CONFECTIONER

Y INDUSTRY OF
PAKISTAN
ANALYSIS OF PAKISTANI INDUSTRIES -
TAHIRA MARIUM JAFFERY

AYESHA AJAZ – 05584

FATIMA TAUSEEF – 05143
MAHNOOR TARIQUE – 05532
MARIUM MUNIR – 05479
NASIK ZIA - 05436
Table of Contents
ACKNOWLEDGMENT.............................................................................................................................3
EXECUTIVE SUMMARY.........................................................................................................................4
OVERVIEW................................................................................................................................................5
What is confectionery?................................................................................................................................5
The Confectionery Industry of Pakistan......................................................................................................5
MAJOR PLAYERS.....................................................................................................................................7
DEMAND CONDITIONS..........................................................................................................................9
FACTOR CONDITIONS..........................................................................................................................13
GOVERNMENT POLICIES.....................................................................................................................18
ISSUES AND CHALLENGES.................................................................................................................19
Percentage Contribution to sales:...........................................................................................................20
FUTURE PROSPECTS.............................................................................................................................21
DESIGNER CONFECTIONARY.............................................................................................................22
BIBLIOGRAPHY.....................................................................................................................................28
ACKNOWLEDGMENT

First and most importantly, the Analysis of Pakistan Industry research report team is extremely thankful
to Allah Almighty for giving us the strength and determination for finishing the tedious task efficiently
and to the best of our capabilities as per the course requirements.

We would also especially extend our gratitude to Miss Tahira Mariam Jaffery for assisting, guiding and
providing us the right path on which to work towards. Her in depth analysis into the industry and her
critique definitely proved to be very valuable and indeed provided us the opportunity to improve upon
ourselves.

Much grateful thanks to all relevant suppliers, owners, managers and shopkeepers who shared their
extensive views on the selected industry and gave upon their valuable time to accommodate us within
their very tight and busy schedules.

Finally thank you to all members of the team who worked consistently, guiding and helping out one
another to bring out the best in each other

We certainly hope that the API research report on the Confectionary Industry of Pakistan will be to be a
coherent and valuable source of information and is covering all the possible aspects concerned.

Regards,

API Research Report Team,

Industry: Confectionary Industry of Pakistan

Members:

Ayesha Ajaz, Fatima Tauseef, Marium Munir, Mahnoor Tarique, Nasik Zia

30th May 2014

EXECUTIVE SUMMARY

This report has been prepared after extensive research, data collection and analysis of the confectionery
industry of Pakistan. Because the confectionery industry is a highly undocumented industry, the research
team relied mostly on primary data sources, interviewing representatives of different industry players,
retailers, specialized confectionery shops and designer chocolate cafes. The information available online
was outdated therefore; this research presents the latest information regarding this sector via its primary
sources. Repeatedly, our sources confirmed that chocolate is the most demanded product out of all the
available confectionery ranges as well as the fact that it has a very promising future in the Pakistani
market. Thus a large part of this report deals with chocolates.

An emerging trend that came to attention while studying this industry was the move towards designer
chocolates. This trend, identified as a major threat is one of the biggest hindrance limiting the growth of
the confectionery industry and this report reserves a separate section for discussion on this issue.

Overall, through this report, readers will be sure to derive out the most prominent aspects of the
confectionery industry of Pakistan at present (year 2014).

The research team hopes that this report meets all the set requirements of the concerned people.

Thank you,
The Research Team,
Confectionery Industry of Pakistan
OVERVIEW

What is confectionery?

Confectionery items are products that posses a high sugar content. Confectionery items are divided into
two broad categories namely the bakers’ confectionery and the sugar confectionery. In Pakistan, the
bakers’ confectionery items include the most popular mithais (traditional sweets) of different varieties, as
well as cakes, pastries and the likes. This report however, focuses on sugar confectioneries which include
chocolates, jellies, hard boiled and soft boiled candies, lollypops and chewing gums.

The Confectionery Industry of Pakistan

The confectionery industry of Pakistan, suffers seriously from the lack of much documentation. Therefore
there are close to no exact determinations of market size or shares of the different players of the industry.
Such trends are only identified via the estimations of different stakeholder of the industry.
The Pakistani industry of confectionery has enjoyed growth of about 9% in the previous years. However,
this growth figure, when compared to other Asia-pacific countries is small.[ CITATION Bra09 \l 1033 ]. On
the positive side however, Pakistan’s confectionery market is worth approximately $100 million and is
growing strongly.[ CITATION Ian13 \l 1033 ]

Sales of the confectionery industry are made via established brand names such as Hilal, Candlyland,
Cadbury etc and these brands dominate the confectionery market accounting for more than 85% of the
total sales of the industry.[ CITATION Con09 \l 1033 ] Unbranded players also exist in the market, whose
products are most commonly found at small khokhas and paan shops in the Sec C districts of the city.
Certain unbranded products such as the chiniminis, soft candies are also available in selected kiryana
stores and are consumed by all sections of the socio economic classes.

In the organized sector, there are 23 units involved in manufacturing confectionery products. The total
capacity of these plants is broken down in the table below. [ CITATION Sub14 \l 1033 ]
Table 1 Capacity Utilization and Distribution of the Organized Sector

Sweets 30,000 metric tons

Toffees 12,000 metric tons
Bubble gum 7,800 metric tons
Chocolates 4,200 metric tons
Total Capacity 54,300 metric tons
Actual production 32,000 metric tons

In the unorganized sector there are roughly 15 units involved in producing confectionery items. Many of
these are small scale cottage industry units.

Table 2 Capacity Utilization of the Unorganized Sector

Total capacity 12,000 metric tons

Actual Production 5000 metric tons
MAJOR PLAYERS
In the branded confectionery sector, there are a number of well established brands. There are close to no
new entrants as there is heavy competition in the industry between the already existing brands. Also, no
government subsidiaries or incentives are provided to the new upcoming brands, therefore in the last 10
years, there has been no influx of new entrants in this industry.

Candyland: Market leader in term of volume produced. Candy land aims to target SEC A and SEC B
specifically, but also caters to SEC C. Offers around 40 different brands including chocolates, candies,
jellies, marshmallows and chewing gums. The most popular product of candyland is CHILI MILLI. Since
Candyland caters to Sec A class, it is continuously trying to adapt to the changing trends and the threat
that segments’ confectionery industry faces due to rise in imports of imported chocolates and the rise of
designer confectionery shops. Candylands’ products aim to match international standards along with
valuing local consumers and their buying power.[ CITATION Ope14 \l 1033 ]

Hilal: Hilal has been running operation is Pakistan since 1957. It is one of Pakistan’s top confectionery
and cake manufacturers. Hilal is actively involved in exporting to 20 countries around the world including
Cananda, Russia, China, Australia, Bolivia, Argentine and so on. Hilal has invested heavily in Research
and Development facilities and is continuously bringing up innovative and new concepts to the market. It
was the first local company to introduce the concept of packaged cakes and cupcakes. In the
confectionery department it introduced a unique variant of hard boiled candy know as ‘Amrood candy’.
[ CITATION Hil14 \l 1033 ]

Cadbury: This is perhaps the most growing player of the industry currently. With Dairymilk as its most
popular product for SEC A and B and perk being its substitute for the lower economic classes, Cadbury
Pakistan is most efficiently meeting the need and growing demand for chocolates out of all the
confectionery items offered by the industry. Cadbury is now known as Kraft Foods as it has been taken
over by the Lakson group when it formed an Alliance with Mondelez Pakistan, a parent company having
many fast growing brands of the world such as Oreo, Tang, LU and now Cadbury.[ CITATION Scr13 \l
1033 ]

Other prominent players in this industry include B.P., Mayfair, Mitchells and Kidco.
The following charts show the percentage distribution in terms of revenue as well as output between the
major market players of the industry.

Market Share In Terms of Revenue

Cadbury Candyland Hilal Mitchell's Others

10%
Market Share in terms of Output
31%
15% Candyland Hilal Mitchell's Cadbury Others

10%

14% 33%
18%

27%

17%

26%

Figure 1 Source: Average of primary data collected by different industry players

Figure 2 Source: Data gathered from primary sources

DEMAND CONDITIONS

Most demanded products by company;

 Candyland Chilli Milli
Hilal Ding Dong and Freshup
B.P Spacer Toffee
Cadbury Dairymilk
Mayfair Creamers

Confectionery items comprise 10% of total sales (Approximations based on the surveys conducted);

Chocolates 77%
Toffees 4%
Chewing Gum 9%
Jellies 5%
Lollipops 2%
Candies 3%

Demand conditions in the home market can help companies create a competitive advantage, when
sophisticated home market buyers pressure firms to innovate faster and to create more advanced products
than those of competitors.

Pakistan's confectionery industry has experienced an upward trend in the recent past. According to
Pakistan Biscuit & Confectionery Manufacturers Association, Pakistan's Bakery and Confectionary
Industry has grown with an average annual rate of 6.5% to 7.5% during 2002-2010.This indicates that
Pakistan is a very lucrative market for the confectionery industry and local, foreign and imported brands
are successfully targeting different segments of the population to tap this potential. According to Ian
Buchan, General Manager of world's biggest snacking company, Mondelez International, "Pakistan is
among the top 5 future growth markets for Mondelez”, and adding that the country's confectionary market
is worth approximately $100 million and growing strongly." [ CITATION Far13 \l 1033 ]

The multinational snack and confectionary giant has gained strong positions in a [ CITATION Far13 \l
1033 ]number of categories, specifically in the snacking business that includes its Cadbury and tang
portfolio. This can be attributed to the rise in the demand for chocolates, jellies and snacks due to the
large amounts of investments in these products whereas the demand for lollipops and candies has
experienced falling demand. It is observed that for many consumers’ chocolates and jellies despite having
high price points, offers more utility in comparison to candies and gums.

The interview with the representatives of Candyland and B.P revealed that for local industries the sales of
confectionery items does not vary substantially throughout the year.[ CITATION Sam14 \l 1033 ] The
only major drop in demand occurs during the Holy month of Ramadan and bounces back during festivals
like Eid. According to Sami Rehman, brand manager of Candyland, most of the confectionery items have
seasonal demand, for example, in winters demand for chocolates and jellies rises and in summers for
toffees and gums. This is because in summers, when temperatures in southern Pakistan go as high as 42
degrees, chocolates and jellies tend to melt and lose their original shape which makes them difficult to
eat. During this time hard boiled toffees and gum is a more preferred choice.

Demand Pattern Throughout The Year

18

16

14

12 Gums
Candies
10 Jellies
Chocolates
8

0
Jan-March April- June July-August Sept- October Nov- December

The snapshot of the demand patterns in the industry reveal that the overall demand has increased in the
face of industry setbacks. Firstly, the prices of confectionery exports have risen due to the recent
appreciation of the rupee but this has barely altered the market demand pattern. Since our local
confectionery products are low priced they are still relatively cheap. Moreover, a substantial price hike is
observed in the prices of confectionery items by 100-150% in the last 2 years. Fortunately, that setback
that could’ve resulted from this price hike is set off by increasing domestic demand due to factors
including effective marketing and promotions. The company representatives went so far as to admit that
there has been a considerable deterioration in the quality and quantity (volume) of products because of the
high costs. A portion of this cost is met by cutting profits and other by reducing the quantity and quality
of products. The ultimate aim is to keep the prices low. The confectionery market in Pakistan had been
built around low price points; and through this confectionery giants like Candyland and Hilal have
captured the market. Foreign or imported brands as well as large scale local confectionery companies are
successfully targeting the lower segment of the market by introducing low end products between the price
range of PKR 5 to PKR 25. This low price positioning has played a crucial role in the boost of this
industry as of the demand comes from SEC B and below.

Companies catering to;

SEC A – Cadbury, Candyland, Hilal

SEC B and SEC C – Cadbury, Candyland, Hilal, Mayfair, BP, Pearl confectioneries, Danpak
confectioneries.

Most of the demand for the local confectionery industry comes from pre-teens and teenagers of SEC A
and SEC B. Adult consumption and that of SEC A is much lower than it was in the affinity markets. It is
the virtual absence of SEC A which has framed a major portion of this report and will be discussed later
on. Due to high media influence, class A is more inclined towards imported products E.g. Kit Kat,
snickers, skittles etc. Companies, have recently begun to attempt to cover this gap in the market by
adapting themselves to cater to SEC A, for instance, Candy Land is coming up with high end products;
Yums in place of Skittles, Cloud 9 in place of Kit Kat and Perk and Paradise in place of Bounty.

One of the most rapidly expanding product markets in Pakistan in terms of demand is chocolates and this
can be attributed to the hefty investments made on the marketing and positioning of chocolate as an
affordable life style product, especially by Cadbury. Interestingly, the nature of the industry allows other
companies to reap the benefits from the efforts of another company. However, the market is still in its
fledgling state and there remains ample of untapped demand in the industry. Also, Pakistanis are still
relatively slow to adopt new flavors and combinations. For example Candyland launched the combination
of mint and chocolate under the brand of "MINTASTIC" but it did not do very well and was soon
dismissed.

The confectionery industry has also experience a new trend developing towards designer chocolates.
These chocolates are tailored for customers who're looking for gifting chocolates with a personalized
touch. With mithai becoming increasingly expensive and changes in tastes preferences and lifestyles
Pakistani consumers have taken a step into designer chocolate market. In Pakistan we have LAL’s
Chocolates, Butlers, Lo Choco Lounge, all of which import Swedish and Belgium chocolate. Embossing
of names, logos of companies and personalized message on the chocolates are fast becoming popular.
These designer chocolates focus a lot of attention on packaging. The packaging of these products includes
materials like imported mesh, gold foils and brocade, lace and satin-draped boxes being in heavy demand.
With the rise in disposable incomes, people do not mind spending on designer chocolates, most of which
costs between PKR 500 and PKR 2,500 per kg. Companies are increasing demand by creating websites
where the consumer can also win prizes by entering a code that they were given on a candy wrapper.
These have all been used as driving forces to change the competition within the industry. This influx of
designer chocolates if often seen as an important reason for the decline in SEC A chocolates as these
chocolates are mostly demanded by SEC A.

The Pakistani confectionery Industry is a unique mix with extreme consumption patterns, attitudes,
beliefs, income level and spending. Understanding the consumer demands and maintaining the quality
will be essential. Local companies will have to keep themselves abreast with the developments in other
parts of the world. Most importantly; pricing is the key for companies to make their product reach
consumers' pockets. Right pricing will make or break the product success. There's an immense scope for
growth of confectionery industry in Pakistan - geographically as well as in the product offering. Keeping
these positive signs in mind one could expect that future of Chocolate and Confectionery market of
Pakistan is promising.
FACTOR CONDITIONS

Factor conditions include the human, physical and capital resources along with the kind of infrastructure
that an industry withholds. Human Resources officials are individuals that operate an organization. This
department is a critical component of any business as they are responsible for a wide variety of functions.
Of the several roles of Human Resource, it is the part of the organization that deals with employee
relations. From a high level, the human resources department of a company deals with payroll, benefits,
hiring, firing, and regulations management. The giants of the Pakistan’s Confectionery industry are very
particular about their recruits. Though different firm have different criteria for selection and employment,
they all have a certain trend that they follow.

Before we move on to the trend, the kind of specialists that confectioners require are very technical in
nature. Meaning unless you are a certified graduate in a specific field you cannot apply for the job. Apart
from this they also look for past experience mostly in the same field that they are applying for. The
specific jobs and their requirements are listed below for better understanding:

1. Manager Quality Assurance- MSc/BS (Food Science & Technology) with 3-4 years of
relevant experience in food industry.
2. Manager Export-MBA in Marketing with 3-4 years of relevant experience in international
Marketing/Business Development.
3. Production Executive- MSc/BS (Food Science & Technology) with at least 1-2 years of
relevant experience in Food Industry.
4. Marketing Executive-MBA in Marketing with at least 1 year relevant experience with
FMCG in International Marketing.
5. HR Executive-MBA in HR with at least 1 year relevant experience with FMCG.
6. Export Officer-Graduate with 2 years of working experience in Export Department.
7. Creative Designer-Graduate with a diploma in Creative designing from Indus Valley or
Karachi school of arts and minimum 1 year of experience with an advertising or creative
agency.

Therefore it can be said that the industry employees skilled labor be t in the form of in office employees
or the manufacturing unit employees. This is because most of the manufacturing units are capital
intensive. Because this industry requires constant innovation and because the industry is currently very
much saturated, it is crucial for all the players to have a research and development department. This
department is responsible for testing, replicating and creating new products. Some may be inspired by
international products. For instance CandyLand introduced a local version of Nestle’s Bounty in the form
of Paradise chocolate. It had a similar taste and look, even the packaging had similar colors. However this
was a replica of what Nestle was selling yet it is being sold very successfully all over Pakistan.

Another important aspect of innovation in terms of HR is the creative designing team. The need for this
department is also critical as the target market of these confectioners is mostly the younger audiences and
they require constant creativity. This creativity can be in the form of tvcs, the product itself, the marketing
campaign, packaging etc.

The infrastructure requirements for confectionery industry should be such that follow the guidelines that
any food industry is required to follow. For instance the premises must be the suitable for the operations
and process to be carried out in them, these may include storage, processing, manufacture, packing,
warehousing. Although many producers have separate warehousing facilities in Pakistan, some may even
outsource it. BP has a warehouse located in Karachi region where from all the primary buyers collect
their purchases.[ CITATION MrA14 \l 1033 ]. The premises must also be secure against the ingress of all
types of pests – birds, animals and insects, especially in case of confectionery as the main raw material is
sugar that attracts much of such pests. Entrances such as the doors and windows should be kept fixed shut
during the operations and have automatic closure devices, plastic strip curtaining, double doors or air
screens or be covered with suitable protective mesh to prevent ingress of pests and should have their sills
sloped to prevent their being used as shelves after hours. All other openings should be sealed. The air,
water, power and drainage are other important aspects for the facility as if dirt accumulates it can pose a
contamination risk. Other than these the waste pipes should be connected to a sewage system large
enough to carry peak flows and constructed to avoid contamination of potable water supplies.

As for many food processing units, all and any equipment that is used such as the utensils and measuring
devices, come in physical contact with food, directly or indirectly. These should therefore be made of
materials that do not transmit toxic substances, odor, taste or foreign materials to the food. Ideally the
materials should be non-absorbent and able to withstand the environment of their intended use, and their
use should be in such a way that contacts corrosion can occur should be avoided.

Factories have a specific cleaning schedule with a formal cleaning plan for the specific zones, indicating
four things: 1) what should be cleaned, 2) the frequency of cleaning, 3) the cleaning method and 4) the
responsibility for cleaning. This applies to the big players in Pakistan only and not to the cottage industry.
Wet cleaning of parts of equipment, moulds or utensils is performed in separate rooms. The cleanliness
and dryness should be considered in the factory operations as it is very important for production of
several items. For instance, chocolate production is considered a dry operation and water should only be
used if wet cleaning is absolutely required. It should only be applied to small areas at a time and complete
and immediate drying should be ensured. Dry cleaning of floor and equipment will include scraping,
brushing and vacuum treatment, followed by sanitizing for example with a food-grade and food friendly
detergents etc. All potentially dangerous chemicals such as cleaning chemicals and fumigants should be
stored securely and in such a manner as to prevent the contamination of raw materials, products or the
process environment. To sum it up, it is extremely crucial that the place of production be gems free and
no material should be used in production areas when a risk of tainting is expected.[ CITATION BES09 \l
1033 ]

Traditionally, food-processing facilities have been located close to their agricultural source. For these
facilities, there is usually one chief raw material that makes up the largest percentage of the final food
product’s composition. Confectionery involve an elaborate manufacturing processes. Typically, specialty
food processing uses less water and utilizes base materials that have been preprocessed before they enter
their specialty production process. Compared to other industries, for example, metal fabrication and pulp
and paper making, the food-processing industry is not considered energy-intensive. Facilities usually
require electrical power, which is supplied by local utilities, to run food-processing machinery. These
again hold only for the documented market. As most of the cottage industry produces despite of using the
electrical energy etc, mostly use electrical services as a result of theft and are hence not accounted for.

As it is obvious, the major raw material used in confectionery items is sugar. As the sugar prices have
recently risen, its proportion in the overall cost of sales has increased, though the ratio is still not
significantly high. On the other hand, a number of raw material ingredients are imported having high
value. These ingredients include packaging material, fats, cocoa, gum base, taste enhancers and food
colors, etc. The prices of imported raw materials have increased manifolds within a year. Most common
challenges are soaring prices of raw material and high excise and import duties on raw material.

Due to increase in raw material prices, the industry is currently working below capacity. Instability in raw
material prices leads to fluctuation in selling prices which in turn affects the industry. While it is
relatively difficult to increase the price of confectionery items due to coin barriers psyche of the
consumer. The industry has faced this “coin-barrier” issue in sugar confectionery products at least three
times during last three decades when all key players unanimously agreed to increase their product price
due to escalating prices of raw material (first from 25 paisa to 50 paisa in the mid 80’s, then 50 paisa to
Rs.1 in mid 90’s and from Rs 1 to Rs. 2 in the late 2008) whereby the active players of the industry were
compelled to raise their prices not less than anything but 100% because next jump to coin/price
denomination was such that they had no way. This action led to decline in sales as a reaction of price
changes. It was so huge that is forces leading brands to take their decision back yet they were not able to
retrieve their original volumes again. Classic examples of this include Mitchell’s Milk Toffee and Kidco
4ever.

To defer the situation pro-active companies in Pakistan’s confectionery industry implemented three such
strategies, without reducing or with slightly reducing trade margins. These being:

1. Reduce no. of units per pack, unit size, and packaging (to reduce cost)
2. Compromising in product quality by reducing quantity and/or quality of expensive raw material
3. Use close substitute available at a relatively cheaper price as a replacement of expensive raw
material

With increasing raw material prices, bulks of cottage industry operators, which lack financial muscle, are
being wiped out. This has benefited the formal sector in the form of increase in market share. This was
probably the only beneficial factor for the documented market players as a result of coin barrier issue.
Cottage industry posed very high competition for the other players. Such industry comes into being when
the demand in the market is not met by the current suppliers and hence the cottage producers tap into the
market playing by the rule of ‘at the right place, at the right time’. These producers usually supply to the
rural end of Pakistan as the consumers there are unaware of the differences between the original and
replicated products. Another reason being that they are usually cheaper in cost than the original product.
In addition the transport cost of the cottage producers is lesser when supplied to rural ends as most of
their production units are based in rural areas only. This further reduces their cost and they also minimize
the cost by using close substitutes of actual ingredients that can most definitely cause harm to the
consumers’ health. Hence as they were to a certain extend wiped out of business when price dominations
changed, it helped not only the big players but the society as a whole.[ CITATION MrA14 \l 1033 ]

The supply in industry is currently sufficient to fulfill customer needs. In this industry opportunity,
growth and higher sales are achieved through demand pull generated by:

1. Introducing innovative products

2. Product substitution
 3. Varied packaging.

The industry’s products are also exported to countries in Asia, America, Europe and Africa. Products
such as chocolates have shown a rapid growth in last 10 years. Total value of exports of biscuits,
confectionery and bakery products rose by approximately 30% in 2006-07 to US$7.612 million from
US$5.873 million in 2005-06. As an opportunity vast expansion export opportunities lie in Europe and
Middle East.
GOVERNMENT POLICIES
Role of government has been negligible in this industry. Since it is an industry which uses high amounts
of sugar, small prices of sugar causes large impacts. Sugar prices, in the recent past, have gone down by
25% which in turn shall lower the prices of confectionery and beverage items.

Furthermore, there are some measures taken by government to ensure a proper check and balance. These
measures include:
 Establishment of Pakistan Standard Quality Control Authority (PSQCA). All the products need
to be registered from here so there can be a proper check as to how many products are circulating
in the market and are available to the consumers.
 Carrying a safety logo on the packaging (Halal), so the consumers may trust and feel no harm in
eating the food products.
 Allowance from Federal Board of Revenue (FBR) of adjustments of FED to be made on sweet
items.
 SEZ bill of 2012, which was signed during Asif Zardari's regime to meet the global challenges of
competitiveness to attract FDI. It will also allow creating industrial cluster with liberal
incentives.
ISSUES AND CHALLENGES
Confectionery industry is an industry that requires a lot of research and development work, hefty
investments in terms of cost (due to the installation of big plants and machineries), skilled labor and
proper handling at every stage of its supply chain. There are many products in the market that are the
innovation of one company or the other. Major issues are faced due to the cottage and the small scale
industries, which produce the copies of products available in the market.

Many small companies have introduced their chocolates, candies, lollipops etc. They offer a poor quality
product at a relatively lower cost and a large chunk of consumers go for them (SEC C class mainly). They
often adapt unethical measures to reduce cost, like not paying taxes, electricity bills, gas bills. It poses a
threat to companies like B.P, Candy land, Mayfair, whose target market is mainly SEC B and SEC C.
These cottage industries usually tap the products that are in huge demands. For instance when a TVC is
aired and demand for jelly is increased. This is where the cottage producers will step in and take
advantage. They tap the gaps in market. If there is demand of 500 million but the company is only
supplying 300 million then the gap will be completed by the cottage industry’s fake products. Hence
companies try to keep up with the demand as best as they could in order to counter this problem.

However, due to various public awareness campaigns, people are becoming conscious of the health
hazards that a low quality products could lead to. This gives a competitive edge to Candy land as they
employ strict measures to ensure good quality. Moreover, the effect of inflation is posing problems for the
companies. They tend to cut down the size of the product to a certain extent, but beyond that they need to
increase the prices otherwise they will have to compromise on the quality of raw material used.

What companies like Candy Land believe is that they are missing the market segment of SEC A. These
segments are more inclined towards eating chocolates like Snickers, Bounty and Kit Kat etc. To cater to
this market and to cover up this issue they launched chocolates that could match that taste significantly
and could be easily affordable by masses. Consequently, Candy Land came up with Paradise in place of
Bounty, Sonnet for Snickers, Cloud 9 for Kit Kat and Now for Mars. Although SEC A still don't buy
much of these because of their liking of branded chocolates. For this very reason, marketers of Pakistani
confectionery industry believe that international chocolates should be banned here so that people start
buying our local brands and promote them.
Percentage Contribution to sales:
We visited various stores of different levels, those catering to different socio-economic classes, and in
various localities. Mostly, the shopkeepers or the store managers were very reluctant to share the
information. Interestingly, the findings obtained from a variety of stores led to similar findings. They said
the percentage contribution of confectionery in total sales constitutes to only 10%. Out of that 10%, this
is the percentage distribution of various products: Dairy Milk (50%), Imported chocolates-Kit Kat,
Snickers etc (40%), Jellies (5%), Candies (3%), Others-chewing gums, lollipops, marshmallows etc
(2%).

Sales

Dairy Milk
Imported Chocolates
Jellies
Candies
Other

Sales of these products are influenced by seasonal changes. It varies throughout the year as per the
demand pattern. In winter the demand of chocolates and jellies touches its peaks, however in summer, as
it gets sticky, customer don't prefer buying it. That is the season where ice creams and beverages are
more popular among the consumers. In addition, demand of confectionery is also increased during Eid
and other festivals.
FUTURE PROSPECTS
Although the majority of consumers still prefer sweet traditional confectionary (mithai) over chocolate
confectionery, this trend is changing, as seen by the expected increase in current value and volume sales
in 2013. Chocolate was perceived as a foreign taste, but major campaigns by Cadbury Pakistan, for
instance “Kuch meetha hojai” (Let’s have something sweet), changed the perception of consumers,
encouraging them to try chocolate instead of mithai, changed this perception amongst the younger
generation. University, college and school students have started to prefer chocolate, but to change the
cultural norm it will take time.

Chocolate is expected to be seen as an important type of confectionery instead of traditional confectionery

(mithai) in most urban areas in near future. This change will be due to strong advertising by
manufacturers to change traditions. Also, the rise in health-consciousness will push consumers to avoid
oily traditional confectionery, and switch towards chocolate confectionery.

Retail volume and constant value sales of gum are expected to increase by CAGRs of 5% and 6%
respectively over the forecast period. The low and affordable price of gum, and the appeal for the fun and
relaxation it offers, indicates good growth in the forecast period.

Sugar confectionery is expected to continue to see growth, thanks to it being an affordable sweet treat for
consumers. It will show higher growth if there are no increases in prices. The majority of growth will be
driven by the increase in the population and the increase in manufacturers’ distribution channels.

Apart from these, as will be discussed in the later section, there is much potential in the imported designer
chocolates sector. Though they cater to a certain class, we can expect the growth of this sector to increase
as many current producers are planning to expand their operations to other cities and new enterants may
be expected.

Also with increased hygiene factors and better production processes, it can be said that the export industry
will mot definitely benefit as the quality assurance criteria can be fulfilled. However increased duties and
excise have been a problem for the exporters and even importers of raw materials, if these are taken care
of in the near future then the industry is deemed to flourish. [ CITATION SBP14 \l 1033 ]
DESIGNER CONFECTIONARY

The focus of our research report will certainly be incomplete without the importance of the impact and
instant threat that is being brought about by the influx of designer and imported chocolates in Pakistan for
the local confectionary market. These branded chocolates are forming a very strong and integral part of
the entire Pakistani Confectionary market as per the shift that is now clearly seen towards this sector. This
section of the report will be focusing towards three major highlighting factors which are as follows:

1. Impact of designer chocolates on the local confectionary market

2. Health awareness factor
3. Increase in imported chocolates

The various significant foreign brands forming an essential share of our local confectionary market and of
which are primary research was specifically focused towards are as follows:

 LALs, Butlers Chocolate Café, Lo Choco Lounge

 Bombay Sweets, Bombay Choc n Nuts, Liaqat Store, Aghas’ (Retailer Shops of only imported
chocolates available)

The major focus of these well renowned designer brands of confectionary that deal with imported
chocolates wholly is mostly towards chocolates from where the demand is most derived from. The Local
confectionary industry of Pakistan is unable to cater fully to the SEC A class. Even though, there are
certain renowned and established companies that have taken a step forward to tap on to the target
audience of this particular class. However, their inability to do so can be clearly seen for instance the
attempt at launching Cloud 9 by Candyland which was brought about as a similar product to Kitkat yet
was met with rather disappointing response in the market. Moreover, retailer shops example Liaqat and
Bombay Choc n Nuts, Aghas that are completely catering to the SEC A class and claim to establish the
most demand arriving for the imported section of chocolates only. The local confectionary’s incapability
to capture the needs of the particular upper class can also be further viewed from the endeavor made to
launch Bubbly as an extension to product line of Cadbury Dairy Milk which has certainly done
exceptionally well in the market yet is unable to tap on to the needs and taste absorbed by the SEC A
consumers of branded chocolates. Furthermore, the local confectionary industry lacks the ability to be
able to incorporate into the foreign taste and brand as per their financial constraints.
These foreign chocolate brands are recording relatively moderate growth in the metro cities of Pakistan
being Karachi, Lahore, Islamabad, Pindi and Faisalabad. In these metropolitan cities, the sales and retail
prices are rising as each day passes by. The acceptance of imported brands has now relatively increased
over the past which is driven by the rising population and the growing number of consumers belonging to
the upper and middle class in the urban areas of Pakistan. It must also be noted that there now is a trend
towards the supermarket phenomena which is becoming one of the sole reasons of the increased
consumption of these foreign chocolate brands. Moreover, supermarkets which include various types of
modern retail outlets have now surpassed the upper and middle class customers in order to make presence
in the very mass market [ CITATION Sai10 \l 1033 ]

The customer base is completely different as stated by the relevant managers and owners themselves;
there is a wholly different market segment that is being targeted by these branded chocolate owners i.e.
SEC A class. Their price range is from 55-70 per piece. A recent trend that is now seen in the designer
chocolates arriving in Pakistan is the customization phenomena which can be seen on grounds of the fact
where the chocolates come prepared from foreign countries such as Sweden and Belgium and is wrapped
and packed in personalized boxes over here at the branded outlets. There are increased variances in
wrappings that are done also from where the packaging in a place such as Lo Choco Lounge differs from
2000-6000 and also highly dependent on the type of customization demanded from the customer.
However, it should be noted that the prices of imported brands in Pakistan have always been rather
uncertain and fluctuating as most of the imported products arrives in Pakistan through parallel imports
which results in often not paying proper import duties.[ CITATION Own14 \l 1033 ]

As per the ranking done by “Candy Industry” Publication in January 2009, the Top Ten Chocolate
manufacturer worldwide as per their revenue figures are as follows. The top Ten Confectionery
manufactures in the world enjoying their presence in Pakistan are as follows:
Rank Company No. of No. of Net Sales Brands Availability
plants employees 2009 US$ Available in of brands 
millions  Pakistan in Pakistan 
Source:
Candy (outlet class)
Industry
Publication
Jan 2009

1 Mars Inc 1,353 65,000 16,500 Mars, Selective

McClean,Va USA Snickers, Key
Twix, Accounts, A
Galaxy, & B+ outlets
M&M,
Bounty
2 Nestle SA 4,563 283,000 11,393 Kit Kat, Selective,
Vevey,Switzerland  Polo, Fox, Key
After Eight Accounts, A
and B class
outlets
3 Ferrero Group 18 21,600 8,997 Ferrero Selective,
Alba, Italy Rocher Key
Accounts, A
class
4 Cadbury PLC 64 50,000 8,819 Dairy Milk, Local
London Perk, production
Velvet, facility,
Crunchie, Excellent
Flakes,  availability,
Occasions Key
Accounts,
A ,B and C
5 Kraft Foods Inc. 1,683 98,000 8,332 Toblerone Very
 Northfield,III. USA Selective,
Premium, A
and selective
B
6 The Hershey Co. 8 12,800 5,319 Chocolate Limited, 
Hershey,Pa, bars, Kisses available at
USA   Premium, A
and selective
  B class
outlets
7 Perfetti Van Melle 31 17,000 2,882 Alpenliebe, Good,
SpA  Fruit-tella Key
Italy(Lainate) Mentos, Accounts, A
The Happydent, & B class
Netherland(Breda) Centre outlets
Fresh,
Chupa
Chups
8 Lindt & Sprungli 8 6,788 2,569 Lindt Very
AG Chocolate Selective
Switzerland Bars Key
Accounts
9 * Meiji Seika Kaisha 6 45,313 1,560 - Nil
Ltd.,Tokyo
10 Ezaki Glico Co 43 48,623 1,567 - nil
             
  Total     67,938    
[ CITATION Sai10 \l 1033 ]

People in Pakistan have now certainly become significantly more health conscious in particular where
there is tremendous awareness rising amongst consumers concerning the physical wellbeing of one’s own
self. As per focusing on the health awareness factor, many of these chocolate brands have normal as well
as diet chocolates available with their flavors varying from 16 in Chocos to 16 different in diet
chocolates. In addition, the hygiene factor certainly plays a strong role where most consumers are willing
to now resort to outlets and brands selling a cleanlier method of producing their commodities. This is
accountable to increased consumer awareness that is now existent amongst our general population. A
significant example can be seen from the increased unhygienic related recordings and videos shown
throughout the media channels in order to make people more attentive of the alarming detrimental
activities being followed by various small scale or local market. Similarly, sugar free products are also
kept at the well renowned designer brand outlets where the most diabetic concerned consumers can resort
to those. This actually proves to be a very effective factor in building a well established consumer base
which will be highly retainable.[ CITATION Own14 \l 1033 ]

These brand outlets are basically the retailers who receive readymade chocolates from Sweden, Belgium,
UK, Dubai etc and which are further reached upon them through their specific suppliers. These outlets
have their own specific suppliers, supplier channels abroad from where the most common challenge is
faced amongst the delays in flights which results in a late arrival of stock of chocolates.

A very significant local market catering to the SEC A class and stocking branded chocolates alone is
Bombay Sweets located in Khadda Market. They have been in business for over 34 years now having
their center base in Dubai from where the chocolates arrive from as quoted by the shopkeeper. Their most
demand is deriving from chocolates and has seen tremendous growth (increasing trend) over the past
years.[ CITATION Sho14 \l 1033 ]

Being in business for over 6 years now, Lal’s is doing exceptionally well catering to the SEC A class
quite sufficiently. They are specifically concerned with the differentiation aspect and bringing about
different and unique ideas whilst providing quality simultaneously. The quality is reflective in terms of
the tendency of these branded chocolates to be able to “smoothly dissolve within” whilst categorizing the
local chocolate as of “tending to stick”. Moreover, the clients of such brands are very loyal indeed who
come in for the services, quality food, and pleasant environment and for the product i.e. the chocolates
itself. There are specialty chocolates, dipped chocolates available. The demand is varying and the
variety/range in chocolates is given as such that customers are always attracted and are catered
specifically for each category. The high prices reflect the increased expenditures borne by such branded
outlets. The demand tends to vary as per the seasonal and occasional fluctuations depending on the
demand as per specific occasions. For instance, sharp increases in demand seen on special occasions such
as Eid, Christmas, and Valentines etc where there is a common tendency to gift chocolates out.
[ CITATION LAL14 \l 1033 ]
A highlighting factor noticed amongst the various competing brands of designer chocolates was of
extreme self absorption where they consider absolutely no one to be their competitor in the market
without considering the obvious presence of different brands of foreign chocolate outlets existing within
their very proximity. The owners believe there to be no comparison, and competition at any level.
Nevertheless, the significant fact cannot be denied that the imported and designer chocolates brands are
only catering to a very specific section of the entire marketplace i.e. a one specific upper tier of our
society i.e. the SEC A class. Whereas, the other section of our entire local confectionary market is still
able to hold on to SEC B and SEC C class which is very significant in their position.

The growth prospects seem promising as per the increased brand loyalty, variation in consumer taste and
preferences, and increased health awareness factor playing a significant role. This is liable till the
exchange rate remain fairly constant over time in the Pakistani market. However, brands such as LALs
and Butlers claim to not incorporate other confectionary business in the local market or any such relevant
joint ventures. Yet it should be noted that there is certainly a lot of potential lying on the untapped
markets of Punjab i.e. Lahore and Islamabad where the entire market functioning seems to be very
different.
BIBLIOGRAPHY
(2014). Retrieved May 12, 2014, from Hilal Foods: http://hilalfoods.com.pk/

Adnan, M. (2014, May). BP interview. (F. Tauseef, Interviewer)

Baloch, F. (2013, November 20). Pakistan among top five growth markets for Mondelez. The Express
tribune .

(2009). BEST PRACTICES FOR THE COCOA, CHOCOLATE AND CONFECTIONERY INDUSTRY .

Branded Chocolate and confectionery industry of Pakistan. (2009, October). Retrieved April 17, 2014,
from Wordpress: http://saifdewan.wordpress.com/2009/10/05/branded-chocolate-and-confectionery-
industry-of-pakistan/

Buchan, I. (2013). Mondelez Pakistan. Karachi: The Express Tribune.

Chocolates, S. M. (2014, May). Influx of Imported Chocolates. (M. Munir, Interviewer)

Confectionery in Pakistan. (2009). Retrieved March 31, 2014, from Euromonitor:

http://www.euromonitor.com/confectionery-in-pakistan/report

Dewan, S. (2010, Feburary 5). Saif Dewan's Blog. Retrieved May 30th, 2014, from Saif Dewan's Blog:
http://saifdewan.wordpress.com/2010/02/05/global-top-10-chocolate-confectionery-brands-and-their-
presence-in-pakistan/

Lounge, O. o. (2014, May). Influx of Designer Chocolates in Pakistan. (M. Munir, Interviewer)

Manager, L. (2014, May). Influx of Imported Designer Chocolates. (M. Munir, Interviewer)

Manager, O. (2014, May 5). Candyland's position in the confectionery industry of Pakistan. (N. Z.
Tarique, Interviewer)

Rehman, S. (2014, April). Confectionery industry of Pakistan. (Z. N. Tarique M, Interviewer)

REPORT, S. (n.d.). Retrieved 2014, from http://www.sbp.org.pk/departments/ihfd/Sub-Segment

%20Booklets/Other%20Food%20Product-Baker%20and%20Other%20Confectionary%20Products.pdf

Scribd. (2013). Retrieved March 10, 2014, from cadbury pakistan:

http://www.scribd.com/doc/76302204/Presentation-on-CadBury-Scheweppes-and-CadBury-Pakistan

Sub segment of confectionery products. (2010). Retrieved march 15, 2014, from SBP:
http://www.sbp.org.pk/departments/ihfd/Sub-Segment%20Booklets/Other%20Food%20Product-Baker
%20and%20Other%20Confectionary%20Products.pdf