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COUNTRY MARKET REPORT
CHOCOLATE IN INDIA
PURPOSE OF THE REPORT
Provide relevant country and market information to foreign chocolate manufacturers who want to enter the Indian chocolate market.
AGENDA
1. General Country Background
2. The Political/Legal Environment
3. The Economic Environment
4. The Socio-Cultural Environment
5. The Indian Chocolate Market
6. Conclusions and Recommendations
General Country Background
Chocolate in India
General Country Background
Name Republic of India
(Bhārat Gaṇarājya)
Government Federal Republic
Area 3,287,263 km2 (7th)
Capital New Delhi
Largest city Mumbai
Population 1,170,938,000 (2nd)
Official languages English, Hindi
Administrative divisions
28 states and 7 union territories
Currency Indian Rupee (INR)
General Country Background
India is one of the fastest growing economies in the world.
Fast development of the country
Increasing income levels
Westernization of the national culture
Wide variety of opportunities for foreign companies
General Country Background
India also faces many challenges:
Poverty Poor infrastructure High levels of illiteracy Quality and quantity of
universities Inadequate public health
system Overpopulation
The Political/Legal Environment
Chocolate in India
The Political/Legal Environment
British colony for almost 200 years, independence on August 15th 1947
Federal parliamentary republic
Problems: fragmented multi-party coalition, high bureaucracy, policy implementation weaknesses, conflict over Kashmir, poverty, religious conflicts
Relatively high country risk, BERI=58
Taxation system: income taxes, custom duties, Central Excise, sales taxes, etc.
Tariffs on food imports still high, despite liberalization of trade in 2001
Legal requirements for food safety, packing and labeling: PFA (Prevention of Food Alteration Act), Standards of Weights and Measures Act
The Political/Legal Environment
The Economic Environment
Chocolate in India
The Economic Environment
GDP (Purchase Power Parity)
$ 4,06 trillion (5th in the world)
GDP growth rate 10,4% p.a.
GDP per capita $ 3,500
Inflation rate 12%
Labor force 478 million
Unemployment rate 10%
Exports $ 225,6 billion
Imports $ 357,7 billion
Exchange rate
INR per USD
46,163
Fastest growing economy in the world
Until 1990ies stagnation and under-development
Economic reforms, LPG model
Deregulation of markets, lift of restrictions on FDI
The Economic Environment
Sources of economic growth:
Services: 54% (of GDP)
Agriculture: 28%
Industry: 18%
Major exporter of IT services: Bangalore and Hyderabad – the “Indian Silicon Valley”
Increase in FDI since 1990ies, many international players
Main trading partners: UAE, China, USA, Saudi Arabia
The Economic Environment
India still faces many problems despite the rapid economic development:
High inflation rate of up to 10%
Inequalities between the rich and poor
Poor physical and social infrastructure
Poverty (37% below poverty line)
Strict labour laws which prevent FDI
The Socio-Cultural Environment
Chocolate in India
The Socio-Cultural Environment
High ethnic and cultural diversity ( >1000 different languages spoken)
Fastest growing middle class in the world
High level of urban migration
Religion plays an important role in people’s lives (Hinduism)
Many festivals (Diwali, Rakhi, Onam)
Total population 1,2 billion (2011)
Growth rate 1,35% p.a.
Life expectancy 67 years
Urban population 30%
Population below poverty line
37%
Literacy rate, male resp. female
73%, resp. 48%
Official languages Hindi, English
Regionally recognised languages
18
% under 65 years 95%
The Socio-Cultural Environment
Considerable differences between regions
Southern and Western India are more developed with strong agricultural and industrial sectors
Northern India is most populous, mainly agriculture
Eastern India is largely poor
Bangalore
Hyderabad
The Socio-Cultural Environment
India is a young country, less than 5% over 65 years, 50% under 25 years
Younger generations are more westernized and brand-conscious
Hofstede’s cultural dimensions: high PD, moderate UA, MSC, IND
Cast systems still relevant
The Indian Chocolate Market
Chocolate in India
General Overview
Major changes since the 1990ies
Market still very small ($300 mil.) but steady growth of 18-20% p.a.
Huge growth potential for premium segment
70% of sales in urban areas
Very price-sensitive market
Most popular chocolate tablet in India
Consumer Behaviour
Chocolate consumption still very low: 300g p.a. (1,9kg in Britain)
Westernization of Indian lifestyle
Rising income levels, travel abroad, metropolitan population
Gifting sweets during festivals
Substitution of traditional mithai with chocolate
Competition
Two dominant players with a long tradition: Cadbury and Nestle (90% of market)
Local manufacturers: Amul, Campco, etc.
International players: Lindt, Godiva, Hershey’s, etc. (premium segment)
Housewives
Market snapshot for 2011
Jan. 2011 - Kraft Foods acquires Cadbury India
Jul. 2011 - Hershey’s exits JV with Godrej Group
Oct. 2011 - Ferrero opens first production facility in India
Nov. 2011 - Campco increases production to 23,000 ton./year
Dec. 2011 - Kraft Foods increases investments in Cadbury India
Distribution Channels
Distribution system: low efficiency, high costs
Many intermediaries
Retail sector highly unsystematic
Small independent stores: Kiranas, Paan-Beedis
Supermarkets, malls, exclusive chocolate stores
Kirana and Paad-Beedi shops
Conclusions and Recommendations
Chocolate in India
Conclusions
India – high cultural, economic, ethnic, linguistic, religious diversity
Differences between regions and income levels
Huge growth potential of the chocolate market, many international players are entering
Westernization of culture and lifestyles
Market is highly concentrated, very price-sensitive
Market entry needs careful planning
Recommendations
Large capital investments for branding and marketing to compete with major players
Appropriate pricing strategy is crucial
Selection of appropriate local trading partners, importers, distributors
Focus on more developed regions and metropolitan areas first
Thank you for your attention!
Sources available on request.