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Product differentiation, innovation drive Ferrero India’s remarkable challenge to Nestle

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Driven by product differentiation and innovation, Ferrero International, the world’s fourth-largest confectionery company, which entered India in 2008, is targeting to capture the No. 2 spot in the country’s chocolate confectionery market.
In just seven years, the maker of the iconic Ferrero Rocher confectionery has not just tremendously upped its distribution and popularity in India, but its revenues have inched stunningly close to Nestle’s chocolate sales. This in light of the fact that in 2013, Nestle’s chocolate business was three times that of Ferrero in India.
The company has confirmed to that the rising popularity of the Nutella chocolate-hazelnut spread, Ferrero Rocher chocolates, Kinder Joy and Tic Tac breath mints — among all age groups — resulted in upping Ferrero India’s sales by 76 per cent to Rs 1,014 crores in the year ended in August 2014.
Nestle’s chocolate division, which sells Kit-Kat and Munch among other brands, had revenues of Rs 1,286 crore in calendar 2013. While it hasn’t declared annual segment-wise performance for 2014, a company investor presentation indicates that domestic chocolates sales fell 2.3 per cent to Rs 830 crore in the January-September period.
The chocolate segment in India is dominated by Modelez, which sell Cadbury’s, with a 65 per cent market share. Cadbury is followed by Nestle at 16 per cent and Ferrero with almost 12 per cent, according to Nielsen data.
“All products of Ferrero are so differentiated that none of the rivals come close to their brands, be it Nutella, Kinder Joy or Rocher,” Devendra Chawla, president, food and FMCG business for Future Group, was quoted as saying.
Ferrero’s remarkable growth can also be attributed to an innovative distribution strategy;
Tic Tac is now retailed through stationery shops in addition to kirana stores, while Fererro Rocher’s network has also included neighbourhood grocery shops.
The company’s India plan is now reportedly set to intensify; it has raised the borrowing limit to Rs 2,500 crore, signaling its intention to invest in distribution and manufacturing expansion.
By Mehak Sharma

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