Confectionery - An update in 2011

India`s conIectionery market is set to witness robust growth in the coming years. The Iactors contributing
to the growth are buoyancy in demand, increasing consumerism, dual Iamily incomes and a rising young
population.

ConIectionery categories are chocolate like eclairs and toIIees, sugar conIectionery or hard boiled
candies lollipops, mints & lozenges, bubble gum and cereal bars.

The major conIectionery companies in India are Cadbury ( Dairy Milk, Perks, Gems, 5-Star celebrations,
Bytes, Dairy Milk Eclairs, Eclairs Crunch, Halls, Bubbaloo Bubblegum), Nestle(Kit Kat, Kit Kat
Chunky, Munch, Munch Pop Choc and Milkybar Crispy WaIer), Parle (Simply Imlee), HUL (ChocoMax
and Max Magic candy), PerIetti ( Centre Shock, Happydent White, Alpenliebe, Big Babol, Chloromint
and CoIitos) and Candico (Mint-O and Loco Poco).

It has been reported that the country`s conIectionery industry is the largest in the Iood processing
segment. The market is estimated to be about Rs 1,400 crore, registering a growth oI 9 per annum.

According to Chetan Hanchate, director, Centre Ior Processed Foods, the Indian market Ior conIectionery
has been indicating robust action going by the Irequent product launches, and consumer promotions by
companies.

Confectionery industry overview

A major portion oI the conIectionery industry in India comprise the local subsidiaries oI global
conIectionery majors like PerIetti, Lotte, Wrigley's and Cadbury. Cadbury India, the Iully owned
subsidiary oI KraIt Foods Inc, estimates the total global conIectionery market at Rs 41 billion with a
volume turnover oI about 2,23,500 tonnes per annum. The category is largely consumed in urban areas
with a 73 skew to urban markets and a 27 to rural markets. Hard boiled candy accounts Ior 18,
Eclairs and ToIIees account Ior 18, Gums and Mints and lozenges are at par and account Ior 13.
Digestive Candies and Lollipops account Ior 2.0 share, respectively. The overall industry growth is
estimated at 23 in the chocolates segment and sugar conIectionery segment has declined by 19.

Giving an overview oI the industry in India, a section oI management students oI the Indian Institute oI
Management, stated that the conIectionery segment is keeping pace with the evolving new Indian
consumer, who needs a toIIee or a candy or a bubble gum to keep him company.

Although the Indian conIectionery market has several unorganised players, a lot oI consolidation took
place post 2005.

It all began in June 2004, with the erstwhile Parry`s ConIectionery, part oI the Chennai-based Murugappa
group, was bought over by Korea`s Lotte India.

This was Iollowed by Godrej Foods & Beverages Limited which acquired Nutrine ConIectionery
Company Private Limited in June 2006.

Close to the heels oI this deal was a joint venture eIIort in April 2007, when the Hershey Company, North
America's leading chocolate and conIectionery manuIacturer, announced the Iormation oI Godrej Hershey
Foods & Beverages Ltd., to manuIacture and market conIectionery across the country.

Among the well-known national names are Candico which is engaged in the development oI a range oI
products.

Naturo Food & Fruit Products Pvt. Ltd in the outskirts oI Bangalore is one oI the largest Indian
conIectionery companies known Ior its innovative Iruit based products. Its Fruit Bars range under the
brand name Naturo` oIIers a tasty, healthy and appetising Iruit snack and is available in Apple, Mango,
Strawberry & Orange pure Iruit varieties. The Iruit bars are manuIactured in a captive and HACCP and
BRC certiIied Iacility is totally natural with no sugar and preservatives added. The Iruit bars are
manuIactured employing a unique retexturised process to retain the vital nutrients oI the Iruits, stated G
Lakshminarayanan, senior vice-president, Naturo Food & Fruit Products Pvt. Ltd

Pops Foods Products Private Limited manuIactures a range oI bubble gums

Central Arecanut and Cocoa Marketing and Processing Co- operative Ltd (Campco) based at Mangalore
which is producing chocolate Ior Cadbury-KraIt has now inked a pact with Karnataka Milk Federation
to manuIacture chocolates at its Iacility. The company Campco produces all types oI moulded chocolates
along with semi-Iinished products like cocoa butter and cocoa powder. Food research is open to assess
the new product innovations which is a prime Iactor Ior the growth oI the industry, stated Dr V Prakash,
director, Central Food Technological Research Institute, Mysore . 'We have also developed a tamarind
candy and transIerred the technology to industry.

At DeIence Food Research Laboratory at Myore, eIIorts were on to develop a range oI candies and Iruit
bars Ior the armed Iorces stationed in high altitudes, stated Dr AS Bawa.

%rends in confectionery:

It is observed by a section oI Iood scientists Irom the University oI Agricultural Sciences department oI
Iood innovation and research that the conIectionery industry has achieved maturity. The growth is
attributed through globalised eIIorts like mergers and acquisitions or joint development eIIorts. There is
also the Iactor oI rising incomes and aIIordability in many oI the developing markets which indicate
novel tastes and aspirations Ior newer conIectionery.

Another trend is the growing health consciousness which has led to the development oI conIectionary
in low-Iat, low-sugar, versions. There is also the inclination to look at products that are Iree Irom artiIicial
colours, Ilavours and additives. This throws open business opportunities Ior development oI ingredients
using natural ingredients, stated experts at UAS.

The conIectionery sector has Ielt signiIicant changes since a Iew years. Food consultants are attributing
this to changing consumer consumption habits. ConIectionery manuIacturers are working to inIluence to
health-conscious consumers with Iunctional innovations, ensuring that they still continue to show the
streak oI active indulgence.

Extensive product and market research is on to see that new products come in. Key growth opportunities
Ior the industry are in categories oI gum, chocolate and cereal bars, says Dr Prakash.

Challenges in the confectionery industry

The rising inIlation and Iood prices together with the growing crude prices would impact the
conIectionery industry in the coming months. While cost oI sugar is a concern, there is also the issue oI
working out costs in packaging driven by petroleum products as conIectionery items are packaged in
plastic packs. ThereIore the industry will now need to work out a pricing due to big jumps in the cost oI
raw materials such as sugar which cannot be absorbed by the industry, stated observers.

ifestyle
A Sweet look into the world of Indian Confectionery
India's contribution to the conIectionery market has been signiIicant, says Pooja Thakkar

Despite the world economy`s recent tryst with recession, the global conIectionery industry is experiencing
steady growth. India`s contribution to this growth has been signiIicant thanks to the aIIluent group oI
consumers and their exposure to the multinational brands.
The ConIectionery industry will never cease to lose its popularity; In Iact it is arguably in the midst oI the
best growth cycle in its history. In a country like India where majority oI people have a sweet tooth and
Iind every reason to celebrate any occasion with sweets, the conIectionery industry is bound to be the
largest and most popular among the Iood processing sectors in the country. II one hast to deIine the term
ConIectionery`, it would be the category oI Iood items that are rich in sugar. The conIectionery industry
is broadly divided into chocolate conIectionery, sugar conIectionery and gums. In India this industry is
Iurther divided into chocolates, hard boiled sugar candies, lollipops, lozenges, & chewing bubble gums.
Confectionery Market in India:
The organized conIectionery segment in India segment is pretty much dominated by the multinational
companies; however, domestic players are gradually increasing their Ioothold in the market.
Cadbury India, Ltd. is by Iar the market leader, Iollowed by PerIetti Van Melle India, Ltd. and Nestle
India, Ltd. Other important players are Lotte India Ltd, Nutrine ConIectionery Co Pvt Ltd, Candico India
Ltd, Parle Products Pvt Ltd, Wrigley India Pvt Ltd, ITC Foods, Hindustan Lever Ltd and CAMPCO Ltd.
Since import restrictions were eased in 2001, imports oI conIectionery products have grown rapidly.
Retail chocolates and sugar conIectionery account Ior the greatest share oI total conIectionery imported
into India.
The Indian candy market is currently valued at around $664 million, with about 70 per cent share ($ 461
million) in sugar conIectionery and the remaining 30 per cent ($ 203 million) in chocolate conIectionery.
The domestic conIectionery industry is beneIitting Irom the country`s economic boom and growth in
consumer spending. With the nation`s economy growing at around 10 per cent, Indian Consumers are
expected to consume more chocolates. This higher consumer spend is also driven by the new Iound mall
culture.
While the consumers are becoming more and more health conscious, a wide range oI sugar-Iree products
in gums, chocolates and candies have already been introduced. There`s a huge demand Ior the dark
chocolate with a high cocoa content as well.
According to Maurizo Decio, president - Asia PaciIic, Barry Callebaut AG, one oI the world`s leading
manuIacturers oI cocoa and chocolate products, the chocolate market has the potential to grow, especially
in metropolitan areas, as the disposable income oI an Indian consumer continues to rise.
The organised market Ior conIectionery in India is valued at Rs 2,000 crore. The contribution Irom rural
India is estimated at 48 per cent and the balance 52 per cent Irom urban India.
With demand Ior high-end conIectionery going up, India is becoming an attractive place Ior Ioreign
investments with large multinational companies entering the Indian chocolate & conIectionery market.
These Ioreign brands are entering the industry either through direct imports or by acquisitions oI existing
conIectionery companies. This will indirectly help in opening up new avenues in market and also help in
exploring possibilities to bring up new products in this country. With the entry oI new MNCs in India,
there is tremendous potential Ior exports oI these products.
imitations:
The conIectionery industry has considerable potential Ior growth. However, the main issue is that the
conIectionery industry has today is the price point (MRP). While the input costs oI major ingredients like
sugar, glucose, milk powder, butter and packaging material are increasing, the industry is not able to
increase any MRP on products due to coinage and thereIore the manuIacturers have to maintain the price
at the level oI 50 paise and one rupee.
The unorganised sector, which is much larger as compared to organised sector, is seeing more growth
than the organised sector as it gets the beneIit oI the diIIerential government duties and taxes. ThereIore,
government needs to look into these taxations very seriously specially on excise duty, which is 8 per cent,
and also on the 12.5 per cent VAT.
Another challenge in Iront oI the conIectionery market is that it is still not able to target the adult group in
the country and is largely associated with products that cater to kids. However some companies are taking
initiatives to capitalise upon it.
%he Future of Indian Confectionery Industry:
India is a small market compared to the global numbers, but it has an annual turnover oI around Rs 3,500
crores with huge potential to grow. According to a study by Euromonitor, the Indian sugar conIectionery
market is projected to expand at a compounded annual growth rate (CAGR) oI 8 per cent until 2011.
The conIectionery market can grow immensely, depending on the kind oI categories & products that are
introduced. There are some companies which are Iocusing on niche high-end or designer chocolates.
These kinds oI chocolates have become status symbols and are linked to the people`s aspiration &
liIestyle and malls are the perIect points oI sale.
As the competition becomes more intense and the Iuture looking bright Ior the conIectionery industry,
companies are gearing up by introducing new strategies and products in the market. The Indian
ConIectionery industry and the consumers are sure to get a sweet ending to 2010 and hope more delicious
years await them in the Iuture