Confectionery Industry overview

7/30/2019 Confectionery Industry overview

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Sweet-toothed Indians delight global confectionery majors

A great success story is unfolding in the Indian confectionery market as more and more consumers are

indulging themselves with snacking and experimenting with new products. With a per-capita confectionery

consumption (18 grams against world average of around 3 kg) that is amongst the lowest in the world and

a consumer market which exhibits enormous future potential, the global confectionery majors are all set

to woo the great Indian middle class segment.

Currently, according to Datamonitor estimates, the organized confectionery market in India is estimated to

be over INR 5,500 crores in 2009 and has been growing at an annual average rate of over 10% since the

last 5 years. Sugar confectionery segment, which includes hard boiled candies, is the largest category

within the confectionery market with a category share of more than 50% in volume terms and more than a

third in value terms. Chocolate and gum category contributes close to two-thirds of the market in value

terms. Cereal bars with a miniscule market size forms the remaining part of the market; however it is thefastest growing category along with chocolate.

In terms of competitive landscape, Cadburys (now Kraft) leads the Indian confectionery market due to its

overwhelming share in the chocolate category and strong brands such as Dairy milk, 5 star, etc. Perfetti

Van Melle is the second largest player in the Indian confectionery market with significant presence in the

sugar confectionery and gum segment. Parle, Godrej and Candico are amongst the key domestic players

in the market.


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Growth catalysts India is one of the fastest growingconfectionery markets in the world. Rising

disposable income, urbanization and growth of organized retailing has positively helped Indianconfectionery market. Some of the other key growth catalysts include:

Gifting chocolates According to Datamonitors latest

report Confectionery in India- Chocolates are fast

replacing sweets as the preferred gift during festivities and

celebrations. Companies are capitalizing on this trend by

introducing chocolate gift packs for festivals such as Diwali,

Raksha Bandhan etc. Even consumers are lapping up the

idea of chocolate gifts as it not only serves the purpose of

distributing sweet but also offers convenience in terms of

packaging and shelf life. Banking upon the Indian tradition

of having something sweets before every auspiciousoccasion, Cadbury (now Kraft) has launched its new ad

campaign Shubh Aarambh (meaning Good Beginning) to

promote the chocolate as the substitute of Sweets.

Entry of multinational corporations - Economicslowdown in the western economies resulted in the slowgrowth of their confectionery market as indulgenceproducts have high correlation to the performance ofgeneral economy. However, demand from the Indianconsumers continues to be buoyant as they now havemore money in hand and are exposed to the westernproducts due to frequent travels. This surge in demand for

high-end products has enticed the global companies toenter Indian market. According to Datamonitors reportConfectionery in India, companies such as Ferrero,Lindt, Barry Callebaut and Hersheys have already enteredIndia on their own or by partnering with domesticconfectionery companies. Datamonitor expects thatconfectionery market would see further boost with increasein new product development activities by existing and newplayers and thus offering Indian consumers a wider choice.

Market at the bottom of pyramid Indian confectionery market is still dominated by low price products

with largest volume coming from 0.5 to Rs 1 categories. A large part of the total confectionery sales are

made through Kirana stores or Paanwala shops where Indian consumers take a small break from their

daily grind to chit-chat with friends. Many products from Wrigleys, Perfetti, Lotte, Candico etc. caters to

this low price but high volume confectionery market. Even companies such as Cadburys (now Kraft) are

introducing products in smaller packages to strengthen its presence in this segment.

Impediments to the growth

Formidable sweet market Indianconfectionery majors face a formidabletask of competing not only amongst theipeers but also with the very strongtraditional Indian sweets or mithaiconsumed at home.

High input cost and low MRP

Confectionery companies are alsofacing a challenge of maintain MRPwhile input cost and excise duty costsare on the rise. Due to high sensitivityof Indian consumers towards theprices, companies have not been ableto pass-on the hikes to the consumersresulting in high pressure on theirmargins.

Underdeveloped infrastructureModern trade channels such as

supermarkets, convenience storeswhich offer access to affluent Indiansis still at a nascent stage impeding thegrowth of high priced products.Moreover, lack of infrastructuresupport such as refrigeration, logisticetc is also hampering the growth ofpremium chocolate categories.


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Decoding Indian consumer:

According to Niraj Lalka, Senior Consumer Analyst at Datamonitor - Confectionery companies have

launched variety of products over the last couple of years to cater to the differing segments of the Indian

consumers based on their consumption habit and health attitude. Following analysis would help further

decode the characteristics of the Indian consumer and relevant product launches:

New Product Launches in India

Datamonitors report Confectionery in India provides as insight into the prevalent trends in the product

launches in the Indian confectionery market. Excerpts from the report:

India ranked fifth in terms of retail sales and 17th in new product launches in the globalconfectionery market in 2009. New launches decreased greatly in many countries over 2009 due tothe global economic slowdown, including Japan and Germany (which last year registered declinesin new product launches of 19% and 17%, respectively).

The largest proportion (47%) of new product launches in the Indian confectionery market in 2009belonged to the sugar confectionery category. This was followed by chocolate, which accountedfor 29% of the new product launches. During 2009, cereal bars as a category contributed a mere8% to the overall new product launches in the Indian confectionery market.

The Indian confectionery market is highly concentrated, with the top four players accounting for aretail sales share of 77.7% in 2009. Large international players dominate the market, includingCadbury (now Kraft), Perfetti Van Melle, Nestl and Mars Inc. In terms of new product launch sharein 2009, it was other international companies like Areka, Halter Bonbons and The WrigleyCompany that had the maximum number of launches.


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The Next step: While Indians have just started relishing the taste of global brands with companies

bringing in their global portfolio in the Indian market, companies should also look to introduce products

that cater to the local tastes. Recent product initiative from the local manufacturers such as Kacha Aam

candy by Ankur confectionery or Aamla candy by Deewal gramodyog does indicate the companyswillingness to explore this virtually virgin territory. However, similar initiatives by the global major could

further unravel the opportunity to penetrate Indian market.

Worldwide, confectionery market is following the phenomena of Go healthy & be well whereas in India

the health trend is largely restricted to gum category. The need of the hour for the confectionery

manufacturers is to seize this opportunity by extending the health offering to other product categories in

the confectionery market.

Another important developing area is the adult confectionery market. Indian confectionery markets still

largely cater to kids while the untapped potential lies in the adult confectionery market. Companies such

as Cadburys (now Kraft) have already started taking initiative by launching product such as Bourneville

dark chocolate which specifically target adult consumers with a taste for strong flavors.

With rising disposable income, increasing aspiration and growing awareness, Indian consumer today is

more astute than ever. Hence, undermining the need of the Indian consumers could be the biggest fallacy

any confectionery companies can make opines Niraj Lalka. The Idea for the confectionery companies is

to focus on Glocalisation by introducing global product portfolio and tweaking it in accordance with the

local tastes and preference.

- ENDS -

This is based on Datamonitors analysis and inputs from Datamonitors latest report Confectionery in India For

further information on this title, please contact Aartee Sundheep on +91 40 6672 9586 or

[email protected].

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Confectionery Industry overview