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    The Indian Confectionery Industry

    Overview of Indian Confectionery:

    The Indian population represents roughly one-fifth of the global population. India has attractedthe interest of many seeking new investment and market opportunities in food and agriculture.

    However, consumption of confectionery products is relatively low and product penetration is still

    very limited. At the same time, observers have noticed opportunities for growth of the market

    and increasing potential for imported chocolate and other confectionery products.The global

    confectionery market has been forecast to increase at a compound annual growth rate (CAGR) of

    3% for the five-year period 2011 - 2016, rising from a valuation of $157,640 million in 2011, to

    hit an industry value of $182,697.1 million by the end of 2016.

    The Indian confectionery market is expected to grow at a CAGR of more

    than 18% during 2012-15. Confectionery is related to the food items that are rich in sugar and

    often referred to as a confection. Modern usage may include substances rich in artificial

    sweeteners as well. With consumers staying at home to save money because of the economic

    crisis, demand for this format has significantly increased. As a result, rather than introducing

    new products in an already saturated market, manufacturers are increasingly introducing sharing-

    format variations instead. Historically, the chocolate confectionery market has been

    characterized by the dominance of a number of well established brands, such as Cadbury's Dairy

    Milk, Mars Bar and Kit Kat. Although some brands enjoy a rich heritage, the key need in a busy

    and developed market sector is innovation, not just of existing brands but also in the

    development of completely new brands. Over recent years, competitors in the confectionery

    market have made significant investments in new product development. Despite its vast

    population, Indias confectionery market is still very small. It is valued at close to US $450

    million, and is estimated to be 138,000 MT. Sugar confectionery (candies and toffees) has the

    largest share (50%), followed by chocolate, (16%), and bubble gum, (10%).

    History

    The confectionery market in India has undergone major changes and growth since the opening

    up of the economy and liberalization of the investment regime in 1991. India became an

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    attractive place for foreign investment and several large multinational companies entered the

    market for confectionery products. This resulted in its steady growth and gradual transformation

    from a commodity market to a branded products market dominated by multinational

    companies.Over the 1998 - 2003 period, confectionery retail sales have grown more than 55% in

    value terms and 46% in volume terms, at an average annual rate of 9.5% and 8% respectively.

    There is a clear trend of faster sales growth in value terms, indicating that consumers are

    increasingly ready to pay a premium for higher value products. The chocolate segment is the

    fastest growing in value terms (9.8% average annual growth rate) closely followed by the gum

    segment (9.5%). In volume terms gums grow at the fastest rate (8.5%), followed by chocolate

    and sugar confectionery (7.8% each). At the same time, to put these figures in some perspective,

    while retail sales for 2003 in India are estimated to have been US$562 million (Rs. 26,220

    million), US$26 billion worth of confectionery products were sold in the US. In volume terms

    these figures were 127,000 MT in India and 3.3 million MT in the US. While growth rates in

    general look rather healthy, and all agree that there is still large potential for further growth of

    the confectionery sector in India, many individual players have experienced slower growth in

    their sales over the last few years. This trend is partly attributed to the economic slowdown that

    India experienced in 2000-02 and resulting decline in consumer spending. Confectionery

    products are impulse purchases which would be among the first to be cut out. Companies are

    fighting this trend by broadening their consumer base from primarily children and teenagers, to

    adults as well. Most of the large multinationals active in India are also actively marketing to rural

    India, where penetration is lower than the average for the country. The organized confectionery

    segment in India segment is dominated by the multinational companies; however, domestic

    players are increasingly finding a prominent position in the market. Cadbury India, Ltd. is by

    far the market leader, followed by Perfetti Van Melle India, Ltd. and Nestle India, Ltd. Other

    important players are Lotte India Ltd, Nutrine Confectionery Co Pvt Ltd, Candico India

    Ltd, Parle Products Pvt Ltd,Wrigley India Pvt Ltd, Gujarat Coop., Milk Marketing

    Federation, ITC Foods, Hindustan Lever Ltd, CAMPCO Ltd, and Lotus Chocolates Co.

    Ltd.

    Retail chocolates and sugar confectionery account for the greatest share of total confectionery

    imported into India. In 2003-04, imports of retail chocolate totaled close to US $5.7 million.

    Imports of sugar confectionery fell close behind, totaling US $3.3 million, but registered a

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    growth rate of 100% from the previous year. Imports of bulk chocolate and chewing gum

    remained very small at roughly US $500,000 and US $400,000, respectively. In addition to the

    regular import channels, Indian also has significant gray imports. As a result, actual imports are

    probably larger than that shown by official statistics.

    Market structure:

    Market size

    Despite its vast population, Indias confectionery market is still very small. With a population about five

    times larger than the US, the volume size of its confectionery market is more than 20 times smaller. It is

    valued at close to US $450 million, and is estimated to be 138,000MT

    THE MARKET FOR CONFECTIONERY PRODUCTS IN INDIA

    Candies & Toffees 68,000 MT

    Chocolates 22,500 MT

    Breath Fresheners 7000 MT

    Bubble Gum 14000 MTChewing Gum 3350 MT

    Other Categories 23150 MT-

    The market value for Indian confectionery market is1726.3 million in 2011 and it is expected to have a

    value of $3,060.2 million in 2016

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    The Indian confectionery market grew by 6.3% in 2011 to reach a volume of 213.1 million kg. In 2016,

    the Indian confectionery market is forecast to have a volume of 297 million kg, an increase of 39.4%

    since 2011.

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    The Indian confectionery market had total revenues of $1,727.3 million in 2011, representing a compound annualgrowth rate (CAGR) of 12.4% between 2007 and 2011. In comparison, the Chinese and Japanese markets grew with

    CAGRs of 4.7% and 1% respectively, over the same period, to reach respective values of $7,322.5 million and

    $10,660.8 million in 2011.

    Market consumption volumes increased with a CAGR of 6.2% between 2007-2011, to reach a total of 213.1 million kg

    in 2011. The market's volume is expected to rise to 297 million kg by the end of 2016, representing a CAGR of 6.9%

    for the 2011-2016 period.

    The gum segment was the market's most lucrative in 2011, with total revenues of $592.1 million, equivalent to 34.3%

    of the market's overall value. The sugar confectionery segment contributed revenues of $578.5 million in 2011,

    equating to 33.5% of the market's aggregate value

    The performance of the market is forecast to decelerate, with an anticipated CAGR of 12.1% for the five-year period

    2011 - 2016, which is expected to drive the market to a value of $3,060.2 million by the end of 2016. Comparatively,

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    the Chinese and Japanese markets will grow with CAGRs of 4.9% and 1.2% respectively, over the same period, to

    reach respective values of $9,321.8 million and $11,315.5 million in 2016.

    Market share

    Perfetti Van Melle is the leading player in the Indian confectionery market, generating a 22.6% share of the market's

    value. Kraft Foods, Inc. accounts for a further 20.5% of the market

    The Indian confectionery market is concentrated, with the top four players holding 69.5% of the total market value.

    The confectionery market in India was estimated to be worth $1.27bn in 2009, growing at

    a compound annual growth rate (CAGR) of 10.5% during 2004-09. The market is

    expected to grow to a value of $2.28bn by 2014 and is estimated to grow at a CAGR of

    12.4% during 2009-14.

    Increasing health consciousness, a fast evolving indulgence seeking attitude of the Indian

    consumers along with snacking/eating on-the-go are a few of the key trends shaping the

    Indian confectionery market.

    In 2011, new product launches were dominated by sugar confectionery and chocolate

    category which together accounted for around 80% of the launches.

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    India is primarily a mono-pack market while the market worldwide is a multi-pack

    market.

    While the trade and distribution in western countries is mostly organized, in India, retail

    outlets like paan shops and kirana outlets account for the bulk of the sales and organized

    trade still has only an insignificant share in overall confectionery sales.

    Functional products and sugar free confectionery dominate the worldwide market while

    this trend is yet to pick up in India.

    Sugar confectionery will remain the largest confectionery type.

    As younger children are traditionally the key consumer group for confectionery, pricing

    strategies play a significant role in shaping purchasing decisions.

    50 paise is the most popular price-point and around 85% of confectionery sales occur at

    this price point - but there are some products in the rural markets that are available at 25

    paise. The Re 1 price-point is not very popular.

    Gum confectionery will be the fastest growing category, albeit from a smaller retail base.

    Instead of chewing on paan (betel nut leaf) to freshen ones breath or using spices such as

    fennel to aid digestion, the local population is increasingly turning to branded

    confectionery products such as chewing gum and mints. Consuming products such as

    mint and medicated confectionery conveys a sophisticated image, which appeals to young

    people.

    Manufacturers are increasingly looking to create a shift from manufacturing low-margin

    products like toffees and boiled sweets to higher-margin products such as gum and

    chocolates confectionery.

    There is strong growth potential for chocolate; sales of chocolate confectionery are

    expected to continue to grow by more than 8% per year in value terms. This is due to the

    low penetration of chocolate confectionery in rural areas as well as the general low

    consumption of such products among adults.

    Almost all confectionery purchases in India are believed to be impulse driven.

    Experts indicate that sugar confectionery and gum products consumption are driven

    almost entirely by impulse purchasing.

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    The figure is lower for chocolates (about 70%), because of its increasing popularity as a

    gift for various occasions and during the festival season.

    In their effort to increase consumption and product penetration, marketers have started to

    promote some products as appropriate snacks, not just an indulgence

    The country is poised to climb the rankings of worlds largest confectionery markets by

    value from its current 25th position to 19th position by 2014, according to a new report

    by Datamonitor, a London-based market research firm.

    The countrys $1.2bn confectionery market is expected to grow at a compounded annual

    growth rate of 12 per cent from 2009 to 2014.

    India is theworlds largest consumer of sugar.

    The growth rate in the market for sugary snacks and sweets was the second highest in the

    world in 2008-9, making it a lucrative proposition for the worlds largest confectioners

    looking to off-set dwindling sales in the west.

    Once an indulgence, sweets are becoming part of everyday life, consumed on-the-go.

    And western confectionery are replacing traditional Indian sweets as they have longer

    shelf-life and are more aggressively marketed.

    Sugar confectionery, by contrast, is the slowest growing segment of the market forecasted

    to grow at a compounded annual growth rate of 5.5 per cent until 2014.

    But the average Indian persons propensity for sweetness which has given India the

    dubious reputation of being the diabetes capital of the world has meant that the sales

    of low-sugar products and dark chocolates remain low. This trend is changing, however,

    especially in the urban areas.

    The share of imported confectionery will continue to increase over the next several years,

    although overall sales will remain modest. Indians taste will continue to become more

    westernized and more quality conscious.

    Indian confectioners are increasing their efforts in product development and promotional

    activities, and exporters will face stiffer competition from the domestic sector. On the

    other hand, the very low penetration and consumption levels provide ample opportunities

    for growth and make competition less of a constraint.

    http://www.ers.usda.gov/AmberWaves/September10/Features/WorldSugarPrice.htmhttp://www.ers.usda.gov/AmberWaves/September10/Features/WorldSugarPrice.htmhttp://www.ers.usda.gov/AmberWaves/September10/Features/WorldSugarPrice.htmhttp://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:22827050~menuPK:50003484~pagePK:2865066~piPK:2865079~theSitePK:295584,00.htmlhttp://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:22827050~menuPK:50003484~pagePK:2865066~piPK:2865079~theSitePK:295584,00.htmlhttp://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:22827050~menuPK:50003484~pagePK:2865066~piPK:2865079~theSitePK:295584,00.htmlhttp://www.ers.usda.gov/AmberWaves/September10/Features/WorldSugarPrice.htm
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    The popularity of chocolate products, particularly boxed assortments for gifts, will

    continue to increase.

    The sugar confectionery will remain the largest confectionery segment. We expect to see

    growth of new and novelty products, such as mint and gum.

    Health consciousness is one trend that has certainly caught the attention of the

    manufacturers. As a result, cereal bars are currently the fastest growing category in the

    Indian confectionery market.

    The Indian market is very price sensitive. There is a clear distinction between the larger mass

    market where price pressure is significant and the upscale niche market, where although

    important, price is secondary to quality and brand image

    Potential exporters should carefully select trading partners from among the Indian

    importers and distributors, as they will be critical to ensuring presence of their products

    on retail shelves.

    India remains a very price sensitive market and appropriate pricing is key to the success

    of new products.

    Over 30% of the Indian population is in the 014 age group, which is the primary target segment

    for confectionery manufacturers. These will be the prime movers for growth in the confectionery

    market in India

    Players and strategies

    Players

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    StrategiesThe Indian market is highly competitive in nature and is segmented into organized andunorganized sector. To overcome huge competition the players are trying to lure the consumers

    by attractive pricing, customization of products in accordance with Indian taste and preferences ,brand building activities such as advertising ,contesting ,pricing etc etc. The strategies taken bydifferent companies are discussed below-

    Mars, Incorporated

    Mars primarily produces and distributes food products worldwide. The company offers chocolates, candies, chewing

    gums, rice, entrees, sauces, and beverages. Additionally, it provides dog and cat food.

    The company operates across North America, Europe, Russia and Commonwealth of Independent States countries,Asia Pacific, Latin America, and Africa, India and Middle East (AIME).

    The company operates through six business segments:

    1) petcare, chocolate, 2)Wrigley, 3)food, 4)drinks and 5) symbioscience.

    The petcare segment offers a wide range of pet food products. The brands marketed by the segment

    include 1)Pedigree, 2)Royal Canin, 3) Whiskas, 4) Kitekat, 5) Banfield, 6)

    Cesar, 7)Nutro, 8) Sheba, 9)Chappi, 10) Catsan, 11)Frolic, 12)Perfect

    Fit and 13)Greenies.

    Thecompany operates 63 manufacturing facilities in this segment.

    Cadbury India (1948)

    Cadbury India Ltd. is a part of Mondelz International. Cadbury India is fully

    owned subsidy of Kraft Foods &Cadbury creates a global powerhouse insnacks, confectionery & quick meals.

    Cadbury India operates in five categories1) Chocolate confectionery,2) Beverages,3) Biscuits,

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    4) Gum and Candy.

    In the Chocolate Confectionery business, Cadbury has maintained its undisputed

    leadership over the years.

    Some of the key brands are 1)Cadbury Dairy Milk,2) Bournvita, 3) 5 Star,

    4) Perk, Bournville, 5) Celebrations,

    6)Gems, 7)Halls,

    8) clairs, 9)Bubbaloo,

    10) Tangand 11)Oreo.

    Cadbury India enjoys a value market share of over 70 percent in the chocolate

    category and the brand Cadbury Dairy Milk (CDM) is considered the "gold

    standard" for chocolates in India.

    Pricing strategy:

    1)Cadbury has a very convenient prices for all it's products.

    2) The price charged for a chocolate determines whether a consumer will buy it &the level of sales determine whether or not Cadbury Schweppes will make a

    profit.

    3)Cadbury World works with a number of 3rd party promoters and businesses in

    order to offer a discount on the entry price.

    Nestle India (1961)

    Nestle seeks to offer the most innovative and best tasting products,

    manufactured and maintaining the high standards of quality.

    chocolates and confectionery offer consumers a wide range of products-

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    Brands in Beveragegs category

    1.Nescafe

    2. Nescafe Capuccino

    3.Nescafe Classic

    4.Nescafe Sunrise Premium

    5.Nescafe Sunrise

    6.Nescafe Sunrise Strong

    7.Nestle gold

    8.Nestle Iced Tea

    Competitive advantages

    1)

    Strategies Of Nestle

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    Perfetti has been following the simplest of pricing strategies. Most of it's productsare available in the market at two basic price points, i.e. 50paisa for amonopack,which has a single tablet and Re. 1 for brands like Center Fresh, etc.The prices of different products do not vary from region to region, i.e. the part ofthe country they are being soldin, they are same throughout. But almost all of the

    products are available in different kindsof packaging.

    Perfetty lies in top left portion i.e. economy

    The company has been following an economic pricing strategy right from the starting. It has

    been aiming at maximizing its marketing share by keeping its products at a very low cost sothat

    everybody can buy them.

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    Pefetti, very clearly lies in category D, where they produce their products for the mass customer

    base at a very low price, hence aiming at high market share. They have been able to achieve their

    target in almost 16 years and their pricing strategy has been a very important part of their

    campaign in India.

    How do they compete?

    Different companies have different strategies and the firms producing chocolates, gum and sugarproduce differentiated products, they differ in flavour, packaging, advertisement etc. So it can besaid that monopolistic competitionprevails in confectionery market.

    Monopolistic competition and product differentiation

    The Confectionery industry in India follows a Monopolistic-typestructurewhich combines

    features of perfect competition and monopoly. Monopolistic competition is a market type inwhich many firms compete by selling similar but slightly different product. We have many firms

    and free entry and exit, but because products are differentiated each firm can set its own price.

    Product differentiation leads to advertising and brand names.

    Meaning of Monopolistic Competition

    Monopolistic competitionis a type of market in which1. There are many producers in an industry.2. There is free entry into and exit from the industry in the long run.3. Each producer sells a differentiated product.

    Examples: restaurants, clothing, books.

    Types of product differentiation.

    1. Differentiation by type and style. Ex: books, restaurants.2. Differentiation by location. Ex: gas stations, grocery

    stores, dry cleaners.3. Differentiation by quality. High and low quality Ex:

    Restaurants, coffee, chocolate.

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    FIVE FORCES ANALYSISThe confectionery market will be analyzed taking manufacturers of chocolates, gum and sugar confectionery asplayers.The key buyers will be taken as retailers, and cocoa farmers and other raw material producers as the key suppliers

    Summary

    The Indian confectionery market is concentrated, with the top four players holding 69.5% of the total market value.

    The market has a wide range of products, differentiated both by their inherent characteristics and by investment in

    branding. A variety of brands are available and products can also be differentiated with respect to quality and price.

    Consequently, buyer power is prevented from becoming disproportionately strong in this market.

    The key ingredients, such as sugar and cocoa products, are bought in commodity markets, and so manufacturers

    have little control over their prices; although maintaining inventories and engaging in practices such as hedging, can

    reduce the effect of price volatility.

    Entry into this market is highly dependent on growth prospects and also on the size of existing players.

    Confectionery products are vulnerable to the threat of substitutes, such as savory snacks and fresh fruits, due to low

    switching costs and consumption patterns in different geographies.

    The competitive rivalry is deemed as moderate in this market, with branding contributing to a high level of customer

    loyalty.

    Price elasticity and product differentiation play a small part in terms of competitive rivalry in the confectionery market.

    Buyer power

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    Confectionery includes a wide range of product categories, and within each segment, manufacturers have many

    opportunities to create goods that stand out from the rest. Along with the inherent differences (e.g. taste, ingredients,

    etc.) between products, manufacturers invest in advertising to

    build brand identities. Retailers therefore need to respond to consumer demand and the presence of strong

    differentiation and brand loyalty among consumers leads to a weakening of buyer power.

    However, most retailers in this market offer a wide variety of foods. As confectionery is only a small part

    of the retailer's total product range, buyer power is increased. So it can be said Overall, buyer power is

    assessed as moderate.

    Supplier power

    Suppliers to this market are cocoa farmers and producers of various other raw materials. Overall, supplier power isevaluated to be moderate

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    New entrants

    Overall, there is a moderate likelihood of new entrants.

    Threat of substitutes

    Overall, thethreat of substitutes is moderate

    Degree of rivalry

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    Overall, there is a moderate degree of rivalry in this market.

    Understanding Monopolistic Competition -Short Run

    In the short run, firms have given fixed costs and the number of firms in the industry is given.

    Costs shown byATC and MC. Each firm has a demandcurve, DF, which is the one in which

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    other firms have a given price. From demand curve, obtain MR, just like the case of monopoly.

    Firms maximize profits by setting MC=MR, and price is found from demand curve, as in

    monopoly case.

    Understanding Monopolistic Competition in Long Run: Entry and Exit

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    In the long run firms can change fixed costs (ignore this change, for simplicity) and firms can

    enter and exit. If firms make positive profits, new firms will enter, and the demand curve for

    each firm will shift to the left (as each firm has a smaller share of the total, with more firms). If

    firms make losses, firms exit and the demand curve shifts to the right. MR shifts in the same

    way. These changes will continue as long as profits are not zero.

    Understanding Monopolistic Competition in Long Run: Zero Profit

    Equilibrium

    In long-run equilibrium there will be no entry or exit. Profits will be zero, so that price = ATC.

    MC = MR for profit maximization. Demand curve for the firm must be tangential to the ATC; it

    shifts till this happens. Otherwise, profits can be increased with a change in output. Demand

    curve must lie everywhere below ATC

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    Understanding Monopolistic Competition comparison with perfect

    competition

    In long-run equilibrium, with perfect competition, firms are at the minimum point of the ATC

    curve, and P=MC. With monopolistic competition:

    1. Firms produce on downward-sloping part of ATC, not where ATC is at mimimum. Sometimes

    referred to as excess capacity.

    2. P > MC, so that firms would like to sell more at going price. Firms dont increase output

    because they know that it will drive down the price.So they engage in advertising and other

    sales promotion activity. P>MC means that some mutually beneficial trades are not exploited.

    demand side and supply side of confectionery industry in India

    CHANGES IN APPARENT CONSUMPTION OF COCOA In World Market

    2002/2003 AND 2010/2011 (BEAN EQUIVALENT)

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    Chart X shows that, between 2002/2003 and 2010/2011, world cocoa consumption expanded by731,000 tonnes (up by 24%) with most of the increase coming from higher consumption in thetraditional cocoa consuming countries of Europe (up 262,000 tonnes or 17%) while consumption

    increased by 227,000 tonnes (up by 22%) in the Americas over the same period. The most dynamicregions in terms of cocoa consumption were the Asian region (up by 50% or 188,000 tonnes) and theAfrican region (up by 74% or 54,000 tonnes). In 2010/2011, as shown in Table 11, the leadingconsumers of cocoa by country were the United States, Germany, France, the United Kingdom, theRussian Federation, Brazil, Japan, Spain, Italy and Canada and India.

    Production of cocoa beans by country (thousand tonnes)ESTIMATE FORECAST YEAR ON YEAR CHANGE

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    Country 2008/09 2009/10 2010/11 2011/12 2008/09 2009/2010 2010/2011 2011/2012

    Brazil 157.0 161.2 199.8 190.0 -13.6 4.2 38.6 -9.8

    Ghana 662.4 632.0 1024.6 890.0 -66.7 -30.3 392.5 -134.6Cted'Ivoire 1223.2 1242.3 1511.3 1410.0 -159.3 19.1 269.0 -101.3

    India 11.8 13.0 12.0 12.0 1.3 1.2 -1.0 -Peru 36.2 42.9 54.3 50.0 3.7 6.7 -11.5 -4.3

    Source:http://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.html

    APPARENT DOMESTIC CONSUMPTION OF COCOA (in thousand tonnes)Country 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11

    India 12.6 11.8 17.6 19.5 22.3 28 24.9 30.0 32.5

    Source:http://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.html

    Per capita apparent domestic consumption of Cocoa (kilograms per head)Country 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11

    India 0.012 0.011 0.016 0.017 0.020 0.024 0.021 0.025 0.027

    Source:http://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.html

    in the year 2011/12 the domestic production of cocoa was 12.0 thousand tonnes, whereas theconsumption of cocoa was 32.5 thousand tonnes. So, 20.5 thousand tonnes were imported in

    2011/12.

    http://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.htmlhttp://www.icco.org/about-us/international-cocoa-agreements/doc_download/442-the-world-cocoa-economy-past-and-present-26-july-2012.html
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    Regulations

    ControversiesMonopolistic competition and product differentiation leads to firms trying todifferentiate their products from those of other firms through advertising andcreation of brand names. Is that good for the economy?

    AdvertisingFirms advertise in order to increase the demand for their products.Advertising is not a waste of resources when it gives consumers usefulinformation about products. Advertising that simply touts a product withoutgiving real information may imply a waste of resources. It is also harder toexplain. Either consumers are not fully rational, or expensive advertisingcommunicates that the firm's products are of high quality. But maybe they arenot reallyhigher profits based on market power based on perceptions andstatus motives.Brand namesA brand name is a name owned by a particular firm that distinguishes its

    products from those of other firms.Social value of brand names can be positive or negative. Positive if namesconvey real information when they assure consumers of the quality of aproduct. But they may not do that: simply create unjustified market power,higher prices without any better quality, which consumers do not understand.Then effect is negative.

    Demand:

    YEAR RS IN BILLION

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    2000-01 16.5

    2001-02 17.6

    2002-03 18.9

    2003-04 20.15

    2004-05 21.7

    2005-06 23

    2006-07 23.75

    2007-08 25.4

    2008-09 26.8

    2009-10 28.2

    2014-15 36