The Indian confectionery market which is ranked 25th globally in value terms in 2009 is expected to grow at a rapid pace and jump up to 14th position by 2014, said a report from Datamonitor.
The report further added that over 30% of the Indian population is in the 0–14 age group, which is the primary target segment for confectionery manufacturers. These will be the prime movers for growth in the confectionery market in India. Add to this the rapidly growing domestic market.
“Higher disposable income and the resultant higher purchasing power will be instrumental in the rising value and volume growth of the confectionery market in India. With the premiumisation trend on the rise, categories like chocolate and cereal bars are expected to gain sales, while the market is set to grow at an even faster rate, of over 12% during 2009-14,” said Gaurav Marchanda, a Datamonitor consumer markets analyst.
India grew at a compound annual growth rate (CAGR) of 10.5% during 2004–09, placing it among the fastest growing confectionery markets globally.
The Indian confectionery market is highly consolidated, stated the report, with the top five manufacturers accounting for a major share. International manufacturers are particularly dominant in the market, and also lead the way in terms of new product launches. “An analysis of the leading manufacturers in terms of growth suggests that companies like Cadbury (Kraft) and Nestlé, with a higher focus on chocolate products, are performing relatively better than other confectionery manufacturers,” said Marchanda.
As the Indian confectionery market continues to evolve, strong trends have come to the fore which will shape the future of the market and categories within it. Health consciousness is one trend that has certainly caught the attention of the manufacturers. As a result, cereal bars are currently the fastest growing category in the Indian confectionery market. Gifting chocolates during traditional Indian festivals like Diwali and occasions like Raksha Bandhan also continue to gain popularity. According to Marchanda, “such products have a longer shelf-life than traditionally available sweets, and are also accompanied by well-targeted marketing campaigns and product positioning. This is leading to a shift from gifting dried fruits and sweets to chocolates.”
However, there are several obstacles that will inhibit growth in the market. “Added strains on household budgets due to high food inflation in India will indirectly place pressure on the confectionery market, as discretionary spending on comfort food items diminishes,” said Marchanda.
Furthermore, the price of both sugar and cocoa beans (the main ingredients in chocolate) is on the rise, which is likely to exert pressure on the profit margins of manufacturers. “Higher sugar prices directly impact the input costs of low-value sugar confectionery products, which in India tend to have lower price elasticity,” said Marchanda.
