Professional Documents
Culture Documents
in India
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CONTENTS
EXECUTIVE SUMMARY
SECTION 1:
1.1
1.2
1.3
1.4
SECTION 2:
2.1
2.2
2.3
2.4
2.5
SECTION 3:
3.1
3.2
3.3
INTRODUCTION
Objectives
Methodology
Report organization
Exchange rate used
INDIA: COUNTRY BACKGROUND
General background
Economic development and reforms
Indias people
2.3.1 Population and main socio-economic indicators
2.3.2 Age
2.3.3 Income
2.3.4 Urbanization
Religion
Consumer spending and food purchasing behavior
THE CONFECTIONERY MARKET IN INDIA TODAY
General background
The confectionery sector
3.2.1 Market size
3.2.2 Some specific market characteristics
3.2.3 Manufacturers and key players
3.2.4 Market snapshots for 2004
3.2.5 Market shares and brands
Market segments
1
2
2
2
4
4
5
7
7
8
9
11
12
13
16
16
17
17
19
20
21
23
26
3.4
3.5
3.6
3.7
3.8
SECTION 4:
4.1
4.2
4.3
4.4
SECTION 5:
5.1
5.2
SECTION 6:
6.1
6.2
6.3
SECTION 7:
7.1
7.2
26
28
30
32
33
33
34
38
38
39
42
43
44
44
45
45
45
47
47
47
48
48
50
50
52
54
55
56
56
56
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58
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60
60
61
62
64
64
69
73
77
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81
83
85
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89
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92
94
95
97
99
101
EXECUTIVE SUMMARY
India: country background
Diverse is the one word that describes India best. With an area approximately one-third the size
of the USA, it is home to over one billion people of considerable economic, ethnic, linguistic,
cultural, and religious diversity.
After years of socialist-oriented economy and commercial relations oriented primarily to the
Soviet block, in the mid-1980s India initiated economic reforms which started opening up its
consumer markets to the western world. Overall, the country has managed to maintain
economic growth even during the Asian crisis in 1998. Despite the reforms and economic
growth, India continued to heavily restrict imports through the 1990s. However, in compliance
with WTO commitments, in 2001 it removed all quantitative restrictions, which led to rapid
increase of imports to the country. Nevertheless, the government continues to discourage
imports through both tariff and non-tariff barriers.
Despite the economic growth, a very large proportion of Indias over 1 billion population
continues to live in extreme poverty. On the other hand, it has the fastest growing middle class
in the world and forecasts indicate rapid growth of the consuming class. There is serious
disparity between the urban and rural
A socio-economic snapshot of India (2004)
population in India. About 70% of the
1.1 billion
Total population
population lives in rural areas where
1.4%
Annual population growth
unemployment rates are higher and
GDP per capita (purchasing power parity) $2,900
incomes are significantly lower. In
25%
People below the national poverty line
64
result, there is significant migration
Life expectancy at birth (years)
70.2%
Literacy
rate,
adult
male
toward urban areas in search of work
48.3%
Literacy rate, adult female
and better payment. The text box
People with access to safe drinking water 88%
highlights
some
socio-economic
472 million
Labor force
indicators of India and illustrates the
9.5%
Unemployment rate
Source: CIA World Factbook, the World Bank
seriousness of the economic and
social deprivation.
Typical for poorer nations, Indian consumers spend a significant proportion of their income on
food. However, consistent with the positive reports and forecasts for increasing incomes,
consumer expenditure on food is increasing.
The confectionery market in India
The confectionery market in India has undergone major changes and growth since the opening up
of the economy and liberalization of the investment regime in 1991. India became an attractive
place for foreign investment and several large multinational companies entered the market for
confectionery products. This resulted in its steady growth and gradual transformation from a
commodity market to a branded products market dominated by multinational companies.
Despite its vast population, Indias confectionery market is still very small. It is valued at close to
US $450 million, and is estimated to be 138,000 MT. Sugar confectionery (candies and toffees)
has the largest share (50%), followed by chocolate, (16%), and bubble gum, (10%).
Over the 1998 - 2003 period, confectionery retail sales have grown more than 55% in value
terms and 46% in volume terms, at an average annual rate of 9.5% and 8% respectively. There is
a clear trend of faster sales growth in value terms, indicating that consumers are increasingly
ready to pay a premium for higher value products. The chocolate segment is the fastest growing
in value terms (9.8% average annual growth rate) closely followed by the gum segment (9.5%). In
volume terms gums grow at the fastest rate (8.5%), followed by chocolate and sugar
confectionery (7.8% each). At the same time, to put these figures in some perspective, while
retail sales for 2003 in India are estimated to have been US$562 million (Rs. 26,220 million),
US$26 billion worth of confectionery products were sold in the US. In volume terms these
figures were 127,000 MT in India and 3.3 million MT in the US.
While growth rates in general look rather healthy, and all agree that there is still large potential
for further growth of the confectionery sector in India, many individual players have experienced
slower growth in their sales over the last few years. This trend is partly attributed to the
economic slow down that India experienced in 2000-02 and resulting decline in consumer
spending. Confectionery products are impulse purchases which would be among the first to be
cut out. Companies are fighting this trend by broadening their consumer base from primarily
children and teenagers, to adults as well. Most of the large multinationals active in India are also
actively marketing to rural India, where penetration is lower than the average for the country.
The organized confectionery segment in India segment is dominated by the multinational
companies; however, domestic players are increasingly finding a prominent position in the
market. Cadbury India, Ltd. is by far the market leader, followed by Perfetti Van Melle India, Ltd.
and Nestle India, Ltd. Other important players are Lotte India Ltd, Nutrine Confectionery Co
Pvt Ltd, Candico India Ltd, Parle Products Pvt Ltd, Wrigley India Pvt Ltd, Gujarat Coop., Milk
Marketing Federation, ITC Foods, Hindustan Lever Ltd, CAMPCO Ltd, and Lotus Chocolates Co.
Ltd.
Since import restrictions were eased in 2001, imports of confectionery products have grown
rapidly, although they remain tiny and only a small part of the overall confectionery market. Put
into context, Indias total imports for 2002-03 and 2003-04, combined, are less than 1% by
volume and value of US confectionery imports in 2003 alone.
ii
Retail chocolates and sugar confectionery account for the greatest share of total confectionery
imported into India. In 2003-04, imports of retail chocolate totaled close to US $5.7 million.
Imports of sugar confectionery fell close behind, totaling US $3.3 million, but registered a growth
rate of 100% from the previous year. Imports of bulk chocolate and chewing gum remained very
small at roughly US $500,000 and US $400,000, respectively. In addition to the regular import
channels, Indian also has significant gray imports. As a result, actual imports are probably larger
than that shown by official statistics. Nevertheless, they remain very small.
In the last two years, Malaysia and Singapore have been the leading suppliers of confectionery to
India in terms of both value and volume. In 2003-04, the two countries accounted for more than
20% in value and more than 30% in volume of the total confectionery import market in India.
However, in the last year, imports from Singapore have shown decline, particularly in volume
term, while imports from the third largest supplier, the UAE, have grown almost 60% in volume
terms and almost 40% in value terms. The growing importance of the UAE and the port of
Dubai as center for export and re-export of confectionery products was confirmed by our
suppliers, many of who indicated this as a preferred route. The US is a relatively small supplier of
confectionery to India and accounted for only 4% in value and 3% in volume of Indias
confectionery imports in 2003-04. However, US confectionery exports to India experienced
significant growth from 2002-03 and more than doubled in value and increased roughly 80% in
volume, albeit from a tiny base. Other leading suppliers that experienced significant growth in
exports to India in 2003-04 included Australia, Brazil, Spain, and the UK. Confectionery exports
from Spain registered the largest growth, increasing more than 500% in value and more than
twice in volume.
Consumption
Confectionery products have very low penetration in the Indian market. Estimates suggest that
chocolate penetration has been only 5% in 2000, and of sugar boiled confectionery, 15%. Even
considering the more developed urban market alone, the category reaches just 22% of the
consumers. For comparison, cookies, considered to have only modest penetration, have reached
56% of Indian households. In result, annual per capita consumption is also very low. It is
estimated to be just over 300g (0.7lb) for chocolate and around 600g (1.3lb) for sugar
confectionery. For comparison, per capita consumption of confectionery products in the US is
around 25lb.
Almost all confectionery purchases in India are believed to be impulse driven. Experts indicate
that sugar confectionery and gum products consumption are driven almost entirely by impulse
purchasing. The figure is lower for chocolates (about 70%), because of its increasing popularity
as a gift for various occasions and during the festival season. In result, in their effort to increase
consumption and product penetration, marketers have started to promote some products as
appropriate snacks, not just an indulgence.
iii
The urban market is brand conscious; the rural market is price conscious. As one
respondent put it, in the metro areas consumers associate brand names with quality;
in the rural areas, consumers associate higher prices with better quality.
The upscale niche market is focused on brand and image quality. Consumers are
looking for known brands with good quality images. Swiss and Belgium chocolates
are considered the crme de la crme. It is in the upscale niche market segment,
where brand and country of origin really matter to consumers when making
purchasing decisions.
Except for the top quality chocolates, consumers are usually not aware, and generally
not interested in where a product has been manufactured as long as they are familiar
with the brand. For example, Tiffany is a popular brand with mass appeal mostly
manufactured in the UAE. However, consumers associate it with the UK. Indeed,
many of the large multinational companies have production faculties throughout the
world and various distribution arrangements for different countries/regions. Thus
frequently the global brand products may be manufactured at various places without
consumers being aware or interested in the actual place of origin.
Products from SE Asia and South America are more oriented to the mass market,
while European and US products cater to the upscale market segments. Imported
products in general are considered to be of higher quality than the domestic ones.
Attractive packaging is very important for the brand image. Indians associate quality
with good packaging. Imported brands are presented much better than Indian ones.
US brands are less known than European ones. Mars and Hersheys are the only US
brand names with broader recognition in India. Consumers as well as the trade have
generally have a good perception about the quality of US products.
Pricing
The Indian market is very price sensitive. There is a clear distinction between the larger mass
market where price pressure is significant and the upscale niche market, where although
important, price is secondary to quality and brand image.
iv
Most confectionery brands of Nutrine, Lotte, Wrigleys, Perfetti, Candico, Parle, etc. are from
the Rs. 0.25 to Rs. 1 price categories. Some chewing gum and bubble gums are in Re. 1, Rs. 2
and Rs. 5 categories. Most major companies including Cadburys and Nestle are strongly pushing
sales of their Rs. 5, Rs. 7, and Rs. 12 categories. There is big difference in the prices of domestic
and imported products. The general rule is that domestic products are the cheapest. Then,
there are different ranges of prices for imported products, depending on the brand, country of
origin, and product itself. Asian and South American products are usually moderately priced,
while European and US products are the most expensive. For example, from the top end
products, 100gm Lindt chocolate sells for around Rs. 130.
An important factor that affects the price of the products is the Central Excise Duty payable by
the organized/registered manufacturers is as follows. For sugar confectionery (without cocoa), it
is 8% (recently reduced from 16%); for chocolate confectionery, it is 16%.
Market forecast
The confectionery market in India is expected to continue to grow at healthy rates. Sugar
confectionery will remain the largest segment, and new products like mints, lollipops and chewing
gum, as well as boxed assortments will grow at the fastest rates.
The mass market will continue to be very price sensitive pushing manufacturers to price
discounting and offering smaller packages in order to continue penetrating the rural market. On
the other hand, the niche for more upscale products will also offer new opportunities for
branded products. Boxed chocolates show the greatest potential for growth within the
chocolate category; chewing gum, medicated confectionery and power mints are also expected
to grow rapidly, particularly among the young adults segment.
Lollipops is a new category and has sparked lots of interest among children; the category is
expected to continue growing in the coming years.
Experts expect that the adult market will offer an additional niche for some products.
As the market grows, so will imports. Nevertheless they will remain small and with limited
impact on the total market. Imported confectionery products will play a role primarily in the
urban areas, in the more upscale market segments.
Distribution
The Indian food distribution system is characterized by a large number of intermediaries and
relatively poor infrastructure, such as transportation, storage, and refrigeration facilities. It has
low levels of efficiency, with the costs of distribution being rather high. Manufacturers and
importers rely heavily on the middle man for the distribution of confectionery products in India.
Most importers rely on distributors or wholesalers to reach retail outlets and confectionery
manufacturers often rely on C&F agents or dealers to work with the wholesalers and
distributors.
Indias retail sector is highly unorganized, as small independent stores are the main outlet for
consumer purchases. Nevertheless, the retail sector is changing and the organized sector is
gaining ground with the emergence of supermarkets and hypermarkets in metropolitan India.
Confectionery products are predominantly purchased in small independent food stores, known
as kiranas. However, over the last five years, convenience stores, supermarkets, and
hypermarkets have played an important role in the distribution of confectionery products. In
1998, confectionery retail sales in convenience stores were virtually non-existent, but today
these stores account for 2% of confectionery sales. During the same period, the share of retail
sales by supermarkets and hypermarkets has also increased, from roughly 6% to 8%.
Indias organized retail sector remains the preferred distribution channel for branded and
imported products, including confectionery. Although this sector is thought to be in its infancy,
rapid growth is expected over the short to medium-term, creating greater opportunities for
imported confectionery products.
Importing confectionery in India is primarily dependent on the location of the importer and the
markets they serve. Most of the importers operate warehouses near the major ports and, in
many cases, this is the JNPT port at Mumbai. For many importers, JNPT is the easiest port to
distribute products not only to Mumbai and Delhi, but also to other major commercial and
metropolitan areas. If imported confectionery is destined primarily to South India or North
India, importers may use the ports at Chennai and Kolkata.
Most confectionery imports are imported into India by sea. However, two importers that we
interviewed imported by air, though this is a more expensive option.
Market access
The import tariffs for confectionery products vary from 30% to 45%. In addition, there are 16%
additional CVD duty and 2% Custom Educational Cess.
All imported products should fulfill the requirements of the Indian Food Law and the Standards
of Weights and Measures Act. The latest issue of USDAs FAS report on India Food and
Agricultural Import Regulations and Standards from July 2004 (GAIN report # IN4077) provides
excellent background and all necessary information. The report can be viewed at:
http://www.fas.usda.gov/gainfiles/200407/146107003.pdf
vi
Overall, the best approach for any potential exporter to India is to establish contacts and work
with experienced importers and distributors, who would be able to provide the necessary
guidance.
Conclusions
The Indian market for confectionery products has undergone significant changes over recent
years. While penetration and consumption levels are still very low, overall sales, and particularly
sales of higher value premium products have increased. The availability of imported products has
also been rapidly rising since India liberalized its imports regime in 2001. Nevertheless, they are
still very small leaving ample opportunities for further growth.
The distribution channels have also undergone substantial changes. Supermarkets have emerged
and started to gain power over other retail formats. With these changes in mind, we expect
that:
The share of imported confectionery will continue to increase over the next several
years, although overall sales will remain modest. Indians taste will continue to
become more westernized and more quality conscious. This trend will be more
obvious in the urban areas among middle and upper class consumers, offering higherend foreign brands growth opportunities. While most domestic companies also
focus their new product development efforts on the mass market, a few have
products targeting premium products. Nevertheless, Indians associate imported
products with higher quality, and therefore respond positively to confectionery
imports. The United States along with Western Europe are perceived as offering
highest quality, although there is very low awareness of US confectionery products
and brands.
The popularity of chocolate products, particularly boxed assortments for gifts, will
continue to increase.
The sugar confectionery will remain the largest confectionery segment. We expect
to see growth of new and novelty products, such as mint and medicated
vii
confectionery (with added vitamins and/or other minerals), as well as the new to the
country sugar-free confectionery categories.
While the traditional targets for confectionery products have been children and
young people, increasing number of marketers have seen growth opportunities in
targeting the adult consumer segment. This will lead to new products and marketing
strategies aimed at them.
There will continue to be opportunities for new products that appeal to the young
consumer. The ever-present stimulus of novelty and fashion, encouraged by
continuing exposure to western culture will keep the doors open for new products
and new suppliers.
Marketing and promotion expenditures for confectionery products will increase and
distributors will require promotional support from manufacturers.
Recommendations
Potential exporters should carefully select trading partners from among the Indian
importers and distributors, as they will be critical to ensuring presence of their
products on retail shelves. Importing is a relatively new business in India, and many
importers may lack the knowledge and experience to ensure successful distribution
of the products they deal with. Therefore, it is of critical importance to select the
right partner.
Importers and distributors may have limited financial and human resources. Thus
U.S. exporters should be willing to offer as much as possible support, particularly in
the initial phase of market entry.
U.S. exporters may directly contact potential importers and distributors to select
their partner(s). They may use the list of industry contacts provided in Section 6 or
obtain contact through the US Embassy in New Delhi. The typical way of
introduction is to send them company brochures, product catalogues, product
samples, and price lists. A proper, formal introduction is important for a new
entrant to make effective and productive contacts at potential partner firms.
Mumbai and/or New Delhi are the most appropriate entry markets for US exporters.
These cosmopolitan cities, with a larger number of affluent consumers exposed to
western influences, as well as better developed infrastructure, are most appropriate
for introduction of new US products that are generally higher priced than domestic
and some imported products.
India remains a very price sensitive market and appropriate pricing is key to the
success of new products. US exporters should carefully discuss their product pricing
and positioning with their chosen partners in India.
viii
SECTION 1:
INTRODUCTION
The Indian population represents roughly one-fifth of the global population. Many are poor and
suffer deprivation. Despite this, by opening up its trade policy regime, India has attracted the
interest of many seeking new investment and market opportunities in food and agriculture.
Moreover, there are a number of factors suggesting more opportunities in India in the future,
such as the changing trade policy climate, consistent economic growth, rapidly growing middle
class, increasing urbanization, and modernization of the retail sector. Though change is relatively
slow, there are clear signs of movement in the food systems and indications that the potential
market is immense, and while still immature, growing rapidly.
However, consumption of confectionery products is relatively low and product penetration is
still very limited. At the same time, observers have noticed opportunities for growth of the
market and increasing potential for imported chocolate and other confectionery products.
For these reasons, the decision of the National Confectioners Association (NCA) to research
the Indian market for confectionery products and look at the opportunities for US exporters in
India seems appropriate and timely. This report aims to provide description and understanding
of the Indian market. We review the general economic and commercial environment and the
developing situation in the Indian market for confectionery products. We also examine the
competitive market conditions and review the general prospects for US products and potential
entry strategies for US exporters.
1.1
Objectives
The specific objective of this research has been to provide US confectionery manufacturers and
potential exporters to India with:
A clear understanding of the Indian markets for confectionery products as they are
today and the future market conditions in India;
Contact information for importers and distributors to enable them to begin enquiries
about exporting opportunities.
1.2
Methodology
We have used a combination of desk research and trade interviews. The core of the study has
been based on personal interviews with various representatives of the trade. These gave us a
very broad perspective of the market, market system, and the way it works. Overall, we had
face-to-face interviews with 24 executives, as follows: 5 leading manufacturers, 13 leading
importers, and 6 retailers, including major candy chain stores and supermarkets. A full list of
contacts is given in Appendix 3.
Our interviews covered a wide range of issues. In particular, we gained a view of the status quo
in the market, the key players, the bases of competition, and the forces for change.
1.3
Report organization
Section 5 reviews the market access issues, such as tariffs and duties, food safety,
packaging, and label requirements;
1.4
Appendix 2: profiles of the main players in the Indian confectionery market; and
In the report we have presented data in US dollars when it refers to total market and includes
imports. For descriptions of domestic market developments we provide values in Indian Rupees
(Rs).
60
50
40
Rs/US$
Figure 1:
Average annual exchange rate: Rs per USD
30
20
10
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
SECTION 2:
Figure 2: India
Despite this diversity in food consumption, some market segments in India are sufficiently large
to attract the attention of companies willing to export to India or invest in the country. This
section provides a brief description of the Indian economy today and depicts the diversity of
Indias people in a way that can be used in later sections to determine the potential market
opportunities for US confectionery products.
Figure 3: India political map
2.1
General background
parliamentary federal state with a president who is elected for a five-year term by the elected
members of the federal and state parliaments. In theory, the president has full executive power,
but that power is actually exercised by the prime minister (head of the majority party in the
federal Parliament) and his council of ministers, who are appointed by the president.
Despite Indias impressive gains in economic development, investment, and output, there are also
some serious concerns. These include the ongoing dispute with Pakistan over Kashmir, serious
overpopulation, environmental problems, extensive poverty, and ethnic and religious strife.
The Indian north is more populous than the rest of the country, with Uttar Pradesh being the
most populous state in India. The north has predominantly agricultural activity, and Punjab is the
leading agricultural state in the country. Industrial development is moderate.
The India south is well developed and relatively affluent with strong agriculture and industry. The
region is the leader of the Indian IT sector, and Bangalore and Hyderabad are considered the
Indian equivalents of the US Silicon Valley. It also has good coastal and land transportation
infrastructure. This combined with the relatively higher incomes make the Indian South a typical
entry point for new imported products, as well as a favorite test marketing region.
The India west is the best developed part of the country with comparatively higher per capita
incomes. The states Maharashtra and Gujarat are considered the industrial hub of India and
attract most foreign investment. Mumbai, the capital of Maharashtra, is the financial capital of the
country and a very important center for industrial activity.
Opposite to the Indian west, the east and northeast regions are the least developed and poorest
with a huge gap between the urban and rural populations. On the other hand this region is the
major source for some natural mineral resources, such as coal, iron, and bauxite.
2.2
Until the mid-1980s, Indias inward looking socialist-oriented economic policies gave it a minor
presence on the world economic stage. Despite being a founding member of the General
Agreement on Tariffs and Trade (GATT), Indias focus was mainly toward developing commercial
relations and trade with the Soviet bloc.
The turnaround and reform of the Indian economy began in 1986 when the government initiated
policies, which started opening its consumer markets to the western world. The reforms started
with some tentative steps to open up the Indian marketplace to western products - both
industrial and consumer. Restrictions on imports were relaxed, although very slightly. As a
result, trade with the western world started increasing, while trade with the Soviet bloc fell.
However, with the sharp rise of imports by 1990, Indias external debt almost tripled and its
foreign exchange reserves dwindled to below US$1 billion.
Rigidities in the domestic economy resulted in a serious slowdown in growth and a crisis of
confidence. However, this crisis provided the much-needed stimulus for structural adjustment
and reform. In the early 1990s, Indias highly regulated industrial policy was changed drastically as
controls were scaled down. Imports were further liberalized, and foreign investment was
allowed in a wide range of sectors. The momentum of liberalization slowed as a result of
scandal, which undermined the credibility of the government and their reforms. The voters
elected a new government in 1996, the beginning of another phase of development.
The new government was not particularly reform-oriented, but it realized early on that the
economic policy changes that had been made could not be reversed. Nonetheless, the
government since 1996 has moved more cautiously on reforms encouraged in part by the Asian
crisis of 1998 consolidating and institutionalizing the positive aspects and reworking the
negative ones.
The environment for domestic and foreign investment and trade has been progressively
liberalized. Prior to the economic reforms in 1991, foreign investment in India was only $125
million. Furthermore, Indias imports were $27.9 billion and exports were $18.5 billion.
However, between 1996 and 1997, foreign investment reached almost $6 billion and in 2000,
imports and exports reached $50.5 billion and $42.3 billion, respectively. Since that date, they
will have grown further.
Import tariffs have been curbed per World Trade Organizations (WTO) commitments. In April
2001, all remaining quantitative import restrictions were removed. Nonetheless, the government
continues to discourage imports through both tariff and non-tariff barriers. Today the import
duties for most consumer food products range from 31% to 52%.
Figure 4: GDP growth rate
9
8
7
6
percent
5
4
3
2
1
0
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
19
00
20
02
20
)
03
st.
20 4(e
0
20
billion).1 In contrast to the rest of Asia, Indias economy suffered little from the economic
meltdown in 1998. In fact, in that year, it experienced an estimated real growth rate of 5.8%,
compared with the decline experienced in most other Asian economies (e.g. Indonesia 13.1%,
Korea 5.8%, and Thailand 10%). In 2003, GDP growth increased to 8% and estimates for 2004
suggest that it will be about 8.3%.
In sum, India has managed to maintain economic growth despite surrounding economic turmoil,
and this growth has not been at the expense of unruly inflation. While the country consistently
carries a trade deficit, growth in exports has been significant. In addition, liberalization has
encouraged foreign investment in the country, although such is the political environment that this
wind blows hot and cold.
However, despite these encouraging signs, with a per capita GDP of roughly $545 per annum,
many in India are not reaping substantial economic rewards, although the overall situation in the
country has improved markedly in the past decade.
2.3
Indias people
2.3.1
The Indian population is close to 1.1 billion people, representing one-fifth of global population.
There are more than 1,000 languages spoken in the country, nearly 400 of which are spoken by
more than 200,000 people. However, only 18 are officially recognized, and Hindi, the primary
tongue of 30% of the population, is Indias national language. Various States also have their own
official languages and some of the most widely spoken ones are Punjabi, Bengali, Tamil, Gujarati,
Urdu, Telugu, and Marathi. In addition, English which enjoys associate status is the most
important language for international and commercial communication.
India also has a very large proportion of poor people. More than 400 million live with less than
$1 per day, without the resources to buy even basic foods. Almost 40% of Indias people are
illiterate.
The text box below highlights some socio-economic indicators of India and illustrates the
seriousness of the economic and social deprivation.
Different sources give slightly different figures for the GDP growth. For example, Reserve Bank of India
data shows GDP growth to have dropped to 0.8% in 1991 and the World Bank shows growth of 7.5% in
1995. Despite the differences the trend is clear, India has shown a healthy growth over the last 10 years
and even during the Asian crisis managed to maintain much better economic indicators than many other
Asian countries.
7
1.1 billion
1.4%
$2,900
25%
64
70.2%
48.3%
Percent of population with access to safe drinking water (Year 2000) 88%
Labor force
472 million
Unemployment rate
9.5%
2.3.2
Age
2.3.3
Income
Despite the progress in reducing poverty over the last years, India remains a very poor country
with vast disparities between the different income groups in India. The good news, however, is
that the high income class is expanding fast, middle income classes are bulging in size (especially in
rural India), and the low income class is shrinking rapidly.
In a recent publication, The Indian Consumer Market 1997 to 2007, the National Center of
Applied Economic Research (NCAER) in India has very good news for the countrys economy.2
It concludes that for the covered period the very rich will grow six fold, the consuming class will
triple, and the economic destitute will decline three fold. The NCAER breaks the population
into five groups: Rich (high income), Survivors (upper middle income), Climbers (middle income),
Aspirants (lower middle income), and Deprived (low income and poor). The consuming class
comprises the first four categories.
Each segment of the Indian population offers distinct growth and marketing opportunities.
According to the NCAER, the top four segments of the population constituted a market of over
200 million people (about 20% of the population) in 1997. Based on its forecast, this group
2
The NCAER is an old and highly respected institution in India, known for the accuracy of its forecasts. Its
reports are widely used for decisions made by marketers, economists, analysts, and investors.
9
should grow to well over half a billion people by 2007. This consuming class segment is the
focus of attention for aspiring branded food and beverage companies. A major portion of the
Indian population has very low incomes. Today, roughly one-quarter of the population is living
below the nationally defined poverty line, down from over 30% in 1998. The NCAERs report
predicts that over the reviewed period the number of aspirants and deprived will decrease
significantly as people shift up and into the growing ranks of the consuming class. The decline of
the number of poorest people observed over the last five years is a positive sign in this direction.
NCAER forecasts are made on the basis of the following assumptions: the economy will be
growing by 7%; the average Indian household has 5.7 members; and electricity is available in most
households. Many have found it hard to believe that the economy will touch and stay at 7%
(although it has exceeded this figure in 2003 and 2004), or that electricity can be a presumed a
stable service (although power sector reforms which are currently underway can bring in
efficiencies). Going by NCAERs assumptions, in the year 2007:
This expected prosperity, will not simply be the result of investments, creation of jobs, and the
consequent rise in disposable incomes. Simultaneous with the rise in economic growth, is a
predicted fall in population growth. In the 1990s the population grew at about 2.2%, while it has
now declined 1.4%.3 The combination of all these factors has resulted in higher per capita
income.
In summary, the punch-line of the NCAER forecast might well be the following:
By the year 2007, the combined numbers of the upper-classes (annual income
between Rs.45,000 and Rs.215,000) and the 'very rich' (Rs.215,000+) will outnumber
the households with less than Rs.45,000 a year!
The development of a market segment with the economic resources to express a choice
represents an opportunity for US exporters of products.
Depending on the source, this figure varies from 1.4 to 1.7%. Nevertheless, the downward trend is
clearly visible.
10
Urbanization
Million
2.3.4
1,600
1,400
1,200
1,000
800
600
400
200
0
2000
2005
2010
2015
Rural
2020
2025
2030
Urban
The migration towards the urban centers has also expanded smaller towns and cities resulting in
their growth and further development. Today there are about 35 Indian cities with a population
exceeding one million, compared to about 25 cities in 1997. The rapidly developing economy is
reaching smaller cities creating a swelling base of affluent, upwardly, mobile consumer with the
same needs, wants, and desires as the residents of bigger cities, according to KSA Technopak,
Indias largest management consulting company.
This observation is confirmed by NCAERs
research, which indicates that over half of the 10.7 million households with income of less than
Rs. I million ($23,000) live in smaller cities. But even more, the report also indicates a big rise in
number of the rich households with incomes of Rs. 1 to 5 million in the smaller cities. Overall,
in the urban areas, most social-economic indicators are significantly better that nations average.
The urban population is the most important target market for imported products for several
reasons. Income is one of the most important factors and it is approximately much higher in the
urban areas than in rural India. They are the exclusive market for various imported and more
expensive products. According to a recent consumer survey conducted by KSA Technopak,
urban consumers spent over US$ 30 billion on themselves in 2002, a 12% year-on-year increase.4
Even more, the company predicts that annual increase in consumer spending will jump to over
15% by 2008.
In addition, the major urban areas have a more developed food distribution system, another
reason for being an important target for imported food products. Large cities have a variety of
4
The survey is based on a sample of 10,000 four-member families with earnings slightly higher than the
average in 20 Indian cities.
11
restaurants, including westernized chain restaurants and some large chain grocery retailers.
Indeed, Knight Frank, India, a major real estate and property management company, ranks India
fifth in the list of 30 emerging retail markets globally, and predicts 20% growth for the segment
by 2010. The "brand-conscious urban population", which "forms the largest segment of demand
for the majority of retailers has grown over 3% a year over the past decade," according to Knight
Frank, India who also says that the organized retail segment is expected to grow from a mere 2%
to 20% by the end of the decade. This is not surprising, considering that the organized retail
sector is growing at 8.5% per annum.
Despite its deprived position compared to the urban market, rural markets are also growing.
Although on a smaller scale, the economic development has had its impact on rural areas as well.
In addition, infrastructural development (including of the service sector) and the improved
performance of the agricultural sector will contribute to the further growth of this market
segment. However, unlike the increasingly brand conscious urban consumers, rural consumers
are, and will remain extremely price sensitive. Thus, although they are an increasingly important
target for domestic FMCG, including confectionery products, the focus of marketers of imported
goods remains on the more affluent and westernized urban segment.
2.4
Religion
Figure 8:
Religious breakdown of the Indian population
Christian
2%
Muslim
12%
Sikh
Other
2%
3%
Others, include
Buddhist, Jain, Parsi
Hindu
81%
Source: CIA World Factbook
12
Religion
2.5
Eating habits
Hinduism
Islam
Non-vegetarian
Taboo on pork
Preference for halal meat
Christianity
Sikhism
Buddhism
Mostly vegetarian
Jainism
Strict vegetarians
Although it is the second most populous country in the world and despite the positive forecasts
for economic development and increasing incomes, India is still a very poor country. This
reflects on the levels of consumer spending and as seen from the table below, South Asia
accounts for only a small percentage of the overall global consumer spending despite the large
proportion of population it represents.
Consumer Spending and Population, by Region, 2000
Share of
World Private
Consumption
Expenditures
Region
Share of
World
Population
( percent )
United States and Canada
31.5
5.2
Western Europe
28.7
6.4
21.4
32.9
6.7
8.5
3.3
7.9
South Asia
2.0
22.4
1.5
0.4
1.4
4.1
Sub-Saharan Africa
1.2
10.9
13
Typical for poorer nations, Indian consumers spend a significant proportion of their income on
food. However, consistent with the positive reports and forecasts for increasing incomes
consumer expenditure on food is estimated to have been close to Rs. 6 billion in 2002, a 6.6%
current value growth over 2001.5 Also, it has been estimated that Indian consumers have spent
just under 40% of their annual income on food, down from 44% in 2000. Most of this is spent on
basic food items, such as grains, pulses, vegetable, oils, sugar; however, in recent years an
increased spending on higher value products has been a noticeable trend.
Indians have a very strong preference for fresh products which are generally perceived to be
healthier, as well as for traditional spices and ingredients. Indians are notoriously conservative
about food and many strictly follow traditional ethnic and dietary habits which is a barrier to the
growth of the packaged foods sector. The generally higher prices of packaged foods, also put
them beyond reach for a large proportion of the population. Hence, the according to trade
experts, packaged foods account for only about 5% of the total food consumption in India. Sales
are generated mostly in the urban areas, and in 2003 have accounted for about three quarters of
the total sales of packaged foods in India.
However, with rising incomes and changing lifestyles (e.g. more westernized younger consumers,
more women entering the workforce, less time available for cooking from scratch) sales of
packaged foods are expected to increase, although at relatively slow rates. It is also expected
that rural India will contribute to this growth as average incomes rise and the distribution
network and infrastructure develop.
The table below shows the retail sales of packaged foods for the 1998 2003 period. Ice cream
and frozen foods have been the fastest growing categories, but bakery products are the largest
category, accounting for about a third of the total sales of packaged foods. Although sales have
been modest, the confectionery products segment has been growing at a healthy rate.
Retail sales of packaged foods (in billion Rupees)
1998
1999
2000
2001
2002
2003
Average
annual
growth
Confectionery
17
18
20
22
24
26
9%
Bakery products
72
79
87
96
104
113
9%
Ice cream
19%
Dairy products
41
44
48
53
59
65
10%
12%
Snack bars
Source: Euromonitor
14
1998
1999
2000
2001
2002
2003
Average
annual
growth
7%
Ready meals
Soup
0.3
0.3
0.3
0.4
0.4
0.4
7%
Pasta
Noodles
10%
Canned food
0%
Frozen food
17%
Dried food
14
15
17
19
21
23
10%
Chilled food
56
59
62
66
69
73
5%
10
11
12
14
12%
Baby food
10%
0%
225
245
266
291
316
342
9%
Spreads
6
Packaged food
Source: Euromonitor
The sum of sectors does not equal the total packaged foods because of double counting. For example,
canned soups are included in soups and canned food.
15
SECTION 3:
3.1
General background
The chocolate and confectionery market in India has undergone major changes and growth since
the opening up of the economy and liberalization of the investment regime in 1991. India became
an attractive place for foreign investment and several large multinational companies entered the
market for confectionery products. This resulted in its steady growth and gradual transformation
from a commodity market to a branded products market dominated by multinational companies.
Compared to the conventional fast moving consumer goods (FMCG), the confectionery segment
in India offers significantly higher potential for growth. For example, over the past five years
toilet soaps and detergents reached over 90% of the Indian households, while according to ORGMARG estimates, chocolate penetration in 2000 was 5% and of sugar boiled confectionery, 15%.7
Even considering the urban market alone, the category reaches just 22% of the urban consumers.
For comparison, cookies, considered to have modest penetration have reached 56% of the Indian
households. Clearly the confectionery sector, which has been showing healthy growth over the
last years, still has considerable potential to grow before it reaches saturation point, as have
traditional FMCG products such as soaps and detergents. Indeed, the confectionery market in
India is witnessing tremendous activity. Regular product launches, high decibel media activity,
consumer promotions and trade promotions make this one of the most hyperactive categories in
the Indian market.
The Indian confectionery market is segmented
into sugar-boiled confectionery, chocolates, mints
and chewing gums. Sugar-boiled confectionery,
consisting of hard-boiled candy, toffees and other
sugar-based candies, is the largest of the segments
and, according to some key industry players we
spoke to, it is valued at around Rs. 20,000 million.
Some of the largest multinational companies
active in the confectionery sector, like Cadbury,
Nestle and Perfetti, have already invested in India
and others keep entering the market (e.g. Lotte in
2004). Also, global mergers and acquisitions have
7
resulted in consolidation of some of the major players in this segment in India (e.g. Perfetti with
Van Melle, Joyco with Wrigley, and Lotte with Parrys). Some large Indian companies have also
entered the confectionery market by leveraging their overall brand equity and distribution
infrastructure for their existing product lines. In result of these active developments and the
positive socio-economic changes in India, both per capita consumption and availability of higher
quality products are expected to grow in the coming future.
At the same time, Indias confectionery market is very price-sensitive, which makes it difficult for
marketers to raise prices. This price sensitivity plays to the advantage of a large unorganized
production sector in India. These are numerous small scale/backyard operators who are not
registered and do not pay excise duties to the government. At the same time they maintain very
low operational costs. These factors allow them to sell at very low prices and to achieve
significantly higher margins than the organized sector.
However, there are clear signs for a growing market segment for higher value products. With
the growth of the middle class, increasing number of consumers are willing to pay a premium for
quality, which has given a boost to product and packaging innovation. Brand consciousness is
growing in this category as well.
Last but not least, any review of the Indian confectionery sector should take into account the
traditional sweetmeat sector. While not directly included in the scope of this study, Indians have
strongly ingrained traditions and tastes, and frequently prefer and seek the traditional sweetmeats
they are used to instead of a chocolate or other confectionery product. Thus, sweetmeats
directly compete for consumer stomach share. In addition, sweetmeats are generally cheaper, a
very important factor in the price sensitive Indian market. A brief description of the sweetmeat
market is given in Appendix 1.
3.2
3.2.1
Market size
Despite its vast population, Indias confectionery market is still very small. With a population
about five times larger than the US, the volume size of its confectionery market is more than 20
times smaller. It is valued at close to US $450 million, and is estimated to be 138,000MT, as
illustrated in Figure 9.
17
Other
17%
68,000 MT
22,500 MT
7,000 MT
14,000 MT
3,350 MT
23,150 MT
Chewing gum
2%
Candies & toffees
50%
Bubble gum
10%
Breath fresheners
5%
Chocolates
16%
Source: Industry experts and leading manufacturers estimates, Promars trade interviews
As seen from Figures 10 and 11 below, retail sales have shown healthy growth over the last
several years. Indeed, over the 1998-2003 period overall sales have grown more than 55% in
value terms and 46% in volume terms, at an average annual rate of 9.5% and 8%, respectively.
There is a clear trend of faster sales growth in value terms, indicating that consumers are
increasingly ready to pay a premium for higher value products. The chocolate segment is the
fastest growing in value terms (9.8% average annual growth rate) closely followed by the gum
segment (9.5%). In volume terms, gums grow at the fastest rate (8.5%), followed by chocolate
and sugar confectionery (7.8% each).
At the same time, to put these figures in some
perspective, while retail sales for 2003 in India are estimated to have been US$562 million (Rs.
26,220 million), close to US$26 billion worth of confectionery products were sold in the US. 8 In
volume terms these figures were 127,000 MT in India and 3.3 million MT in the US.
While growth rates in general look rather healthy, and all agree that there is still large potential
for further growth of the confectionery sector in India, many individual players have experienced
slower growth in their sales over the last few years. This trend is partly attributed to the
economic slow down that India experienced in 2000-2002 and resulting decline in consumer
spending. Confectionery products are impulse purchases which would be among the first to be
cut out. Companies are fighting this trend by broadening their consumer base from primarily
children and teenagers, to adults as well. Most of the large multinationals active in India are also
actively marketing to rural India, where penetration is even lower than the average for the
country.
The average exchange rate for 2003 was Rs. 46.66 for US$1.
18
30
140
25
120
20
Thousand MT
Billion Rs.
a) Value
15
10
5
100
80
60
40
20
0
1998
1999
2000
Chocolate confectionery
2001
2002
2003
Sugar confectionery
1998
Gum
1999
2000
Chocolate confectionery
2001
2002
Sugar confectionery
2003
Gum
Source: Euromonitor
b) Total growth
70
12
60
9.8
9.5
9.1
9.4
7.8
7.8
8.5
50
Percentage
Percentage
10
7.9
6
4
59.8
54.4
57.3
56.8
45.8
40
45.5
50.2
46.2
30
20
10
0
Value
Value
Volume
Chocolate confectionery
Sugar confectionery
Gum
Confectionery
Chocolate confectionery
Volume
Sugar confectionery
Gum
Source: Euromonitor
3.2.2
Some specific characteristics of the Indian confectionery market, compared to the developed
western markets are:
While the trade and distribution in western countries is mostly organized, in India,
retail outlets like paan shops and kirana outlets account for the bulk of the sales and
organized trade still has only an insignificant share in overall confectionery sales.
Functional products and sugar free confectionery dominate the worldwide market
while this trend is yet to pick up in India.
19
Confectionery
3.2.3
As younger children are traditionally the key consumer group for confectionery,
pricing strategies play a significant role in shaping purchasing decisions.
50 paise is the most popular price-point and around 85% of confectionery sales occur
at this price point - but there are some products in the rural markets that are
available at 25 paise. The Re 1 price-point is not very popular.
Gum confectionery will be the fastest growing category, albeit from a smaller retail
base.
Instead of chewing on paan (betel nut leaf) to freshen ones breath or using spices
such as fennel to aid digestion, the local population is increasingly turning to branded
confectionery products such as chewing gum and mints. Consuming products such
as mint and medicated confectionery conveys a sophisticated image, which appeals to
young people.
Manufacturers are increasingly looking to create a shift from manufacturing lowmargin products like toffees and boiled sweets to higher-margin products such as
gum and chocolates confectionery.
There is strong growth potential for chocolate; sales of chocolate confectionery are
expected to continue to grow by more than 8% per year in value terms. This is due
to the low penetration of chocolate confectionery in rural areas as well as the
general low consumption of such products among adults.
Nestle India Ltd is a manufacturer and marketer of coffee, tea, malted beverages,
instant baby cereals & foods, milk products, chocolates and confectionery, instant
foods and culinary products.
20
Perfetti Van Melle India Ltd is a manufacturer and marketer of sugar based
confectionery and is a leader in the candy and gum segments of the confectionery
market.
Parle Products Pvt Ltd is a manufacturer and marketer of cookies, sugar boiled
confectionery, and cocoa and milk based toffees.
Wrigley India Pvt Ltd is a manufacturer and marketer of chewing gum (Wrigley
brands) and sugar based confectionery, bubble gum, chewing gum and candy (Joyco
brands).
ITC Foods, a division of ITC Ltd made a foray in the confectionery market in year
2002.
Hindustan Lever Ltd, Indias leading FMGC company, has a presence in the
confectionery market since 2001.
The CAMPCO Ltd is a leading processor of cocoa and cocoa based industrial
products and has a small presence in the branded chocolate sector.
Lotus Chocolates Co. Ltd is another processor of cocoa and cocoa based
industrial products with a small presence in the branded chocolate sector.
In addition, India also has a large unorganized manufacturing sector, of small producers offering
very low priced products. There are no statistics about the size of the unorganized sector, but
according to some industry sources, the unorganized sector can account for up to 50% of the
market. We believe that this figure is exaggerated, but the main point is that the unorganized
sector still plays a very important role in India, although it will gradually begin to decline.
3.2.4
The confectionery industry in India has experienced some hectic activity in the year 2004.
21
April 2004 - Sweet World, a Mumbai based candy chain announced their plans to
open 20 outlets across India by 2005. The candy market in India set to experience
significant action and innovation.
June 2004 - Effem India Pvt Ltd., a wholly owned subsidiary of Mars Inc., USA,
announced that it is consolidating the presence of its flagship chocolate brands Mars,
Twix, Snickers and Bounty in India through imports. Imports commenced in August
2004.
September 2004 - Perfetti van Melle India Pvt Ltd announced an additional
investment of Rs. 2000m in India to increase its manufacturing capacity for marketing
and brand building. Parfetti also announced the upgrading of the Van Melle unit,
which it had acquired after the global acquisition of Van Melle in 2002. The Chennai
unit will increase production of the former Van Melle brands - Marbels, Mentos and
Fruittella.
October 2004 - Candico India Ltd became the 1st Indian multinational
confectionery company to setup a manufacturing unit in Tanzania with an investment
of US$1million.
October 2004 - Cadbury India Ltd announced its foray into the confectionery
sector with the re-launch of Adams Halls and Clorets lozenges, formerly Warner
Lambert India Pvt Ltd brands. This was consequent to the acquisition of the global
non-chocolate confectionery business of Pfizer Inc., USA by Cadbury Schweppes plc.,
UK, in 2002. Cadbury India Ltd announced that it will strengthen its position in the
confectionery sector with the launch of gums in 2005.
November 2004 The Rs. 7500m Delhi based DS Group announced a Rs. 750m
joint venture with Lotte Company Japan, to manufacture chewing gum, chocolate,
candy and other confectionery in India by setting up a new plant by 2005.
22
3.2.5
Cadbury India, Ltd. has by far the largest market share in the confectionery sector. Although
other players are catching up, its leading position will remain unthreatened for the coming years.
The following table specifies the sales market shares of the leading companies in India for 2001
and 2002.
Confectionery companies shares
Company
2001
2002
(% retail value)
Cadbury India Ltd
30
29.6
14.2
14.4
9.8
10.2
7.5
7.4
5.7
5.8
4.7
4.6
4.6
4.5
2.1
2.1
1.7
1.7
1.4
1.5
1.2
1.2
1.1
0.9
0.4
0.4
0.2
Ferrero SpA
0.1
0.1
Private Label
0.6
0.6
Others
14.8
14.6
Total
100
100
Source: Euromonitor
After being purchased by Lotte Confectionery Co Ltd. Korea in 2004, the company was renamed to
Lotte India Corporation Ltd.
23
through creative marketing and advertising strategies. Cadbury Indias brands have by far a
leading position in terms of sales; it has four brands among the top 10 selling brands. Cadburys
Dairy Milk brand is the most popular in India, with sales share (in value terms) of over 12%, far
ahead of the second best seller, Perfettis Alpenliebe. The following table shows the leading
chocolate and confectionery brands in India.
Confectionery brands shares (percentage of retail value)
Company
Brand
10
2001
2002
12.4%
12.3%
4.1%
4%
Cadbury's 5 Star
4%
3.9%
Cadbury's Perk
3.6%
3.5%
Cadbury's Celebrations
1.9%
2%
Cadbury's Gems
1.5%
1.4%
Googly
0.2%
0.3%
Cadbury's Mr Pops
0.3%
0.3%
Trebor
0.3%
0.3%
1%
1%
0.2%
0.2%
29.5%
29.2%
Alpenliebe
4.8%
4.7%
Big Babol
4%
4%
Center
1.8%
1.9%
Cofitos
1.4%
1.3%
1%
1.1%
Mentos
0.7%
0.7%
Fruit-tella
0.5%
0.5%
Marbels
0.1%
0.1%
14.3%
14.3%
4%
4%
2.1%
2.3%
1%
1%
Milkybar
0.7%
0.7%
Munch
0.4%
0.6%
0.4%
0.4%
Soothers
0.3%
0.3%
Halls
Clorets
Chlor-Mint
Kit Kat
Nestl Classic
Polo
10
Warner Lamberts brands are currently part of Cadburys portfolio, a result of the purchase of Pfizers
confectionery business in 2002.
24
Company
Brand
2001
2002
After Eight
0.2%
0.2%
Frutips
0.1%
0.1%
9.2%
9.6%
3.1%
3%
Nutrine
2%
2%
Koka Naka
1%
1%
0.4%
0.4%
6.5%
6.4%
Boomer
3.8%
3.8%
Pim Pom
1.6%
1.6%
Bonkers
0.2%
0.2%
Trex
0.1%
0.1%
Doublemint
0.3%
0.3%
6%
6%
Kismi
2.7%
2.7%
0.8%
0.8%
Parle Poppins
0.5%
0.5%
0.2%
0.2%
0.1%
0.1%
4.3%
4.3%
Coffy Bite
2.5%
2.5%
Lacto King
1.4%
1.3%
3.9%
3.8%
Maha Lacto
11
Max
1.7%
1.7%
Amul
1.4%
1.5%
Private Label
0.6%
0.6%
Others
22.6%
22.4%
Total
100%
100%
Source: Euromonitor
11
In 2004 Wm. Wrigley acquired the confectionery business of Joyco Group, Spain, of which Joyco India
was a fully owned subsidiary.
12
In 2004, the Muragappa Group, owner of Parrys Confectionery Ltd. sold 60.4% of Parrys to Lotte
Confectionery Co Ltd., Korea and the company was renamed to Lotte, India, Ltd. Lotte Korea is expected
to acquire the remaining shares in the near future.
25
3.3
Market segments
3.3.1
Chocolate confectionery
Although chocolate confectionery represents less than 20% of the total confectionery market in
India in volume terms, its share in value terms is about 40%. It is also the fastest growing
confectionery segment in value terms with average annual growth close to 10% (see Figures 10
and 11). However, it should be noted that despite the healthy growth potential, this is still a very
small market with sales concentrated primarily in the better-off urban areas.
As seen from Figure 13 below, chocolate tablets
dominate the market, accounting for about half of all
chocolate sales of about Rs. 10 billion (27 thousand
MT) in India. Countlines is the second largest
segment, followed by boxed assortments. Tablets
also have shown strongest average annual growth
rate (Figure 14). This however, is matched by the
growth rate for the various boxed assortments
which are becoming increasingly popular to be given
as gifts. Milk chocolate is strongly preferred to dark
and bitterer chocolates. It is estimated that about
75% of the volume of tablet chocolate sold is plain
milk, while dark or white chocolates account for
about 8% and 4% respectively, with the remainder
being various filled chocolates (Figure 12).
Source: Euromonitor
12.00
30
10.00
25
Thousand MT
Billion Rs.
a) Value
8.00
6.00
4.00
2.00
20
15
10
5
0.00
0
1998
1999
2000
Tablets
Bagged selflines/softlines
Other chocolate confectionery
2001
2002
2003
1998
1999
2000
Tablets
Bagged selflines/softlines
Other chocolate confectionery
Countlines
Boxed assortments
Source: Euromonitor
26
2001
2002
Countlines
Boxed assortments
2003
b) Total growth
70
12.0
8.0
10.1
10.1
9.5
60
9.8
9.0
7.9
7.7
6.0
Percentage
Percentage
10.0
7.8
7.7
5.7
4.0
62
50
62
58
60
54
46
45
40
46
45
30
32
20
2.0
10
0
0.0
Value
Tablets
Boxed assortments
Value
Volume
Countlines
Chocolate confectionery
Tablets
Boxed assortments
Bagged selflines/softlines
Volume
Countlines
Chocolate confectionery
Bagged selflines/softlines
Source: Euromonitor
As seen in Figure 15, Cadbury and Nestle completely dominate the chocolate market segment.
Cadbury is a very strong number one, but in recent years Nestle has toughened the competition
by launching new products and targeting the mass market with lower priced products. In result,
Nestle is gradually earning some additional market share (from 20% in 2001 to over 21% in
2002). Despite the gains, Cadburys leading position seems to be unthreatened for the
foreseeable future. The Gujarat Milk Cooperative Marketing Federation, Ltd. (GCMMF) is a
distant number three; it has found it difficult to leverage its leading position in the dairy sector
into the confectionery market. However, it has also started a major effort to broaden its reach
by launching new products and targeting the children and teens consumer segment. Finally, the
respondents to our trade survey reported that some imported brands have started gaining
popularity in India. In the upscale niche market segment these are mostly Swiss and Belgium
chocolates, while in the mass market there is a broader spectrum of brands manufactured in
Malaysia, Thailand, Argentina, and other countries.
Figure 15: Companies retail value share in the chocolate confectionery sector
a) 2001
Ferrero SpA
0.3%
GCMMF
3.8%
b) 2002
Ferrero SpA
0.3%
Others
9.4%
Others
9.4%
GCMMF
4.0%
Nestl India Ltd
21.4%
Source: Euromonitor
27
Cadburys Dairy Milk is the leading chocolate brand with about 32% share of the value of retail
sales. Nestls Kit Kat is second with just over 10% share, closely followed by Cadburys 5 Star,
and Cadburys Perk. Other brands with noticeable market presence are Nestle Classic,
Cadburys Celebrations, Amul (of GCMMF), Cadburys Gems, Munch (Nestle), Nestle Bar One,
After Eight (Nestle), Ferrero Rocher (Ferrero SpA), Nestle Choco, Stick, and Cadburys Chocki.
In addition to the major companies, there are numerous small chocolates manufacturers
operating in India taking advantage of the premium end segment. A few, worth mentioning are:
Also, many housewives have taken the business of chocolate making seriously and operate during
the festival season (for e.g. Rakhi, Diwali, Christmas, New Year). Trade estimates suggest that
there are about 15,000 20,000 housewives in India who are making chocolates professionally,
not just as a hobby or for home consumption. According to a major manufacturer of bulk
chocolate, the bulk chocolate market in India is about 8,000 10,000 MT, and a major part of
this is utilized by the homemade chocolate segment, in addition to the bakery, and ice cream
industries. Many of these home-based operations market and sell chocolates online and
frequently they claim to be using Belgian and Swiss ingredients. According to the respondents to
our survey, this is a relatively new trend that was not seen five years ago.
3.3.2
Sugar confectionery
This is the largest confectionery sector in India both in value and volume terms. Accounting for
about half of the total confectionery market, the sugar confectionery segment is also showing
healthy growth, primarily due to the low-price strategies and discounts offered by the main
players.
As seen from Figure 16, the toffees/caramels/nougats segment is by far the largest, followed by
sugar boiled sweets and mints. In terms of growth however, mints sales have been growing the
fastest over the last 5 years (Figure 17). Lollipops are a new product in the Indian market which
first registered noticeable presence in the market in 2002, but for the 2002-03 period, they have
also registered growth of over 10%, the same as mints. Forecasts show that lollipops will
continue to strengthen their market position.
28
b) Volume
14.00
10.00
Thousand MT
Billion Rs.
12.00
8.00
6.00
4.00
2.00
0.00
1998
1999
2000
2001
2002
90
80
70
60
50
40
30
20
10
0
1998
2003
Boiled sweets
Pastilles, gums, jellies, chews
Lollipops
1999
2000
2001
2002
2003
Boiled sweets
Pastilles, gums, jellies and chews
Medicated confectionery
Source: Euromonitor
b) Total growth
14
10
8
11.5
9.3
8
9.1
6.8
6.7
Percentage
Percentage
12
9.8
8.1
7.8
7.2
5.1
4.6
2
0
Value
Mints
Toffees, caramels and nougat
Boiled sweets
80
70
60
50
40
30
20
10
0
72.2
56.3
54.4
46.8
39.3 38.6
47.9
45.5
41.4
28.2
Value
Volume
Medicated confectionery
Pastilles, gums, jellies and chews
Sugar confectionery
59.7
Mints
Toffees, caramels and nougat
Boiled sweets
Volume
Medicated confectionery
Pastilles, gums, jellies and chews
Sugar confectionery
Source: Euromonitor
The sugar confectionery segment is highly fragmented with over 20 companies in the organized
sector and a proliferation of unorganized players which according to industry sources account for
nearly 5,000 brands and numerous manufacturers. The unorganized sector has been traditionally
operating through huge trade margins and relying on trade push. Over 70% of the products sold
in this segment are in the 50 paise category. However, there are clear trends in favor of the
organized sector due to better products, improved merchandising and brand-building activities.
With customers also becoming increasingly quality conscious, the share of the unorganized
sector in this category has been gradually shrinking. In addition, the recent reduction of the
excise tariff for sugar confectionery to 8% has further reduced the competitive disadvantage
which the unorganized sector had.13
13
25
Unlike the chocolate segment, company and brand leadership is less dominant, leading to
stronger competition among the main players. Perfetti Van Melle is the leader in terms of sales,
but it is closely challenged by Nutrine and Cadbury, followed by Parle, Lotte (Parrys
Confectionery), and several others. The top five account for over 60% of the retail sales of sugar
confectionery in India. The table below lists the share of retail sales of the main players.
Share of sugar confectionery retail sales
Company
2001
2002
1. Perfetti Van Melle India Ltd
16.9%
17.1%
15.1%
15%
9.8%
9.8%
9.4%
9.4%
9.2%
9.2%
4.2%
4.2%
4.1%
4%
3.7%
3.8%
3.4%
3.4%
2.4%
2.4%
1.3%
1.3%
0.5%
0.4%
14. Others
20.2%
19.9%
Total
100%
100%
No single brand commands more than 10% share. The two largest ones are Alpenliebe of
Perfetti Van Melle and Cadburys Dairy Milk clairs with 10% and 8% respectively, followed by a
myriad of other brands. Since Cadbury acquired Warner Lamberts confectionery business, it has
been making a strong push to develop its brands (Clorets, and Adams Halls).
3.3.3
Chewing gum
This a smaller but fast growing segment of the confectionery market in India. As seen from
Figure 18 below, the market is driven primarily by sales of bubble gum to children which
accounts for over 75% of the total value of gum retail sales in India. Chewing gums like mints, for
example, are gaining momentum among young adults as breath fresheners. Although chewing
gums are also showing faster growth rate than bubble gum (see Figure 19), it is nowhere near
30
catching up with it in terms of sales and market share. While bubble and chewing gum are
growing quite fast, functional gums that address specific health issues (e.g. fighting tooth decay
and plague, gum disease) are virtually non-existent. The only functional gum that is on the
market is Perfettis Happydent White, launched in 2001. This is a mint flavored gum that fights
tooth decay and has a whitening effect due to the baking soda it contains. However, the product
has sold way under expectation, gaining some recognition only in several key metropolitan cities,
like New Delhi, Mumbai, and Chennai.
Figure 18: Gum confectionery retail sales
a) Value
b) Volume
3.5
3
Thousand MT
2
1.5
1
0.5
0
1998
1999
2000
Chewing gum
2001
2002
1998
2003
1999
Bubble gum
2000
Chewing gum
2001
2002
2003
Bubble gum
Source: Euromonitor
b) Total growth
70
12
60
10.6
9.1
9.5
8.4
50
8.5
Percentage
10
Percentage
Billion Rs.
2.5
20
18
16
14
12
10
8
6
4
2
0
6
4
66
55
57
54
40
49
30
20
10
0
Value
Value
Volume
Chewing gum
Source: Euromonitor
Bubble gum
Gum
Volume
Chewing gum
Bubble gum
Gum
Unlike sugar or chocolate confectionery, there are only few important players in the gum
segment. Perfetti Van Melle, India is the leader followed by Wrigley, India, and Candico, India.
Until the acquisition of the Spanish Joyco Group by Wm. Wrigley Jr. Co, Joyco was number two
in gum sales and Wrigley was number four. Since the acquisition, however, the two companies
31
50
and their brands will be consolidated. Currently, Perfetti holds a slightly higher share at 45%,
and the joint share of Wrigley and Joyco is about 35%. Candico has about 8%.
Perfettis Big Babol and Joycos Boomer are the two leading brands in terms of sales with 32%
and 30% share respectively. Other popular brands are Center (Perfetti), Loco Poco (Candico),
Doublemint (Wrigley), Trex (Joyco), and Chlor-Mint (Perfetti).
3.3.4
Sugar-free confectionery
Until July 2003 the use of artificial sweeteners was not allowed in India. As a result there was no
sugar-free confectionery available in the market. This ruling was to a great extent the result of
the pressure the strong sugar lobby was putting on the government. India has a very important
sugar industry providing employment for a large number of people. It is estimated that the
sugarcane farmers and their families number over 35 million and represent about 7% of the rural
population. Up to that time, the only artificial sweeteners that were allowed to be manufactured
in the country were table top sweeteners for use by diabetics. Since the Indian food law did not
allow the use of artificial sweeteners in confectionery products, no such products were imported
as well. While some sugar-free beverage and confectionery products could be seen on market,
these had been imported illegally.
However, in July 2003, the Ministry of Health with consultation with the Central Committee of
Food Standards amended the Prevention of Food Adulteration (PFA) rules of 1995 and allowed
production of sugar-free confectionery. According to this notification, confectionery products
can contain up to 1% food grade titanium dioxide and limited quantities of aspartame. The
ingredient was allowed in categories such as chewing gum and bubble gum, cookies, bread and
cakes. The notification adds that all food products said to contain artificial sweeteners will need
to declare contains artificial sweeteners on the package.
Immediately after this notification, Perfetti Ven Melle launched Happydent Protex sugar-free
chewing gum followed by Wrigley's who launched Orbit. Several of our respondents in the retail
sector reported that they carry some sugar-free products. Nevertheless, since these products
have been allowed in India for such a short period of time, there are no statistics or estimates
available to quantify the market segment. The couple of respondents who were carrying sugarfree products in their stores believed that the category should grow. One thing is for sure,
however, the category is currently very small.
32
3.4
Confectionery imports
3.4.1
Until recently, the Indian market was virtually closed to imports due to extremely high tariffs and
other additional taxes on imported goods. In 2001, the Government of India took steps to ease
many of these restrictions and imports have since started to slowly infiltrate the Indian market.
Despite these efforts, import tariffs for many goods, including confectionery, remain high. As a
result, and in combination with relatively low demand for confectionery products, confectionery
imports into India remain very small.
According to official statistics, in 2002-03, the first full year without prohibitive quantitative
import restrictions, India imported slightly more than 2,700 MT of confectionery, valued at
roughly US $7 million. 14 Although confectionery imports increased by more than 40% in value
and 20% in volume in 2003-04, Indias confectionery imports still totaled just over 3,000 MT and
valued at less than US $10 million. Put into context, Indias total imports for 2002-03 and 200304, combined, are less than 1% by volume and value of US confectionery imports in 2003 alone.
As seen in Figure 20 below, retail chocolates and sugar confectionery account for the greatest
share of total confectionery imported into India. In 2003/2004 imports of retail chocolate totaled
close to US $5.7 million. Imports of sugar confectionery fell close behind, totaling US $3.3
million, but registered a growth rate of 100% from the previous year. Imports of bulk chocolate
and chewing gum remain very small at roughly US $500,000 and US $400,000, respectively.
Confectionery imports into India
2003-04
$ 000
MT
Chewing gum 170410
390
77
Sugar confectionery - 170490
3,300
1,338
Bulk chocolate - 180620
540
339
Retail chocolate Total
5,670
1,563
Retail chocolate - 180631
30
3
Retail chocolate - 180632
70
185
Retail chocolate - 180690
5,570
1,375
Total
9,900
3,317
Source: India Directorate General of Foreign Trade
14
2002-03
$ 000
MT
260
78
1,650
835
430
308
4,620
1,530
60
10
110
87
4,450
1,433
6,960
2,751
Growth
Value
Volume
50%
-1%
100%
60%
26%
10%
23%
2%
-50%
-70%
-36%
113%
25%
-4%
42%
21%
The import data throughout this section is per financial year. Indias financial year runs from April 1 to
May 31 the following year.
33
Figure 20:
2003-04 share of confectionery imports by type (volume & value)
Chewing gum
2%
Chewing gum
4%
Sugar
confectionery
33%
Sugar
confectionery
40%
Retail chocolate
48%
Retail chocolate
58%
Bulk chocolate
5%
Bulk chocolate
10%
Base: 3,317 MT
It is important to note that an estimated 40-50% of Indias confectionery imports are thought to
be gray market imports those goods that have been: under invoiced in order to have fewer
duties paid; smuggled goods; parallel imports; and goods brought into India by people traveling
from abroad. While confectionery products imported through the gray market pose a threat to
confectionery goods imported legally, they also affect the value of confectionery actually
imported into India. As a result, actual imports are probably somewhat larger that shown by
Indias official import statistics. Nevertheless, they remain very small.
3.4.2
As seen from the table below and Figure 21, in the last two years, Malaysia and Singapore have
been the leading suppliers of confectionery to India in terms of both value and volume. In 200304, the two countries accounted for more than 20% in value and more than 30% in volume of the
total confectionery import market in India. However, in the last year, imports from Singapore
have shown decline, particularly in volume term, while imports from the third largest supplier,
the UAE, have grown almost 60% in volume terms and almost 40% in value terms. The growing
importance of the UAE and the port of Dubai as center for export and re-export of
confectionery products was confirmed by our suppliers, many of who indicated this as a
preferred route. The US is a relatively small supplier of confectionery to India and accounted for
only 4% in value and 3% in volume of Indias confectionery imports in 2003-04. However, US
confectionery exports to India experienced significant growth in 2002-03 and more than doubled
in value and increased roughly 80% in volume, albeit from a tiny base. Other leading suppliers
that experienced significant growth in exports to India in 2003-04 included Australia, Brazil,
34
Spain, and the UK. Confectionery exports from Spain registered the largest growth, increasing
more than 500% in value and more than twice in volume.
Confectionery imports by supplier
2003-04
$ 000
MT
Malaysia
1,020
661
Singapore
1,010
399
United Arab Emirates
800
227
Australia
800
326
Netherlands
630
196
Brazil
540
63
Switzerland
510
88
UK
510
111
Thailand
490
202
Spain
440
79
Korea
410
109
US
380
84
Others
2,360
772
Total
9,900
3,317
Source: India Directorate General of Foreign Trade
2002-03
$ 000
MT
950
645
1,030
517
510
166
350
148
760
315
350
30
360
74
240
43
340
233
70
31
300
105
150
46
1,550
398
6,960
2,751
Growth
Value
Volume
7%
2%
-2%
-23
57%
37%
129%
120%
-17%
-38%
54%
110%
42%
19%
113%
158%
44%
-13%
529%
155%
37%
4%
153%
83%
52%
94%
42%
21%
Figure 21:
2003-04 leading foreign suppliers (volume & value)
Malaysia
10%
Malaysia
10%
Singapore
10%
Singapore
10%
UAE
8%
Others
54%
UAE
8%
Others
54%
Australia
8%
US
4%
Australia
8%
Netherlands
6%
US
4%
35
Netherlands
6%
Base: 3,317 MT
Bulk chocolate
Others
11%
Singapore
15%
Others
33%
US
6%
Brazil
8%
Singapore
17%
Netherlands
10%
UAE
10%
Malaysia
72%
Malaysia
Switzerland 9%
9%
Base: US $540,000
Retail chocolate accounts for the biggest share of confectionery imports into India and the
second largest share of the total market for confectionery in India. Singapore is by far the leading
supplier of retail chocolate to India and in 2003-04 it exported more than 300 MT of retail
chocolate, valued at US $850,000. The Netherlands is the second largest supplier of retail
chocolate and exported roughly 175 MT at a value of close to US $600,000. Although Singapore
and the Netherlands account for 25% of Indias imported confectionery market, exports from
these countries dropped more than 15% and 22%, respectively, in value and more than 30% and
40% in volume between 2002-03 and 2003-04.
On the other hand, exports from several other countries, including the US, the UK, Lebanon and
France, grew significantly during the same period and their combined market share increased
from 9 to more than 20%. Lebanese chocolate exports increased substantially, rising from just
US $20,000 in 2002-03 to US $310,000 in 2003-04, while US chocolate exports increased from
US $110,000 to US $340,000.
36
Despite this rapid growth, the chocolate brands primarily found in India continue to be from the
leading suppliers of retail chocolate, with a few exceptions. Some of the most popular brands
and country of origin include:
Tango Malaysia
Nestle Switzerland
Toblerone Switzerland
Lindt Switzerland
Tiffany UAE
Solen Turkey
Quanta UAE
Gandour Malaysia
Vochelle Malaysia
Sugar confectionery
Sugar confectionery accounts for the largest
share of Indias confectionery market and,
although imports remain a very small portion
of the whole, they are growing rapidly.
Between 2002-03 and 2003-04 the value of
sugar confectionery imports grew from close
to US $1.7 million to US $3.3 million and the
volume increased from more than 800 MT to
more than 1,300 MT. In fact, of the top ten
suppliers of sugar confectionery to India
(Australia, Thailand, Spain, China, Turkey,
Korea, UAE, UK, Malaysia, and Argentina),
only imports from Malaysia decreased and the
rest increased by at least 40%.
Thailand
13%
US
1%
Turkey China
7%
7%
Spain
13%
Australia is the leading supplier of sugar confectionery to India and more than doubled its
exports between 2002-03 and 2003-04. Thailand and Spain are also important sugar
confectionery suppliers and exports from the latter increased from just US $30,000 in 2002-03
to US $420,000 in 2003-04. Other countries with notable growth in exports include Turkey,
Argentina, UAE and the US. Although sugar confectionery exports from the US are very small,
they grew more than 250% in 2003-04.
37
Brands of sugar confectionery in India originate from a number of different countries and some of
the most prevalent brands are:
Brachs US
Arcor Argentina
Candeli Argentina
Tiffany UAE
Chewing gum
Figure 24: 2003-04 leading suppliers
market share of chewing gum
Others
10%
Indonesia
8%
Japan
26%
UAE
8%
Australia
In terms of value, Japan is the leading supplier
Korea
15%
18%
of chewing gum to India, with exports of US
China
$100,000 in 2003-04. Although the value of
15%
exports from Japan increased by close to
200% from the year before, the actual volume
Base: US $390,000
of exports that year decreased by more than
50% and totaled just 8 MT. Australia is the Source: India Directorate General of Foreign Trade
leading supplier in terms of volume and in 2003-04 exported more than 20 MT valued at US
$60,000. China and Korea are also important suppliers of chewing gum to India with 2003-04
exports totaling US $60,000 and US $70,000, respectively.
3.5
Consumption
3.5.1
General information
As already discussed in Section 3.1 confectionery products have very low penetration in the
Indian market. In result, annual per capita consumption is also very low; it is estimated to be just
over 300g (0.7lb) for chocolate and around 600g (1.3lb) for sugar confectionery. For
comparison, per capita consumption of confectionery products in the US is around 25lb.
38
It is primarily the low penetration and consumption that heighten everybodys expectations about
the high potential for growth of this market. The optimism is further fueled from the forecast
for rapidly increasing incomes. On the other hand, confectionery products compete with the
traditional sweetmeats which continue to be very popular in India.15 Finally, westernization of
India (particularly young adults in the urban areas) is seen as another factor positively impacting
the growth potential for confectionery products and chocolate in particular. Chocolate has
already shown larger growth than sugar confectionery, which is a result of its increasing
popularity as a gift. It is seen as an indulgence product, and therefore appropriate as a gift. This
trend has given a boost to the boxed chocolates segment.
On the negative side, as already indicated, India is a very price sensitive market. Thus even with
the rising incomes and westernization, many confectionery products and particularly chocolates
are considered luxury products even by the better-off consumers. In addition, increase in world
prices of cocoa contributed to increased prices of chocolates, further strengthening the
indulgence product constraint to deepening market penetration and increasing consumption.
Almost all confectionery purchases in India are believed to be impulse driven. Experts indicate
that sugar confectionery and gum products consumption are driven almost entirely by impulse
purchasing. The figure is lower for chocolates (about 70%), because of its increasing popularity
as a gift for various occasions and during the festival season. In result, in their effort to increase
consumption and product penetration, marketers have started to promote some products as
appropriate snacks, not just an indulgence.
3.5.2
a)
Age
Children and teenagers are the main consumers of confectionery products, and sugar
confectionery and bubble gum in particular. Some of our respondents also indicated that they
have observed increasing chocolate sales to kids and teenagers. This has several important
consequences for the further development and growth of the Indian market:
15
With over 30% of the population younger than 15, and over 50% younger than 25,
India is a very young nation. The confectionery market will continue to grow by
simply continuing to target this consumer segment which will remain the main
potential for growing the market, particularly in volume terms.
Children usually purchase sweets with their pocket money, rather than with their
parents money. Thus price will remain a most important factor when targeting
Indian youngsters. Most of the potential growth in sales of higher end products will
come from the adult population.
b)
While children are attracted mostly to bubble gum, adults prefer chewing gum.
Similarly, medicated or functional products target the adult (mostly the young adult)
population, which is more modernized and open to novelty and untraditional
products.
Confectionery sales in India are driven mostly by the urban market segment. Estimates suggest
that between 60% and 70% of the confectionery sales in India are concentrated in the more
developed urban areas, where incomes and consumer awareness are generally higher. At the
same time, about 70% of the population lives in rural villages. Indeed, estimates also indicate that
confectionery products have significantly higher penetration (about 22%) in the urban markets
than the country average penetration. Chocolate consumption is concentrated almost entirely in
urban India.
The organized sectors has its stronghold in the urban markets, while unorganized manufactures
and home made sweets thrive in the rural areas. Price, poor infrastructure, lack of exposure to
new products and stronger traditionalism, are the main reasons for this. However, many of the
main players in the Indian confectionery sector have started focusing on tapping the potential of
rural India. As incomes in these areas are generally lower, marketing efforts are concentrated on
promoting the lower priced mass market products and on offering smaller packs. Chocolate
sales are still limited only to the few wealthier households.
While rural sales have been growing over the last years, the potential for growth in urban areas
also remains significant.16 The difference is that in urban India, in addition to the growth trend in
the mass market segment, there are increasing opportunities to sell higher-end niche products.
This is particularly important for those who are looking for opportunities to export
confectionery products to India. As imported products, particularly from Europe and the US,
generally fall in the highest price brackets, they hold potential among the more affluent consumer
segments, concentrated mainly in the urban areas and large metropolitan areas.
16
For example, Euromonitor estimates that the value share of retail sales in rural areas has grown from
20% in 1998 to 30% in 2003.
40
c)
Regionality
Westernization
41
At the same time, manufacturers and marketers are putting increasing effort into detaching
chocolate from its kids image and to broaden its consumer base among adults.
3.5.3
While domestically manufactured brands dominate the market and consumers have general
awareness about them, foreign products and brands are becoming increasingly known. This
trend is particularly noticeable in the urban areas and among middle and upper class consumers.
We were consistently hearing similar comments from our respondents from all categories
manufacturers, importers and distributors, and retailers. These can be summarized as follows:
The urban market is brand conscious; the rural market is price conscious. As one
respondent put it, in the metro areas consumers associate brand names with quality;
in the rural areas, consumers associate higher prices with better quality.
The upscale niche market is focused on brand and image quality. Consumers are
looking for known brands with good quality images. Swiss and Belgium chocolates
are considered the crme de la crme. It is in the upscale niche market segment,
where brand and country of origin really matter to consumers when making
purchasing decisions.
Except for the top quality chocolates, consumers are usually not aware, and generally
not interested in where a product has been manufactured as long as they are familiar
with the brand. For example, Tiffany is a popular brand with mass appeal mostly
manufactured in the UAE. However, consumers associate it with the UK. Indeed,
many of the large multinational companies have production faculties throughout the
world and various distribution arrangements for different countries/regions. Thus
frequently the global brand products may be manufactured at various places without
consumers being aware or interested in the actual place of origin.
Products from SE Asia and South America are more oriented to the mass market,
while European and US products cater to the upscale market segments. Imported
products in general are considered to be of higher quality than the domestic ones.
Attractive packaging is very important for the brand image. Indians associate quality
with good packaging. Imported brands are presented much better than Indian ones.
US brands are less known than European ones. Mars and Hersheys are the only US
brand names with broader recognition in India.17 Consumers as well as the trade
generally have a good perception about the quality of US products.
17
Although the Mars brands are usually associated with the US, the products available in India are usually
imported from, and made in Europe.
42
3.6
Pricing
As it was already emphasized, the Indian market is generally price sensitive. Also, many experts
see that the mass market will grow at faster rates than the niche segments. In result most
confectionery companies are trying to fit their products in the lower price ranges. The most
popular price range for confectionery products is the Rs. 0.25 0.85.
Most confectionery brands of Nutrine, Lotte, Wrigleys, Perfetti, Candico, Parle, etc. are from
the Rs. 0.25 to Rs. 1 price categories. Some chewing gum and bubble gums are in Re. 1/-, Rs. 2/and Rs. 5/- categories. Most major companies including Cadburys and Nestle are strongly
pushing sales of their Rs. 5/-, Rs. 7/-, and Rs. 12/- categories. There is a big difference in the
prices of domestic and imported products. The general rule is that domestic products are the
cheapest. Then, there are different ranges of prices for imported products, depending on the
brand, country of origin, and product itself. Asian and South American products are usually
moderately priced, while European and US products are the most expensive. For example, from
the top end products, 100gm Lindt chocolate sells for around Rs. 130.
An important factor that affects the price of the products is the Central Excise Duty payable by
the organized/registered manufacturers. For sugar confectionery (without cocoa), it is 8%
(recently reduced from 16%); for chocolate confectionery, it is 16%. All involved in the
distribution and manufacturing of chocolate products see this as a major constraint to the growth
of the segment and believe that the excise duty for chocolates should be brought down similar to
the duty for sugar confectionery. However, the government is not really keen on reducing the
duty, because it is not seen to affect any major true Indian player or manufacturer. The
dominating view is that this duty is earning revenues from two major chocolate manufacturers,
Cadbury and Nestle, both of which are foreign companies.
There is also a sales tax, which varies from state to state. For example, Maharashtra has the
highest sales tax, 15.3%, while in some of the southern states it varies from 5-10%. From April
01, 2005 the Government of India will implement value-added tax (VAT). The VAT will replace
the sales tax regime in all states with a two-tier tax regime of 4% and 12.5%.
For imported products the price is generally structured as follows:
Landed cost (FOB+freight+insurance)
+ Basic duty
+ Countervailing duty
= Excise duty (production duty)
+ Special additional duty
+ Educational cess (2%)
43
3.7
Seasonality
Our respondents reported that there are no seasonal trends in the sales of sugar confectionery
and gum. Sales are consistent throughout the year. On the other hand, chocolate sales peak
during the festival season (August to February), when exchanging gifts is a tradition.
3.8
Market forecast
The confectionery market in India is expected to continue to grow at healthy rates. Sugar
confectionery will remain the largest segment, and new products like mints, lollipops and chewing
gum, as well as boxed assortments will grow at the fastest rates.
The mass market will continue to be very price sensitive pushing manufacturers to price
discounting and offering smaller packages in order to continue penetrating the rural market. On
the other hand, the niche for more upscale products will also offer new opportunities for
branded products. Boxed chocolates show the greatest potential for growth within the
chocolate category; chewing gum, medicated confectionery and power mints are also expected
to grow rapidly, particularly among the young adults segment.
Lollipops is a new category and has sparked lots of interest among children. The category is
expected to continue to grow in the coming years.
Experts expect that the adult market will offer an additional niche for some products.
As the market grows, so will imports. Nevertheless, they will remain small and with limited
impact on the total market. Imported confectionery products will play a role primarily in the
urban areas, in the more upscale market segments.
44
SECTION 4:
4.1
DISTRIBUTION CHANNELS
Overview
The Indian food distribution system is characterized by a large number of intermediaries and
relatively poor infrastructure, such as transportation, storage, and refrigeration facilities. It has
low levels of efficiency, with the costs of distribution being rather high. Manufacturers and
importers rely heavily on the middle man for the distribution of confectionery products in India.
Most importers rely on distributors or wholesalers to reach retail outlets, while confectionery
manufacturers often rely on C&F agents or dealers to work with the wholesalers and
distributors.
Indias retail sector is highly unorganized, as small independent stores are the main outlet for
consumer purchases. Nevertheless, the retail sector is changing and the organized sector is
gaining ground with the emergence of supermarkets and hypermarkets in metropolitan India.
Confectionery products are predominantly
purchased in small independent food stores,
known as kiranas (see Figure 26). However, over
the last five years, convenience stores,
supermarkets, and hypermarkets have played an
important role in the distribution of confectionery
products. In 1998, confectionery retail sales in
convenience stores were virtually non-existent,
but today these stores account for 2% of
confectionery sales. During the same period, the
share of retail sales by supermarkets and
hypermarkets has also increased, from roughly 6%
to 8%.
Source: Euromonitor
Confectionery
specialists
9%
Others
5%
Supermarkets/
hypermarkets
8%
Indias organized retail sector remains the preferred distribution channel for branded and
imported products, including confectionery. Although this sector is thought to be in its infancy,
rapid growth is expected over the short to medium-term, creating greater opportunities for
imported confectionery products.
4.2
Domestic production
cover the whole country. Typically, domestic confectionery manufacturers in India rely on
company-owned dealers or C&F agents who, in turn, work with wholesalers and distributors
throughout the country to reach the retail network. Manufacturers use their own stockists/C&F
agents (which are also warehouse/company depots - mostly company) as a starting point for
distribution. Stockists/C&F agents are appointed depending on the city and state. In large metro
cities such as Mumbai, Delhi, Kolkata, and Chennai a company may have 2-3 stockists/C&F
agents. Manufacturers also service large metropolitan areas through wholesalers. In smaller
cities and towns where the manufacturers do not have their stockists/C&F agents they generally
work with wholesalers. Figure 27, illustrates the most typical distribution channels for domestic
confectionery.
Through these dealers, many domestic confectionery manufacturers have access to hundreds or
thousands of wholesalers and distributors to reach the small retail outlets in both rural and urban
areas as well as to reach the larger supermarkets in the metropolitan areas. In addition, in some
cases, manufacturers have several regional sales offices and, and using their C&F, agents can
access retailers directly within that region.
Figure 27:
Typical distribution channels for domestic confectionery
Wholesaler
Manufacturer
Stockist/C&F agent
company owned
Retailers
Grocery/Kinara stores
Chemists
Gift shops
Book shops/Newspaper vendors
Supermarkets
Specialty shops malls
Airport shops, railway stations, bus
stands
Paan Beedi shops
46
Wholesaler
4.3
Imports
4.3.1
Importing confectionery in India is primarily dependent on the location of the importer and the
markets they serve. Most of the importers operate warehouses near the major ports and, in
many cases, this is the JNPT port. For many importers, JNPT is the easiest port to distribute
products not only to Mumbai and Delhi, but also to other major commercial and metropolitan
areas. If imported confectionery is destined primarily to South India or North India, importers
may use the ports at Chennai and Kolkata.
Most confectionery imports are imported into India by sea. However, two importers that we
interviewed import by air, though this is a more expensive option.
47
Several of our respondents mentioned that Dubai has turned into an important center for
shipping product to India, with numerous consolidators working there.
4.3.3
Handling of imports
Confectionery imports into India are mainly handled by local importers who then distribute the
products through a network of distributors, wholesalers, and sometimes directly to large
retailers. Figure 28 on the following page illustrates the distribution of imported products from
the JNPT port throughout India.
It is important to keep in mind that confectionery imports into India are very small and even the
large importers deal in very small volumes. For example, our respondents reported that they
import between 10 and 200 containers of confectionery products per year. However, only one
reported 200 containers, one reported 100 to 110, one reported 50 to 65, and the remaining 10
said that they import around 10 containers.
Many importers still cover a wide range of confectionery products and import from several
different countries. However, we spoke to several importers who focused on the niche market
and import only chocolates or only from one country or brand.
4.3.4
Given the size of the country, poor infrastructure, and the large number of intermediaries,
established business relationships play an important role in the distribution of both domestic and
imported confectionery products in India. The majority of the importers and manufacturers that
we interviewed have had long-standing relationships with their agents or distributors or have
exclusive arrangements for the distribution of their product. As one manufacturer stated, A
C&F agent or distributor can make or break your brand.
48
Figure 28:
49
4.4
4.4.1
Food retailing in India is changing rapidly. While small independent stores, such as kiranas and
paan-beedi shops prevail, modern supermarkets are becoming increasingly common in urban
areas such as Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad and Pune, leading to
increasing demand for quality products, including confectionery. Larger scale wholesale
club/hypermarket formats are also appearing. Overall, organized retailing is growing rapidly and
in addition to supermarkets and hypermarkets, the shopping mall concept is quickly gaining
ground.
Today, India has approximately 12 million retail outlets. These are second only to agriculture
sector in terms of employment. It is estimated that food products are sold by an estimated 6.5
million small grocery stores and wet markets throughout India, with only a small percent sold in
more organized supermarkets and hypermarkets. . Food and beverage retail sales are estimated
at roughly US $135 billion with a growth rate of 4-5% each year. However, out of this, receipts
in the organized sector represent less than 1%.
Kiranas
Paan-Beedi
The friendly neighborhood paanwalla or the paanbeedi shop has played a key role for the growth of the
chocolate and confectionery sector in India. The
paan-beedi retailer occupies a slot in a locality in
urban and rural India that gives enormous
convenience to people looking to buy basic things.
These stores, positioned to serve the mass market,
are usually found in all busy streets and in residential
neighborhoods in most Indian cities and towns. They
50
occupy only about 10 square feet of space and stock everything from chocolates and
confectionery, produce, and other food items to cigarettes, batteries, and personal care items
and to branded and non-branded items.
It has become increasingly easier for the paan-beedi shops to expand the breadth and depth of
their product line, as many branded product brands now come in mono packs and in low unit
volumes and prices. Many fast moving consumer goods companies are increasingly using this vast
network, which accounts for more than one million stores and is growing.
Paan-beedi shops are generally served by C&F agents and wholesalers and distributors. Several
of the leading confectionery manufacturers, including Nestle, Perfetti, ITC Foods, and Cadbury,
are using these shops and they have become a major distribution channel for their confectionery
products.
Candy stores
Although candy stores in India account for close to 10% of confectionery retail sales in India,
their share has been declining in recent years. These stores typically sell a range of confectionery
products from domestic and imported chocolates and confectionery to bulk and branded
confectionery products and are primarily aimed at children. Indian candy stores usually purchase
from domestic manufacturers, C&F agents, and distributors for imported products. However, if
importers are based locally, some confectionery retail stores will purchase directly from the
importer.
Despite the general decline of the share of
Figure 31: Sweet World candy store
candy stores in overall retail sales of
confectionery products, some specialized
candy stores and chains are thriving. A typical
example is the Mumbai based chain Sweet
World, which currently has 20 stores in 9
cities in all prestigious shopping malls in
Mumbai, Delhi, Pune, Gurgaon, Noida,
Bangalore, Hyderabad, Kolkata and Chennai.
They have positioned themselves to serve the
more upscale market segment and sell more
than 150 varieties of confectioneries. Sweet
World is a pickn mix concept store, which
sells a wide range of candies. They do not sell branded products, but clearly label the origin of
their candies.
51
Sabka Bazaar is operated by The Home Stores (THS) and is part of a Rs. 600
crore Shahid Group of Companies and is a 51:49 JV with Groupe Casino, France a
multi-format retailer. Sabka Bazaar is North Indias largest supermarket chain and
there are 21 Sabka Bazaar stores in Delhi. THS in association with Ansal Housing
and Construction Ltd, a leading property developer (Rs. 3.5 billion), has forayed into
the hypermart segment with a Super Sabka Bazaar in New Delhi.
Bombay Bazaar Limited (BBL) is perhaps one of the largest private sector pure
grocery retail chains, in terms of the number of outlets. It is a Mumbai-based retail
chain with 250 outlets, selling food, groceries, and provisions. Currently, BBL is
concentrating on promoting their private brands of groceries and provisions.
53
Some of the main, larger scale, retail formats (hypermarkets) in India are:
4.4.3
Metro Cash & Carry India Ltd (MCCI), a 100% subsidiary of the German-based
cash and carry store, Metro AG, is scheduled to open its first store in Bangalore in
2003. MCCI is opening its second venture in Kolkata in 2005.
The continued growth of the organized retail sector in India will have a huge impact on the
countrys distribution channel. Growth in this sector will be dependent on rising incomes and
increasing exposure to the western lifestyle. It is estimated the food retail sales in
supermarkets and hypermarkets have grown approximately 30% per year in the last three years
and this trend is expected to continue in the future.
Although the retail sector is rapidly changing, the importance of the smaller independent food
stores will still play a role in the Indian distribution channel, but primarily for domestic products.
As a result, there should be a unique opportunity for imported food products in the supermarket
sector in the future.
54
4.4.4
Most of the major confectionery manufacturers in India rely on regional and national television to
promote their products. Their marketing message is primarily aimed at children, teenagers, and
young adults. Thus, they also use promotional activities such as sponsorships of sports and other
activities in schools and colleges.
For the most part, importers and retailers are not heavily involved in promotion of
confectionery. Aside from the in-store display of confectionery, retailers do not go into any
additional lengths to promote their products. However, some of our respondents indicated that
they occasionally place advertisements in newspapers or magazines around the holiday season
and several respondents had plans to use radio promotion in the future.
Also, some of the
importers we interviewed indicated that they consider promotional support from their overseas
suppliers important for carrying their products and brands.
55
SECTION 5:
MARKET ENTRY
5.1
5.1.1
All the categories mentioned below are listed under OGL (Open General License) and can be
imported freely into the country and no special import license is required.
Chewing gum (HS 1704.10)
Sugar confectionery (HS 1704.90)
Bulk chocolate (HS 1806.20)
Retail chocolate (HS 1806.31; 1806.32; 1806.90)
Sugar free confectionery (HS 2106.90.99)
5.1.2
Import tariffs
The import tariffs for each of the above classifications are as follows:
Unit
Duty Rates in %
Kilogram(s)
Basic
ADD.
DUTY
EDU.
CESS
45 %
16 %
2%
Unit
Duty Rates in %
Kilogram(s)
56
Basic
ADD.
DUTY
EDU.
CESS
30 %
16 %
2%
Unit
Duty Rates in %
Kilogram(s)
Basic
ADD.
DUTY
EDU.
CESS
30 %
16 %
2%
Unit
Duty Rates in %
Kilogram(s)
Basic
ADD.
DUTY
EDU.
CESS
45 %
16 %
2%
Unit
Duty Rates in %
Kilogram(s)
Basic
ADD.
DUTY
EDU.
CESS
45 %
16 %
2%
Unit
Duty Rates in %
Kilogram(s)
57
Basic
ADD.
DUTY
EDU.
CESS
30 %
16 %
2%
Unit
Duty Rates in %
5.1.3
Kilogram(s)
Basic
ADD.
DUTY
EDU.
CESS
150 %
0%
2%
An example
5.2
The Indian Food Laws could be the main constraint for US chocolate and confectionery
manufacturers immediate entry into India via the legal channel, although some recent
amendments in the laws will benefit the imports of sugar free confectionery. For example,
according to one respondent, an importer and agent for a US brand, 70% of the confectionery
range of this brand manufacturer cannot be legally imported into India because certain food
additives (colors, preservatives and flavoring agents) used by the company are not approved by
PFA in India. 18
18
The Prevention of Food Adulteration Act (PFA) of 1954 and the PFA Rules of 1955 as amended. The
PFA covers various aspects of food processing and distribution, such as food color, preservatives, pesticide
residues, packaging and labeling, and regulation of sales.
58
Also, US manufacturers are not willing to comply with some labeling requirements and special
instructions, because current volumes are too small to justify the adjustments. Although, the
Government of India through a special notification issued by Ministry of Commerce & Industry
has allowed the importer to put these special labels/stickers on the consignment at the port of
entry in India; this could be one of the reasons why importers prefer to buy from agents in Dubai
and Singapore who are willing to put these additional labels/stickers on the consignment prior to
shipment to India.
Another government act that needs to be taken into consideration is the Standards of Weights
and Measures Act, 1976, and Standards of Weights and Measures (Packaged Commodities) Rule,
1977. These legislative measures are designed to establish fair trade practices with respect to
packaged commodities. The rules are to ensure that the basic rights of consumers regarding vital
information about the nature of the commodity, the name and address of the manufacturer, the
net quantity, date of manufacture, and sale price are provided on the label. There may be
additional labeling requirements for food items covered under the PFA. Importers of packaged
food products must adhere to these acts, including labeling the product, informing the consumer
of the name and address of the importer, the net quantity, date of manufacture, best before date,
and sale price.
The latest issue of USDAs FAS report on India Food and Agricultural Import Regulations and
Standards from July 2004 (GAIN report # IN4077) provides excellent background and all
necessary information. The report can be viewed at:
http://www.fas.usda.gov/gainfiles/200407/146107003.pdf
Overall, the best approach for any potential exporter to India is to establish contacts and work
with experienced importers and distributors, who would be able to provide the necessary
guidance.
59
SECTION 6:
6.1
General prospects
The Indian market for confectionery products has undergone significant changes over recent
years. While penetration and consumption levels are still very low, overall sales, and particularly
sales of higher value premium products have increased. The availability of imported products has
also been rapidly rising since India liberalized its imports regime in 2001. Nevertheless, they are
still very small leaving ample opportunities for further growth.
The distribution channels have also undergone substantial changes. Supermarkets have emerged
and started to gain power over other retail formats. With these changes in mind, we expect
that:
The share of imported confectionery will continue to increase over the next several
years, although overall sales will remain modest. Indians taste will continue to
become more westernized and more quality conscious. This trend will be more
obvious in the urban areas among middle and upper class consumers, offering higherend foreign brands growth opportunities. While most domestic companies also
focus their new product development efforts on the mass market, a few have
products targeting premium products. Nevertheless, Indians associate imported
products with higher quality, and therefore respond positively to confectionery
imports. The United States along with Western Europe are perceived as offering
highest quality, although there is very low awareness of US confectionery products
and brands.
The popularity of chocolate products, particularly boxed assortments for gifts, will
continue to increase.
The sugar confectionery will remain the largest confectionery segment. We expect
to see growth of new and novelty products, such as mint and medicated
confectionery (with added vitamins and/or other minerals), as well as the new to the
country sugar-free confectionery categories.
60
6.2
While the traditional targets for confectionery products have been children and
young people, increasing number of marketers have seen growth opportunities in
targeting the adult consumer segment. This will lead to new products and marketing
strategies aimed at them.
There will continue to be opportunities for new products that appeal to the young
consumer. The ever-present stimulus of novelty and fashion, encouraged by
continuing exposure to western culture will keep the doors open for new products
and new suppliers.
Marketing and promotion expenditures for confectionery products will increase and
distributors will require promotional support from manufacturers.
Recommendations
Potential exporters should carefully select trading partners from among the Indian
importers and distributors, as they will be critical to ensuring presence of their
products on retail shelves. Importing is a relatively new business in India, and many
importers may lack the knowledge and experience to ensure successful distribution
of the products they deal with. Therefore, it is of critical importance to select the
right partner.
Importers and distributors may have limited financial and human resources. Thus
U.S. exporters should be willing to offer as much support as possible, particularly in
the initial phase of market entry.
U.S. exporters may directly contact potential importers and distributors to select
their partner(s). They may use the list of industry contacts provided in Section 6 or
obtain contact through the US Embassy in New Delhi. The typical way of
introduction is to send them company brochures, product catalogues, product
samples, and price lists. A proper, formal introduction is important for a new
entrant to make effective and productive contacts at potential partner firms.
Mumbai and/or New Delhi are the most appropriate entry markets for US exporters.
These cosmopolitan cities, with a larger number of affluent consumers exposed to
western influences, as well as better developed infrastructure, are most appropriate
for introduction of new US products that are generally higher priced than domestic
and some imported products.
India remains a very price sensitive market and appropriate pricing is key to the
success of new products. US exporters should carefully discuss their product pricing
and positioning with their chosen partners in India.
61
6.3
Success stories
Distribution is the key to success for high value food items like chocolates. There are many
examples of both small companies with minimal financial resources and large companies with
substantial financial resources who lack adequate experience in the import trade or knowledge
and access to distribution channels for confectionery products and who have ventured into the
import of chocolates and confectionery but failed. In fact, some of the most common mistakes
have revolved around seasoned and diversified importers entering the confectionery import
market with a keen understanding of importing but a lack of knowledge about the confectionery
market and distribution in India. There have been several examples where importers with
experience in industries from metals to healthcare products partnered with leading foreign
confectionery manufacturers to import and distribute their products throughout India. Yet,
these importers did not have an understanding of the complex confectionery distribution
channels, the price sensitivity of the confectionery market, nor their target market and,
inevitably, imports were discontinued and the goal of the partnerships was never attained.
Although these companies did not have success in Indias confectionery import market, for all of
the unsuccessful attempts there are an equal number of success stories. Some of these are as
follows:
Effem India Pvt Ltd - a 100% subsidiary of Mars Inc., USA is perhaps the only
company in India that is professionally importing and distributing chocolate in India.
The company commenced imports in August 2004. They import products such as
Mars, Twix, Snickers and Bounty from the Mars subsidiaries Masterfoods, Holland
and Masterfoods, France. The products are distributed by Snowmans Frozen Foods
Pvt Ltd, a distribution company, which uses a cold/refrigerated chain to distribute the
product all over India and the product is available in all metropolitan areas, cities and
main supermarkets such as Foodworld, Food Bazaar, Subka Bazaar, Nilgiris, C3 as
well as in convenience/kinara stores, chemist shops, and grocery stores across India.
Sunstar Confection & Trading (Pvt) Ltd / Fantasie Chocolates - The other
international major brand in India is Lindt. These chocolates are imported by a
Mumbai based company Sunstar Confection & Trading (Pvt) Ltd who also retails the
Lindts range through their own air conditioned boutique stores called Fanatise
Chocolates in Mumbai, Pune and Bangalore. Fantasie chocolates also sell their home
brand Fantasie through these stores. Fantasie chocolate brand is 50 years old and is
well known in Western India.
Vrinka Overseas Pvt Ltd/Sweet World is perhaps Indias only multi-store, multilocation candy store. Sweet World commenced operations in 2002 and introduced
the Pick N Mix concept in India. Sweet World sells over 200 varieties of unbranded
imported confectionery including jellybeans, gummies, marshmallows, gumballs,
62
licorice, etc. There will be 20 Sweet World stores in India by March 2005, all of them
in the prestigious malls in major metropolitan areas across India.
Brook Trading Co. Pvt Ltd./Patchi Chocolates another imported chocolate brand
which has a presence in Mumbai, India is Patchi. Mumbai based Brook Trading Co.
Pvt Ltd., imports and retails a range of Patchis chocolates imported from Lebanon.
Their flagship store, Patchi, opened in Crossroads, an upmarket shopping mall in
Mumbai in 2003. The company is planning to open two stores in Delhi and one each
in Kolkata, Bangalore, Hyderabad and Pune in 2005.
Other US chocolate and confectionery brands that have established some small
presence in India over the last three years are:
Jelly Belly - imported and distributed in India by HMA Udyog Ltd; and
63
SECTION 7:
7.1
64
65
66
67
68
7.2
69
70
71
72
Safead (rice-flour);
Dried fruits and nuts (primarily almonds, pistachios, cashews and raisins);
Flavoring, and coloring agents (e.g. -- the most common cardamom flavor, rose
water, mango, ginger, lemon, peel, etc. -- saffron (zafran), turmeric (yellow),
cochineal (red), pistachio (green) and other edible coloring agents);
Hot spices. Dried (and oftern baked or roasted) cardamom, cloves, cinnamon, and
cassia leaves;
73
Barak/Tabqka for decorating the more expensive sweetmeats (e.g. rose petals, silver
leaf, etc).
Milk Sweets are made from kheer or khoya. Tradition plays a major role in kheer or
khoya sweets. The range includes a wide range of variations such as Pedas and
Burfis.
Ghee sweets are made by using ghee as a base with besan and safead. Again, there is
a wide range types, including of Ladoos, Halwas and Pinnis and the famous Sohan
Papdis.
Bengali sweets are the most popular and are made from Chenna. These include the
Rasgullas, Gulab Jamuns, Sandesh, Chum Chums, Anurodh, Pakizas and a wide range
of Bhoj.
Dry fruit sweets are prepared from almonds, cashews, and pistachios. Figs and
raisins are also widely used. These include Badam Pista Katli, Kaju Anjeer Roll, Kaju
Katli and Anjeer Burfi.
74
companys own retail outlets and sometimes to other retailers as well. Usually the production
facility and the retail outlets are located in the same city. Most of these have been established for
many years and remain in the hands of the original family owners. The following table lists some
larger sweetmeat operators in India.
Brijwasi Sweets - Mumbai
Punjabi Chandu Halwai
Karachiwala - Mumbai
15
branches
11
branches
6 branches
5 branches
2 branches
8 branches
6 outlets
9 branches
75
Attempts to develop a larger scale production of sweetmeats have been limited to a few
products such as rasagolla (a spongy succulent sweet) and shrikhand (a traditional curd-based
milk sweet). Two companies K C Das Pvt Ltd, Kolkatta and Haldiram Foods International Ltd,
Nagpur both sell branded canned rasagollas under their brand K C Das and Haldirams,
respectively. However, the canned sweetmeat concept has yet to be embraced by Indian
consumers.
On the other hand, organized efforts have been fairly successful in branding shrikhand. The most
popular brand is Amul from Gujarat Cooperative Milk Marketing Federation Ltd. Others include
Warana from Warana Dairy and Aarey from Aarey Dairy. The majority of the sales of branded
shrikhand are in Western India, especially in Mumbai where it is a traditional sweet. The market
for branded shrikhand alone is estimated to be 7,000 metric tons.
76
77
Main activities
A manufacturer of chocolates and confectionery, malted foods and drinking chocolate, and soft
drinks.
During FY2003, Cadbury India was bestowed with the award for the first Business
Today A. T. Kearney, Indias Best Managed Company. Indias best companies were
identified on the basis of four characteristics: value creation, strategic direction,
complexity of portfolio and status as a role model.
During FY2003, Cadbury India was selected amongst the top 10 Great Places To
Work in corporate India by Great Place To Work Institute, Inc., USA
Cadbury India has a 5% market share in the organized sugar confectionery segment.
Cadbury India also markets Halls and Clorets under the Adams brand in India.
Cadbury India has setup an entirely new network for its confectionery range and is
not using its existing chocolate network.
During FY2003, Cadbury India launched Double Deck and Caramello a new milk
chocolate variant, launched Perk and Gems in smaller pack size priced at Rs. 2 and
launched Bytes a chocolate flavored wafer snack.
During FY 2003, Cadbury India also focused on newer gifting formats for various
occasions.
Cadbury India chocolate brands include: Dairy Milk, Perk, Crackle, 5 Star, Temptations; and the
confectionery brands are clairs and Gems.
Gums. Cadbury India entered this segment with the acquisition of the Adams brands from
Warner Lambert India Pvt Ltd, which was consequent to the acquisition of the global nonchocolate confectionery business of Pfizer Inc., USA by Cadbury Schweppes plc., UK, in 2002.
The acquisition is now poised to become a growth area for Cadbury India. The company
announced that it will strengthen its position in the confectionery sector and will launch some of
their gum brands such as Trident, Dentyne, Bubbas and Chiclets in 2005.
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Malted Foods. Cadbury India has the strong brand presence of Bournvita, which enjoys a
market share of around 16%. Other malted foods are Cadburys Drinking Chocolate and
Cadburys Cocoa powder, which contributes 22% of the companys revenue.
Soft Drinks. Cadbury India has an arrangement with Pure Drinks Ltd to manufacturer a range
of soft drinks such as Canada Dry, Crush and Tonic Water.
Distribution and future outlook
Cadbury India is aiming at the development of its retail network in rural areas for expanding its
sales volume and turnover. It also has an advantage of brand equity, distribution network, access
to global technology and a strong base for raw material collection.
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Recent performance
For FY ending December 31 2003:
Sales: Rs.23,077m
Net Profit: Rs. 2,631m
During FY 2003, Nestle India manufactured 21,450 MT of chocolates and
confectionery products valued at Rs. 3,366m.
Main activities
Manufacturer and marketer of coffee, tea, malted beverages, instant baby cereals & foods, milk
products, chocolates and confectionery, instant foods and culinary products. Manufactures
products in categories that include: Milk Products and Nutrition, Beverages, Prepared
Dishes and Cooking Aids, and Chocolate and Confectionery.
Products and brand presence
Chocolates and confectionery. Nestle India forayed into chocolates and confectionery in
1990 and has cornered a quarter of the chocolate market in India. It has expanded its products
range to all segments of the market. The Kit Kat brand is among the largest selling chocolate
brands in India.
During FY 2003, Nestle India continued to strengthen their presence in the market.
It sustained momentum through innovative consumer promotions and trade offerings
and supporting key price points.
During FY2003, Nestle India launched a range of innovative and renovated products
in this category that includes Nestle Milk Chocolate, Nestle Fruit & Nut, Nestle
Krunchy, Nestle Milkybar Starz, Nestle Choco, Nestle Chocolate clairs, Nestle
Coffee clairs and various flavors of Chocostick.
During FY 2003, Nestle India earmarked 25% of its product portfolio at affordable
price points and cut prices of Kit Kat to drive volume growth. Nestle India cut
prices of Kit Kat by up to Rs. 2, bringing the brand on a par with the chocolate
industry benchmark price points of Rs. 5 and Rs. 10.
Nestle Munch, the largest selling unit in the wafer segment and the most widely
distributed, continued to gain in volumes. Nestle Chotu Munch, which was launched
at Rs. 2/- price point was well received.
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Chocolate: Milky Bar, Marbles, Munch, Nestle Rich Dark, Bar-One, etc.
All confectionery products are sold under the umbrella brand Allen's.
Parrys was a pioneer of the confectionery industry in India and was the first Indian
company to setup its factory in 1914.
During 2004, Murugappa Group sold 60.39% of its stake in Parrys to Lotte
Confectionery Co Ltd, Korea, for Rs.6447m and will further acquire 20% of Parrys
in the near future.
The entry of multinationals in the Indian confectionery sector over the last decade,
adversely affected Parrys business and could not support further investments. In this
changed market environment, the Murugappa Group found it difficult to pump in
money continuously to build and sustain the confectionery brands and decided to
exit to divest the group's stake in Parrys in the best interest of its shareholders.
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During FY1999-00, Parrys entered into a joint venture agreement with Hutamaki Oy
Leaf, Finland to manufacture and market Smilees brand - sugar panned chocolate
buttons, Lakerol brand - medicated candy, and Chewits brand - chewable toffee with
an investment of Rs. 250m but had to exit from this business as the products could
not be adapted to Indias tropical climate conditions.
During FY2003-04, Lotte India upgraded its quality systems and received the ISO9001-2002 and ISO 14000 certifications and also HACCP certification from BVQI for
its plant in Nellikuppam, Tamil Nadu.
Lotte India brands have a 24.5% market share of the confectionery industry and a
28% market share in the toffee segment.
Lotte India brands have a strong presence in the 25 paise price segment.
During FY2003-04, it entered the deposit candy segment through the launch of
Butter Scotch Rings.
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Lotte India portfolio of consists of 16 brands aiming the children and teens consumer segment.
Some popular brands include Parrys clairs, Lacto King, Coffee Bite, Coconut Punch, Madras
Caf, Soft Spot, Shakti, Mocca, Joozy Mangoh, Cricket, Lacto Bon Bon, Caramilk and Fruitz. All
are sold under the umbrella brand of Parrys / Lotte
Distribution and future outlook
Lotte India currently has 800 distributors and plans to appoint an additional 400 distributors
India-wide. Lotte Indias brands are retailed through more than 300,000 outlets throughout the
country. The company plans to infuse funds and expertise into the company by introducing new
products including gums and other innovative products from the Lotte international kitty.
During FY1999-00, Nutrine sold its biscuit brands and bakery division to Sara Lee
Corporation, USA for Rs. 330m.
Main activities
Nutrine manufactures and markets sugar boiled confectionery, cocoa and milk based toffees,
candies, clairs and fruit bars.
Products and brand presence
Nutrines main brands are as follows:
Confectionery: Koka Naka, Elaichi, Maha Lacto, Wild Koffy, Nutrine Gold, Gulkhand,
Amras, Caramella, Superstar, Marvel, and Lolli pop;
Toffeees/Eclairs: Aasay; and
Fruit bars: Naturo.
All are sold under the umbrella brand Nutrine.
The Nutrine's Maha Lacto brand is among the most popular, bringing about Rs
1,000m.
Eighty percent of the market comprises products at the 50-paise price point.
Nutrine spends 8% of its turnover on advertising and brand promotion per annum.
Nutrine is the major sponsor of sports events at school and college levels and has a
national brand presence.
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Candico was earlier the confectionery division of Bakemans India Ltd., a large
manufacturer of biscuits and bakery products which was hived off in FY1997-98 as a
separate company.
Candico is the 4th largest manufacturer of confectionery products and has a market
share of approximately 8%.
During 2002, Candico sold its Mint-O brand to ITC Foods a division of Indian
Tobacco Co. Ltd.
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Technical collaboration with Eurobase, Belgium for gum-base the worlds largest
independent gum base manufacturer.
Candico products are sold through a 1,500 distributors countrywide network. The
company has a direct or indirect distribution reach in most towns and cities with a
population of over 25,000 individuals.
Candico has identified candy retail as one of the potential segments for future growth
and is actively exploring this opportunity.
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Gums:
Alpenliebe - milk and caramel based candy - is the largest selling candy in India.
Cloromint - mint flavored candy.
Cofitos - coffee and cream based candy.
Herbasol - herbal breath freshener - mint, orange, strawberry and peach flavors.
Big Babol - non sticky bubble gum in 4 flavors - fruit, cream, strawberry and mango
is the largest selling gum in India targeted at children.
Centerfresh in spearmint and strawberry flavors, targeted at the teen segment.
Brooklyn targeted at the adult segment.
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Center Fresh was the first brand offering of Perfetti to be launched in India in 1994, followed by
Big Babol and Alpenliebe. Alpenliebe today is the largest brand in its portfolio. Big Babol ranks
second in size followed by Center Fresh and Chlormint. Alpenliebe Lollipop, Mentos, Cofitos,
Center Shock, Marbels, and Fruit-telta are other leading brands in the Perfetti portfolio.
With a basket of 13 brands, the company strives to leverage its international product expertise
while adapting flavors and blends to local tastes.
Perfetti has a 25% share of the organized confectionery market in India. It spends between 10 to
15% of its net sales on advertising each year.
With a focus on innovation and new product development, Perfetti launched 12 products across
several categories during 2004. It also forayed into the chocolate clairs market with
Chocotella and the digestives market with Chatarpatar. Three to four more products are
expected to be launched in 2005.
Among the 2004 launches was Happydent Protex', a specially formulated sugar-free chewing gum
containing Xylitol. Perfetti is positioning the sugar-free gum as an oral care product and
maintains that the contents of Xylitol assist in prevention of tooth decay and helps contain
bacterial growth.
The company intends to spend an estimated Rs. 20m in advertising to
promote Happydent Protex' over the next few months.
Outward foreign direct investment
During FY2003, Perfetti India, which is a wholly owned subsidiary of its Italian parent, set up its
first manufacturing plant outside India - in Bangladesh with an investment of Rs. 200m.
Distribution and future outlook
Perfetti markets its product to 1 million outlets across India. Pan shops plays a key role in the
company's growth, with its products stocked across 250,000 pan shops across the country.
Over the last 10 years, Perfetti has invested approximately Rs. 6,000m in India. During 2004, it
announced a planned further investment of Rs. 1,500m over the next two years in marketing and
brand building, and to increase its manufacturing capacity by upgrading its Chennai plant.
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Installed capacities:
Products manufactured at integrated plants and hence installed capacities cannot be
ascertained.
Parle has 19 contract manufactures located in different parts of the country out of
which 14 for manufacturing their range of biscuits and 5 for confectionery products.
Recent performance
For FY ending March 31, 2004 Parles sales turnover was approximately Rs. 8500m.
Main activities
Parle manufactures and markets cookies, sugar boiled confectionery, and cocoa and milk based
toffees.
Products and brand presence
Eighty percent of Parles revenue is from the sale of biscuits and bakery products.
It has 40% market share in the total cookies industry in India. Parle G remains the
largest selling cookies brand in the world by volumes, accounting for more than half
of Parles sales turnover.
Parle has 15% market share in the total confectionery industry. Melody, Poppins,
Mangobite and Kismi enjoy a strong imagery and appeal amongst consumers.
Its brands are targeted at the lower and middle price segment.
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Parle donates 25% of its income to public charities to support education medical
care.
During 2004, Wm. Wrigley Jr. Co. USA, acquired the confectionery business of Joyco
Group, Spain. This transaction involved Joyco's operations in India along with China,
France, Italy, Poland and Spain.
As part of the restructuring, the corporate head office of Wrigley, India has moved
from Bangalore to Delhi, which was Joycos base of operations.
Joyco Group earlier named Agrolimen, Spain entered India during 1995 through a
51:49 joint venture General de Confiteria Ltd with the New Delhi based Dabur
Group.
During 1999, Agrolimen, Spain bought out Dabur's share in the joint venture and
General de Confiteria Ltd acquired the status of a 100% subsidiary of Joyco Group.
At the same time, the company's name was also changed to Joyco India Pvt Ltd.
Wrigley entered India in 1994 with the launch of Wrigleys chewing gum.
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GCMMFL has a manufacturing contract agreement with The CAMPCO Ltd for
production of its brands.
The CAMPCO Ltd will offer 3,000 MT of its chocolates manufacturing capacity
exclusive for production of AMUL brands for GCMMFL.
92
Recent performance
For FY ending March 31, 2004, GCMMFL had net sales of Rs. 27,480 million.
Main activities
Producers and marketers of milk, milk products, ice creams and processed foods.
Produces and markets a wide range of dairy and non-dairy bread spreads, powdered
milk & dairy whitener, fresh & UHT milk, a wide range of cheese, yogurt, flavored
yogurt, flavored milk, cooking butter, ghee, a wide range of ice creams, malted foods,
chocolates and confectionery and instant foods.
GCMMFL currently has less than 2% share of the total chocolate market.
GCMMFL is a success story of dairy and ice cream business in India and wants to
have another go at its chocolate brand.
GCMMFL wants a hold in the chocolate market that is seeing new international
players like Mars.
During FY 2003-04 introduced three new brands to add to its range. GCMMFL also
re-launched clairs its confectionery brand, which was pulled out of the market two
years ago.
GCMMFL chocolate brands (all sold under the AMUL brand) are Milk Chocolate, Fruit n Nut,
Almond Bar, Bindaaz, Fundoo and clairs. It also has Rejoice, a gifting brand.
Distribution and future outlook
GCMMFCL currently poses very little threat to the other two chocolate giants Cadbury and
Nestle, as it still needs to get its distribution and product attributes in place before it can make a
dent in the chocolate market.
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ITC Limited
Company name and ownership details
ITC Limited (ITCL) is the flagship company of the ITC conglomerate, Indias largest manufacturer
of cigarettes and tobacco products, is an agri-commodity trader with interests in greetings, gifting
and stationery products, safety matches and essence sticks, hotels, paper board and specialty
papers, packaging, information technology, lifestyle retailing and foods.
British American Tobacco Co. Ltd holds 45.33% stake in ITCL.
Indian Public Limited Company.
Listed at the Mumbai, Delhi, Calcutta, Cochin, Bangalore, Ahmedabad, Pune, Hyderabad,
Chennai, Uttar Pradesh and National SXs.
During 2002, ITCL, set-up a separate division for its foods business called ITC Foods. ITCL made
its entry into the branded and packaged foods business in August 2001 with the launch of the
Kitchens of India brand. A more broad-based entry has been made since June 2002.
ITCL Foods Division does not have its own manufacturing facilities for confectionery products.
Products are manufactured by contract manufacturers.
Recent performance
FY ending 31 March 2004:
Net Sales: Rs. 64704.40m (total sales of the group)
Net Profits: Rs. 15928.50m (total net profit of the group)
Main activities Food division
Marketer of 45 value added products in four categories: staples, confectionery, snack foods and
cookies, and ready to eat meals.
Products and brand presence
During 2002, ITCs Foods rolled out its maiden confectionery brand- Mint-O, which
it had acquired from the Delhi-based Candico India Limited. Mint-O is targeted at the
young adult segment. Mint-O is also available in Lemon and Orange flavors.
During 2003, ITC Foods later launched Candyman targeted at the under 12 children
segment. Candyman is available in two variants - Wild Banana and Mango Delight.
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ITC Foods sugar-boiled confectionery portfolio consists of just two brands Mint-O
and Candyman.
19
Atta is wheat flour, primarily used for making Indian breads, such as Chapati and Roti.
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HLL does not have its own manufacturing facilities for confectionery products. Products are
manufactured by contract manufacturers.
Recent performance
For calendar year ending December 31, 2003 HLL had sales of Rs. 1,109.60million, and net profit
of Rs. 180.43million.
Main activities
HLLs Food Division comprises the business of tea, coffee, ice creams, bakery products, staples
and confectionery.
Products and brand presence
HLL brand range includes hard-boiled candies, toffees, mint candies and crackling candy, such as
ChocoMax, MaxCream, MaxMint and MaxCrackler. All are priced at 25p, 50p and Rs. 2 and sold
under the brand Max.
Max candies are among the most popular confectionery brands in India.
Max candies have an innovative marketing strategy targeting children. The Max
brand story is about simple and imaginative play. The brand ambassador is the playful
Max lion who rules the Kingdom of Max. Max Kingdom is a place full of mouthwatering confectionery and ice cream treasures that have to be continuously guarded
against the designs of the Evil Shadow master. In this adventure, he is guided by Prof.
Higgabottom. Max always wants to play and have fun, whereas Prof. Higgabottom
always disciplines him and wants him to behave like a King and herein lies the
conflict. Therefore, most kids identify with Max being one of them and his struggles
and adventures as their own.
HLL is aware that increasing the distribution reach would be the key to growth.
HLL had plans to take its confectionery business to 400,000 outlets by the end of
2004 and is developing its exclusive distribution system for the confectionery
business.
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CAMPCO undertakes processing of cocoa beans and supplies cocoa and other
intermediary products to Cadbury and Nestle.
CAMPCO currently has a manufacturing contract tie-up with GCMMF, which will use
CAMPCOs installed capacity of 3,000 MT.
97
During FY2003-04, CAMPCO adopted a strategy of "low price point" to market its
chocolate brands to the middle-class segment and introduced innovative packaging
and a new look to its enrobed chocolate products Turbo and Treat. Turbo
was also introduced in Rs 3 pack, apart from the existing Rs 5 pack.
Another brand, CAMPCO Bar, which is sold at Rs 10 for a 45-gm pack, was launched
at Rs 2 for a 9-gm pack under CAMPCO Mini Bar segment.
CAMPCO also markets a wide range of chocolate products under its own brand and has small
presence in different segments of the chocolate market. Its main brands, all sold under the
CAMPCO umbrella brand, include:
Chocolate: Melto, Cream, Turbo, Treat, Megabite, Bar, 4ever, Krust, clair, Melto
clairs, Brown Center clairs, Play Time; and
Drinking chocolate: Winner.
Distribution and future outlook
CAMPCO, being a co-operative, is unable to match the advertising budgets of MNC such as
Cadbury and Nestle. Instead, it is concentrating on event management activities to popularize its
products especially in schools.
CAMPCO has 22 area sales offices and regional offices in Kolkata, Lucknow, Delhi, Hyderabad,
Bangalore, and Mumbai. Delhi, Himachal Pradesh, Punjab, Haryana, and Uttar Pradesh account for
38% of the total chocolate market of CAMPCO. Its chocolate products are sold in nearly
100,000 outlets throughout the country. Nearly 40% of the outlets are in Uttar Pradesh.
CAMPCO has a strong market presence in Karnataka and Kerala, as most of the members of this
co-operative organization are from these States. This has helped it garner more than half of its
chocolate market in the southern states.
During FY2003-04, CAMPCO appointed a Bangalore based consulting company to train its sales
representatives, sales managers and regional heads in areas such as leadership, management, and
team-building initiatives.
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Until August 2003, Lotus was 52% owned by Network Foods International Limited,
Singapore, a holding company belonging to Sunshine Allied Investments, Singapore,
part of MUI Group, Malaysia. Lotus had obtained a total loan of US$2.33m from
Network Foods International Ltd during FY1998 and FY1999 towards brand
promotion and working capital requirements.
During FY 2003, the ownership of the company changed hands and two Hyderabad
based businessmen Mr. D. Durgaprasad and Mr. A. Ramakrishna acquired 42.25% of
the equity from Network Foods International Limited, Singapore and also infused Rs.
20m into the sick company.
Lotus has been incurring losses over the past 5 years and performance has not been
encouraging for this 13 years old company. Despite several efforts MUI Group,
Malaysia could not revive the companys operations.
99
Main Activities
A manufacturer and marketer of chocolate and a wide range of cocoa based industrial products.
Lotus currently has a cocoa processing and chocolate manufacturing agreement with
Cadbury India Ltd, which is the major revenue earner for the company.
100
Kayempee Foods
Pvt, Ltd.Mr. Sirish Kothapally
Executive Director
A-50/1, IDA, Kukatpally
Hyderabad 500 037
Tel: +91 40 2308 5739 / 2308
8559
Fax: +91 40 23088581
Email: sirishh@rediffmail.com
Website: www.chocomarco.com
Nutrine Confectionery
Company Pvt Ltd
Mr. K. Siva Mohan Reddy
Executive Director
PB#38, B. V. Reddy Colony
Chittoor 517 001
Tel: +91 8572 229969 (8 lines)
Fax: +91 8572 226646 / 226244
Email: nutrine@vsnl.com
Website: www.nutrinesweets.com
IMPORTERS/DISTRIBUTORS:
Bajoria Foods Pvt Ltd / Virgo
Mr. Sanjey Bajoria
Director
Marketing
41/1623, D. N. Nagar
Andheri (W)
Mumbai 400 053
Tel: +91 22 3090 7575 / 2670 5686
Fax: +91 22 2670 7110
Email: bajorias@vsnl.com
101
Kaivan Foods
C. K. Balsara Group of
Companies
Mr. Kaivan C. Balsara
Director
3, Kurla Industrial Estate
L.B.S. Marg
Ghatkopar (W)
Mumbai 400 086
Tel: +91 22 25138455 / 25116795
Fax: +91 22 25139318
Email: kaivanbalsara@yahoo.com
RETAILERS:
Champion Sweet Mart
Mr. Ramesh Bhai
Proprietor
272, Bhat Bazar
Narshi Natha Street
Masjid Bander (E)
Mumbai 400 009
Tel: +91 22 23475616
Le Chocolat
Ms. Leela Thawani
Proprietor
8/9, Joy Palace, 29th Road
Bandra (W)
Mumbai 400 050
Tel: +91 22 2640 8879
102
Sweet World
Vrinka Overseas Pvt Ltd
Ms. Vrinda Rajgarhai
Director
46, Jolly Maker Chambers II,
225 Nariman Point
Mumbai 400 021
Tel: +91 22 2202 7309 / 2202
7335
Fax: +91 22 2281 6122
Email:
vrinda@sweetworldonline.com
Website:
www.sweetworldonline.com