Research analysis by Euromonitor International
The last couple of years have seen a spate of product innovations, value-additions and new launches in the Indian confectionery market. According to industry experts, with young consumers looking for newer formats and flavours in confectionery, manufacturers were induced to cash in on the demand and expand their product range. Dabur, for instance, extended its popular digestive brand Hajmola, and reinstated its presence in the pure confectionery segment with the launch of the Natkhat Amrud variant and Hajmola Chuzkara.
Hajmola has been a popular digestive in tablet and candy format in Dabur’s portfolio. Market experts feel that the popularity of Dabur Hajmola will benefit Chuzkara as well. Comments Ajay Parihar, Category Head–Digestives at Dabur India, “The Indian confectionery market is one of the fastest-growing in the world with a strong double-digit annual CAGR. Hajmola Chuzkara, with its unique blend of natural ingredients and good taste is liked by consumers across all age groups.”
Chuzkara – a semi-liquid sweet and sour candy – has further created room for more innovations and value-addition by other brands. In 2013, Perfetti Van Melle, the ruling confectionery player in India, expanded its Alpenliebe’s brand basket with the launch of Alpenliebe Spicey 1, spicy chilli and sweet mango in one tangy candy. The product was created with flavors to suit the Indian taste bud and liking for spicy, sweet and sour flavours. In the same year, Wrigley India enlarged the famous Boomer bubble gums range with the launch of Boomer jelly variant in mango flavor. This launch followed that of Juzt Jelly by Perfetti Van Melle in late 2012.
Says Nikhil Sharma, Director-Marketing, Perfetti Van Melle India,”As per a Nielsen report, the confectionery category is estimated to be growing at 8 percent in 2014. While the confectionery market has always been fragmented and continues to be so with more than3,200 brands operating in the category, growth has been driven by the emergence of new segments like Jelly, which has gained quick consumer acceptance. The category has also seen premiumization to some extent but needs to be accelerated in the coming years.”
Apart from sugar-based candies, the confectionery space has witnessed a lot of action in the chocolate segment. Cadbury India, part of Mondelez International, launched Cadbury 5Star Chomp in April 2014. A new entrant under the Cadbury 5Star umbrella, it offers consumers a combination of chocolate, caramel and nougat along with the crunchiness of peanuts, and is priced an affordable Rs 15 for a 30 gm pack. Siddhartha Mukherjee, Director – Chocolate Category and Media, Cadbury India, says, “As a category leader, we see a marketing opportunity with Cadbury 5Star Chomp and for expanding the repertoire of Cadbury 5Star. The product has been developed keeping in mind the evolving consumer palate. Cadbury 5Star Chomp will introduce consumers to a completely new chocolate format experience.”
Tapping the rising affluent urban demographics, and keeping pace with market trends, Nestle India launched chocolate brand Alpino targeted at older consumers in metro cities. Alpino has been positioned as a premium chocolate, priced at Rs 25 for a pack of two bite-sized chocolates. Apart from additions by existing players, the category saw new entrees like Schogetten, a leading German chocolate brand from Ludwig Schokolade GmbH (-A Member of KrÜger Group-). Schogetten comes in portioned chocolate bar format in 14 flavours, and is available in a 100 gm pack containing 18 portioned pieces, and priced Rs125.
According to Alkesh Dedhia, Director, Regal Group that operates a chain of four retail stores in Mumbai and is a leading importer, confectionery is an important segment in the food and grocery retail business. The younger generation in the country, who are well travelled and look for newer formats and flavours in the confectionery segment has led to increase in demand. Amit Lohani, MD, Max Foods, says, “The confectionery segment has been witnessing new product launches and is an important section for any retailer as it targets children, adults, young and old, but I feel that the category requires more visibility and a stronger positioning.”
As per Euromonitor, in 2013 the value sales of sugar confectionery grew by 20 percent to reach Rs 47,140.4 million, and is estimated to reach Rs 51,458.8 million in 2014. Perfetti Van Melle (PVM) India continued to lead with a value share of 23 percent in 2013, and continued to enjoy a wide portfolio of sugar confectionery brands such as Alpenliebe, Chlor-Mint, Mentos, Fruit-tella, and Cofitos. Of all, Alpenliebe was the most prefered by adults and children, and accounted for a significant value share.
ITC Ltd recorded the largest increase in share to touch 15 percent of the market share in 2013. The company’s strong retail sales includes through small cigarette shops located in rural areas and tier II cities, helped the company strengthen its value share. Other leading brands with considerable presence are Ravalgaon Sugar Farms, Wrigley India, and Parle Products. Domestic manufacturer Ravalgaon Sugar Farms continued to invest in combating the hold of the multinationals in India.
In the chocolate sub-segment, in 2013, Cadbury India continued to dominate with a value share of 56 percent mainly due to its long established presence and portfolio of popular brands including 5 Star and Cadbury Dairy Milk, and Nestle India was another dominant player in the sub-section.
As the Indian confectionery market continues to evolve, strong trends have come to the fore, which are expected to drive and propel the growth potential of the confectionery market and the categories within it. “One of the major trends is towards sugar-free, healthy products, and manufacturers are launching innovative products in the segment,” says Vikash Kumar Singhal, Owner, Sunbeam Mercantile Ventures, a leading importer and marketer. Affirms Lohani, “Consumers are so health-conscious today that they seek health and wellbeing in every thing they consume, including confectionery. Now they are demanding sugar-free candies and chocolates.”
Health consciousness has certainly caught the attention of manufacturers, as a result of which , the market is seeing cereal bars being introduced, which are currently amongst the fastest growing category in the Indian confectionery market, even while toffees, candies, caramels and nougat continued to record the fastest growth (estimated at 23 percent) in 2013. This fast growth in sales was mainly due to the growing popularity of caramels and their growing acceptance as cheaper alternatives to chocolates. Additionally, the increased visibility of caramel brands, including Alpenliebe, in modern retail stores and kirana stores, helped them gain more sales.
Another visible trend, that of adult consumers’ demand for premium chocolates continued to grow in 2013. To tap this segment of consumers, manufacturers of premium chocolates, such as Sprüngli, expanded their brand presence in premium stores such as Brown Tree and other modern stores in urban areas.
Interestingly, gourmet chocolate manufacturers, including Japan’s luxury chocolate maker Royce, also made a foray into India’s premium chocolate segment in 2013. Buoyed by the potential in the Indian market, the company opened its own store in Bangalore and Mumbai, and, more recently, in Delhi.
Sales of premium chocolates have been supported further with consumers preferring to gift premium chocolates on festive and celebratory occasions. For instance, during Raksha Bandhan, Ferrero Rocher introduced special gift packs. at select modern and traditional retail stores. Over the years, festive packs of confectionery products have become quite popular among consumers with many shifting from mithai to chocolates and other confectionery gift hampers.
Dedhia says, “During the festive season, the confectionery segment generates about 50-70 percent sales revenue. Till 10 years ago, people believed in gifting traditional Indian sweets or mithais, but now, the younger generation especially believes in gifting chocolates and confectionery products due to their longer self life, easy to store and handle, and also because of healthy options available.”
Confectionery falls under the impulse purchase segment, and (generally) does not witness any in-store promotions and offers. Confectionery items are stacked near store check-outs, luring customers, who while billing, tend to add some items to their shopping basket.
Lohani explains, “Since brands do not spend on promoting candies, toffees and chocolates,as it is not viable for them, this segment remains inactive and lacks attention in comparison to other categories. Of course, their display at the check-outs helps, but a lot of time they are overlooked when people don’t want to scan the section near billing counters. Also, not all the brands can get prominent display, so the ones kept at the back or on the last shelf, lose visibility.”
Adding on to the challenges are the stringent FSSAI regulations on imported products, so brands are finding it difficult to enter the Indian market, while the existing ones are finding it difficult to sustain their business and even considering exiting the Indian market.
Adds Dedhia, “Confectionery manufacturers typically make heavy investments in TV commercials, but are not very considerate towards retailer margins. Retailers actually help in building the brand and influencing consumer choice. If manufacturers would just use 50 percent of this expenditure for increasing the retailer margins, it would benefit them more.”
Way to go
The Indian confectionery market In comparison to other developed markets, is in the initial phase of growth, and will continue to evolve. It is expected to touch Rs 55,720.0 million in 2015 and Rs 60,188.6 million in 2016. It is believed that the sugar confectionery is likely to see a constant value CAGR of 8 percent over the next few years. The growth will be driven by the increasing consumption of sugar confectionery facilitated by the launch of new flavours by leading companies.
While Lohani at Max feels that it would take 2-3 years for this segment to gain better prominence and visibility, Singhal at Sunbeam Mercantile Ventures anticipates new packaging formats being introduced in the segment apart from more innovative products. According to industry experts, consumers will largely continue to buy confectionery from kirana stores. Nevertheless, with the growth of supermarkets and hypermarkets in tier II cities, sales of sugar confectionery through modern retail would increase.
“For us, general retail stores contribute 60 percent revenue and modern formats generate10 percent. We believe that as the market evolves, the revenue contribution from modern retail stores would rise,” shares Dhaval Chheda, owner of National Chikki, a Mumbai-based confectionery manufacturer. “Our current distribution network covers over 52 major cities in India, and by the end of this year, we plan to appoint 40 additional distributors to expand our penetration. We are also working on introducing several new products in the market soon,” he adds.
Shares Singhal, “Our current distribution network consists of over 80 distributors and we aim to expand our presence in B+ level stores in major cities. Over the last few years, our confectionery business has grown by15 to 20 percent year-on-year, and we anticipate similar growth for the next two years.”
Dedhia at Regal Group, is optimistic about the confectionery segment. “Being an important segment, it will continue to witness a lot of innovative launches.”
According to Nikhil Sharma, Perfetti Van Melle India enjoys (approximately) a third of the confectionery market share. “In spite of the low entry barrier, we have always provided consumers with unique and innovative products. Distribution of these products has always been our biggest strength with a brand like Center Fresh being available in every third outlet in the confectionery dealer universe. Three of Perfetti’s flagship brands continue to be amongst the top five brands within the confectionery space, backed by strong distribution with well-loved advertising campaigns.”
The confectionery market of India is divided into three segments: chocolate, sugar confectionery and gum market, which is further divided into sub-segments. The Indian confectionery market is going through rapid changes in terms of trends and consumer behaviour pattern, and the industry is benefitting from higher consumer spending, which in turn is being driven by the new found mall culture and changing lifestyle.
According to Nikhil Sharma at Perfetti Van Melle India, the per capita consumption should continue to increase for the category on the back of relevant innovations. “Going forward we might see a shift within the category, with higher price points becoming more prevalent within the segment. We also expect the Jellies segment to continue to be a growth driver, given the recent success of Perfetti’s Juzt Jelly, which has become the fastest growing brand in the confectionery space.”
The entry of multinational companies in the Indian confectionery space has not only increased competition, but also the per-capita consumption, by launching new products at affordable prices, and creating awareness among buyers through advertisements and promotional campaigns. The emerging trend of gifting confectionery products is also driving the category, and there is great potential for further growth in the untapped rural market. Backed by these factors, the Indian confectionery market is expected to grow at a CAGR of more than 18 percent during 2012-2015.