chocolate in india

COUNTRY MARKET REPORT

CHOCOLATE IN INDIA

PURPOSE OF THE REPORT

Provide relevant country and market information to foreign chocolate manufacturers who want to enter the Indian chocolate market.

AGENDA

1. General Country Background

2. The Political/Legal Environment

3. The Economic Environment

4. The Socio-Cultural Environment

5. The Indian Chocolate Market

6. Conclusions and Recommendations

General Country Background

Chocolate in India


Name Republic of India

(Bhārat Gaṇarājya)

Government Federal Republic

Area 3,287,263 km2 (7th)

Capital New Delhi

Largest city Mumbai

Population 1,170,938,000 (2nd)

Official languages English, Hindi

Administrative divisions

28 states and 7 union territories

Currency Indian Rupee (INR)


India is one of the fastest growing economies in the world.

Fast development of the country

Increasing income levels

Westernization of the national culture

Wide variety of opportunities for foreign companies


India also faces many challenges:

Poverty Poor infrastructure High levels of illiteracy Quality and quantity of

universities Inadequate public health

system Overpopulation

The Political/Legal Environment

Chocolate in India


British colony for almost 200 years, independence on August 15th 1947

Federal parliamentary republic

Problems: fragmented multi-party coalition, high bureaucracy, policy implementation weaknesses, conflict over Kashmir, poverty, religious conflicts

Relatively high country risk, BERI=58

Taxation system: income taxes, custom duties, Central Excise, sales taxes, etc.

Tariffs on food imports still high, despite liberalization of trade in 2001

Legal requirements for food safety, packing and labeling: PFA (Prevention of Food Alteration Act), Standards of Weights and Measures Act


The Economic Environment

Chocolate in India


GDP (Purchase Power Parity)

$ 4,06 trillion (5th in the world)

GDP growth rate 10,4% p.a.

GDP per capita $ 3,500

Inflation rate 12%

Labor force 478 million

Unemployment rate 10%

Exports $ 225,6 billion

Imports $ 357,7 billion

Exchange rate

INR per USD

46,163

Fastest growing economy in the world

Until 1990ies stagnation and under-development

Economic reforms, LPG model

Deregulation of markets, lift of restrictions on FDI


Sources of economic growth:

Services: 54% (of GDP)

Agriculture: 28%

Industry: 18%

Major exporter of IT services: Bangalore and Hyderabad – the “Indian Silicon Valley”

Increase in FDI since 1990ies, many international players

Main trading partners: UAE, China, USA, Saudi Arabia


India still faces many problems despite the rapid economic development:

High inflation rate of up to 10%

Inequalities between the rich and poor

Poor physical and social infrastructure

Poverty (37% below poverty line)

Strict labour laws which prevent FDI

The Socio-Cultural Environment

Chocolate in India


High ethnic and cultural diversity ( >1000 different languages spoken)

Fastest growing middle class in the world

High level of urban migration

Religion plays an important role in people’s lives (Hinduism)

Many festivals (Diwali, Rakhi, Onam)

Total population 1,2 billion (2011)

Growth rate 1,35% p.a.

Life expectancy 67 years

Urban population 30%

Population below poverty line

37%

Literacy rate, male resp. female

73%, resp. 48%

Official languages Hindi, English

Regionally recognised languages

18

% under 65 years 95%


Considerable differences between regions

Southern and Western India are more developed with strong agricultural and industrial sectors

Northern India is most populous, mainly agriculture

Eastern India is largely poor

Bangalore

Hyderabad


India is a young country, less than 5% over 65 years, 50% under 25 years

Younger generations are more westernized and brand-conscious

Hofstede’s cultural dimensions: high PD, moderate UA, MSC, IND

Cast systems still relevant

The Indian Chocolate Market

Chocolate in India

General Overview

Major changes since the 1990ies

Market still very small ($300 mil.) but steady growth of 18-20% p.a.

Huge growth potential for premium segment

70% of sales in urban areas

Very price-sensitive market

Most popular chocolate tablet in India

Consumer Behaviour

Chocolate consumption still very low: 300g p.a. (1,9kg in Britain)

Westernization of Indian lifestyle

Rising income levels, travel abroad, metropolitan population

Gifting sweets during festivals

Substitution of traditional mithai with chocolate

Competition

Two dominant players with a long tradition: Cadbury and Nestle (90% of market)

Local manufacturers: Amul, Campco, etc.

International players: Lindt, Godiva, Hershey’s, etc. (premium segment)

Housewives

Market snapshot for 2011

Jan. 2011 - Kraft Foods acquires Cadbury India

Jul. 2011 - Hershey’s exits JV with Godrej Group

Oct. 2011 - Ferrero opens first production facility in India

Nov. 2011 - Campco increases production to 23,000 ton./year

Dec. 2011 - Kraft Foods increases investments in Cadbury India

Distribution Channels

Distribution system: low efficiency, high costs

Many intermediaries

Retail sector highly unsystematic

Small independent stores: Kiranas, Paan-Beedis

Supermarkets, malls, exclusive chocolate stores

Kirana and Paad-Beedi shops

Conclusions and Recommendations

Chocolate in India

Conclusions

India – high cultural, economic, ethnic, linguistic, religious diversity

Differences between regions and income levels

Huge growth potential of the chocolate market, many international players are entering

Westernization of culture and lifestyles

Market is highly concentrated, very price-sensitive

Market entry needs careful planning

Recommendations

Large capital investments for branding and marketing to compete with major players

Appropriate pricing strategy is crucial

Selection of appropriate local trading partners, importers, distributors

Focus on more developed regions and metropolitan areas first

Thank you for your attention!

Sources available on request.

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