One Does Not Simply Eat A Chocolate, One Earns It

Posted on January 22, 2013 in Business and Economy

By Shweta Madaan:

I know you cannot hear me but I hope it sounds somewhat like Homer Simpson: “Mmm….chocolate!” Chocolate is the masterpiece of sweet-makers which makes everyone go crazy and it dates back to the time of the Mayans. The Hershey Company was the first one to bring chocolate in solid forms. It is one of the few foods that people feel passionate about – a passion that goes beyond the love for the ‘sweetness’ of most candies or desserts. After-all, it is a feel-good food. It is a fact that chocolate contains more than 300 known chemicals, the combinations of which provide the ‘lift’ that is experienced by most of the chocolate eaters.

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In India, the chocolate market is of Rs 2,000 crore and is growing continuously at a rate of 20%. It is not surprising that the global chocolate market has a turnover of about $83.2 billion; the variation is because of consumers’ consumption habits. Here, in India, the per capita consumption of chocolate is 300 grams when compared to 1.9 kilograms in developed markets such as the United Kingdom.

The Indian chocolate industry is dominated by two chocolate giants; Cadbury and Nestle, both multinationals. Cadbury dominates the market with a share of 70 percent whereas Nestle has around 25 per cent build up in the chocolate market in India.

According to an estimate, there are good signs for the Indian chocolate industry because sales have risen by 15% in 2007 to reach 36000 tons. Some emerging brands are ‘Sweet World’, ‘Candico’ and ‘Chocolatiers’ which are marking their presence in several malls. ASSOCHAM Secretary General DS Rawat said, “The consumption of chocolates is steadily increasing in urban and semi-urban areas, registering a compound annual growth rate of 25 per cent. It is expected to cross Rs 7,500 crore by 2015.” The key growth driver is the Indian tradition of gifting sweets, which is now shifting currently from mithais to chocolates because of rise in consumer income levels, prices suitable for everyone and attractive labeling and packaging. This is the reason for the sudden spurt in this industry. It may develop at a much larger scale by targeting its products towards the youth as they consume most of these products. The growth is not at much pace when compared to foreign brands. There is a Delhi-based brand called ‘Chocolatiers’ which started with a small shop in south Delhi’s Chittaranjan Park and is now venturing into malls and multiplexes in NCR, Mumbai and Bangalore and their focus is on designer chocolates. Another firm ‘Candico India’ is available at 400 locations across malls and multiplexes in the country; both of them not much known brands.

Let us look at British and Swiss giants such as Cadbury and Nestle. They are doing a very good business in India. Cadbury has the largest target segment which is focused on the youth. Some of its products are Five Star, Gems, Eclairs, Perk and Dairy Milk which are, without any doubt, the leaders in their segments. Although Cadbury is the market leader as it had 80% of the market in its hands till the 90s. It was after this that Nestle appeared on the scene and from then onward, there has been a tiff between the two for grabbing the No.1 position. Nestle introduced some international names like Kit Kat and Lions and is commanding a 15% share. The reasons behind the success of Cadbury are their maintenance and improvement in quality, meeting the specific needs of consumers, improving its taste and presenting new variants in the market. In India, Nestle trails Cadbury but some of its achievements are a better understanding of local cultures, traditions and needs besides providing best quality at a low cost; which is quite sufficient for grabbing a large market share.

Now, let us look at the Indian chocolate brand Amul. The Gujarat Co-operative Milk Marketing Federation Ltd. or Amul is getting ready to challenge Cadbury in the moulded chocolate market. Amul has been lying low for a while with its generic chocolate variants such as Fruit & Nut and Milk. Now, it is planning to segment its chocolates, so as to cater to different age-groups and categories that are likely to consume its brand. It is planning to cash on Cadbury’s damage control activities in its favour. It also has plans of segmenting the market with brands catering to the `impulse’ and `teen’ segments, as well as having brands catering to different occasions. Its impulse segment can taste success instantly because the range and variety of chocolates available in malls seems to be growing day by day, which leads to lot of impulse sales for chocolate companies. With ITC and Parle getting more active in this segment, Amul officials feel it already has its cold chain and distribution network in place to get more products to ride this chain. Presently, is has 5 lakh retail outlets and has 2,600 distributors under its fold.

In India, the per-capita consumption of chocolates has increased from 40gm in 2005 to 110-120 gm. There is a lot of scope for it to grow even further as Indians are developing a palate for dark chocolates as well. But the key challenges that the chocolate market is facing in India are inflationary pressures on raw material prices, lack of government initiatives, high entry barriers due to duopolistic market and price-sensitive consumers. So, for changing the game, the Indian chocolate industry needs to gear itself up for satisfying the consumers’ needs; it has to build its brand like those of international brands and then only can it lead this market. The government must liberalize some of its policies and start taking the initiative so that everyone can taste this wonderful commodity.

Photo Credit: cacaobug via Compfight cc

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