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Festive season gives chocolates big push

Posted on Oct 09, 09:15PM | IBNS

The consumption of chocolates is steadily increasing in urban and semi urban areas, registering a compound annual growth rate (CAGR) of 25pc and is expected to cross Rs 7,500 crore by 2015, according to the estimates by apex industry body ASSOCHAM.

The Indian Chocolate market is currently poised at over Rs 4,500 crore, according to an analysis of 'Indian Chocolate Market' by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

"Ahead of the festival, the demand of chocolates is increased by 35pc than the last year in urban areas due to rising awareness about adulterated and high-priced traditional sweets available in the market," said D S Rawat ASSOCHAM, Secretary General while releasing the findings of the chamber's analysis.

The key growth factors are tradition of gifting sweets in India, shift in consumer preference from traditional mithai to chocolates, rising income levels and attractive packing coupled with pricing which is suitable to every pocket, added Rawat.

"The per-capita consumption of chocolates has also increased from 50gm in 2005 to 300 gm now and there is a lot of scope to grow even further," says the analysis.

The industry caters to a variety of consumers with over 65 per cent of the consumption being in the urban market. However, over the years, chocolate is increasingly becoming popular among Indians and gradually replacing traditional sweets.

The major key challenges that the chocolate market is facing in India are inflationary pressures on raw material prices, lack of government initiative, high entry barriers due to duopolistic market and price-sensitive consumer, adds the paper.

Chocolates competing with other categories like soft drinks, snacks and beverages for a share of the consumer's wallet, but modern trade and other factors like liberalisation of the economy, growing income of middle class and macro-economic conditions have had a positive impact on consumer spending," said Rawat.

Facts and Figures

Chocolate market is estimated to be around 4,500 crores growing at 25pc per annum

Cadbury is the market leader with 70pc market share

The per capita consumption of chocolate in India is 300 gram compared with 1.9 kilograms in developed markets such as the United Kingdom

Over 70 per cent of the consumption takes place in the urban markets

Margins in the chocolate industry range between 10 and 20 per cent, depending on the price point at which the product is placed

Chocolate sales have risen by 15pc in 2007 to reach 40,000 tonnes

The global chocolate market is worth USD 85 billion annually

Consumer Trends

Mithai- the traditional Indian sweats is getting expensive and substituted by chocolates among upwardly mobile Indians. Instead of buying sweats on Raksha Bandhan, Diwali, people prefer to buy chocolates.

The range and variety of chocolates available in malls seems to be growing day by day, which leads to lot of impulse sales for chocolate companies.

Chocolates which use to be unaffordable, is now considered mid-priced.

Designer chocolates have become status symbols.

Some of the key growth drivers being:

Tradition of gifting sweets

Shifting in consumer preference (from traditional 'mithai' to chocolates)

Increasing awareness - demand for sugar-free and diet chocolates among consumers

Expansion potential due to lesser penetration

Rising income levels and rapid development in rural markets

However, there is a long way to go for the Indian chocolate industry. Increasing awareness, rising disposable income, shifting in Indian consumer preference, and rapid development in rural markets shows there is a huge untapped market that the chocolate manufactures can capture.