Chocolate Industry 2013 Mrp 3

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Indian chocolate industry analysis

Transcript of Chocolate Industry 2013 Mrp 3

CHAPTER-1 INTRODUCTION OF THE INDUSTRY

1.1 Rationale behind the selection of Industry justificationThe Indian Chocolate Industry has come a long way since long years. Ever since 1947 the Cadbury is in India, Cadbury chocolates have ruled the hearts of Indians with their fabulous taste. Indian Chocolate Industrys Cadbury Company today employs nearly 2000 people across India. The company is one of the oldest and strongest players in the Indian confectionary industry with an estimated 68% value share and 62% volume share of the total chocolate market. It has exhibited continuously strong revenue growth of 34% and net profit growth of 24% throughout the 1990. The brand of Cadbury is known for its exceptional capabilities in product innovation, distribution and marketing. With brands like Dairy Milk, Gems, 5 Star, Bourn vita, Perk, Celebrations, Bytes, Chocki, Delite and Temptations, there is a Cadbury offering to suit all occasions and moods.

Today, the company reaches millions of loyal customers through a distribution network of 5.5 lakhs outlets across the country and this number is increasing every day. In 1946 the Cadburys manufacturing operations started in Mumbai, which was subsequently transferred to Thane. In 1964, Induri Farm at Talegaon, near Pune was set up with a view to promote modern methods as well as improve milk yield. In 1981-82, a new chocolate manufacturing unit was set up in the same location in Talegaon. The company, way back in 1964, pioneered cocoa farming in India to reduce dependence on imported cocoa beans. The parent company provided cocoa seeds and clonal materials free of cost for the first 8 years of operations. Cocoa farming is done in Karnataka, Kerala and Tamil Nadu. In 1977, the company also took steps to promote higher production of milk by setting up a subsidiary Induri Farms Ltd., near Pune.In 1989, the company set up a new plant at Malanpur, MP, to derive benefits available to the backward area. In 1995, Cadbury expanded Malanpur plant in a major way. The Malanpur plant has modernized facilities for Gems, clairs, and Perk etc. Cadbury operates as the third party operations at Phalton, Warana and Nasik in Maharashtra. These factories churn out close to 8,000 tons of chocolate annually.In response to rising demand in the chocolate industry and reduce dependency on imports, Indian cocoa producers have planned to increase domestic cocoa production by 60% in the next four years. The Indian market is thought to be worth some 15bn rupee (?0.25bn) and has been hailed as offering great potential for Western chocolate manufacturers as the market is still in its early stages.Chocolate consumption is gaining popularity in India due to increasing prosperity coupled with a shift in food habits, pushing up the country's cocoa imports. Firms across the country have announced plans to step-up domestic production from 10,000 tons to 16,000 tones, according to Reuters. To secure good quality raw material in the long term, private players like Cadbury India are encouraging cocoa cultivation, the news agency said. Cocoa requirement is growing around 15% annually and will reach about 30,000 tons in the next 5 years.

Brief IntroductionIndian Chocolate Industry as today is dominated by two companies, both multinationals. The market leader is Cadbury with a lion's share of 70%. The company's brands like Five Star, Gems, clairs, Perk, and Dairy Milk are leaders in their segments. Until early 90's, Cadbury had a market share of over 80 %, but its party was spoiled when Nestle appeared on the scene. The other one has introduced its international brands in the country (Kit Kat, Lions), and now commands approximately 15% market share. The two companies operating in the segment are Gujarat Co-operative Milk Marketing Federation (GCMMF) and Central Areca nut and Cocoa Manufactures and Processors Co-operation (CAMPCO). Competition in the segment will only get keener as overseas chocolate giants Hershey's and Mars consolidate to grab a bite of the Indian chocolate pie.

The UK based confectionery giant, Cadbury is a dominant player in the Indian chocolate market and the company expects the energy glucose variant of its popular Perk brand to be singularly responsible for adding five per cent annually to the size of the companys market share.

1.2 CHOCOLATE INDUSTRY IN INDIAThe chocolates sales globally have witnessed a decline in the last few years due to the 2009 economic crisis. However, the global chocolate market has shown an upward trend since late 2010 with the improvement in the economy. Western Europe accounts for the largest market for chocolate followed by North America and Asia Pacific. With the increased consumption of chocolate and substituting it with traditional sweets, the market is expected to accelerate in the coming five years.According to the recently published report by Techs Research India Chocolate Market Forecast & Opportunities, 2018, the chocolate market revenues in India is expected to witness the compounded annual growth rate (CAGR) of around 21% from 2013-2018. The chocolate industry is also considered as the most popular product in the food processing sector. With the demand of premium high end chocolate going up in the market; international companies are entering into the market through collaborations and acquisitions in order to increase their share in the market. It is forecasted that India chocolate market will reach USD 3.2 Billion revenues by 2018 due to increasing gifting culture in the country and increase in the income bracket which will fuel the demand for chocolate products in India. India chocolate market is divided into four segments where Bars chocolate segment accounts for maximum share of 36%. However, the demand for assorted chocolates is expected to increase with the highest growth rate within next five years consideringg the increasing gifting culture in the country followed by growing demand.Techs Researchs report further elaborates that the domestic market for chocolate has increased due to shift in consumer preference and development in rural markets. The Indian chocolate market is dominated by Crafts Food being the market leader followed by Nestle and Amul. There are certain local manufacturers who also play a significant role in the chocolate market due to proximity in non-metropolitan areas and increasing awareness among the consumers. India imports chocolate products from a lot of countries such as China, Singapore, UAE, Malaysia, UK, Switzerland and Netherlands. However, one of the major challenges for the local manufacturers is the increasing cocoa prices in the country which is currently being imported and act as a main raw material used for preparing chocolates by many leading players.

The chocolate industry has a considerable growth potential in the country but the area of concern lies in high input cost of raw materials such as sugar, cocoa, milk powder and increasing packaging cost. Increasing tariffs and rising custom duty also makes the imported chocolate costly thereby affecting the sales of premium chocolates in the country.

The report has evaluated the future growth potential of chocolate market in India and provides statistics and information on market structure, market trends, market size, etc. The report will suffice in providing the intending clients with cutting-edge market intelligence and help them in taking sound investment decisions. Besides, the report also identifies and analyzes the emerging trends along with essential drivers and key challenges faced by the industry.The chocolate market in precedent years has been witnessing tremendous growth in terms of value as well as volume. The governance of market is maintained by large international giants through franchisee and expansion into new markets which is leading to the growth of the chocolates market in India. Indian chocolate industry has registered a growth of 15% per annum from 2008 to 2012 and is projected to grow even at a higher rate in future. The industry has a positive outlook due to phenomenal growth in the confectionery industry, rising per capita income and gifting culture in the country.According to India Chocolate Market Forecast & Opportunities, 2018, theper capita consumption of chocolates is increasing in the country which will continue to flourish the market revenues. It is expected that India chocolate industry will be growing at the CAGR 23% by volume between the years 2013-2018 and reach at 3,41,609 Tons. The dark chocolates are expected to account for the larger market share when compared to milk and white chocolates in the coming years. The introduction of medicinal and organic ingredients in the manufacturing of chocolates had lead to a new trend and development in the country, which will be adapted by major manufacturers to remain active in the market.

1.3 INDIAN CHOCOLET INDUSTRY AT GLANCE 2012- 2013The Indian chocolate industry may surpass the Rs 7,500-crore mark by 2015 with the help of growing consumption in the urban and semi-urban areas, according to the industry chamber Associated Chambers of Commerce and Industry of India (ASSOCHAM). Currently, the Indian chocolate market is worth around Rs 4,500 crore. The Indian chocolate industry is registering a compound annual growth rate of 25 per cent at present. The demand for chocolates in India has clocked about 35% rise as against last year primarily in urban areas due to the rising shift to chocolates from traditional mithai around the festival season.High income levels in the urban sector are a good reason for the rapid growth of the chocolate industry in India. More than 65% of the consumption occurs in the urban market. Today, the Indian confectionery industry is one of the fastest growing in the world with an estimated market size of over Rs 2,000 crore per annum accounting for an annual growth of 18-20 per cent.The glo