Chocolate - Case Study

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Case Study – Chocolate Market – Amit Kulshresth ( July 7, 2009)

In the present world, Chocolate is the only word that transcends the barrier of age and languageintriguing alike from kids to their grandparents. It is one which is consumed and liked by almostevery one. Chocolate accounts for a small share of the sugar and confectionary market in India.

Mithai- the traditional Indian sweet is getting substituted by chocolate. The consumption level of chocolate surges during festive seasons like Rakshabandhan, Diwali, and etc. chocolate marketin India is estimated be around 1500 crores growing at 18-20% per annum.

The increasing consumption levels, offers the industry significant prospects, especially for foreignplayers which are highly competitive. There are a small number of large firms in the industry -Cadbury’s, Nestlé and Amul being the most well known. Many of the brands in the market havebeen in existence for a long time and have a high amount of brand loyalty. Openings for newproducts therefore are limited. There are many examples of products that have been launchedbut could not sustain long-term sales success. For example, mars, Gandour, etc.

Most of the market is being grabbed by foreign brands like Cadbury and nestle. In spite of being adomestic brand Amul market share is around 3% along other local brands. Amul has brandloyalty among its customers in its other dairy products. But it is may be due to its less promotional

and distribution, it could not get more market share. Amul chocolates are positioned as if theywere only for children. And due to this it was unable to capture the market of other age groups.

Till the eighties, the chocolate market was small and the product category itself was fuzzy. In theeighties, Cadbury’s - the virtual monopolist - decided to focus its efforts on making chocolates adistinct category with an identity of its own. And the marketer had sharply positioned its product atchildren to do that. Hence, chocolates bore an “Only for kids” tag, and kept adults at bay.

By the end of the eighties, Cadbury’s still ruled the roost with over 80 percent market share.Though several brands - like Amul and Campco - tried to break into the market, none of themsucceeded in shaking the leader’s grip. In fact, Cadbury’s had become a brand virtually generic tochocolates. Then chocolates were used to reward and reinforce positive behavior and hencewere categorized as a luxury reserved for special occasions. This was, a stark contrast to the

west where chocolates were snacked on, eaten as mini meals or just to suppress pangs of hunger.

But constant working by players like Cadbury’s (re-launch of Cadbury’s Dairy Milk targeting adultsand as a casual any-time buy) and Nestle towards exploding the myth that chocolates are meantfor children only, has resulted in the segment booming.

Cadbury India's five factories in India churn out close to 8,000 tones of chocolate and theCompany sells a million bars every day.

Cadbury enjoys a value market share of over 70% - the highest. Cadbury brand share in theworld! The flagship brand Cadbury Dairy Milk is considered the "gold standard" for chocolates in

India. The pure taste of CDM defines the chocolate taste for the Indian consumer.



The Indian Chocolate market can be sliced into four parts.

1. Moulded Chocolate Segment - comprising slab chocolates like Dairy milk chocolates,

etc. These are made by pouring the ingredients into moulds.

2. Countline Segment - comprising bars like 5 star, Bar One, Perk, Kit Kat, etc. These

have ingredients other then chocolate and are usually Bar shaped, making for chunkybites.

3. Choco-Panned Segment - comprising chocolate forms like Butterscotch, Nutties, Tiffins,

etc. Panned variety has different cores/centers which are covered with a layer of

chocolate.

4. Sugar-Panned Segment - comprising chocolate forms such as Gems, Chocolate eclairs,

etc. These generally have a sugar coating on the outside.

Facts & Figures

1. Chocolate market is estimated to be around 1500 crores (AC Nielson) growing at 18-20% per annum2. Cadbury is the market leader with 72% market share3. The per capita consumption of chocolate in India is 300 gram compared with 1.9 kilograms indeveloped markets such as the United Kingdom4. Over 70 per cent of the consumption takes place in the urban markets5. Margins in the chocolate industry range between 10 and 20 per cent, depending on the pricepoint at which the product is placed6. Chocolate sales have risen by 15% in 2007 to reach 36000 tonnes according to one estimate.Another estimate puts the figure at 25000 tonnes7. The chocolate wafer market (Ulta Perk etc) is around 35 % of the total chocolate market andhas been growing at around 13% annually8. As per Euromonitor study, Indian candy market is currently valued at around USD 664 million,with about 70%, or USD 461 million, in sugar confectionery and the remaining 30%, or USD 203

million, in chocolate confectionery9. Entire Celebrations range has a market share is 6.5%10. The global chocolate market is worth $75 billion annually

Consumer Trends

1. Chocolates which use to be unaffordable, is now considered mid-priced. Convenience over Mithai in terms of packaging and shelf life in making both middle class and rich Indians opt for chocolates2. Designer chocolates have become status symbols. They are linked to one’s aspiration andlifestyle and malls are perfect points of sale as people usually are happy and gay at thesedestinations3. Cadbury initial communication for Celebrations was concentrated on occasions like Diwali and

Rakshabandhan. Over the last seven to eight years, the brand emerged as a good gift propositionfor occasions and enabled people to come closer. Research done by Cadbury suggested thatthey should extend the plank of occasion-based gifting to social gifting i.e. all-year-round giftingoptions4. Consumers can choose from wide range of chocolates, which initially was limited to Milkchocolates like DairyMilk and MilkyBar. In past few years we have seen so many SKUs withalmonds, raisins and all sort of nuts. And how can we forget latest 5 star crunchy and Ulta Perk,which has opened new windows for consumers5. In past, consumers had negligible inclination for dark chocolates. But now we have seen achange in the Indian palate, which is increasing the base of this sub-segment



Questions

Q1. Cadbury’s dark chocolate is known as _________________________________

Q2. Nestle’s wafer chocolate is __________________________________________

Q3. Variants of Nestle’s wafer chocolate are priced at Rs. ________ , Rs. __________ and

Rs. _________

Q4 “Fundoo” is a chocolate by __________________________

Q5 Five star has variant known as “ Five star ___________________”

Q6 Its ad was “"Kabhi bhi kaise bhi"” and is now 'Baaki sab Bhoola de' this is _____________

Q7 For traditional gifting Cadbury has launched _______________________

Q8 A pack of delightful crunchy chocolaty nibbles - wafer cubes covered with delicious chocó

layer by Nestle is named as ___________ ______________ _____________

Q9 THODI SI PET POOJA KABHI BHI KAHI BHI was _____________ ad line.

Q10 . Cadbury has a chocolate with Disney characters embossed in it this is known as Cadbury

Dairy Milk _______________________

Q11. Temptation chocolate is available in ____________ number of flavors.

Q12 Nestle’s ______________ outsells Perk in the outlets where both are available.

Q13 Badam Bar is product of _________________________

Q14 Cadbury’s premium dark chocolate brand Bournville comes in a 90 gm bar for Rs _______

Q15 . 150 gm bar of Toblerone chocolate will cost 1) Rs. 50 2) Rs. 100 3) Rs. 200 4) Rs. 300

Q16 Rakshabandhan Gift hampers was a brand started by ______________________

Q17 Perk has been positioned by Cadbury’s as a____________________ food

Q18 Bar-one is by ___________________

Q19 Nestle Milky Bar Eclairs is in ____________________ flavor

Q20 Indian Classics chocolate is from _____________________



Answers

Q1. Cadbury’s dark chocolate is known as TEMPTATIONS

Q2. Nestle’s wafer chocolate is MUNCH

Q3. Variants of Nestle’s wafer chocolate are priced at Rs. 10 , Rs. 5 and Rs. 3

Q4 “Fundoo” is a chocolate by AMUL

Q5 Five star has variant known as “ Five star CRUNCH”

Q6 Its ad was “"Kabhi bhi kaise bhi"” and is now 'Baaki sab Bhoola de' this is PERK

Q7 For traditional gifting Cadbury has launched CELEBRATIONS

Q8 A pack of delightful crunchy chocolaty nibbles - wafer cubes covered with delicious chocó

layer by Nestle is named as NESTLE MUNCH POP CHCOC

Q9 THODI SI PET POOJA KABHI BHI KAHI BHI was PERK ad line.

Q10 . Cadbury has a chocolate with Disney characters embossed in it this is known as Cadbury

Dairy Milk WOWIE

Q11. Temptation chocolate is available in 5 number of flavors.

Q12 KITKAT outsells Perk in the outlets where both are available.

Q13 Badam Bar is product of Amul

Q 14 Cadbury’s premium dark chocolate brand Bournville that comes in a 90 gm bar for Rs 75.

Q15 . 150 gm bar of Toblerone chocolate will cost 1) Rs. 50 2) Rs. 100 3) Rs. 200 4) Rs. 300

Q16 Q16 Rakshabandhan Gift hampers was a brand started by CADBURYs

Q17 Perk has been positioned by Cadbury’s as a SNACK food

Q18 Bar-one is by NESTLE

Q19 Nestle Milky Bar Eclairs is in STRAWBERRY flavor

Q20 Indian Classics is from AMUL

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Chocolate - Case Study