The dark knight

Is market leader Cadbury’s foray into the dark chocolate segment an attempt to gain ground over much-in-demand imported chocolates?

Life used to be pretty sweet for chocolate maker Cadbury until 2003. Then the worms crawled out of the bag, swiftly eating into its reputation. Overnight, its market share in India slid from 73 per cent to 69.4 per cent. For a company used to setting the rules, that was hard to take.

The damage control measures, which included a new packaging format and brand ambassador, worked. Cadbury more or less resurrected itself. Today, its market share stands at 71 per cent, just two percentage points short of what it used to be.

At present, the chocolate maker has the market nicely covered with offerings that range from Re 1 for a Cadbury Éclair to the all-year-round Celebration gift packs priced between Rs 145 and Rs 155.

Nevertheless, intent on surpassing the peaks it had scaled earlier, the brand is penetrating deeper. Cadbury has just announced its foray into the dark chocolate segment with the fashionably packaged Rs 75 Cadbury Bournville Fine Dark chocolate. “We noticed that if we’ve got distinct products it just adds to growth. This brand will create a new category and add 3-5 per cent to our revenues,” says executive director, marketing and international business, Sanjay Purohit.

Second chance
This is Bournville’s second coming, given that it has been around for almost 30 years. “We realised that it was not marketed well, there was hardly any promotion. It merely existed, with no specific marketing plans, and accounted for a miniscule part of our business. So we pulled it off the shelf and changed everything about it. The name was retained for any residual Bournville equity,” says Purohit.

Analysts, however, feel this move is a fitting reply on Cadbury’s part to imported chocolate makers, many of whom have been slowly gaining ground. “Cadbury has already lost out on the upper end of the market,” says Sanjay Sethi of Technopak Advisors, the retail consultancy. “Though there are various international players in the dark chocolate sector, in India only Amul was able to offer feeble competition with its dark chocolate, Bindaaz. Thus entering or re-launching this is a strategy to maintain the competitive advantage.”

Sales of imported chocolates at popular retail outlets like Spencer’s and Food Bazaar are on par with chocolates made in India. “At Spencer’s, sales are exactly the same for imported chocolates and Indian ones,” says Samar Singh Sheikhawat, vice-president, marketing, Spencer’s Retail. Similarly, imported chocolates make up a substantial 45 per cent of the total chocolate sales in Food Bazaar.

“It is not that only the more trusted Swiss and Belgian chocolates (Ferrero Rocher, Lindt and so on) are gaining ground. Australian brands (Walter Heindl, Macadamia), Sri Lankan brands (Edna) and various imports from the west Asian countries are also grabbing a significant share of the market in India,” says Sethi.

Not surprisingly, Future Group tied up with Tiffany’s to launch its brands at various Food Bazaar outlets. So what is it about imported chocolates that have caught the fancy of both retailers and consumers alike?

“Fortunately or unfortunately, imported chocolates give us better margins. Modern trade accounts for a small turnover for locally-made chocolates, but given the way it is growing, it would make sense for domestic chocolate players to activate modern trade elements,” says Food Bazaar’s chief executive officer Sadashiv Nayak. In June this year, Future Group, which owns Food Bazaar, boycotted the Cadbury brand over alleged price discrimination. A few days later, the two companies buried the hatchet.

“For the consumer, the key driver is innovation — right from the ingredients — which sparks imagination and consumption. Innovation always gets rewarded handsomely by customers,” says Naik. Agrees Sethi: “Foreign brands, with their combination of technology, cost and ingredients, have been able to manufacture chocolates of better quality, texture and taste.”

The contenders
Making matters worse for Cadbury, more and more foreign players are formally launching their brands in the country. In September this year, Mars Snickers started its first television commercial in the country. Though the chocolate bar will not be manufactured in the country just yet, the company has got its marketing team in place. “Mars is the world’s number 1 chocolate company, and naturally our aim is to build in the long-term a significant business in India,” says Mars India’s director, chocolate category, Arjun Charanjiva. So far, thing are going according to plan. “We are growing significantly faster than the market rate of 20 per cent,” he says.

Further, it is also rumoured that US-based Hershey’s is planning to enter the Indian chocolate market through its joint venture with Godrej.

Purohit, though, remains unperturbed. “With the economy opening up, there will be competition. Imported chocolates in India still have a market share of just 1 per cent. How much you see of them and what sells are two different things.”

Still, Cadbury is not taking chances. With an impetus on innovation, the confectionery maker is moving away from making chocolates for children to making them for the richer, affluent, indulgent adult. “Today, we find chocolate restricted to children, but we’ve decided to change that,” says Purohit. As far as ingredients go, the dark chocolate will have four variants: rich cocoa, raisin and nut, hazelnut and almond. To top it all, the health benefits attached to dark chocolate will be presented as an added incentive to consumers. “The cocoa beans used are a natural source of anti-oxidants and reduce ageing,” adds Purohit.

Sheth seconds: “Dark chocolate will do well because of its rich taste and intrinsic health and well-being benefits.”

But where the taste and health benefits might be top notch, the 100-gram chocolate makes the wallet considerably lighter. Isn’t Cadbury afraid that the price would deter customers? “People will see more value in it. Besides, this is positioned as an indulgence,” replies Purohit.

Naik of Food Bazaar agrees. “Dark chocolate has potential. I would put my bet on it.”