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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

highlights 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 light on problems and

challenges of the Indian Chocolate Industry, growth opportunities 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.




Table of contentsSr. No Topic PageNo1 Project Objective 6

2 An Overview of Chocolate Industry in India 8

3 Types of Chocolates 12

4 Categories of Chocolates & Form of Consumption 14

5 Chocolate Manufacturing Process 15

6 Market Size (by value & by volume) 16

7 Major Players & their Market Share 17

8 Cadbury’s India Limited – A Study 18

9 Cadbury & The Worm Controversy 37

10 MARKETING - PROMOTION of CHOCOLATES in INDIA 46

11 Nestle India 50

12 Amul (GCMMF) 53

13 CAMPCO 59

14 Home-made Chocolates 62

15 Interesting Chocolate Facts 63

16 Problems & Challenges in Indian Chocolate Industry 64

17 External Factors affecting Growth of Chocolate Industry in INDIA 66

18 Growth Opportunities in Indian Chocolate Industry 67

19 Strategies for Growth & Success in India 69

20 Chocolate Boutiques & Designer Chocolates 70

21 Conclusion 72




22 Bibliography 73

Project Objective

This project aims at understanding the overall Chocolate Industry in India,the product portfolios of different players in the market, various factorsaffecting the growth and success of chocolate industry in India, thechallenges and opportunities which the market offers and the changingtrends in the Indian Chocolate Industry. The project also covers a brief studyof Cadbury’s India with reference to above points.

An Overview of Chocolate Industry in IndiaThe chocolate industry in India as it stands today is dominated by twocompanies, both multinationals. The market leader is Cadbury with alion's share of 70 percent. The company's brands (Five Star, Gems, Eclairs,Perk, Dairy Milk) are leaders their segments. Till the early 90s, Cadbury hada market share of over 80 percent, but its party was spoiled when Nestleappeared on the scene. The latter has introduced its international brands inthe country (Kit Kat, Lions), and now commands approximately 15 percentmarket 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. Competitionin the segment will get keener as overseas chocolate giants Hershey's andMars consolidate to grab a bite of the Indian chocolate pie.

Per Capita Chocolate Consumption (in lb) of first 15 countries of theworldRank Countries Per Capita Consumption (in lb)

· Switzerland 22.36

· Austria 20.13

· Ireland 19.47

· Germany 18.04

· Norway 17.93

· Denmark 17.66




· United Kingdom 17.49

· Belgium 13.16

· Australia 12.99

· Sweden 12.90

· United States 11.64

· France 11.38

· Netherlands 10.56

· Finland 10.45

· Italy 6.13

INDIA, stands nowhere even near to these countries when compared interms of Per Capita Chocolate Consumption. The Indian chocolate industry isextremely fragmented with a range of products catering to a variety ofconsumers. We have the bars/slabs, jellies, lollipops, toffees and sugarcandies.Given India's mammoth population, it comes as a surprise that per capitachocolate consumption in the country is dismally low - a mere 20 gms perIndian. Compare this to over 7 kgs in most developed nations.However, Indians swallowed 22,000 tonnes of chocolate last year andconsumption is growing at 10-12 percent annually. The market size ofchocolates was estimated to be around 16,000 tonnes, valued around Rs.4.16 billion in 1998. Volume growth which was over 20% pa in the 3 yearspreceding 1998, slowed down thereafter.Both chocolate and sugar confectioneries have abysmally low penetrationlevels, in fact, even lower than biscuits, which reach 56 per cent of thehouseholds. Market growth in the chocolate segment has hovered between10 to 20%. In the last five years, the category has grown by 14-15% on anaverage and will expect it to continue growing at a similar rate in the nextfive years.The market presently has close to 60mn consumers and they are mainlylocated in the urban areas. Growth will mainly come through an increase inpenetration as income levels improve.However, almost all of this consumption is in the cities, and rural India isnearly ‘chocolate-free’. But the fact is that three quarters of Indians live inRural Areas. “Average summertime temperatures reach 43 degrees Celsiusin India. Chocolate melts at body temperature of 36 degrees.”




Per capita consumption of chocolates in India is minuscule at 20gms in Indiaas compared to around 5-8 kgs and 8-10 kgs respectively in most Europeancountries. ... Awareness about chocolates is very high in urban areas at over95%. ...Growth of other lifestyle foods such as malted beverages and milk food haveactually declined by 3.7 per cent and 11.7 per cent, however theCHOCOLATES continue to grow at the rate of 12.6%.Low priced unit packs, increased distribution reach and new productlaunches 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 chocolateas a substitute to traditional sweets during festivals, have boostedconsumption. This is also because chocolate, which was considered to be anelitist food, has caught the fancy of buyers looking for a lifestyle item ataffordable cost. Till recently, chocolate consumption had been restricted bylow purchasing power in the market. Chocolates and other cocoa-basedsnack foods were looked upon as food suitable only for the well-off.After economic liberalization in 1991, major changes have occurred in foodhabits, partly on account of rise in gross domestic product (GDP) growth andhigher purchasing power in the hands of the middle-class representing athird of the total population. Availability of chocolate products has alsoexploded. A study had projected that sales of the Indian chocolate industrywould rise from $125/$130 million in 1998 to $175/$180 million by the year2000 and to $450 million by the year 2005 which ACTUALLY happenedirrespective of various negative factors. Per capita chocolate consumptioncontinues to be low at about 200g per person, being mainly consumed inurban areas. In the middle and higher income groups, 70 per cent ofchildren, 43 per cent of young adults and 16 per cent of adults consumechocolate. Chocolate Consumption Structure – 2004 Children 55% Adults12% Young Adults 33% Chocolate & Confectionery Market of India – 2004Chocolate 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 Rs 2,000-crore (Rs 20 billion)

Types of Chocolates

Depending on what is added to (or removed from) the chocolate liquor,different flavors and varieties of chocolate are produced. Each has a differentchemical make-up, the differences are not solely in the taste.




1. Unsweetened or Baking chocolate is simply cooled, hardened chocolateliquor. It is used primarily as an ingredient in recipes, or as a garnish.

2. Semi-sweet chocolate is also used primarily in recipes. It has extracocoa butter and sugar added. Sweet cooking chocolate is basically thesame, with more sugar for taste.

3. Milk chocolate is chocolate liquor with extra cocoa butter, sugar, milkand vanilla added. This is the most popular form for chocolate. It isprimarily an eating chocolate.

Cocoa is chocolate liquor with much of the cocoa butter removed, creating afine powder. It can pick up moisture and odors from other products, so youshould keep cocoa in a cool, dry place, tightly covered.There are several kinds of cocoa

� Low-fat cocoa has the most fat removed. It typically has less than tenpercent cocoa butter remaining.� Medium-fat cocoa has anywhere from ten to twenty-two percent cocoabutter in it.� Drinking or Breakfast cocoa has over twenty-two percent left in it. This isthe cocoa used in chocolate milk powders like Nestle's Quik.� Dutch process cocoa is cocoa which has been specially processed toneutralize the natural acids in the chocolate. It is slightly darker and has amuch different taste than regular cocoa.

Decorator's chocolate or confectioner's chocolate isn't really chocolate at all,but a sort of chocolate flavored candy used for things such as coveringstrawberries. It was created to melt easily and harden quickly, but it isn'tchocolate.

Categories of Chocolates

Commercial Chocolates are available in the following forms:

1. Bars or Moulded Chocolates2. Counts3. Panned Chocolates (Gems)4. Éclairs5. Assorted Chocolates




Bars or moulded chocolates (like Dairy Milk, Truffle, Amul Milk Chocolate,Nestle Premium, and Nestle Milky Bar) comprise the largest segment,accounting for 37% of the total chocolate market in volume terms. ... Waferchocolates such as Kit-Kat and Perk also belong to this segment. Pannedchocolates accounts for 10% of the total chocolate market. ... Waferchocolates such as Kit-Kat and Perk also belong to this segment. ..

Form of Consumption:

a. Pure Chocolatesb. Toffeesc. Cakes & Pastriesd. Malted Beveragese. Wafer Biscuits & Baked Biscuitsf. Chocolate Desserts

Chocolate Manufacturing Process:

Workers cut the fruit of the cacao tree, or pods open and scoop out thebeans. These beans are allowed to ferment and then dry. Then they arecleaned, roasted and hulled. Once the shells have been removed they arecalled nibs. Nibs are blended much like coffee beans, to produce differentcolors and flavors. Then they are ground up and the cocoa butter isreleased. The heat from the grinding process causes this mixture of cocoabutter and finely ground nibs to melt and form a free flowing substanceknown as chocolate liquor. From there, different varieties of chocolate areproduced.

What is conching?

Raw unprocessed chocolate is gritty, grainy and really not suitable foreating. Swiss chocolate manufacturer Rudolph Lindt discovered a process ofrolling and kneading chocolate that gives it the smoother and richer qualitythat eating chocolate is known for today. The name 'conching' comes fromthe shell-like shape of the rollers used. The longer chocolate is conched, themore luxurious it will feel on your tongue. Market Size (by value & byvolume) The Indian chocolate market is valued at Rs. 650 crores (i.e. Rs.6.50 billion) a year. The Indian chocolate bazaar is estimated to be in theregion of 22,000-24,000 tons per annum, and is valued in excess of US$ 80million. Chocolate penetration in the country is a little over 4 percent, with




India's metros proving to be the big draw clocking penetration in excess of15 percent. Next, comes the relatively smaller cities/towns whereconsumption lags at about 8 percent. Chocolates are a luxury in the ruralsegment, which explains the mere 2 percent penetration in villages. Themarket presently has close to 60mn consumers and they are mainly locatedin the urban areas.

Major Players & their Market Share:

The major players in the Indian Chocolate Industry are:1. Cadbury’s India Limited2. Nestle India3. The Gujarat Co-operative Milk Marketing Federation (GCMMF) – AMUL4. Cocoa Manufactures and Processors Co-operative (CAMPCO) Bars Count Lines Wafer Panned Premium Cadbury’s Dairy Milk & Variants ,5-Star, Milk Treat Perk Gems, Tiffins Temptation & Celebrations Nestle Milky Bar Bar One, Crunch Kit Kat, Munch Nutties Amul Milk Chocolate Fruit ‘n’ Nut FUNDOO Bindaaz Almond Bar Campco Campco Bar, Cream Krust, Turbo Treat

Cadbury’s India Limited – A Study




CADBURY’S INTERNATIONALCadbury is a very old trusted name. It all started in Birmingham in Englandwhen John Cadbury started his family grocery shop with side business ofcocoa and chocolate products in around 1824. His two sons, Richard andGeorge, expanded their family business of cocoa and chocolate. Bournville, atown near Birmingham, was build by them as a part of expansion of theirbusiness. Cadbury family is also known for their contribution in socialreforms 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 awholly owned subsidiary of Cadbury Schweppes Overseas Ltd (CSOL) in1948. The company’s original name was Cadbury Fry (India) Ltd. In 1978,CSOL diluted its equity stake to 40% to comply with FERA guidelines. In1982, the name waschanged to Hindustan Cocoa Products. CSOL’s shareholding was increased to51% in Jan ’83 through a preferential rights issue of Rs700mn. The currentname was restored in Dec ’89. In 2001, Cadbury Schweppes made an openoffer to acquire the 49% public holding in the company. The parent holdsover 90% of the equity capital after the first open offer. A second open offerhas been made to buyback the balance shareholding, after which thecompany would operate as a 100% subsidiary of Cadbury Schweppes PlcEver since the Cadbury is in India in 1947, Cadbury chocolates have ruledthe hearts of Indians with their fabulous taste. The company today employsnearly 2000 people across India. Its one of the oldest and strongest playersin the Indian confectionary industry with an estimated 68 per cent valueshare and 62 per cent volume share of the total chocolate market. It hasexhibited continuously strong revenue growth of 34 per cent and net profitgrowth of 24 per cent throughout the 1990’s. Cadbury is known for itsexceptional 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 alloccasions and moods. Today, the company reaches millions of loyalcustomers through a distribution network of 5.5 lakhs outlets across thecountry and this number is increasing everyday.

OBJECTIVES AND VALUES




Our objective is toGrow shareholder value…over the long term-Cadbury in every pocket Ourmarketing strategy is aimed at achieving this vision by growing the market,by appropriate pricing strategy that will create a mass market and to haveofferings in every category to widen the marketOur Managing for Value Process incorporates Setting stretched financialobjectives. Adopting Value Based Management for major strategic andoperational decisions and business systems. Creating an outstandingleadership capability within our management. Sharpening our companyculture to reflect accountability, aggressiveness and adaptability. Aligningour management rewards structure with the interests of our shareowners.

VISIONLife Full Of Cadbury-Cadbury is an organisation which impacts andinteracts 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'slife.Cadbury Full Of LifeCadbury as a company is vibrant.Cadbury is a fun and energizing workplace.Cadbury is robust and alive.BusinessCadbury dominates the Indian chocolate market with above 65 – 70 %market share. Besides, it has a 4% market share in the organized sugarconfectionery market and a 15% market share in milk/ malted foodssegment.sChanging product mixContribution to turnover1994Contribution to turnover2001Chocolate 59% 65%Sugar Confectionery 9% 10%Food Drinks 32% 24%Categories/ BrandsChocolate Bars , Count lines , Panned confectionery ,Wafer chocolates, Assorted Chocolates & Gift ChocolatesSugar Confectionery Googly , Mocka, Gollum, Frutus & Nice Cream




Food Drinks Bournvita, Delite & Drinking ChocolateCadbury's Indian operations are not just the largest in Asia but alsothe cheapest. In India,Cadbury has the largest market share anywhere in the world and hasbeen the fastest growingFMCG Company in the last three years with a compound annualgrowth rate of 12.5 per cent.Plant locationsCadbury’s manufacturing operations started in Mumbai in 1946, which wassubsequentlytransferred to Thane. In 1964, Induri Farm at Talegaon, near Pune was setup with a view to promotemodern methods as well as improve milk yield. In 1981-82, a new chocolatemanufacturing unit wasset up at the same location in Talegaon. The company, way back in 1964,pioneered cocoa farming inIndia to reduce dependence on imported cocoa beans. The parent companyprovided cocoa seeds andclonal materials free of cost for the first 8 years of operations. Cocoa farmingis done in Karnataka,Kerala and Tamil Nadu. In 1977, the company also took steps to promotehigher production of milkby setting up a subsidiary Induri Farms Ltd near Pune. In 1989, thecompany set up a new plant atMalanpur, MP, to derive benefits available to the backward area. In 1995,Cadbury expandedMalanpur plant in a major way. The Malanpur plant has modernized facilitiesfor Gems, Eclairs,Perk etc. Cadbury also operates third party operations at Phalton, Waranaand Nashik inMaharashtra.These factories churn out close to 8,000 tonnes of chocolate annually.Raw Material Composition in 2004Product Name Quantity(in Kgs)Cost(Rs) / UtTotal Cost(in Rs.)Milk Powder / Liquid Milk / Cream 26232610 15.79 414212911.9Dry Fruits 432340 162.6 70298484




Edible Oil 2167450 51.72 112100514Glucose-Liquid 27061090 13.17 356394555.3Cocoa Beans / Butter/ Powder 8478460 109.95 932206677Malt Extract 8679690 20.39 176978879.1Total 2062192021Cadbury's India LimitedRaw Material Composition in 2004(in Rs.)Malt Extract9%Cocoa Beans/Butter/Powder46%Edible Oil5%Dry Fruits3%Milk Powder/Liquid Milk/Cream 20%Glucose-Liquid17%FINISHED PRODUCTS DETAILS (as on 2004)Product Name Stock(%)Production(units)Sales Qnty(units)Sales(Rs. Cr.)Chocolates / Coated Wafer & Confectionery 58.57 23810373 22064912518.51Malt Foods (Jar/Refill/Tin) 22.02 3206253 3030579 194.97Excise duty 13.69 - - 121.23Confectionery- Hard Boiled 4.04 4425758 4023276 35.79Cocoa powder (Tin/Bags) 1.67 33312 29904 14.78Total 99.99 31475696 29148671 885.28Cadbury's India LimitedFinished Products - Sales Revenue - 2004(in Rs. Crores)




Cocoa powder(Tin/Bags)2%Confectionery-Hard Boiled4%Excise duty14%Chocolates/Coated Wafer/Confectionery58%Malt Foods(Jar/Refill/Tin)22%Cadbury’s India LimitedSales in Rs. MillionYears 1998 1999 2000 2001Sales 3354 3892 4324 4716Sales335438924324471601000200030004000500098 99 00 01YearsRs. MillionPRODUCT MIX - CHOCOLATESPRODUCT BASKETCategory Brand VariantsBars Dairy MilkPlainFruit n NutsDouble DeckerRoasted Almond




Chunky5-Star5 StarCount Lines 5 Star ChrunchieMilk Treat ChocolateOrangeWafer Chocolate Perk PerkPerk XLOther Chocki Mint, Strawberry & ChocolatePremium/ Gift Chocolates Temptation Rum, Cashew, Almond & OrangeCelebrations Various Gift PacksCadbury’s Dairy Milk (CDM):Cadbury’s Dairy Milk is the flagship brand of Cadbury’s not only in India butworld wide. CDM isthe single largest selling unit in India. It has annual sales to the tune of Rs200 crore. CDM not onlyaccounts for 30 per cent of the total chocolate market in value, butcommands nearly 26 per cent involume terms and close to 30 per cent of Cadbury’s annual turnover.Moving from a predominantly adult positioning in the days of the legendarydancing girl ad, tothe teens and the tweens, when the Cyrus Broacha ads hit the airwaves,CDM has made a long sweetjourney. In spite of the new categories being explored by Cadbury, its starbrand remains CadburyDairy Milk (CDM) which continues to corner almost 30 per cent of thechocolate market.Cadbury’s Temptation:Cadbury’s Temptation is premium chocolate brand aimed for high valueconsumption. Variousvariants available are Almond, Rum, Cashew & Orange. Cadbury’stemptation is priced at Rs. 40Cadbury’s CelebrationCadbury India launched its premium Celebrations range, which containstraditional Indian dryfruits wrapped in Dairy Milk chocolate. This gifting option combines thepleasure of giving away dryfruits — which Indians traditionally consider a premium, healthy gift — withchocolate. Cadburynow has 90 per cent market share in this profitable segment.PRODUCT REVAMPING & INNOVATIONS




Cadbury’s chocolate brands registered double-digit growth in 2002, touchingan astounding19 per cent in the second half of that calendar year. Getting the powerbrands right was the firstpriority, so genuine re-launches of the products were made.However, the growth rate was declining after that. The growth went downfrom 19 per centin 1999 to 12 per cent in 2000 to single-digits, with seven per cent in 2001.If it staged a smartrecovery to nearly 10 per cent in 2002, it was largely on the back of Chockiand the revamped powerbrands.PRODUCT INNOVATIONS:� 5 STAR:Consumer feedback suggested that the old 5 Star was too chewy, andpeople complained of itsticking to their teeth. It was made softer and melted easily in the mouth &introduced as 5 StarCrunchy� PERK:Perk was made much lighter and the size of the bar increased to matchNestle’s Munch. Perkhad been under fire from Nestle’s deadly duo of KitKat and Munch, but afterthe relaunch, itsmarketshare is two per cent more than KitKat’s. And, the five-year-old brandis now almost asbig 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 variousCadbury’s brands.Heroes brand is simply a multi-pack with miniatures of all its most popularbrands in a singleouter case.NEW PRODUCT LAUNCHESRich Dry Fruit CollectionFor Gifting Festive SeasonCadbury Celebrations’ Rich Dry FruitCollection – a range of premiumchocolate gift boxes.Available in attractive packs, the Collection caters to a premium giftingconsumer and is an ideal




festive gift. It is a unique combination of the best Cadbury chocolate andpremium dry fruits andcomes in four different formats each of which is a mix of select premium dryfruits enrobed in richCadbury Dairy Milk chocolate.Cadbury's Creative LaunchA new ‘after dinner' segmentCadbury Desserts“for sweet moments after dinner”“Khaane Ke baad Kuch Meetha Ho Jaye”.Rs. 20/- per packet of 44 gmsCadbury Dairy Milk (CDM) Desserts – with rich indulgent crème center, inexotic & traditionalflavors of Tiramisu and Kalakand. CDM Desserts offer the perfect roundingoff taste, after meal thatadds special ‘Meetha' moments to the family. The rich tastes of CDMcombined with the uniquecrème center in exotic flavors provide a special chocolate experience. CDMDesserts add delight tothe after-meal moments, especially with the consumers whosecurrent choice of sweets range fromhome made delicacies to fruits to meethai.PRICINGAfter the roaring success of Nestle’s Munch and Chocostick, Cadbury’sempire struck back hard.The Rs 5 price point accounts for more than half of all chocolatesales. Nestle had seized theinitiative at this price point, with its launch of Munch, now a roaring success(and the largest sellingproduct at that price point). Today, Cadbury has four products at this pricepoint: CDM, Perk, 5 starand Gems — and the five-rupee CDM bar is its single largest-sellingSKU.“This is a potent price point in India, because the averagepurchasing power is abysmallylow,” is what industry analyst have to say.Nestle kicked off one of the biggest success — the liquid chocolate categorywith its brandChocostick priced at Rs.2 — three months ahead of competition. Cadbury didreact with Chocki,




priced at Rs 2, expanding the concept of sachetisation to new frontiers.Chocki has been the singlebiggest growth driver for Cadbury as well as the entire chocolatecategory. The novelty of theformat endeared itself to the existing customer. In less than one year, itconstituted nearly 10 per centof the total chocolate market, split equally between Cadbury and Nestle.Volume led growth strategyCadbury has followed a well-planned strategy of fuelling volume growth byintroducing smaller unitpacks at lower price points. Simultaneously, the company seems to haveastutely juggled with thelarger pack sizes and raised prices to a degree higher than what appears atface. The strategy hasdriven volumes in the last two years and we expect the volume growth tocontinue in the next twoyears.PRICE WOESChocki, selling at a potent price point of Rs 2, was ideal for smaller towns,especially since it did notneed refrigeration. But Chocki started to cannibalise other higher-pricedchocolates in larger markets.The students of Bombay Scottish (an upmarket school in Mumbai)are not supposed to eatChocki, they should not have even heard of the product.DistributionChocolate needs to be distributed directly, unlike other FMCGproducts like soaps anddetergents, which can be sold through a wholesale network. 90% ofchocolate products are solddirectly to retailers.Distribution, in the case of chocolates, is a major deterrent to new entrantsas the product hasto be kept cool in summer and also has to be adapted to suit local tropicalconditions.Cadbury's distribution network used to encompasses 2100 distributors and450,000 retailers.The company has a total consumer base of over 65 million. Besides use of ITto improve distributionlogistics, Cadbury is also attempting to improve distribution quality. Toaddress the issues of product




stability, it has installed VISI coolers at several outlets. This helps inmaintaining consumption insummer, when sales usually dip due to the fact that the heat affects productquality and therebyofftake.To avoid cannibalization of its higher priced products from lower priced ones,Cadbury issetting up two separate distribution channels – one for CORE business &other for MASS markets,with different stockists, wholesalers and retailers. One set will be dedicatedto Cadbury’s high-endproducts and traditional chocolates. The other will cater to the mass marketbrands namely Chocki,Halls, Eclairs et al — all products priced below Rs 3.But today, Cadbury's distribution network reaches out to six lakh outletseach for itschocolate & confectionery brands (i.e. total reaching12 lakh outlets).PromotionTypically it is said that chocolates are being eaten when everyone is happy.And this issomething advertising has always portrayed. But it is found chocolates areeaten under diverseconditions and moods - when people are anxious, when they are sad, whenhappy - a whole range ofemotions. Condensing these views & thoughts, it can be said chocolate is atrue soul mate. Someonewho is with you through the ups and downs of life, helping you bounce back.And that's whatCadbury's Dairy Milk (CDM) positioned itself as - a special friend.% Share of various Brands Ad spending of CadburyHere, the 6 Cadbury brands shown in the graph comprise 85% of theadvertising pie, whereas, rest ofthe 9 brands advertised by Cadbury comprise 15% of the advertising.Cadbury Dairy Milk Chocolateis the most advertised brand (with 22%).RE-INVENTING CABDURY“Kya Swad Hai Zindagi Mein” redefined the way Indians looked atCadburyChocolates. (The commercial showed a beautiful young lady overcoming allobstacles on the cricket




ground, crossing boundary, watchman, securities and embracing her loverwho won the game byhitting a six). This theme introduced in around mid 90’s bought instantgrowth to Cadbury’s DairyMilk. The Ad campaign ran successful for about four years and immerseddeeper inside hearts ofIndians.In March 2002, Cadbury launched its next advertisement campaign for itsflagship chocolatebrand, Cadbury's Dairy Milk (CDM). The campaign featured a television (TV)commercial that wassignificantly different from the company's earlier commercials for the brand.It featured CyrusBroacha interviewing college students and asking why they liked to eat CDM.This was followed bycollege students 'singing' their excuses for eating CDM. Just as thecommercial seems all set to endwith the students and Cyrus singing the famous CDM theme, 'Khane WalonKo Khane KaBahaana Chaahiye' (those who want to eat, will find excuses), a studentcomes up and questionsCyrus,The advertisement aimed at conveying the idea that no specificoccasion is required forconsuming CDM. This was a significant departure from CIL's strategyof appealing to adultsin India, who sought a rational justification for indulging inchocolate consumption.Cadbury roped in Preity Zinta for its PERK brand. Preity Zinta’s angelicdimples laid thefoundation for what would become the Indian teenager’s favorite snack.After this campaign,PERK’S sale surgedCadbury’s advertising has, over the past few years, aptly reflectedIndia’s passion forchocolates.CADBURY ADVERTISEMENTSDil 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 CELEBRATIONSLooking wistfully at a photograph, Mr. Bachchanthinks, he recollects the photo-shoot when he hadthrown 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 hoJisme rishto ki mithas ho….Cadbury’s CelebrationsRishto ki MithasCadbury And The Worm ControversyThe discovery of worms in some samples of Cadbury’s Chocolate in earlyOctober 2003created one of the biggest controversies in India against a Multi Nationalreputed for being abenchmark of QUALITY.The controversy created an deep adverse impact on the company with theirsales not onlydrastically dipping down, but at the same time allowing the competitors toestablish their footholdand taking maximum advantage of Cadbury’s misfortune.The controversy, and the adverse publicity received in several countries, setback its plan ofoutsourcing model which would have resulted in significant revenuegeneration, several monthsback.The "worms’ controversy" came at the worst time….the next fewmonths were the peakseason of Diwali, Eid & Christmas. Cadbury sells almost 1,000 tonnesof chocolates duringDiwali. In that year, the sales during festival season dropped by 30per cent. The company sawits value share melt from 73 per cent in October 2003 to 69.4 percent in January 2004. In May,however, it inched up to 71 per cent. CDM sales volumes declinedfrom 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 endedDecember 2003, its net profit fell 37 per cent to Rs 45.6 crore (Rs456 million) as comparedwith a 21 per cent increase in the previous year.However, Cadbury’s reiterated that all through the 55 years of leadership inIndia, that it hasremained synonymous with chocolates and have remained committed tohigh quality and consumersatisfaction."CABDBURY’S FIGHT-BACK'Project Vishwas'“Steps to ensure quality & regain the confidence”Following the controversy over infestation in its chocolates, Cadbury IndiaLtd unveiled'Project Vishwas', a plan involving distribution and retail channels toensure the quality of itsproducts.The company's team of quality control managers, along with around 300sales staff, checkedover 50,000 retail outlets in Maharashtra and replaced all questionablestocks with immediate effect.The Vishwas programme was intended to build awareness among retailerson storagerequirements for chocolates, provide assistance in improving storageconditions and strengthenpackaging of the company's range of products.Cadbury reduced the number of chocolates in its bulk packets to 22 barsfrom the present 60bars. These helped stockists display and sell the products "safely andhygienically" 190,000 retailersin key states were covered under this awareness programme.The Big ‘B’ FACTORThe big factor that has pushed up CDM sales is the Amitabh Bachchancampaign. It helpedrestore consumers' faith in the quality of the product. In early January,Cadbury appointed AmitabhBachchan as its brand ambassador for a period of two years.The company believed that the reputation he has built up over the last threedecadescomplements their own, which was built over a period of 50 years.




Yet, the entire credit of recovery could not be attributed to the brandmascot.Incisive action taken by the company also helped. Some of which were:1. Responded to consumers concern over the issue rapidly. Also, thecommunication campaignworked effectively in giving out the central message.2. The packaging was changed to include a sealed plastic wrapper inside theoutside foil.Cadbury’s launched a new 'purity-sealed' packaging for its flagship product,Cadbury DairyMilk. The packaging is in response to foreign bodies, notably worms, beingfound in itsproducts. Over the next few weeks Cadbury will work towardsintroducing either a heatsealedor a flow-pack packaging that offers a high level of resistance toinfestation fromimproper storage.3. New advertising & promotion campaigns were in place which accountedfor an Ad spend ofnearly Rs 40 crore (Rs 400 million)Cadbury invested nearly Rs 25 crore (Rs 250 million) this year onnew machinery for theimproved packaging.Addressing his audience, Mr. Bachchan says, "Mujhe aapse kuch kehna hai,jis kaammein manushya ki antar aatma uske saath na ho, uss kaam ko karne seusse sab kuchmil sakta hai... man ki shaanti nahin mil sakti. Isliye jab Cadbury walon nemujhe kahaki unki baat main aap tak pahunchaoon, to pachpan saalon se Cadburykhaane walamain bhi thoda sa hitchkichaya.... ...Maine unse ek sawaal poocha,ki kyaiske baad mainchain ki neend so paoonga ya nahin, to jawaab mein voh mujhe apni factoryle gaye."Walking into the Cadbury factory,he takes a look at their completemanufacturing process and continues,"Aur mujhe apni internationaltechnology....apne kade quality controlsaur double protection... ...packaging




dikhayi."Saying which he takes a bite of thechocolate.Finally giving his personal assurance andapproval he says,"Aaj kal mein badichain ki neend so raha hoon.""Ab aapki favourite Cadbury Dairy Milknaye purity seal pack mein."CADBURY’S SINGING SWEETLY AGAINAll is well that ends well. And for Cadbury’s India, nothing can besweeter thanRegaining Back the Consumer Confidence.Thanks to quick action taken to recover the damage done by the wormcontroversy likeOperaion Vishwas, adopting new packaging & massive advertising with Mr. Amitabh Bachchanastheir brand ambassador, Cadbury’s regained its market share.The survey conducted by the company says that consumers have long forgotten thecontroversy and are back to their merry chocolate-chomping ways. Sales were back to theprecontroversylevels. Consumer confidence in the product was back and there was a steady progressionin 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 costsCadbury India appointed management consultancy firm AT Kearney to draw up a strategy tocontrolcosts in several areas, including sourcing of raw materials and packaging. This was partly anoutcome of the worms’ controversy more than a year ago. Among other things, it changed thewrappers for its Cadbury Dairy Milk brand and introduced better coolers.The consultancy firm will also look at the sourcing of direct and indirect materials likerenegotiating with suppliers for longer term contracts and vendor management. Other costs(indirectexpenses) 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.Earnings sensitivity factorsCocoa bean prices: Domestic as well as international prices of key raw material - cocoa havesignificant impact on margins.Excise duties : Changes in excise levied on malt and chocolate influences end product pricesandthereby volume growth as well as margins.




Changes in custom duties and foreign exchange fluctuation: As 20% of raw material isimported,changes in custom duties & foreign exchange fluctuations have significant impact on the finalcost ofthe product.Competition from MNCs like Nestle as well as imported brands. Increasing competition putspressure on advertisement budget and margins. However on the positive side, it helps inexpandingthe market.Success factors of Cadbury’s India Limited1. Global management processes:India occupies a high profile position in the global organization, with advocates in regional andglobal headquarters. Global management has allowed the local operation a high degree offlexibilityin growing the business, understanding that asset utilization may be lower and returns slower toarrive, 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 thattheonly way to succeed in India is by developing localized business models. For example, thecompanytailored the chocolate formula in India to prevent melting in the country’s open-air highfrequencystore environment.3. Customized business models:Local management has set up systems to test and develop products from the ground up withspecialized interlinked cells that execute innovation and market testing hand-in-hand. CadburyIndiais known as a key product innovator. Besides Dairy Milk, the entire Cadbury product portfolio inIndia has been developed locally to suit Indian consumer tastes. Packaging, marketing anddistribution 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, thecompany gets unlimited access to latest technology, new products and so on. They can alsointroducenew products from the parent, if it is suitable for Indian market.5. Subtle reengineering of raw material mix led to cost savings:Cadbury has reduced its dependence on cocoa, thus lowering its exposure to volatile rawmaterialprices as well as cutting costs.It appears that they have subtly altered its recipe by using less of costlier cocoa and more ofmilk 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 aboutRs.94mn (1.8 percent of net sales) in FY1999.MARKETING - PROMOTION of CHOCOLATES in INDIATraditionally, chocolates were always targeted at children. But stagnancy in growth ratesmade the companies re-think their strategies. Cadbury was the first chocolate company that tookthemarket by storm by repositioning brands at adults, as opposed to children.IBUYING BEHAVIOURChocolates are consumed as indulgence and not as snack food, as prevalent in westerncountries. Almost 75% chocolates are impulse purchases. Chocolates are bought predominantlybyadults and gifted to children. On an average the wholesalers sells Rs50000/month ofChocolates(all brands included). Also the wholesaler usually deals in all kinds of FMCG goods, Foodstuffinaddition 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 thecases 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 extensivelyonthe promotions by the sales staff. Also the companies can devise there marketing strategies thatarecatering to specific segments and are thus more effective.IINATURE OF RETAIL OUTLETChocolates 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 allocatedforthe chocolates was less when compared to the total area of the shop. Of the space allocated forchocolates, Cadbury brands occupied more than Nestle brands.The chocolates category thrives on excitement. It's all about giving the consumer achoice and taste which they enjoy.IIISTOCKING OF THE PRODUCTSIn most of the cases, various brands of chocolates are kept together. In some of the cases thechocolates are stocked depending on the manufacturer’s provision. The chocolates are kept inGlassJars and boxes – These are provided by the respective companies along with the product. Thechocolates 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 chocolatesfor thecustomer who is visiting the store.Medium size retailers sell chocolates of about Rs. 400 – Rs. 800 per week while bigretailers sell chocolate worth Rs1000 or more per week.CHOCOLATE ADVERTISING IN INDIAGrowth of Chocolate Advertising on Television: Year 2003 - 2004Company-wise Ad SpendingThe graph shows that Cadbury's India Ltd. tops with 52% share of the advertising pie ontelevision. Nestle India Limited grabs the 2nd position with 34% share, whereas, ParleProducts gets the 3rd position with 8% of the advertising share.Chocolate Ads shift focus from KIDS to YOUTHIndian chocolate market is almost totally depended on purchases of kids. In recent times, thechocolate majors, Cadburys and Nestle took major initiatives to bring in grown-ups into thismarket.While Cadbury is trying to sell indulgence to adults, Kit Kat is selling 'ritualistic' break toteenagers/ young adults. This is reflected in the changing advertising patterns across differentchannels.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 buyersofthis product category are children.But heavy advertising on channels like MTV, MAX, Star Plus, Zee, Zee Cinema, Discoveryand Channel [V] proves the changing profile of the potential consumer for the advertisers, in thiscategory, from children to teenagers/young adults as well as adults.

NESTLE INDIABackgroundNestle India was promoted by Nestle Alimentana, Switzerland, a wholly owned subsidiary ofNestle Holdings Ltd., Nassau, Bahama Islands. Nestle is one of the oldest food MNC operatinginIndia, with a presence of over a centuryNestle has a presence in 83 countries worldwide. It has a total number of 509 factories out ofwhich 220 are located in Europe, 153 in America and 136 in Africa, Asia and OceaniaThe Swiss food giant has been in India for 90 years, with six manufacturing plants,3,500 employees and almost $500 million in sales in 2002.BusinessNestle has a presence in the following categories - Baby Food, Milk products, Beverages(Coffee,malted beverage), Chocolates & confectionery and other processed food products.Chocolates & Confectionery




Nestle forayed into chocolates & confectionery in 1990 and has cornered a fourth share of thechocolate market in the country. Chocolates contributes 14% to Nestle’s turnover. It hasexpanded its products range to all segments of the market. In fact, Nestle is the fastest growingcompany in chocolates in India.The Kitkat brand is the largest selling chocolate brand in the world. Other brands includeMilky Bar, Marbles, Crunch, Nestle Rich Dark, Bar-One, Munch etc. New launches such asNestleChoco Stick and Milky Bar Choo were made at attractive price points to woo new consumers.Thecompany introduced two new brands, Charge and Crunch, in 1998. The company hasdiscontinuedproducts Chocostick, as it did not add value to the its portfolio. Nestle achieved roaring successbygrabbing the Rs 5 price point. From Jan – Sep ’05, Nestle chocolates witnessed a growth of14.8per cent.New Product Introduction & InnovationsThe Company sustained momentum during the year by driving distribution through innovativeconsumer promotions and trade offerings and supporting key price points.High temperatures are a typical characteristic of Indian subcontinent. Chocolate startsmelting at such high temperatures thus making chocolate unfit for consumption. Hence, Nestleintroduced 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 mostwidely distributed, continued to gain in volumes. NESTLE CHOTU MUNCH, which waslaunched at Rs. 2/- price point, was well received.A range of other innovative and renovated products were launched which included NESTLEMilk Chocolate, NESTLE Fruit & Nut, NESTLE Krunchy, NESTLE MILKYBAR STARZ,NESTLE CHOO, NESTLE Chocolate Eclairs, NESTLE Coffee Eclairs and various flavours forCHOCOSTICK,NESTLE CHOCOLATE PRODUCT PORTFOLIONESTLE MAHAMUNCHA ROARING SUCCESSNESTLE MAHA MUNCHRuk Na Paye…… Ruk Na PayeNestle MAHA Munch…only Rs. 5Amul (GCMMF)The Rs 2,748-crore GCMMF is in chocolate segment since quite some time. However, its marketshare is just 5% and the company did not look aggressive till recently. Amul chocolates used tocomein 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 andrevamping its packaging.Amul just recently launched new chocolate brands in the market - Rejoice, Kite Bite andNuts `bout You.Cadbury’s Worm Controversy & AMULThe breakup of Cadbury’s worms’ controversy accelerated & facilitated Amul’s marketingefforts. 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 yearchocolate market in India, the company raised its market share from 2 per cent in the beginningofOctober 2003 (time when worm controversy broke) to 15 per cent by the end of the month. Thecompany sold nearly 20 tonnes in Oct 2003 in Mumbai, against only 2 tonnes in Oct 200220 % overall growth of Amul’s chocolate share can be purely contributed to the Cadbury’sworm controversy.In an attempt to boost sales, the company launched three new chocolates in Mumbaiunder 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 tagof Rs10 for a 35 gm chocolate.Launch of Cooking ChocolateThough, cooking chocolate is available in the market, it is offered only as a commodity, notas a branded product. The Gujarat Co-operative Milk Marketing Federation (GCMMF), owner ofthebrand Amul, is strategized to capture a lion's share in the chocolate segment by tapping thehithertountouched sub-segments with the launch of its new brand Amul Chef in July 2003, making it thefirstever 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 SECA and B households, caterers, bakeries, restaurants, biscuit manufacturers, ice-creamparlours, and confectioners. Amul also aimed to capture a market share of 20 per cent in thefirsttwo months in Delhi and Mumbai.The market size of cooking chocolate in Mumbai and Delhi alone is estimated at 50tonnes per month.Brand New Products & Packaging to push Chocolate BusinessAmul revived its chocolate business with new products and renewed packaging.The company launched Chocozoo brand of chocolates in December 2004, to target the age groupoffour 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 launchedon the eve of Valentine’s Day, while the Kite Bite brand was unveiled during the kite-flyingfestival in Ahmedabad.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 underits fold.GCMMF has also drawn up plans to make its chocolate business a separate division of thecompany.

CAMPCOCentral Arecanut and Cocoa Manufactures and Processors Co-operativeA sudden withdrawal by the buyers of cocoa from the procurement operationsdue to crash in the international market came as a shock to cocoa cultivators in India. KarnatakaandKerala Governments enthused, at this stage, the CAMPCO to enter on the scene to rescue thefarmersfrom distress. CAMPCO willingly took up the responsibility to enter the cocoa market andperformed a savior's role.As a strategy for survival in the International scene the CAMPCO played a major role inestablishing a name for Indian Cocoa, which hitherto had not been achieved. It procured cocoapodsfrom growers and adopting scientific processing methods to market standards, released dry cocoabeans matching in quality in the world market equal to that of Ghana, Brazil and other cocoacultivation nations.After entering into the Cocoa market, the Co-operative was able to export Cocoa Beans worthRs 40 million to European countries in the initial phase of operations. India was not known as aCocoa producer in the international Trading Community, since yearly production was hardly 5 to6thousand tonnes which is not even 0.3% of the total world consumption.Through sustained efforts CAMPCO has been able to ensure reasonable prices to Cocoagrowers. The Co-operative had to face the problem of a limited internal market and un-remunerativeexport market. With the setting up of the chocolate manufacturing factory at Puttur, 50KM fromMangalore, the Co-operative has been able to increase local consumption of cocoa basedproductsand to export value added semi-finished products. With a view to creating a permanentdemandand a steady market for thebeans, CAMPCO established a Chocolate Manufacturing Factory at Kemminje village inPuttur 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.116.7Millions.CAMPCO CHOCOLATES

CURRENT STATUS of CAMPCOHowever, the company does not have much visibility in the Indian market. No advertising areseenbeing aired on TV…at least not on the prime channels. The company seems to have restricted itsmarketing efforts in south India only.Campco, being a co-operative is functioning under pressures from various political parties and issurrounded by various controversies all of which arising out of internal disputes.Home-made ChocolatesAnother area of chocolate industry in India is HOME-MADE CHOCOLATES. This segmentishighly fragmented and operates independently. They are more pronounced for manufacturingdistinctflavors and varieties of chocolates in various shapes and size. But, these chocolates are usuallypriced at a higher price than that available for branded products for the same quantity. House-wivesfrom elite class usually indulge in this kind of business. They usually operate in local area andthrough their contact network. Some home-made chocolate manufacturers manufacture reallyattractive GIFT CHOCOLATES.Interesting Chocolate FactsWhy is Chocolate in India different than most European chocolates?The temperatures in India are much higher than that of the European countries. To preventthe chocolate from melting and to enable shape retention under such high temperatures the recipeofthe chocolate is adapted to the Indian climate. Therefore the milk fat content in Indian chocolatesislesser 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 thechocolate.'This means white spots emerge on the surface of the chocolate. This phenomenon is called 'fatbloom'. It is entirely safe to consume chocolates however the feel and the taste of the chocolatemaynot be the same as is originally intended to.Are chocolates available for diabetics?Currently in India no manufacturer produces chocolates for diabetics, as the governmentregulations do not permit manufacture of such chocolates. The industry majors are liaising withthe




government authorities to enable manufacture of such chocolates in India. Chocolates fordiabetics,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 suggeststhey do good things to blood vessels. Dark chocolate contains flavanoids, an antioxidantwhichhelps the body by neutralising potentially cell-damaging substances known as oxygen-freeradicals, a normal byproduct of metabolism.Problems & Challenges in Indian Chocolate Industry1. TEMPERATURE:A peculiar problem that hinders the distribution to far-off places is the tendency of chocolates tomeltunder even moderate heat. The temperatures can reach as high as 48 degrees in summers,whereaschocolate starts melting at body temperature (about 37-38 degrees) .Manufacturers have totakeprecautionary 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. Companiesreviseingredients to make chocolate withstand heat, and so Indian chocolates are more resilient to heatthanEurupean chocolates by a factor of 2 degrees. Ironically, the chocolate market has grownrecentlybecause smaller retailers have stuffed fridges and coolers supplied by the cola companies CokeandPepsi with chocolates.Nestle and Cadbury have tried to provide loans for retailers to buy fridges, but to hold downpower costs the shopkeepers switch off the fridges at night. As a result the cocoa fat melts andmigrates to the main body of the chocolate bar. When the cooling is switched on in the morning,thecocoa fat solidifies and turns white, presenting a bizarre, un-sellable white on black form. Nestletried to provide fridges with see-through doors, but was appalled to see its chocolatessandwiched between dead chicken, butter and vegetables.Small coolers were provided to retailers to keep the chocolate from melting, but that didn't quitedothe trick. Electricity costs money and is not provided in a uniform way, so on and off theelectricity goes and the product may suffer sometimes3. 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.Cocoaprices are at a near 20-year high at $2358 per ton, up from $900 a year back. India does notproducecocoa to any noteworthy extent but is a large consumer of chocolates. Consumption ofchocolatesand 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 aresold directly to retailers. Building such a direct network in rural areas is a daunting task since theinfrastructure 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 domesticchocolate industry. Usually, these imported chocolates taste better than domestic chocolate duetorecipe difference. Hence consumers who are willing to spend a little more, prefer these importedchocolates.However, the premium brands, which come through official channels, do not pose a threat tothe market, as these cater to a small niche market. However there is a lot of dumping fromneighboring countries like Dubai, Nepal, etc of inferior brand of imported chocolates. These arenotonly of low quality, but are brought very near to their expiry dates. Most of the cheap chocolatebrands that are available do not meet Indian Food Regulations.External Factors affecting Growth ofChocolate Industry in INDIA� Good monsoon ensures adequate availability of raw materials, which are mainly agriculturalinnature. 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 allinfluence the business.� Market growth driven by overall economic growth and urbanization also contributes. Anoverallbooming economy will consume tonnes 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 rawmaterial(esp. cocoa) expensive.Growth Opportunities in Indian Chocolate IndustryUntapped Market & Limited Consumption:The fact that chocolate is not a traditional food, high prices and domestic production problemswill




provide the main problems to market growth. As these markets develop, prices will fall makingtheseproducts more accessible to the wider population. However the Indian market is still untappedandprovides 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 chocolateshave a potential market of about 116mn consumers.Chocolate consumption in India is extremely low. Per capita consumption is around 160gmsin the urban areas, compared to 8-10kg in the developed countries. The per capita chocolateconsumption in India is still much below the East Asian standards. Hence per capitaconsumption hasa immense scope for improvement.In rural areas, it is even lower. Chocolates in India are consumed as indulgence and not as asnackfood. A strong volume growth was witnessed in the early 90's when Cadbury repositionedchocolatesfrom children to adult consumption. The biggest opportunity is likely to stem from increasing theconsumer base. Leading players like Cadbury and Nestle have been attempting to do this byvaluefor money offerings, which are affordable to the masses.We also believe that the near term opportunity lies in increasing penetration rather thanincreasing intensity of consumption.In the past five years, the chocolate business grown by 14-15% on an average and isexpected to grow further for at least next five years.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 elitistconsumption till recently.But with the launch of lower-priced, smaller bars of chocolate in the last two years andpositioning of chocolate as a substitute to traditional sweets during festivals, have boostedconsumption.Chocolates which were considered to be an elitist food hit the fancy of masses looking for achange 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 rapidacceptance.Leverage India for offshoring:India is being leveraged for export of finished goods, as a superior destination formanufacturing best practices, and for BPO opportunities.All the above points bring us to a conclusion that there’s an immense scope for growth ofchocolate industry in India not only in its offering pattern but also for increment in its totalconsumption value and size.




Strategies for Growth & Success in India1. Revamp the product to keep the excitement alive.2. Companies should look at new avenues, while expanding the reach of its products.Distributionwill hold the key. Companies need to reach out to smaller towns, where three-fourths of thepopulation does not even know the product.3. Merger & Acquisitions: Mergers & Acquisitions with companies that match the productportfolio & overall growth strategy should be considered which will not only strengthen thecompany to establish a stronger hold in the country but also ward off possible competition in theselect category. Such collaborations will also facilitate companies to use each other’s distributionnetworks.Chocolate Boutiques & Designer ChocolatesThey call it 'choco fever'. Chocolate Boutiques are a complete chocoholic experience.Surroundedon all sides by scrumptious chocolates wrapped neatly in colourful foil and paper, any one willbegripped by this fever.It’s a world of chocolates where the flavour of Jamaican rum truffle melts in your mouth evenas your hand reaches out greedily for a kiwi-flavoured concoction or where roasted almonds areadelight to eat while your mind flirts with hazelnut praline.Manufacturers are finding an increasing number of curious customers who're pampering theirtaste-buds to apricot and peach chocolate, strawberry chocolate or better still wild berry incognacflavoured chocolate. Manufacturers are now luring their patrons with chocolates in geometricshapes,animal figurines coloured in metallic hues and glitter. For the more adventurous, there are alsochocolates with pan-supari, cardamom flavours and liqueur filling. Products like nut-basedpralinechocolates, some unique flavors like tamarind and chilli chocolates, and champagne andJamaicanrum truffles are also demanded in the market.These manufacturers also cater to the older and the health-conscious choco-lovers, the highfibre, low fat and sugar ones are quite popular. Apart from the festive season, weddings and babyannouncements also see heavy offtake of premium sweet delicacies. For those who are healthconscious there is also a special range of sugar-free and diet chocolates. These are usually boughtbycorporates or individuals who want to make a special statement.Extensive range of Baby chocolates are available which are beautifully wrapped in pinks andblues and embellished with decorations like baby bottles, satin ribbons, silk flowers, bibs andbowsare 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 thechocolates are fast becoming popular.There are 1,000 varieties of designs to choose from -- ranging from good luck charms, X'masfigurines and animals -- and nearly 50 kinds of gift packaging available to suit any particularoccasion.From festive occasions to personal celebrations to corporate gifting, made-to-orderchocolates are most sought after. And we are not talking about the boring old rectangular slabs ofcocoaThese designer chocolates focus a lot of attention on packaging. The packaging of these productsincludes materials like imported mesh, gold foils and brocade, lace and satin-draped boxes beinginheavy 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 tocorporate clients for festive occasions, product launches, new employee joinings andmanagementtraining programmes. From logos to company names being embossed in chocolates of differentshapes and colours, these are all in demand.CONCLUSIONThe 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 consumedwhen priced at even Rs 2500/kg while there are places in India where people have never eventastedchocolates 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 theworld.PRICING is the key for companies to make their product reach consumers’ pockets. Rightpricing will make or break the product SUCCESS. Economical distribution of the products willalso be equally important.The companies’ strategies should focus on driving sales through a right product mix,efficient materials procurement, reduced wastages, increased factory efficiencies andimprovedsupply chain management.There’s an immense scope for growth of chocolate industry in India - geographically as wellas in the product offering.The Indian Chocolate Industry is destined to grow and will do so in the future.

Bibliographywww.rediff.comwww.indiainfoline.comwww.business-standard.comwww.India-stats.com




www.Agencyfaqs.comwww.Equitymaster.comwww.indiantelevision.comwww.myiris.comwww.ibef.orgwww.thehindubusinessline.com

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