CRUSH CHOCOLATE’S BUSINESS PLAN

AN OVERVIEW OF CHOCOLATE INDUSTRY IN INDIAN:-

The chocolate industry in India as it stands today is dominated by two companies,

both multinationals. The market leader is Cadbury with a lion's share of 70 percent. Till
the early 90s, Cadbury had a market share of over 80 percent, but its party was spoiled
when Nestle appeared on the scene. The Gujarat Co-operative Milk Marketing Federation
(GCMMF) and Central Arecanut and Cocoa Manufactures and Processors Co-operative
(CAMPCO) are the other companies operating in this segment. Competition in the
segment will get keener as overseas chocolate giants Hershey's and Mars consolidate to
grab a bite of the Indian chocolate pie.

INDIA, stands nowhere even near to these countries when compared in terms of Per
Capita Chocolate Consumption. The Indian chocolate industry is extremely fragmented
with a range of products catering to a variety of consumers. We have the bars/slabs, jellies,
lollipops, toffees and sugar candies. Given India's mammoth population, it comes as a
surprise that per capita chocolate consumption in the country is dismally low - a mere 20
gms per Indian. Compare this to over 7 kgs in most developed nations.

However, Indians consumed 22,000 tones of chocolate last year and consumption is
growing at 10-12 percent annually. The market size of chocolates was estimated to be
around 16,000 tones, valued around Rs.4.16 billion in 1998. Volume growth which was
over 20% pa in the 3 years preceding 1998, slowed down thereafter.

Both chocolate and sugar confectioneries have abysmally low penetration levels, in
fact, even lower than biscuits, which reach 56 per cent of the households. Market growth
in the chocolate segment has hovered between 10 to 20%. In the last five years, the
category has grown by 14-15% on an average and will expect it to continue growing at a
similar rate in the next five years.

Per capita consumption of chocolates in India is minuscule at 20gms in India as

compared to around 5-8 kgs and 8-10 kgs respectively in most European countries.
Awareness about chocolates is very high in urban areas at over 95%.

The launch of lower-priced, smaller bars of chocolate in the last two years and
positioning of chocolate as a substitute to traditional sweets during festivals, have boosted
consumption. This is also because chocolate, which was considered to be an elitist food,
has caught the fancy of buyers looking for a lifestyle item at affordable cost.

A study had projected that sales of the Indian chocolate industry would rise from
$125/$130 million in 1998 to $175/$180 million by the year 2000 and to $450 million by
the year 2005 which ACTUALLY happened irrespective of various negative factors AC
Nielsen ORG Marg report estimates the Indian Chocolate Industry’ worth at Rs 2,000-
crore (Rs 20 billion)

 Chocolate Consumption Structure - 2004

 Children 55%

 Adults 12%

 Young Adults 33%

 Chocolate & Confectionery Market of India - 2004

 Chocolate Counts Rs. 250 Cr. 10%

 Chocolate Bar Rs. 350 Cr. 14%

 Mints & Chewing gums Rs. 325 Cr. 13%

 Sugar Boiled Confectionery Rs. 1600 Cr. 63%

INTERESTING CHOCOLATE FACTS:-

Why is Chocolate in India different than most European chocolates?

The temperatures in India are much higher than that of the European countries. To
prevent the chocolate from melting and to enable shape retention under such high
temperatures the recipe of the chocolate is adapted to the Indian climate. Therefore the
milk fat content in Indian chocolates is lesser than that of European chocolates and hence
they taste different.
Sometimes, white spots appear on Chocolates sometimes. Is that safe?

When a chocolate gets exposed to temperature variances from a hot day to a cold
night (which is very common all across India), the fat expression happens on the surface
of the chocolate. 'This means white spots emerge on the surface of the chocolate. This
phenomenon is called 'fat bloom'. It is entirely safe to consume chocolates however the
feel and the taste of the chocolate may not be the same as is originally intended to.

Are chocolates available for diabetics?

Currently in India no manufacturer produces chocolates for diabetics, as the

government regulations do not permit manufacture of such chocolates. The industry
majors are liaising with the government authorities to enable manufacture of such
chocolates in India. Chocolates for diabetics, though, are available in certain parts of the
world.

Chocolate: the new solution for blood pressure?

Cocoa beans have antioxidant compounds called flavanols, and scientific research
suggests they do good things to blood vessels. Dark chocolate contains flavanoids, an
antioxidant which helps the body by neutralizing potentially cell-damaging substances
known as oxygen-free radicals, a normal byproduct of metabolism.

ABOUT HOME – MADE CHOCOLATES:-

Another area of chocolate industry in India is HOME-MADE CHOCOLATES. This

segment is highly fragmented and operates independently. They are more pronounced for
manufacturing distinct flavors and varieties of chocolates in various shapes and size. But,
these chocolates are usually priced at a higher price than that available for branded
products for the same quantity. House-wives from elite class usually indulge in this kind
of business. They usually operate in local area and through their contact network. Some
home-made chocolate manufacturers manufacture really attractive GIFT CHOCOLATES.

GROWTH OPPORTUNITIES IN INDIAN CHOCOLATE INDUSTRY:-

Untapped Market & Limited Consumption:

The fact that chocolate is not a traditional food, high prices and domestic production
problems will provide the main problems to market growth. As these markets develop,
prices will fall making these products more accessible to the wider population. However
the Indian market is still untapped and provides immense scope for growth, both
geographically as well as product basket wise. Chocolates right now reaches about 70mn
to 75mn consumers. It is estimated that chocolates have a potential market of about 116mn
consumers.

Chocolate consumption in India is extremely low. Per capita consumption is around

160gms in the urban areas, compared to 8-10kg in the developed countries. The per capita
chocolate consumption in India is still much below the East Asian standards. Hence per
capita consumption has a immense scope for improvement. In rural areas, it is even lower.
Chocolates in India are consumed as indulgence and not as a snack food.

In the past five years, the chocolate business grown by 14-15% on an average and is
expected to grow further for at least next five years.

Changing Attitudes & Consumption pattern:

In the past, chocolate consumption had been restricted by low purchasing power in
the market. Chocolates and other cocoa-based snack foods were looked upon as food
suitable only for elitist consumption till recently.

But with the launch of lower-priced, smaller bars of chocolate in the last two years
and positioning of chocolate as a substitute to traditional sweets during festivals, have
boosted consumption. Chocolates which were considered to be an elitist food hit the fancy
of masses looking for change in life style at affordable cost.

Rural expansion:

Rural market and small town markets are seen as the key to spurring double-digit
growth. Products such as liquid chocolate packs from the existing portfolio are expected to
enable rapid acceptance.

Leverage India for offshoring:

 India is being leveraged for export of finished goods, as a superior destination for
manufacturing best practices, and for BPO opportunities. All the above points bring us to a
conclusion that there’s an immense scope for growth of chocolate industry in India not
only in its offering pattern but also for increment in its total consumption value and size.

Strategies for Growth & Success in India

 Revamp the product to keep the excitement alive.

 Companies should look at new avenues, while expanding the reach of its products.
Distribution will hold the key. Companies need to reach out to smaller towns, where
three-fourths of the population does not even know the product.

 Merger & Acquisitions: Mergers & Acquisitions with companies that match the
product portfolio & overall growth strategy should be considered which will not
only strengthen the company to establish a stronger hold in the country but also
ward off possible competition in the select category. Such collaborations will also
facilitate companies to use each other’s distribution networks.

Chocolate Boutiques & Designer Chocolates

They call it 'choco fever'. Chocolate Boutiques are a complete chocoholic

experience. Surrounded on all sides by scrumptious chocolates wrapped neatly in
colourful foil and paper, any one will be gripped by this fever.

It’s a world of chocolates where the flavour of Jamaican rum truffle melts in your
mouth even as your hand reaches out greedily for a kiwi-flavoured concoction or where
roasted almonds are a delight to eat while your mind flirts with hazelnut praline.

Manufacturers are finding an increasing number of curious customers who're

pampering their taste-buds to apricot and peach chocolate, strawberry chocolate or better
still wild berry in cognac flavoured chocolate. Manufacturers are now luring their patrons
with chocolates in geometric shapes, animal figurines coloured in metallic hues and glitter.
For the more adventurous, there are also chocolates with pan-supari, cardamom flavours
and liqueur filling. Products like nut-based praline chocolates, some unique flavors like
tamarind and chilli chocolates, and champagne and Jamaican rum truffles are also
demanded in the market.
 These manufacturers also cater to the older and the health-conscious choco-lovers,
the high fibre, low fat and sugar ones are quite popular. Apart from the festive season,
weddings and baby announcements also see heavy offtake of premium sweet delicacies.
For those who are health conscious there is also a special range of sugar-free and diet
chocolates. These are usually bought by corporates or individuals who want to make a
special statement.

Designer chocolates are tailored for customers who're looking at gifting chocolates
with a personalized touch. Embossing of names, logos of companies and personalized
message on the chocolates are fast becoming popular.

There are 1,000 varieties of designs to choose from -- ranging from good luck
charms, X'mas figurines and animals -- and nearly 50 kinds of gift packaging available to
suit any particular occasion.

These designer chocolates focus a lot of attention on packaging. The packaging of

these products includes materials like imported mesh, gold foils and brocade, lace and
satin-draped boxes being in heavy demand.

With the rise in disposable incomes, people do not mind spending on designer
chocolates, most of which costs between Rs 500 and Rs 2,500 per kg. Few chocolate
makers cater only to corporate clients for festive occasions, product launches, new
employee joinings and management training programmes. From logos to company names
being embossed in chocolates of different shapes and colours, these are all in demand.

THREATS IN THE CHOCOLATE INDUSTRY:-

1. TEMPERATURE:

A peculiar problem that hinders the distribution to far-off places is the tendency of
chocolates to melt under even moderate heat. The temperatures can reach as high as 48
degrees in summers, whereas chocolate starts melting at body temperature (about 37-38
degrees) .Manufacturers have to take precautionary measures to ensure the preservation of
chocolates especially in summer.

2. UNAVAILABILITY OF CONTROLLED REFRIGERATION:

India does not have controlled refrigerated distribution. Air-condition supermarkets

are rare. Chocolate enterprise in general loses 1.5 percent of annual sales of Rs. 6.8 billion
to heat damage. Companies revise ingredients to make chocolate withstand heat, and so
Indian chocolates are more resilient to heat than Eurupean chocolates by a factor of 2
degrees.

Nestle and Cadbury have tried to provide loans for retailers to buy fridges, but to
hold down power costs the shopkeepers switch off the fridges at night. As a result the
cocoa fat melts and migrates to the main body of the chocolate bar. When the cooling is
switched on in the morning, the cocoa fat solidifies and turns white, presenting a bizarre,
un-sellable white on black form.

Small coolers were provided to retailers to keep the chocolate from melting, but that
didn't quite do the trick. Electricity costs money and is not provided in a uniform way, so
on and off the electricity goes and the product may suffer sometimes

3. RAW MATERIALS:

Cocoa is the key raw material and accounts for around 35% of the total material
cost (including packaging) of chocolates. The price of cocoa has been hitting a new high
of late. Cocoa prices are at a near 20-year high at $2358 per ton, up from $900 a year
back. India does not produce cocoa to any noteworthy extent but is a large consumer of
chocolates. Consumption of chocolates and other cocoa-based products, especially among
the middle class, has been growing.

4. TRANSPORTATION:

Chocolate needs to be distributed directly, unlike other FMCG products. 90% of our
products are sold directly to retailers. Building such a direct network in rural areas is a
daunting task since the infrastructure is poor in India in rural areas.

5. THREAT FROM IMPORTED BRANDS:

Free availability of imported brands bought through illegal routes pose a threat to
the domestic chocolate industry. Usually, these imported chocolates taste better than
domestic chocolate due to recipe difference. Hence consumers who are willing to spend a
little more, prefer these imported chocolates.

However, the premium brands, which come through official channels, do not pose a
threat to the market, as these cater to a small niche market. However there is a lot of
dumping from neighboring countries like Dubai, Nepal, etc of inferior brand of imported
chocolates. These are not only of low quality, but are brought very near to their expiry
dates. Most of the cheap chocolate brands that are available do not meet Indian Food
Regulations.

FACTORS AFFECTING THE GROWTH OF CHOCOLATE INDUSTRY IN

INDIA:-

 Good monsoon ensures adequate availability of raw materials, which are mainly
agricultural in nature. Raw material prices have significant influence on margins.

 Government policies in terms of licensing, duties, movement of agricultural

commodities etc. also affect the introduction of products, time lag for a product
launches, taxes, excise, etc all influence the business.

 Market growth driven by overall economic growth and urbanization also

contributes. An overall booming economy will consume tonnes of chocolates
because consumer spending increases. Also, the absolute number of consumers in
middle class & upper middle class increases.

 Rupee depreciation improves export realizations; however it also makes import of

raw material (esp. cocoa) expensive.
BUSINESS MODEL:-
OFFER/VALUE PROPOSITION

Our area of business deals with semi finished chocolates and raw chocolates. The reason
for selecting this is due to the need in the hotels and also as a gift item for the corporate.

TARGET CUSTOMERS

Our target customers are hotels and corporate. The need of chocolates in hotel is in large
demand, though the making of it is easy the handling the same becomes hard.

DELIVERY CHANNEL

We prefer direct marketing as delivery channel by which we have a direct contact with the
hotels and can deliver the product in prompt timings.

RELATIONSHIP BUILDING

In order to build a strong relationship with the customers and to maintain a strong bond,
discounts are given to the customers even at the off seasons.

REVENUE MODEL

We prefer to have cash and carry method for receiving revenue but when bulk orders are
placed 75 % are paid as cash and 25 % a

CORE CAPABILITY

We the partners in our business are versatile in various fields like production, operations,
system marketing, finance and human resource management. This versatility makes us
excel our self in our business.

COMPETITIVE ADVANTAGE

The competitive edge in our business is to provide a unique product with a center filled
soft chocolate and also to provide seasoned chocolates with spices like cardamom, elache,
pepper and other Indian spices.
PARTNER NETWORK

In order to succeed in the current business a strong relation is maintained with other co
partners like the logistics, dealers providing raw materials, mechanics dealing with the
machinery and the others relating to the business.

COST METHOD
As mentioned already we are using automated machines in our business to yield
higher profit our basic investment is for the machines in the form of fixed asset, and the
rest of the investment will be for the avenue where our project is going to be estabilished
and on the human resources.

ANALYSIS OF BUSINESS PLAN:-

MARKET ATTRACTIVENESS

As the investment in the chocolate industry in low and at the same time the return from the
industry is high, it finds an attractive market for our business to start. As said by the
management gurus that the best way the start a business to have a minimum investment a
gain maximum returns from it.

INDUSTRY ATTRACTIVENESS

As the chocolate industry is in growth trend, we are expecting to have a high demand for
the chocolates in the future. Since the demand is high we find the market very attractive to
start up the business and excel in it.

SEGMENT ATRACTIVENESS

By segmenting the work and concentrating on a particular field further innovation can be
implemented this in turn can result in production of bulk output with the automated
machines and delivering the same through the delivery channel.

SUSTAINABLE ADVANTAGE

Reasonable time maintenance has to be done with in to achieve the requirements. To have
an edge compared to the competitors an unique characteristics has to added with the
existing products like the centre filling etc..

VISSION / RISK TAKING ABILITY

All the steps taken should always lead to the success path of the organization aiming to
reach the vision by setting out small goals. And the risk taking ability and focus to achieve
success results in reaching out with the vision .

CRITICAL SUCCESS FACTOR

The USP of our business and the various other uniqueness like using of automated
machine and use of natural species makes us exhibit among our competitors and results as
a critical success factor.

CONNECTEDNESS IN SCM

In order to meet out with various requirements like acquiring raw materials , maintenance
of the available machinery and other related works a proper and well maintained
relationship has to be there and a decent knowledge on the current happenings in the same
field has to done.

SUBJECT OVERVIEW:-

TOTAL QUALITY MANAGEMENT:

Total Quality Management is a management concept created by W. Edwards

Deming. The basis of TQM is to reduce the errors produced during the manufacturing or
service process, increase customer satisfaction, streamline supply chain management, aim
for modernization of equipment and ensure workers have the highest level of training. One
of the principal aims of TQM is to limit errors to 1 per 1 million units produced. Total
Quality Management is often associated with the development, deployment, and
maintenance of organizational systems that are required for various business processes.

TQM and Six Sigma

The main difference between TQM and Six Sigma is the approach. TQM tries to
improve quality by ensuring conformance to internal requirements, while Six Sigma
focuses on improving quality by reducing the number of defects and impurities.

Gourmet chocolate quality

Good quality chocolate will only have cocoa butter in it. The more cocoa butter in
Good quality chocolate will only have cocoa butter in it. The more cocoa butter in the
chocolate, the better the chocolate.

In our semi finished product of chocolate we use only cocoa, poor quality chocolate
will constitute more oil in it. Cocoa butter melts at a much lower temperature than oil.

QUALITY ASSURANCE

We provide the quality assurance to fulfill the requirements of a product with

adequate confidence as a supplier. By providing quality assurance we made the gourmet
chocolates to build the quality into the products as:
  Quality of design
 Quality of conformance
 Quality of performance
 Quality of service

PRODUCTION PLANNING AND CONTROL:

Once the entrepreneur has taken the decisions regarding the product design and
production processes and system, his next task is to take steps for production planning and
control, as this function is essentially required for efficient and economical production.

Planned production is an important feature of the small industry. The small

entrepreneur possessing the ability to look ahead, organize and coordinate and having
plenty of driving force and capacity to lead and ability to supervise and coordinate work
and simulates his associates by means of a programme of human relation and organization
of employees, he would be able to get the best out of his small industrial unit.

We have a machine, which is completely automate to do the process. For instance

the 25 mm diameter truffles that we make in our completely automated facility are all
centre filled which in itself is unique because making a chocolate with a soft centre filling
is a pretty complicated process.

Chocolates thus made by us, serve as the raw material for the institutional
customers. They buy the chocolate which is, say 20 mm , 25 mm diameter and which has a
soft core. They then garnish or enrobe the chocolates to sell as finished products.

Hotels have a big demand for chocolates. Many of them know how to make them
but they cannot handle beyond a certain volume. Making them is labour intensive work
and requires a lot of time. A regular chef who has other routine work to do will not have
time to prepare them.

We supply those semi-finished products and raw chocolates with a soft core cut of
specific dimensions and sizes. Hotels process it further and sell it as finished product.

The biggest advantage of working with us is we have developed our own unique
filling which otherwise has to be imported or bought locally at a steep price. Our fillings
have one year’s shelf-life. We have a neutral filling which can be customised to suit
anybody’s requirement. We just have to add the natural flavours and customize it for end-
user requirements.

LOGISTICS AND SUPPLY CHAIN MANAGEMENT:

Supply Chain Management (SCM) is the management of a network of

interconnected businesses involved in the ultimate provision of product and service
packages required by end customers (Harland, 1996). Supply Chain Management spans all
movement and storage of raw materials, work-in-process inventory, and finished goods
from point of origin to point of consumption (supply chain).

Supply chain management is a cross-function approach including managing the

movement of raw materials into an organization, certain aspects of the internal processing
of materials into finished goods, and the movement of finished goods out of the
organization and toward the end-consumer. These functions are increasingly being
outsourced to other entities that can perform the activities better or more cost effectively.
The effect is to increase the number of organizations involved in satisfying customer
demand, while reducing management control of daily logistics operations. The purpose of
supply chain management is to improve trust and collaboration among supply chain
partners, thus improving inventory visibility and the velocity of inventory movement.

As for our semi-finished chocolates our supply chain management plays a major
role for our delivery of the product to the customers. We deliver the products through the
different modes of transportation like motor vehicles, van, flights, etc.,

PRODUCT MANAGEMENT:

Product management is an organizational lifecycle function within a company

dealing with the planning or forecasting or marketing of a product or products at all stages
of the product lifecycle.

Product management (inbound focused) and product marketing (outbound focused)

are different yet complementary efforts with the objective of maximizing sales revenues,
market share, and profit margins. The role of product management spans many activities
from strategic to tactical and varies based on the organizational structure of the company.
Product management can be a function separate on its own and a member of marketing or
engineering.

While involved with the entire product lifecycle, product management's main focus
is on driving new product development. According to the Product Development and
Management Association (PDMA), superior and differentiated new products — ones that
deliver unique benefits and superior value to the customer — is the number one driver of
success and product profitability.

Product marketing of our semi-finished chocolate

 Product positioning
 Promoting the product externally with press, customers, and partners
 Conduct customer feedback and enabling (pre-production, beta software)
 Bringing new products to market
 Monitoring the competition
 USP (unique selling preposition)

FEASIBILITY:-

Technical Feasibility

In technical feasibility the following issues are taken into consideration.

• Whether the required technology is available or not

• Whether the required resources are available -

- Manpower- programmers, testers & debuggers

- Software and hardware

Once the technical feasibility is established, it is important to consider the monetary

factors also. Since it might happen that developing a particular system may be technically
possible but it may require huge investments and benefits may be less. For evaluating this,
economic feasibility of the proposed system is carried out.
 In our business to improve upon the quality automated machines are used for mass
production thus reduces the price and at the same time we can generate high marginal
profit.

Economic Feasibility

For any system if the expected benefits equal or exceed the expected costs, the
system can be judged to be economically feasible. In economic feasibility, cost benefit
analysis is done in which expected costs and benefits are evaluated. Economic analysis is
used for evaluating the effectiveness of the proposed system.

Operational Feasibility

Operational feasibility is a measure of how well a proposed system solves the

problems, and takes advantage of the opportunities identified during scope definition and
how it satisfies the requirements identified in the requirements analysis phase of system
development.

Using the efficient logistics & supply chain management , promotion tactics ,
strategic alliance with our customers we are able to overcome the main threat faced by
chocolate industry i.e, temperature, transportation, availability of raw materials, proper
refrigeration, imported brands.

MARKETABILITY

The consumption of chocolate-based confectionery follows special laws. We know that

the level of chocolate consumption in a given country depends on the prevailing climate,
the dietary habits, and the growth of gross national product. This “chocolate law” also
explains the development of the different markets over the past few decades.