Premium Varieties To increase Chocolate Demand In India

The Central Arecanut and Cocoa Marketing and Processing Co-operative Limited (CAMPCO) is eyeing Mangaluru, the coastal city, for launching its third chocolate kiosk. This kiosk will be selling Campco's entire range of chocolates and drinking chocolate powder.

The multi-state co-operative is operating another two kiosks in Puttur, where its chocolate factory is located, and Bengaluru.

Suresh Bhandary, Managing Director, Campco Ltd, said, "The co-operative has scouted for a premise at a vantage location at City Centre Mall on K S Rao Road. We are awaiting allotment of the same, which I believe could be auctioned."

"If this premise that we have seen does not materialise, Campco is also looking at an alternate site which draws good footfalls that will help boost chocolate sales," he added.

Currently, the cooperative is selling 21 varieties of chocolates in moulded, enrobed, éclair and drinking chocolate powder segment. 

Swiss chocolate maker Lindt & Spruengli is planning to gain more chocolate loving customers in Japan, China, South Africa, Brazil and Russia which the group states to be the market with "enormous potential".

Lindt, a leader in the affordable luxury chocolate segment, said in its annual report that subsidiaries in those five countries had produced "an above average result" in 2017, with organic growth of 12.4%.

Lindt said, "This positive trend is being fuelled by consumers' growing demand for quality, greater purchasing power and also a growing desire for chocolate with a high cocoa content.”

It added people gave into their temptation for Lindt chocolate elsewhere as well, with global net profits rising 7.8 percent from 2016.

Meanwhile, sales hit an all-time record for the 175 year old company of more than 4 billion Swiss francs (3.45 billion euros, $4.3 billion).

It said Lindt feted an improved market situation for key raw materials cocoa beans, cocoa butter and sugar with "much better harvests in 2016/17, allowing the previous record-high prices to ease back to normal levels".That should allay chocolate lovers' fears of an imminent crisis for their favourite treat. It was good news all round, bar in the United States, the world's largest chocolate market but a weaker one for Lindt, where company sales dipped slightly.

The dip came despite Lindt’s new packaging and discounts over Christmas, and with the relaunch of a sugar-free chocolate line.

Nestle will launch a ruby chocolate version of its Kitkat brand in Japan and South Korea this month, becoming the first consumer brand to market the new variety developed by Barry Callebaut.

Barry Callebaut said in a statement that KITKAT Chocolatory Sublime Ruby' will be available from Friday, January 19, in time for Valentine's Day. Ruby Chocolate which is used in Kitkat has a fresh berry-fruity taste and characteristic colour. Ruby chocolate is made from the ruby cocoa bean. No berries, berry flavour or colour are added.

Barry Callebaut unveiled the ruby variety in September, creating a fourth kind of chocolate in addition to dark, milk and white.

Taking a cue from the sweet success of Sofit in India, Hershey's has introduced the brand in its home country.

Company also plans to launch Sofit, positioned in the snacking category in the US, in other countries. The US snacking market is worth $103 billion and PepsiCo commands a share of nearly 15%.

Hershey's, the second-largest player, has about 8%. The introduction of Sofit nutritional bars by the $7.4-billion Hershey highlights CEO Michele Buck’s plan to take the company beyond chocolates and make it an innovative snacking powerhouse.

Hershey's is the latest multinational consumer products company to launch an Indian brand in the Western market. In the past, Unilever (Fair & Lovely, Lakme, Bru, Kissan), PepsiCo (Kurkure) and Nestle (Maggi Masala), among others, have taken India-developed products, either in its original or modified form, to other global regions.

Hershey's hopes Sofit to work in North America (including Canada. About 85% of the sales come from North America. The remaining 15% comes from international markets.

Buck is betting on emerging economies like India, Brazil and Mexico to boost Hershey’s international revenues. The company, which entered India through a joint venture with Godrej from 2008-2012, will be investing $50 million to scale up its local operations. The plan is to focus on its premium offerings even as it looks to discontinue low margin products.

 “We are in the process of evolving our portfolio in India. We will not invest in commoditised and low-margin products (referring to acquired brands Jumpin and Nutrine). At the same time, we will evaluate launching some of our US brands in India” Shared Steven Schiller president-international, Hershey.

Mondelez said Indian business will be crucial to building its global ecommerce sales as the maker of Cadbury and Oreo strives for $1 billion in online sales by 2020.

Ganesh Kashyap, head e-comm, AMEA at Mondelez International said “As a company, we have taken a big bet to build a billion dollar business online in snacking by 2020. A third of that would come from Asian, the Middle Eastern and African regions and India will really be a key market for us. By 2020, online business will get to about 5% of our overall sales in India from less than 1% now. But the company also expects additional revenues to come from newer platforms it launched its own portal in India, marking its entry into the ecommerce business, especially to cash in on the premium gifting market. “We don't expect to be a retailer, but in gifting, there’s a real opportunity for personalisation of gifts. We as a company want to push the frontier in the space”.

Until now, the country’s largest confectioner has been selling its products online through marketplaces such as Big Basket and Amazon. Since last year, it has been deepening its relationship with them by having product customisation and promotions, exclusive to online. For instance, it set up a virtual chocolate store on Amazon India, launched Bournvita biscuits, Cadbury Fuse, Marvellous Creations and Silk Oreo first on various online portals before rolling them out at traditional retail stores.

The digital push comes at a time when health-conscious consumers are cutting back on discretionary spend, forcing chocolate and confectionery makers in India to post near-decade-low growth in sales last fiscal. Mondelez saw sales rise by about 6% in the year to March 2017, better than a year ago but far from the double-digit growth it had posted in most of the past decade.

Mondelez said e-commerce is showing signs of leapfrogging modern trade. In 2016, the company’s e-commerce net revenue grew more than 35% globally. China remains one of its biggest growth drivers with online sales already accounting for 10% of the country’s overall revenue.

Its round chocolates in golden wrap may be the best known product of Ferrero Rocher, but it’s the tiny toys packed inside its top selling chocolate-confectionery product Kinder Joy that are now Ferrero India’s biggest product.

Stefano Pelle, managing director at Ferrero India said “India is a growing and very important market with big scope for category penetration. We don’t have a mass brand. We are working in that direction, especially in sugar confectionery, and later, within the enlarged chocolate market, not strictly chocolate products. it would not be easy for the company to compete in mainstream chocolates market. We wouldn’t make something that is there in the mainstream that wouldn’t be Ferrero then. Comparatively, the upcoming products will be among the most affordable products in the Ferrero universe. This doesn’t mean we won’t have our premium products. In spite of the fact that the environment was turbulent, we still saw some double digit growth. While the chocolate market has been facing some headwinds, Ferrero has been growing in double digits."

Ferrero India makes 900 million toys, of which 270 million are used for domestic consumption and the rest are exported, either as part of Kinder Joy packs or as toys.

The Italian firm, which reported €10.3-billion revenues for the year ended August 2016, has only one manufacturing unit in India in Baramati, Maharashtra, but it has some exclusive vendors in the country who manufacture toys only for Ferrero.

The Italian firm, which sells chocolates, bakery products, snacks, spreads, mints and drinks across over 170 countries, has begun testing entry-level confectionery brands in India as it looks to broadbase its portfolio and step up share in an intensely competitive market.

The US candy maker Hershey's Co said it would buy SkinnyPop popcorn maker Amplify Snack Brands in a deal valued at $1.6 billion, including debt, to gain a firmer footing in the fast-growing market for healthy snacks.

The maker of Reese's Peanut Butter Cups and Hershey's Kisses said it would pay $12 per Amplify share, a 71.4 percent premium to the stock's close on Friday. Amplify's shares were at $11.96 in premarket trading, while Hershey fell 1 percent to $113.

Big U.S. food companies are snapping up smaller brands as they try to maintain dominance with consumers increasingly moving to smaller, healthier or more artisanal brands. Over the past two years, Hershey has acquired brands such as Krave meat jerky and Ripple Brand Collective's barkTHINS.

Amplify Snack owns brands such as SkinnyPop popcorn and Paqui chips which claim to have no artificial ingredients or transfats and come in dairy-free cheese and naturally sweet flavours that are popular among millennial consumers.

Hershey's Chief Executive Michele Buck said “Hershey's snack mix and meat snacks products, combined with Amplify's Skinny Pop, Tyrrells, Oatmega, Paqui and other international brands, will allow us to capture more consumer snacking occasions by creating a broader portfolio of brands.”

Hershey's offer values Amplify's equity at $920.95 million and it will also take on the company's debt, which was $590.5 million as of Sept. 30. Hershey will also incur a make-whole payment of $76 million related to a tax receivable agreement that Amplify entered into when it went public in 2015.

Amplify's largest stockholder, TA Associates, and key company insiders who collectively represent about 57 percent of outstanding shares have agreed to back the deal.

Hershey, US based chocolate confectionary firm investing USD 50 million in India over the next five years to increase its operation in India.

Parveen Jakate, Hershey India Chairman and Managing Director said “We anticipate an investment of about USD 50 million during the next five years as we focus on growing and expanding our presence in India. India is one of our key International focus markets and we are investing to build this important business. We are excited about the future of our great brands and products in India. Our investments over the next several years will help us to further build upon our positive momentum.

Hershey had entered India through a joint venture with Godrej Group in 2008, but dissolved it four years later, buying out the entire stake. India is among the four key markets for the company globally outside North America.

Hershey India's product portfolio includes brands like Hershey's Syrups, Hershey's Milk Booster, Hershey's Spreads, Hershey's Milk Shakes, Sofit, Jolly Rancher, Brookside Chocolates, Jumpin, Nutrine and Smart Cook.

Hershey Company Chief Financial Officer Patricia Little said “Constant currency net sales in India increased 16 per cent and slightly exceeded our plan. Growth in the brands we are investing behind continues to be solid. Our transition of the India portfolio is enabling a higher margin business, and we are on track to expand gross margins here by 1,000 basis points in 2017. This is enabling adjustments in the local marketplace that should result in a sustainable operating model”.

Pennsylvania-headquartered firm, which recently announced its third quarter global earnings, had said that India has emerged as the fastest growing market, clocking a net sales growth of 16 per cent.

For chocolate lovers and enthusiast alike, the fun has just begun as a chocolate brand ‘Tohfa’ has launched its niche products to the Indian market including premium chocolates (such as those by Ferrero Rocher) and other imported products.

In order to mark its entry in the Indian market, Maiden Group recently organized a gala night at Warehouse Café in Gurgaon and revealed all the products of its flagship ‘Tohfa’ brand.

The CEO & Founder of Maiden Group Kapil Goyal expressed delight towards the launch of his dream project. He said, “Definitely an indigenous way of gifting will be a disruption in the market and India being a land of festival and celebrations, market is surely not a challenge. Looking at the current gifting industry, I think there is a lot of scope to improvise on quality and operational fronts. Yes we are new but we understand the Indian market better than most of our competitors. A thorough work that our back end research team has done shows a bright future in terms of both market and branding. We also have a strong network amongst FMCG, distribution network across India and the ground work started months before the launch date.”   

Italian chocolate maker Ferrero who made endeavored in the Indian market eight years ago are now roaring high as their annual revenue figures are scaling up year-on-year. The recent numbers of 2015 show that company which produces products such as Kinder Joy chocolates and Nutella chocolate-hazelnut spread has generated revenue of Rs 929 crore (as on March 2015). On the other hand, the company which is among one of the leaders in the business, Nestle has managed to garner revenue 1,110 crore in calendar 2015.

The aforementioned figures suggest that Ferrero is closing in with Nestle as three years ago, Nestle used to generate revenue which was three times that of its Italian counterpart. Mondelez, which sells Cadbury chocolates, still dominates the segment with annual revenues of over Rs 6,500 core. Experts attribute this to Ferrero's differentiation strategy.

Describing about the recent shift, Devendra Chawla, President, FMCG and Brands at Future Group said that there is a case to revisit the lens with which marketers view Indian consumers and affordability. Brands like Ferrero with no historic baggage has discovered and led the top down approach of premiumising through innovation versus old school thinking of focusing mainly on low priced products. Ferrero has shown that there is a large market even at the top end.

The recent report of Nomura claims that Nestle has suffered a lot because of its portfolio issues that gradually piled up and resulted in the decline of its revenue and share loss. The report further stated that Growth in the chocolate and confectionery business for the company has been in decline since calendar 2010, but revenue has declined from calendar 2013 onwards. Reasons for this decline are portfolio optimisation in chocolates, as well as seeking premiumisation at a time when demand was slowing. That apart, the failure to innovate beyond the wafer segment when consumer tastes were evolving is also blamed for the growth decline. 

In order to cash in the chocolate temptation of its guests, ITC is eyeing to include 6 to 7 boutiques of luxury chocolate brand Fabelle in its hotels over the coming 15 months. Currently, the company has only one hotel, ITC Gardenia, Bangalore on its grid which sells the luxury chocolate brand. After seeing a hike in Fabelle’s demand, ITC has decided to include the brand in its other hotels as well.

VL Rajesh, CEO, ITC Foods informed that ITC has forayed in the luxury chocolate segment with Fabelle brand. Over the next 15 months, it plans to add 6-7 boutiques for Fabelle at its hotel properties in the country. Company aim is to sell the best chocolate in the world.

The company is also looking at expanding offering in the competitive instant noodles category. ITC consolidated its presence in instant noodles category with brand Yippee, post the Maggi controversy last year.

Stating further, Rajesh said that ITC has about 25 per cent market share in instant noodles category as against 15 per cent market share prior to the controversy. Market will see a few more products in this segment from ITC.

Earlier this week, ITC said it will invest Rs 4,000 crore over the next 2-3 years to set up 8-9 factories across the country for manufacturing of food products.

In order to cash in the chocolate temptation of its guests, ITC is eyeing to include 6 to 7 boutiques of luxury chocolate brand Fabelle in its hotels over the coming 15 months. Currently, the company has only one hotel, ITC Gardenia, Bangalore on its grid which sells the luxury chocolate brand. After seeing a hike in Fabelle’s demand, ITC has decided to include the brand in its other hotels as well.

VL Rajesh, CEO, ITC Foods informed that ITC has forayed in the luxury chocolate segment with Fabelle brand. Over the next 15 months, it plans to add 6-7 boutiques for Fabelle at its hotel properties in the country. Company aim is to sell the best chocolate in the world.

The company is also looking at expanding offering in the competitive instant noodles category. ITC consolidated its presence in instant noodles category with brand Yippee, post the Maggi controversy last year.

Stating further, Rajesh said that ITC has about 25 per cent market share in instant noodles category as against 15 per cent market share prior to the controversy. Market will see a few more products in this segment from ITC.

Earlier this week, ITC said it will invest Rs 4,000 crore over the next 2-3 years to set up 8-9 factories across the country for manufacturing of food products.

Three major food companies, namely Mapro, Dukes and Finetti are planning to introduce chocolate bread spreads in India, as reported by Economic Times.

The companies will bring out their own line of Ferrero India's Nutellalike chocolate spreads this month, challenging the dominance of fruit preserves that have found favour with consumers for ages.

"Consumption growth of jams is on a decline and chocolate spread, although on a small base, is rising steadily," Nikunj Vora, Director, Mapro Foods told ET Reatail. "The trigger to launch the product has been customer or demand driven, instead of the usual trend of companies bringing out products and expecting it to sell,” he explained.

According to a research by Euromonitor International, Chocolate spreads in India are forecast to grow at a CAGR of 24 per cent over 2013-2018, though Nutella's dominance in the country is even stronger than in most other markets globally, with the brand commanding nearly 90 per cent value share in 2013.

While that's a key trigger for newer players to enter, price will be a barrier. "There's a niche market for such products and the segment is not very competitive. But it costs nearly three times more than jams and getting it for mass consumers could be challenging," said Mohammed Rafathullah, CEO, Hyderabad-based Ravi Foods that owns Dukes brands of chocolates and wafer products.