Preface

An Analytical Study of Chocolate Industry in India with Special

Reference to our chocolate 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 our
chocolate the biggest player in the Indian Chocolate Industry with
reference to its presence, market share, product offerings, marketing
strategies, strengths & weaknesses, problems, success factors. Also, the
implication of pricing, distribution strategies and impact of external
environment has been recorded.

Project Objective
This project aims at understanding the overall Chocolate Industry in India, the product portfolios
of different players in the market, various factors affecting the growth and success of chocolate
industry in India, the challenges and opportunities which the market offers and the changing
trends in the Indian Chocolate Industry. The project also covers a brief study of Cadburys India
with reference to above points.

An Overview of Chocolate Industry in India

The chocolate industry in India as it stands today is dominated by two companies, both
multinationals. The market leader is Cadbury with a lion's share of 70 percent. The
cgompany's brands (Five Star, Gems, Eclairs, Perk, Dairy Milk) are leaders their 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 has introduced its international brands in the country (Kit Kat, Lions),
and now commands approximately 15 percent market share. The Gujarat Co-operative Milk
Marketing Federation (GCMMF) and Central Arecanut and Cocoa Manufactures and Processors
Co-operative (CAMPCO) are the other companies operating in this segment. 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.
Per Capita Chocolate Consumption (in lb) of first 15 countries of the world
Rank Countries Per Capita
Consumption (in lb)
1 Switzerland 22.36

2 Austria 20.13
3 Ireland 19.47
4 Germany 18.04
5 Norway 17.93
6 Denmark 17.66
7 United Kingdom 17.49
8 Belgium 13.16
9 Australia 12.99
10 Sweden 12.90
11 United States 11.64
12 France 11.38
13 Netherlands 10.56
14 Finland 10.45
15 Italy 6.13
INDIA, stands nowhere even near to these countries when compared in terms of Per Capita
Chocolate Consumption. The Indian chocolate industry is extremely fragmented with a
range of products catering to a variety of consumers. We have the bars/slabs, 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 around Rs.
4.16 billion in 1998. Volume growth which was over 20% pa in the 3 years preceding 1998,
slowed down thereafter. Both chocolate and sugar confectioneries have abysmally low
penetration levels, in fact, even lower than biscuits, which reach 56 per cent of the households.
Market growth in the chocolate segment has hovered between 10 to 20%. In the last 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 60mn consumers and they are mainly located in the
urban areas. Growth will mainly come through an increase in penetration as income levels
improve. However, almost all of this consumption is in the cities, and rural India is nearly
chocolate-free. But the fact is that three quarters of Indians live in Rural Areas. Average
summertime temperatures reach 43 degrees Celsius in India. Chocolate melts at body
temperature of 36 degrees.
Per capita consumption of chocolates in India is minuscule at 20gms in India as compared
to around 5-8 kgs and 8-10 kgs respectively in most European countries. ... Awareness
about chocolates is very high in urban areas at over 95%. ...
Growth of other lifestyle foods such as malted beverages and milk food have actually
declined by 3.7 per cent and 11.7 per cent, however the CHOCOLATES continue to grow
at the rate of 12.6%.
Low priced unit packs, increased distribution reach and new product launches can be said
to have fuelled this growth.
The launch of lower-priced, smaller bars of chocolate in the last two years and positioning
of chocolate as a substitute to traditional sweets during festivals, have boosted
consumption. This is also because chocolate, which was considered to be an 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.
A study had projected that sales of the Indian chocolate industry would rise from $125/$130
million in 1998 to $175/$180 million by the year 2000 and to $450 million by the year 2005
which ACTUALLY happened irrespective of various negative factors.
Per capita chocolate consumption continues to be low at about 200g per person, being mainly
consumed in urban areas. In the middle and higher income groups, 70 per cent of children, 43
per cent of young adults and 16 per cent of adults consume chocolate.
Chocolate Consumption Structure - 2004
Children
55%
Adults
12%
Young Adults
33%

Major Players & their Market Share

The major players in the Indian Chocolate Industry are:
1. Cadburys India Limited
2. Nestle India
3. The Gujarat Co-operative Milk Marketing Federation (GCMMF) AMUL
4. Cocoa Manufactures and Processors Co-operative (CAMPCO)
Bars Count
Lines Wafer Panned Premium
Cadburys 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

Competitive brands
1. Amul
2. Cadbury
3. Nestle
4. Ferrero rocher
5. Safari

Competitors
Cadbury
Cadbury was incorporated in India on 19 July 1948. Currently, Cadbury
India operates in five categories Chocolate confectionery, Beverages,
Biscuits, Gum and Candy. Some of the key brands are Cadbury Dairy
Milk, Bournvita, 5 Star, Perk, Bournville, Celebrations, Gems, Halls, clairs,
Bubbaloo, Tang and Oreo. Its products include Cadbury Dairy Milk, Dairy
Milk Silk, Bournville, 5-Star, Temptations, Perk, Gems (a version of
M&M's), Eclairs, Bournvita,[70] Celebrations, Bilkul [71] Cadbury Dairy
Milk Shots, Toblerone, Halls, Tang and Oreo.
Nestle
Nestl was formed in 1905 by the merger of the Anglo-Swiss Milk
Company, established in 1866 by brothers George Page and Charles
Page, and Farine Lacte Henri Nestl, founded in 1866 by Henri Nestl.
Nestl S.A. is a Swiss multinational food and beverage company
headquartered in Vevey, Switzerland. It is the largest food company in
the world measured by revenues. Nestls products include baby food,
bottled water, breakfast cereals, coffee and tea, confectionery, dairy
products, ice cream, frozen food, pet foods, and snacks.
Amul

Amul is an Indian dairy cooperative, based at Anand in the state of

Gujarat, India.[2] The word amul is derived from the Sanskrit word
amulya meaning priceless. The co-operative was initially referred to as
Anand Milk Federation Union Limited hence the name AMUL.Formed in
1946, it is a brand managed by a cooperative body, the Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF), which today is
jointly owned by 3 million milk producers in Gujarat.
Safari
Cocoa Safari Chocolates, located in Madison, Indiana, creates
homemade chocolates made from the finest ingredients and natural
flavors. Cocoa Safari also offers the sweet sugar-free treats.Cocoa Safari
also offers chocolates from around the world.
Ferrero Rocher
Ferrero Rocher is a spherical chocolate sweet made by Italian chocolatier
Ferrero SpA. Introduced in 1982, the chocolates consist of a whole
roasted hazelnut encased in a thin wafer shell filled with hazelnut cream
including vegetable oil and covered in milk chocolate and chopped
hazelnuts.[1] The sweets each contain 73 calories, and are individually
packaged inside a gold-coloured wrapper. Rocher comes from French
and means "rock".

Permissions
1. Business license
2. License for handling and preparing food
3. Tax identification number
4. Liability insurance.

5. Contractor permission > municipality permissions > surveyors

certificate

External Factors affecting Growth of

Chocolate Industry in INDIA
Good monsoon ensures adequate availability of raw materials, which are mainly agricultural
in nature. Raw material prices have significant influence on margins.
Government policies in terms of licensing, duties, movement of agricultural commodities etc.
also affect the introduction of products, time lag for a product launches, taxes, excise, etc all
influence the business.
Market growth driven by overall economic growth and urbanization also contributes. An
overall booming economy will consume 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 raw
material (esp. cocoa) expensive.

Growth Opportunities in Indian Chocolate Industry

Untapped Market & Limited Consumption:
The fact that chocolate is not a traditional food, high prices and domestic production problems
will provide the main problems to market growth. As these markets develop, prices will fall
making these products more accessible to the wider population. However the Indian market is
still untapped and provides immense scope for growth, both geographically as well as product
basket wise.
Chocolates right now reaches about 70mn to 75mn consumers. It is estimated that chocolates
have a potential market of about 116mn consumers.
Chocolate consumption in India is extremely low. Per capita consumption is around 160gms
in the urban areas, compared to 8-10kg in the developed countries. The per capita chocolate
consumption in India is still much below the East Asian standards. Hence per capita
consumption has a immense scope for improvement.
In rural areas, it is even lower. Chocolates in India are consumed as indulgence and not as a
snack food. A strong volume growth was witnessed in the early 90's when Cadbury repositioned
chocolates from children to adult consumption. The biggest opportunity is likely to stem from
increasing the consumer base. Leading players like Cadbury and Nestle have been attempting to
do this by value for money offerings, which are affordable to the masses.
We also believe that the near term opportunity lies in increasing penetration rather than
increasing intensity of consumption.
In the past five years, the chocolate business grown by 14-15% on an average and is
expected to grow further for at least next five years.

Changing Attitudes & Consumption pattern:

In the past, chocolate consumption had been restricted by low purchasing power in the market.
Chocolates and other cocoa-based snack foods were looked upon as food suitable only for elitist
consumption till recently. But with the launch of lower-priced, smaller bars of chocolate in the
last two years and positioning of chocolate as a substitute to traditional sweets during festivals,
have boosted consumption.

Chocolates which were considered to be an elitist food hit the fancy of masses looking for a
change in life style at affordable cost.

Rural expansion:
Rural market and small town markets are seen as the key to spurring double-digit growth.
Products such as liquid chocolate packs from the existing portfolio are expected to enable rapid
acceptance.
Leverage India for offshoring:
India is being leveraged for export of finished goods, as a superior destination for
manufacturing best practices, and for BPO opportunities.
All the above points bring us to a conclusion that theres an immense scope for growth of
chocolate industry in India not only in its offering pattern but also for increment in its total
consumption value and size.

MARKETING - PROMOTION of CHOCOLATES in INDIA

Traditionally, chocolates were always targeted at children. But stagnancy
in growth rates made the companies re-think their strategies. Cadbury
was the first chocolate company that took the market by storm by
repositioning brands at adults, as opposed to children.
I - BUYING BEHAVIOUR
Chocolates are consumed as indulgence and not as snack food, as
prevalent in western countries. Almost 75% chocolates are impulse
purchases. Chocolates are bought predominantly by adults and gifted to
children. On an average the wholesalers sells Rs50000/month of
Chocolates
(all brands included). Also the wholesaler usually deals in all kinds of
FMCG goods, Foodstuff in addition to the chocolates. The items like
chocolates are placed near the counter.
Chocolates are kept in cardboard boxes and are also delivered in the
same. ... In a few of the cases the chocolates were kept separately (as
per equipment provided by the manufacturer e.g.
VISI Coolers), In addition to marketing promotions companies have been
focusing extensively on the promotions by the sales staff. Also the

companies can devise there marketing strategies that are catering to

specific segments and are thus more effective.
II - NATURE OF RETAIL OUTLET
Chocolates are primarily sold through Kirana Stores, Gift stores, Medical
Stores, canteens,
Pan-Bidi stores, Bakeries, Sweet Shops etc. This is true for chocolates
also. The space allocated for the chocolates was less when compared to
the total area of the shop. Of the space allocated for chocolates,
Cadbury brands occupied more than Nestle brands.
The chocolates category thrives on excitement. It's all about giving the
consumer a choice and taste which they enjoy.
III - STOCKING OF THE PRODUCTS
In most of the cases, various brands of chocolates are kept together. In
some of the cases the chocolates are stocked depending on the
manufacturers provision. The chocolates are kept in Glass Jars and
boxes These are provided by the respective companies along with the
product. The chocolates are kept there. But in most of the cases
chocolates are stocked near the counter. Ideally the shopkeeper tries to
keep chocolates within the reachable (sitting on the counter) distance.
Chocolates are kept at or below the eye level. This is to facilitate
visibility of the chocolates for the customer who is visiting the store.
Medium size retailers sell chocolates of about Rs. 400 Rs. 800 per
week while big
retailers sell chocolate worth Rs1000 or more per week.

Problems & Challenges in Indian Chocolate Industry

1. TEMPERATURE:

A peculiar problem that hinders the distribution to far-off places is the

tendency of chocolates to melt under even moderate heat. The
temperatures can reach as high as 48 degrees in summers, whereas
chocolate starts melting at body temperature (about 37-38 degrees)
.Manufacturers have to take precautionary measures to ensure the
preservation of chocolates especially in summer.
2. UNAVAILABILITY OF CONTROLLED REFRIGERATION:
India does not have controlled refrigerated distribution. Air-condition
supermarkets are rare.
Cadbury loses 1.5 percent of annual sales of Rs. 6.8 billion to heat
damage. Companies revise ingredients to make chocolate withstand
heat, and so Indian chocolates are more resilient to heat than European
chocolates by a factor of 2 degrees. Ironically, the chocolate market has
grown recently because smaller retailers have stuffed fridges and coolers
supplied by the cola companies Coke and Pepsi with chocolates. Nestle
and Cadbury have tried to provide loans for retailers to buy fridges, but
to hold down power costs the shopkeepers switch off the fridges at
night. As a result the cocoa fat melts and migrates to the main body of
the chocolate bar. When the cooling is switched on in the morning, the
cocoa fat solidifies and turns white, presenting a bizarre, un-sellable
white on black form. Nestle tried to provide fridges with see-through
doors, but was appalled to see its chocolates sandwiched between dead
chicken, butter and vegetables.
Small coolers were provided to retailers to keep the chocolate from
melting, but that didn't quite do the trick. Electricity costs money and is

not provided in a uniform way, so on and off the electricity goes and
the product may suffer sometimes
3. RAW MATERIALS:
Cocoa is the key raw material and accounts for around 35% of the total
material cost
(Including packaging) of chocolates. The price of cocoa has been hitting
a new high of late. Cocoa prices are at a near 20-year high at $2358 per
ton, up from $900 a year back. India does not produce cocoa to any
noteworthy extent but is a large consumer of chocolates. Consumption
of chocolates and other cocoa-based products, especially among the
middle class, has been growing.
4. TRANSPORTATION:
Chocolate needs to be distributed directly, unlike other FMCG products.
90% of our products are sold directly to retailers. Building such a direct
network in rural areas is a daunting task since the infrastructure is poor
in India in rural areas.
5. THREAT FROM IMPORTED BRANDS:
Free availability of imported brands bought through illegal routes pose
a threat to the domestic chocolate industry. Usually, these imported
chocolates taste better than domestic chocolate due to recipe
difference. Hence consumers who are willing to spend a little more,
prefer these imported chocolates.
However, the premium brands, which come through official channels, do
not pose a threat to the market, as these cater to a small niche market.
However there is a lot of dumping from neighboring countries like
Dubai, Nepal, etc of inferior brand of imported chocolates. These are not

only of low quality, but are brought very near to their expiry dates. Most
of the cheap chocolate brands that are available do not meet Indian
Food Regulations.

DHAMAKA
Chocolate Manufacturing Process
Workers cut the fruit of the cacao tree, or pods open and scoop out the
beans. These beans are
allowed to ferment and then dry. Then they are cleaned, roasted and
hulled. Once the shells have been removed they are called nibs. Nibs are
blended much like coffee beans, to produce different colors and flavors.
Then they are ground up and the cocoa butter is released. The heat
from the grinding process causes this mixture of cocoa butter and finely
ground nibs to melt and form a free flowing substance known as
chocolate liquor. From there, different varieties of chocolate are
produced.
DHAMAKA
Raw Material Composition
(in Rs.)
Malt Extract
9%
Cocoa Beans/
Butter/Powder
46%
Edible Oil
5%
Dry Fruits
3%
Milk Powder/
Liquid Milk/
Cream 20%
Glucose-Liquid
17%

PRODUCT
PLACE
Chocolate needs to be distributed directly, unlike other FMCG products
like soaps and detergents, which can be sold through a wholesale
network. 90% of chocolate products are sold directly to retailers.
Distribution, in the case of chocolates, is a major deterrent to new
entrants as the product has to be kept cool in summer and also has to
be adapted to suit local tropical conditions.
Cadbury's distribution network used to encompasses 2100 distributors
and 450,000 retailers.
The company has a total consumer base of over 65 million. Besides use
of IT to improve distribution logistics, Cadbury is also attempting to
improve distribution quality. To address the issues of product stability, it
has installed VISI coolers at several outlets. This helps in maintaining
consumption in summer, when sales usually dip due to the fact that the
heat affects product quality and thereby off take.
To avoid cannibalization of its higher priced products from lower priced
ones, Cadbury is setting up two separate distribution channels one for
CORE business & other for MASS markets, with different stockists,
wholesalers and retailers. One set will be dedicated to Cadburys highend products and traditional chocolates. The other will cater to the mass
market brands namely Chocki, Halls, Eclairs et al all products priced
below Rs 3.

Promotion

Typically it is said that chocolates are being eaten when everyone is

happy. And this is something advertising has always portrayed. But it is
found chocolates are eaten under diverse conditions and moods - when
people are anxious, when they are sad, when happy - a whole range of
emotions. Condensing these views & thoughts, it can be said chocolate
is a true soul mate. Someone who is with you through the ups and
downs of life, helping you bounce back. And that's what Cadbury's Dairy
Milk (CDM) positioned itself as - a special friend.
% Share of various Brands Ad spending of Cadbury
Here, the 6 Cadbury brands shown in the graph comprise 85% of the
advertising pie, whereas, rest of the 9 brands advertised by Cadbury
comprise 15% of the advertising. Cadbury Dairy Milk Chocolate is the
most advertised brand (with 22%).

PRICING
After the roaring success of Nestles Munch and Chocostick, Cadburys empire struck back hard.
The Rs 5 price point accounts for more than half of all chocolate sales. Nestle had seized the
initiative at this price point, with its launch of Munch, now a roaring success (and the largest
selling product at that price point). Today, Cadbury has four products at this price point: CDM,
Perk, 5 star and Gems and the five-rupee CDM bar is its single largest-selling SKU.
This is a potent price point in India, because the average purchasing power is abysmally
low, is what industry analyst have to say.
Nestle kicked off one of the biggest success the liquid chocolate category with its brand
Chocostick priced at Rs.2 three months ahead of competition. Cadbury did react with Chocki,
priced at Rs 2, expanding the concept of sachetisation to new frontiers. Chocki has been the
single biggest growth driver for Cadbury as well as the entire chocolate category. The
novelty of the format endeared itself to the existing customer. In less than one year, it constituted
nearly 10 per cent of the total chocolate market, split equally between Cadbury and Nestle.

Volume led growth strategy

Cadbury has followed a well-planned strategy of fuelling volume growth by introducing smaller
unit packs at lower price points. Simultaneously, the company seems to have astutely juggled
with the larger pack sizes and raised prices to a degree higher than what appears at face. The
strategy has driven volumes in the last two years and we expect the volume growth to continue in
the next two years.
PRICE WOES

Chocki, selling at a potent price point of Rs 2, was ideal for smaller towns, especially since it did
not need refrigeration. But Chocki started to cannibalise other higher-priced chocolates in larger
markets.
The students of Bombay Scottish (an upmarket school in Mumbai) are not supposed to eat
Chocki, they should not have even heard of the product.

Interesting Chocolate Facts

Why is Chocolate in India different than most European chocolates?
The temperatures in India are much higher than that of the European
countries. To prevent the chocolate from melting and to enable shape
retention under such high temperatures the recipe of the chocolate is
adapted to the Indian climate. Therefore the milk fat content in Indian
chocolates is lesser than that of European chocolates and hence they
taste different.
Sometimes, white spots appear on Chocolates sometimes. Is that safe?
When a chocolate gets exposed to temperature variances from a hot
day to a cold night
(Which is very common all across India), the fat expression happens on
the surface of the chocolate.' This means white spots emerge on the
surface of the chocolate. This phenomenon is called 'fat bloom'. It is
entirely safe to consume chocolates however the feel and the taste of
the chocolate may not be the same as is originally intended to.
Are chocolates available for diabetics?
Currently in India no manufacturer produces chocolates for diabetics, as
the government regulations do not permit manufacture of such
chocolates. The industry majors are liaising with the government
authorities to enable manufacture of such chocolates in India.
Chocolates for diabetics, though, are available in certain parts of the
world.

Chocolate: the new solution for blood pressure?

Cocoa beans have antioxidant compounds called flavones, and scientific
research suggests they do good
things to blood vessels. Dark chocolate contains flavonoids, an
antioxidant which helps the body by neutralizing potentially celldamaging substances known as oxygen-free radicals, a normal
byproduct of metabolism.

CONCLUSION
The Indian Chocolate Industry is a unique mix with extreme consumption patterns, attitudes,
beliefs, income level and spending. At one hand, we have designer chocolates that are consumed
when priced at even Rs 2500/kg while there are places in India where people have never even
tasted chocolates once.
Understanding the consumer demands and maintaining the quality will be essential.
Companies will have to keep themselves abreast with the developments in other parts of the
world.
PRICING is the key for companies to make their product reach consumers pockets. Right
pricing will make or break the product SUCCESS. Economical distribution of the products will
also be equally important. The companies strategies should focus on driving sales through a
right product mix, efficient materials procurement, reduced wastages, increased factory
efficiencies and improved supply chain management.
Theres an immense scope for growth of chocolate industry in India - geographically as well
as in the product offering.

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

Bibliography
www.rediff.com , www.indiainfoline.com , www.business-standard.com
www.India-stats.com , www.Agencyfaqs.com , www.Equitymaster.com
www.indiantelevision.com , www.myiris.com , www.ibef.org
www.thehindubusinessline.com