Executive Summary

The Chocolate industry is one of the fastest growing sectors in the FMCG industry with a CAGR of 18-20 percent. The sector is dominated by two MNCs- Cadbury and Nestle, which together account for more than 95 percent of the market share. Our topic of study in this report is the long forgotten and currently neglected brand of one of the most celebrated corporations of the world- Amul Chocolates. The rise and fall story of Amul Chocolates is unique. From being the market leader at the time of its launch in the 1970s, it is currently languishing at a 2 percent share in the sector. At the same time other offerings from Amul like Ice-Creams, Fresh Milk, Butter, and Ghee

have gained immense popularity and are leaders in their respective segments.

Through this report we look at the journey of Amul Chocolates over the years and analyze its current position in terms of the marketing strategies it adopts. We try to look at possible reasons of its failure. Through a questionnaire and a retailer study, we try to evaluate the current Chocolate consumption patterns and customer preferences to analyze the standing of Amul Chocolates. Further using the results of these studies, we suggest some marketing strategies for the brand that may help it rise to about 10 percent share in the market. We also recommend a feasible action plan that may be undertook to achieve the same. Looking at the financial implications, we trace a possible growth chart for the brand. At the end, we suggest some implementation and control measures that should be kept in mind while it ups the ante.

The core objective of the strategies is to restore the strength and popularity of the brand which it rightfully deserves, coming from the umbrella of Amul. Amul stands for quality, trust, and tradition and according to us there is no reason why it cannot make its Chocolate offerings a success especially because of the excellent distribution channel it possesses in the rural markets and the unprecedented brand connect and recall it enjoys.

Current Marketing Situation

Amul chocolates, currently, is one of the neglected SBU of Amul. As far as its position in the chocolate industry is concerned, it has been completely overshadowed by the power brands like Nestle and Cadbury.

The chocolate industry in India as it stands today is dominated by two companies, bothmultinationals. The market leader is Cadbury with a lion's share of 70 percent. The company'sbrands (Five Star, Gems, Éclairs, Dairy Milk) are leaders their respective segments. Till the early 90s, Cadbury had a market share of over 80 percent, but its party was spoiled when Nestle appeared on the scene. The latter 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 (AMUL) and Central Arecanut and Cocoa Manufactures and Processors Co-operative (CAMPCO) are the other companies operating in this segment. Competition in the segment will get keener as overseas chocolate giants Hershey's and Mars consolidate to grab a bite of the Indian chocolate pie.

In India, the chocolate market is estimated at about Rs. 1500 Crores, growing at about 18-20 percent annually. The per capita consumption, given India’s mammoth population, is abysmally low at about 300g. In contrast the per capita consumption of developed countries like UK stands at about 1.9 Kg.

Changing Marketing Strategies of Amul Chocolates

In 1970s Amul was the market leader in an uncontested market space. At that time the market for chocolates was not a big one. People had the tendency to consume traditional sweets, and

chocolates were seen as something meant for kids. At that time, print media was the only one popular form of advertising. Amul focused on its core strength in the promotions i.e. its simplicity and quality of product. The advertisements also stressed on the variety of flavors in which the chocolates were being offered to the customers.

The positioning statement used by Amul was ‘A gift for someone you love’. This again stressed on core Indian values of bonding and spreading love through simple gifts. The advertisements used cartoons and refrained from using any famous personality as brand ambassador. The restrictions on the entry of foreign brands at that time meant that Amul kept operating in an almost uncontested space during the 1970s and 1980s. However it all changed post 1991 when economic reforms opened up the Indian market and hence MNCs started to show their might by offering great variety of products in each and every product domain.

In the 1990s Amul also shifted its focus from Chocolate to other products. In retrospect this was a complacent approach that led to a great fall in the market share of Amul Chocolates as Cadbury

pumped up its distribution and visibility in the market at about the same time. In the 1990s Amul this introduced many new variants like ‘Bidaas’ and ‘Nuts about You’. The intention was to target teenagers with their new product taglines like ‘Till we meet again’, ‘I understand’, ‘Will you

be mine’, ‘Why do I love you so much?’ and ‘forgive me’.

However with the increasing pressure from Cadbury and Nestle, Amul Chocolate market share kept on declining with each passing year till a stage was reached in 2003, when the market share was as low as 2 percent. In 2003, due to Cadbury Worm controversy, the sales of Amul Chocolates increased by 20%. To capitalize on this rub of the green, Amul introduced new products like Fundoo and Almond Bar. Amul also upgraded its festive pack REJOICE, which now offered 6 products instead of the earlier three.

In 2004, Amul went for a complete repositioning of its Chocolate brand. It undertook a series of aggressive initiatives to increase visibility and brand loyalty in customers. The first was a launch of CHOCOZOO, chocolates in the shapes of animals, cartoon characters, airplanes etc. This was a move to capture the hearts of young children fond of watching cartoons. The second was to introduce economic variants of chocolates prized at Rs. 1, 3 and 5. The third was to go for a trendier look in its packaging and promotions. It removed the cute little butter girl and the cheese boy from its wrappers and introduced new packaging designed by a US firm. The last move was to shift emphasis from festivals and special occasions to spreading love on all occasions.

In 2007, Amul reworked its strategy in the chocolate category to push its Chocolate product sales. The following steps were a part of the strategy rework.

• The strategy aimed at identifying the market gaps and trying to fill them as done in the past with their sugar free and Choco Zoo, both of which were appreciated by the consumers.

• Amul placed its chocolate products at lesser price points compared with its competitors. • Concentrating on the niche segment such as health chocolates. • Launched Trix, a wafer biscuit coated with rich milk chocolate. Cadbury's Perk and

Munch from Nestle were the two major players in the wafer chocolate segment. Priced at Rs 5, it was made available in strawberry and chocolate flavours.

• Introduced father son advertisement, Rose day advertisement, and a corporate image advertisement. As a result of these measures, the market share of the chocolates touched 10%, the highest since early 1990s. However this peak was short lived as Cadbury pumped up its ‘Celebrations’ campaign by spending heavily on advertising and promotions.

Current position of Amul Chocolates

Amul Chocolates that was a determined competitor to Cadbury and Nestle in the 1990s and 2000s, and tried to stay put till 2007, is barely seen on the shelves these days. A two-horse race that became three-horse competition, with Nestle joining in, appears to have slipped back into a market dominated by the two foreign brands. The homegrown Indian brand, a household name more famous than its owner, Gujarat Cooperative Milk Marketing Federation, is barely visible in the chocolate market. Marketing and branding aces blame the vanishing trick on poor marketing and low expertise in chocolate making. Another plausible reason could be the diversion of milk fat, an important ingredient in chocolate making, to producing liquid milk. The milk cooperative’s chief marketing manager, R S Sodhi, put the business priorities of the cooperative in perspective: “For us, chocolate is not big. We are not putting any advertising. Our focus is dairy and dairy products.”

Opportunity and Issue Analysis

70%

25%

5%

Indian Chocolate Market 2010

CadburyNestleImported+ Others includ-ing Amul

Amul has a minuscule market share in the Indian Chocolate Market space. Cadbury and Nestle remain to be strong and Amul is being elbowed out by constantly growing foreign brands. Indian Chocolate Industry however continues to be robust with an expected CAGR of about 18-20 percent.

As far as the position of Amul Chocolates amongst the various SBUs of Amul Umbrella is concerned, Amul Chocolates once again fails to score. Amul chocolates contributed probably half a per cent to one per cent to Amul’s overall turnover (Rs 6,711 crores in 2008-09, Rs 5,255 crores in 2007-08). 

As can be seen from the adjacent BCG matrix for the Amul SBUs, Amul Chocolates Unit is a QUESTION MARK. With a low relative market share in a high growth Chocolate Industry, Amul Chocolates needs to pull up its socks and look at innovating and repositioning to respond to the competitors’ dominance. Amul Chocolates could not change with the changing market scenario. From being the Market leaders in the 1970s when they were launched, they are now languishing at the

bottom of the pyramid with a mere 5 percent market share in the lucrative Chocolate industry growing at about 18-20 percent annually. Amul Chocolates also face a threat from increasing penetration of foreign chocolate brands in the urban markers, and the growing awareness about these brands amongst the customer segments.

Amul works with the principle of UMBRELLA BRANDING. With a wide range of products, many of which that are doing very well, it is most likely that Amul Chocolates is not being given the attention and the effort that it needs to recapture the position it once held in its glory days in the 70s.

Observations from a Retailer Study

Some observations on company policies from ground feedback:

1. Zero credit flexibility from dealers. Payment on dispatch.2. No return on unsold goods (A rule solely adopted by Amul)3. Negligible variants as compared to competitive brands.4. Minimalistic advertising. Zero promotions and offers. No dealer incentives.5. No answer to Cadbury’s positioning itself as a replacement to the traditional Indian

sweets.

Common brands stocked (In Order of Visibility):

1. Cadbury2. Imported Brands (Tobeleron, Bounty etc.)3. Nestle4. Amul (Very poor stock at most of the places)

Current market scenario as per dealers:

1. Not a price sensitive market.2. Foreign brands proving to be a strong competition. 3. Highly emotional buy- either for personal consumption or for gifting.4. Power Brand: Cadbury- Best distribution, positioning and advertising.

Summary Results of Field Study

A field study was conducted by us to gauge the awareness levels of Amul Chocolates, to understand the buying patterns and to decipher the customer preferences while purchasing a chocolate. The results of the study are summarized below followed by the salient interpretation of the study.

67%

12%

10%

5%7%

Reasons for buying a particular chocolate

TastePriceAvailabilityPromotionsBrand Loyalty

Inferences from the Survey

Twenty one percent respondents said that they crave for chocolates at least once a day, and almost fifty percent more replied that they craved for chocolates sometimes. This statistic points to the fact that chocolate consumption in urban centers is quite high and is

Imported Chocolate

Domestically Produced

Regular Buying Preference

38%

5%19%

29%

10%

Chocolate Variant Preffered

Nuts and Fruits VariantsWafer ChocolateDark ChocolateMilk ChocolateCaramel Chocolate

38%

62%

Amul Chocolate Advertisement Recall

YesNo

45%

7%17%

24%

5% 2%

The Tastiest Chocolate

CadburyNestleHersheyFerrero RocherTobleroneAmul

31%

48%

21%

Craving for ChocolateRarely SometimesAt least Once a Day

88%

12%

Amul Chocolate AwarenessAware Not Aware

TriedNot Tried

Amul Chocolate Tried?

bound to grow even further as traditional Indian sweets keep getting substituted by chocolates as gifting propositions. With growing health awareness, there is also a market for health chocolates fortified by proteins and other essential nutrients.

About two-thirds of the respondents buy domestically produced chocolates i.e. Cadbury, Nestle and other brands including Amul. A growing segment is the one that is buying imported chocolates like Hershey’s and Ferrero Rocher. This segment is bound to grow further as awareness about these brands increase and their availability at retail chains becomes easier.

Maximum respondents said that their favorite variants are the fruits and nuts one and basic milk chocolates. The other niche variants don’t have a major fan following but do have cult following.

Almost fifty percent responds said that Cadbury made the tastiest chocolates. A major observation is that more people found Hershey’s and Ferrero Rocher to be tastier than Nestle. This again proves the growing popularity of the imported foreign brands.

The awareness for Amul Chocolates is high. Ninety percent respondents are aware of the offering. About fifty percent respondents have tried the brand at least once.

About sixty respondents said that they recall at least one advertising campaign of Amul Chocolates. The figure is surprisingly high. But one thing to be considered is that respondents may have got confused with the extremely popular Amul girl print advertisements.

Sixty seven percent respondents said that they buy a particular brand of chocolate because of the taste. This just proves that a person may buy a particular brand because of curiosity and other factors, but becomes loyal to the brand which he finds the tastiest. Hence product quality and taste is of utmost importance.

The attribute most associated with Amul is trust, followed by quality and tradition. This shows that Amul as a brand has a very good reputation, with the people calling it a highly trustworthy brand. However Amul scores low at attributes such as ‘innovation’ and ‘being cool’, and this is a perception that is must change to compete with the growing foreign brands.

Customer Decision Making Process- A typical example of evaluation of alternatives

In a normal retail store, a typical example of a chocolate purchase can be shown as below. Chocolate brands can be subdivided into known and unknown. A normal customer with imperfect knowledge prefers to go for Known brands. The known brands can be subdivided into Evoked, Inept. Inert, and Overlooked. In the current scenario, AMUL Chocolates are usually

overlooked. The causes for this are basically inefficient promotions and unsatisfactory distribution. At the time of final purchase, the customers generally prefer to go for Cadbury over Nestle, as is also reflected by the India Market share statistics.

The core issue that can be inferred from the above flowchart is that Amul chocolates currently lies in the OVERLOOKED segment, and that does not augur well from its growth prospects. The customers are not even willing to consider Amul chocolates for consumption. The major reasons for this can be summed up as

Inept distribution policies- Scale and Incentives need to be looked into

ALL BRANDS

KNOWN BRANDSNESTLE, CADBURY,

AMUL, FERRERO ROCHER, SNICKERS,

MARS

UNKNOWN BRANDSTOBLERONE,

HERSHEY’S, TWIGGS, SKITTLES

EVOKEDCADBURY,

NESTLE

INEPTÉclairs,

Milky Bar, Nutties

INERTBar One,

Mars, Snickers

OVERLOOKED

AMUL

PURCHASED

CADBURY

NOT PURCHASE

DNESTLE

Inefficient Advertising and Promotions- Leading to low brand recall Strong brands as competitors Unimaginative product offerings

Objectives

The major objectives of our marketing plan are listed as follows

1. To understand the reasons why Amul Chocolates have not been able to return to its glory days of the 1970s when it was the market leader, and to gauge the current perception of the brand offering in the mind of the customers.

2. To suggest a marketing strategy that might help the brand to get a facelift and get a new vigor in terms of their dormant current market growth. As a part of the strategy we intend to look at all the 4Ps i.e. Product, Price, Place, and Promotions.

3. To formulate a workable action plan that would help Amul Chocolates to implement the strategy suggested.

4. To underline the challenges faced by Amul Chocolates and how they can overcome them.

5. To provide financial estimates, as to how Amul Chocolates can grow to a market share of about 10 percent in the next three years.

6. To suggest implementation and control measures.

Marketing Strategy

The Indian chocolate industry is extremely fragmented with a range of products catering to a variety of consumers. We have the bars/slabs, jellies, lollipops, toffees and sugar candies. Given India's mammoth population, it 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 Tonnes 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 tonnes, valued at around Rs. 1600 crores. 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 five years, the category has grown by 14-15% on an average and will expect it to continue growing at a similar rate in the next five years. The market presently has close to 60 million consumers and they are mainly located in the urban areas. Growth will mainly come through an increase in penetration as income levels improve.

Amul chocolates, currently, is one of the neglected SBU of Amul. As far as its position in the chocolate industry is concerned, it has been completely overshadowed by the power brands like Nestle and Cadbury in the urban markets. We here propose a strategy to improve the current standing of Amul Chocolates. As a part of the strategy we need to relook all the ‘4 Ps’, i.e. Product, Price, Place, and promotions.

Product:

As indicated by our survey results, in the chocolate market, what matters the most is the ultimate product. People may try out various brands and offerings once or twice, but they become loyal to only those chocolates which they find to be the most effective buy in terms of the ability to satisfy the taste buds. Cadbury has created a strong brand i.e. ‘Dairy Milk’, which is almost synonymous with them. Once ‘Dairy Milk’ was established and accepted by the public, then it offered variants in the same like fruit and nut and crackers. Amul on the other hand created multiple brands but could not create loyalty for one particular brand. This diluted their image and could not provide the public with one point of association to their brand of chocolates. We propose that Amul concentrates on one particular offering with a new name, to start of a new beginning for the company in the chocolates market.

Amul could use its sugar-free chocolates more effectively by targeting people with diabetes (though it currently is trying to bring them to the diabetic population, albeit unsuccessfully). About 10% of India’s urban population comprises people with diabetes. For many people, the hard part of dealing with their condition is to say goodbye to their favorite sweet foods, including chocolates. Moreover, the health benefits of chocolates can be highlighted. It is widely known that chocolates and its ingredients have the following beneficial properties:

Cocoa contains high levels of naturally occurring polyphenols that have antioxidant properties and work by fighting the free radicals, which attack cells causing disease and accelerated ageing.

Dark chocolate contains especially high levels of polyphenols – great news for the hearts of those people who indulge in the taste of dark chocolate!

It’s not just bars of chocolate that have these high levels of antioxidants – hot chocolate contains higher concentrations of antioxidants than red wine or tea.

A recent study has suggested that eating chocolate may improve the way our brains work. The theobromine and phenylethylamine, as well as the caffeine in chocolate were shown to increase alertness and mental performance.

Chocolate contains tryptophan, which is one of the building blocks that the body uses to make serotonin. Serotonin is a neurochemical that is associated in the brain with the sensation of pleasure.

These multiple health benefits should be emphasized in the ad-campaigns for Amul chocolates as well, to further build on the trustworthiness-image associated with Amul. This is especially because today our society is becoming more aware about health issues and is becoming more health conscious by and large.

Amul Chocolates today is not only competing with Cadbury and Nestle, but also with imported brands like Hershey’s and Ferrero Rocher. Hence they need to spend in research and development to create a product offering that is unique and that can give a tough fight to the competition on attributes such as taste.

Price:

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 elitist food, has caught the fancy of buyers looking for a lifestyle item at affordable cost. Till 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 liberalization 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. Availability of chocolate products has also exploded.

Amul has also placed its chocolate products at lesser price points compared with its competitors. Furthermore, as discussed below, lower-priced chocolates like Trix and other smaller sized-packs can be introduced in the rural markets.

Place:

Amul can take advantage of exploiting the rural markets. Although chocolates are considered ‘luxury’ in rural India, growing incomes would mean that the sales are bound to increase manifold very soon. Amul enjoys an excellent distribution channel and can target the rural consumers with the low priced Trix, or other chocolates in smaller packs.

Amul has an excellent distribution channel in smaller towns and in rural areas. It should leverage this and market its chocolates in these areas. Moreover they enjoy tremendous trust and faith of the public at large. This should help them in their endeavor to capture the rural markets.

Promotion:

The company needs to seriously take charge of its advertising by increasing the ad-frequency and showing during the prime-time. Also, in a country where Bollywood significantly influences the consumer behavior and marketing of a brand, Amul could use

a celebrity to revamp its chocolate-image, just like Cadbury roped in budding actress Genelia D'Souza as the brand ambassador to mark the re-launch of Cadbury Perk.

Their current budget on ads is too low to achieve the objective of expanding sales or penetrating the market. Amul must increase advertising expense from the current 1% of the revenue to 5-6% as done by other competitors.

Amul must expand its product portfolio to include something that competes with Cadbury Celebrations gift pack, especially during Diwali and other festive seasons. Since chocolates are increasingly replacing mithai in this area, Amul could make a big impact with a greater emphasis on its gift-packs.

Amul would also fare better if it moves away from the traditional advertising approach to a more tech-savvy method of employing animations that attracts children and teenagers because chocolates are consumed largely in this segment. For example, the Chocozoo ad seems 50 years behind the competitors’ ads.

Amul must come up with its own chocolate boutiques and form its own shelves in retail shops and take ownership of maintaining them. For example, the picture on the right shows how Cadbury has effectively mastered this.

Action Plan

1. Rebrand the basic milk chocolate by giving it a new name, a new packaging, with the same positioning statement. Introduce the variants under the same brand name.

2. Appoint a saleable brand ambassador who connects with the masses and introduce TV and print advertisements.

3. Increase visibility in retail shops, malls, and college/university canteens by ramping up distribution and carrying on promotional campaigns.

4. Offer incentives to distributors to stock and sell Amul Chocolates. Increase flexibility in credit rules and start giving returns on unsold goods.

5. Once the sales of the basic chocolate and its variants increase, start the promotion of the ‘healthy chocolates’ line of products. Price these products at a premium and sell in select urban centers.

6. Conduct a market research in the Tier-II and Tier-III cities, along with smaller town and villages. At these centers promote the benefits of eating chocolates vis- a- Vis traditional sweets that are far more expensive and riskier in terms of contamination and unhygienic production.

7. Create exclusive distribution deals with traders in these centers. Price the products competitively to fight of competition from Cadbury and Nestle. A brand ambassador who can connect with the masses should prove useful in this endeavor.

8. Create tie up of chocolates with other successful products of Amul like its milk products.

Financial Projections

Current Market Size: Rs. 1600 Crore

Current Market Share: 2-3 %

Current SBU size (estimated): 40 Crores

Targeted Market share: 10%

Time period targeted: 3 Years

Annual Growth Rate of Industry: 18%

Future Market Size: Rs. 2629 Crore

Targeted SBU size: Rs. 263 Crore

Targeted SBU Growth (CAGR): 87.3%

In effect Amul Chocolates will have to grow 87.3% each year for the next three years to achieve its objective of attaining 10 percent market share. This is a monumental task and will require aggressive marketing strategies. However it would be impossible to grow evenly over these three years. Initially the growth would be slower when new initiatives will be introduced, costs would be more and revenues growth would be in lower gear. We estimate the following future growth pattern

The year on growth that should be targeted to get achieve a 10 percent market share can be shown as follows

For achieving the targeted growth we chart out a cost structure based on the market leader’s (Cadbury) financial statements. For a 2100 Crore sales revenue, Cadbury spends about 820 Crore on raw materials, 40 Crore on power and fuel, 150 Crore on Employees, and about 650 Crore on other things which majorly include sales and promotion. Our proposed cost structure for the next three years for Amul chocolates is:

2011 2012 2013

Revenue 60 Crore 120 Crore 264 Crore

Raw Material Cost 23.5 Crore 48 Crore 105 Crore

2011 2012 2013 20140

50

100

150

200

250

300

SBU size (In Crores)

SBU size (In Crores)

2010.5 2011 2011.5 2012 2012.5 2013 2013.5 2014 2014.50

20

40

60

80

100

120

140

Percent Growth

Year

Grow

th

Employee Cost 4.28 Crore 8.4 Crore 18.5 Crore

Other expenses including 20 Crore 40 Crore 80 Crore

Advertising

Profit 12.22 Crore 23.6 Crore 50.5 Crore

Conclusion