—The Journal of Business Perspective
Lessons in Branding from the Gums Line of Perfetti Van Melle in India
Perfetti, Lotte, Wrigley’s and Cadbury were swinginginto action with new strategies backed by largerinvestments to grab a larger slice of the confectionerymarket.Korean confectionery company Lotte India, whichacquired a 60.39 per cent in Parry’s Confectionery fromthe Murugappa group in January 2004 for rupees 64.47crore, and another 20 per cent through an open offer, islooking to diversify into product categories likechocolates, biscuits, snack foods and ice creams. Lotte,counted among the five largest Korean Cheabols, has ahuge portfolio of brands including beverages, bottledwater, flavoured water, fruit juices, chocolates, biscuitsand ice creams. Lotte will use the Parry’s brand for fiveyears and is paying EID Parry a royalty of rupees 5 lakha year. Lotte is studying the domestic market and plansto roll out its global brands over a two to three year timeframe. The company recently rolled out Butter Scotch,a new sugar boiled candy in butterscotch flavour and isplanning to re-launch the blockbuster brand Coffee Bitevery soon. As on 2003 the combined portfolio of brandsdid not have any offering in Gums category.Cadbury India, the venerable (the wormscontroversy apart) chocolates and confectioneries majorin India is also eyeing the gum market and is looking atthe possibility of bringing in some of the brands fromWarner Lambert’s international portfolio. However,Cadbury’s does not share Perfetti’s enthusiasm for theIndian market. According to company officials, ‘Thegums market was not doing well in India. We areevaluating if there is a market for gums in India andwhether it is going to be worth our while,’ says BharatPuri, Managing Director, Cadbury India. For Cadbury’sthe attraction in the confectionery market lies in its fastergrowth over the chocolates market (still recovering fromworms). Earlier Cadbury’s re-launched Halls, one of Warner Lambert’s brands to push sales. The companysays Halls has begun doing well after the re-launch. Lastyear Cadbury India’s foreign parent acquired Pfizer’sinterests in the confectionery business for $4.2 billion.That included the Warner-Lambert product portfolio,known best for Halls, Clorets and Chiclets. Theacquisition is now poised to become a growth area forCadbury India, whose confectionery brands includeEclairs. Strangely enough, Cadbury’s is not using itsexisting chocolate network for retailing its confectioneryand has set up an entirely new network. Apart fromrepackaging and re-launching candy brand HallsCadbury’s does not seem to be doing anything aboutWarner Lambert’s other brands such as Chiclets, theoldest chewing gum brand in India and Clorets, whichsells with a small franchise without any advertisingsupport.Meanwhile, the global leader in the gum marketWrigley’s has also been aggressively expanding itspresence in India. In June, 2003 Wm Wrigley acquiredthe worldwide Joyco gum and confectionery businessesfrom Agrolimen, a privately-held Spanish foodconglomerate for €215 million. This cash transactionwas for Joyco’s operations in China, France, India, Italy,Poland and Spain along with Cafosa, its chewing andbubble-gum base business. The deal gave Wrigley’s adominant position in confectionery lollipops and bubblegums in India, since Joyco was a leader in the Indianconfectionery business and brought the Pim Pom candy,Boomer Gum and Solano lolli pop brands into Wrigley’sportfolio. Joyco on its part came to India in 1999 whenJoyco International, Spain bought out Dabur’s 49 percent stake in the erstwhile General de Confiteria. Andwas bracing up for India was also preparing itself forthe larger pie of the confectionery market in India. Alongwith its flagship brand Solano, Boomer and Pim Pom, itis fortifying its brand portfolio with a slew of brandslike, Bonkers, Donald Bubble Gum, Donald Candy andMickey Toffee, Aqtimint andSolano Coffee Bean. Butof course now it was a part of consolidated operationsof Wrigley’s India Pvt. Limited.Other companies present in Indian confectionerymarket were Candico, Nutrine, Ravalgaon, Parle, ITC,Nestle, Amul etc. However, none of them had anysignificant presence in gums business in 2003.
Industry Potential: High on Hopes But Slipping onVolumes
On the face of it, the vital statistics of the confectionerysegment seem more promising than the conventionalFMCG categories such as toilet soaps or detergents.While toilet soaps and detergents already reach over 90per cent of the households, both chocolate and sugarconfectioneries have abysmally low penetration levels.In 2001, the average consumption per capita per yearwas around 250 gms of sugar confectionery in a year(and out of this only 100 gram is attributed to organisedplayers), but in Australia it was around 2.50 kg (peryear). And the North Americans consumed around 10.6kg per capita in 2001.ORG-MARG estimates suggest that chocolatespenetrated just 5 per cent of the Indian households in2000 and gums could penetrate even less. On the other