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 the fastest 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.

Growth catalysts India is one of the fastest growing confectionery markets in the world. Rising disposable income, urbanization and growth of organized retailing has positively helped Indian confectionery 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 auspicious occasion, 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 - Economic slowdown in the western economies resulted in the slow growth of their confectionery market as indulgence products have high correlation to the performance of general economy. However, demand from the Indian consumers continues to be buoyant as they now have more money in hand and are exposed to the western products due to frequent travels. This surge in demand for high-end products has enticed the global companies to enter Indian market. According to Datamonitors report Confectionery in India, companies such as Ferrero, Lindt, Barry Callebaut and Hersheys have already entered India on their own or by partnering with domestic confectionery companies. Datamonitor expects that confectionery market would see further boost with increase in new product development activities by existing and new players and thus offering Indian consumers a wider choice. Impediments to the growth Formidable sweet market Indian confectionery majors face a formidable task of competing not only amongst their peers but also with the very strong traditional Indian sweets or mithai consumed at home. High input cost and low MRP Confectionery companies are also facing a challenge of maintain MRP while input cost and excise duty costs are on the rise. Due to high sensitivity of Indian consumers towards the prices, companies have not been able to pass-on the hikes to the consumers resulting in high pressure on their margins.

Underdeveloped infrastructure Modern trade channels such as supermarkets, convenience stores which offer access to affluent Indians is still at a nascent stage impeding the growth of high priced products. Moreover, lack of infrastructure support such as refrigeration, logistic etc is also hampering the growth of premium chocolate categories.

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.

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 global confectionery market in 2009. New launches decreased greatly in many countries over 2009 due to the global economic slowdown, including Japan and Germany (which last year registered declines in new product launches of 19% and 17%, respectively). The largest proportion (47%) of new product launches in the Indian confectionery market in 2009 belonged to the sugar confectionery category. This was followed by chocolate, which accounted for 29% of the new product launches. During 2009, cereal bars as a category contributed a mere 8% 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 a retail sales share of 77.7% in 2009. Large international players dominate the market, including Cadbury (now Kraft), Perfetti Van Melle, Nestl and Mars Inc. In terms of new product launch share in 2009, it was other international companies like Areka, Halter Bonbons and The Wrigley Company that had the maximum number of launches.

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 companys willingness 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 asundheep@datamonitor.com.