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Industry Overview

In 2018 Indian chocolate market reached a value of US$1,495 MILLION this is because Consumers
are now buying chocolates for everyday consumption rather than just special occasions. Due to
change in lifestyle, westernization, growth of food sector it is estimated that the indian chocolate
market will reach revenues worth US$ 3,281 million, growing at a rate of 14% DURING 2019-24.

Market structure

Oligopoly
In oligopoly market structure there is competition among two or more firms.
Therefore, there is scope for strategic interdependence between the firms. Every
oligopolistic firm is large enough to influence the market conditions; therefore it has
market power, which affects the market conditions faced by all the rival firms.
The two giants Cadbury with 70 per cent and Nestle around 20 per cent have
been instrumental in building up the chocolate market in India with huge
investments in product development, advertising and brand building.
Due to the dominance of large-scale production dynasties, franchises and small
businesses tend to focus on unique or specialty items or services. Unique chocolates
may be from a region famous for a particular technique, baked on-site or offer a
different take on tradition, while specialty services tend to focus on gift-packaging or
delivery.

MAJOR PLAYERS OF CHOCOLATE INDUSTRY


There are a few major players in the INDIAN CHOCOLATE INDUSTRY
Cadbury India Limited

Nestle India

Gujarat Co-operative Milk Marketing Federation

Amul Milk Chocolate

Nature of the Industry


1.The chocolate industry in India works at different levels that include
chocolate giants like Cadbury's , Dairy Milk, etc, small chocolate
manufacturers, chocolate retailers, chocolate importers and people who
make chocolates at home
2. Diversification and innovation is the need of the hour and chocolatiers
are exactly doing that to increase their client-base.
3. The population of India presents multiple avenues for companies to
foray into India. "The regulatory environment, too, has become
conducive for foreign players to operate in the country. There is
immense scope that the country presents to players in terms of hiring
home grown talent to grow business, given the educational boom. This
clearly means that the three main factors like demand for products,
conducive regulations and customized talent are abundant in India,
which makes it inevitable for foreign players to ignore India.

Price:
Indian customers are very price sensitive and the price of a chocolate bar can easily determine
its sales. If the prices are too low then it affects the company profits while higher might mean
diminished sales.

Therefore Cadbury Dairy Milk resorts to the reasonable and affordable price mission while
Cadbury Silk caters to the customers wiling to spend more on a chocolate bar. Cadbury caters to
all types and all classes with 5 Star, Cadbury Dairy Milk, and Perk being in the reasonable price
range and Cadbury Silk and Bourneville being the premium chocolates.

Nestle has adopted a similar method. As the two firms are in great competition, similar
chocolates have similar prices. But the new Nestlé‟s Alpino is the premium chocolate competing
against Cadbury‟s Silk as a gifting and a higher chocolate.
Amul also have a strategy of low cost pricing. To cater all customer segments amul has launched various
products. Thus every customer segment has different price expectation from the product.
Amul also have fun animal shape Choco – bites called “Chocozoo” specially targeting children.

PRODUCTION
Production is the creation of goods and services from inputs or resources, such
as labour, machinery and other capital equipment, land, raw materials, and so
on. The various ingredients used to produce chocolates as raw materials are
Full Cream Milk, Sugar, Cocoa Mass, Cocoa Butter, Milk Solids, and Emulsifiers,
traces of nuts, cocoa solids and milk solids. As there are four factors of
production i.e. land, labour, capital and entrepreneurship. According to
Chocolate Industry, only labour will be a variable factor where as all others will
be fixed factors during short run. If a particular Chocolate company such as
Cadbury wants to increase its sales to meet the demand of the consumers it
will in
crease its labour to produce more chocolates during that particular period of
time. Such situations generally occur during festive seasons like Diwali in which
the chocolates become most demanding product. In the long Run, all the
factors of production are variable. According to Chocolate Industry, the
production of the products is executed keeping in mind the demand of the
customers during different times. For this, the chocolate companies may
increase or decrease their capacity by increasing their capital through funds or
any other means or can introduce new technologies according to the needs of
changing trends.
LAW OF DIMINISHING MARGINAL PRODUCT
The principle states that as the number of units of the variable input increases,
other inputs held constant, a point will be reached beyond which the marginal
product decreases. In case of Chocolate Industry also the law of diminishing
marginal product will apply. As more number of labours will be employed
other inputs remaining constant, a time will come when the numbers of
products produced could be produced by employing less labour which would
reduces the cost and increase the marginal product.
COST
In the Short Run the cost is partly fixed and partly variable. The total of fixed cost and
variable cost will make Short Run Total Cost. According to Chocolate Industry, the
fixed cost can be the cost of rent paid for the factory, machinery where as variable
cost will be the cost of employing labour, raw material for producing output. In the
long Run since all the factors of production are variable the cost will vary according
to the plans of the chocolate companies keeping in mind the cost charged by various
suppliers, or the cost of attaining factors of production throughout the long run.

DEMAND OF CHOCOLATES
if we put the quantity of Chocolates on the x or horizontal axis of a graph and
the price of Chocolate on the y or vertical axis and plot the information we just
discussed, we would start to see a picture of demand or a visual relationship
between the two variables: The line that is created when we connect the
points on the graph slopes downward. This downward slope means that there
is an inverse (or opposite) relationship between price and quantity demanded.
When price increases, quantity demanded decreases, and when price
decreases, quantity demanded increases. In fact, we could recreate this same
scenario with almost any good or service and get the same result-a downward-
sloping line. This downward-sloping line is called a demand curve

The demand curve is a helpful tool, but it is not static (or unchanging). It shifts
back and forth as conditions in the market change. For example, if you heard of
an impending Chocolate shortage, you might expect Chocolate prices to rise in
the future. As a result, you might run to your favourite candy store and buy
extra Chocolates before chocolate prices increase. In this case, the original
demand curve no longer tells the whole story; it must shift to the right to
accurately reflect the change in chocolate demand. Or put another way, your
chocolate bar demand curve shifted to the right because the quantity of
chocolate bars you-and your fellow chocolate lovers-demand would be greater
at each of the given prices.
SUPPLY OF CHOCOLATES
if we put the quantity of Chocolates on the x- (horizontal) axis of a graph and
the price of Chocolate on the y- (vertical) axis and plot the information we just
discussed, we would start to see a visual relationship between the two
variables: The line that is created when we connect the points on the graph
slopes upward. The upward slope means that there is a direct relationship
between price and quantity supplied: When price rises, the quantity supplied
rises, and when price falls, the quantity supplied falls. In fact, we could
recreate this same scenario with almost any good or service and get the same
result-an upward-sloping line. This upward-sloping line is called a supply curve.
The supply curve is a helpful tool, but it is not static (or unchanging). It shifts back
and forth as conditions in the market change. For example, if a raw material
supplier sold cocoa at cheaper rate which allowed the chocolate producing
companies to produce Chocolate at a substantially lower cost than the current
production cost, the increased profit would cause to increase the production of
Chocolate. In this case, the original supply curve no longer tells the whole story: It
must be shifted to the right to accurately reflect the new Chocolate supply. Or put
another way, the Dairy Milk supply curve shifted to the right because the quantity
of Chocolate supplied by me-and other chocolate sellers-would be greater at each
of the given prices.

Barriers :-
Anyone can enter the chocolate market in India by creating a new recipes and start off with a
cottage industry, which can later evolve into a large scale business.

However there are many obstacles that a new company have to overcome in order to be
successful.

There are many companies who are already existing and doing an amazing job, like Cadbury
which currently holds 70% of India’s chocolate. In order to compete with giants like these a new
company has to be extremely creative and different from other companies.

Even after the company become successful the company need to produce more of chocolates
and produce new kinds of chocolate to maintain its position in the market.

This is how you get into chocolate market in India

Trend :-
The new trend in chocolate market is of dark chocolate. Consumers nowadays are more
concerned about the impact of their food intake on their health and wellness. Since health
benefits associated with dark chocolates are high, owing to high percentage of cocoa present in
it. Therefore the high-quality premium dark chocolates are consumed comparatively more and
consumers are ready to pay for premium and high-quality products, thus the penetration is
growing, as the consumers are more inclined toward the brand and quality of the chocolate.