Indian confectionery industry on a growth trajectory driven by rising consumerism and young consumers

Monday, March 07, 2011 08:00 IST

Nandita Vijay, Bangalore

Indias confectionery market is set to witness robust growth in the coming years. The factors contributing to the growth are buoyancy in demand, increasing consumerism, dual family incomes and a rising young population. Confectionery categories are chocolate like eclairs and toffees, sugar confectionery or hard boiled candies lollipops, mints & lozenges, bubble gum and cereal bars. The major confectionery companies in India are Cadbury ( Dairy Milk, Perks, Gems, 5-Star celebrations, Bytes, Dairy Milk Eclairs, Eclairs Crunch, Halls, Bubbaloo Bubblegum), Nestle(Kit Kat, Kit Kat Chunky, Munch, Munch Pop Choc and Milkybar Crispy Wafer), Parle (Simply Imlee), HUL (ChocoMax and Max Magic candy), Perfetti ( Centre Shock, Happydent White, Alpenliebe, Big Babol, Chloromint and Cofitos) and Candico (Mint-O and Loco Poco). It has been reported that the countrys confectionery industry is the largest in the food processing segment. The market is estimated to be about Rs 1,400 crore, registering a growth of 9% per annum. According to Chetan Hanchate, director, Centre for Processed Foods, the Indian market for confectionery has been indicating robust action going by the frequent product launches, and consumer promotions by companies. Confectionery industry overview A major portion of the confectionery industry in India comprise the local subsidiaries of global confectionery majors like Perfetti, Lotte, Wrigley's and Cadbury. Cadbury India, the fully owned subsidiary of Kraft Foods Inc, estimates the total global confectionery market at Rs 41 billion with a volume turnover of about 2,23,500 tonnes per annum. The category is largely consumed in urban areas with a 73% skew to urban markets and a 27% to rural markets. Hard boiled candy accounts for 18%, Eclairs and Toffees account for 18%, Gums and Mints and lozenges are at par and account for 13%. Digestive Candies and Lollipops account for 2.0% share, respectively. The overall industry growth is estimated at 23% in the chocolates segment and sugar confectionery segment has declined by 19%. Giving an overview of the industry in India, a section of management students of the Indian Institute of Management, stated that the confectionery segment is keeping pace with the evolving new Indian consumer, who needs a toffee or a candy or a bubble gum to keep him company. Although the Indian confectionery market has several unorganised players, a lot of consolidation took place post 2005. It all began in June 2004, with the erstwhile Parry`s Confectionery, part of the Chennai-based Murugappa group, was bought over by Koreas Lotte India. This was followed by Godrej Foods & Beverages Limited which acquired Nutrine Confectionery Company Private Limited in June 2006. Close to the heels of this deal was a joint venture effort in April 2007, when the Hershey Company, North America's leading chocolate and confectionery manufacturer, announced the formation of Godrej Hershey Foods & Beverages Ltd., to manufacture and market confectionery across the country. Among the well-known national names are Candico which is engaged in the development of a range of products. Naturo Food & Fruit Products Pvt. Ltd in the outskirts of Bangalore is one of the largest Indian confectionery companies known for its innovative fruit based products. Its Fruit Bars range under the brand n ame Naturo offers a tasty, healthy and appetising fruit snack and is available in Apple, Mango, Strawberry & Orange pure fruit varieties. The fruit bars are manufactured in a captive and HACCP and BRC certified facility is totally natural with no sugar and preservatives added. The fruit bars are manufactured employing a unique retexturised process to retain the vital nutrients of the fruits, stated G Lakshminarayanan, senior vice-president, Naturo Food & Fruit Products Pvt. Ltd Pops Foods Products Private Limited manufactures a range of bubble gums Central Arecanut and Cocoa Marketing and Processing Co- operative Ltd (Campco) based at Mangalore which is producing chocolate for Cadbury-Kraft has now inked a pact with Karnataka Milk Federation to manufacture

chocolates at its facility. The company Campco produces all types of moulded chocolates along with semifinished products like cocoa butter and cocoa powder. Food research is open to assess the new product innovations which is a prime factor for the growth of the industry, stated Dr V Prakash, director, Central Food Technological Research Institute, Mysore . We have also developed a tamarind candy and transferred the technology to industry. At Defence Food Research Laboratory at Myore, efforts were on to develop a range of candies and fruit bars for the armed forces stationed in high altitudes, stated Dr AS Bawa. Trends in confectionery: It is observed by a section of food scientists from the University of Agricultural Sciences department of food innovation and research that the confectionery industry has achieved maturity. The growth is attributed through globalised efforts like mergers and acquisitions or joint development efforts. There is also the factor of rising incomes and affordability in many of the developing markets which indicate novel tastes and aspirations for newer confectionery. Another trend is the growing health consciousness which has led to the development of confectionary in low-fat, low-sugar, versions. There is also the inclination to look at products that are free from artificial colours, flavours and additives. This throws open business opportunities for development of ingredients using natural ingredients, stated experts at UAS. The confectionery sector has felt significant changes since a few years. Food consultants are attributing this to changing consumer consumption habits. Confectionery manufacturers are working to influence to healthconscious consumers with functional innovations, ensuring that they still continue to show the streak of active indulgence. Extensive product and market research is on to see that new products come in. Key growth opportunities for the industry are in categories of gum, chocolate and cereal bars, says Dr Prakash. Challenges in the confectionery industry The rising inflation and food prices together with the growing crude prices would impact the confectionery industry in the coming months. While cost of sugar is a concern, there is also the issue of working out costs in packaging driven by petroleum products as confectionery items are packaged in plastic packs. Therefore the industry will now need to work out a pricing due to big jumps in the cost of raw materials such as sugar which cannot be absorbed by the industry, stated observers.