India's Chocolate And Cocoa Confectionery Industry And Competitive Landscape 2023
Updated: January 04, 2024Industry Landscape
Demand Conditions
In 2022, India's imports of chocolate and confectionery containing cocoa (HS code 1806) amounted to USD 111 million by value (up 39.5% YoY), slightly less than the country's exports which amounted to USD117 million the same year (down 4.3% YoY). By volume however the opposite was true with imports amounting to 24.2 million kilograms (up 22.4% YoY), slightly higher than exports which amounted to 21.9 million kilograms (up 12.6% YoY).
At just 140 grams per person compared with over 10 kilograms in the UK, India's chocolate consumption has tremendous room for growth. The International Cocoa Organisation (ICCO) sees major growth potential in India's chocolate market as well as the country's cocoa market due to increasing use of cocoa in non-chocolate products such as dairy products and biscuits. Increasing disposable incomes on the back of economic growth (India is projected to become the world's third biggest economy by 2027 overtaking Japan and Germany according to IMF estimates) could drive chocolate demand. India's per capita incomes (which amounted to USD 8,400 in 2022 on a PPP basis) have grown at a CAGR of 6.6% over the five year period between 2017-2022, and although this lags countries like China (where per capita incomes grew at a CAGR of 8% between 2017-2022 reaching USD 21,482 in 2022), it nevertheless represents a sizeable opportunity considering India's demographic advantages (India's over one billion population is growing and youthful with a median age of 29.5 compared with China whose one billion population is shrinking and ageing with a median age of 39.8).
Supply Factors
India is a net importer of key chocolate-making raw materials such as cocoa powder (HS code 1805), cocoa butter (HS code 1804), cocoa paste (HS code 1803), and cocoa beans (HS code 1801).
India's domestic cocoa production has increased steadily over the past several years, rising from 13,416 metric tonnes in 2012-2013 to 27,072 in 2020-2021 according to latest available data from India's Directorate of Cashewnut & Cocoa Development. The state of Andra Pradesh accounted for around 40% of India's cocoa production, followed by Kerala (35%), Karnataka (13.7%), and Tamil Nadu accounting for the remaining 10%. Andhra Pradesh leads in terms of yields, followed by with 950 kg/ha, followed by Kerala (850 kg/ha), Karnataka (525 kg/ha), and Tamil Nadu 350 kg/ha).
Latest available data indicate India had a total of 97,563 hectares of cocoa planted in the country during the year 2020-2021. The southern state of Andhra Pradesh led the way accounting for 40% of India's cocoa hectarage, followed by the state of Tamil Nadu at 33%, the state of Kerala at 17.8%, and the state of Karnataka accounting for the remainder. India's cocoa hectarage as well as productivity have been on the rise over the past several years with planted area up from 66,465 hectares in 2012-2013, and produtivity increasing from 268 in 2012-2013 to 669 in 2020-2021.
Trends And Opportunities
Health benefits associated with dark chocolate consumption is driving demand. Search trends for dark chocolate in India have shown a consistent increase over the years suggesting growing consumer interest.
Chocolate is becoming popular for gifting particularly during Valentine's Week (the week preceding Valentine's Day), when chocolate sales and search interest spike. Indian quick commerce platform Dunzo reported a 25% jump in chocolate sales during the week leading up to Valentines Day 2023, and sales tripled during 'Chocolate Day' (celebrated on February 9 as part of Valentine's Week celebrations in India). While Valentine's Day tends to be celebrated by all age groups, arguably the younger generation tends to take a material approach, buying gifts and presents to celebrate. India has the largest youth population in the world with around 60% of the country's 1.4 billion population under the age of 35. The UNFPA expects India to continue having one of the youngest populations in the world til 2030.
India's younger generation is also spearheading an evolution in the country's festive food customs with traditional sweets and desserts being tweaked to incorporate chocolate or are being complemented with chocolates. Trays and gifts of decadent traditional confections such as rasgulla, kaju katli, gulab jamun, and burfi have historically been among the highlights of Indian festivals such as Diwali and Bhai Dooj, however younger generations are serving up chocolates alongside these traditional sweets and additionally are driving innovations like chocolate rasgulla, chocolate kaju katli, gulab jamun truffles, chocolate modaks, and chocolate burfi.
Challenges
In the gifting market, chocolate is facing increasing competition from India's vast array of traditional confections. These have historically been sold by the unorganized sector, but they are now becoming premiumized as organized players enter the space and drive consumer demand with branding and packaging improvements. According to the CEO of Reliance Grocery Retail, sales of 'kaju katlis' (a traditional confection) have overtaken chocolate sales in Indian supermarkets.
Weak infrastructure, particularly cold chain facilities, makes chocolate transport a challenge particularly considering India's hot and humid climate. In 2022, India was ranked 52nd out of 63 countries in terms of infrastructure, in the World Competitiveness Ranking compiled by IMD. On the positive side however, India's 2023 ranking is an improvement from 55th position in 2019.
Competitive Landscape
Mondelez
American snack giant Mondelez's India portfolio largely comprises chocolate bars in a variety of packaging formats including boxes, tins, pouches, and hampers, sold under their flagship brand Cadbury, as well as Toblerone. The company dominates India's chocolate market with a market share of 57.4% (much of that held by Cadbury alone), followed by Nestle at 16%. Ferrero Rocher, Mars Wrigley, Hershey's and Amul account for rest of the market.
Recent financials:
Mondelez India generated revenues of INR 9.7 billion (approximately USD 120 million) in FY 2022 (FY ended March 2022), up 16% YoY. Chocolate sales account for nearly 75% of total sales.
Future plans:
Mondelez is planning on production and warehouse capacity expansion, as well as investing in supply chain improvements such as cold chain facilities in an effort to increase market penetration in India.
Mars Wrigley
American chocolate powerhouse Mars Wrigley's India product offering includes countlines, dragees, and chocolate bars, manufactured in their one of their four factories in India (of the remaining three factories, two produce gums and the fourth manufactures pet fod), and sold under brands Mars, M&Ms, Galaxy, and Snickers. Snickers and Galaxy are currently their top two chocolate brands in terms of sales contribution.
Recent developments:
The company's portfolio expansion efforts continued this year with the launch of new products including Snickers Berry Whip, as well as their entry into India's dark chocolate space with the launch of Galaxy Fusions Dark Chocolate with 70% cocoa.
Mar Wrigley's Galaxy chocolate brand roped in Bollywood superstar Kiara Advani as its brand ambassador in India.
Future plans:
Mars Wrigley's growth strategy rests on continued portfolio expansion (including launching India-only variants), expanding domestic production capabilities, distribution expansion (including increased rural penetration by offering products at affordable price points). The company expects to double its India business over the next 4-5 years.
Fabelle Chocolates
Fabelle Chocolates, a chocolate brand owned by public-listed Indian conglomerate ITC, offers chocolate bars and boxed chocolates (chocolate thins and truffles) catering to the premium and luxury segment, as well as chocolate desserts and beverages such as cakes, pastries, and hot chocolate. Channels includetheir physical boutiques in ITC hotel locations throughout India, as well as (online food delivery channels such as Zomato and Swiggy). The brand wields a competitive advantage in terms of branding, distribution and marketing with ITC's collection of luxury hotels being leveraged for Fabelle Chocolates with exclusive boutiques and kiosks across the company's hotel portfolio in the country while and the hotel's in-house staff of chocolatiers and pastry chefs are leveraged to create seasonal and limited edition chocolate creations and desserts as part of marketing and promotion efforts.
Recent developments:
New products (non-seasonal) launched during the year include a '5 Taste Sensations' Collection. Seasonal releases include chocolate truffles inspired by traditional Indian confections for Holi, chocolate elaborate chocolate figurines for Easter, chocolate modaks for Ganesh Chaturthi, a limited edition boxed chocolate assortment comprising handcrafted truffles inspired by flavors from 10 nations for cricket season, a collection for Diwali,
Marketing initiatives include chocolate festivals, workshops, and menu promotions.
Amul Chocolate
Indian dairy cooperative Amul, has long focused on dairy products but a few years ago in 2018, they made a strategic decision to refocus attention on India's burgeoning chocolate market, efforts of which are bearing fruit with the cooperative already controlling 10% of India's chocolate market. Amul's product portfolio includes chocolate bars and chocolate syrups.
Future plans:
Amul is planning to double up capacity over the coming years as their existing plant began running at 100% capacity last year despite expanding the chocolate facility five times since its inauguation in 2018.
Choko La
Homegrown chocolate player Choko La offers a wide assortment of chocolate and cocoa products including chocolate bars, boxed chocolates, chocolate drinks as well as desserts such as cakes (pre-made and custom made), cookies, and macarons. Channels include their own boutique stores numbering 7 by mid 2023 (boutique stores account for 60% of revenues), online channels such as their own online store, flagship online stores on third party marketplace platforms (such as Amazon, and Flipkart), online food delivery channels (such as Zomato, Swiggy, and Blinkit), as well offline channels including Choko La's physical store outlets, and third-party retailers including grocery retailers like Spencer's, and duty free stores. About 95% of the company's revenues are generated in India. The brand differentiates themselves with their extensive product portfolio (which spans chocolate confectionery and cocoa desserts), combined with their customization services (particularly gift box customization services which leverages on their wide product assortment to offer customers extensive product combinations to choose from).
Recent developments:
Seasonal launches include collections for Valentine's Day, and hampers for Diwali.
Other product launches include a new canned RTD chocolate drink, as well as desserts for Valentine's Day and Christmas.
ChokoLa launched a 'Wedding Gift Edit' wedding gift box customization service.
Future plans:
Choko La announced their plans to expand their national store footprint across India, and increase the number of cloud kitchens to 25 by FY2024 from 15 currently. Cloud kitchen expansion plans are driven by their cakes business which has quadrupled over the past two years and expected to grow a further 2x-3x by FY2024 according to company management. Cakes currently generate 35% of Choko La's revenues but this figure is expected to increase over the coming years with their revenue contribution expected to match chocolates.
The company is also looking at channel expansion with plans to increase revenue contribution from non-boutique stores to about 60% from 40% currently.
Choko La plans to launch new flavors for their popular chocolate drinks, as well as new launches in the better-for-you segment including sugar-free, and vegan. Budget-friendly chocolate drink options will be launched as well to increase penetration in tier II and tier III cities.
International expansion to markets including the U.S., and U.K., are underway and the company is aiming to expand to new markets including Canada, Singapore, GCC, Western Europe, and Australia. Management is aiming to have international markets generate 15% of revenues over the comging years from about 5% currently.
The Hershey Company
American chocolate giant The Hershey Company sells chocolate bars, boxed chocolates, dragees, cocoa powder, chocolate syrups, and chocolate spreads in India under their flagship brand Hershey's, as well as chocolate confectionery products such as peanut butter cups under the Reese's brand.
Recent developments:
New product launches during the year include Hershey's Choco Tube (a chocolate-coated wafer product) and a new variant to their Hershey's Kisses brand with Hershey's Kisses Special Dark 'n' Almonds.
New Entrants
Swiss luxury chocolate brand Läderach made their foray into India this year in partnership with Indian FMCG giant DS Group, with their first store opened in Delhi selling a variety of chocolates including bars, pralines, and truffles, 100% of which are made in Switzerland and imported into India. The company is planning to open 5-7 stores over the coming two years in key metro cities across India. Future channel expansion plans will also include shop-in-shops, eCommerce channels, airport retail stores, as well as the gifting space in corporate, wedding and event gifting categories.