The Industry

Indias markets are the golden egg of which everyone wants a piece because of
the delectable combination of proliferating disposable income, changing lifestyle
and a young populations penchant for indulgence has put India onto one of the
fastest growing chocolate markets of the world with and CARG of almost 25%
every year which is giving multinationals the incentive they need to enter Indian
markets. The Indian chocolate industry is worth Rs 10,500cr. Indias per capita
consumption stands at 100gm. Urban markets account for 38% if the
consumption value which is going to be ground zero for premium chocolates.
The two biggest firms in the Indian chocolate industry are Cadbury Indian and
Nestle with a market share of 62% and 18% respectively. The chocolate industry
is divided into three parts.

Brand
Cadbury Dairy Milk
5 Star
Munch
Kit Kat
Cadbury Gems
Cadbury Perk
Cadbury Celebrations
Kinder Joy
Nestle Premium Milk Chocolate
Ferrero Rocher India

Value
30.9
7.9
6.7
5.6
5.4
4.2
3.1
3
2.6
2

Key Findings:

The chocolate industry in India, valued at INR 58bn (~USD 966mn) in FY 2014, has been growing at a
CAGR of ~15% over the last three years. ValueNotes estimates that the industry will be worth nearly INR 122bn
(~USD 2,033mn) by FY 2019, growing at a CAGR of ~16%

The chocolate industry can be segmented by the type of ingredients which is used to produce the
chocolates. This includes dark, milk and white chocolates.

Increasing disposable income, changing lifestyle, rising trend of gifting chocolates instead of traditional
Indian sweets, and a surge in the sale of dark chocolates are expected to drive the industry growth

Latest trends witnessed in the industry reveal that companies are constantly engaged in improving the
packaging and adapting the flavour of the chocolate according to the taste of the consumers

Manufacturers are increasing their investment in the cold chain facilities across the country
The report includes profiles of the top-5 players with a brief overview about their service offerings, key financial
ratios, expansion strategies, etc.

The Gifting Industry in India

Pooler (2003) describes 'Gifting' as a tool to make a statement about one's
feelings. This in turn leads to strengthening of an 'emotional bond'
between the giver and the recipient. The emotion or expense in a gift is
considered a measure of one's respect, esteem or love for one another.
'Gifting is a two way process' -A challenge disguised as an opportunity for
the marketer and retailer in the gift business is the understanding that a
'gift' is meant and directed both towards the receiver and the giver.
According to Pooler (2003), 'A customer is always seeking re-assurance
that the given gift will bring him/her as much emotional satisfaction as the
person for whom he is buying it'. Thus, gifts at one level bring personal
satisfaction and are self-indulgent in nature.

'People are irrational when they gift'- Another advantage for the marketer
in the 'gifting' business is the irrational and unjustified expenditure a
consumer is willing to make on it, so as long as it makes 'emotional
sense'. Thus, customers are largely price insensitive, especially if the
strength of the relationship between the receiver and giver is strong. This
allows retailers t tap into the potential of high margin products.
The Indian gift market is still in nascent stages with per unit consumption
being very low as compared to developed markets of US and Europe ( 0.5
as against 30+) [12] .The Indian Gift Market is a Rs.1000 crore gift market
is looking up to progress at a rate of 10% (2007 estimates) [13] . A large
part of this gift market is unorganized, thus making correct estimates of
the size of the market difficult. The Premium and Gift Market is mostly
concentrated out of the major cities. Mumbai is the largest centre,
followed by New Delhi, Bangalore, Hyderabad, Chennai and Ahmedabad.
The Indian market is highlighted by important festivals such as Diwali and
Holi for 'gift giving' , however, westernization of culture has led to

occasions such as Valentine's day, Mother's day, Father' s day becoming

popular gift giving occasions.
The gifting industry in India has registered a strong growth over the past
decade thanks to rising income levels and aspirations. Also aiding this
growth are such factors as, on the demand side, the widening of the
customer base, and, on the supply side, the ofering of innovative
products at attractive prices. The gifting markets size is estimated at USD
40-42 billion, with many players reporting annual growth in the range of
20-40%. It comprises corporate gifting and personal gifting, with the
former making up a significant share.

Porters Five Force Analysis of the Chocolate Industry of

India

BARGAINING POWER OF SUPPLIERS

(MODERATE)
1.High Foreign dependence
2.Domestic market suppliers short 3.But the
bargaining power of suppliers is moderate to high.
4.Limited access to distribution channels for
importers.

1. Diverse ofering to choose from

2. Diverse oferings to choose from.
3. Price sensitive consumers for low-priced
chocolates, especially rural consumer base
4. No brand loyalty.
5. Chocolate retailers margin ranges between 10 to
20% depending on the price point at which the
product is placed.

BARGINING POWERS OF BUYERS (HIGH)

INTENSITY OF RIVARLY AMONGST COMPETITORS

1. Few major players but with high influence Price wars.

2. Advertising battles
3. High launches of product lines
4. High quality of customer service
5. High variety of products ofered

THREAT OF SUBSTITUTE PRODUCTS &

SERVICES (MODERATE)

1. Diference in products.
2. Need for large capital requirements.
3. Health-consciousness and calorie counting
products.
4. Product innovation can result in new entries.
5. Caramel candies.

1. Threat of substitutes such as soft drinks, snacks &

beverages is moderate.
2. Industry must also compete in retail arena with
traditional mithai.
3. Sugar candies are more readily available than
chocolate.

BARRIERS TO ENTRY (MODERATE)

Current Competitor Landscape

Nestle Indias market share in chocolates dropped from 26.1% in 2008 to

23.6 % in 2012, Nielsen Co.In the same period, Cadbury owner Mondelez
Indias market share fell from 70% to 64.5%. (Livemint,2015)
Mondelez Int. plans to invest Rs.1000 crore in Andhra Pradesh to establish
the company's largest manufacturing plant in Asia Pacific. This investment
in is part of their ongoing supply chain reinvention plan. (Business
Today,2015)
Mars is setting up new factories as it imports all the chocolate form US
presently. (Business standard,2015)
Both Nestle and Mondelez lost market share to Mars International India
Pvt. Ltd and Ferrero India, which are gaining ground in chocolate
confectionery driven by new products, according to a March report by
research firm Euromonitor. (Livemint, 2015)
Premium chocolate confectionery brands such as Ferrero Rochers, Mars
and Tobelerone outperformed overall chocolate confectionery in terms of
growth in 2014 and 2015, according to the Euromonitor report. (Livemint,
2015)