The Chocolate Industry In India

The Chocolate Industry In India Introduction This assignment deals with the organization whose current main product is at maturity stage in the market life cycle and its sales have been reduced, to sustain its market share the organization has to go for product development to defend it from its rivals. The organization chosen for this particular scenario is Lotus Chocolate Company Limited. An Overview of Chocolate Industry in India The chocolate industry in India as it stands today is dominated by two companies, both multinationals. The market leader is Cadbury with a lions share of 70 percent. The companys brands (Five Star, Gems, Éclairs, Perk, Dairy Milk) are leaders their segments. Till the early 90s, Cadbury had a market share of over 80 percent, but its party was spoiled when Nestle appeared on the scene. The latter has introduced its international brands in the country (Kit-Kat, Lions), and now commands approximately 15 percent market share(rediff.com).The Gujarat Co-operative Milk Marketing Federation (GCMMF) and Central Areca nut and Cocoa Manufactures and Processors Co-operative (CAMPCO) are the other companies operating in this segment. Competition in the segment will get keener as overseas chocolate giants Hersheys and Mars consolidate to grab a bite of the Indian chocolate pie. Per Capita Chocolate Consumption (in lb) of first 15 countries of the world Rank Countries Per Capita Consumption (in lb) 1 Switzerland 22.36 2 Austria 20.13 3 Ireland 19.47 4 Germany 18.04 5 Norway 17.93 6 Denmark 17.66 7 United Kingdom 17.49 8 Belgium 13.16 9 Australia 12.99 10 Sweden 12.90 11 United States 11.64 12 France 11.38 13 Netherlands 10.56 14 Finland 10.45 15 Italy 6.13 INDIA, stands nowhere even near to these countries when compared in terms of Per Capita Chocolate Consumption. (Data sourced from LMC International, The world cocoa market outlook).Chocolate and confectionary market is valued around US$ 282.6mn and which is divided into three main sectors or groups namely sugar boiled confectionery with US$ 65.2mn, next comes chewing and bubble gums with US$ 87mn and the major chunk goes to milk chocolate with US$ 130mn.Chocolate Consumption Structure by age groups are as follows- Children 55% Adults 12% Young Adults 33% (Data sourced from Overview of Indian consumer goods) The chocolate market in India grew by 19 per cent and reached the market value of INR 17.9bn(2007), low consumption patterns have been changing due to the raising economy(www.just-food.com). The market is divided into two segments urban and rural segments, the consumption of chocolate is higher in urban areas and lower in rural segment,the growth rate of urban is higher( Data sourced from Overview of Indian consumer goods). This poses a high potential for chocolate manufacturers as the raise in population who are opting for chocolates as alternatives as local mithais, as a part of cultural transition due to the high influence of western cultures at work and other areas(The Dark Chocolate Rush). Background of the organization Lotus Chocolate Company Limited is established in the year 1992 (www.lotuschocolate.com), It is renowned for its innovative chocolate design and their variety taste when compared with competitors. The plant is located at Medak district Andhra Pradesh. They provide consumer and industrial solutions for different chocolate manufacturers. The famous chocolate brands/products produced are Chuckles, Superr Carr and Tango. Lotus is also famous for producing customized chocolate gift packs upon consumers request(www.lotuschocolate.com).The core target market of the organization is the low end niche group(children young adults). The organization lost its core market share due to the increased marketing efforts and rapid development of new products based on changing customer trends(The Hindu Bussinesline). Issue-1 Decline of Lotus chocolate brands (Superr carr, Tango chuckles) in the market due to changing consumer and chocolate industrial patterns, high competition from well established multinationals such as Nestle Cadbury. The main objective of Lotus chocolate company ltd. is to regain its market share and stand against competition. SWOT Analysis Strengths Experience in chocolate industry. Brand presence in the market. Established industrial supplier. Medium production capacity. High suppliers base. Customized products facility for consumers. Weaknesses Limited distribution facility outside South-India. Poor advertising strategies. Limited product range. Limited resources. Opportunities Strong growth potential in South-India urban region. Raise in chocolate consumption. Market expansion into North-India. Changing consumer behavior patterns. Threats Aggressive market penetration by multinationals Price sensitive market. Competitive position of Lotus is fragile. Increasing production costs. Vast cultural influences on buying patterns. Alternatives to regain the market position and share by using Ansoffs Matrix Option A (Market Development) Developing markets other than core markets, such as moving into north Indian market or entering into other markets where the product or brand is not present. Option B (Diversification) This option deals with shifting the interests of the organizations core interest into other businesses interests, for instance moving away from chocolates and entering into cold drinks or clothes or etc. Option C (Market Penetration) This option deals with penetrating the existing core market with lower prices and more products with enhanced distribution processes. Option D (Product Development) This option deals with developing new products to compete in the market and to sustain the companys presence in the market . Recommendations A mixture of market penetration ( C)and product development (D) because for the following reasons This gives opportunity for Lotus chocolate to develop a product to sustain its brand value,market share,to increase its financial position and consumer base. Due to increased competition in the market, developing innovative tastes and along side producing chocolates with lower health effects such as Organic chocolates. As the organic market is gaining interest among the higher class segment(Indias booming organic market, rediff.com). Market penetration helps Lotus chocolate to revitalize its distribution systems and revitalize its brand image among the targeted consumers at sustainable price as the brand has its presence already in the market. Product development helps Lotus chocolate to over come its past weaknesses and product is the core and brand enhances its value. The rising chocolate consumption poses an opportunity which can be converted into financial means, develop a strong brand image and loyal consumers. Why not for Market development Diversification can be justified by the following sentences- Market development needs much heavier finance and it needs to invest more time resources , it deals with entering into new markets which are more complex and the risk is higher, in-turn concentrating on new markets may led to the fall of existing markets. Diversification deals with completely moving from core operations into new businesses and it is very risky and needs much time to develop and build reputation from scratch, these two options would need high monetary resources. Based on the present situation and Lotus chocolates swot analysis the best and feasible options are market penetration and product development which deals with existing markets. After deciding on what course of action to be carried for sustaining and developing the brand value and consumer base. The options and strategies chosen are product development and market penetration. After deciding to go for product development next comes what product to develop and whom to target, how to reach them and what are the core benefits the product is to deliver and the value chain process from suppliers to consumers. The strategy opted for reaching the perceived state of position is focused differentiation strategy coupled with best cost provider strategy from porters five generic strategies(Thomson etal,pg. 134).The focused differentiation strategy concentrates on a narrow buyer segment and outcompeting rivals by having lower costs than rivals, best cost provider strategy deals with giving customers more value for their money by incorporating good to excellent product attributes at a lower cost than rivals. According to an article named Indias booming organic market states that India would be both a major organic food producer and consumer, the potential of consuming organic food products are on a raise due to increased awareness about health and having environmentally friendly raw-materials. According to article named Global Organic Business the consumption of Organic beverages and confectionary would increase drastically in India by 40 % by 2020, starting early would be better option to reap the future benefits and would help us to establish ourself in the market. The core target group is children aged from 14 to 18 years old,teens and adults from rich urban segments and upper middle class sections. Branding of Hercules Branding adds value to the products and gives additional identity to the products and their consumers, products mite change but brands will not change and once a brand decides its characters and features it remains steady for longer time. Developing optimal brands needs a change in corporate management culture and their attitude. The influence for deciding a brand character is explained below Branding is one of the main ingredient in the success of the product in the market, the proposed brand values for Hercules is its premium nature, pure nature and energy, individuality and freedom. As Hercules is not a just a chocolate its more than an luxury experience. Marketing Mix Marketing mix consists of 4 Ps namely product,price, promotion and place (distribution). The right strategies for all these Ps are necessary for success of the product or service in the market. Product Product is the physical representative of the companys core value transition from organization to the consumers. Product strategies deal with the issues such as package, product shape,product features and product quality. The package is designed based on the target market and product features. The shape is also designed based on the perceived best by the target market and brand image. Packaging also has implications on the perceptions of the consumers which visually appeal them and classify the product into premium product. The levels of product are as follows- Core Product- The core benefits of the organic chocolate is that of its health benefits and taste variety. Tangible Product- The tangible are those benefits which are positioned by the packaging and advertisements. For this organic chocolate the tangible benefits are premium quality. Augmented Product- The augmented benefits are the values which reach the consumers expectations , which are non-tangible and can be measured only in-turns of consumer reply in favor of praising the product. Potential Product- The potential product benefits surpasses the expectations of consumers and the core-product, which would obtain large consumers delight. Product differentiation strategy provides the primary source for competitive advantage, this also provides a platform for developing future products under the same brand. Product strategy is directly linked to the strategies of the organization. The product line is available in two versions of weight namely 100gms and 200gms. Name of the Organic Chocolate is Hercules Price Pricing strategy deals with pricing the product based on the current market pricing structure, organizations break even, psychological pricing. The pricing strategy is also based on the product and the targeted consumers. The pricing strategy used for this product is a mixture of premium pricing and quality-based strategy. The cultural aspects of the target market has a profound impact on spending and food habits. The costing of the new product is one of the tough jobs of management. The cost of the product has direct relationship with positioning of the product. The factors to be considered while deciding a price for Hercules are as follows The consumer spending structure and their patterns are to be analyzed and find the average and the best cost in the market for Hercules. The companies costing systems and proposed investments for developing Hercules and the rate of returns expected by the organization. The brand strategies and the positioning strategies proposed for the Hercules also have their share on deciding the price. According to the article defining the premium chocolate market, the appearance of luxury chocolates in the super marts as the aspirants for consuming luxury has become a trend and even those who cannot afford the luxury goods are having premium chocolates as alternatives to satisfy their urge to feel good. A research presentation from Ledbury Research states that there would be 140,000 families in India with annual income around $230,000. The consumers spending have dramatically increased on apparels,food and entertainment. The pricing strategy which has been decided is value-based pricing and quality based pricing, the price decided after calculating the ROI,manufacturing costs , promotional costs distribution cost is 75 rupees for 100gms and 150 rupees for 200gms. This is unpriced structure across the market. The custom ordered chocolates online are priced based on their ordered quantity and their flavor structure. Pricing is done in a way to differentiate from competitors and duplicate products which are a major threat in Indian market, Organization to move towards price excellence for better market acceptance. Distribution Distribution deals with making product available to the consumers at right time and right place, the considerations for designing the distribution network deals with the consumers choice, companys resources and market infrastructure. The distribution sector in India is fragmented and completely complex due to the large size and fundamental infrastructural problems such as electricity, roads and warehouses. The main distribution system is divided into three segments namely distributors, wholesalers/super-marts and retail stores. The major factors which influence the distribution strategy for the Hercules is the product strategy, organizations strategy for business, target consumers. The strategy which is selected for distributing this project is selective distribution which means the company selects few distribution channels to reach target markets through which the product availability can be controlled by the company, this also assists Lotus chocolates to keep their brand image and to maintain the premium image of the product. Based on the competitors distributions channels, consumers choice and feasible options of the organization the selected ways to reach the target market are super markets , premium chocolate stores, hyper malls , airports(duty free stores ) and through internet directly to consumers (online). The distribution picture can give you a complete idea about Lotus chocolate distribution channels for Hercules. The picture states that they are single layer channels, double layer channels and triple layer distribution channels to reach the targeted consumers. As developing a strong customer base and differentiating the Hercules from other competitive brands and products, Lotus chocolate has developed a program for its customers to design their own organic chocolate online with the available options, through this options customers can directly buy and give their feedback directly. Promotion This is one of the most important aspect of the marketing mix which would decide the success of the Hercules(Organic chocolate ) in the market. Promotion deals with promotional activities such as advertising, promotional strategies such as offers, discounts, public relations and publicity. The promotion aspects aim at creating an impact about the Hercules on the mind sets of targeted consumers. We are going to use one of the oldest marketing strategy for promoting the product to the target market through AIDA model (www.changingminds.com), AIDA means to attract by visual appeal such as cool ads, create interest among the target market, then develop desire among consumers by proving more information about core and potential benefits of Hercules and the final one is action this is considered done when the consumers by the product. In addition to the AIDA model, the consumers interest through sharing benefits and values, opinions with customers and asking for their feedback via blogs, post and emails. The channels used to reach the target market are through print media, internet, television, out-door campaigning and point of sale. The basic message in the strategic marketing communication would be more of product oriented and would explain about the products core benefits and its core values which add value to the target market. The chocolates are advertised through 360 degree for complete. The television channels which are known for reaching target markets and their share are explained below The subliminal message which we want to pass on to consumers is that Hercules is not just a chocolate but its a wonderful and joyful experience and its merely more than a chocolate. This also needs to break and build the present brand image of Lotus chocolate company Ltd. Promotion and popularity of the product are directly proportional to each other. Emotional flavor infusions in the marketing campaigns would attract the targeted consumers. While marketing in India you need to understand the cultural aspects of the target market. Hofstedes cultural dimensions would assist in understanding cultural aspects of the consumers and also helps in designing an innovative message. The chart below explains power distance index, individualism, masculinity, uncertainty avoidance index and long term orientation. Sourced from (http://www.geert-hofstede.com/hofstede_india.shtml) As the above graph indicates that higher PDI means higher inequality among different sections of people, its also indicates that India is a collectivistic society, uncertainty avoidance is lower at 40 per cent which indicates that people are open to any uncertain situations and ideas. (wwww.geert-hofstede.com). By understanding the above graph the message through with we need to reach our target market should be designed and developed in way that it should touch them culturally and explain the health benefits and environmental benefits Hercules is going to provide. Other than television ads, there are also other channels through which we can reach consumers such as wall paintings, print media advertising such as publishing in premium magazines of sports, movies,business and animation. Point of sale posters at shelves at super stores, out-door campaigning at malls and multiplex cinema halls, conducting competitions on environment at international schools for faster promotion among schools. Another important form of advertising through online such as website ,pop-ups at yahoo, google,windows mail, orkut, twitter,face-book and much more. One more aspect of promotional channel which is gaining popularity is mobile advertising such as through mobile phone messages and mobile games. The utilization of full resources at maximum rate would help Lotus chocolate to create an impact in the market and target market and helps to establish the Hercules. Evaluation of the Hercules Success in the Market Evaluation is done based on the sales patterns. Consumer feeling are collected using feedback such as compliments and complaints. Key partnership with retailers and examining the consumer behavior towards Hercules. A primary research for understanding the current advertising strategy and the message passed through them and what target consumers understand and perceive. Marketing Production Schedule/Plan for Hercules Production objectives The main objective is to procure green or organic or chemical free cocoa and other raw-materials. Insure the quality is double checked. Ensuring that the process flow is smooth and meets the production capacity. Targeted production percentage is to produce 75 per cent of Hercules than other nominal brands which are out competed. Production of customized Hercules for customized orders are to be produced 25% of the total capacity. Marketing management objectives Increase the awareness about Hercules among the target market segments by 30% per annum. Decrease the potential customers resistance by 25 percent per annum. Position the brand image of Hercules as premium luxury chocolate and stand differentiated among the competitors by providing customized chocolates for consumers. Strengthening of non-priced competitiveness, business restructuring by rebranding the image of lotus chocolates company and Hercules brand. Demand creation, sustainment and enhancement of quality advantage and healthy products. Increase the sales of Hercules by 5-6 per cent per quarterly. Marketing Plan 02/05/10 Brand image and product development 05/06/10 Product testing for quality, taste, color and odor 20/06/10 Promoting Hercules brand through television commercials 25/06/10 Promoting through out door campaigning, print media, radio. 30/06/10 Passing the product through distribution channels and making it available to the target consumers. 10/07/10 Evaluating the outcomes of the advertising campaigns promotional activities. 20/07/10 Developing alternative and going for aggressive campaigning. The alternatives for promoting Hercules is by pairing with brands which are identical and supports each other in promoting themselves as premium brands. For example promoting Hercules (organic chocolate) with BMW or any luxury brands. Or Promoting Hercules with premium airlines through giving complementary packs to business class flyers, or promoting with premium star hotels.