Assignment

Of
Principle Of Marketing








%4pic:
Ch4c4late and C4nfecti4nery Industry Pakistan

Submitted %4:
Pr4f Farah Naz Naqvi

Submitted By:
Fareiha Raza Mi08BBA02
Maleeha Hasan Mi08BBA027
Suniha Ramzan Mi08BBA041
Manal Sarwar Mi08BBA056






Introduction:
ConIectionery and Chocolate industry oI Pakistan in 2009 is an analysis oI branded
(domestically produced) conIectionery and chocolate market oI Pakistan. The article reveals
close estimates oI sales turn over oI major active players in the industry. It also examines
contemporary trends in the local conIectionery and chocolate market, with an emphasis on
providing some useIul inIormation about the structure, norms, challenges and competitive
landscape oI the industry. BeIore proceeding to our core topic, it would not be unwise to have a
look at the snapshot oI country`s socio-economic indicators.

Pakistan- Snapshot:
The Islamic Republic oI Pakistan is a medium size, densely populated country with over 170
million people living in 796,095 square kilometres. With respect to population and area, Pakistan
stands at no. 7 and no.43 respectively among the nations oI the world. It is located at Southern
Asia, bordering the Arabian Sea, between India on the east and Iran and AIghanistan on the west
and China in the north.
Pakistan, an impoverished and underdeveloped country, has suIIered Irom decades oI internal
political disputes, low levels oI Ioreign investment, and declining exports oI manuIactures. Faced
with untenable budgetary deIicits & high inIlation.
During 2004-07 GDP growth has been within the range oI 6-8. InIlation remains the top
concern among the public, jumping Irom 7.7 in 2007 to 20.8 in 2008, primarily because oI
rising world Iuel and commodity prices. In addition, the Pakistani rupee has depreciated
signiIicantly as a result oI political and economic instability.
ConIectionery and Chocolate Industry An overview:
Despite Pakistan`s conIectionery and chocolate industry has enjoyed an emerging and growing
trend in the recent past yet its size and growth pattern has been Iar inconsequential compared to
other countries oI Asia-paciIic region. The industry has grown with an average annual rate oI 6.5
to 7.5 during 2002-2008. Domestic brands dominate the market accounting Ior more than 85
oI total value sales oI the industry.
The industry as a whole can be divided between two broader sectors namely organized sector
(branded segment) and un-organized sectors (generic segment). The branded segment is more oI
monopolistic in nature where there are nine prominent, active players in the competitive
landscape oI this sector. A brieI overview oI major companies` estimated annual sales in PKR (1
US$ 83 PKR) is as Iollows:
Company name, Major Product lines, Major brands Estimated annual turn-over
PKR.(1US$83PKR), Share
Hilal Candy, Bubble, Jellies, Chocolates, Beans, powder Drinks, Supari Ding Dong Bubble,
Fresh up bubble, Tulsi, AamRus, Kopra candy Limopani
3.5 billion 26 Share
Ismail Industries Ltd.(Candyland) Jellies, candies, lollypops, Chocolates, Biscuits, Snacks etc.
Chillimili, Fanty candy, Now, Bisconi Chocolito, Cocomo, Snack city, Sonnet
2.8 billion 21 Share
B.P sweets
Jellies, candies, lollypops, Chocolates, Biscuits, Bread, Snacks etc. Spacer, Dolphin Jellies, B.P
Lollies, Dream Chocolates etc.
1.7 billion 13 Share
Cadbury`s
Chocolates(Countlines and Moulded) ToIIees, Chewable mint candies Dairy Milk Chocolate,
Eclairs, SoItmint, Velvet
1.5 billion 11 Share
Kidco
Bubbles candies, lollypops, Chocolates etc. 4ever, Centro-bubble, Lollies, Punch candy, Chox
1.20 billion 9 Share
MayIair
Candies, ToIIees, Creamers, Amrood candy, Eclair, CaIe biscuit
0.8 billion 6 Share
Mitchell`s(only ConIectionery & Chocolates)
Groceries ( Squashes, Jams, sauces, Chocolates- Moulded and Countlines , ToIIees and candies
Milk ToIIee, Fruit BonBon, Butter Scotch, Jubilee, Golden Hearts
0.70 billion 5 Share
DanPak
Bubble Gum, Lolly Pops, Candies Chini mini, Fresh` O bubble, Choco Bisco, Milko Sip
0.70 billion 5 Share
Sweet Hills
Candies, ToIIees Dr. Milk, NutKut, Love candy , Cow 0.50 billion 4 Share
TOTAL 13.4 Billion PKR
ConIectionery and Chocolate Market An overview
Characteristics:
The branded conIectionery and chocolate market is highly price elastic and growing with the
bulk oI sales concentrated in mid-price range products. Urban markets account Ior the major
share and also Ior a higher penetration rate. Various retail price points exist within the mass
market segment oI chocolates between the range oI PKR 3-25. In Sugar ConIectionery major
running conIectionery items Iall into the retail price segment oI Rs. 0.50-1.00. The eIIorts made
Ior the induction oI Rs.2 ConIectionery unit by industry giants have gone into vain so Iar.
However Rs. 2 and 3 are popular price points Ior lolly pops and chocolates range. The industry
has Iaced 'coin-barrier issue in sugar conIectionery products at least three times during last
three decades when all key players unanimously agreed to increase their products` price due to
escalating prices oI raw materials (Iirst Irom 25 paisa to 50 paisa- in mid 80`s, than 50 paisa to
Rs. 1 in mid 90`s and lastly Irom Rs.1 to Rs.2-in late 2008) whereby the active players oI the
industry were compelled to raise their prices not less than any thing but 100 because next jump
to coin / price denomination was such that they had no way out. It would be interesting Ior the
readers to learn that such moves however have always been proved to be a 'bitter pill Ior the
industry as it brought immense resistance Irom consumers and trade. In some oI the cases decline
in sales as a reaction oI price increase was so huge that it Iorced to leading brands to take their
decision back yet they were not able to retrieve their original volumes again. Mitchell`s Milk
ToIIees and Kidco 4ever are classic examples. To avoid and deIer this situation (up to last
extend) pro-active companies in Pakistani conIectionery industry adopt three kinds oI strategies ,
without reducing or with slightly reducing trade margins. Namely reduce the no. oI units per
pack, unit size, and packaging ( in an endeavour to reduce cost) Compromising in product
quality by reducing qty and/or quality oI expensive raw material by using close substitute that is
available relatively at cheaper price as a replacement oI expensive raw materials.
Distribution and Selling strategy: About (70-80) sugar conIectionery and chocolate sales
generate through wholesale channel depending upon the nature oI product and strategies oI
manuIacturing companies. Almost all but precisely Hilal and B.P rely much on wholesale
channel to generate bulk chunk oI their total sales. To support their sales through this channel
they advertise heavily on electronic media to create brand pull Ior their brands and subsequently
it Iorce retailers to buy these brands Irom whole sale. The underlying reason behind limited
coverage in retail sector by these two companies is they do not have premium priced items that
could yield suIIicient revenues to make retail distribution viable Ior their distribution partners so
they do a limited coverage in retail sector. Since these companies themselves do not emphasize
on retail penetration so their distributors also take an escape route and adopt the way oI easy
selling through WS. However there are companies like Cadbury, Candyland, Mitchell`s and
MayIair that are Iully aware oI the importance oI retail penetration .Hence these companies pay
due importance and attention to retail coverage and subsequently allocate resources Ior retail
sector. As stated earlier the emphasis oI Hilal and B.P has always been on building consumer
pull through mass media advertising ( mostly through television) and pushing their brands
through wide-spread network oI distributors and wholesalers throughout the nation . This
combination oI 'Push & Pull ' has proved to be a successIul tool in their cases because the
nature oI their brands also support this strategy as they produce products oI mass market with as
low price as Rs.1 , 2 and beyond. Because oI this pricing strategy their products are equally
popular in rural and urban towns among middle and lower middle class. B.P and Hilal having
this advantage enjoy the beneIits oI a wide-spread distribution network in 300 towns and over
350 distributors nation wide (as they have more than one distributors in some towns). They
always try to adopt cost leadership strategy and generate revenues through high volumes oI sales.
Frequent launches, re-launches, re-introduction oI old brands with slight modiIications,
withdrawals, adjustments in packaging, product designing and even recipe change are a common
phenomenon in the brands oI these two major companies. Contrary to this Cadbury`s ,
Candyland and Mitchell`s believe on establishing brands and brand equity and thereIore
protraction oI quality up to last possible extend remains their top priority.
Popular Brands , Price point and Trades` margins:
Popular Brands:
In hard-boiled (candy) category: Price range 0.50 paisa-Re.1: Fanty (Candyland), AamRus
(Hilal), Choran Chatni (Hilal), Kopra candy (Hilal), 4ever (Kidco), Butter Scotch (Candyland)
and (Mitchell`s), Amrood (MayIair), Creamers (MayIair) and Fruit Bonbons (Mitchell`s) are
Iamous brands.
In soIt-boiled (ToIIees) category:
Price range 0.50 paisa-Re.1: Spacer (B.P) a brand oI 450- 500 million PKR, Milk ToIIee
(Mitchell`s)- brand worth over 250 million PKR and Eclairs (Cadbury`s) can be ranked top three
among others in this category.
As oI today (August 2010) there hardly exist any 50 paisa conIectionery unit, those that were
available, have been switched to Rs.1 price point.
In Lolly Pops: Price range Re.2- Rs.3/- : twin-lolly (B.P), Paint n Pop (B.P), Kidco Pop (Kidco),
Funny Bunny (Candyland) are popular among consumers.
In Enrobed Chocolate category:
Price range Re.1- Rs.5/- : Jubilee (Mitchell`s), 5 Star ( Cadbury) Perk (Cadbury`s), Now
(Candyland), Dream (B.P), Choco Dip (B.P), Kat Kat (B.P) Unitee (Mitchell`s), Sonnet
(Candyland), Luxuree (Mitchell`s), Chox (Kidco) and Paradise (Candyland) enjoy major share in
the market.
In Moulded Chocolate category:
Price range Re.2- Rs.10/- :Dairy Milk (Cadbury`s), Cone (B.P), Mr. Bear (B.P) Twin Rabbit
(B.P), Golden Hearts ( Mitchell`s), Velvet (Cadbury`s) are Iamous among other brands.
In Bubble:
Rs.1: Ding Dong (Hilal) in Rs. 1 and recently launched in Rs. 2 as well. The brand has worth
about 1000 million PKR, Fresh Up (Hilal) retail Rs.5/-, Tiger (MayIair) and Kidco Bubble,
Centro (Kidco) are leading brands.
Though retailer`s margin varies Irom companies to companies and product to product but
generally acceptable margin in local items Ior retail trade is between 15-25. It is lower Ior Iast-
moving brands and higher in the case oI slow-moving items.
Drivers, Challenges and Key Trends:
Drivers:
Until mid 80`s chocolates was supposed to be the product oI upper and upper middle class
segment. In 1983 Mitchell`s Jubilee was launched Iirst time in Pakistani market at Rs.3.50 per
bar. Due to its attractive packaging, quality, aIIordable price and an intact media support the
brand received un-matched reception and became a success story in Pakistani industry. The
brand is still very popular among masses and available in three diIIerent price points at Rs.2,
Rs.5 and Rs.10. In early 2000 Cadbury`s introduced quality products with aIIordable price. The
launch oI Dairy Milk (Rs.5/-), 5 Star (Rs.5/-), Velvet (Rs.5/-) and Perk (Rs.3) with attractive
dispensing-chillers was the turning and revolutionary point Ior making chocolates the choice Ior
every one. The role oI Cadbury`s Ior expansion oI chocolate market in Pakistan will always be
written in golden words.
Challenges:
The most common challenges to this industry are soaring prices oI raw material, high excise and
import duties on raw material, high entry barrier because oI strong monopolistic competition and
inIlux oI cheap imported brand through gray-Channels.
Trends:
Driven by marketing initiatives, consumer preIerences are speedily changing in the Iavour oI
chocolates. Independent retailers and wholesalers are still the largest channel contributors
however the role oI International modern trade (Makro, Metro and HyperStar) is growing at the
increasing rate. Foreign or imported brands are successIully targeting the Lucrative premium
segments in urban population. Nestle has recently revamp their sales and distribution
management system through appointment oI one oI the leading distribution house in Pakistan.
Large retailers and wholesalers have already started private imports by paying less import duties
through tax evasions. The largest bakery and conIectionery chain oI Lahore is also considering
Ior launching their own chocolate brands in a bid to grow their private label sales. Keeping these
positive signs in mind one could expect that Iuture oI Chocolate and ConIectionery market oI
Pakistan is promising