analytical study of choclate industry

8/8/2019 Analytical Study of Choclate Industry

http://slidepdf.com/reader/full/analytical-study-of-choclate-industry 1/67

A

PROJECT REPORT

ON

ANALYTICAL STUDY OF CHOCLATE

INDUSTRY OF INDIA

SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF

THE DEGREE OF BACHELOR IN BUSINESS

ADMINISTRATION( 2010-2012)

UNDER THE GUIDANCE OF: Mr. Sachin Gupta

Submitted By : Akanksha Singh

Maharaja Agrasen Institute Of Management Studies

Affiliated to Guru Gobind Singh Indrapastha University

PSP Area, Plot No. 1, Sector 22,Rohini, Delhi-110086



STUDENT DECLARATION

This is to certify that I have completed the summer project titled(Analytical Study

Of Choclate Industry) under the guidance of Mr. Sachin Gupta in partial

fulfillment of the requirement for the award of Degree of Bachelor of Business

Adminestration at Maharaja Agrasen Institute Of Management Studies, Delhi.

This is an original piece of work & I have not submitted it earlier elsewhere.

Date: Signature:

Place: Name:

University Enrollment No.:

2



ACKNOWLEDGEMENT

This repor t has been made poss ib le through d i rect and ind i rect

support of various people for whom I wish to express my

appreciation and gratitude.

Nothing in this world can be achieved without proper coordinat ion.

Every work, be i t of market ing, f inance, product ion or successful

launching of a product , is the resul t of teamwork. This project of

mine wouldn’t have seen the l ight of the day without the coordination

of Mr. Sachin Gupta my project guide. I would l ike to express my

special thanks and grat i tude to him for constant ly guiding me and

tackl ing a var iety of hurdles wi th impl ic i t pat ience throughout my

research project and whose deep involvement and interest infused in

me great inspi rat ion and conf idence in taking up this study in the

r ight di rect ion. Without his overal l guidance and help, the project

may not have been completed.

I am commit ted to extend my profound thanks to Dr. N.K. Kakkar

(Director, MAIMS) for giving me an opportunity to work on a valuable

project and for his kind support.

Akanksha Singh

3



Certificate

The project study t i t le “Analytical Study of Chocolate Industry of

India” is a bonafied work carried out by Akanksha Singh in partialfulf i l lment of the requirement for the award of Bachelor of Business

Administrat ion (General) degree approved by the Guru Gobind Singh

Indraprastha University, Delhi under my guidance and direction.

Mr. Sachin Gupta

(Project Guide)

4



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 highl ights 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 l ight on problems and challenges of the Indian

Chocolate Industry, growth opportunit ies 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.

5



Table of contents

Project Objective

An Overview of Chocolate Industry in India

Types of Chocolates

Categories of Chocolates & Form of Consumption

Chocolate Manufacturing Process

Market Size (by value & by volume)

Major Players & their Market Share

Cadbury’s India Limited – A Study

Cadbury & The Worm Controversy

MARKETING - PROMOTION of CHOCOLATES in INDIA

Nestle India

Amul (GCMMF)

CAMPCO

Home-made Chocolates

Interesting Chocolate Facts

Problems & Challenges in Indian Chocolate Industry

External Factors affecting Growth of Chocolate Industry in

INDIA

Growth Opportunit ies in Indian Chocolate Industry

Strategies for Growth & Success in India

Chocolate Boutiques & Designer Chocolates

Conclusions

Bibliographies

6



Project Objective

This project aims at understanding the overall Chocolate Industry inIndia, the product portfol ios of different players in the market,

various factors affecting the growth and success of chocolate

industry in India, the challenges and opportunit ies 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.

7



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 l ion's share of 70 percent. The company's brands (Five Star,

Gems, Éclairs, Perk, Dairy Milk) are leaders their segments. Til l the

early 90s, Cadbury had a market share of over 80 percent, but i ts

party was spoi led 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. Competit ion in the segment wil l get keener as overseas

chocolate giants Hershey's and Mars consol idate to grab a bi te of

the Indian chocolate pie.

8



Per Capita Chocolate Consumption (in lb) of first 15

countries of the world

Rank Countries per capi ta 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

9



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, jel l ies, lol l ipops, toffees and sugar candies.

Given India's mammoth population, i t 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 tones 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

tones, valued around Rs. 4.16 bil l ion 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 f ive years, the

category has grown by 14-15% on an average and wil l expect it to

continue growing at a similar rate in the next f ive years.

The market presently has close to 60mn consumers and they are

mainly located in the urban areas. Growth wil l 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 l ive in Rural Areas. “Average summertime

temperatures reach 43 degrees Celsius in India. Chocolate melts at

body temperature of 36 degrees.”

10



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

elit ist food, has caught the fancy of buyers looking for a l i festyle

item at affordable cost.

Til l 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 l iberalization 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. Availabil i ty

of chocolate products has also exploded.

11



A study had projected that sales of the Indian chocolate industry

would rise from $125/$130 mil l ion in 1998 to $175/$180 mil l ion by

the year 2000 and to $450 mil l ion by the year 2005 which

ACTUALLY happened irrespective of various negative factors.

12



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 & Chewing gums: - Rs. 325 Cr. 13%

Sugar Boiled Confectionery: - Rs. 1600 Cr. 63%

AC Nielsen ORG Marg report estimates the Indian Chocolate

Industry’ worth at Rs2,000-crore (Rs 20 bi l l ion)

13



Types of Chocolates

Depending on what is added to (or removed from) the chocolate

liquor, different f lavors and varieties of chocolate are produced.

Each has a different chemical make-up; the differences are not

solely in the taste.

Unsweetened or Baking chocolate is simply cooled,

hardened chocolate l iquor. It is used primarily as an

ingredient in recipes, or as a garnish.

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.

Milk chocolate is chocolate l iquor with extra cocoa butter,

sugar, milk and vanil la added. This is the most popular form

for chocolate. It is primarily an eating chocolate.

Cocoa is chocolate l iquor with much of the cocoa butter removed,

creating a f ine powder. It can pick up moisture and odors from other

products, so you should keep cocoa in a cool, dry place, t ightly

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.

14



Drinking or Breakfast cocoa has over twenty-two percent left in

it. This is the cocoa used in chocolate milk powders l ike Nestlé’s

Quik.

Dutch process cocoa is cocoa which has been special ly

processed to neutralize the natural acids in the chocolate. It is

sl ightly darker and has a much different taste than regular cocoa.

Decorator's chocolate or confectioner's chocolate isn't really

chocolate at al l , but a sort of chocolate f lavored candy used for

things such as covering strawberries. It was created to melt easily

and harden quickly, but i t isn't chocolate.

15



Categories of Chocolates

Commercial Chocolates are available in the fol lowing forms:

Bars or Molded Chocolates

Counts

Panned Chocolates (Gems)

Éclairs

Assorted Chocolates

Bars or molded chocolates (l ike Dairy Milk, Truff le, 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.

Form of Consumption

Pure Chocolates

Toffees

Cakes & Pastries

Malted Beverages

Wafer Biscuits & Baked Biscuits

Chocolate Desserts

16



Chocolate Manufacturing Process

Workers cut the frui t 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 l ike 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 free f lowing substance known as chocolate l iquor.

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 rol l ing 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-l ike shape of the rollers used.

The longer chocolate is conched, the more luxurious it wil l feel on

your tongue.

17



Market Size (by value & by volume )

The Indian chocolate market is valued at Rs. 650 crores (i.e. Rs.

6.50 bil l ion) a year. The Indian chocolate bazaar is estimated to be

in the region of 22,000-24,000 tones per annum, and is valued in

excess of US$ 80 mil l ion.

Chocolate penetration in the country is a l i t t le 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 cit ies/towns

where consumption lags at about 8 percent. Chocolates are a luxury

in the rural segment, which explains the mere 2 percent penetration

in vi l lages.

The market presently has close to 60mn consumers and they are

mainly located in the urban areas.

18



Major Players & their Market Share

The major players in the Indian Chocolate Industry are:

Cadbury’s India Limited

Nestle India The Gujarat Co-operative Milk Marketing Federation (GCMMF) – AMUL

Cocoa Manufactures and Processors Co-operative (CAMPCO)

• Cadbury’s

o Dairy milk & its Variants

o 5-Star

o

Treato Perk

o Gems

o Tiffins

o Temptations1

o Celebrations

• Nestle

o Milky Bar o Bar One

o Crunch

o Kit Kat

o Munch

o Nutties

• Amul

o Milk Chocolateo Fruit ‘n’ Nut

o Fundoo

o Bindaaz

o Almond Bar

19



• Campco

o Campco Bar

o Cream Krust

o Turbo Treat

20



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. Bourneville, 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 complywith 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

21



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.

22



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.

23



VISION

Life Full Of Cadbury

• Cadbury is an organization 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 is a fun and energizing 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

Confectionary

9% 10%

Food Drinks 32% 24%

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.

25



Plant locations

Cadbury’s manufacturing operations started in Mumbai in 1946, which was

subsequently transferred to Thane. In 1964, Induri Farm at Talegaon, near Punewas 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, Éclairs, and Perk etc. Cadbury also operates

third party operations at Phalton, Warana and Nashik in Maharashtra.

These factories churn out close to 8,000 tones of chocolate annually.

26



Raw Material Consumption In 2004

Product

Name

Quantity(in

Kgs)

Cost(Rs)/

Unit

Total Cost

(in Rs.)

Percentage

Milk Powder/Liquid Milk/

Cream26232610 15.79 414212911.9

20%

Dry Fruits 432340 162.6 70298484 3%

Edible Oil 2167450 51.72 112100514 5%

Glucose-Liquid

27061090 13.17 356394555.317%

Cocoa Bean/Butter/ Butter

Powder 8478460 109.95 932206677

46%

Malt Extract 8679690 20.39 176978879.1 9%

Total 73051640 373.62 2062192021 100%

27



Finished Products Details as in 2010(Till August)

Product

Name

Stock (%) Production(Units) Sales

Quantity(Units)

Sales (Rs.

Cr.)

%age

Chocolates/Coated Wafer &Confectionary

58.57 23810373 22064912 518.51 58%

Malt Foods(Jar/Refill/Tin)

22.02 3206253 3030579 194.97 22%

Excise Duty 13.69 - - 121.23 14%

Confectionary-

Hard Boiled

4.04 4425758 4023276 35.79 4%

CocoaPowder(Tin/Bags)

1.67 33312 29904 14.78 2%

Total 99.99 91475696 29148671 885.28 100%

Comparison of Sales During 2006 – 2009

Years Sales(in Rs. Millions)2006 33542007 38922008 43242009 4716

28



PRODUCT MIX - CHOCOLATES

PRODUCT BASKET

Category of Chocolates, Brands & its Variants

Bars

• Dairy milk(Plain, Fruit ‘n’ Nuts, Double Decker, Roasted Almond,

Chunky)

• 5- Star(Plain, Fruit ‘n’ Nut)

Count Lines

• 5- Star(Crunchie)• Milk Treat(Orange)

Wafer Chocolates

• Perk(Perk, Perk XL)

• Kit Kat(Kit Kat, Kit Kat Chunky)

Premium/ Gift Chocolates

• Temptations(Rum, Cashew, Almond)

• Celebrations Various Gift Packs

Others

• Chocki(Mint, Strawberry, Mango & Chocolate)

29



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 CelebrationCadbury 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.

30



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 Nestlé’s

Munch. Perk had been under fire from Nestlé’s deadly duo of Kit Kat and Munch,

but after the relaunch, its market share is two per cent more than Kit Kat’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 mostpopular brands in a single outer case.

31



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 crème 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 crème 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 .

32



PRICING

After the roaring success of Nestlé’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.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 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 adegree 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.

33



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 toimprove 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, Éclairs et al — all products priced below Rs 3.

34



But today, Cadbury's distribution network reaches out to six lakh outlets each

for its chocolate & confectionery brands (i.e. total reaching12 lakh outlets).

35



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 motions. 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 atelevision (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,

36



'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. Bachchanthinks, 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,

jo sirf taufa nahin ehsaas ho

Jisme rishto ki mithas ho….

Cadbury’s Celebrations Rishto ki Mithas

37



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 MultiNational reputed for being a benchmark of QUALITY.

The controversy created a 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 tones 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."

38



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.

39



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 r a flow-pack packagingthat 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.

40



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, he 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."

41



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.

42



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.

43



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 theground 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.

4. 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.

44



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.

45



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.

46



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.

47



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.

48



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 & InnovationsThe 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. 2/- 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 Éclairs,

NESTLE Coffee Éclairs and various flavours for CHOCOSTICK,

50



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 sharefrom 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 tones in Oct 2003 in Mumbai, against only 2 tones 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.

51



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 tones 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.

52



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.

53



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 tones 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 chocolatemanufacturing 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.

54



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.

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.

55



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.

56



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.

57



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 aresult 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

58



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 ruralareas 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.

59



External Factors affecting Growth of Chocolate Industry in INDIA

Good monsoon ensures adequate availability of raw materials, which aremainly 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 tones 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.

60



Growth Opportunities in Indian Chocolate Industry

Untapped Market & Limited Consumption:

The fact that chocolate is not a traditional food, high prices and domesticproduction 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. Leadingplayers 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.

61



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.

62



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.

63



Chocolate Boutiques & Designer Chocolates

They call it 'choco fever'. Chocolate Boutiques are a complete chocoholic

experience. Surrounded on all sides by scrumptious chocolates wrapped neatlyin 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 themarket.

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

64



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 gifting, made-to-

order chocolates are most sought after. And we are not talking about the boringold rectangular slabs of cocoa

These designer chocolates focus a lot of attention on packaging. The packaging

of these products includes materials like imported mesh, gold foils and brocade,

lace and satin-draped boxes being in heavy 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 to corporate clients for festive occasions, product

launches, new employee joinings and management training programmes. From

logos to company names being embossed in chocolates of different shapes and

colours, these are all in demand.

65



CONCLUSION

The 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 consumed when priced at even Rs 2500/kg while

there are places in India where people have never even tasted chocolates 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 the world.

PRICING is the key for companies to make their product reach consumers’

pockets. Right pricing will make or break the product SUCCESS. Economical

distribution of the products will also be equally important.

The companies’ strategies should focus on driving sales through a right

product mix, efficient materials procurement, reduced wastages, increased

factory efficiencies and improved supply chain management.

There’s an immense scope for growth of chocolate industry in India-

geographically as well as in the product offering.

The Indian Chocolate Industry is destined to grow and will do so in the

future.

66



Bibliography

www.rediff.com

www.indiainfoline.com

www.business-standard.com

www.India-stats.com

www.Agencyfaqs.com

www.Equitymaster.com

www.indiantelevision.com

www.myiris.com

www.ibef.org

www.thehindubusinessline.com

analytical study of choclate industry

Documents