Conceptual Study

What Is Chocolate
Chocolate is a mixture of cocoa paste, cocoa butter, and sugar. Nowadays, the shops offer many different varieties of chocolates, the differences of which start already from the countries of origin of the cocoa beans and also depend on the method of manufacturing and the recipe. Dark chocolate The cocoa content of dark chocolate may even exceed 90%. This type of chocolate is the healthiest and this is mainly due to its cocoa content! Dark chocolate consists mainly of cocoa bean mass, cocoa butter, sugar, lecithin and vanillin used for highlighting the flavour. The depth of the colour and bitterness of the flavour of the chocolate depend on the ratio between the beans mass and sugar. Semi-sweet dark chocolate with the cocoa content of up to 50% is usually used in baking. Milk chocolate In the case of milk chocolate, a part of the dry components of the cocoa are substituted with milk components, which give the chocolate a sweeter flavour, lighter colour and also softer structure. Due to the fact that the milk chocolate is extremely sensitive to heat, using it for desserts that require heat is much more complicated. At the same time, it is very suitable for decorating, offering variation to the dark chocolate in terms of smell, flavour as well as colour. White chocolate Making and raw materials of the white chocolate are similar to those of the regular chocolate, except one important difference: no cocoa beans mass or powder is used in it. Thus, the only cocoa product used in it is the cocoa butter. Thanks to that the white chocolate is sweeter than others and is very suitable for making desserts. As compared to the regular chocolate, it also contains much more milk. However, melting white chocolate requires special care. As a result of too fast heating, it may become grainy or burn.

History of Chocolate
The oldest records related to chocolates date back to somewhere around 1500-2000 BC. The high rainfall, soaring temperatures and great humidity of Central American rain forests created the perfect climate for the cultivation of the Cacao Tree. During that time, the Mayan civilization used to flourish in that region. Mayan people worshipped Cacao Tree, believing it to be of divine origin. They also used to roasted and pounded seeds of the tree, with maize and Capsicum (Chilli) peppers, to brew a spicy, bitter sweet drink. The drink was consumed either in ceremonies or in the homes of the wealthy and religious elite. It is said that the word Cacao was corrupted by the early European explorers and turned into 'Cocoa'. Even the Aztecs, of Central Mexico, are believed to have acquired the beans through trade and/or the spoils of war. In fact, Cacao beans were considered to be so prized by Aztecs that they started using it as a type of currency. They also made a drink, similar to the one made by Mayans, and called it Xocolatl, the name which was later corrupted to 'Chocolat', by Spanish conquistadors. The further corruption of the word, which finally gave it its present form Chocolate, was done by the English. Entry in Europe Xocolatl, or Chocolate, was brought to Europe by Cortez. It was here that sugar and vanilla were added to the Aztec's brew, to offset its spicy bitterness. The commercialization of chocolate started in Spain, where the first chocolate factories were opened. Spanish treasure fleets brought back dried fermented beans from the new world, roasting and grounding them to make chocolate powder. This powder was used to make European version of the Aztec drink and then, exported to the other countries in Europe. Within a few years, Spains drink become popular throughout the continent and it was around 1520 that it came to England. However, it was only in the year 1657 that the first Chocolate House of England was opened, in London. The popularity of the drink led to a string of other Chocolate Houses. Since cocoa was so expensive, the houses started serving as elite clubs, where the wealthy and business community met to smoke a clay pipe of tobacco, conduct business and socialize over a cup of chocolate. Its America Again Chocolate came to the place of its birth once again. This time, it was the English colonists who carried chocolate, along with coffee, with them to the colonies in North America. These colonies later consolidated into the United States of America and Canada. Despite the changes in the territorial boundaries, chocolate continued to be a favorite of all the Americans, of every age, sex, group, and so on. Till date, the status quo has not changed and hot chocolate is still one of the favorite drinks of the Americans. Modern Chocolate The chocolate of today, in the sold form, took its roots in England. It was around mid-1600, when English bakers started adding cocoa powder to cakes. Seeking to make chocolate drink smoother and more palatable, Johannes Van Houten, a Dutch chemist, invented a technique of

extracting the bitter tasting fat (cocoa butter) from the roasted ground beans, in 1828. With this, he paved the way for the chocolate in its present form. It was in 1847 that solid chocolate, as we know of today, was made by Fry & Sons of Bristol (England), by mixing sugar with cocoa powder and cocoa butter. The first milk chocolate was made in 1875, by Daniel Peters, a Swiss manufacturer, by mixing cocoa powder and cocoa butter with sugar and dried milk powder. The rest, as they say, is history! Today, chocolate is made across the globe and liked by almost every person in this world.

Chocolate manufacturing process

Making chocolate is a time consuming process. Cacao plants are grown on plantations in South America, where the plant is native, and in parts of Africa. There are actually several varieties of cacao plant, all of which produce chocolates with slightly different flavors, and the flavor is also impacted by where the chocolate is grown, how it is handled after harvest, and how it is processed. Chocolate companies invest a great deal of money in developing ideal blends of cacao beans to create the flavors their consumers are used to. Cacao beans grow in large pods which are harvested once they ripen and then allowed to ferment. Initially, the cacao beans are extremely bitter; the fermentation process softens the bitterness, allowing producers to move on the next steps, roasting and hulling. Roasting helps to develop the flavor of the beans, while shelling exposes the cacao nibs, the portion of the bean which has all the flavor. Once cacao nibs are extracted, they must be ground into a substance known as chocolate liquor. Chocolate liquor isn't something you'd want to eat: it is extremely fatty, thanks to the cocoa butter it contains, and it is gritty and bitter. This liquid is then pressed to create what is known as press cake, a substance consisting primarily of cocoa solids, while the cocoa butter is allowed to drain away. Once press cake has been created, producers have a number of options. To make cocoa, they can squeeze the press cake even more to isolate the cocoa solids before allowing it to dry and then pulverizing it. They can also blend some of the cocoa butter back in, along with sugar and other ingredients, to produce eating chocolate, which is subjected to a process called conching to create a smooth, creamy confection without any traces of grittiness. Eating chocolate can also be adulterated with milk, creating milk chocolate, and the level of sweetness can vary widely. For white chocolate, cocoa butter is mixed with vanilla and milk.

Categories of Chocolates
Commercial Chocolates are available in the following forms: 1. Bars or Molded Chocolates 2. Counts 3. Panned Chocolates (Gems) 4. clairs 5. Assorted Chocolates

Form of Consumption
a. Pure Chocolates b. Toffees c. Cakes & Pastries d. Malted Beverages e. Wafer Biscuits & Baked Biscuits f. Chocolate Desserts

Analysis of Indian Chocolate Industry & Consumer Trends

Brief Introduction
Indian Chocolate Industry as today is dominated by two companies, both multinationals. The market leader is Cadbury with a lion's share of 70%. The company's brands like Five Star, Gems, Eclairs, Perk, Dairy Milk are leaders in their segments. Untill early 90's, Cadbury had a market share of over 80 %, but its party was spoiled when Nestle appeared on the scene. The other one has introduced its international brands in the country (Kit Kat, Lions), and now commands approximately 15% market share. The two companies operating in the segment are Gujarat Cooperative Milk Marketing Federation (GCMMF) and Central Arecanut and Cocoa Manufactures and Processors Co-operation (CAMPCO). Competition in the segment will soonly get keener as overseas chocolate giants Hershey's and Mars consolidate to grab a bite of the Indian chocolate pie. The UK based confectionery giant, Cadbury is a dominant player in the Indian chocolate market and the company expects the energy glucose variant of its popular Perk brand to be singularly responsible for adding five per cent annually to the size of the companys market share.

History
The Indian Chocolate Industry has come a long way since long years. Ever since 1947 the Cadbury is in India, Cadbury chocolates have ruled the hearts of Indians with their fabulous taste. Indian Chocolate Industrys Cadbury Company today employs nearly 2000 people across India. The company is one of the oldest and strongest players in the Indian confectionary industry with an estimated 68% value share and 62% volume share of the total chocolate market. It has exhibited continuously strong revenue growth of 34% and net profit growth of 24% throughout the 1990s. The brand of Cadbury is known for its exceptional capabilities in product innovation, distribution and marketing. With brands like Dairy Milk, Gems, 5 Star, Bournvita, Perk, Celebrations, Bytes, Chocki, Delite and Temptations, there is a Cadbury offering to suit all occasions and moods. Today, the company reaches millions of loyal customers through a distribution network of 5.5 lakhs outlets across the country and this number is increasing everyday. In 1946 the Cadbury?s manufacturing operations started in Mumbai, which was subsequently transferred to Thane. In 1964, Induri Farm at Talegaon, near Pune was set up with a view to promote modern methods as

well as improve milk yield. In 1981-82, a new chocolate manufacturing unit was set up in the same location in Talegaon. The company, way back in 1964, pioneered cocoa farming in India to reduce dependence on imported cocoa beans. The parent company provided cocoa seeds and clonal materials free of cost for the first 8 years of operations. Cocoa farming is done in Karnataka, Kerala and Tamil Nadu. In 1977, the company also took steps to promote higher production of milk by setting up a subsidiary Induri Farms Ltd., near Pune. In 1989, the company set up a new plant at Malanpur, MP, to derive benefits available to the backward area. In 1995, Cadbury expanded Malanpur plant in a major way. The Malanpur plant has modernized facilities for Gems, Eclairs, and Perk etc. Cadbury operates as the third party operations at Phalton, Warana and Nashik in Maharashtra. These factories churn out close to 8,000 tonnes of chocolate annually. In response to rising demand in the chocolate industry and reduce dependency on imports, Indian cocoa producers have planned to increase domestic cocoa production by 60% in the next four years. The Indian market is thought to be worth some 15bn rupee (0.25bn) and has been hailed as offering great potential for Western chocolate manufacturers as the market is still in its early stages. Chocolate consumption is gaining popularity in India due to increasing prosperity coupled with a shift in food habits, pushing up the country's cocoa imports. Firms across the country have announced plans to step-up domestic production from 10,000 tonnes to 16,000 tonnes, according to Reuters. To secure good quality raw material in the long term, private players like Cadbury India are encouraging cocoa cultivation, the news agency said. Cocoa requirement is growing around 15% annually and will reach about 30,000 tonnes in the next 5 years.

Facts & Figures

1. Chocolate market is estimated to be around 1500 crores (ACNielson) growing at 18-20% per annum 2. Cadbury is the market leader with 72% market share 3. The per capita consumption of chocolate in India is 300 gram compared with 1.9 kilograms in developed markets such as the United Kingdom 4. Over 70 per cent of the consumption takes place in the urban markets 5. Margins in the chocolate industry range between 10 and 20 per cent, depending on the price point at which the product is placed 6. Chocolate sales have risen by 15% in 2007 to reach 36000 tonnes according to one estimate. Another estimate puts the figure at 25000 tonnes 7. The chocolate wafer market (Ulta Perk etc) is around 35 % of the total chocolate market and has been growing at around 13% annually

8. 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 confectionery 9. Entire Celebrations range marketshare is 6.5% 10. The global chocolate market is worth $75 billion annually

Market capitalization
The Indian candy market is currently valued at around $664 million, with about 70% share ($ 461 million) in sugar confectionery and the remaining 30% ($ 203 million) in chocolate confectionery. Indian Chocolate Industry is estimated at US$ 400 million and growing at 18% per annum. Cadbury has over 70 % share in this market, and recorded a turnover of over US$ 37m in 2008.

Size of the industry

The size of the market for chocolates in India was estimated at 30,000 tonnes in 2008. Bars of moulded chocolates like amul, milk chocolate, dairy milk, truffle, nestle premium, and nestle milky bar comprise the largest segment, accounting for 37% of the total market in terms of volume. The chocolate market in India has a production volume of 30,800 tonnes. The chocolate segment is characterized by high volumes, huge expenses on advertising, low margins, and price sensitivity.The count segment is the next biggest segment, accounting for 30% of the total chocolate market. The count segment has been growing at a faster pace during the last three years driven by growth in perk and kitkat volumes. Wafer chocolates such as kit kat and perk also belong to this segment. Panned chocolates accounts for 10% of the total market. The chocolate market today is primarily dominated by Cadbury and Nestle, together accounting for 90% of the market.

Major Players

Cadbury India Limited Nestle India

Gujarat Co-operative Milk Marketing Federation Cocoa Manufactures and Processors Co-operative (CAMPCO) Bars Count Lines Wafer Panned Premium Cadburys Dairy Milk & Variants 5-Star, Milk Amul Milk Chocolate Treat Perk Gems, Tiffins Temptation & Celebrations Nestle Milky Bar & Bar One.

Latest developments

Chocolate-lovers may soon find their chocolate dearer if the problems plaguing the industry continue. Raw material costs have risen by more than 20 % in the last few years. Although retail prices have not increased, a rise in input costs will force the manufacturers to consider a price hike.The Bigger players in the country such as Cadbury, which leads the Rs 2,500 crore chocolate markets in India with a share of 72%, will find it easier to absorb the surge in input costs as it has products at various price points in the market, said industry experts. Cadbury may also opt for a price hike, albeit marginal, if the current trend continues. Indian Chocolate Industry?s Margin range between 10 and 20%, depending on the price point at which the product is placed. The input costs in India are under check owing to the 24% decline in the prices of sugar. The Worlds Leading manufacturer of high quality cocoa and chocolate products Barry Callebaut, has announced the opening of its first, state-of the art, Chocolate Academy in Mumbai, India in July 2007. According to the analysis of the international market intelligence provider Euromonitor, the relatively small Indian chocolate market with volumes of about 55,000 metric tonnes of chocolate and compound per year is expected to grow on average per year by around 17.8% between 2008 and 2012. Ferrero the Italian confectionery giant of $8 billion has planned up for a new production facility in Maharashtra with an investment of over $125 million to whip up some of its popular brands that include Rocher and Kinder.

Consumer Trends
1. Mithai- the traditional Indian sweats is getting substituted by chocolates among upwardly mobile Indians. Instead of buying sweats on Raksha Bandhan, sisters prefer offering chocolates to their brothers. This is the reason for sudden spurt in advertisement between July & Sep by

most of the companies 2. The range and variety of chocolates available in malls seems to be growing day by day, which leads to lot of impulse sales for chocolate companies 3. 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 chocolates 4. Designer chocolates have become status symbols. They are linked to ones aspiration and lifestyle and malls are perfect points of sale as people usually are happy and gay at these destinations 5. 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 proposition for occasions and enabled people to come closer. Research done by Cadbury suggested that they should extend the plank of occasion-based gifting to social gifting i.e. allyear-round gifting options 6. Consumers can choose from wide range of chocolates, which initially was limited to Milk chocolates like DairyMilk and MilkyBar. In past few years we have seen so many SKUs with almonds, raisins and all sort of nuts. And how can we forget latest 5 star crunchy and Ulta Perk, which has opened new windows for consumers 7. In past, consumers had negligible inclination for dark chocolates. But now we have seen a change in the Indian palate, which is increasing the base of this sub-segment

Advertisement Trends
1. Chocolate advertising rose by 30 per cent during January-November 2007 compared to January-November 2006 2. Maximum chocolate advertising was during Raksha Bandhan across 2005 and 2006 and January-November 2007 3. As expected chocolate advertising skewed towards kids channels and regional GEC took the second position 4. Cadbury India Ltd rules chocolate advertising on television 5. 17 per cent more advertising during third quarter 2007 (Raksha Bandhan festival) compared to first quarter 2007 6. Regional GEC took the second place with a 21 per cent share ad volumes of chocolates, followed by Hindi movie with 13 per cent share during January-November 2007 7. Among regional GEC, maximum advertising of chocolates was on Malayalam and Bengali channels

8. Cadbury India Ltd was way ahead of its peers with 66 per cent share followed by Nestle India Ltd and Parle Products Pvt Ltd during January-November 2007 9. During January-November 2007 the number of new chocolate brands advertised decreased to seven from 12 during 2006 10. Nestle Munch Pop Chocolate led the chart of new chocolate brands advertised on television during January-November 2007

Some BTL Activities

1. Cadbury India has tied up with leading coffee chain Caf Coffee Day for direct sampling of the product in top cities

External Environment
1. The prices of cocoa and milk, the chief ingredients used in chocolates, have gone up by 50 per cent, while the price of sugar, another important raw material, has come down. The overall input costs have gone up by 20 per cent. If the prices of these commodities keep increasing, companies will be forced to increase the prices. India imports most of its cocoa requirements. The prices of cocoa have risen globally due to unavailability of the commodity 2. US-based chocolate-maker Hersheys is mulling a foray into the Indian chocolate market through its joint venture with Godrej