From Cadbury to Hershey, Indians love their chocolate

India’s chocolate confectionery market is the fastest growing market in the world, and established global players are vying with each other to capture a significant share

November 28, 2019

Mondelez India holds the largest share of the market at 64 percent, according to Euromonitor International, followed by Nestle, Ferrero and Hershey

Mintel sees the Indian chocolate confectionery market growing 20.6 per cent from 2016 to 2020, making it the world’s fastest growing market

In May 2018, Italian confectionery major Ferrero declared that they will invest another US$71.4 million in India, taking the total to US$285.7 million

Home to the world’s second largest population, India is slated to become the world’s third largest consumer economy by 2023 with improving affordability

Last year, with an eye on capturing a bigger slice of India’s booming chocolate confectionery market, Pennsylvania-headquartered Hershey launched its popular, 112-year-old bite-sized chocolate brand, Kisses, in India. The quick success of this brand, available in 14 cities and in major online stores such as Amazon, Flipkart, and Bigbasket, facilitated Hershey India to scale up the market share and replace another American chocolate major, Mars Wrigley Confectionery as India’s No 4 chocolate company.

India’s US$1.7 billion chocolate confectionery market, much like its soft drinks and premium cosmetic segments, is dominated by foreign players. That has been the case since the iconic Cadbury, the 195-year-old British confectionery brand, entered India in 1948. It is not surprising that Mondelez India Food Pvt Ltd, the present manufacturers of Cadbury Dairy Milk and 5Star products, holds the largest share of the market at 64 per cent, according to Euromonitor International, followed by Swiss food and drink giant, Nestle, Ferrero, Italy’s leading chocolate manufacturer, and Hershey, one of the largest chocolate makers in the world.

Though Indian brands like Amul, which launched a US$27.1 million state-of-the-art chocolate plant inaugurated by Prime Minister Shri Narendra Modi in Anand, Gujarat, last year, as well as small homegrown brands are also striving to get a bite of the expanding market, these global brands clearly have the sweet edge. 

Growth Projections and Drivers

The per capita consumption of chocolate by Indians remains low at about 170 g per year. It is not comparable to the Swiss, who tuck into 9 kg of chocolate a year. The USA and China markets might be bigger than India at US$19.2 billion and US$3.2 billion, respectively, but consumption rates in India are clearly rising. According to a study by Euromonitor, India’s chocolate market is projected to grow 8 per cent annually from 2016-21 to reach US$2.5 billion. While Mintel estimates that the Indian chocolate confectionery market is expected to grow 20.6 per cent from 2016 to 2020, making it the fastest-growing market for chocolate in the world.

In the last decade, key international chocolate players have introduced premium products, strengthened distribution and supply chains, and expanded in India to manufacture products suited to local tastes.

It is the sheer size of the Indian market, which includes a sprawling, untapped rural hinterland that makes the Indian market attractive for these international brands. For some like Mondelez India, are seeing double-digit growth in revenues. Taking into account India’s “demographic and economic potential” and the “expected consumption growth rates in the years ahead,” global players are competing with each other across geographies and formats to bolster their share.

Some of the key drivers behind the growth in the Indian chocolate industry are changing consumer tastes from traditional Indian sweets to chocolates, rising affluence, and a growing middle-class with disposable incomes. Chocolate manufacturers are also tapping into the increasing purchasing power of rural India. For example, a big bulk of Mondelez’ US$150 million increase in their global investment this year will be in rural India, the company’s senior spokesperson told the media recently. In fact, this American multinational has ramped up its distribution network to rural areas and plans to be in about 75,000-100,000 villages in the next three years, up from 50,000 in 2018.

The increase in online shopping in India and the sharp tax cuts too have spurred growth in this sector. Last year, the government had slashed GST rates on many consumption items like chocolates, bringing the levy down from 28 per cent to 18 per cent, leading to a reduction in chocolate retail prices. According to marketing research firm Nielsen and Euromonitor, chocolate sales in India then rose at a faster pace in 2018 than in 2017. Online chocolate sales have surged 144 per cent from 2013 to 2018, making this distribution channel a major priority for the MNCs.

Wooing the Indian Market

Constant innovations and technology, the introduction of new products and emerging consumer trends like a demand for dark or artisanal hand-made chocolates have kept foreign players on the top of the game in India’s crowded chocolate market.

In the last decade, key international chocolate players have indeed been proactively introducing premium range products, strengthening their distribution and supply chains, expanding their facilities and investing in India to manufacture products suited to local tastes. 

In May 2018, for example, Italian confectionery major Ferrero India Pvt Ltd declared that they will invest another US$71.4 million in India, taking their total investments in the country to US$285.7 million, to expand their distribution network and production facility. The company, which sells Nutella chocolate spread, Ferrero Rocher and Kinder chocolates, will manufacture products suited to local needs, according to a report on the Indian Confectionery Market by Invest India. Ferrero India, which has a manufacturing plant in Baramati, which makes Kinder Joy chocolates and Tic Tac for India and for export purposes, is all set to develop innovative chocolate confectionery products with higher melting points for Indian consumers.

With an eye on the super-premium chocolate segment, Nestle India introduced its hand-crafted, artisanal Les Recettes De L’Atelier bars from Europe in India last year. Made in Switzerland at the Maison Callier, or Chocolate Museum, this range uses only natural ingredients. Nestle India has been actively launching new premium products, with 39 new brand launches from 2016 to 2018 to be exact. It has invested in counter-top coolers, expanding distribution and running celebrity ads. 

Mars International India, the wholly-owned arm of US-based chocolate maker Mars Inc, has kept up with its competitors. Viewing India as a key “accelerate” market, the company ramped up its distribution network in the country and built a strong supply chain to reach markets beyond metros and some key cities last year. Mars, in fact, integrated its Mars Chocolate and Wrigley segments to create Mars Wrigley Confectionery to tap into the “high growth potential” in the Indian chocolate market. Focussed on creating products relevant to the market, the company’s innovation centre in Bengaluru is helping localise some flavours. 

Most of these international manufacturers import their chocolates or tie up with local manufacturing partners or few have even set up their own plants. Mars has its own manufacturing plants in Pune, Baddi, Hyderabad, and Bengaluru. Earlier, the company was importing its chocolate brands Snickers and Galaxy but now manufactures them at its Pune plant, which was set up with an investment of over US$160 million in 2017. Chocolate maker Mars Inc. will bring more of its global products to India like it did its signature M&M chocolate candy.

Might of Indian consumption

Mondelez too has its own manufacturing facilities, the latest being their largest unit in the Asia Pacific region at Sricity SEZ in Andhra Pradesh, established with an investment of US$142.9 million in 2015. With a production capacity of 100,000 tonnes of chocolates, this factory caters to the domestic market largely. On a drive to boost their distribution, they added 200,000 outlets and installed an extra 70,000 mini-fridges last year. 

Mondelez considers its Indian business to be crucial to achieving its global online sales target by 2020. For the US$26 billion Mondelēz, the Indian business accounts for less than US$1 billion by revenue, but the market share of flagship brand Cadbury Dairy Milk in the country has been the highest for Mondelez globally. Hershey India, meanwhile, which introduced its first chocolate brand Brookside in India in November 2016, too has committed to making an investment of US$50 million over the next five years. 

The chocolate industry is riding on the back of the growing consumption power of Indians today. Hosting the world’s second-largest population, India is slated to become the world’s third-largest consumer economy by 2023. As studies estimate that by 2030, 51 percent of Indian households will earn over US$8,500 per annum, India’s consumption story is expected to remain robust, making it sweet for foreign investors for some time to come.

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