and then dry. Then they are cleaned, roasted and hulled. Once the shells havebeen removed they are called nibs. Nibs are blended much like coffee beans, to produce differentcolors and flavors. Then they are ground up and the cocoa butter is released. The heat from thegrinding process causes this mixture of cocoa butter and finely ground nibs to melt and form afreeflowingsubstance known as chocolate liquor. From there, different varieties of chocolate areproduced.What is conching?Raw unprocessed chocolate is gritty, grainy and really not suitable for eating. Swisschocolate manufacturer Rudolph Lindt discovered a process of rolling and kneading chocolatethatgives it the smoother and richer quality that eating chocolate is known for today. The nameconching comes from the shell-like shape of the rollers used. The longer chocolate is conched,themore 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. TheIndian chocolate bazaar is estimated to be in the region of 22,000-24,000 tonnes per annum, andisvalued in excess of US$ 80 million.Chocolate penetration in the country is a little over 4 percent, with Indias metros proving tobe the big draw clocking penetration in excess of 15 percent. Next, comes the relatively smallercities/towns where consumption lags at about 8 percent. Chocolates are a luxury in the ruralsegment,which explains the mere 2 percent penetration in villages.The market presently has close to 60mn consumers and they are mainly located in theurbanareas.Major Players & their Market ShareThe major players in the Indian Chocolate Industry are:
7. 1. Cadbury’s India Limited2. Nestle India3. The Gujarat Co-operative Milk Marketing Federation (GCMMF) – AMUL4. Cocoa Manufactures and Processors Co-operative (CAMPCO)Bars CountLines Wafer Panned PremiumCadbury’s Dairy Milk &Variants5-Star, MilkTreat Perk Gems,TiffinsTemptation &CelebrationsNestle Milky Bar Bar One,CrunchKit Kat,Munch NuttiesAmulMilk ChocolateFruit ‘n’ NutFUNDOOBindaazAlmond BarCampco Campco Bar,CreamKrust,Turbo TreatCadbury’s India Limited – A StudyCADBURY’S INTERNATIONALCadbury is a very old trusted name. It all started in Birmingham in England when JohnCadbury started his family grocery shop with side business of cocoa and chocolate products inaround 1824. His two sons, Richard and George, expanded their family business of cocoa andchocolate. Bournville, a town near Birmingham, was build by them as a part of expansion oftheirbusiness.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 LIMITEDCadbury was originally incorporated as a wholly owned subsidiary of Cadbury SchweppesOverseas Ltd (CSOL) in 1948. The company’s original name was Cadbury Fry (India) Ltd. In1978,CSOL diluted its equity stake to 40% to comply with FERA guidelines. In 1982, the name waschanged to Hindustan Cocoa Products. CSOL’s shareholding was increased to 51% in Jan ’83through a preferential rights issue of Rs700mm. The current name was restored in Dec ’89. In2001,Cadbury Schweppes made an open offer to acquire the 49% public holding in the company. The
8. parent holds over 90% of the equity capital after the first open offer. A second open offer hasbeenmade to buyback the balance shareholding, after which the company would operate as a 100%subsidiary of Cadbury Schweppes PlcEver since the Cadbury is in India in 1947, Cadbury chocolates have ruled the hearts ofIndians 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 anestimated 68 per cent value share and 62 per cent volume share of the total chocolate market. Ithasexhibited continuously strong revenue growth of 34 per cent and net profit growth of 24 per centthroughout 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 networkof 5.5 lakhs outlets across the country and this number is increasing everyday.OBJECTIVES AND VALUESOur objective is toGrow shareholder value…over the long termCadbury in every pocketOur marketing strategy is aimed at achieving this vision by growing the market, byappropriatepricing strategy that will create a mass market and to have offerings in every category towiden themarketOur Managing For Value Process incorporatesSetting stretched financial objectives.Adopting Value Based Management for major strategic and operational decisions and businesssystems.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.VISIONLife Full Of CadburyCadbury 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 consumers life.Cadbury Full Of LifeCadbury as a company is vibrant.Cadbury ia a fun and energising workplace.Cadbury is robust and alive.BusinessCadbury dominates the Indian chocolate market with above 65 – 70 % market share. Besides, ithas a
9. 4% market share in the organized sugar confectionery market and a 15% market share in milk/malted foods segment.Changing product mixContribution to turnover1994Contribution to turnover2001Chocolate 59% 65%Sugar Confectionery 9% 10%Food Drinks 32% 24%Categories/ BrandsChocolate Bars , Count lines , Panned confectionery ,Wafer chocolates, Assorted Chocolates & Gift ChocolatesSugar Confectionery Googly , Mocka, Gollum, Frutus & Nice CreamFood Drinks Bournvita, Delite & Drinking ChocolateCadburys 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 fastestgrowingFMCG Company in the last three years with a compound annual growth rate of 12.5 percent.Plant locationsCadbury’s manufacturing operations started in Mumbai in 1946, which was subsequentlytransferred to Thane. In 1964, Induri Farm at Talegaon, near Pune was set up with a view topromotemodern methods as well as improve milk yield. In 1981-82, a new chocolate manufacturing unitwasset up at the same location in Talegaon. The company, way back in 1964, pioneered cocoafarming inIndia to reduce dependence on imported cocoa beans. The parent company provided cocoa seedsandclonal materials free of cost for the first 8 years of operations. Cocoa farming is done inKarnataka,Kerala and Tamil Nadu. In 1977, the company also took steps to promote higher production ofmilkby setting up a subsidiary Induri Farms Ltd near Pune. In 1989, the company set up a new plantatMalanpur, MP, to derive benefits available to the backward area. In 1995, Cadbury expandedMalanpur 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 inMaharashtra.These factories churn out close to 8,000 tonnes of chocolate annually.Raw Material Composition in 2004Product Name Quantity(in Kgs)Cost(Rs) / Ut
11. Hard Boiled4%Excise duty14%Chocolates/Coated Wafer/Confectionery58%Malt Foods(Jar/Refill/Tin)22%Cadbury’s India LimitedSales in Rs. MillionYears 1998 1999 2000 2001Sales 3354 3892 4324 4716Sales335438924324471601000200030004000500098 99 00 01YearsRs. MillionPRODUCT MIX - CHOCOLATESPRODUCT BASKETCategory Brand VariantsBars Dairy MilkPlainFruit n NutsDouble DeckerRoasted AlmondChunky5-Star5 StarCount Lines 5 Star ChrunchieMilk Treat ChocolateOrangeWafer Chocolate Perk PerkPerk XLOther Chocki Mint, Strawberry & ChocolatePremium/ Gift Chocolates Temptation Rum, Cashew, Almond & OrangeCelebrations Various Gift Packs
12. Cadbury’s Dairy Milk (CDM):Cadbury’s Dairy Milk is the flagship brand of Cadbury’s not only in India but world wide.CDM isthe single largest selling unit in India. It has annual sales to the tune of Rs 200 crore. CDM notonlyaccounts for 30 per cent of the total chocolate market in value, but commands nearly 26 per centinvolume 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, tothe teens and the tweens, when the Cyrus Broacha ads hit the airwaves, CDM has made a longsweetjourney. In spite of the new categories being explored by Cadbury, its star brand remainsCadburyDairy 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. Variousvariants available are Almond, Rum, Cashew & Orange. Cadbury’s temptation is priced at Rs. 40Cadbury’s CelebrationCadbury India launched its premium Celebrations range, which contains traditional Indian dryfruits wrapped in Dairy Milk chocolate. This gifting option combines the pleasure of givingaway dryfruits — which Indians traditionally consider a premium, healthy gift — with chocolate.Cadburynow has 90 per cent market share in this profitable segment.PRODUCT REVAMPING & INNOVATIONSCadbury’s chocolate brands registered double-digit growth in 2002, touching an astounding19 per cent in the second half of that calendar year. Getting the power brands right was the firstpriority, so genuine re-launches of the products were made.However, the growth rate was declining after that. The growth went down from 19 per centin 1999 to 12 per cent in 2000 to single-digits, with seven per cent in 2001. If it staged a smartrecovery to nearly 10 per cent in 2002, it was largely on the back of Chocki and the revampedpowerbrands.PRODUCT INNOVATIONS:� 5 STAR:Consumer feedback suggested that the old 5 Star was too chewy, and people complained of itsticking to their teeth. It was made softer and melted easily in the mouth & introduced as 5 StarCrunchy� PERK:Perk was made much lighter and the size of the bar increased to match Nestle’s Munch. Perkhad been under fire from Nestle’s deadly duo of KitKat and Munch, but after the relaunch, itsmarketshare is two per cent more than KitKat’s. And, the five-year-old brand is now almost asbig 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.
13. Heroes brand is simply a multi-pack with miniatures of all its most popular brands in a singleouter case.NEW PRODUCT LAUNCHESRich Dry Fruit CollectionFor Gifting Festive SeasonCadbury Celebrations’ Rich Dry FruitCollection – a range of premiumchocolate gift boxes.Available in attractive packs, the Collection caters to a premium gifting consumer and is an idealfestive gift. It is a unique combination of the best Cadbury chocolate and premium dry fruits andcomes in four different formats each of which is a mix of select premium dry fruits enrobed inrichCadbury Dairy Milk chocolate.Cadburys Creative LaunchA new ‘after dinner segmentCadbury Desserts“for sweet moments after dinner”“Khaane Ke baad Kuch Meetha Ho Jaye”.Rs. 20/- per packet of 44 gmsCadbury Dairy Milk (CDM) Desserts – with rich indulgent crème center, in exotic & traditionalflavors of Tiramisu and Kalakand. CDM Desserts offer the perfect rounding off taste, after mealthatadds special ‘Meetha moments to the family. The rich tastes of CDM combined with the uniquecrème center in exotic flavors provide a special chocolate experience. CDM Desserts add delighttothe after-meal moments, especially with the consumers whose current choice of sweets rangefromhome made delicacies to fruits to meethai.PRICINGAfter 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 theinitiative at this price point, with its launch of Munch, now a roaring success (and the largestsellingproduct at that price point). Today, Cadbury has four products at this price point: CDM, Perk, 5starand 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 abysmallylow,” is what industry analyst have to say.Nestle kicked off one of the biggest success — the liquid chocolate category with its brandChocostick priced at Rs.2 — 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 thesinglebiggest growth driver for Cadbury as well as the entire chocolate category. The novelty ofthe
14. format endeared itself to the existing customer. In less than one year, it constituted nearly 10 percentof the total chocolate market, split equally between Cadbury and Nestle.Volume led growth strategyCadbury has followed a well-planned strategy of fuelling volume growth by introducing smallerunitpacks at lower price points. Simultaneously, the company seems to have astutely juggled withthelarger pack sizes and raised prices to a degree higher than what appears at face. The strategy hasdriven volumes in the last two years and we expect the volume growth to continue in the nexttwoyears.PRICE WOESChocki, selling at a potent price point of Rs 2, was ideal for smaller towns, especially since it didnotneed refrigeration. But Chocki started to cannibalise other higher-priced chocolates in largermarkets.The students of Bombay Scottish (an upmarket school in Mumbai) are not supposed to eatChocki, they should not have even heard of the product.DistributionChocolate needs to be distributed directly, unlike other FMCG products like soaps anddetergents, which can be sold through a wholesale network. 90% of chocolate products aresolddirectly to retailers.Distribution, in the case of chocolates, is a major deterrent to new entrants as the product hasto be kept cool in summer and also has to be adapted to suit local tropical conditions.Cadburys 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 improvedistributionlogistics, Cadbury is also attempting to improve distribution quality. To address the issues ofproductstability, it has installed VISI coolers at several outlets. This helps in maintaining consumptioninsummer, when sales usually dip due to the fact that the heat affects product quality and therebyofftake.To avoid cannibalization of its higher priced products from lower priced ones, Cadbury issetting up two separate distribution channels – one for CORE business & other for MASSmarkets,with different stockists, wholesalers and retailers. One set will be dedicated to Cadbury’s high-endproducts and traditional chocolates. The other will cater to the mass market brands namelyChocki,Halls, Eclairs et al — all products priced below Rs 3.But today, Cadburys distribution network reaches out to six lakh outlets each for itschocolate & confectionery brands (i.e. total reaching12 lakh outlets).Promotion
15. Typically it is said that chocolates are being eaten when everyone is happy. And this issomething advertising has always portrayed. But it is found chocolates are eaten under diverseconditions and moods - when people are anxious, when they are sad, when happy - a wholerange ofemotions. Condensing these views & thoughts, it can be said chocolate is a true soul mate.Someonewho is with you through the ups and downs of life, helping you bounce back. And thats whatCadburys Dairy Milk (CDM) positioned itself as - a special friend.% Share of various Brands Ad spending of CadburyHere, the 6 Cadbury brands shown in the graph comprise 85% of the advertising pie, whereas,rest ofthe 9 brands advertised by Cadbury comprise 15% of the advertising. Cadbury Dairy MilkChocolateis the most advertised brand (with 22%).RE-INVENTING CABDURY“Kya Swad Hai Zindagi Mein” redefined the way Indians looked at CadburyChocolates. (The commercial showed a beautiful young lady overcoming all obstacles on thecricketground, crossing boundary, watchman, securities and embracing her lover who won the game byhitting a six). This theme introduced in around mid 90’s bought instant growth to Cadbury’sDairyMilk. The Ad campaign ran successful for about four years and immersed deeper inside hearts ofIndians.In March 2002, Cadbury launched its next advertisement campaign for its flagship chocolatebrand, Cadburys Dairy Milk (CDM). The campaign featured a television (TV) commercial thatwassignificantly different from the companys earlier commercials for the brand. It featured CyrusBroacha interviewing college students and asking why they liked to eat CDM. This was followedbycollege students singing their excuses for eating CDM. Just as the commercial seems all set toendwith the students and Cyrus singing the famous CDM theme, Khane Walon Ko Khane KaBahaana Chaahiye (those who want to eat, will find excuses), a student comes up andquestionsCyrus,The advertisement aimed at conveying the idea that no specific occasion is required forconsuming CDM. This was a significant departure from CILs strategy of appealing toadultsin 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 thefoundation for what would become the Indian teenager’s favorite snack. After this campaign,PERK’S sale surgedCadbury’s advertising has, over the past few years, aptly reflected India’s passion forchocolates.CADBURY ADVERTISEMENTS
16. 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 kaCADBURY DESERTS“khaane ke baad kuch meetha ho jaaye.”CADBURY CELEBRATIONSLooking wistfully at a photograph, Mr. Bachchanthinks, he recollects the photo-shoot when he hadthrown the cap off his friends head.Aaj dil ne socha yun, kissi apne ko kya doon?Jo usse kahe tum apne ho,.jo apne aap mein khaas ho,jo sirf taufa nahin ehsaas hoJisme rishto ki mithas ho….Cadbury’s CelebrationsRishto ki MithasCadbury And The Worm ControversyThe discovery of worms in some samples of Cadbury’s Chocolate in early October 2003created one of the biggest controversies in India against a Multi National reputed for being abenchmark of QUALITY.The controversy created an deep adverse impact on the company with their sales not onlydrastically dipping down, but at the same time allowing the competitors to establish theirfootholdand taking maximum advantage of Cadbury’s misfortune.The controversy, and the adverse publicity received in several countries, set back its plan ofoutsourcing model which would have resulted in significant revenue generation, several monthsback.The "worms’ controversy" came at the worst time….the next few months were the peakseason of Diwali, Eid & Christmas. Cadbury sells almost 1,000 tonnes of chocolates duringDiwali. In that year, the sales during festival season dropped by 30 per cent. The companysawits value share melt from 73 per cent in October 2003 to 69.4 per cent in January 2004. InMay,however, it inched up to 71 per cent. CDM sales volumes declined from 68 per cent inOctober’03 to 64 per cent in January 2004Clearly, the worm controversy took a toll on Cadburys bottom-line. For the year endedDecember 2003, its net profit fell 37 per cent to Rs 45.6 crore (Rs 456 million) as comparedwith 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 hasremained synonymous with chocolates and have remained committed to high quality andconsumersatisfaction."CABDBURY’S FIGHT-BACK
17. Project Vishwas“Steps to ensure quality & regain the confidence”Following the controversy over infestation in its chocolates, Cadbury India Ltd unveiledProject Vishwas, a plan involving distribution and retail channels to ensure the quality of itsproducts.The companys team of quality control managers, along with around 300 sales staff, checkedover 50,000 retail outlets in Maharashtra and replaced all questionable stocks with immediateeffect.The Vishwas programme was intended to build awareness among retailers on storagerequirements for chocolates, provide assistance in improving storage conditions and strengthenpackaging of the companys range of products.Cadbury reduced the number of chocolates in its bulk packets to 22 bars from the present 60bars. These helped stockists display and sell the products "safely and hygienically" 190,000retailersin key states were covered under this awareness programme.The Big ‘B’ FACTORThe big factor that has pushed up CDM sales is the Amitabh Bachchan campaign. It helpedrestore consumers faith in the quality of the product. In early January, Cadbury appointedAmitabhBachchan as its brand ambassador for a period of two years.The company believed that the reputation he has built up over the last three decadescomplements 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 campaignworked 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 DairyMilk. The packaging is in response to foreign bodies, notably worms, being found in itsproducts. Over the next few weeks Cadbury will work towards introducing either aheatsealedor a flow-pack packaging that offers a high level of resistance to infestation fromimproper storage.3. New advertising & promotion campaigns were in place which accounted for an Ad spend ofnearly Rs 40 crore (Rs 400 million)Cadbury invested nearly Rs 25 crore (Rs 250 million) this year on new machinery for theimproved packaging.Addressing his audience, Mr. Bachchan says, "Mujhe aapse kuch kehna hai, jis kaammein manushya ki antar aatma uske saath na ho, uss kaam ko karne se usse sab kuchmil sakta hai... man ki shaanti nahin mil sakti. Isliye jab Cadbury walon ne mujhe kahaki unki baat main aap tak pahunchaoon, to pachpan saalon se Cadbury khaane walamain bhi thoda sa hitchkichaya.... ...Maine unse ek sawaal poocha,ki kya iske baad mainchain ki neend so paoonga ya nahin, to jawaab mein voh mujhe apni factory le gaye."Walking into the Cadbury factory,he takes a look at their completemanufacturing process and continues,
18. "Aur mujhe apni internationaltechnology....apne kade quality controlsaur double protection... ...packagingdikhayi."Saying which he takes a bite of thechocolate.Finally giving his personal assurance andapproval he says,"Aaj kal mein badichain ki neend so raha hoon.""Ab aapki favourite Cadbury Dairy Milknaye purity seal pack mein."CADBURY’S SINGING SWEETLY AGAINAll is well that ends well. And for Cadbury’s India, nothing can be sweeter thanRegaining Back the Consumer Confidence.Thanks to quick action taken to recover the damage done by the worm controversy likeOperaion Vishwas, adopting new packaging & massive advertising with Mr. Amitabh Bachchanastheir brand ambassador, Cadbury’s regained its market share.The survey conducted by the company says that consumers have long forgotten thecontroversy and are back to their merry chocolate-chomping ways. Sales were back to theprecontroversylevels. Consumer confidence in the product was back and there was a steady progressionin sales .The company posted a high double digit sales growth in that year end.The recovery began in May 2004 when Cadburys value share went up to 71 per cent.Hires AT Kearney to curb costsCadbury India appointed management consultancy firm AT Kearney to draw up a strategy tocontrolcosts in several areas, including sourcing of raw materials and packaging. This was partly anoutcome of the worms’ controversy more than a year ago. Among other things, it changed thewrappers for its Cadbury Dairy Milk brand and introduced better coolers.The consultancy firm will also look at the sourcing of direct and indirect materials likerenegotiating with suppliers for longer term contracts and vendor management. Other costs(indirectexpenses) 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 factorsCocoa bean prices: Domestic as well as international prices of key raw material - cocoa havesignificant impact on margins.Excise duties : Changes in excise levied on malt and chocolate influences end product pricesandthereby volume growth as well as margins.Changes in custom duties and foreign exchange fluctuation: As 20% of raw material isimported,changes in custom duties & foreign exchange fluctuations have significant impact on the finalcost of
19. the product.Competition from MNCs like Nestle as well as imported brands. Increasing competition putspressure on advertisement budget and margins. However on the positive side, it helps inexpandingthe market.Success factors of Cadbury’s India Limited1. Global management processes:India occupies a high profile position in the global organization, with advocates in regional andglobal headquarters. Global management has allowed the local operation a high degree offlexibilityin growing the business, understanding that asset utilization may be lower and returns slower toarrive, 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 thattheonly way to succeed in India is by developing localized business models. For example, thecompanytailored the chocolate formula in India to prevent melting in the country’s open-air highfrequencystore environment.3. Customized business models:Local management has set up systems to test and develop products from the ground up withspecialized interlinked cells that execute innovation and market testing hand-in-hand. CadburyIndiais known as a key product innovator. Besides Dairy Milk, the entire Cadbury product portfolio inIndia has been developed locally to suit Indian consumer tastes. Packaging, marketing anddistribution have all been tailored to local market conditions.4. Royalty Structure:Royalty to Cadbury Schweppes Plc., is around 1 per cent of the turnover. But with that, thecompany gets unlimited access to latest technology, new products and so on. They can alsointroducenew 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 rawmaterialprices as well as cutting costs.It appears that they have subtly altered its recipe by using less of costlier cocoa and more ofmilk and sugar. Cadburys launch of Perk has also contributed significantly in reducing theproportion of cocoa in the overall raw material mix. Consequently, Cadbury saved aboutRs.94mn (1.8 percent of net sales) in FY1999.MARKETING - PROMOTION of CHOCOLATES in INDIATraditionally, chocolates were always targeted at children. But stagnancy in growth ratesmade the companies re-think their strategies. Cadbury was the first chocolate company that tookthemarket by storm by repositioning brands at adults, as opposed to children.
20. IBUYING BEHAVIOURChocolates are consumed as indulgence and not as snack food, as prevalent in westerncountries. Almost 75% chocolates are impulse purchases. Chocolates are bought predominantlybyadults and gifted to children. On an average the wholesalers sells Rs50000/month ofChocolates(all brands included). Also the wholesaler usually deals in all kinds of FMCG goods, Foodstuffinaddition 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 thecases 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 extensivelyonthe promotions by the sales staff. Also the companies can devise there marketing strategies thatarecatering to specific segments and are thus more effective.IINATURE OF RETAIL OUTLETChocolates 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 allocatedforthe chocolates was less when compared to the total area of the shop. Of the space allocated forchocolates, Cadbury brands occupied more than Nestle brands.The chocolates category thrives on excitement. Its all about giving the consumer achoice and taste which they enjoy.IIISTOCKING OF THE PRODUCTSIn most of the cases, various brands of chocolates are kept together. In some of the cases thechocolates are stocked depending on the manufacturer’s provision. The chocolates are kept inGlassJars and boxes – These are provided by the respective companies along with the product. Thechocolates are kept there. But in most of the cases chocolates are stocked near the counter.Ideallythe 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 chocolatesfor thecustomer who is visiting the store.Medium size retailers sell chocolates of about Rs. 400 – Rs. 800 per week while bigretailers sell chocolate worth Rs1000 or more per week.CHOCOLATE ADVERTISING IN INDIAGrowth of Chocolate Advertising on Television: Year 2003 - 2004Company-wise Ad SpendingThe graph shows that Cadburys India Ltd. tops with 52% share of the advertising pie on
21. television. Nestle India Limited grabs the 2nd position with 34% share, whereas, ParleProducts gets the 3rd position with 8% of the advertising share.Chocolate Ads shift focus from KIDS to YOUTHIndian chocolate market is almost totally depended on purchases of kids. In recent times, thechocolate majors, Cadburys and Nestle took major initiatives to bring in grown-ups into thismarket.While Cadbury is trying to sell indulgence to adults, Kit Kat is selling ritualistic break toteenagers/ young adults. This is reflected in the changing advertising patterns across differentchannels.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 buyersofthis product category are children.But heavy advertising on channels like MTV, MAX, Star Plus, Zee, Zee Cinema, Discoveryand Channel [V] proves the changing profile of the potential consumer for the advertisers, in thiscategory, from children to teenagers/young adults as well as adults.NESTLE INDIABackgroundNestle India was promoted by Nestle Alimentana, Switzerland, a wholly owned subsidiary ofNestle Holdings Ltd., Nassau, Bahama Islands. Nestle is one of the oldest food MNC operatinginIndia, with a presence of over a centuryNestle has a presence in 83 countries worldwide. It has a total number of 509 factories out ofwhich 220 are located in Europe, 153 in America and 136 in Africa, Asia and OceaniaThe 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.BusinessNestle has a presence in the following categories - Baby Food, Milk products, Beverages(Coffee,malted beverage), Chocolates & confectionery and other processed food products.Chocolates & ConfectioneryNestle forayed into chocolates & confectionery in 1990 and has cornered a fourth share of thechocolate market in the country. Chocolates contributes 14% to Nestle’s turnover. It hasexpanded its products range to all segments of the market. In fact, Nestle is the fastest growingcompany in chocolates in India.The Kitkat brand is the largest selling chocolate brand in the world. Other brands includeMilky Bar, Marbles, Crunch, Nestle Rich Dark, Bar-One, Munch etc. New launches such asNestleChoco Stick and Milky Bar Choo were made at attractive price points to woo new consumers.Thecompany introduced two new brands, Charge and Crunch, in 1998. The company hasdiscontinuedproducts Chocostick, as it did not add value to the its portfolio. Nestle achieved roaring successby
22. grabbing the Rs 5 price point. From Jan – Sep ’05, Nestle chocolates witnessed a growth of14.8per cent.New Product Introduction & InnovationsThe Company sustained momentum during the year by driving distribution through innovativeconsumer promotions and trade offerings and supporting key price points.High temperatures are a typical characteristic of Indian subcontinent. Chocolate startsmelting at such high temperatures thus making chocolate unfit for consumption. Hence, Nestleintroduced 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 mostwidely distributed, continued to gain in volumes. NESTLE CHOTU MUNCH, which waslaunched at Rs. 2/- price point, was well received.A range of other innovative and renovated products were launched which included NESTLEMilk Chocolate, NESTLE Fruit & Nut, NESTLE Krunchy, NESTLE MILKYBAR STARZ,NESTLE CHOO, NESTLE Chocolate Eclairs, NESTLE Coffee Eclairs and various flavours forCHOCOSTICK,NESTLE CHOCOLATE PRODUCT PORTFOLIONESTLE MAHAMUNCHA ROARING SUCCESSNESTLE MAHA MUNCHRuk Na Paye…… Ruk Na PayeNestle MAHA Munch…only Rs. 5Amul (GCMMF)The Rs 2,748-crore GCMMF is in chocolate segment since quite some time. However, its marketshare is just 5% and the company did not look aggressive till recently. Amul chocolates used tocomein 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 growingchocolate industry. It has firmed up its measures with marketing and new product launches andrevamping its packaging.Amul just recently launched new chocolate brands in the market - Rejoice, Kite Bite andNuts `bout You.Cadbury’s Worm Controversy & AMULThe breakup of Cadbury’s worms’ controversy accelerated & facilitated Amul’s marketingefforts. 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 yearchocolate market in India, the company raised its market share from 2 per cent in the beginningofOctober 2003 (time when worm controversy broke) to 15 per cent by the end of the month. Thecompany sold nearly 20 tonnes in Oct 2003 in Mumbai, against only 2 tonnes in Oct 200220 % overall growth of Amul’s chocolate share can be purely contributed to the Cadbury’sworm controversy.In an attempt to boost sales, the company launched three new chocolates in Mumbaiunder the brands Fundoo, Bindaas and Almond Bar.
23. While the first two were been priced at Rs 10 for a 30 gm stick, Almond Bar carried a price tagof Rs10 for a 35 gm chocolate.Launch of Cooking ChocolateThough, cooking chocolate is available in the market, it is offered only as a commodity, notas a branded product. The Gujarat Co-operative Milk Marketing Federation (GCMMF), owner ofthebrand Amul, is strategized to capture a lions share in the chocolate segment by tapping thehithertountouched sub-segments with the launch of its new brand Amul Chef in July 2003, making it thefirstever 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 SECA and B households, caterers, bakeries, restaurants, biscuit manufacturers, ice-creamparlours, and confectioners. Amul also aimed to capture a market share of 20 per cent in thefirsttwo months in Delhi and Mumbai.The market size of cooking chocolate in Mumbai and Delhi alone is estimated at 50tonnes per month.Brand New Products & Packaging to push Chocolate BusinessAmul revived its chocolate business with new products and renewed packaging.The company launched Chocozoo brand of chocolates in December 2004, to target the age groupoffour to 14 years.Besides introducing new products in the chocolate segment, Amul also revamped itspackaging with the help of TMA, which is an international agency.Amul also launched occasion-related sub-brands. Its Nuts ‘bout U brand was launchedon the eve of Valentine’s Day, while the Kite Bite brand was unveiled during the kite-flyingfestival 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 underits fold.GCMMF has also drawn up plans to make its chocolate business a separate division of thecompany.CAMPCOCentral Arecanut and Cocoa Manufactures and Processors Co-operativeA sudden withdrawal by the buyers of cocoa from the procurement operationsdue to crash in the international market came as a shock to cocoa cultivators in India. KarnatakaandKerala Governments enthused, at this stage, the CAMPCO to enter on the scene to rescue thefarmers
24. from distress. CAMPCO willingly took up the responsibility to enter the cocoa market andperformed a saviors role.As a strategy for survival in the International scene the CAMPCO played a major role inestablishing a name for Indian Cocoa, which hitherto had not been achieved. It procured cocoapodsfrom growers and adopting scientific processing methods to market standards, released dry cocoabeans matching in quality in the world market equal to that of Ghana, Brazil and other cocoacultivation nations.After entering into the Cocoa market, the Co-operative was able to export Cocoa Beans worthRs 40 million to European countries in the initial phase of operations. India was not known as aCocoa producer in the international Trading Community, since yearly production was hardly 5 to6thousand tonnes which is not even 0.3% of the total world consumption.Through sustained efforts CAMPCO has been able to ensure reasonable prices to Cocoagrowers. The Co-operative had to face the problem of a limited internal market and un-remunerativeexport market. With the setting up of the chocolate manufacturing factory at Puttur, 50KM fromMangalore, the Co-operative has been able to increase local consumption of cocoa basedproductsand to export value added semi-finished products. With a view to creating a permanentdemandand a steady market for thebeans, CAMPCO established a Chocolate Manufacturing Factory at Kemminje village inPuttur Taluk in Dakshina Kannada district, adopting foreign technical advancement inchocolate making. The Factory was set up in 1986 at an initial investment of Rs.116.7Millions.CAMPCO CHOCOLATESCURRENT STATUS of CAMPCOHowever, the company does not have much visibility in the Indian market. No advertising areseenbeing aired on TV…at least not on the prime channels. The company seems to have restricted itsmarketing efforts in south India only.Campco, being a co-operative is functioning under pressures from various political parties and issurrounded by various controversies all of which arising out of internal disputes.Home-made ChocolatesAnother area of chocolate industry in India is HOME-MADE CHOCOLATES. This segmentishighly fragmented and operates independently. They are more pronounced for manufacturingdistinctflavors and varieties of chocolates in various shapes and size. But, these chocolates are usuallypriced at a higher price than that available for branded products for the same quantity. House-wivesfrom elite class usually indulge in this kind of business. They usually operate in local area andthrough their contact network. Some home-made chocolate manufacturers manufacture really
25. attractive GIFT CHOCOLATES.Interesting Chocolate FactsWhy is Chocolate in India different than most European chocolates?The temperatures in India are much higher than that of the European countries. To preventthe chocolate from melting and to enable shape retention under such high temperatures the recipeofthe chocolate is adapted to the Indian climate. Therefore the milk fat content in Indian chocolatesislesser 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 thechocolate.This means white spots emerge on the surface of the chocolate. This phenomenon is called fatbloom. It is entirely safe to consume chocolates however the feel and the taste of the chocolatemaynot be the same as is originally intended to.Are chocolates available for diabetics?Currently in India no manufacturer produces chocolates for diabetics, as the governmentregulations do not permit manufacture of such chocolates. The industry majors are liaising withthegovernment authorities to enable manufacture of such chocolates in India. Chocolates fordiabetics,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 suggeststhey do good things to blood vessels. Dark chocolate contains flavanoids, an antioxidantwhichhelps the body by neutralising potentially cell-damaging substances known as oxygen-freeradicals, a normal byproduct of metabolism.Problems & Challenges in Indian Chocolate Industry1. TEMPERATURE:A peculiar problem that hinders the distribution to far-off places is the tendency of chocolates tomeltunder even moderate heat. The temperatures can reach as high as 48 degrees in summers,whereaschocolate starts melting at body temperature (about 37-38 degrees) .Manufacturers have totakeprecautionary 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. Companiesreviseingredients to make chocolate withstand heat, and so Indian chocolates are more resilient to heatthan
26. Eurupean chocolates by a factor of 2 degrees. Ironically, the chocolate market has grownrecentlybecause smaller retailers have stuffed fridges and coolers supplied by the cola companies CokeandPepsi with chocolates.Nestle and Cadbury have tried to provide loans for retailers to buy fridges, but to hold downpower costs the shopkeepers switch off the fridges at night. As a result the cocoa fat melts andmigrates to the main body of the chocolate bar. When the cooling is switched on in the morning,thecocoa fat solidifies and turns white, presenting a bizarre, un-sellable white on black form. Nestletried to provide fridges with see-through doors, but was appalled to see its chocolatessandwiched between dead chicken, butter and vegetables.Small coolers were provided to retailers to keep the chocolate from melting, but that didnt quitedothe trick. Electricity costs money and is not provided in a uniform way, so on and off theelectricity goes and the product may suffer sometimes3. 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.Cocoaprices are at a near 20-year high at $2358 per ton, up from $900 a year back. India does notproducecocoa to any noteworthy extent but is a large consumer of chocolates. Consumption ofchocolatesand 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 aresold directly to retailers. Building such a direct network in rural areas is a daunting task since theinfrastructure 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 domesticchocolate industry. Usually, these imported chocolates taste better than domestic chocolate duetorecipe difference. Hence consumers who are willing to spend a little more, prefer these importedchocolates.However, the premium brands, which come through official channels, do not pose a threat tothe market, as these cater to a small niche market. However there is a lot of dumping fromneighboring countries like Dubai, Nepal, etc of inferior brand of imported chocolates. These arenotonly of low quality, but are brought very near to their expiry dates. Most of the cheap chocolatebrands that are available do not meet Indian Food Regulations.External Factors affecting Growth ofChocolate Industry in INDIA� Good monsoon ensures adequate availability of raw materials, which are mainly agriculturalinnature. Raw material prices have significant influence on margins.
27. � 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 allinfluence the business.� Market growth driven by overall economic growth and urbanization also contributes. Anoverallbooming 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 rawmaterial(esp. cocoa) expensive.Growth Opportunities in Indian Chocolate IndustryUntapped Market & Limited Consumption:The fact that chocolate is not a traditional food, high prices and domestic production problemswillprovide the main problems to market growth. As these markets develop, prices will fall makingtheseproducts more accessible to the wider population. However the Indian market is still untappedandprovides 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 chocolateshave a potential market of about 116mn consumers.Chocolate consumption in India is extremely low. Per capita consumption is around 160gmsin the urban areas, compared to 8-10kg in the developed countries. The per capita chocolateconsumption in India is still much below the East Asian standards. Hence per capitaconsumption hasa immense scope for improvement.In rural areas, it is even lower. Chocolates in India are consumed as indulgence and not as asnackfood. A strong volume growth was witnessed in the early 90s when Cadbury repositionedchocolatesfrom children to adult consumption. The biggest opportunity is likely to stem from increasing theconsumer base. Leading players like Cadbury and Nestle have been attempting to do this byvaluefor money offerings, which are affordable to the masses.We also believe that the near term opportunity lies in increasing penetration rather thanincreasing intensity of consumption.In the past five years, the chocolate business grown by 14-15% on an average and isexpected 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 elitistconsumption till recently.But with the launch of lower-priced, smaller bars of chocolate in the last two years andpositioning of chocolate as a substitute to traditional sweets during festivals, have boostedconsumption.Chocolates which were considered to be an elitist food hit the fancy of masses looking for a
28. 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 rapidacceptance.Leverage India for offshoring:India is being leveraged for export of finished goods, as a superior destination formanufacturing best practices, and for BPO opportunities.All the above points bring us to a conclusion that there’s an immense scope for growth ofchocolate industry in India not only in its offering pattern but also for increment in its totalconsumption value and size.Strategies for Growth & Success in India1. Revamp the product to keep the excitement alive.2. Companies should look at new avenues, while expanding the reach of its products.Distributionwill hold the key. Companies need to reach out to smaller towns, where three-fourths of thepopulation does not even know the product.3. Merger & Acquisitions: Mergers & Acquisitions with companies that match the productportfolio & overall growth strategy should be considered which will not only strengthen thecompany to establish a stronger hold in the country but also ward off possible competition in theselect category. Such collaborations will also facilitate companies to use each other’s distributionnetworks.Chocolate Boutiques & Designer ChocolatesThey call it choco fever. Chocolate Boutiques are a complete chocoholic experience.Surroundedon all sides by scrumptious chocolates wrapped neatly in colourful foil and paper, any one willbegripped by this fever.It’s a world of chocolates where the flavour of Jamaican rum truffle melts in your mouth evenas your hand reaches out greedily for a kiwi-flavoured concoction or where roasted almonds areadelight to eat while your mind flirts with hazelnut praline.Manufacturers are finding an increasing number of curious customers whore pampering theirtaste-buds to apricot and peach chocolate, strawberry chocolate or better still wild berry incognacflavoured chocolate. Manufacturers are now luring their patrons with chocolates in geometricshapes,animal figurines coloured in metallic hues and glitter. For the more adventurous, there are alsochocolates with pan-supari, cardamom flavours and liqueur filling. Products like nut-basedpralinechocolates, some unique flavors like tamarind and chilli chocolates, and champagne andJamaicanrum truffles are also demanded in the market.These manufacturers also cater to the older and the health-conscious choco-lovers, the highfibre, low fat and sugar ones are quite popular. Apart from the festive season, weddings and baby
29. announcements also see heavy offtake of premium sweet delicacies. For those who are healthconscious there is also a special range of sugar-free and diet chocolates. These are usually boughtbycorporates or individuals who want to make a special statement.Extensive range of Baby chocolates are available which are beautifully wrapped in pinks andblues and embellished with decorations like baby bottles, satin ribbons, silk flowers, bibs andbowsare also available and are getting very popular in elite classes.Designer chocolates are tailored for customers whore looking at gifting chocolates with apersonalized touch. Embossing of names, logos of companies and personalized message on thechocolates are fast becoming popular.There are 1,000 varieties of designs to choose from -- ranging from good luck charms, Xmasfigurines and animals -- and nearly 50 kinds of gift packaging available to suit any particularoccasion.From festive occasions to personal celebrations to corporate gifting, made-to-orderchocolates are most sought after. And we are not talking about the boring old rectangular slabs ofcocoaThese designer chocolates focus a lot of attention on packaging. The packaging of these productsincludes materials like imported mesh, gold foils and brocade, lace and satin-draped boxes beinginheavy demand.With the rise in disposable incomes, people do not mind spending on designer chocolates,most of which costs between Rs 500 and Rs 2,500 per kg. Few chocolate makers cater only tocorporate clients for festive occasions, product launches, new employee joinings andmanagementtraining programmes. From logos to company names being embossed in chocolates of differentshapes and colours, these are all in demand.CONCLUSIONThe Indian Chocolate Industry is a unique mix with extreme consumption patterns, attitudes,beliefs, income level and spending. At one hand, we have designer chocolates that are consumedwhen priced at even Rs 2500/kg while there are places in India where people have never eventastedchocolates once.Understanding the consumer demands and maintaining the quality will be essential.Companies will have to keep themselves abreast with the developments in other parts of theworld.PRICING is the key for companies to make their product reach consumers’ pockets. Rightpricing will make or break the product SUCCESS. Economical distribution of the products willalso be equally important.The companies’ strategies should focus on driving sales through a right product mix,efficient materials procurement, reduced wastages, increased factory efficiencies andimprovedsupply chain management.There’s an immense scope for growth of chocolate industry in India - geographically as wellas in the product offering.The Indian Chocolate Industry is destined to grow and will do so in the future.