Alpenliebe & the Indian Sugar Confectionery Market

Abstract

Alpenliebe was the single largest brand in the Indian sugar confectionery market. Analysts felt
that Perfetti Van Melle (India) Ltd., a subsidiary of the Italian confectionery major, had done
exceedingly well to build the brand in the low value, low margin, and fragmented market with
exceptional branding. In 2007, the company tried to take the brand to the next level by roping in
leading Hindi film actor Kajol as its brand ambassador.

Issues:

» Involvement
» Purchase behavior
» Consumer behavior and product strategy and promotion strategy
» Marketing communication

Introduction

Alpenliebe, a hard-boiled sugar candy, was one of the first brands

to be launched after Perfetti Van Melle (India) Ltd. (PVMI)
launched its operations in India in 1994.

A wholly-owned subsidiary of the world's third largest confectionery major Perfetti Van Melle
S.p.A, PVMI also had other big brands such as Center Fresh, Center Shock, Big Babol,
Chlormint, Mentos, Fruitella, Cofitos, Protex Happydent, Happydent White, Marbles,
Chocoliebe, Chatar Patar, etc., in its brand portfolio. As of early 2008, Alpenliebe was the single
largest selling sugar confectionery brand in India and made up a major portion of PVMI's
revenue, estimated to be Rs.7 billion in 2007...

Alpenliebe was available in three flavors - 'rich milky caramel', 'cream strawberry', and
'chocolate'. In addition to this, the company also started marketing lollipops under the Alpenliebe
brand in the early 2000s in three flavors - 'rich milky caramel', 'strawberry cream', and 'cola &
vanilla'. In 2005, the company also launched a center-filled candy under the brand name
Abpenliebe Creamfills.

Analysts gave PVMI credit for creating a big brand (Alpenliebe) in the low value, low margin,
and fragmented sugar confectionery market in India that was quite different from the market in
other developed countries but very competitive nevertheless.

The sugar confectionery market includes products such as sweets, jellies, and gums but not
chocolate confectionery. While there was a large unorganized market for sugar confectioneries in
India, the organized market in India was estimated to be US$461 million in 2007, i.e., around 70
percent of the total candy market in the country.
According to Euromonitor, the market in India grew at a rate of 7.2 percent per year between
2002 and 2006. The market was dominated by PVMI, which was the market leader with a market
share of more than 30 percent, Cadbury India, Wrigley's, and Lotte Confectionery.

Other significant players in the market were Hindustan Unilever Ltd(HUL), ITC Ltd(ITC),
Nestlé India Ltd. Candico, Godrej Beverages and Food Ltd., and Ravalgaon Sugar Farm
Ltd.Analysts felt that the market was witnessing a shift with an expansion in the organized
segment.

All these companies were devising aggressive marketing programs to corner a bigger share of the
market. The sugar confectionery market in India was price-sensitive and distribution driven.

It was driven by children who spent a significant portion of their pocket money on sugar
confectioneries and, as such, most of the brands were available at low price points such as
Rs.0.50 and Rs.1.00. Stiff competition in the market had also ensured that the pricing was
constant for nearly five years.

Unlike in other countries, mono packs ruled the Indian sugar confectionery market. And a very
big chunk of the sales came from unorganized mom-and-pop stores and the paan shops.
Moreover, unlike in more developed markets, most of the functional and sugar-free products
were yet to catch on.

The companies competing in this market relied heavily on advertising, sales promotion (both
consumer and trade), and the distribution network. They were trying to reposition the brands to
appeal to the whole family rather than children alone and to expand the price points with value
added products.

Analysts felt that PVMI had played a great role in developing the market in India. For instance, it
was credited with creating the Indian caramelized candy segment in India with Alpenliebe. It did
this by offering a quality product at the Rs.0.50 price point and backing it up with a smart
advertising and distribution strategy.

The brand was positioned as an irresistible offering with the pay-off line-cum-jingle, Jee
Lalchaye Raha Na Jaaye. Considering that the brand name was somewhat complicated for the
Indian audience, the initial 30 second ads for the brand pronounced the name five times to ensure
that the target audience got familiar with it and pronounced it properly.

By 2002, Alpenliebe was estimated to be a more than Rs.1 billion brand in India and accounted
for one-third of PVMI's revenues.

PVMI also kept the brand interesting to the target audience by launching new variants such as
'cream strawberry' in 2003 and 'Chocoduet' in 2007.
Market Strategy:

1. Naming: Alpenliebe is a difficult name to adopt for a chocolate and much research on the
internet couldn’t help me trace out its origin. So it is a Herculean task to teach Indians ( with 24
languages and a million dialects) pronounce a brand name that does not have a meaning. Theory
says that the brand name should be simple, reflect the brand values and easily pronounced.
Alpenliebe broke all rules. In the initial 30 second ad of Alpenliebe pronounced the name 5 times
to ensure that the TG pronounce it correctly. Why such a complicated brand name is another
question all together. But this risk paid off in that the name became the biggest differentiator and
reflected an International image. It is known fact that Indians are crazy about foreign brands and
Alpenliebe capitalised on that.

2. Shape: The shape was also unique because most of the candies at that time was rectangular or
cylindrical but Alpenliebe came out with a round shape.
More than the shape and the name, the product itself was good .The company changed the taste
of this brand to suit the Indian Palette making it more creamier and filled with more caramel than
the international one.

3. Flavours: Alpenliebe was available in three flavors - 'rich milky caramel', 'cream strawberry',
and 'chocolate'. In addition to this, the company also started marketing lollipops under the
Alpenliebe brand in the early 2000s in three flavors - 'rich milky caramel', 'strawberry cream',
and 'cola & vanilla'. In 2005, the company also launched a center-filled candy under the brand
name Abpenliebe Creamfills.

The Confectionery Market:

The sugar confectionery market includes products such as sweets, jellies, and gums but not
chocolate confectionery. While there was a large unorganized market for sugar confectioneries in
India, the organized market in India was estimated to be US$461 million in 2007, i.e., around 70
percent of the total candy market in the country.

According to Euromonitor, the market in India grew at a rate of 7.2 percent per year between
2003 and 2008.The market was dominated by PVMI, which was the market leader with a market
share of more than 30 percent, Cadbury India, Wrigley's, and Lotte Confectionery.

In the early 2000s, the competition in the Indian sugar confectionery industry intensified. Fast
moving consumer goods (FMCG) majors such as ITC and HUL too entered the fray.

It was driven by children who spent a significant portion of their pocket money on sugar
confectioneries and, as such, most of the brands were available at low price points such as
Rs.0.50 and Rs.1.00. Stiff competition in the market had also ensured that the pricing was
constant for nearly five years.
Unlike in other countries, mono packs ruled the Indian sugar confectionery market. And a very
big chunk of the sales came from unorganized mom-and-pop stores and the paan shops.
Moreover, unlike in more developed markets, most of the functional and sugar-free products
were yet to catch on.

Marketing Confectionery in India and Alpenliebe:

The companies competing in this market relied heavily on advertising, sales promotion (both
consumer and trade), and the distribution network. They were trying to reposition the brands to
appeal to the whole family rather than children alone and to expand the price points with value
added products.

Analysts felt that PVMI had played a great role in developing the market in India. For instance, it
was credited with creating the Indian caramelized candy segment in India with Alpenliebe.It did
this by offering a quality product at the Rs.0.50 price point and backing it up with a smart
advertising and distribution strategy.

The brand was positioned as an irresistible offering with the pay-off line-cum-jingle, Jee
Lalchaye Raha Na Jaaye. Considering that the brand name was somewhat complicated for the
Indian audience, the initial 30 second ads for the brand pronounced the name five times to ensure
that the target audience got familiar with it and pronounced it properly.

By 2002, Alpenliebe was estimated to be a more than Rs.1 billion brand in India and accounted
for one-third of PVMI's revenues.
Questions for Discussion:

1. What are the challenges in marketing a low-involvement product such as hard-

boiled candy that are often purchased on impulse?

There are a number of challenges facing the confectionery industry in Canada if it is to

continue growing, enhancing its competitiveness and taking advantage of new market
opportunities.

Multinational enterprises are expected to continue to have an increasingly important role.

These firms establish a benchmark or standard against which smaller firms measure their
success, both in relation to their ability to reduce costs and meet changing market requirements.

Multinationals operating in Canada will have the challenge of maintaining or expanding

their product mandates (mostly North American) within their corporate structures and seeking
new export opportunities.

Like all food processors, this industry is assessing how to deal with the emergence of E-
commerce. The confectionery industry will have to determine if it can effectively use this
medium to increase efficiencies through business-to-business solutions and the development of
web-based marketing strategies.

For small- and medium-sized enterprises, the challenge will be to exploit opportunities,
particularly in areas where multinationals are not competitive and where flexibility and
sensitivity to regional tastes may be important factors. Access to investment and the capital
needed for technology and product development, as well as the ability to enter into strategic
alliances (e.g., with other confectioners or distributors) in developing export markets will also be
a challenge for these firms.

More general challenges for the confectionery industry include:

• developing a regulatory framework consistent with globalization (e.g., working with

government to address the issue of enforcing Canadian labelling requirements equally on
domestic and imported products, and harmonizing standards with Canada's major trading
partners); and
• enhancing competitiveness through:
o supply chain management (e.g., working with government and the dairy industry
to ensure that the Special Milk Class Permit System for confectionery
manufacturers keeps dairy input prices competitive);
o fostering new product innovation (e.g., sugar-free, low-fat and natural-flavouring
technologies); and
o enhancing technical, export and marketing skills.
Cost and competitiveness

Confectionery companies in Canada are in a somewhat unique position among food processors
in that they use only small quantities of Canadian agricultural inputs (other than dairy).
Production costs in the confectionery sub-sector are sensitive to even small increases in world
sugar, cocoa, raisin or nut prices. The prices of these globally traded commodities are often
volatile. When prices increase significantly, processors have no easy way of passing them along
to consumers while retaining their traditional share of the snack market.

Canadian firms that export products are less competitive when world commodity prices,
particularly for sugar, rise. Generally, Canadian confectionery manufacturers enjoy a cost
advantage over American manufacturers when they export to the U.S. The U.S. maintains a high
domestic price for sugar, while Canadian processors derive a significant benefit from their ability
to purchase refined sugar at world prices, which are normally about 25-30% lower. Some of this
benefit is, however, offset by transportation costs incurred by Canadian firms in getting their
products to the U.S. market.

Some high-quality chocolate and novelty products are sold, primarily, at a few special times
during the year. Managing production, full-time employees, inventory, marketing and cash flow
(on a yearly basis) can thus be particularly challenging, especially for smaller firms.

2. Critically analyze Perfetti Van Melle's marketing strategy for Alpenliebe in

India.

As of early 2008, Alpenliebe was the single largest selling sugar confectionery brand in
India and made up a major portion of PVMI's revenue, estimated to be Rs.7 billion2 in 2007.

Alpenliebe was available in three flavors - 'rich milky caramel', 'cream strawberry', and
'chocolate'. In addition to this, the company also started marketing lollipops under the Alpenliebe
brand in the early 2000s in three flavors - 'rich milky caramel', 'strawberry cream', and 'cola &
vanilla'. In 2005, the company also launched a center-filled candy under the brand name
Abpenliebe Creamfills.

Analysts gave PVMI credit for creating a big brand (Alpenliebe) in the low value, low
margin, and fragmented sugar confectionery market in India that was quite different from the
market in other developed countries but very competitive nevertheless.3
 The sugar confectionery market includes products such as sweets, jellies, and gums but
not chocolate confectionery. While there was a large unorganized market for sugar
confectioneries in India, the organized market in India was estimated to be US$461 million in
2007, i.e., around 70 percent of the total candy market in the country.

According to Euromonitor, the market in India grew at a rate of 7.2 percent per year
between 2002 and 2006. The market was dominated by PVMI, which was the market leader with
a market share of more than 30 percent, Cadbury India, Wrigley's, and Lotte Confectionery.

Other significant players in the market were Hindustan Unilever Ltd9 (HUL), ITC Ltd10
(ITC), Nestlé India Ltd.11, Candico12, Godrej Beverages and Food Ltd.13, and Ravalgaon Sugar
Farm Ltd.14 Analysts felt that the market was witnessing a shift with an expansion in the
organized segment.

3. Analyze its marketing communication campaigns for Alpenliebe and Alpenliebe

lollipops.

Alpenliebe variants:

PVMI also kept the brand interesting to the target audience by launching new variants such as
'cream strawberry' in 2003 and 'Chocoduet' in 2007.

It was a relatively late entrant in the lollipop segment. In the lollipop market that was declining
(14 percent in 2002) and dominated by two brands Pim Pom of Joyco and Mr Pop of Cadburys
with a market share of 70 percent and 30 percent respectively, PVMI managed to emerge as a
leader in 2003 with a market share of 46 percent.

According to analysts, it had snatched the market leadership in the lollipop category by moving
away from the kid-centric positioning of lollipops.
The brand, marketed at the Rs.2.00 price point, was also targeted at adults while emphasizing the
long-lasting properties of its lollipops in the initial ads, and then following it up with the
immensely popular colloquial advertising with the pay-off line Lagey Raho (Keep going!).

Alpenliebe Creamfills, which the company had developed for the Indian market, and promoted
with the pay-off line Kuch alag Achanak (Something different, Suddenly!), too did exceptionally
well and was also launched in other markets including China and Poland.
Market Strategy:

1. Naming: Alpenliebe is a difficult name to adopt for a chocolate and much research on the
internet couldn’t help me trace out its origin. So it is a Herculean task to teach Indians ( with 24
languages and a million dialects) pronounce a brand name that does not have a meaning. Theory
says that the brand name should be simple, reflect the brand values and easily pronounced.
Alpenliebe broke all rules. In the initial 30 second ad of Alpenliebe pronounced the name 5 times
to ensure that the TG pronounce it correctly. Why such a complicated brand name is another
question all together. But this risk paid off in that the name became the biggest differentiator and
reflected an International image. It is known fact that Indians are crazy about foreign brands and
Alpenliebe capitalised on that.

2. Shape: The shape was also unique because most of the candies at that time was rectangular or
cylindrical but Alpenliebe came out with a round shape.
More than the shape and the name, the product itself was good .The company changed the taste
of this brand to suit the Indian Palette making it more creamier and filled with more caramel than
the international one.

3. Flavours: Alpenliebe was available in three flavors - 'rich milky caramel', 'cream strawberry',
and 'chocolate'. In addition to this, the company also started marketing lollipops under the
Alpenliebe brand in the early 2000s in three flavors - 'rich milky caramel', 'strawberry cream',
and 'cola & vanilla'. In 2005, the company also launched a center-filled candy under the brand
name Abpenliebe Creamfills.

The Confectionery Market:

The sugar confectionery market includes products such as sweets, jellies, and gums but not
chocolate confectionery. While there was a large unorganized market for sugar confectioneries in
India, the organized market in India was estimated to be US$461 million in 2007, i.e., around 70
percent of the total candy market in the country.

According to Euromonitor, the market in India grew at a rate of 7.2 percent per year between
2003 and 2008.The market was dominated by PVMI, which was the market leader with a market
share of more than 30 percent, Cadbury India, Wrigley's, and Lotte Confectionery.

In the early 2000s, the competition in the Indian sugar confectionery industry intensified. Fast
moving consumer goods (FMCG) majors such as ITC and HUL too entered the fray.

It was driven by children who spent a significant portion of their pocket money on sugar
confectioneries and, as such, most of the brands were available at low price points such as
Rs.0.50 and Rs.1.00. Stiff competition in the market had also ensured that the pricing was
constant for nearly five years.
Unlike in other countries, mono packs ruled the Indian sugar confectionery market. And a very
big chunk of the sales came from unorganized mom-and-pop stores and the paan shops.
Moreover, unlike in more developed markets, most of the functional and sugar-free products
were yet to catch on.

Marketing Confectionery in India and Alpenliebe:

The companies competing in this market relied heavily on advertising, sales promotion
(both consumer and trade), and the distribution network. They were trying to reposition the
brands to appeal to the whole family rather than children alone and to expand the price points
with value added products.

Analysts felt that PVMI had played a great role in developing the market in India. For instance, it
was credited with creating the Indian caramelized candy segment in India with Alpenliebe.It did
this by offering a quality product at the Rs.0.50 price point and backing it up with a smart
advertising and distribution strategy.

The brand was positioned as an irresistible offering with the pay-off line-cum-jingle, Jee
Lalchaye Raha Na Jaaye. Considering that the brand name was somewhat complicated for the
Indian audience, the initial 30 second ads for the brand pronounced the name five times to ensure
that the target audience got familiar with it and pronounced it properly.

By 2002, Alpenliebe was estimated to be a more than Rs.1 billion brand in India and accounted
for one-third of PVMI's revenues.
4. What future strategies should Perfetti Van Melle adopt to establish its
leadership position in the Indian sugar confectionery market?
Strategies well executed:

1. PVMI deserves credit for creating a big brand (Alpenliebe) in the low value, low margin, and
fragmented sugar confectionery market in India that was quite different from the market in other
developed countries but very competitive nevertheless.
2. Ever introduction of new flavours and hence adapting to the consumer
3. Initial commercial repeated the brand name about 6 times to get the pronunciation right
4. Positioning of Alpenliebe as a fun and family brand
5. Effective marketing and distribution strategies
6. Introduction of mono and multi packs at price points of 0.50Rs, 1Re and 5 Rs.

Done in the future:

1. Alpenliebe should maintain its positioning as a family toffee rather than focussing on the
celebrity promotion campaign. Most of the TG felt that the celebrity endorsement was not in
sync with the core positioning of Alpenliebe.
2. Have Alpenliebe mono and multi packs at the display counters next to the cash at the retail
marts. Even though this is strategy is being followed this shelf space in any retail mart is
dominated by Cadburys. Alpenliebe should focus more on having its 5Rs packs at this shelf.
3. Alpenliebe could introduce family packs with varied assortments
4. Most of Alpenliebe sales come from the Kirana stores and hence it should focus on having a
sound distribution strategy for these stores.