Amity Global Business School

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AMITY GLOBAL BUSINESS SCHOOL

NOIDA (U.P)

A

DISSERTATION REPORT ON

GROWTH STRATEGY IN CONFECTIONERY MARKET IN INDIA

FOR PARTIAL FULFILLMENT OF MASTER IN BUSINESS ADMINISTRATION

(MARKETING & INTERNATIONAL BUSINESS)

ACADEMIC YEAR

(FEB 2013 TO MAY 2013)

Submitted to Submitted by

Miss Mamta Chawla Ahmad Mohammad

Enrollment #A3010191107


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CONTENTS;-

EXECUTIVE SUMMARY

1. CHANGE IS INEVITABLE

2. OBJECTIVES OF THE STUDY

Research methodology Type of research

3. INDUSTRY PROFILE

4. GROWTH PATTERN OF THE INDUSTRY

5. FINDINGS

6. ANALYSIS

7. APPENDIXES


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ACKNOWLEDGEMENT

This dissertation is a milestone in my academic career. I have been fortunate

enough to learn concepts and figures which would have been impossible if I had

not extensively carried out the needed research. I am grateful to number of

people who have guided and supported me throughout the research process and

provided assistance for my report.

I would first like to thank my mentor, Mrs. MAMTA CHAWLA, Faculty AGBS, whoguided me in selecting the final theme for my research. My mentor was therethroughout my preparation of the proposal and the conceptualization of itsstructure. I would not have been competent to do the research and achievelearning in the same manner without sirs help and support. His

recommendations and instructions have enabled me to assemble and finish thedissertation effectively.

I would also like to thank all my instructors and teachers, who throughout myeducational career have supported and encouraged me to believe in my abilities.

They have directed me through different situations, allowing me to reach this

accomplishment.

Finally, my family has supported and helped me along the course of this

dissertation by giving encouragement and providing the moral and emotional

support I needed to complete my thesis.

To them, I am eternally grateful


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EXECUTIVE SUMMARY;

The confectionery market in India includes sugar boiled confectionery, hard-boiled candies, toffees and other sugar-based candies and edible gums.

The Indian confectionery market is going through rapid changes in terms of trends

and consumer behavior pattern. The industry is being benefitted from the

countrys economic boom, and growth in consumer spending. This higher

consumer spending is also driven by the new found mall culture and changing

lifestyle.

The entry of various multinational companies in the Indian confectionery market

has not only increased the competition but also the per-capita consumption, by

launching new products at affordable prices, and creating awareness among the

buyers through advertisements and promotional campaigns.

The confectionery market of India is divided into three segments: chocolate, sugar

confectionery and gum market.

For several years now, the industry has been stuck at the 50 Paisa price point,

even though inputs costs have been going up and the industry struggles to

maintain this price point. The challenge for the confectionery industry is to

increase price with better products

The total contribution of the sugar boiled confectionery market in the organized

sector, comprise plain, hard-boiled candies, toffees, clairs and gums is around

Rs. 20 billion. Add to this the unorganized sector and the market for all types ofconfectionery is Rs. 50 billion. However, in terms of value the organized sector

commands 60% of the market share. With the exit of MNCs and other established

organized players from very low priced (25 paisa) category, the unorganized

sector has grown very fast. MNCs and high-powered advertising support

substitute products like chewing and bubble gums


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Several global players like Bassetts; Maynards, Pascall and Trebor were trying to

enter the Indian market

The confectionery industry of India, which was ranked 25th in the world in 2009 ,

has now emerged as one of the largest and well-developed food processing

sectors of the country is expected to grow at a rapid pace and jump up to 14th

position by 2014. India grew at a compound annual growth rate (CAGR) of 10.5%

during 200409, placing it among the fastest growing confectionery markets

globally. As the Indian confectionery market continues to evolve, strong trends

have come to the fore which will shape the future of the market and categories

within it.

Health consciousness is one trend that has certainly caught the attention of the

manufacturers. As a result, cereal bars are currently the fastest growing category

in the Indian confectionery market. Gifting chocolates during traditional Indian

festivals like Diwali and occasions like Raksha Bandhan also continue to gain

popularity

Another growing trend in the consumption of confectionery products is the

chhutta market where in a shopkeeper gives the customer confectionery

products instead of returning back the change left with him. It forms a part of

40% of the confectionery sales in metropolitan cities like New Delhi.

Again, with the opening of retail chains across India, a portion of confectionery

market is certainly benefitting. Companies have come up with pouches of 50 and

100 candies to be sold at retail chains. This has enlarged their customer base.

In this present phase of the confectionery segment there is huge scope of bringing

in new and varied products into the market.


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Chapter 1

The phenomenon

A fascinating market phenomenon emerged. When brands like Coffy Break,Eclairs, Coffee Bite, and Coconut Cookies hit the market in the mid-1980s, Parle'sPoppins started disappearing from urban stores. But Poppins re-appeared and isselling well. There has been a locational shift. Poppins is found in rural and semi-urban general stores and the pan-beedi shops. A strategic decision to positionitself in a different market saved the brand.

Similarly,

These types of changes in trends and location always affect the market in one orthe other way. At times they are for good of the products and also have negativeimpacts section.

Any market or sector has certain trends and patterns which it follows. Market andthe money flow keeps on changing and advancing with the advancement in timeand technology

The biggest change in the confectionery industry in India for more than a decadehas been in terms of heavy competition, packaging and promotions. Todays

confectionery products are far superior in terms of packaging. Even in terms ofpromoting and marketing the products, every company is spending much moreon brand building initiatives, which was almost negligible a decade ago. There isalways an increasing awareness among the consumers and the public in generalabout the confectionery products as more and more international products aremaking its entry into Indian Market and the consumers today are demandingsuperior quality branded products with best price. The majority of the consumersof confectionery products, are the younger generation. The majority of the retail

sales in this industry takes place in single units and not in packs or in quantitiesand thus the majority of the consumption is at the "Point of Sale". Super markets,chain stores etc. are also becoming a place for promotions to consumers.Overall, this sector itself has become more organized and the players in thisbusiness are concentrating on ways to improvise their packaging, merchandisingand product promotion schemes. There is an uphill trend in the confectionery


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trade as more companies showing interest in the segment, so this industry isexpected to grow in the future.

Growth strategy of this market can be formulated by studying the past trends inthis segment and studying the patterns or buying behavior of the consumersthrough research in which the consumers, the sellers and the distributors areasked questions and their response is noted.

These responses are then analyzed in this research and possible implementationsare suggested based on the response of the consumers and the sellers.

The reason for selecting this industry for my dissertation is that during mysummer internship I worked in the confectionery segment, which intrigued meand I developed interest in studying the pattern of growth in this industry. Also,this industry showed huge potential of growth in India.

The confectionery industry in India depends on the region, not the variety of

products, a confectionery might be in great demand in the market in new delhibut it can be the least demanded confectionery in Bihar or Madhya Pradesh andthe reason can be anything ranging from the price to distribution.

Limitations;

The details of the distribution system of the confectionery industry in Indiais not provided

Individual examination of the brands and companies, exceptional brandsfind a mention.

The research is conducted in an area of population 1000 having four smallkirana stores, additional information has been taken from the sales andwho supply to these shops.


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CHAPTER 2

Objectives of the study:

Primary Objective: the study aims at analyzing and evaluating the confectionery

market in India

Specific Objectives:-

1. To give an overview of the Indian confectionery Industry.

2. To study the distribution of the confectionery industry in todays marketand finding its share in the whole market and analyzing the divisions.

RESEARCH METHODOLOGY

RESEARCH DESIGN; DECSRIPTIVE

The Research design to be used for the preparation of this report will beDescriptive design. As the data involved will be purely descriptive in nature which

will be exactly the same as it was; and comparative as the data would involve the

facts and figures of the past of different and its comparative analysis will be done,

so as to find out the trend followed in the recent past and its upcoming impacts.


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Descriptive Research design is a scientific method which involves observing and

describing the behavior of a subject without influencing it in any way. The main

goal of this type of research is to describe the data and characteristics about what

is being studied. The idea behind this type of research is to study frequencies,

averages, and other statistical calculations. Although this research is highly

accurate, it does not gather the causes behind a situation. A descriptive study is

one in which information is collected without changing the environment i.e.,

nothing is manipulated.


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METHODS OF COLLECTION OF DATA

Secondary Data:

Data collected by the sales force of the confectionery industry.

Data collected by the researches and studies conducted by the government and

other private researchers.

Limitations of the study:

Time and resource constrains. There were certain instances where the shopkeepers and other vendors

were reluctant in giving information about their distribution system andtheir data.

Only secondary data used


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QUESTIONNAIRE

1. How often do you confront customers who ask about confectioneryproducts that are not present in the market?

2. In what rate does the fastest moving confectionery is sold in the market?

100 per day 25 in a day

50 per day Less than 25 in a day

3. What is the highest of the age groups in confectionery purchasers?Below 14 18 above

14-18 Parent of kids

Once in a week Once in a month

More than once in a week never


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4. What is the age of the lowest percentage of confectionery buyers ?Below 14 18 above

14 18 Parents of kids

5. How do you look at present confectionery industry?Growing Stagnant

Deteriorating Cannot say


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QUESTIONNAIRE ( consumers)

1. How often do you buy a confectionery product?Once everyday Once a week

Once in two days never

2.

How much are you influenced by the advertisements of confectionery?Never At times

always Kids get influenced

3. How do you like getting confectionery instead of changeNever Always(I have sweet tooth)

Does not matter seldom

4. Which brand of confectionery is your favourite?perfetti I.T.C

Parrys Candico

Parle nutrine


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CHAPTER 3INDUSTRY PROFILE

India is a country with a collection of wide range of different cultures and manyfestivals and occasions are being celebrated in different parts of the nation andconfectioneries play a major role in those special occasions. Therefore, theconfectionery industry in this country has got a huge potential and this sector hasgrown recently in the India with the entry of many foreign companies. Indian

companies are also growing steadily and this field and they are acquiring the toppositions in this sector. The names of India top players, who are dominating theconfectionery industry, are given below:

Top Six Confectionery Companies in India:

Cadbury India Ltd.

Lotte India Co. Ltd.

Candico India Ltd.

Nestle India Ltd.

Lotus Chocolate Company Ltd.

Campco Ltd.


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Some of the details regarding these top players in the confectionery industry inIndia are given below:

Cadbury India Ltd.:

Cadbury India Limited is a part of Kraft Foods Group and in the confectioneryindustry in India, Cadbury in engaged in the production of five different categoriesof products namely candy, gum, biscuits, beverages and confectionery. In theconfectionery sector, Cadbury has been operating as an undisputed leader for thepast several years and some of their popular brands like Eclairs, Gems, Perk, 5

Star and Dairy Milk have won the hearts of not only children, but also the heartsof people belonging to different age groups as well.

Lotte India Co. Ltd.:

Lotte India Co. Ltd. has been operating in the confectionery industry right fromthe British rule in India, when children of India was not actually aware ofchocolates. Initially, the company was operating in the name of ParrysConfectionery, which was a popular name among confectionery lovers. They areengaged in the manufacture of snacks, candies and gums in the confectioneryindustry and some of their popular brands are Caramilk, Lacto King and CoffeeBite.

Candico India Ltd.:

Candico came into existence in the year 1997 and within a short period of itsinception, the company grew to become the second largest confectionerycompany in India. They are selling over two billion confectionery products everyyear and they are engaged in manufacture of confectioneries under categorieslike gums, toffees, candies and gift packs.


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ITC Foods Ltd;- an Indian based company which has a wide variety of candies andhas plunged itself into the confectionery industry in india.

Nestle India Ltd.:

Nestle India Limited is a subsidiary of the Switzerland based Nestle S.A and theyhave more than seven factories in India for offering world-class products to theIndian consumers. They are engaged in the manufacture of food and relateditems in the categories of beverages, prepared dishes & cooking aids, milkproduct & nutrition and of course chocolates and confectioneries. Some of their

popular brands in the confectionery sector are Nestle Kit Kat, Nestle Munch,Nestle Milkybar, Nestle BarOne, Nestle Polo, etc

Lotus Chocolate Company Ltd.:

Lotus Chocolate Company Limited is operating from the state of Andhra Pradeshin India and they are engaged in the production of confectioneries under differentcategories like industrial products and consumer products. Some of their popular

consumer products are Tango, Maltys, Gobble, High 5, Chuckles, etc

Campco Ltd.:

Campco stands for The Central Arecanut & Cocoa Marketing & Processing Co-operative Limited and they are operating from the city of Mangalore in Karnataka.They are engaged in the production of sugar coated chocolate buttons, chocolateclairs, enrobed chocolates, moulded chocolates and drinking chocolate asfinished products both for internal market and for export purpose as well.

The other popular players in this industry are Britannia Industries Ltd., Wrigleys

India Ltd., ITC Foods Ltd.


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The confectionery market of India is divided into three segments: chocolate, sugarconfectionery and gum market, which is further divided into sub-segments.

The total contribution of the sugar boiled confectionery market in the organized

sector, comprise plain, hard-boiled candies, toffees, clairs and gums is around

Rs. 20 billion. Add to this the unorganized sector and the market for all types of

confectionery is Rs. 50 billion. However, in terms of value the organized sector

commands 60% of the market share. With the exit of MNCs and other establishedorganized players from very low priced (25 paisa) category, the unorganized

sector has grown very fast. MNCs and high-powered advertising support

substitute products like chewing and bubble gums.


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The entry of non organized or smaller brands into the

confectionery segment.

Faridabad-based Aparna Chawla owner ofCarmelian Chocolates entered themarket just six months ago. Today she has her buyers not just in NCR but inHyderabad and Kashmir as well. "It was a hobby that has transformed into abusiness venture for me. I marketed my home-made chocolates online and got agreat response." Serving for special occasions and orders, Chawla now hopes totap the local market of Faridabad by reaching out to local stores in the market.Akshara candies at Harinagar in West Delhi was started by Himmanshu Sabharwaland his wife Yogita Sabharwal two years ago and ever since have been expanding

there reach in the region. "We make homemade chocolates and candies andsupply it to the local market and bakeries."On asking if there were buyers for the local homemade candies and chocolates inthe market Sabharwal said, "The trick is to package your product well and if theproduct tastes good you will have your share of buyers." The owner of Aksharacandies said that they are now looking to invest in improved and biggerinfrastructure to take their product to a larger market of NCR.

Despite the bright prospects, the bitter truth for the candy makers is that existing

in the competing market is tough. In the recent times because of inflation, severalsmall companies have had to down shutters. Manpreet Singh owner of ManjosFood Products had his unit in Noida Sector 6, which closed down last year. "I hadto close down my unit because of the constant rising prices of the raw materiallike sugar, glucose and milk products. We made candies, cashew and coffee-basedchocolates, and since all of it became very expensive we chose to move out ofmanufacturing and stick to trading of toffees in the local market."

Elaborating on the problems Singh said, "This is not a product that can bemoulded to suit our purpose during a crisis. Also we were not willing tocompromise with the quality of the product. Besides, getting cheap labour in NCR
http://economictimes.indiatimes.com/topic/Carmelian%20Chocolateshttp://economictimes.indiatimes.com/topic/Akshara%20candieshttp://economictimes.indiatimes.com/topic/Akshara%20candieshttp://economictimes.indiatimes.com/topic/Carmelian%20Chocolates


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is another issue. All these reasons forced us out of the market." The company hasa sister unit in Gujarat. It sources its candies from Gujarat unit and somemanufacturers in Rajasthan to sell them in the interiors of the NCR region. Singhalleged, "Shopkeepers store these local toffees because most of the time they

earn 100 percent margin in this trade. The manufacturers also, do not reallybother about the quality but concentrate on the volume of the product, the localmanufacturers trade without bill and lots of times do not follow the norms whilemanufacturing these items and that is one reason for their continual survival inthis competitive market."


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CHAPTER 5

GROWTH OF THE INDUSTRY; THE CHANGE IN THE

DEMAND OR THE INCREASE

Confectionery (including Edible Gums)

Demand: Past and Future

YEAR RS in BILLION

1990-91 8.2

1991-92 9.15

1992-93 9.6

1993-94 10.5

1994-95 11.44

1995-96 12.32

1996-97 13.361997-98 14.4

1998-99 15.6

1999-00 15.4

2000-01 16.5

2001-02 17.6

2002-03 18.9

2003-04 20.15

2004-05 21.7

2005-06 23

2006-07 23.75


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2007-08 25.4

2008-09 26.8

2009-10 28.2

2014-15 36

This table shows the increase in demand of the confectionery products over theyear and a projected demand by the government of India for 2014-15 is alsoincluded.

The growth pattern observed by the industry is

Market Growth Rates

1990-91 - 1996-97 8.9%

1996-97 - 2001-02 7.3%

2001-02 - 2006-07 6.4%

2004-05 - 2009-10 5.4%

2009-10 - 2014-15 5.0%

A depletion which is continuous is observed in the growth rates of confectionerysegment of the f.m.c.g industry. Despite the decrease in growth rates in the past20 years, the Indian confectionery industry has shown an exceptional growthwhich is still growing. The confectionery industry which was 25th ranked in theworld earlier has now come to 14th position which shows a significant growth.

Despite being considered as an indulgence product, confectionery has witnessedan increase in its consumer base. One of the primary reasons associated with thistrend is the growing gifting culture and the use of confectionery products as a


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replacement of sweets. Moreover, the rural market is also contributing towardsthe growth of this industry by showing increased consumption of confectioneryproducts in terms of volumes. This is further aided with the penetration andavailability of confectioneries at different price points along with the increased

disposable income amongst consumers. All these factors indicate towards thebright future of the confectionery market in India.


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Drivers & Challenges

Growing Gifting Culture Gifting Market in India (2011-2015e)

Rapid Urbanization Growth in Urban Population (2008-2030e)

Growing Retail Market Organized Retail Market Space (2010-2020e) and Growthof Malls in India (2010-11 to 2011-12)

Growing Income and Consumption Aggregate Consumption (2005-2025e) andAggregate Disposable Income (2005-2025e)

Developing Rural Sector Breakup of rural & urban population (Census 2011),share of rural & urban confectionery consumption, segment wise MPCE andoverall MPCE (2004-05 to 2009-10)

Marketing Campaigns Growth in Television Industry (2010-2015e) andDevelopment of Print Media (2009-2014e)

Rise in Ingredient Price Rising Wholesale Price Index (WPI) Trend: Milk powder(Aug 2010 to Aug 2012), Sugar (Aug 2010 to Aug 2012), Dry Cocoa Beans (2009-2011), Wet Cocoa Beans (2009-2011) and Liquid Glucose (Sep 2011 to Sep 2012)

Rise in Packaging Costs Crude Oil Prices (Jan 2005 to May 2012)

Confectionery Market Players ProfilesCompany profiles (All companies)

Financial Snapshot(All Companies except Gujarat Cooperative Milk MarketingFederationLtd.)Key Business segments (Public Companies)Key Geographic segments (Public Companies)


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The market segmentation

Market SegmentationSegment Share (%)

Organized 35

Informal 65

North 28

East 17

West 32

South 23

By age groups

2 to 8 years 15

8 to 25 years 55

25 to 64 years 25

Over 64 years 5


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Market Structure

Product Variation

Type Share (%)

Plain candies 43

Toffees 39

Adult Candies 9

Gums 3

clairs 6

Lead Players and Alliances in Confectionary

Parrys', Nutrine, Candico (India), I.T.C, Nestle, perfetti van melle

Leading Brands

Alpenleibe, Melody, Poppins, Paan Pasand, koffi Toffi, Coffee Bite, Lacto King,Eclairs,


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Findings of the research;

In an average day time kirana store, 20-25 kids purchase confectionery on adaily basis and half of them remain the same while half of the number ofcustomers change everyday.(ranging from 2 Rs to 5 Rs)

Every day in a kirana store catering to 200 populations, on an average 10adults buy a confectionery product. (2 to 10 Rs)

More than rs100 of confectionery is given instead of change every day in akirana catering to population of 200, this forms the biggest selling group in

kirana stores as well as retail stores every day.

8 out of 10 consumers are not happy getting confectionery instead of theirchange.

Shopkeepers have even started giving out small chocolates in return ofFive rupee change which is again a threat to the confectionery market sincethe ability to spend has also increased.

80% people who buy confectionery products do not care about the brandrather they care about the flavor.

The relationship of the distributors is directly proportional to the amountof brand of confectionery he keeps and tries

A very common confectionery segment, i.e. the kids are the farthest fromthe confectionery segment and have lost connection with this industry andits products.


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A large section of population in India has increasingly moved towardspremium chocolates due to growing preference for better quality chocolates.Consumption of premium chocolates by rural consumers also witnessed asharp rise in 2012.

Interestingly, small pack sizes experienced a rapid increase in sales acrossrural areas and tier III cities owing to the affordability attached to it. In linewith the preference for small pack sizes, volume sales of mini chocolateslaunched by Mars also started to emerge in 2012..


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Bibliography

1. Ministry of food processing industrys website.2. Data collected from personal research.3. Data from sales persons of multinational companies.


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APPENDIX

The confectionery industry is a complementary industry running along thecigarette industry as 50% of the confectionery products in the market are atcigarette shops.

Ministry of food processing industry of India sees confectionery on parallelsegments as of chocolates and biscuit industry.

This segmentation implies that apart from the parallel cigarette industrysupported confectionery market has another family of biscuits which canprovide it a base whenever there is a disownment to it from cigarette

support.

A large part of the confectionery market customers are from the lowermiddle class which goes hand in hand with the development withincreasing population.

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