School of Commerce

Devi Ahilya Vishwavidyalaya

A Major Research Project on the topic

“Imports of Chocolates in India and its effect in our
domestic market.”
for partial fulfillment of MBA.

Guide: Candidate:
Dr LK Tripathi Anshika Srivastava
(Head of the Department) MBA (Foreign Trade)
School of Commerce 2 year program, 4th sem
Batch 2009-2011
PREFACE
In present days, the world of foreign market is full of intense competition. This is basically due
to different economies in the world. This also developed FMCG as market of huge potential.
Products which have a quick turnover, and relatively low cost are known as Fast Moving
Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Examples
of FMCG generally include a wide range of frequently purchased consumer products such as
toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as
other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG
may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks,
tissue paper, and chocolate bars.
This major project is based on an analytical study of chocolate industry in India with reference
to major player of Indian chocolate industry. The sweet story of chocolate under this project
enlightens us about the size of chocolate and status of chocolate industry in India. The project
gives information about the international competitors, their market share, and their product
basket and highlights success features. The project also presents data on types & categories of
chocolates. The project also covers a brief study of Cadbury’s India Limited and Nestle– the
biggest players in the Indian chocolate industry with reference to their presence, market share,
and product offerings, marketing strategies strengths and weakness.
I enjoyed every moment while incorporating this research and the day today challenges have
made me learn new things. And I also learn so many new things from my guide which I know
will help me throughout my career. I hope that this report proves to be of significant help to
forthcoming students and other interested parties.
Index-

Introduction

History of chocolate

Making of chocolate

Overview of Indian chocolate industry

Analysis of key industry participants

Global competitiors of Indian chocolate industry

Strategic Issues Facing The Industry

Conclusion
refrences

INTRODUCTION
Chocolate! The name brings memories of a sugary and scrumptious sweet in your mouth. Each
and every person in the world, whatever is his age or his sex, loves the delicious sin. In fact,
chocolate is one of the most preferred gifts on every occasion, birthday or anniversary,
Valentine’s Day or Christmas, wedding or farewell. Whether it is your wife or your boyfriend,
your kids or your in-laws, you can present chocolates to almost everyone.

If people thought that chocolates were just restricted to kids think again. According to a recent
study conducted by a major chocolate brand in India the major consumers of chocolates apart
from kids are teenagers and people between the ages of 15 - 35. Chocolates which were
considered expensive once have now become affordable by one and all. Most of the chocolate
brands in India produce chocolates in different sizes that are priced according to their sizes.
Chocolates like Diary Milk and Five Star can be got for just Rs 10. 

Chocolates in India are slowly and steadily substituting the mithai or traditional Indian sweets.
Due to the increasing levels of social consciousness people prefer gifting well wrapped chocolate
packets rather than sweets on occasions and festivals. Taking advantage of this situation the top
chocolate brands in India are now concentrating on the packaging and are introducing well
packaged chocolates for specific occasions. 

Initially chocolates were just limited to a few flavors caramel and milk chocolate till recent years
when the introduction of dry fruits in chocolates created waves in the chocolate industry in India.
Even dark chocolate which was not widely available in the Indian subcontinent till some time
back has started gaining ground in the Indian chocolate market.

 
The Chocolate market in India is currently estimated at Rs1500 crores. Growing at a rate of
almost 18-20% per annum the chocolate market in India is becoming one of the major industries
in the country. India produces almost 30,000 tones of chocolate products annually. India's per
capita consumption of chocolate is a whooping 300 grams. Out of which Over 70 per cent of the
consumption takes place in the urban areas. Chocolate consumption in the rural areas is
negligible in India. Top Chocolate Brands in India are Cadbury, Nestle, and Amul. Cadbury and
Nestle has been dominating the chocolate industry in India over the last few decades due to their
deep penetration levels and strong customer base. Cadbury over the years has become
synonymous with chocolates in the country. Be it the quality of the chocolate, the packaging, the
marketing or the advertising Cadbury has been ruling the chocolate industry since quite a few
decades now. However as compared to these two brands Cadbury and Nestle, Amul is relatively
new. 
A BREIF HISTORY OF CHOCOLATE

While eating a chocolate, have you ever thought how it came into being? If you are ignorant
about the origin of chocolate till date, use the interesting information on its background, given
below. The origin of chocolate can be traced back to the ancient Maya and Aztec civilizations in
Central America. Who first enjoyed ‘chocolatl’; a much-prized spicy drink made from roasted
cocoa beans. Throughout its history, whether as cocoa or drinking chocolate beverage or
confectionery treat, chocolate has been a much sought after food. Because cocoa beans were
valuable, they were given as gift on occasions such as a child coming of age and at religious
ceremonies. Merchants often traded cocoa beans for other commodities such as cloth, jade and
ceremonial feathers. Because cocoa beans were valuable, they were given as gifts on occasions
such as a child coming of age and at religious ceremonies. Merchants often traded cocoa beans
for other commodities such as cloth, jade and ceremonial feathers.

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, Spain’s 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.
 
It’s 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.

MAKING OF CHOCOLATES
Making chocolate from the bean isn't easy. Chocolate companies invest millions of dollars into
tools and machinery to turn bitter cacao beans into delicious chocolate bars. But with many hours
-- or possibly days -- of hard work and dedication to detail, along with some equipment of your
own, you can turn your kitchen into a miniature chocolate factory. By following these
instructions and techniques, you'll be able to make your very own brand of chocolate.
Roast the cocoa beans. The process is similar to roasting coffee beans, except with gentler
requirements: 5-35 minutes at temperatures between 120-160 degrees C (250-325 degrees F).
You must generally expose the beans to an initial high temperature, lower the temperature
gradually, and stop roasting when the beans start to crack (but not burn). The first image shows
the cocoa beans before roasting, and the second image shows the after-result. You can
accomplish this in your oven or by using a store-bought roaster.

Crack and winnow the beans. After roasting, the beans must be cracked into nibs and
winnowed, whereby the husks (chaff) are removed.

Grind the nibs into a cocoa liqueur. You will need equipment strong enough to liquefy the nibs
and separate the remaining husks. General food processors, Vita-Mix, coffee grinders (burr and
blade), meat grinders (manual and electric) mortar and pestles, and most juicers will not work.
You may need to experiment to find equipment that gets the job done. Many home chocolatiers
find success with a "Champion Juicer". Feed the nibs into the juicer one handful at a time, being
sure to push them in gently (not forcefully) or else the motor may overheat. Cocoa liqueur will
come through the screen and a mixture of husks and liqueur will find its way through the spout.
Feed this mixture through the juicer again until only the husk comes through the spout.

Conch and refine the chocolate. By definition, conching affects the characteristic taste, smell
and texture of the chocolate, while refining reduces the size of the cocoa solids and sugar
crystals. Both processes can be applied at the same time with a powerful wet grinder (success has
been reported with a Spectra 10 mélange, also called the "Stone Chocolate Mélange’’. How you
conch and refine the chocolate will depend on what equipment you use.

Temper the chocolate. This is likely the most difficult part of the process, but it ensures that the
chocolate will be shiny and have a "snap" to it, rather than being matte and soft enough to melt in
your hands. However, the great thing about tempering is you can do it as many times as you like
and the chocolate won't be ruined. Alternatively, you can purchase a tempering machine on the
Internet for $300-400 (US). The most important thing is that you do not let any moisture in the
chocolate, or it will be ruined.

Mold the chocolate while it is still at about 90 degrees F. Pour the chocolate into the molds,
careful not to spill. Some people find it effective to use a large syringe to place chocolate in the
mold, but it is all about personal preference. When all of the chocolate has been added to the
molds, you may freeze, refrigerate, or let them harden at room temperature. Again, it's all about
personal preference, and there is no right way to do it.

Remove the chocolate from the molds when the chocolate is hardened. The molded chocolate
should have a glossy appearance and should snap cleanly in two. If you are unsatisfied with your
chocolate, you may re-temper the chocolate as long as the chocolate remains dry and you haven't
burned it.

INDIAN CHOCOLATE INDUSTRY

Indian scenario

Chocolates have been in existence since the times of the Aztecs and Mayas. The credit of
introducing them to the rest of the world goes to the Spaniards. In the beginning, a highly
unrefined form was used in Europe. Now, the primary components of chocolate are cocoa, sugar
and milk. Hershey's were the first chocolate manufacturers to bring out chocolates in the
currently accepted solid form.

The size of Indian chocolate market size was estimated at approx. 30,000 tones in the year 2008.
Moulded chocolates like dairy milk, amul, nestle premium, truffle and nestle milky bar constitute
37% of the total market (in terms of volume). The count segment comprising of brands such as
five star, kitkat, perk, and picnic is the next largest segment, accounting for 30% of the total
market. Panned chocolates occupy 10% of the total market.

Indian chocolate industry is dominated by two companies; Cadbury and Nestle, both
multinationals. The leader is Cadbury with the biggest share of 70%. The company's various
brands such as Dairy Milk, Five Star, Éclairs, Gems and Perk are leaders in their segments. Until
the middle of 90s, Cadbury had a monopoly among the chocolate manufacturers, and then Nestle
made an entry by introducing its famous brands like Kit Kat and Lions, and in the process ending
Cadbury's monopoly. Competition in this segment is going to increase as big international
heavyweights like Hershey's and Mars are entering the Indian market.

If we see check per capita consumption of different countries of the world, than India stands
nowhere even near the top 30 countries. The Indian chocolate industry is highly fragmented with
a wide range of products. We have molded chocolates, panned chocolates and many more. Given
India's gigantic population, it is a surprise that per capita intake is dreadfully low; a mere twenty
grams/Indian as compared seven kgs in most developed countries. However, the consumption is
growing at 10 to 12 percent annually.

Frazer Foods is one of the leading chocolate manufacturers in India. It specializes in molded

chocolate, hard boiled candy, deposited candy, chewing gum outsourcing and contract
manufacturer confectionery.

Reason for growth

Indians have huge fetish for sweets, and thus chocolates are every Indian’s delight. India being
the second largest populous country in the world offers immense potential for this product. In
addition, with increasing spending power of Indian consumers, people have more money at their
disposal. Moreover, the ever revolutionizing large retail formats has given the needed impetus to
the industry.  

International brands making way in India

In the past few years, India has witnessed the entry of international brands in the chocolate
industry. According to these players, India is one of the fastest growing markets for
confectionery products that offer huge opportunity for growth. Lindt, Hershey's, Patchi,
Leonidas, Godiva, Anthon Berg, Chocolat Stella are a few international chocolate labels now
available in India. Though the current market share for them is the tiniest of the whole share of
the pie, is optimistic for its growth in the near future. At present, their target audiences are those
who are familiar with the brand names, which is just a selected group of consumers. The price
range for these chocolates is another factor for its selected target group. For one gram of
chocolates from these brands, one needs to shell out over Rs 200.

Patchi, entered India in 2003 and is growing at 20-25 per cent year-on-year and operates its own
stores in Mumbai and Delhi. Lindt also recently unveiled a magnificent replica of the Taj Mahal.
Created by Adelbert Bucher, Lindt Master Chocolatier, the Taj Mahal is a delicious tribute from
one of the world’s most loved chocolates to the city, New Delhi and its dynamism. The unveiling
also coincided with the re-launch of Lindt Chocolates in India. Narang Hospitality Services was
appointed the sole distribution, sales, and marketing partner for Lindt Swiss Chocolates in India
in April 2009.

Leonidas the famous Belgian chocolates have made way into India. Vrinda Rambhia, Director,
Premium Pralines Pvt. Ltd tells, “It was difficult to get fresh quality chocolates in India. After
tasting most of the chocolates available, we loved Leonidas. The key values of Leonidas are
freshness, generosity, and tradition. These are the key reasons which made Premium Pralines
open a boutique of chocolates. An Indian consumer is always ready to try new products and with
a wide range of high-quality products being available now from Leonidas, it will always be their
first choice. To enhance the palate and evolve the taste buds of the Indian consumer, Premium
Pralines decided to bring Leonidas to India.”

Trends

The trends in chocolates have been changing. Bars by the chocolate retail players are the
common form of chocolates. Over the years, homemade chocolates have also seen a rise. The
latest innovation in the industry is the opening of exclusive chocolate stores. They have now
moved from just being of shelves with other products to exclusive stores. Chocolate boutiques
are a concept brought to the country by the international players in the segment. There is also a
growing demand for sugar-free and diet chocolates.  

A major part of chocolate industry remains to be explored which means there is a long way
ahead. Chocolates have always been a favourite treat among Indians and will always remain so.
Thus, the potential for the industry is only going to grow from here on.

SUGAR CONFECTIONARY BOOMING IN INDIA

The Indian confectionery market witnessed the launch of over 200 products in various categories
last year, thus ranked, according to Datamonitor, in the top 20 in terms of global new product
launches in 2009.
Confectionery makers are expanding their product ranges in India, based on recognition of the
country’s huge growth potential for chocolate products and sweets and relative insulation from
the global recession, according to a Datamonitor review of the market.
“Sugar confectionery had the highest number of product launches during the year, followed by
chocolate which saw a significant increase in sales in the recent years,” note the analysts.
Indeed, this week saw Bosch unveiling plans to build a new €4m packaging machinery plant in
the country to meet burgeoning demand growth from India’s food, beverage and pharmaceutical
sectors.
Ashok Gourish, business head at Bosch Packaging India, told our sister site
FoodProductionDaily.com the investment would realise a major increase in its production
capacity, saying that sustained and strong growth from the food industry, particularly in
confectionery, was fuelling climbing demand for the company’s machinery.
Chocolate exchange
With the increasing discretionary incomes of consumers in urban India, spending on chocolates,
which has long been considered a luxury good, has increased significantly over 2005/09, said the
confectionery market specialists.
“For a long time now, Indians have followed the tradition of exchanging sweets during festivals
and occasions. In the recent years, chocolates have been replacing sweets on such special
occasions in India,” reports Datamonitor.
Cadbury, now Kraft owned, commands almost a 70 per cent share of the fast growing Indian
chocolate confectionery market and together with number two Nestlé, their overall value share of
that sector exceeded 90 per cent in 2007.
And Indian joint venture Godrej Hershey is reported to be introducing chocolate products amdist
strong competition from those dominant players.
Up until now the alliance, established in 2007, was focused on supplying food and sugar
confectionery products only in India – the Indian company holds 49 per cent stake in the venture
and 51 per cent is held by US based Hershey’s.
"The company (Godrej Hershey) is planning to get into the chocolate business, which is the main
business Hershey's has all over the world," Godrej Industries Ltd chairman Adi Godrej said back
in June.

Adult confectionery
Another marking trend observed in the Indian confectionery market during 2009 was the
emerging adult confectionery market, which is still in a nascent stage.
“Considering that adults have higher discretionary income to spend on confectionery,
manufacturers consider this to be a market which is less sensitive to price changes than the
children’s confectionery segment,” comments Saritha Pingali, Datamonitor consumer markets
analyst.
Health claims
Datamonitor notes that ‘kids’ as a claim on new products declined in 2009.
Manufacturers, continued the market research firm, are cautious of the increasing health
consciousness among Indian adults and have launched few products specifically targeted at the
health conscious adult consumer segment.
The Indian confectionery market seems to be trending towards health, with most of the claims on
the new products launched in 2009 reflecting health and nutrition.
‘Vegetarian’ was the top claim among all the new confectionery products launched in the
country in 2009, while claims such as 'no sugar', 'no gluten', 'high in fiber' and 'high in vitamins'
have witnessed healthy growth over 2008, notes the report.
Flavors
In 2009, majority of the top ten flavors of all the new confectionery products launched were
fruit-based. Some of the top flavors that saw a significant increase over 2008–09 were: orange,
raspberry and caramel however, despite the fact that Indians have started embracing foreign
brands, the preference for local flavors remained unaltered.
“The trend of targeting the urban Indian consumer is expected to continue along with a focus on
rural India, where the country is expected to see a growth in discretionary incomes and
consumer spending,” concludes Saritha.

INDIAN CHOCOLATE DEMAND FUELS DOMESTIC COCOA

INCREASES
In response to rising demand in the chocolate industry and reduce dependency on imports,
Indian cocoa producers have said they will increase domestic cocoa production by 60 per
cent 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 the country 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.
The country's annual cocoa demand is thought to be around 18,000 tones.
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 percent annually and will reach about 30,000 tons in
the next 5 years," Cadbury India said in the article.
Market potential
Indeed, according to an industry study in October by Reporter Buyer, a burgeoning taste for
chocolate in this region is driving domestic demand, creating new markets for chocolate makers.
Compared to the highly developed confectionery markets in Western countries, Asian countries
are at earlier stages of development, according to the report Chocolate Challenges.
For example, the US market is valued at between $14bn (€9.9bn) and $17bn (€12bn), while
India's chocolate operations are valued at only $188.6m (€132.8m).
But China, India and Japan have huge potential for chocolate companies, the report states, and
chocolate consumption in the region is currently increasing at a rate of 25 per cent a year in the
Asia-Pacific region.