Indian Chocolate Industry Analysis - Hoshedar Batliwalla

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A complete insight into the Chocolate industry in India. The presentation speaks about market leader cadbury and its dominance. Mondelez who has now acquired Cadbury has a different game plan internationally.

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Indian Chocolate Industry Analysis - Hoshedar Batliwalla

  1. 1. By Hoshedar Batliwalla (CMBA2/1314) Payal Patel (CMBA2/1318) Arjun Sanka (CMBA2/1313) Kuhu Pathak (CMBA2/1316) Pushkaraj Halge (CMBA2/1320)
  2. 2. To understand the… 1. Overall market size and growth trends & future projections. 2. Main market segments, size and consumer behavior trends. 3. Major macro and global environmental influences on the market and the critical success factors. 4. Analyze the industry with the help of porters 5 forces model. 5. Main market competitors, market share, strength & weaknesses. 6. Main channels of distribution, strengths & weaknesses.
  3. 3. MARKET ………………………………………………………………………..….......…..... DRIVERS & CHALLENGES TRENDS COMPETITION ………………………………………………………………………..….......…..... ………………………………………………………………………..….......…..... ..….…….………….. DRIVERS CHALLENGES • Increase in disposable income. • Chocolate gifting prevailing. • Attractive pricing. • Huge Potential as low per capita consumption. • Rise in cocoa prices. • High entry barriers. • High excise and import duties. • Premium chocolates. • Dark Chocolates. • Gift packaging schemes. • Entry of retailers and confectioners. ………………………………………………………………………..….......…..... CADBURY NESTLE AMUL MARS • Indian chocolate market is growing at a compounded annual growth rate (CAGR) of about 25% (Commodityonline,2013). • India is considered to be loaded with great potential for growth of chocolates. • Increased convenience of premium chocolates and budding taste for dark chocolates aided with higher purchasing power will lead to further development of the market. ………………………………………………………………………..….......…..... Source: Commodityonline
  4. 4. DRIVERS Vs. CHALLENGES DRIVERS Tradition of gifting chocolates Attractive pricing Increase in disposable income Low per capita consumption of chocolates Changing taste of Indians (Marketresearch.com) CHALLENGES Rise in cocoa prices High entry barriers High excise and import duties Social problems like child labour Regulations over imported chocolates (Marketresearch.com) A chocolate bar is often considered an “affordable luxury.” (Franchisehelp) Source: Marketresearch Source: Franchisehelp
  5. 5. • 55,000 tons in 2008 : Mintel, 2013 • 88,000 tons in 2011 : Mintel, 2013 Volume Produced • Rs. 1,011 Crore in 2008 : Mintel, 2013 • Rs. 4,914 Crore in 2011 : Mintel, 2013 Sales • Global chocolate market is worth $85 billion annually : Mintel, 2013 Global Chocolate Scenario Source: Times of India, 9th Oct 2012 Source: Pitchonnet
  6. 6. Source: KPMG Report, June 2012
  7. 7. 16800 12808 14095 15480 12428 6460 5627 2791 2272 2200 655.803 Net Sales 2012 (US$ millions) Cadbury (India) Source: International Cocoa Organization, 2012 Source: Indiainfoline
  8. 8. Source: Make Chocolate Fair (Make chocolate fair report, 2012) (Make chocolate fair report, 2012)
  9. 9. Sales of chocolate have increased from $418 million in 2008 to $857 million in 2011 (Mintel, 2013) India has posted the largest increase in volume sales with 21% growth between 2008 and 2012 Per capita consumption increases 2008- 40 gms to 120 gms in 2013. (Economic times, 2013) Premium chocolates saw launches grow from 4% in 2008 to 6% in 2011 Seasonal & boxed assorted chocolates have experienced the fastest growth & sales are expected to expand 13% between 2010 & 2015 (Franchisehelp, 2013) Seasonal launches increased from 2% in 2008 to 7% in 2011 (Mintel, Pitchonnet) (Mintel,2012) (Mintel, 2013) Source: Pitch on net Source: Mintel Source: Franchisehelp
  10. 10. AverageGrowthRate 2012-2017 India-13.8% Brazil-8.1% Turkey-6.4% China -5.8% Colombia-5.2% Russia -1.3% South Africa- 0.7% (Euromonitor, International Confectionery News 2013)
  11. 11. (Mintel,Livemint) Chocolate sales estimated at Rs.6007 crore in 2013 (Mintel,Livemint) Sales are expected to rise to 22.24% in 2013 (Mintel,Livemint) Chocolate prices are estimated to rise 9.84% to Rs.574.70 per kg in 2013 from an average price of Rs.523.20 per kg in 2012.(TimesofIndia,2012) The Associated Chambers of Commerce and Industry of India (ASSOCHAM) estimated consumption of chocolate to cross Rs.7500 crore by 2015 PROJECTED RETAIL SALES IN 2017 In US $ BILLION BRAZIL 18.5 RUSSIA 9.3 CHINA 2.6 INDIA 2.3 TURKEY 1.8 SOUTH AFRICA 712 Mn COLOMBIA 324Mn (Euromonitor, Confectionery News2013) Source: Mintel Source: Times of India, 2012
  12. 12. Milk Chocolate • Combination of atleast 10% chocolate liquor (not alcohol), cocoa butter, sugar and milk or creamat (12%min.) Sweet Chocolate • A combination of chocolate liquor, cocoa butter and sugar, but contains at least 15% chocolate liquor. Dark chocolate • A combination of chocolate liquor, cocoa butter and sugar, but contains at least 35% chocolate liquor. Unsweetened Chocolate or Baking Chocolate • This chocolate can be sold as unsweetened chocolate or baking chocolate or used to make other chocolate types. White Chocolate • Made from the same ingredients as milk chocolate but without the non fat cocoa solids. As per FDA 2001 it must contain at least 20% cocoa butter and 14% total milk ingredients. Source: Hershey's, 2013
  13. 13. Source: Barry Callebaut, 2012
  14. 14. 0.1 0.12 0.7 1 1.5 1.5 1.6 2.1 4.7 4.8 5 5.2 5.3 5.5 5.6 Chocolate confectionary consumption per person in kilograms Source: Barry Callebaut, 2012
  15. 15. 13-19 years 29% 20-25 years 23% 26-30 years 19% 30-40 years 29% 13-19 years 20-25 years 26-30 years 30-40 years Source: Economic Times, Aug 2013
  16. 16. 23 19 32 12 24 23 23 14 20 24 19 20 24 23 23 14 RELAXATION SHARING HUNGER REJUVENTAION 7 4 3 1 11 6 0 1 9 10 0 1 9 6 1 1 INDULGENCE CELEBRATION HEALTH ROMANCE Any Snack Small Individual Chocolates Bar Chocolate Any Chocolate Source: Mars Survey, Economic Times, 2013
  17. 17. Traditional Mithai Consumer Preference Chocolate 70% Urban Consumption 30% Rural 40 gm (2008) India per capita consumption (Economic times,2013) 120 gm (2012) IMPULSE SALES Premium chocolates increasing due to growing preference for better quality chocolates. Consumption of premium chocolates by rural consumers also witnessed a sharp rise in 2012.(Euromonitor, 2013) Interestingly, small pack sizes experienced a rapid increase in sales across rural areas and tier III cities owing to the affordability attached to it. In line with the preference for small pack sizes, volume sales of mini chocolates launched by Mars also started to emerge in 2012.(Euromonitor, 2013) Source: Times of India, 9th Oct 2012
  18. 18. Domestic: Factors affecting prices of chocolate: • Cost of milk production grown by an annual pace of 14% in 2012 (Credit Suisse, Oct 2013) • Rise in fodder prices by 23% as compared to last year in 2012 : (Credit Suisse, Oct 2013) • Rural wage rate has risen by more than 15% (Credit Suisse, Oct 2013) • Evidence of why importers are hesitant to come to Indian markets: 200 tons of imported chocolates are rotting in warehouses across airports & ports due to Indian regulatory issues of labelling norms (Economic Times, Nov 13) International: • India imports more than half of its requirement of cocoa every year with the demands increasing at 8% per annum (Indian Express, 2012) • Rise in global cocoa prices by 9.84% in 2013 due to production shrink in West Africa : (Livemint, 2013) is going to hamper Indian chocolate market in India. Source: Economic Times Source: Livemint Source: Indian Express
  19. 19. Chocolate industry offers a wide variety of opportunities for the small business owner, even when economic recession is manageable and is growing despite increased health- consciousness and calorie counting consumers. (Franchisehelp, 2013) Growth will be driven by population growth as well as expansion into new markets, product innovation and rising disposable income levels leading to greater purchasing of premium offerings. (Franchisehelp, 2013) Chocolate and confectionery makers say adult consumption of chocolates and candies is growing at the fastest pace in India, and companies like Mondelez, Mars, Nestlé, Perfetti Van Melle, Parle and ITC are launching new products and brands that target the grown-up. (Times Infomedia, 2013) Seasonal and boxed assorted chocolates have been experiencing the fastest growth, and sales are expected to expand 13% between 2010 and 2015(Franchisehelp,2013) Product innovation in 2010 brought a 16% increase in new product releases over 2009(Franchisehelp,2013)
  20. 20. Maximizing the distribution channels has enabled touch points at almost every available retail venue Adaptation to different taste buds makes a chocolate available for every palette Increasing demand for sugar-free and diet chocolates among consumers Rising income levels and rapid development in rural markets helps chocolate companies penetrate into the untapped rural sector Source: Times of India, 9th Oct 2012
  21. 21. Bargaining Power of Buyers (High) • Diverse offerings to choose from. • Price sensitive consumers for low-priced chocolates, especially rural consumer base • No brand loyalty. • Chocolate retailers margin ranges between 10 to 20% depending on the price point at which the product is placed. Bargaining Power of Suppliers (Moderate) (Cocoa farmers & others) • High Foreign dependence • Domestic market suppliers short • But the bargaining power of suppliers is moderate to high. • Limited access to distribution channels for importers. Potential Entrants (Moderate) • Difference in products. • Need for large capital requirements. • Health-consciousness and calorie counting products. • Product innovation can result in new entries. • Caramel candies. Threat of substitute products & services (Moderate) • Threat of substitutes such as soft drinks, snacks & beverages is moderate. • Industry must also compete in retail arena with traditional mithai. • Sugar candies are more readily available than chocolate. Intensity of rivalry among competitors (High) Few major players but with high influence Price wars. Advertising battles High launches of product lines High quality of customer service High variety of products offered
  22. 22. Source: Euromonitor Cadbury 56% Mars 16% Nestle 20% Amul 8% Sales Cadbury Mars Nestle Amul
  23. 23. Nestle India’s market share in chocolates dropped from 26.1% in 2008 to 23.6 % in 2012, Nielsen Co.In the same period, Cadbury owner Mondelez India’s market share fell from 70% to 64.5%. (Livemint,2013) Mondelez Int. announced plans to invest Rs.1000 crore in Andhra Pradesh to establish the company's largest manufacturing plant in Asia Pacific. This investment in is part of their ongoing supply chain reinvention plan. (Business Today,2013) Mars is exploring gujrat to set up new factories as it imports all the chocolate form US presently. (Business standard,2013) Both Nestle and Mondelez lost market share to Mars International India Pvt. Ltd and Ferrero India, which are gaining ground in chocolate confectionery driven by new products, according to a March report by research firm Euromonitor.(Livemint, 2013) Premium chocolate confectionery brands such as Ferrero Rochers, Mars and Tobelerone outperformed overall chocolate confectionery in terms of growth in 2011 and 2012, according to the Euromonitor report. (Livemint, 2013)
  24. 24. 1. Wide consumer base across the globe. 2. It is a global chocolate brand built upon a reputation for fine products and services. 3. One of the Fortune Top 100 Companies to work for in 2005. (CNN Money) 4. Cadbury launched its Cocoa Partnership in 2008 - a ten-year, £45 million (US$ 73 million) investment in cocoa sustainability in Ghana, South- east Asia, India and the Caribbean.(Tradeforum,2010) 1. Strong presence in the United States of America, UK and India but they need to look for a portfolio of countries, in order to spread business risk. 2. Cadbury's recall over 1 million chocolate bars over salmonella (BBC UK,2007) 3. The company has no apprehensions of cannibalization of its chocolate brands. CADBURYSTRENGHTS CADBURYWEAKNESSES : Source: Marketingprofs
  25. 25. 1. Strong brand equity in the Indian market. 2. Strong support by its parent company which is listed under the Fortune 500 companies. (CNN Money,2013) 3. Invested Rs.280 crore- Global R&D centre and for India in Manesar.(Livemint,2013) 4. Mergers and acquisitions and joint ventures to increase market share. (Nestle M&A,2013) 5. Strong advertising. 1. Being a big global brand, numerous controversies in different countries of operation can cause issues. 2. Complex supply chain management. NESTLÉSTRENGHTS NESTLÉWEAKNESSES Source: UNC
  26. 26. 1. High brand equity. 2. Products available at affordable price. 3. Successful advertising and marketing campaigns. 4. Strong network of Amul retail outlets, stalls and parlours. 1. Low market share in chocolates segment. 2. Strong competition from international markets. AMULSTRENGTHS AMULWEAKNESS Source: Business Standard, 2007
  27. 27. 1. Top Products in the Mind of Consumers. 2. Even after a late entry to the Indian market it has a good market share. 3. Mars products outsells chocolate candy market internationally,which implies their great potential. 4. Established image and advertising presence for Mars products. 5. Volume sales of mini chocolates launched by Mars started to emerge in 2012. (Euromonitor,2013) 1. Promotions is weak. 2. M&M’s is the number one selling candy in the chocolate market; however this product steals most of the promotion and advertising money. 3. Milky Way has a low sales percentage of Mars domestic market share. 4. Because of constantly changing campaigns, people are not aware of Milky Way’s positioning in the market. MARSSTRENGHTS MARSWEAKNESSES Source: UNC Source: Euromonitor
  28. 28. With support of District Rural Development Agency (DRDA) will provide interest free loans to its milk producers in Anand and Kheda districts to set up ‘pucca’ toilet blocks.(Amul CSR,2013) Amul extended its expertise in implementation of the Swarnjayanti Gram Swarozgar Yojana (SGSY). (Amul CSR,2013) Blood donation Camps are organized in Amul Dairy Campus. (Amul CSR,2013) Contributed $ 3,012,457 in form of money and food (Triplepundit, 2013) Flagship Vision For Change Program to support cocoa farmers Supporting local schools Blood donation camps and health awareness programs in and around the factory locality(Nestle CSR,2013) Training farmers on animal health and welfare Veterinary check ups (Nestle, official site 2013) . Joined hands with Akshaya Patra and distributed food across India (Cadbury CSR,2013) SARVAM(Sri Aurobindo Rural Village Action Movement) : a project to redevelop two villages in the coastal regions of Puducherry (Cadbury CSR,2013) $ 4 million to non-profit organizations for humanity development (Cadbury CSR,2013) Source: Nestle Source: Cadbury India Source: Triplepundit Source:Amuldairy AMUL MARS NESTLE CADBURY
  29. 29. Wholesaler Manufacturer Wholesaler Company Owned Or Stockist Retailers: Grocery/Kirana stores Gift shops Book shops Airport shops, Railway Stations Bus Stands Shopping Malls Chemist Super markets Speciality Shops Tobacco Kiosk Market for confectionary products in India report, 2005
  30. 30. STRENGTHS Vs. WEAKNESSES WEAKNESSES Poor infrastructure, such as transportation, storage, and refrigeration facilities. Manufacturers and importers rely heavily on the middle man for the distribution of confectionery products in India. Most importers rely on distributors or wholesalers to reach retail outlets, confectionery manufacturers often rely on C&F agents or dealers to work with the wholesalers and distributors. India’s retail sector is highly unorganized, as small independent stores are the main outlets for consumer purchases. (Market for Confectionary Products in India Report, 2005) STRENGTHS Retail sector is changing and the organized sector is gaining ground with the emergence of supermarkets and hypermarkets in metropolitan India. Once shipments are cleared by ports, it penetrates into the market very easily and reaches the consumers effortlessly. Small retail shops have a presence almost everywhere which helps reaching the rural customers. (Market for Confectionary Products in India Report, 2005)
  31. 31. Source: Nestle.com Raw Materials • Agricultural raw materials such as cocoa are sourced from suppliers into safe and value- added food products for consumers. • High environmental standards have to be met by suppliers and cocoa farmers. Manufacturing • ‘Manufacturing’ encompasses all the processes that are necessary to transform perishable raw materials into safe, shelf-stable, value-added food products for consumers. • Efficient technologies and applying best practices are used to improve environmental impacts. Packaging • Packaging is essential to reducing food waste by protecting products during transportation and storage. • It is also vital for food safety, freshness and providing consumers with nutritional information and portion guidance at the point of purchase. Transport & Distribution • Products are delivered via a network of road, rail and sea to an increasingly urbanised population. • On a daily basis, large consignments are transported to customers from factories and distribution centres, delivering the products in highest quality and on time from the factory to the consumer. Promoting Sustainable Consumption • The desire to create a more sustainable world requires understanding, collaboration and action at many levels by governments, companies, brands and consumers. • This drive also comes from consumers themselves, who want to understand the environmental impacts of their choices. Wastes & Recovery • Waste has consequence s beyond the loss of valuable products. • If waste increase, then scarce resources such as water, energy and land generate additional costs for treatment. • Reverse logistics.
  32. 32. Amul,CSR : http://www.amuldairy.com/index.php/csr-initiatives/tribhuvandas-foundation BBC UK: http://www.news.bbc.co.uk/2/hi/uk_news/England/6900467.stm Barry Callebaut: http://www.barry-callebaut.com/cms/download.dhtml?url=/cms_files/N-9004- enen_FileFile_35.pdf,filename=BC_Journal%202012_E_Chocolate%20consumption%20 and%20taste%20preferences.pdf&ei=BICfUtGnIoOTrgeDtYDgDg&usg=AFQjCNHgNe1fK vFfDZeXAODwCPPDiMobzw&bvm=bv.57155469,d.ZGU Business Standard: http://www.business-standard.com/article/companies/amul-revamps-chocolate-strategy- 107091101125_1.html Business Today: http://businesstoday.intoday.in/story/cadbury-india-plant- investment/1/197592.html Business Standard: http://www.business-standard.com/article/companies/us-based-mars-eyes-gujarat-for- chocolate-plant-113061801032_1.html#
  33. 33. Cadbury India: http://www.cadburyindia.com/in/en/about/pages/ourbusinessinindia.aspx Commodity Online: http://www.commodityonline.com/news/india-sweet-tooth- chocolates-the-new-festive-favourite-56742-3-56743.html Confectionery News: http://www.confectionerynews.com/Markets/Mondelez-chocolate-chief-pinpoints- markets-beyond-BRIC CNN Money: http://www.money.cnn.com/search/index.html CNN Money: http://www.money.cnn.com/magazines/fortune/global500/2013/snapshots/6126.html Euromonitor: http://www.euromonitor.com/chocolate-confectionery-in-india/report Economic Times: http://articles.economictimes.indiatimes.com/2013-08- 01/news/40963259_1_chocolate-consumption-chocolate-market-indian-consumers Economic Times: http://articles.economictimes.indiatimes.com/2013-11- 02/news/43611397_1_fssai-indian-food-new-labelling-norms
  34. 34. Franchise Help: http://www.franchisehelp.com/industry-reports/chocolate-industry-report Food Confectionary: http://69.17.111.188/site/c4/w116/downloads/India.pdf Indian Express: http://www.indianexpress.com/news/indians-get-sweet-on-chocolates/972675/0 ICCO: http://www.icco.org/about-cocoa/chocolate-industry.html India Infoline: http://www.indiainfoline.com/Markets/Company/Fundamentals/Profit- Loss/Cadbury-India-Ltd/500793 KPMG: http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/Documents/PDF/M arket%20Sector/Retail_and_Consumer_Goods/chocolate-of-tomorrow.pdf
  35. 35. Live Mint: http://www.livemint.com/Companies/xBxGxG5fHCAIDg8Brn0wyH/Nestle- expects-India-to-become-its-fourth-biggest-market-by.htm Live Mint: http://www.livemint.com/Industry/JAAQ4OuYXMmB4m7ZsHm2SI/Nestle-to- introduce-premium-chocolate-brands-in-India.html Live Mint: http://www.livemint.com/Industry/dzZbXrsKi74yU2v6bHUMJK/Rising-global- cocoa-prices-to-hurt-Indian-chocolate-buyers.html Make Chocolate Fair: http://makechocolatefair.org/issues/cocoa-prices-and-income-farmers-0 Marketingprofs: http://www.marketingprofs.com/ea/qst_question.asp?qstid=13692#ixzz2mX9SLrpJ Mintel: http://www.mintel.com/press-centre/food-and-drink/indias-craving-for-chocolate- unwraps-business-opportunities-for-manufacturers Market Research: http://www.marketresearch.com/Netscribes-India-Pvt-Ltd-v3676/Branded-Chocolate- India-6795080/
  36. 36. Nestle: http://www.nestle.com/csv/environmental-sustainability/highlights-challenges Nestle M&A: http://www.nestle.com/investors/mergers-and-aquisitions Pitch on Net: http://pitchonnet.com/blog/2012/11/08/chocolate-consumption-doubles- in-india-since-2008/ Times Infomedia: http://issuu.com/timesinfomedia/docs/beverages___food_august_issue Times of India: http://articles.timesofindia.indiatimes.com/2012-10-09/india- business/34342337_1_chocolates-traditional-sweets-d-s-rawat Trade Forum: http://www.tradeforum.org/Cadbury-Goes-Fairtrade/ UNC: http://www.unc.edu/~refisher/swot.html

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