How is the Indian market for chocolates performing?
With the global chocolate market remaining robustly defiant and predicted to grow at an average of 2 percent in the next five years, the category is now expanding into highly populated nations with a growing middle class, such as China and India. Renowned chocolate brands from around the world are continuously pushing the boundaries of the industry in order to create new, different and unique flavours. Premium chocolate, especially, is experiencing fast growth in many parts of the world, driven by consumer awareness and wider availability at the retail level. In India, the premium chocolate market is pegged at 10-12 percent of the overall chocolate sales, which though very small compared to the market size of the country, is showing a steady growth of about 30-40 percent per annum.
How did you get into the chocolate business?
When I set up Cosmo Fine Foods in Mumbai, the company was dedicated to the import and distribution of chocolates. Upon sensing the increasing opportunity in the chocolate category, we began to offer a few brands of chocolates. Currently, we are involved in the marketing and retailing of high-quality, international brands of confectionery. We are bringing top-of-the-line chocolates such as Goldkenn, Belgian, Zaini, Hawaiian Host, Droste, Jules Destropper, and Anthonberg along with premium brands such as Frey & Ducd’O.
As per market reports, chocolate consumption in India is extremely low, with per capita yearly consumption around 160 gms in urban areas, compared to 8-10 kg in the UK and US. Data reveals that consumption is growing at 10-12 percent annually. This significant rise in consumption prompted us to get into a partnership with Focus Network Agencies (FNA), following which, we decided to bring the renowned The Cocoa Trees brand into India. I am confident that we will have the first mover advantage in India, despite the fact that ours is still a niche category in the country.
Please tell us about The Cocoa Trees.
FNA is a branded consumer lifestyle group, which was established in 1991. It has grown from a distributor of just two agency lines to becoming a recognised leader in the distribution and retailing of chocolate and confectionery in the Asia Pacific domain. In 2000/01, it launched The Cocoa Trees, a retail concept store, in Singapore.
Seven years since its inception, The Cocoa Trees is Asia’s leading retailer of the widest range of international chocolate and confectionary brands. With the objective tomake The Cocoa Trees the best premium chocolate boutique brand in the Asia Pacific rim, the brand is constantly evolving its product portfolio and store dynamics. It currently sells over 40 varieties of international chocolates from renowned brands such as Belgian chocolate, Anthon Berg, Ferrero, Lorenz and Sorini, Mars travel retail, and Fazer. In India, the retailer is planning to bring its entire range of international chocolates for chocolate aficionados as the country is seen as an emerging market for high-end food concepts. Currently, it is offering more than 40 varieties of international chocolate and confectionary brands, and in partnership with Cosmo Fine Foods of India, it is targeting high traffic areas like supermarkets, leisure stores and airports – places where the brand will have a high recall value in the mind of the Indian consumer. It has opened several outlets in both tier 1 and 2 cities.
What are the current market dynamics in this segment in India?
The Indian chocolate market is currently poised at Rs 4,500 crore. Consumption of chocolates is steadily increasing in urban and semi-urban areas at the rate of 25 percent per year. According to industry analysts, majority of the sales (around 70 percent) comes from the urban market, but a huge untapped potential is seen in smaller cities which are experiencing increasing awareness, rising disposable income, rapid development, and rising aspirational levels.
The current market share
for imported brands is the smallest, with premium brands targeting consumers who are familiar with the brand names, as they are well travelled, and the aspirational consumer who is keen to try out the new brands, has the spending power, and is not averse to indulging in luxury products such as premium chocolates. We are observing other trends such as a shift in consumer preference from traditional mithai to chocolate. During festivals especially, there is a shift in consumer gifting preference from mithai to chocolates. As a result, demand for chocolates during major festivals has increased by 35 percent.
How is modern trade driving sales?
With rapid development of modern trade (air-conditioned supermarkets/hypermarkets and convenience stores), consumption of chocolates has risen signifi cantly. Large retail formats, exclusive stores and chocolate boutiques are giving a boost to the industry. All of these trends portend well for the growth ofthe market for premium chocolate in the near Future.
We have plans to utilise the shop-in-shop concept as part of our expansion strategy
. We want to create a boutique-like concept with an enhanced layout and an ambience, which will encourage increased customer interaction and involvement. Globally, this is how retailers make chocolate buying a truly experiential affair. Also, location plays a very crucial role in a concept store like ours, so we ensure that we get a good catchment every time we open a new outlet.
Where are The Cocoa Trees stores located?
The Cocoa Trees has 10 stores at present in Mumbai, Pune, Delhi and Goa. The stores are well-appointed and located at premium malls, high-street locations and at airports. They are catering to the upper middle class and the well-heeled, well-travelled consumer. The stores house premium brands to satiate even the most discerning chocolate connoisseurs. A lot of our clientele is from the Western and Central part of Mumbai. We get all types ofcustomers: chocolate lovers, casual eaters, gifters or health-conscious consumers from varying age groups. In fact, the store has something for everyone from liquor chocolates, truffl es, jellies, mints and nuts to the most exotic varieties.
The imported premium brands are doing very well. Since we get customers from across various age groups, we stock a plethora of brands to give them more choices. This also ensures repeat walk-ins. But even as we have consumers who are willing to pay the price for such chocolates, at some point in time we have to look at how we can increase footfall. Our pricing strategy depends on that. Our price range varies from as low as Rs 450 to Rs 2,000 per unit, which suits all pockets.
What are your brand positioning strategies?
Our primary focus has been on brand building and strategising on the location of the stores. Plus, our commitment towards maintaining high-quality and hygiene standards has paid rich dividends in creating brand reliability and customer loyalty. Subsequently, thecompany plans to ramp up its advertisement and promotional spends both in the print and electronic media to create awareness about our retail concept. We will also come up with new offerings such as hampers and goodies during festivals as a twist on the mithai gifting tradition. We are also planning tasting sessions for important days such as Mother’s Day or Father’s Day to promote customer engagement. We believe that these kind of activities will create a huge brand recall. I take pride in saying that our efforts seem to be paying off given the encouraging sales volume. We have already managed to open 10 stores within a short time span of 2 years. For us, the growth has been phenomenal, and the customer response has been hugely encouraging. This has prompted us to embark on the next stage of expansion plans.
Please elaborate on your expansion Plans.
It is my strong belief that location plays a very signifi cant role for a concept like The Cocoa Trees. We are already charting out plans to target high-end gourmet stores and set up shop-in-shops there. We cannot be present in any hypermarket or any big retail store for that matter, but we are looking at gourmet stores that offer imported foods, and which have an upscale consumer base. Again, we need to be present in high streets or malls with a good catchment area. We have a shop-in-shop at Nature’s Basket
in Bandra, Mumbai, and are looking at similar store profi les in other cities.
We have a very simple arrangement between the principal store and The Cocoa Trees. We manage everything inside the shop-in-shop, except the point of sale which is managed by the retailer. We try to minimise the risk of any operational inefficiency as our tie-ups are with retail partners who are very organised and extremely effi cient. So far we have not made any compromise on the selection of our partner store and location. For the next couple of years, we plan to focus on exclusive airport outlets – both domestic and international– in different parts of the country. Airport retailing is coming up in a big way in India. Sooner than later every retailer, especially the niche and innovative ones, will line up to be a part of this growth story. Fortunately for us, we have realised the potential of airport retailing at a very early stage of our expansion plans, in fact, we want to be visible in every airport, and wherever there is an opportunity to cover the length and breadth of the country.
For FNA as well, the Indian market is significant as it sees a tremendous opportunity here, and plans to launch almost all the global brands, along with its global best practices, through us.
What are the current trends in chocolate retailing?
A new emerging trend is the concept of exclusive chocolate stores or boutiques. From just another product on store shelves, chocolates have moved to exclusive stores that create a suitable ambience and in-store shopping experience for upscale consumers. I believe that a boutique concept housing a plethora of international high-end and popular chocolate brands is an innovative idea in itself. We have got into a concept which is very unique and has huge acceptance in a young and aspirational market like India. At The Cocoa Trees consumers fi nd convenience to buy their favourite imported brand at an easy to access boutique, as opposed to a store in an airport in another country. We stock rare brands such as Zaini which has all Disney characters in their chocolate shaped eggs, and Frey’s extra-fi ne milk chocolates, which are exclusively licensed to be sold only at The Cocoa Trees outlets. Also, the USP lies in the fact that our chocolate boutiques are at par with international standards in terms of store ambience, service, and product offerings. In fact, famous chocolate boutiques around the world such as Chocolat Michel Cluizel in New York, Jean-Paul Hevin in Paris, Pierre Marcolini in Brussels, and Chocolaterie du Rhone in Geneva; etc, have been thriving for more than 100 years with their product offerings and superior retail Atmosphere.
What are the retailing challenges?
The main operational issue is the absence of a strong back-end support to service our outlets in variuos locations. Also, the weather condition in India is not very conducive to storage of high-quality imported chocolates. Initially, we started off with the support of third party logistics, but as we are expanding, we plan to strengthen our back-end and logistics. We will include chilled vehicles and other logistical support systems to enhance the shelf life of the products. In fact, in India, the lack of strong back-end support is a huge deterrent for perishable food items, including imported chocolates. Almost all the retailers worth their salt are investing heavily in logistics. We too plan to make signifi cant investment in strengthening the back-end so that we can expand The Cocoa Trees brand without any operational fall-outs.
As regards importing challenges, importers of luxury products like chocolates must have an understanding of the complex confectionery distribution channels in India. They should be able to gauge the price sensitivity of the confectionery market and know their target consumers.