50-paise price point for candies may hold

Even as margins in the Rs 1,500 crore confectionery segment continue to shrink, manufacturers are still not ready to vacate the 50 paise price point. At present, over 85 per cent of the products in the segment are offered at this price, with volumes compensating for wafer- thin margins.

"The 50-paise price point is now synonymous with the mints and candy segment and increasing prices would have an impact on volumes," said an industry expert.

That is perhaps the key reason for big players in the segment such as Perfetti van Melle, ITC and Nutrine sticking to the 50-paise price point despite increase in cost of inputs such as sugar.

"The 50 paise product is going to stay here for a while," said Prakash Wakankar, managing director, Perfetti van Melle India. The reason is that both candy and confectionery are still an impulse-driven and price-sensitive category.

The 50 paise pricing makes the product attractive and accessible to a large section of consumers, including children. At this price, shopowners too find it convenient.

While the candies and mints segment is valued between Rs 800 crore and Rs 1,000 crore, chewing and bubble gums together are worth Rs 500 crore. The standard price point for candies is 50 paise and for gums Re 1.

According to market watchers, the industry has always operated on single-digit margins, and with input and packaging costs having gone up over the past year, these margins have been further squeezed.

Being almost entirely an impulse-driven category, advertising is also a crucial aspect of the overall cost, which again eats into operating margins. As a result, confectionery manufacturers have now started pricing the new launches at Re 1. For instance, when Perfetti introduced Alpenliebe Creamfills and Cadbury Eclairs Crunch, both were priced at Re 1.