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Slowdown makes candies, toffees sweeter than chocolate

NEW DELHI: The slowdown in Indian consumers' discretionary spend is impacting chocolate sales, but it hasn't changed people's love for "meetha". Sales of candies, eclairs, toffees, jellies, lollipop and mintshave shot up even as chocolate sales have slowed. Consumption of candies grew more than double the rate of chocolates in 2012, industry players said quoting market researcher Nielsen's data (see graphic).

Compared to price points starting at 5 and 10 for chocolates, confectionery price points start upwards of 1 and 2. Non-chocolate confectionery makers such as 
Perfetti Van Melle, Parle, Wrigley, Ferrero and ITCBSE -1.05 % attribute the increasing demand to a number of factors including new products, product innovation, higher investments in distribution and marketing spends, and the increasing prices of chocolates. "Confectionery consumption is rising, and that's guided to a large extent by new products, as new sub segments have emerged within gums and candies," says Ramesh Jayaraman, managing director at Perfetti Van Melle, which leads the category with a 25% share. Recent innovations from the Indian arm of the Italian confectionery maker include Alpenliebe Jelly at Re 1 a pack, which it rolled out last quarter.

Gautam Sharma, former CEO of confectionery firm 
Wrigley and now an independent management consultant, points out that candy makers have managed to increase prices without taking a hit on sales. "Sugar prices have been stable for 8-10 months and at the same time, most firms have upgraded price points from 50 paise to Re 1, so margins of confectionery firms have gone up. This has resulted in them re-investing in distribution and advertising, which is leading to higher consumption," Sharma says.

Mayank Shah, group product manager at 
Parle Products, which makes the popular candy brand Mango Bite, says, "Increasing prices of chocolates has also contributed to growth of sugar-boiled candies and mints." Last month, Cadbury India ran its biggest price-off promotion for its triangular chocolate brand Toblerone, when it sold 400-gm packs for Rs 250, against Rs 430 earlier, to deal with slowing demand of premium products. Analysts also attribute lack of innovation and competition for the slowdown in chocolate consumption, to 7% last year from 8% a year earlier. "Lack of innovation in chocolates and restricted number of players have led to category sales slowing down," Prathish Nair, chief business architect at consulting firm Transcend Brand Consulting, says.

Last month, Cadbury India ran its biggest price-off promotion for its triangular chocolate brand Toblerone, when it sold 400-gm packs for Rs 250, against Rs 430 earlier, to deal with slowing demand of premium products. 

Analysts also attribute lack of innovation and competition for the slowdown in chocolate consumption, to 7% last year from 8% a year earlier. "Lack of innovation in chocolates and restricted number of players have led to category sales slowing down," Prathish Nair, chief business architect at consulting firm Trancend Brand Consulting, says. Industry watchers also point out that 
candies and gums don't require coolers and refrigerators at the trade and storage level unlike chocolates. 

Chandramouli Venkatesan, who is the regional chocolate category head for Asia Pacific at Mondelez International, in a rent interview with ET had said that Cadbury India's biggest priorities included bringing in visi-coolers and ensuring cold chain infrastructure. 

Buoyed by the boom in demand, many confectionary makers plan to widen their product range while some companies such as DS Group, the maker of Pass Pass mouth freshener and Catch spices and packaged water, plan foray into the candy segment. 

DS Group, which launched Chingles chewing gums last year, will extend the brand to candy, jujubes and 
jellies over the next couple of months, Atanu Ganguly, category head - confectionery and powdered drinks at DS Group, says. "Consumers are upgrading from unbranded to branded products, price points of candies and mints are always more attractive than chocolates, and supply chain dynamics are more convenient for nonchocolate confectionery," he says.