Chocolate Industry 2013 Mrp 3

CHAPTER-1 INTRODUCTION OF THE INDUSTRY

1.1 Rationale behind the selection of Industry – justification

The 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 Industry’s 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 Cadbury’s

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.

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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, Éclairs, 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.

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Brief Introduction

Indian 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, Éclairs, 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 company’s market share.

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1.2 CHOCOLATE INDUSTRY IN INDIA

The 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 Research’s 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.

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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.

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1.3 INDIAN CHOCOLET INDUSTRY AT GLANCE 2012- 2013

The 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 global chocolate market is estimated to be around $85

billion. The Indian confectionery industry is further categorized

into sub-sectors such as sugar- based confectionery, chocolate-

based confectionery and gums. After Liberalization, Privatization

and Globalization, India has witnessed tremendous growth in

F&B sector, particularly, in the confectionery segment. Many

foreign players like Nestle and Cadbury forayed into the Indian

market to tap 100+ million customers and are ruling the roost till

date.

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1.4 Objectives of study

To identify the chocolate industry’s dominant economic features.

To identify the kinds of competitive forces are industry members facing.

To identify the factors are driving industry change and impacts will they have.

To identify the market positions do rivals occupy—who is strongly positioned and

who is not.

To identify the key factors for future competitive success.

To check whether the outlook for the industry present is an attractive opportunity

or not.

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Chapter2: Major Players

2.1Cadbury India Ltd

Company Profile

Early Days - A One Man Business

Birmingham 1824

John Cadbury was one of ten children of Richard Tapper Cadbury, a prominent Quaker who had

moved to Birmingham, England from the West Country in 1794.

In 1824, 22-year-old John Cadbury opened his first shop at 93 Bull Street, next to his father's

drapery and silk business in the then fashionable part of Birmingham.

Apart from selling tea and coffee, John Cadbury sold hops, mustard and a new sideline - cocoa

and drinking chocolate, which he prepared using a mortar and pestle.

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Cocoa and drinking chocolate had been introduced into England in the 1650s but remained a

luxury enjoyed by the elite of English society. Customers at John Cadbury's shop were amongst

the most prosperous Birmingham families, the only ones who could afford the delicacy. Cocoa

beans were imported from South and Central America and the West Indies.

Experimenting with his mortar and pestle, John Cadbury produced a range of cocoa and

chocolate drinks, the latter with added sugar. The products were sold in blocks: customers

scraped a little off into a cup or saucepan and added hot milk or water.

John Cadbury had a considerable flair for advertising and promotion. "John Cadbury is desirous

of introducing to particular notice 'Cocoa Nibs', prepared by him, an article affording a most

nutritious beverage for breakfast," announced his first advertisement in the Birmingham Gazette

in March 1824.

He soon established himself as one of the leading cocoa and drinking chocolate traders in

Birmingham. The popularity and growing sales of John Cadbury's cocoa and drinking chocolate

of 'superior quality' determined the future direction of the business.

In 1831, John Cadbury rented a small factory in Crooked Lane not far from his shop. He became

a manufacturer of drinking chocolate and cocoa, laying the foundation for the Cadbury chocolate

business.

These early cocoa and drinking chocolates were balanced with potato starch and sago flour to

counter the high cocoa butter content, while other ingredients were added to give healthy

properties.

By 1842, John Cadbury was selling sixteen lines of drinking chocolate and cocoa in cake and

powder forms.

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PRODUCT LINE

1) Dairy Milk

2) Fruit & Nut

3) 5 Star

4) Break

5) Perk

6) Gems

7) Eclairs

8) Nutties

9) Temptation

10) Milk Treat.

FUTURE STRATEGY

Maintain dominance in chocolate confectionery and market leadership in brown drinks.

New channels such as Gifting, child connectivity and Value for Money offerings to be

the ley growth drivers

Grow volume sales at 10% pa over the next three years.

Achieve the goal of best manufacturing location in Cadbury Schweppes world for Dairy

Milk and Éclairs

One new major product launch every year.

Says simply, ‘Cadbury means quality’; this is our promise. Our reputation is built upon

quality; our commitment to continuous improvement will ensure that our promise.

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Mission Statement 0f the product:

The mission statement of our new product is “To provide our customers with a tempting

and exquisite taste” as Enticing Treats means a mouth watering treat which is simply

irresistible.

"Working together to create brands people love".

2.2 Nestle India Ltd

Company Profile

Nestlé's relationship with India dates back to 1912, when it began trading as The Nestlé Anglo-

Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in

the Indian market.

After India's independence in 1947, the economic policies of the Indian Government emphasized

the need for local production. Nestlé responded to India's aspirations by forming a company in

India and set up its first factory in 1961 at Moga, Punjab, where the Government wanted Nestlé

to develop the milk economy. Progress in Moga required the introduction of Nestlé's

Agricultural Services to educate advice and help the farmer in a variety of aspects. From

increasing the milk yield of their cows through improved dairy farming methods, to irrigation,

scientific crop management practices and helping with the procurement of bank loans.

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Nestlé set up milk collection centers that would not only ensure prompt collection and pay fair

prices, but also instill amongst the community, a confidence in the dairy business. Progress

involved the creation of prosperity on an on-going and sustainable basis that has resulted in not

just the transformation of Moga into a prosperous and vibrant milk district today, but a thriving

hub of industrial activity, as well.

Nestlé has been a partner in India's growth for over nine decades now and has built a very special

relationship of trust and commitment with the people of India. The Company's activities in India

have facilitated direct and indirect employment and provides livelihood to about one million

people including farmers, suppliers of packaging materials, services and other goods.

The Company continuously focuses its efforts to better understand the changing lifestyles of

India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness

through its product offerings. The culture of innovation and renovation within the Company and

access to the Nestlé Group's proprietary technology/Brands expertise and the extensive

centralized Research and Development facilities gives it a distinct advantage in these efforts. It

helps the Company to create value that can be sustained over the long term by offering

consumers a wide variety of high quality, safe food products at affordable prices.

Nestlé India manufactures products of truly international quality under internationally famous

brand names such as NESCAFÉ, MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID

and NESTEA and in recent years the Company has also introduced products of daily

consumption and use such as NESTLÉ Milk, NESTLÉ SLIM Milk, NESTLÉ Dahi and NESTLÉ

JeeraRaita.

Nestlé India is a responsible organization and facilitates initiatives that help to improve the

quality of life in the communities where it operates.

PRODUCT LINE

Nestlé

Crunch

Cailler

Galak/Milkybar

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Kit Kat

Smarties

Butterfinger

Aero

Polo.

FUTURE STRATEGY

Nestlé’s objectives are to be recognized as the world leader in Nutrition, Health and Wellness,

trusted by all its stakeholders, and to be the reference for financial performance in its industry.

We believe that leadership is not just about size; it is also about behavior. Trust, too, is about

behavior; and we recognize that trust is earned only over a long period of time by consistently

delivering on our promises. These objectives and behaviors are encapsulated in the simple

phrase, “Good Food, Good Life”, a phrase that sums up our corporate ambition.

The Nestlé Roadmap is intended to create alignment for our people behind a cohesive set of

strategic priorities that will accelerate the achievement of our objectives. These objectives

demand from our people a blend of long-term inspiration needed to build for the future and

short-term entrepreneurial actions, delivering the necessary level of performance.

Watch a short animation highlighting the company’s performance over the past year and

outlining Nestlé’s ambitions for the future: Nestlé 2012 in 3 minutes.

The world's leading nutrition, health and Wellness Company. Our mission of "Good

Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in

a wide range of food and beverage categories and eating occasions, from morning to

night.

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To be a leading, competitive, Nutrition, Health and Wellness Company delivering

improved shareholder value by being a preferred corporate citizen preferred employer

preferred supplier selling preferred products.

2.3 Lotte India Corporation Ltd

COMPANY PROFILE

“At the heart of the corporate purpose, which guides us in our approach to doing business, is the

drive to serve consumers in a unique and effective way”

It’s a story born in the age of British Raj. When children in India found confectionery hard to

come by. It had to be imported from across the seas until the year 1914; When Parry’s picked up

the gauntlet and pioneered the manufacture of sweets - the first to do so in the country. Parry’s

sweets went on to become a household name- a name that people recollect with warmth and a

smile. Ever since, the Parry’s factory was set up in Nellikuppam, in the Cuddalore District of

Tamilnadu in South India. Parry’s has become synonymous with Sweets and Confectionery.

With the penchant we Indians have for sweets is not surprising that this smooth, milky and

irresistibly delicious confectionery is the best gift any child could get. And an obsession with

quality ensured that children had a choice of nothing but the very best in confectionery.

In the nine decades since, the scenario has undergone a dramatic change. There are a number of

offerings in the market today, each wooing children with a wide array of products. But Parry’s

still finds a prominent place in the heart of consumers.

Parry’s has always stayed at the top, having weathered the vicissitudes of change, with our ear

close to the ground - and to the hearts of children, changing, adapting and growing with the times

- But never losing sight of its values traditions and ethics. At the turn of this century, Parry’s is

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poised on the threshold of greater challenges in a global village, where dynamism and innovation

is the very law of survival.

In the backdrop of India joining the WTO, and the global giants eyeing the Indian Market with

enthusiasm, the company needed to strengthen itself and broaden its base to delight customers

across the country and abroad. With this vision in the mind, Murugappa Group, promoters of

Parry’s Confectionery Limited entered in to an agreement with Lotte Confectionery Limited,

South Korea, by which the, entire shares which Murugappa Group, the founders of Parrys

Confectionery Limited, held was divested to Lotte Confectionery Limited -A South Korean

Multinational giant.

Lotte Confectionery is the first Company of the Lotte family of Companies founded by Mr. Shin

Kyuk-ho. The three L’s in the Lotte Emblem stand for Love, Liberty and Life. The Corporate

philosophy and idealism of Lotte is driven by dream of a world full of Love where people care

for each other and respect each other’s thoughts. The Lotte Group has presence in Food &

Beverages, Distribution, Tourism and Leisure business; Heavy Chemicals, Construction and

Machinery; Information, Communication and Electronics, Trading and Services apart from

Welfare Research and Support Services. The Lotte Confectionery Co. Ltd. is the Lotte Group’s

flagship Company in Foods and Beverages category. Lotte Confectionery, Korea, was

established with 500 employees in 1967 and today it has more than 6000 Employees. It has over

500 products produced at 5 large-scale plants in Korea. Lotte has been actively working towards

establishment of overseas branches, production facilities and has a presence in more than 70

countries. Lotte Confectionery’s annual Sales are over USD 900 millions, Apart from Korea,

Lotte has overseas investments in production facilities in China, Philippines and Vietnam. Lotte

Confectionery’s Main line products are Chewing Gum (Lotte Xylitol, Lotte Juicy & Fresh, Lotte

Spearmint, Lotte Fresh Mint, Flavono, White & E, Spout Café Coffee) Candy, Biscuits,

Chocolates, Snacks, Ice cream, and health care product.

If the decades past are any indication, there’s little doubt that even in the coming century,

children grow up with the brands Parry’s has established.

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PRODUCT LINE

Latte Choco Pie

Lacto King

BooProo

FUTURE STRATEGY

Regardless of the worsening economic situation in and out of the country in 2012, the

Lotte Group realized consistent growth in each business sector. Specifically, the overseas

business grew enough to earn 10 trillion won of profit based on the secured new markets

and joint promotion with affiliates. Although the emergency management system was

instituted at the first half of the previous year as a way to preemptively cope with the

unstable economic situation, an investment to secure the new growth engine was actively

promoted. As a consequence, it was possible to reach the ‘Hi-mart.’

Recovery of the world economy is under a cloud of pessimism; however, Lotte plans to

exert efforts to break through the low-growth era based on a prepared management

against all potential crises in 2013 while searching for new opportunities for growth.

Also, strengthening the core competence as well as the investment for the discovery of

the new growth engine will continue by thoroughly observing the changing economic

condition in and out of the country. Moreover, Lotte plans to go a step closer toward the

realization of the vision of ‘2018 Asia Top 10' by consistently reinforcing the overseas

business and promoting the value of Lotte as a global brand.

Lotte’s mission is the foundation as well as the starting point of our management

activity. It serves a significant role in granting a sense of pride and cohesion

while motivating group members.

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To spring as a global business group as well as ‘one of the top 10 global business group

in Asia,’ which leads the Asian region, Lotte proclaimed ‘Vision 2018’ and has been

exerting multidimensional efforts through the core business reinforcement and expanded

overseas business weight, aiming at its realization until 2018.

2.4 Lotus Chocolate Company Ltd.

COMPANY PROFILE

Lotus Chocolates take great pride in being one of India's select manufacturers of the

finest chocolates, cocoa products and cocoa derivatives. Our products are supplied to

chocolate makers and chocolate users across the world, from local bakeries to multi -

national companies. Incorporated in 1989 and having commenced operations in 1992,

Lotus is well known as a reliable business partner for the supply of cocoa and chocolate

products.

Starting from the cocoa bean processing to delivering fine chocolates... Lotus’s fully

integrated manufacturing facility is built with the best technologies and expertise from

across the globe.

We are the one stop chocolate hub for you - our valued customer.

Located just 55km from Hyderabad in Andhra Pradesh (South India), one of India's

fastest growing cities, we have the added advantage of close proximity to the cocoa

growing areas of South India. Equipped with sophisticated machinery from Germany,

UK, Denmark, and Italy, and backed by stringent quality processes, we ensure that our

chocolate is developed with its own unique flavor - a flavor that leaves a smile of savored

happiness...

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PRODUCT LINE

Chuckles

Superr Carr

On & On

High 5

Kajoos

Gobble

Milky Punch

Maltys

Tango

Eclairs

&

"To constantly reinvent, innovate and implement ideas. Create finest quality,

worldclass, and value for money products through continuous research to deliver

the best."

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2.5 Strategic Group Mapping

What is strategy group map?

A strategy group consist of those industry members with similar competitive approaches and

position in the market. Companies in the same strategy group can resemble one another in any of

several ways: they may have comparable product-line breadth, sell in the same price/quality

range, emphasize the same distribution channel; use essentially the same product attributes to

appeal to similar types of buyers, depend on identical technology approaches, or offer buyers,

similar services and technical assistance. An industry contain only one strategy group when all

seller pursue very similar strategy and have comparable market position.

The procedure for constructing a strategy group map is straightforward:

Identify the competitive characteristic that differentiate firm in the industry; typical

variable are price/quality range (high, medium, low), geography coverage (local,

regional, national, global), use of distribution channel (one, some, all), and degree of

service offered (no-frill, limited, full).

Plot the firm on a two-variable map using pair of these differentiate characteristics.

Assign firm that fall in about the same strategy space strategic group.

Draw circles around each strategy group, making the circles proportional to the size of

the group’s share of total industry sales revenues.

Company Name Profit (Rs.in crs) No.of.products

Lotus Chocolate Company Ltd.-2.2 10

Cadbury India Ltd.303.25 10

Nestle India Ltd. 1078.63 9

Lotte India Corporation Ltd.6.66 3

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High

Product

Line

Low

Low Net profit Net Profit High Net profit

Interpretation:

From the above strategic group mapping, we can say that nestle is having the nine product line and also consists of highestnet profit in the overall chocolate industry. nestle is having the rivalry with Cadbury which has the highest product line which consists of small net profit but the portfolio of the products are very profitable which has led to the highest net profit in the year 2012. Cadbury is the second highest profitable company seen as per the net profit and having the product portfolio of 10 products in chocolate industry, among those nestle end to lead the highest profit of all segment. Here nestle and Cadbury are almost similar in product line. Cadbury and Nestle have a close competitor with each other in this industry. Lotus is having its minus net profit which is not in the rivalry of nestle and Cadbury. Moreover, lotte is also having low profit comparison with nestle and Cadbury.

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CADBURYLOTUS

Chapter 3. Strategic Analysis

3.1 Industry’s dominant economic features

1. Scope of Competitive Rivalry:

The chocolate industry has become increasingly larger within the last couple of years as a result

increase the consumers need and demand. The market is very competitive because they offer the

same products, but has different physical attributes to the chocolate and different costs, which

buyers have choices to choose from. Companies want to provide the best products and to attract

buyers improving products, which makes the chocolate industry very competitive.

Here are the main factors of competitive rivalry:

Bundle flavor: like some fruits, sweet silk, Kesar. Fruit and nuts.

Improvement in product design and packaging

Providing chocolate to the health conscious customers.

2. Stage in Life Cycle:

The chocolate industry is in the Mature Life Cycle Stage, where nearly all-potential customers

are already users of the industry’s product. The cell chocolate industry’s growth and profitability

depends entirely on its ability to attract new customers. By increasing and improving product

innovation, it will attract more potential buyers and need of customer.

3. Numbers of Companies in the Industry:

There are many companies with only top m four companies in the chocolate industry that

controls 80 percent of the market. Even though there are emerging new companies into the

market, they are relatively small. The four top companies are rank as follow as the largest to the

smallest chocolate company.

1. Lotus Chocolate Company Ltd

2. Cadbury India Ltd

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3. Nestle India Ltd

4. Lotte India Corporation Ltd

4. Customers:

What consumers want?

The psychology behind chocolate suggests consumers see it as a ‘naughty but nice’ impulse

treat. But a closer look reveals three distinct types of buyer, each with different behaviors and

demands.

The convenience buyer

Chocolate may be seen as an impulse purchase, but it’s becoming increasingly everyday among

consumers. Convenience is a major driver for chocolate lovers, who want to grab a bar from a

local store or throw a multi-pack into the trolley during a weekly shop. As convenience becomes

more important to time-poor shoppers, sales of tablet bars are growing (up 37% in the UK last

year) as consumers grab and go. Premium chocolate-makers such as Godiva are rethinking their

strategies to get a bite of this lucrative market, introducing smaller bar formats. A desire for

convenience is also increasing the popularity of sharing bags, particularly in Western markets, as

consumers buy to share or finish eating later. Manufacturers have reacted with packaging

innovations, such as the ‘memory wrapper’ from Mars that allows bars to be twisted, closed and

saved. Mars says the innovation “empowers the consumer”. It also drives brand loyalty.

5. Capital Requirements:

Chocolate companies require minimum capital to enter and remain in the market successfully.

Companies require capital to create products that attracts consumers and for total assets and

revenues to enlist other products. A valuable capital in the chocolate industry is the consumers

because revenue and profits depends on them who buy the companies ’product.

This makes the market very competitive and large companies that have big economies of scale

provide a highly automated service to a large number of customers, and have the financial

resources required in building and maintaining a large chocolate market.

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The chocolate industry enjoyed sweet success in 2009, with domestic industry revenues topping

$11 billion. Chocolate businesses have performed well despite a tough economy due to

innovations in chocolate manufacturing and increased consumer awareness about chocolate’s

health benefits. Chocolate businesses include a number of enterprise options. You might decide

to run a gourmet chocolate candy store, manufacture your own organic chocolate products or

rent chocolate fountains. Other ideas include a chocolate fondue café, chocolate gift shop or

chocolate gift basket business.

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SubstitutesSubstitutes like Ice-cream,Potato chips, biscuits, soft drinks,chewing gum, are a source of threat as well as opportunityfor market expansion.

SuppliersMajor raw materialSuppliers are cocoaProducers in LatinAmerican countries.Due to negligibleDomestic production inIndia, suppliers enjoyhigh bargaining power.Milk supply alsofluctuates, therefore, insummer months, milksuppliers gain sufficient bargaining power.

CompetitorsDuopolyBoth the major players haveFinancial muscle to sustain theirBrandsAll players following a pullstrategy.

BuyersSince chocolates do not satisfy anyImmediate needs, it is not aNecessaryitem.Consumer power is very high andconsumers need to be persuadedthrough various positioning planksto consumechocolates.

New EntrantsImminent entry of global majors likeHershey's, Mars etc. is bound to changethe power equation in the Indian chocolatemarket.

Porter's 5 Forces Model

3.2 Porter’s Five Forces Model

Although the Indian Consumer chocolate market is highly competitive, the high growth rates that

it promises make it a good industry to enter.

Threat of New Entrants

High Capital Requirements:

The large investment is requiring for the new enter the market successfully. Related to

manufacturing facilities and equipment, introductory advertisement and sales promotion.

Cost and resources disadvantages not related to scale of operation.

New entrance cannot take advantage of experience of industry, proprietary technology,

partnership with the best and cheapest raw material and components.

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Difficult to make network of distributors or retailers.

A potential entrance can face the challenges of distribution channel. Retailer and

wholesaler both avoid purchasing the product which is new to the market and for

customer.

Strong brand prefer more.

The well knows brand is preferred first, and it’s been hard for the newcomer to sell their

product. For building more clients they have to promote their product with the help of

different medium.

Restrictive regulatory polices

Government agencies can’t limit or even bar entry by requiring license and permits. As

different company having their own rules and regulation to implement and accordingly

government performed their task.

Tariffs and international trade restrictions

The ability and inclination of industry incumbents to lunch vigorous initiative to block a

newcomer’s successful entry.

Bargaining Power of Buyers

The bargaining power of buyers is increased by two factors: a number of large volume

buyers and the buyers' relatively low profits from the product. However, the bargaining

power of buyers is low to moderate because of the industry's differentiated products, the

presence of switching costs, the lack of threat of backward integration, and the reliance

on the industry's product.

Cost of competitive brand is low

When the number of brand is more and with different price the customer can easily

switch on to another brand as the customer having more option with them.

If the buyer are in small number

This point is always point of consent for the seller that buyers are in small number and

competitors are more.

25 | P a g e

If buyer are well informed about sellers products, prices, and costs.

The more information buyer has, the better bargaining position they are in. with the help

of technology customer can take all information and compare about the product and

price.

If buyers have judgment in whether and when they purchase the product.

Consumer can delay their purchase if they are not happy with product and if are not good

with financial condition.

Bargaining power of suppliers

The biggest threat is the trend of large suppliers integrating forward by setting up their

own retail outlets. However, in the Indian, there are a large number of suppliers in the

chocolate market who face overcapacities, poor distribution, large duties, and declining

margins and hence the bargaining power for suppliers is less and competitive pricing

comes into play. With more companies setting up the manufacturing plants in India.

Product differentiation is more and more difficult in the consumer chocolate industry.

The bargaining power of suppliers is decreased because the industry is an important

customer of the supplier group and the supplier does not pose a threat of forward

integration. But the bargaining power of suppliers is moderate to high because the

supplier group is concentrated; there are no substitute products and the importance of the

supplier's product to the industry.

Whether the items being complete is a product that is readily available for many

suppliers at the going market price.

When supplies became quite tight and industry members are so eager to secure what they

need that they agree to terms more favorable to supplies.

Supplier is the primary sources of particular items.

Good reputation supplier and strong demand of their material for to barging with the

buyer.

Inputs are in short supply

Short supply has some degree of pricing power. Particular items greatly weakness

supplier pricing power and bargaining power.

Differentiated raw material that improve the product

26 | P a g e

Improving the efficiency of their production processes, the more bargaining power.

Intensity of Rivalry amongst existing players

There are few key players in the consumer chocolate market, but as they are part of big

Indian business groups, they have a lot of muscle power and hence the intensity of rivalry

can be placed at a mid level. Though factors such as high transport and storage costs, lack

of differentiation, large investments, and low switching costs tend to intensify the rivalry,

the fact that the market is only at the nascent stage with promises of high growth rates

with the diverse needs of customer groups, and an untapped rural market; the existing

players seem to be enjoying a relatively low rivalry.

Rivalry intensifies as the number of competitor’s increases.

It is always difficult for the one or two player to win commanding market shares and

comfort weaker market challenges from rivals.

Rivalry is usually strong in slow growing market and weaker in fast growing

market.

Rapidly expanding buyer demand produces enough new business for all industry

members to grow. In slow growing market buyer demand drop of unexpectedly.

Better customer services

Giving better services in the market for attracting more number of customers. When

rivalry giving better services then it’s became pressure from the other competitor to

perform better. And providing different feature product with low price.

Rivalry is more powerful when industry condition tempts competitors to use price

cuts or other competitive weapons to boost unit volume.

When the product is perishable, seasonal, or costly to hold in inventory, competitive

pressures build quickly any time one or more firms decide to cut prices and take the

advantage.

Threat of Substitutes

The threat of substitute produces in the chocolate are high. The industry must compete

with alternate cooking flavors such as vanilla and lemon. In addition they must compete

27 | P a g e

with many types of snacks including non-chocolate snacks. Finally, they must also

compete in the retail arena.

Substitutes are readily available and attractively price.

When the substitutes are available and with a attractive price creates competitive

pressure. Finally they have to cut their price to sustain and attract the consumer, and

maintaining profit.

Substitutes having better quality, performance, and other related attribute.

Substitute product is inviting customer to compare performance, feature, ease of use and

other attributes as well as prices.

Whether the cost that buyer gain in switching to the substitutes are high or low.

High switching cost discourage switching to substitutes, while low switching costs make

it easier for the seller of attractive substitutes to lure buyer to their offering. Typical cost

include involvement, cost of addition equipment, time cost. High switching cost can

materially weaken the competitive pressures.

3.3 Driving forces of industry

Product and package innovation

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Packaging is a key element in the industry, with options such as single-serving packages,

bite-sized packs and resalable bags proving popular. As consumers become more health

conscious, companies are offering healthy options such as low calorie, low fat, vitamin

fortified, organic and fiber-rich chocolate.

Chocolate demand rises in festive season.

A survey by Assocham says that chocolate demand soars by 40% amid growing concerns

of adulterated sweets & abnormally high dry-fruit prices in festive season: Survey.

"Adulteration in traditional sweets eroding consumers' confidence along with dry fruit

prices going through the roof and other significant multiple factors like growing

acceptance of chocolates amid varied Indian palates, attractive packaging, consistency in

quality, growing gifting culture, rising urban affluence amid youth with high disposable

incomes and a crazy sweet tooth together with other related factors are driving the

demand for chocolates.

Attractive youth

Marketing to the youthful population of immerging market especially in India will be

vital. Use of popular culture, including bands and TV shows, in marketing campaigns

may increase, as will vital marketing and social media interaction, as young people

broaden their channels. While children prefer sweeter chocolate, concerned parents with

look for chocolate with added health value.

New distribution channels

Chocolate will be available from wider variety of outlets, from coffee shop to health food

stores, to cater for convenience buyers. Super markets and discount stores will continue

to dominate sales, particularly among value customers. Premium chocolate could become

available in main streams stores as luxury buyers proliferate. Brands might seek to move

up the value chain by creating their own flagship stores.

3.4. Rival’s next moves

The main rival of Nestle is Cadbury. We have described the future action of Cadbury.

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Cadbury introduced a long-term (2012–15) strategy programmed, Vision into Action, last

summer. Centered on the concept of ‘Fewer, Faster, Bigger, Better’, the company says it

"aims to capture the significant under-exploited potential in the business in revenue

growth, margins and returns". This will be achieved by focusing resources on fewer,

bigger and more value-creating initiatives, and the strategy is already said to be

delivering results, including improved margins and returns for shareholders.

Creating Value in Future

Effectively managing growth drivers

1. Gifting Child Connectivity and low end VFM.

2. New channels

Optimizing manufacturing efficiencies.

Competitiveness in logistics and distribution using IT.

Exploiting mass media to create / maintain large brands.10+% Advertising / Sales

3.5. Key factors for future competitive success

The rapid change of the past few years gives us some vital clues to the industry’s direction.

30 | P a g e

Luxury vs. commodity

A growing middle class will continue to propel the luxury market, and will increasingly drive it

into mainstream retailers. But this will pose a challenge: although middle class consumers in

emerging markets may develop expensive tastes, their disposable income will still be relatively

limited. Manufacturers may need to choose between margins and volume, positioning

themselves carefully as either a luxury or commodity player.

The personal touch

Bespoke bars may be commonplace. One artisan chocolate maker says he envisages smaller

shops offering people the chance to create their own bar. As consumer palates grow more

sophisticated, unusual flavors will become the norm, with chocolate-lovers choosing their own

combinations. Consumers may also be able to design their own packaging.

New distribution channels

Chocolate will be available from a wider variety of outlets, from coffee shops to health food

stores, to cater for convenience buyers. Supermarkets and discount stores will continue to

dominate sales, particularly among value customers. Premium chocolate could become available

in mainstream stores as luxury buyers proliferate. Brands might seek to move up the value chain

by creating their own flagship stores, something Hershey and Mars (through its M&M’s brand)

have already done successfully.

Middle class rule

Manufacturers are likely to offer more chocolate from ethical sources to meet inspirational

buyers’ needs. Middle class consumers will also be keen on premium chocolate for gifting

purposes, and seasonal launches, which increased 6% during 2011, will continue to grow.

A new recipe

Milk chocolate will have a lower cocoa content due to rising prices, and manufacturers will be

forced to use cocoa more sparingly. Demand for cocoa could spiral out of control: one Latin

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American manufacturer predicts that China and India increasing average per capita consumption

by just 1kg could make most manufacturers’ current models unsustainable. In that scenario,

artificial cocoa could become a viable alternative.

Fresh flavors

In developed markets, flavors may become increasingly unusual as palates grow more

sophisticated and brands seek a marketing boost. Combinations of sweet and savoury (such as

bacon and chocolate) will increase, and salt, olive oil, herbs and flowers will all be used as

flavorings.

Think small

Rising obesity levels and government regulation will lead to manufacturers limiting portion

sizes. Sharing bags of smaller bars will become more popular as people seek to limit the amount

eaten in one sitting. Average per capita consumption (currently 8kg in Europe) may drop,

although overall consumption is likely to rise as the global middle class mushrooms.

Price vs. size

In emerging markets, chocolate takes a hefty bite from the household budget. As input price

volatility continues, manufacturers may have to keep value in mind or risk losing consumers.

Price per gram is rising fast in developed markets, but research shows consumers feel cheated if

bars get smaller but price is static. Mainstream manufacturers could be forced to choose between

containing costs, at the expense of size and moving further up the value chain.

3.6 Internal analysis

3.6.1NESTLE SWOT ANALYSIS:

Strengths Weaknesses

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1. Unmatched product and brand portfolio

2. R&D capabilities

3. Distribution channels and geographic

presence

4. Competency in mergers and acquisitions

5. Brand reputation valued at $7 billion

1. Inability to provide consistent

quality in food products

2. Weak implementation of CSR

Opportunities Threats

1. Increasing demand for healthier food

products

2. Acquiring startups specializing in

producing well-being products

3. Establishing new joint ventures

1. Food contamination

2. Trend towards healthy eating

3. Growth of private labels

4. Rising raw food prices

Strengths

1. Unmatched product and brand portfolio. The business offers one of the widest

portfolios of food and brewery products in its sector. It also operates 29 brands that earn

more than $1 billion in annual revenues. With more than 8,000 products it is hard for any

other corporate to compete against Nestlé.

2. R&D capabilities. Nestlé invested more than $2 billion in R&D in 2011. It’s introducing

new and redesigned products every year, strengthening firm’s competitive advantage.

3. Distribution channels and geographic presence. Nestlé runs in more than 100 countries

and has extensive distribution channel all over the world, which supports its operations

globally.

4. Competency in mergers and acquisitions. Over the years Nestlé has been forming

successful partnerships and acquiring other companies in order to grow and maintain its

leadership in the market.

5. Brand reputation valued at $7 billion. Nestlé is known almost everywhere and has a

reputable brand for its products that are used by millions every day.

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Weaknesses

1. Inability to provide consistent quality in food products. Nestlé has been recalling

many products from trade due to food contamination or poor quality supplies. This does

not only hurt firm’s sales but its image as well as the business is unable to control quality

of the products.

2. Weak implementation of CSR. The company has announced and is involved in many

programs that aim to make company more eco-friendly and improving the working

conditions of its suppliers. Still, Nestlé receives a lot criticism over the effectiveness of

its programs.

Opportunities

1. Increasing demand for healthier food products. The trend of buying and consuming

only healthy food products is a major shift in consumer tastes and opens up an immense

market for companies. Currently, Nestlé tries to introduce more healthy food products in

response to the trend.

2. Acquiring startups specializing in producing well-being products. Many new startups

are forming and introducing new products for well-being or revolutionizing the ways

those products are made. Startups are cheap and can easily be acquired. Nestlé is focusing

on providing more well-being products and this is a great opportunity to expand its

portfolio.

3. Establishing new joint ventures. Nestle is already involved in many successful

partnerships with major world companies like The Coca-Cola Company and Colgate-

Palmolive.

Threats

1. Food contamination. Although it is Nestlé’s responsibility to run thorough quality

checks of its products, the company had been reportedly providing contaminated food or

other products to the market. Such actions hurt company’s reputation and result in losses.

34 | P a g e

2. Trend towards healthy eating. Nestlé is a major supplier of chocolate and chocolate

drinks that have high level of calories and due to changing customer habits, will

experience decline in demand.

3. Growth of private labels. The growing number of supermarkets and other retailers are

introducing their own label products that cost less and can easily compete with Nestlé’s

product portfolio.

4. Rising raw food prices. With an overall growth of world economy and population, the

demand for raw food will rise. The result of that will be higher material costs and

squeezed margin for Nestlé.

Here we complete the chapter 3 of our report, in which we have evaluated industry environment

by using secondary data. In the next chapter financial statement analysis of the industry is

presented.

CHATER 4

FINANCIAL ANALYSIS

4.1 BACKGROUND OF FINANCIAL ANALYSIS

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One of the most common ways of analyzing financial data is to calculate ratios from the data to

compare against those of other companies or against the company's own historical performance.

Financial Analysis is performed by professionals who prepare reports using ratios that make use

of information taken from financial statements and other reports. These reports are usually

presented to top management as one of their bases in making business decisions.

Financial analysts often assess the firm's:

1. Profitability - its ability to earn income and sustain growth in both short-term and long-term.

A company's degree of profitability is usually based on the income statement, which reports on

the company's results of operations;

2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-term;

3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate obligations;

4. Stability- the firm's ability to remain in business in the long run, without having to sustain

significant losses in the conduct of its business. Assessing a company's stability requires the use

of the income statement and the balance sheet, as well as other financial and non-financial

indicators.

Financial analysts often carried out by the following ways:

Past Performance - Across historical time periods for the same firm (the last 5 years for

example),

Future Performance - Using historical figures and certain mathematical and statistical

techniques, including present and future values, this extrapolation method is the main

source of errors in financial analysis as past statistics can be poor predictors of future

prospects.

Comparative Performance - Comparison between similar firms.

Objectives of Financial Analysis

Objectives of the financial Analysis of the IT Industry are as follows:

To know profitability of the industry

To know the Financial Performance of the Industry

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To study, compare, and analyze the financial performance of major companies dealing in

the Paint Industry.

Tools Used for Financial analysis

We have used two tools for the financial analysis of Paint Industry

Ratio Analysis

Trend Analysis

BALANCE SHEET

Table –4.1 (Rs in Crs)Particulars 08 - 09 09 - 10 10 - 11 11 -12 12 -13

SOURCES OF FUNDS :Share Capital 38.15 37.87 39.32 39.32 39.32

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Reserves Total 216.17 259.56 476.21 655.74 863.08Total Shareholders’ Funds 244.72 290.04 508.68 685.77 892.08Secured Loans 9.18 0.92 0.635 1.04 0.65Unsecured Loans 3.13 3.095 2.755 248.60 267.83Total Debt 12.31 4.01 3.39 249.634 268.47Other Liabilities 0 0 0 234.48 268.05Total Liabilities 257.03 294.05 512.07 1169.89 1428.59APPLICATION OF FUNDS :Gross Block 534.01 627.55 813.85 1003.72 1513.79Less : Accumulated Depreciation 267.41 298.34 332.83 381.58 465.56Less: Impairment of Assets 0.09 2.58 0 3.45 3.54Net Block 266.51 326.63 481.02 618.69 1044.69Capital Work in Progress 58.47 58.04 107.38 389.98 168.72Investments 9.455 55.32 52.15 43.4 91.27Current Assets, Loans & AdvancesInventories 170.19 180.61 237.29 303.37 365.16Sundry Debtors 18.075 25.56 27.94 46.81 39.54Cash and Bank 118.49 110.54 174.17 187.99 186.22Loans and Advances 48.785 52.73 51.08 41.72 37.29Total Current Assets 355.54 369.43 490.47 579.89 628.20Less : Current Liabilities and ProvisionsCurrent Liabilities 249.93 286.63 363.62 457.88 536.14Provisions 174.76 219.68 250.50 58.72 27.17Total Current Liabilities 424.69 506.31 614.11 516.60 563.32Net Current Assets -69.15 -136.9 -123.6 63.30 64.89Deferred Tax Assets 14.84 15.945 21.14 29.27 44.32Deferred Tax Liability 23.095 25.01 25.97 37.098 66.87Net Deferred Tax -8.255 -9.065 -4.83 -7.83 -22.56Other Assets 0 0 0 62.36 81.59Total Assets 257.03 294.05 512.07 1169.89 1428.59Contingent Liabilities 21.80 40.97 42.66 48.50 78.35

We are taken the all data of balance sheet by average.

PROFIT & LOSS

Table 4.2 (Rs in Crs)

Particulars 08 - 09 09 - 10 10 - 11 11 -12 12 -13INCOME :Sales Turnover 1607.27 1873.41 2299.46 2887.69 3316.61Excise Duty 80.32 53.77 60.89 90.01 127.64Net Sales 1526.95 1819.64 2238.57 2797.68 3188.97Other Income 15.74 13.54 18.56 38.47 23.12

38 | P a g e

Stock Adjustments 20.26 -1.42 42.28 16.78 34.79Total Income 1562.95 1831.76 2299.41 2852.93 3246.88EXPENDITURE :Raw Materials 600.97 700.11 913.79 1121.52 1253.34Power & Fuel Cost 48.72 50.38 69.83 92.06 115.90Employee Cost 110.70 143.85 151.41 202.54 240.26Other Manufacturing Expenses 199.39 204.57 280.83 331.49 363.43Selling and Administration Expenses 303.69 373.49 454.96 549.82 644.43Miscellaneous Expenses 19.84 28.46 28.55 51.92 46.58Less: Pre-operative Expenses CapitalizedTotal Expenditure 1283.30 1500.86 1899.37 2349.34 2663.94Operating Profit 279.65 330.91 400.04 503.59 582.94Interest 2.65 1.23 1.42 2.61 8.62Gross Profit 277.01 329.67 398.62 500.98 574.32Depreciation 33.83 40.17 49.6275 59.60 93.09Profit Before Tax 243.18 289.5 348.99 441.39 481.23Tax 64.34 76.08 97.64 125.42 122.51Fringe Benefit tax 2.99 0.65 0 0 0Deferred Tax 1.23 0.81 -4.24 1.32 14.73Reported Net Profit 174.68 211.96 255.59 314.65 343.99Extraordinary Items -0.33 -0.48 -2.09 -0.997 -2.59Adjusted Net Profit 174.95 212.44 257.69 315.65 346.59Adjst. below Net Profit 0 0 0 0.0025 0P & L Balance brought forward 82.63 115.87 140.86 232.75 378.38Appropriations 141.37 186.98 163.70 169.02 171.97P & L Balance carried down 115.87 140.86 232.75 378.38 550.40Dividend 104.05 118.46 118.46 118.46 118.46Equity Dividend % 111.25 126.25 126.25 126.25 126.25Earnings Per Share-Unit Curr 24.98 32.03 36.16 48.07 51.80Book Value-Unit Curr 73.70 85.68 196.11 230.61 269.38

We are taken the all data of profit & loss by average.

4.2 Ratio Analysis

The relationship of one item to another expressed in a simple mathematical form is

known as the Ratio.

The relationship can be expressed as:

1. Percentage

2. Times

39 | P a g e

3. Proportion of numbers

4. Days

Ration is used as benchmark for evaluating the financial position and the performance of

the company. Ratio helps to summaries the large quantities of financial data and to make

qualitative judgment about the financial performance of the company. Ratio in general, is a

statistical yardstick by means of which the relationship between figures can be compared and

measured.

Ratio analysis is a widely – used tool of financial analysis. It is defined as the systematic

use of ratio to interpret the financial statement so that the strengths and weaknesses of a firm as

well as its historical performance and current financial can be determined.

Interpretation through ratios:-

Only calculating ratio is useless there must be a logical interpretation that can be useful to

management for making policy and take important decision. Investors can use this for finding

out the risk involved and what would be the return from the particular company. Methods used

for deriving interpretation are as below.

a. Comparison with ideal ratio

b. Comparison with past year ratio

c. Compare with ratio of other competitor company

d. Help of some related ratio.

4.3.1 Current ratio

It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities.

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

Table 4.1

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013

40 | P a g e

Lotus Chocolate Company Ltd 1.65 1.91 2 1.85 1.9Cadbury India Ltd 0.93 1.11 1.1 1.24 1.31Nestle India Ltd 0.66 0.63 0.62 0.57 0.51Lotte India Corporation Ltd 0.91 0.77 1.26 1.66 1.41

Total 4.15 4.42 4.98 5.32 5.13Average 1.0375 1.105 1.245 1.33 1.2825

2008-09 2009-10 2010-11 2011-12 2012-20130

0.2

0.4

0.6

0.8

1

1.2

1.4

Current ratio

Fig.-4.1

Above graph shown the current ratio of chocolate industry of five year. The current ratio of the industry is increase in 2008-09 to 2011-12, but in 2012-13 the current ratio of the industry is decrease.

4.3.2 Interest coverage ratio

The interest coverage ratio (ICR) is a measure of a company's ability to meet its interest. It determines how easily a company can pay interest expenses on outstanding debt. Payments. Interest coverage ratio is equal to earnings before interest and taxes (EBIT) for a time period, often one year, divided by interest expenses for the same time period. The interest coverage ratio is a measure of the number of times a company could make the interest payments on its debt with its EBIT

INTEREST COVERAGE RATIO = EBIT / INTEREST EXPENSES

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http://www.readyratios.com/reference/profitability/ebit_earnings_before_interest_and_taxes.html

Table 4.2

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 4.85 14.22 2.83 -4.53 -0.16Cadbury India Ltd 39.82 72.44 64.9 87.31 61.9Nestle India Ltd 472.23 655.99 1,061.29 272.61 59.37Lotte India Corporation Ltd 0.23 28.83 6.09 78 105.63

Total 517.13 771.48 1135.11 433.39 226.74

Average129.282

5 192.87283.777

5 108.3475 56.685

2008-09 2009-10 2010-11 2011-12 2012-2013

0

50

100

150

200

250

300

Interest coverage ratio

Fig.-4.2

Above graph shown the Interest coverage ratio of chocolate industry of five year. The Interest coverage ratio of the industry is increase in 2008-09 to 2010-11, but in 2011-12 to 1012-13 the Interest coverage ratio of the industry is decrease.

4.3.3 Return on capital employed ratio

Return on capital employed (ROCE) is a measure of the returns that a business is achieving from the capital employed, usually expressed in percentage terms. Capital employed equals a company's Equity plus Non-current liabilities (or Total Assets − Current Liabilities), in other words all the long-term funds used by the company. ROCE indicates the efficiency and profitability of a company's capital investments.

ROCE = EBIT / CAPITAL EMPLOYED

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= EBIT / (EQUITY + NON-CURRENT LIABILITIES)

= EBIT / (TOTAL ASSETS - CURRENT LIABILITIES)

Table 4.3

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 3.04 4.12 5.42 0 0Cadbury India Ltd 44.96 45.3 39.09 41.78 30.34Nestle India Ltd 173.13 174.16 158.6 69.91 45.1Lotte India Corporation Ltd 0 12.37 0 1.41 1.88

Total 221.13 235.95 203.11 113.1 77.32Average 55.2825 58.9875 50.7775 28.275 19.33

2008-09 2009-10 2010-11 2011-12 2012-20130

10

20

30

40

50

60

70

Return on capital employed ratio

Fig. -4.3Above graph shown the ROEC of chocolate industry of five year. The ROEC of the industry is increase in 2008-09 to 2009-10, but in 2010-11 to 1012-13 the ROEC of the industry is decrease.

4.3.4 Return on net worth ratio

The return on equity ratio (also known as the return on net worth) reveals the amount of return earned by investors on their investments in a business. This return can be improved when a business buys back its own stock from investors, or by using more debt and less equity to fund its operations.

RETURN ON NET WORTH RATIO = NET INCOME / EQUITY

Table 4.4

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Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 4.47 6.39 5.63 0 0Cadbury India Ltd 38.09 37.91 33.06 33.86 25.93Nestle India Ltd 119.78 124.22 113.97 90.31 69.52Lotte India Corporation Ltd 0 6.08 0 1.09 1.48

Total 162.34 174.6 152.66 125.26 96.93Average 40.585 43.65 38.165 31.315 24.2325

2008-09 2009-10 2010-11 2011-12 2012-2013

05

101520253035404550

Return on net worth ratio

Fig.-4.4Above graph shown the Return on net worth ratio of chocolate industry of five year. The Return on net worth ratio of the industry is increase in 2008-09 to 2009-10, but in 2010-11 to 1012-13 the Return on net worth ratio of the industry is decrease.

4.3.5 The fixed assets ratio

Fixed asset turnover ratio compares the sales revenue a company to its fixed assets. This ratio tells us how effectively and efficiently a company is using its fixed assets to generate revenues. This ratio indicates the productivity of fixed assets in generating revenues. If a company has a high fixed asset turnover ratio, it shows that the company is efficient at managing its fixed assets. Fixed assets are important because they usually represent the largest component of total assets.

FIXED ASSET TURNOVER RATIO = SALES REVENUE / TOTAL FIXED ASSETS

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Table 4.5

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 1.42 1.72 1.86 2.32 3.25Cadbury India Ltd 3.09 3.12 3.22 3.78 4.08Nestle India Ltd 3.46 3.43 3.65 3.49 2.47Lotte India Corporation Ltd 1.45 1.54 0.76 0.6 0.67

Total 9.42 9.81 9.49 10.19 10.47Average 2.355 2.4525 2.3725 2.5475 2.6175

2008-09 2009-10 2010-11 2011-12 2012-2013

2.22.25

2.32.35

2.42.45

2.52.55

2.62.65

The fixed assets ratio

Fig.-4.5Above graph shown the Fix asset turnover ratio of chocolate industry of five year. The Fix asset turnover ratio of the industry is increase in 2008-09 to 2009-10 and 2010-11 to 2012-13, but in 2010-11 the Fix asset turnover ratio of the industry is decrease.

4.3.6Inventory ratio

Inventory to sales ratio establishes relationship between the sales with average stock. This ratio measures the velocity of conversion stock in to sales. Usually, a high inventory sales indicates efficient management of inventory because more frequently the stock are sold, the lesser amount of money is required to finance the inventory. A low inventory to sales ratio indicates an inefficient management of inventory, over investment in inventories, sluggish business, and poor quality of good and lower profit as compared to total investment. A high inventory turnover may be the result of a very low level of inventory which results in shortage of goods in relation to

45 | P a g e

demand and position of stock or the turnover may be high due to conservation methods of valuing inventories at lower value or the policy of the being to buy frequently in small lot.

INVENTORY RATIO = SALES / INVENTORY

Table 4.6


Total 38.44 40.25 38.9 34.03 34.95Average 9.61 10.0625 9.725 8.5075 8.7375

2008-09 2009-10 2010-11 2011-12 2012-20137.5

8

8.5

9

9.5

10

10.5

Inventory ratio

Fig.-4.6

Above graph shown the Inventory ratio of chocolate industry of five year. The Inventory ratio of the industry is increase in 2008-09 to 2009-10 and 2011-12 to 2012-13, but in 2010-11 to 2011-12 the Inventory ratio of the industry is decrease.

4.3.7Debtors ratio

Debtors Turnover ratio is a test of the liquidity of the firm. This ratio establishes the relationship between net credit sales and accounts receivables. The objective of this ratio is to determine the efficiency with which the debtors are being managed. It suggests the number of time the amount of credit sale is collected during the year.

DEBTORS RATIO = NET SALES / DEBTOR

Table 4.7

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Total 257.46 238.34 238.21 213.69 207.02Average 64.365 59.585 59.5525 53.4225 51.755

2008-09 2009-10 2010-11 2011-12 2012-20130

10

20

30

40

50

60

70

Debtors ratio

Fig.-4.7

Above graph shown the Debtors ratio of chocolate industry of five year. The Debtors ratio of the industry is decrease in 2008-09 to 2012-13.

4.4 Trend Analysis

Trend analysis is one of the tools for the analysis of the company’s monetary statements for the investment purposes. Investors use this analysis tool a lot in order to determine the financial position of the business. In a trend analysis, the financial statements of the company are compared with each other for the several years after converting them in the percentage. In the trend analysis, the sales of each year from the 2008-2009 to 2012-2013 will be converted into percentage form in order to compare them with each other.

47 | P a g e

Trend Analysis is an aspect of technical analysis that tries to predict the future movement of a

stock based on past data. Trend analysis is based on the idea that what has happened in the past

gives traders an idea of what will happen in the future.

Method for calculating Trend

Trend Percentage Method

We have utilized trend percentage method for the calculation of trend. For the trend analysis

index number is advocated. The procedure followed is to assign the number 100 to the item of

the base year and to calculate percentage change in each item of other years in the relation to the

base year. This procedure is called trend-percentage method.

4.4. Total Assets

Table 4.8

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 8.22 9.31 11.55 22.67 17.47Cadbury India Ltd 506.1 542.97 740.88 1,081.42 1,370.71Nestle India Ltd 473.35 581.27 855.42 3,129.96 3,873.65

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Lotte India Corporation Ltd 40.44 42.64 440.43 445.49 452.54Total 1028.11 1176.19 2048.28 4679.54 5714.37

Average 257.03 294.05 512.071169.88

5 1428.59100 114.40 199.23 455.16 555.81

2008-09 2009-10 2010-11 2011-12 2012-20130

100

200

300

400

500

600

100 114.4199.23

455.16

555.81

Total Assets

Total Assets

Fig.-4.8

Above graph shown the Total Assets of chocolate industry of five year. The Total Assets of the industry is increase 555.81 in 2008-09 to 2012-13.

4.4.2 Inventories

Table 4.9

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 2.92 3.05 5.07 13.72 5.11Cadbury India Ltd 222.81 199.82 339.23 427.04 676.63

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Nestle India Ltd 434.91 498.74 575.95 734.04 745.58Lotte India Corporation Ltd 20.1 20.84 28.9 38.69 33.3

Total 680.74 722.45 949.15 1213.49 1460.62Average 170.19 180.61 237.29 303.37 365.16

100 106.12 139.43 178.25 214.56

2008-09 2009-10 2010-11 2011-12 2012-20130

50

100

150

200

250

1 2 3 4 5

100 106.12

139.43

178.25

214.56

Inventory

Inven-torie

Fig.-4.9

Above graph shown the Inventories of chocolate industry of five year. The Inventories of the industry is increase 214.56 in 2008-09 to 2012-13.

4.4.3 Total Liability

Table 4.10

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 8.22 9.31 11.55 22.67 17.47Cadbury India Ltd 506.1 542.97 740.88 1,081.42 1,370.71

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Nestle India Ltd 473.35 581.27 855.42 3,129.96 3,873.65Lotte India Corporation Ltd 40.44 42.64 440.43 445.49 452.54

Total 1028.11 1176.19 2048.28 4679.54 5714.37Average 257.03 294.05 512.07 1169.885 1428.59

100 114.40 199.23 455.16 555.81

2008-09 2009-10 2010-11 2011-12 2012-20130

100

200

300

400

500

600

100 114.4199.23

455.16

555.81

Total Liability

Total Liability

Fig.-4.10

Above graph shown the Total liability of chocolate industry of five year. The Total liability of the industry is increase 555.81 in 2008-09 to 2012-13.

4.4.4 Total Share Capital

Table 4.11

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 20.23 20.23 20.23 20.23 20.23Cadbury India Ltd 32.18 31.07 31.07 31.07 31.07

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Nestle India Ltd 96.42 96.42 96.42 96.42 96.42Lotte India Corporation Ltd 3.77 3.77 9.56 9.56 9.56

Total 152.6 151.49 157.28 157.28 157.28Average 38.15 37.87 39.32 39.32 39.32

100 99.27 103.07 103.07 103.07

2008-09 2009-10 2010-11 2011-12 2012-2013

97

98

99

100

101

102

103

104

10099.27

103.07 103.07 103.07

Total Share Capital

Total Share Capital

Fig.-4.11

Above graph shown the Total share capital of chocolate industry of five year. The Total share capital of the industry is decrease 99.27 in 2008-09 to 2009-10 and 2009-2010 to 2010-11 in total share capital is increase 103.07, but in 2010-11 to 2012-13 the total share capital constant.

4.4.5 Gross Profit

Table 4.12

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 1.9 2.63 1.57 -4.36 -1.58

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Cadbury India Ltd 238.37 278.14 309.96 443.74 445.25Nestle India Ltd 865.18 1,028.25 1,272.86 1,541.25 1,829.77Lotte India Corporation Ltd 2.58 9.65 10.09 23.3 23.84

Total 1108.03 1318.67 1594.48 2003.93 2297.28Average 277 329.67 398.62 500.98 574.32

100 119.01 143.91 180.86 207.34

2008-09 2009-10 2010-11 2011-12 2012-20130

50

100

150

200

250

100119.01

143.91180.86

207.34

Gross Profit

Gross Profit

Fig.-4.12

Above graph shown the gross profit of chocolate industry of five year. The gross profit of the industry is increase 207.34 in 2008-09 to 2012-13.

4.4.6 Operating Profit

Table 4.13

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 2.1 2.72 2.17 -3.48 0.22

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Cadbury India Ltd 243.57 281.42 313.86 448.1 451.26Nestle India Ltd 866.82 1,029.65 1,273.94 1,546.36 1,856.37Lotte India Corporation Ltd 6.12 9.83 10.2 23.38 23.92

Total 1118.61 1323.62 1600.17 2014.36 2331.77Average 279.65 330.91 400.04 503.59 582.94

100 118.33 143.05 180.08 195.85

2008-09 2009-10 2010-11 2011-12 2012-20130

50

100

150

200

250

100118.33

143.05

180.08195.8500000

00001

Operating Profit

Operating Profit

Fig.-4.13

Above graph shown the operating profit of chocolate industry of five year. The operating profit of the industry is increase 195.85 in 2008-09 to 2012-13.

4.4.7 Total Income

Table 4.14

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013

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Lotus Chocolate Company Ltd 24.23 28.48 31.12 40.37 55.03Cadbury India Ltd 1,664.98 1,932.33 2,616.92 3,498.63 4,175.95Nestle India Ltd 4,392.68 5,175.83 6,380.33 7,589.99 8,457.58Lotte India Corporation Ltd 169.9 190.41 169.26 282.73 298.95

Total 6251.79 7327.05 9197.63 11411.72 12987.51Average 1562.95 1831.76 2299.41 2852.93 3246.88

100 117.2 147.12 182.53 207.74

2008-09 2009-10 2010-11 2011-12 2012-20130

50

100

150

200

250

100117.2

147.12182.53

207.74

Total Income

Total Income

Fig.-4.14

Above graph shown the total income of chocolate industry of five year. The total income of the industry is increase 207.74 in 2008-09 to 2012-13.

4.4.8 Total ExpensesTable 4.15

Particular 2008-09 2009-10 2010-11 2011-12 2012-2013Lotus Chocolate Company Ltd 22.13 25.76 28.95 43.85 54.81

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Cadbury India Ltd 1,421.41 1,650.91 2,303.06 3,050.53 3,724.69Nestle India Ltd 3,525.86 4,146.18 5,106.39 6,043.63 6,601.21Lotte India Corporation Ltd 163.78 180.58 159.06 259.35 275.03

Total 5133.18 6003.43 7597.46 9397.36 10655.74Average 1283.3 1500.86 1899.37 2349.34 2663.94

100 116.60 148 183.07 207.59

2008-09 2009-10 2010-11 2011-12 2012-2013

0

50

100

150

200

250

100116.6

148183.07

207.59

Total Expenses

Total Expenses

Fig.-4.15

Above graph shown the total expenses of chocolate industry of five year. The total expenses of the industry is increase 207.59 in 2008-09 to 2012-13.

CHATER 5

Business Plan

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5.1 Business Plan for Chocolate Industry

Blueberry Chocolate

Bhavsar Meghal K. 12044311004 (IBM)Bhojak Keyur B. 12044311005 (Marketing)Gadhvi Hiren B. 12044311022 (HR)Goswami Hardip P. 12044311028 (Marketing)Joshi Naiya G. 12044311035 (HR)Patel Jignesh D. 12044311095 (Finance)

5.2 Executive Summary

We are starting a business of manufacturing chocolates. Name of the company is “Blueberry

Chocolate”. Our target market is whole Gujarat. The customers to whom our products will be

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supplied are retailers, wholesalers and traders in Gandhidham, Adipur, Rajkot, Ahmedabad,

Surat and Vadodara. The location of our manufacturing plant would be GIDC, Adipur.

We would be targeting the consumers of all age groups. The products that we would offer are:

Blueberry Plain Chocolate

Blueberry Milk Chocolate

Blueberry Fruit N Nut Chocolate

The core competencies on which our company would be competing are taste and quality of our chocolates. Our company would be a partnership firm. There would be 2 finance managers, 2 marketing managers, 1 accountant and 1 general manager as part of the organization.

5.3 General Company Description

Our company will be in the confectionary business. Our company will be involved in

manufacturing of chocolates.

Vision

Our vision is to be the leading manufacturer of chocolates all over India.

Mission

We seek to produce high quality products at competitive price using modern technology to

provide high satisfaction to the consumers.

Objectives

To manufacture and provide the customers with the quality products to the best interest of

the customers.

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To create Price competitive Products as part of the effect to increase the world access to

high quality chocolates.

To ensure a hygiene & clean working environment as to continue to produce Safe &

Tasty Products

To strive to Meet & Exceed Customer's Expectations so as to ensure a sustainable

business relationship.

Target Market

Upper class

Middle class

Lower middle class

All age groups

About Chocolate Industry

The chocolate market is estimated around 33,000 tonnes valued at approximately Rs. 8 billion.

Bars of molded chocolates like Amul, milk chocolate, dairy milk, truffle, nestle premium, and

nestle milky bar comprise the largest segment, accounting for 37% of the total market in terms of

volume. To push sales chocolate companies have been targeting mainly adult audiences.

Chocolates are being presented as snack food for the new target audiences. The chocolate

segment is characterized by high volumes, huge expenses on advertising, low margins, and price

sensitivity

Cadbury is the leading player in the chocolate market industry with the penetration of 70%

market share. The company's brands like Five Star, Gems, Éclairs, Perk, and Dairy Milk are

leaders in their segments. Nestle & Amul are the other major players in chocolate industry.

Chocolate industry is growing at steady growth rate of 25%. Over 70% of the consumption of

chocolates takes place in the urban market. It is price sensitive market.

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

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the segment will soon get keener as overseas chocolate giants Hershey's and Mars consolidate to

grab a bite of the Indian chocolate pie.

Indian Chocolate Industry’s Margin range between 10 and 20%, depending on the price point at

which the product is placed. The input costs in India are under check owing to the 24% decline

in the prices of sugar.

Core Competencies

The core competencies on which our company will compete are:

Taste

By consuming the “Blueberry Chocolates” flavor begins to fill your mouth the moment

the chocolate begins to melt on your tongue like butter and it tastes like pure chocolate

rather than cocoa powder. At first there is so much pleasure in tasting the chocolate, it

may be difficult to focus on the specifics of flavor. First perception the consumer would

describe for the chocolate as “chocolaty” and “Yummy & crunchy”.

Quality

The raw ingredients are of finest quality and also care is taken of the production process;

roasting and crushing the cocoa beans and mixing the cocoa paste with sugar and other

ingredients such as milk. Blueberry chocolates are high quality chocolates as they are

shiny brown, breaks cleanly and is smooth. Blueberry chocolates has the sufficient

quantities of cocoa butter and vegetable fat so that it does not become greasy or sticky at

ambient room temperature.

Ownership

Our company will be a partnership firm.

5.4 Competitor Analysis

COMPANY FOUNDED IN BRAND PORTFOLIO

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(confectionery products)

Nestle 1860s Kit Kat, Smarties, Wonka

Ferrero 1940s Rocher, Raffaello, Kinder, Tic Tac,

Mon Cheri, Nutella

Mars 1911 Bounty, Galaxy, Mars, Snickers, Milky

Way, Wrigley’s, M&M’s etc

Amul 1945 Milk chocolate, Fruit & Nut chocolate

Hershey’s 1894 Hershey’s milk chocolate, Kisses, Pot

of gold, Milk duds, Reese’s,

Icebreakers etc

Perfetti Van

Melle

2001, when Perfetti

and Van melle

merged

Alpenliebe, Chlormint, Centerfresh,

Happydent, Mentos

ITC 2002(confectionery

segment)

Minto and Candyman

Parle 1929 Melody, mango bite, poppins, kismi

toffee, mazelo, xhale, éclair, golgappa,

parle lites, orange candy

Cadbury 1948 (Indian

Market)

Dairy Milk, Dairy Milk fruit N nut,

Dairy Milk Shots, Dairy Milk Roasted

Almond, Dairy Milk Silk

Our Products

Our company will be dealing in the manufacturing of 3 products. They are:

1. Milk Chocolate

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2. Fruit & Nut Chocolate

3. Plain Chocolate

Ingredients of Milk Chocolate

Sugar, Full Cream Milk Powder, Vegetable Fat, Emulsifiers, Flavors, Whole Cow’s Milk, Cocoa

Butter.

Recipe for milk chocolate

Take one cup of powdered sugar, one cup of milk powder.

One heaped table spoon of cocoa powder, about half table spoon of butter, and to this add

the minimum quantity of water required to make a thick batter.

Place this batter on a stove and bring to a boil on a low flame.

When the batter becomes thick (shown in the clip) stop the boiling, cool.

Pour into suitable moulds, cut, cool in a fridge and it gets ready.

Ingredients of Fruit & Nut

Sugar, Full Cream Milk Powder, Raisins, Cocoa Butter, Cocoa Mass, Almonds, Vegetable Fat,

Emulsifiers, Flavors.

Recipe for fruit & nut chocolate

First take whatever moulds you like and grease it with butter. Set this aside for a moment.

Melt the chocolate either in double boiler method or in a microwave. Remove it and set

aside.

Chop up all your nuts and dried fruits. Add it to the chocolate and mix well.

Take a spoonful of this and fill your prepared mould and put it in the deep freeze for 1

hour.

Unmold it and keep it in the fridge until serving.

Ingredients of Plain Chocolate

Sugar, Full Cream Milk Powder, Cocoa Butter, Cocoa Mass, Vegetable Fat, Emulsifiers,

Flavors.

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Recipe for plain chocolate

Combine cocoa and sugar and blend until all lumps of cocoa are gone. Add water and salt

and mix well.

Cook over medium heat, bringing it to a boil.

Keep boiling until thick, stirring to keep from overflowing.

Remove from heat and let cool.

When cool, add vanilla.

Then put this in your milk, just like the store bought stuff.

5.5 Marketing Plan

Economics

Total size of chocolate market is 33000 tones

Trends in Consumer Preferences

The range and variety of chocolates available in malls seems to be growing day by day,

which leads to lot of impulse sales for chocolates companies.

Chocolates which use to be unaffordable is now considered mid-priced.

Branded chocolates have become more popular.

Mithai is becoming the substitute of chocolates

Instead of buying sweets on Rakhshabhandan, Diwali, people prefer to buy chocolates.

Barriers to entry

Huge startup costs

Ensuring good quality products to the customers

High Level of competition from the well established brands

To keep price of the product low, as it is a price sensitive market

Overcoming the barriers to entry

To overcome the barrier of huge start up costs our machinery would be taken for lease for

first few years of business.

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Marketing of our products would be on the basis good quality and healthy products to

provide a competitive advantage.

From customer’s point of view, chocolate is the product which shows their impulse buying

behavior. Customers are looking for low priced chocolates and also it should have good taste.

5.6 Features and benefits

Milk chocolate

Milk chocolate is a stimulator, to the brain, to the emotions, thus, increases your stamina.

Milk chocolate is high in vitamins B1, B2, D and E. It also contains potassium and

magnesium.

Milk chocolate contains antioxidants that boost the immune system.

Fruit N Nut chocolate

Almonds help in the creation of new blood cells, hemoglobin and help in proper

functioning of vital organs of the body.

Almonds also help in weight loss, lowering blood pressure, reduction in risk of recurrent

coronary heart disease, solving constipation, etc.

Raisin helps in digestion problems, acidity or constipation problems.

Raisins contain considerable amount of iron

Cashew nuts provide protein and fiber to body.

Cashews have no cholesterol. Cashews contain healthy monounsaturated fat that

promotes good cardiovascular health.

Plain chocolate

Chocolate contains essential trace elements and nutrients such as iron, calcium and

potassium, and vitamins A. B1, C, D, and E.

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Cocoa is also the highest natural source for Magnesium.

The high Magnesium content of Chocolate is beneficial for the Cardiovascular System

and hypertension.

Cancer Fighter

High in Antioxidants

Cocoa contains flavones, a type of flavonoid that is only found in cocoa and chocolate.

Customers (Wholesalers and Retailers)

Anil Provision Store

166 Dbz-North Sector, AryaSamaj Road, ZandaChowk, Gandhidham, Gandhidham– 370201

Rajani Provision Stores

Vidhyanagar Main Road, Virani Chowk, Opp. Dr. Sanjay Gadre, Virani Chowk, Rajkot - 360002

Gayatri General Provision Stores

Amrut Shopping Centre, Kevdawadi Main Road, Kevdawadi, Rajkot – 360002

Jatin Provision Stores

6, Nityanand Apartment, Ellisbridge, Near Pritamnagar Akhada, Ellisbridge, Ahmedabad, Gujarat 380006

Narayan Department Store

Khodiyar Chowk, Ram Nagar, Sabarmati, Ahmedabad, Gujarat 380005

Madhur Super Market

ZodiacSquare,Bodakdev,Ahmedabad

Dhirajsons Toyshop

Mega Store, Near Chowpati, Athwa Gate, Athwa Gate, Surat

Sahaj Super Store

Jain Wadi, Surat, Gujarat 395009

Ashok Provision Store

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https://plus.google.com/117658621243568765850/about?gl=in&hl=en

Shop No:n -16, Main Bazar, Gandhidham, Gandhidham– 370201

Pankaj Provision Store

Shop No1, Lilasha Nagar, 12c Plo No: 637, Gandhidham, Gandhidham– 370201

Chamunda Provision Store

Gondal Road, Hasanvadi-4, Hasanwadi, Rajkot - 360002

Gujarat Provision Store

C-72, Main Bazaar, Gandhidham- 370201

Yogeshwar Provision Store

Dbz - N -No :1, Khanna Market, Gandhidham, Gandhidham– 370201

Dairy King

Plot No 117, Plaza Corner, Oslo Circle, Gandhidham, Gandhidham– 370201

Signature

Zanda Chowk, Gandhidham - 370201

Kavita Provision Store

Maitri Road,

Adipur – 370205

Competitors

Amul

Nestle

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http://www.asklaila.com/Main-Bazaar-Guide-Gandhidham/lg5845

Cadbury

Kent

Niche

Our niche market would be the children and young generation as chocolate is mostly liked by

children and youngsters.

Marketing strategy for niche market

Attractive packing: Our Company will focus on packaging to attract children.

Good quality and healthy chocolates are the factors on which marketing will be done.

Promotion

Local news paper

Local TV channel

Local radio Station

Hoardings in Adipur and Gandhidham

Through pages and account on Social Networking Sites (Facebook & Twitter)

Distribution channels

Our products would be distributed through channels like wholesalers, retailers and our own

sales force.

Proposed Location

For our business, the proposed location would be in GIDC, Gandhidham.

5.7 Operational Plan

Production

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The product will be manufactured by Full Automatic Chocolate Production Line (QH200),

with this system, baking the moulds, depositing, forming etc. series procedure can be

achieved automatically. It's available to depositing all shape of chocolate. Such as double

color filled-inside, nuts etc chocolate. Since our product are plain as well as nut are added

this machine is appropriate.

This machine can produce 100-300 kg chocolates per hour. It can produce chocolates in

different shapes .It can help to reduce cost of chocolates mould. By Producing Chocolates in

different shapes we can attract all segments of market.

The production capacity is fully automated as mentioned above, so the need of personnel is

comparative less than other semi-automatic machine.

5.8 Manufacturing process

Chocolate production is highly sophisticated computer controlled process with much of the

new specialist machinery. Machines like as chocolate cooling tunnels, enrobing machines,

coating machines, molding machines.

Chocolate processing: Production flow of chocolate Cleaning

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Cleaning Roasting Grinding Cocoa processing

Mixing & Refining

ConchingTempering & molding

Cooling

When seeds arrive to factory they are carefully selected and cleaned by passing through a bean

cleaning machine that removes extraneous materials. Different bean varieties are blended to

produce the typical flavor of chocolate of particular producer. Then the bean shells are cracked

and removed. Crushed cocoa beans are called nibs.

Roasting

The beans are then roasted to develop the characteristic chocolate flavor of the bean in large

rotary cylinders. The roasting lasts from 30 minutes to 2 hours at very high temperatures. The

bean colour changes to a rich brown and the aroma of chocolate comes through.

Grinding

The roasted nibs are milled through a process that liquefies the cocoa butter in the nibs and

forms cocoa mass (or paste). This liquid mass has dark brown colour, typical strong smell

and flavor and contains about 54% of cocoa butter.

Cocoa Pressing

Part of cocoa mass is fed into the cocoa press which hydraulically squeezes a portion of the

cocoa butter from the cocoa mass, leaving "cocoa cakes". The cocoa butter is used in the

manufacture of chocolates; the remaining cakes of cocoa solids are pulverized into cocoa

powders.

Mixing and Refining

Ingredients, like cocoa mass, sugar, cocoa butter, flavorings and powdered or condensed milk

for milk chocolate are blended in mixers to a paste with the consistency of dough for

refining. Chocolate refiners, a set of rollers, crush the paste into flakes that are significantly

reduced in size. This step is critical in determining how smooth chocolate is when eaten.

Conching

Conching is a flavour development process during which the chocolate is put under constant

agitation. The conching machines, called "conches", have large paddles that sweep back and

forth through the refined chocolate mass anywhere from a few hours to several days.

69 | P a g e

Conching reduces moisture, drives off any lingering acidic flavors and coats each particle of

chocolate with a layer of cocoa butter. The resulting chocolate has a smoother, mellower

flavor.

Tempering and Molding

The chocolate then undergoes a tempering melting and cooling process that creates small,

stable cocoa butter crystals in the fluid chocolate mass and is deposited into moulds of

different forms. Properly tempered chocolate will result in a finished product that has a

glossy, smooth appearance.

Cooling

The moulded chocolate enters controlled cooling tunnels to solidify the pieces. Depending on

the size of the chocolate pieces, the cooling cycle takes between 20 minutes to two hours.

From the cooling tunnels, the chocolate is packaged for delivery to retailers and ultimately

into the hands of consumers.

Location

Our manufacturing unit will be located in Adipur. Kandla Port and Mundra Port are also near

to Adipur so it also helps in future, if we want Chocolates to be exported.

Labour is easily available since there are many such labour contractor available in

Gandhidham. We will get skilled and unskilled labour as per our need. Technical people are

also available easily to monitor the quality and consistency of our product.

Legal formalities:

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We could get DIN (Director Identification Number) which is printed, signed, and sent to

Ministry of Corporate Affairs.

Get a TAN (Tax Account Number) for income taxes from Income Tax Department’s

Assessing Office.

We must be registered Enroll with Establishment Act (State/Municipal), Shops, and

Office of Inspector.

We should also get food process order certificate from ministry of food processing

industries and also doing as business certificate required for our chocolate industry.

Personnel

The machine is fully automatic so need of personnel is less. We need skilled worker for

packaging and storage of our product. There would be a need of professional for checking and

maintaining the quality of product.

Inventory

The basic raw material required for making chocolate is Sugar, Full Cream Milk Powder, Cocoa

Butter, Cocoa Mass, Vegetable Fat, Emulsifiers, and Flavors.

Suppliers For Milk Powder:

Aditya Enterprises

Mr. Abhay

Near Jain Mandir, Kolhapur, Maharashtra, India - 416118

Phone: +91-230-2481402

Fax: +91-230-2481402

Mobile: +91-9011710691

Email ID: [email protected]

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Web Site: http://www.adityaenterprisesindia.in

Sugar S-30:

Payment Terms L/C

Akhilendra Pratap Singh

ASA PORTFOLIO PRIVATE LIMITED

Place of Origin: Maharashtra

Packaging: 50 KG

Delivery Detail: Within 20 days from the receipt of Confirmed payment instruments

Butter & Vegetable Fat, Vegetable oil:

Company Name: BABA CASEIN INTERNATIONAL

Address: 108, Kabir Market, Hathi Khana Main Road

Vadodara, Gujarat, India.

Zip: 390006

Tel: +91- 265- 2432628

Mobile Phone:9824048990

Fax: +91- 265- 2432628

Website: http://www.baba-group.com

Contact Person: Mr. Ashwin Golani

Milk Powder, Whole Milk Powder, Skimmed Milk Powder, Dairy Whitener, Butter

Company Name: VARSHNEY BHANDU FOODS PVT LTD

Address: 388 / 3, 1st Floor, Upper Side on Pratap Ghee, Main Road, Khari Baoli

New Delhi Delhi India

Zip: 110006

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Tel: 91- 11- 23973674

Mobile Phone:9810120977

Fax: 91- 11- 23973674

Website: http://www.meerapremium.com

Contact Person: Mr. Anoop Kumar Varshney

Cocoa Powder & Soya Leicithin:

AkhilHealthcare Private Limited-Mr.ManojShah (Managing Director) No. 205/206, B. B. C.

Tower, Opposite World Trade Center, Sayajigunj, Vadodara - 390 020, Gujarat, India.

Management and organization

Company Name: Blue Berry Chocolates.

Owner Partners: Shilesh Vyash

General Manager: Mr.Nitesh Kadam

Job Description:

Increasing management's effectiveness by recruiting, selecting, orienting, training,

coaching, counseling, and disciplining managers

Communicating values, strategies, and objectives; assigning accountabilities

Accomplishes subsidiary objectives by establishing plans, budgets, and results

measurements; allocating resources; reviewing progress; making mid-course corrections.

Maintains quality service by establishing and enforcing organization standards.

Contributes to team effort by accomplishing related results as needed.

Finance Managers: Divya Dhawani

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Rinku Salat

Job Description:

providing and interpreting financial information;

monitoring and interpreting cash flows and predicting future trends;

developing financial management mechanisms that minimize financial risk;

conducting reviews and evaluations for cost-reduction opportunities;

managing a company's financial accounting, monitoring and reporting systems;

liaising with auditors to ensure annual monitoring is carried out;

managing budgets;

arranging new sources of finance for a company's debt facilities;

Marketing Managers: Jay Pujara

Nikunj Gajara

Job Description:

manage and coordinate all marketing, advertising and promotional staff and activities

conduct market research to determine market requirements for existing and future

products

analysis of customer research, current market conditions and competitor information

develop and implement marketing plans and projects for new and existing products

manage the productivity of the marketing plans and projects

monitor, review and report on all marketing activity and results

determine and manage the marketing budget

deliver marketing activity within agreed budget

develop pricing strategy

deal with media and advertising

Accountant: Rinku Salat

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Job Description:

compile and analyze financial information to prepare financial statements including

monthly and annual accounts

ensure financial records are maintained in compliance with accepted policies and

procedures

ensure all financial reporting deadlines are met

prepare financial management reports

resolve accounting discrepancies and irregularities

monitor and support taxation issues

develop and maintain financial data bases

financial audit preparation and coordinate the audit process

ensure accurate and appropriate recording and analysis of revenues and expenses

analyze and advise on business operations including revenue and expenditure trends,

financial commitments and future revenues

analyze financial information to recommend or develop efficient use of resources and

procedures, provide strategic recommendations and maintain solutions to business and

financial problems

5.9 Financial analysis

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Price 15 Rs.Working days / years 315 DaysRaw material cost 48 % of SalesCost of power 5 % of SalesWage and salary 10 % of SalesFactory overhead 50000 for first year then increase by 2 %.Administration expenses 4 % of SalesSelling expenses 4.5 % of SalesLoan amortization 5 equal Installment / yearIncome-tax rate 30 %Preliminary expense. Written off 5 equal Installment / yearRent 1. Building 55000 / month 2. Machinery 130000 / monthRate of interest on loan amortization 13.75 %

5.9.1 Loan amortization

YEARA B C D= (C-B) E= (A-D)

Outstanding beginning

Interest(13.75 %)

Payment(EAI)

Capital Recovery

Outstanding Ending

1 40,00,000 5,50,000 11,58,145 6,08,145 33,91,8552 33,91,855 4,66,380 11,58,145 6,91,765 27,00,0913 27,00,091 3,71,262 11,58,145 7,86,882 19,13,2094 19,13,209 2,63,066 11,58,145 8,95,078 10,18,1305 10,18,130 1,39,993 11,58,145 10,18,152 -22

5.9.2 Profit & Loss Account

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Particular 1st Year 2nd Year 3rd Year 4th Year 5th Year

Selling per day (Unit) 2000 2480 2960 3440 3440

Install capacity (Unit/Year) 19,00,000 19,00,000 19,00,000 19,00,000 19,00,000

Production (Unit/Year) 6,33,333 760000 8,86,667 1013334 1013334Capacity Utilization 60 % 70 % 80 % 85 % 85 %

Sales Realization 94,50,000 1,17,18,000 1,39,86,000 1,62,54,000 1,62,54,000Cost of productionRaw material 45,36,000 56,24,640 67,13,280 78,01,920 78,01,920Power 4,72,500 5,85,900 6,99,300 8,12,700 8,12,700Wage & salary 9,45,000 11,71,800 13,98,600 16,25,400 16,25,400Factory overhead 50,000 51,000 52,020 53,060.4 54,121.61Administration & selling expensesAdministration expenses 3,78,000 4,68,720 5,59,440 6,50,160 6,50,160Selling expenses 4,25,250 5,27,310 6,29,370 7,31,430 7,31,430Rent 22,20,000 22,20,000 22,20,000 22,20,000 22,20,000Gross profit before interest 4,23,250 10,68,630 17,13,990 23,59,329.6 23,58,268.39Total financial expensesInterest on term loan 5,50,000 4,66,380 3,71,262 2,63,066 1,39,993

Operating profit -1,26,750 6,02,250 13,42,728 20,96,263.6 22,18,275.39Preliminary expenseWritten off 40,000 40,000 40,000 40,000 40,000Profit & loss before tax -1,66,750 5,62,250 13,02,728 20,56,263.6 21,78,275.39Provision for tax 0 1,68,675 3,90,818.4 6,16,879.08 6,53,482.617

Net profit -1,66,750 3,93,575 9,11,909.6 14,39,384.52 15,24,792.773

EBIT 3,83,250 10,28,630 16,73,990 23,19,329.6 23,18,268.39

5.9.3 Balance sheet

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Particulars At the End of Period.

1st Year 2nd Year 3rd Year 4th Year 5th Year

LiabilityOwner’s fund 30,00,000 30,00,00

030,00,000 30,00,000 30,00,000 30,00,000

Net Profit -1,66,750 3,93,575 9,11,909.6 14,39,384.52 15,24,792.77Secured loanTerm loan 40,00,000 33,91,85

527,00,091 19,13,290 10,18,130 -22

Total 70,00,000 62,25,105

60,93,666 58,25,199.6 54,57,514.52 45,24,770.77

Asset

Loan & advancesAssets 60,50,000 48,40,00

036,30,000 24,20,000 12,10,000 0

Current AssetsRaw materials 2,24,600 3,45,000 4,15,000 4,85,000 4,85,000Stock in process 1,56,000 2,98,000 3,05,409 3,15,409 3,15,409Finish goods 1,89,607 2,60,000 3,10,617 3,34,000 3,34,000Cash & bank balance 7,50,000 6,54,898 14,40,666 22,94,173.6 30,73,105.52 33,90,361.77

Misc. Expenditure & lossesPreliminary expenses 2,00,000 1,60,000 1,20,000 80,000 40,000 0

Total 70,00,000 62,25,105

60,93,666 58,25,199.6 54,57,514.52 45,24,770.77

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5.9.4Cash Flow Statement

Particular Period 1st Year 2nd Year 3rd Year 4th Year 5th YearSource of FundOwner’s fund 30,00,000EBIT 3,83,250 10,28,630 16,73,990 23,19,329.6 23,18,268.39Preliminary expense

40,000 40,000 40,000 40,000 40,000

Increase in long term loan

40,00,000

Decrease in loan & Advances

12,10,000 12,10,000 12,10,000 12,10,000 12,10,000

Total (A) 70,00,000 16,33,250 22,78,630 29,23,990 35,69,329.6 35,68,268.39

Capital expenditure for the project

60,50,000

Increase in working capital

5,70,207 3,32,793 1,28,026 1,03,383 0

Preliminary expense

2,00,000

Repayment of long term loan

6,08,145 8,18,716 13,77,999 19,58,396 21,56,625

Interest on term loan

5,50,000 4,66,380 3,71,262 2,63,066 1,39,993

Tax (30 %) 0 1,68,675 3,90,818.4 6,16,879.08 6,53,482.617

Total (B) 6250000 17,28,352 17,86,564 22,68,105.4

29,41,724.08 29,50,100.617

Opening balance of cash in hand & at bank

0 750000 6,54,898 11,46,964 18,02,848.4 24,30,453.92

Net surplus deficit (A-B)

750000 -95,102 4,92,066 6,55,884.4 6,27,605.52 6,18,167.77

Closing balance of cash In hand

750000 6,54,898 11,46,964 18,02,848.4

24,30,453.92 30,48,621.69

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CHAPTER 6

CONCLUSION

India is recognized as a biggest and fastest growing market in the world for chocolate

growing at 18 to 20% every year.

So all the countries are looking at Indian chocolate industry markets for exports.

India may also get some advantage in this situation as there are subsidies given by

government of India.

At present India, have negligible exports to international markets. These are at present are

dominated by European Union, New Zealand, Australia and America.

Both public and private sector have contributed to the chocolate industry growth in India.

From the financial analysis of the industry we can see that the profitability of industry is

increasing year of years, and investments in current and fixed assets are also increasing.

In line with the same we may conclude that the industry is growing and hence provide

attractive outlook to enter.

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CHAPTER 7

BIBLIOGRAPHY

Books:

“Crafting and Executing Strategy: The Quest for Competitive Advantage” by Thompson

II, Strickland, Gamble and Jain; McGraw Hill Publication, Latest Edition. (TSG)

Kotler, Philip. "Marketing Management" Analysis, Planning, Implementation, and

Control Prentice-Hall, Inc. Eighth Edition

Websites:

Search Engine: www.google.co.in

Other Sites:

www. lotuschoco www. cadburyindia .com/

www. nestle .in/ late .com/companyoverview.html

www. lotteindia .com/

http://www.amul.com/

www.indianmirror.com/indian-industries/chocolate.html

http://www.nestle.in/aboutus/Pages/AllAboutNestl%C3%A9.aspx

http://www.indiainfoline.com/Markets/Company/Fundamentals/Balance-Sheet/Cadbury-India-Ltd/500793

ht tp://www.indiainfoline.com/Markets/Company/Fundamentals/Profit-Loss/Cadbury-India-Lt d/ 500793

http://www.indiainfoline.com/Markets/Company/Fundamentals/Balance-Sheet/Nestle-India-Ltd/500790

http://www.indiainfoline.com/Markets/Company/Fundamentals/Profit-Loss/Nestle-India-Ltd/500790

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tp://www.indiainfoline.com/Markets/Company/Fundamentals/Profit-Loss/Cadbury-India-Lt



http://www.nestle.in/aboutus/Pages/AllAboutNestl%C3%A9.aspx

http://www.indianmirror.com/indian-industries/chocolate.html

http://www.amul.com/

http://www.lotteindia.com/

http://www.lotuschocolate.com/companyoverview.html

http://www.lotuschocolate.com/companyoverview.html

http://www.google.co.in/

http://www.indiainfoline.com/Markets/Company/Fundamentals/Balance-Sheet/Lotus-Chocolate-Company-Ltd/523475

http://www.indiainfoline.com/Markets/Company/Fundamentals/Profit-Loss/Lotus-Chocolate-Company-Ltd/523475

http://www.indiainfoline.com/Markets/Company/Fundamentals/Key-Ratios/Cadbury-India-Ltd/500793

http://www.indiainfoline.com/Markets/Company/Fundamentals/Key-Ratios/Nestle-India-Ltd/500790

http://www.indiainfoline.com/Markets/Company/Fundamentals/Key-Ratios/Lotus-Chocolate-Company-Ltd/523475

www.capitaline.com

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http://www.capitaline.com/











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