A Chocolate Industry Project Report

III
EXECUTIVE SUMMARY
India's chocolate market is estimated at around Rs 3,000 crore while the organized confectionery
market is around Rs 2,000 crore in 2013. The overall chocolate market is growing 15% a year,
while the growth in modern retail is almost double of that. India's chocolate market is expected
to reach $3.2 billion by 2018 due to increasing gifting culture in the country and increase in the
income bracket. The per capita consumption of chocolate in India has increased from 40 gm to
120 gm in 2013.
Chocolates are items of impulse purchase, competing with categories like soft drinks, snacks and
beverages for a share of the consumer's wallet. The cocoa, chocolate, and confectionery industry
employs hundreds of thousands of people around the world and is a key user of other agricultural
commodities such as sugar, dairy products, nuts, and fruits.
For the depth study of chocolate industry we have used the various models for the analysis
purpose like BCG Matrix. Strategic Group Mapping, GE Nine Cell and porter‘s five force
analysis. We have also done pest analysis of chocolate industry.
In Indian chocolate industry Mondelez India is the market leader with 62% market share
followed by Nestle 22%. In addition to this there are many players which includes Mars, Ferrero,
Amul, Hershey‘s, Lotus and Lindt.
The current trends in chocolate industry includes more demand for dark chocolates, Urban cities
account for nearly 80% of the consumption of chocolates, Occasion and celebration, Premium
chocolates. After analyzing porter‘s force model we have concluded that in chocolate industry
rivalry among competitors and threat of substitute product is very high.
BCG Matrix shows the position of different chocolate companies. In that we have takes five
companies. We have found that Cadbury Fall in the star category and the remaining four
companies Mars, Nestle, Ferrero and Amul falls in the question mark category. After analyzing
this model we can conclude that which strategy company should follow.

IV
In GE Nine Cell we have analyzed the industry attractiveness measures and competitive
strengths. Strategic group mapping is also one of the important for analyzing the industry. It
reveals which companies are close competitors and which are distant competitors. In that we
have taken two variables i.e. price and number of brands. We come to know about that Cadbury
offers chocolate in all the price range as well as it has more than nine brands. It is also shown
that Nestle and Lotus has more competition.
In this project report we have also analyzed the driving forces in the chocolate industry which
includes festivals, change in who buy the chocolate, technological change and product
innovation. In addition to this financial analysis and opportunity & threat analysis is also
included.
Value chain analysis identifies primary and support activities that add value to the final product
and then analyze these activities to reduce costs or increase differentiation. In chocolate industry
primary activities includes production, marketing, processing, chocolate manufacturing,
distribution, and customers. Support activities include R & D, human resource management,
technical assistance and general administration.

TABLE OF CONTENT
CHAPTER SR NO. PARTICULARS PAGE NO.
* Preface I.
* Acknowledgement II.
* Executive Summary III.
1 Introduction about chocolate industry 1
2 Research Methodology
2.1 Objective of the study of product market analysis 3
2.2 Information needs 3
2.3 Research design 4
2.4 Data collection & sources 4
2.5 Analysis plan 4
2.6 Limitations 4
3 Study of World Market
3.1 Global scenario of chocolate industry 5
3.2 Characteristics of chocolate industry 8
3.3 Cocoa suppliers 13
3.4 Global trends 15
4 Study of Indian Market
4.1 History of chocolate industry 20
4.2 Indian scenario of chocolate industry 22
5 Product Profile
5.1 Ingredient 25
5.2 Types of chocolate 26

5.3 Manufacturing process of chocolate 28
6 Demand Determination of Chocolate Industry
6.1 Price 31
6.2 Income of targeted consumers 32
6.3 Penetration level 32
6.4 Promotion schemes 33
7 Distribution channel in chocolate industry 34
8 Key issues & current trends 35
9 PEST analysis
9.1 Political factor 38
9.2 Economic factor 43
9.3 Socio-cultural factor 47
9.4 Technological factor 49
10 Michel Porter’s Five Force Model
10.1 Rivalry among competitors 51
10.2 Threat of new entry 52
10.3 Threat of substitute product 55
10.4 Bargaining power of supplies 56
10.5 Bargaining power of buyers 58
11 Other Portfolio Model
11.1 BCG Matrix 61
11.2 GE Nine cell matrix 64
11.3 Strategic Group Mapping 68
11.4 Driving force 71

11.5 Key Success Factor 72
11.6 Value Chain Analysis 73
12 Financial Analysis 78
13 Opportunity & Threat Analysis 86
14 Findings 88
15 Bibliography 89

INDEX OF TABLE
Table No. Title Page No.
1 Per capita consumption 9
2 Price & demand relationship 31
3 Per capita income & demand 32
4 Political factor 42
5 Economic factor 46
6 Social factor 48
7 Rivalry among competitors 52
8 Threat of new entry 54
9 Threat of substitute product 55
10 Bargaining power of suppliers (cocoa) 56
11 Bargaining power of suppliers (milk powder) 58
12 Bargaining power of buyers 59
13 Relative market share 62
14 Industry attractiveness 64
15 Competitive strengths 65
16 Profitability ratio 78

INDEX OF CHART
Chart No. Title Page No.
1 Profile of Chocolate Eaters 2
2 World Chocolate Demand 5
3 Compounded Annual Growth Rate 8
4 Global cocoa bean production 14
5 Share Of Milk, White & Dark Chocolate 27
6 Cocoa Price 39
7 GDP growth rate 43
8 Per capita income 44
9 Inflation rate 44
10 Unemployment Rate 45
11 Age distribution 47
12 Gross profit margin 79
13 Operating profit margin 80
14 Net profit margin 81
15 Cash profit margin 82
16 Return on capital employed 83
17 Return on equity 84
18 Return on total assets 85

Chapter-1
INTRODUCTION ABOUT
CHOCOLATE INDUSTRY

Chocolate Industry
S. V. INSTITUTE OF MANAGEMENT, KADI Page 1
 India's chocolate market is estimated at around Rs 3,000 crore while the organized
confectionery market is around Rs 2,000 crore in 2013.
 The overall chocolate market is growing 15% a year, while the growth in modern retail is
almost double of that.
 India's chocolate market is expected to reach $3.2 billion by 2018 due to increasing gifting
culture in the country and increase in the income bracket.
 The chocolate market in precedent years has been witnessing tremendous growth in terms of
value as well as volume.
 Indian chocolate industry has registered a growth of 15% per annum from 2008 to 2012 and
is projected to grow even at a higher rate in future. The industry has a positive outlook due
to phenomenal growth in the confectionery industry.
 According to India Chocolate Market Forecast & Opportunities, 2018, the per capita
consumption of chocolates is increasing in the country, which will continue to flourish the
market revenues.
 It is expected that India chocolate industry will be growing at the CAGR 23% by volume
between the years 2013-2018 and reach at 3,41,609 Tons.
 Dark Chocolates are said to lead the milk chocolates in consumption and use of organic raw
materials like herbs in making chocolates is likely to boost the unorganized chocolate
industry in India.
 Chocolates are items of impulse purchase, competing with categories like soft drinks, snacks
and beverages for a share of the consumer's wallet. The cocoa, chocolate, and confectionery
industry employs hundreds of thousands of people around the world and is a key user of
other agricultural commodities such as sugar, dairy products, nuts, and fruits.1
1
http://www.indianmirror.com/indian-industries/2014/chocolate-2014.html

Chocolate Industry
Chart : 1
In the above chart, it is shown that the chocolate eaters are more in the age group of 30-40 years
which is 30% and after that, chocolate eaters are more in the age group of 13-19, which is 28%.
The chocolate market is registering high
growth mainly because of availability,
affordability, anytime-anywhere consumption
and convenience. Chocolates are now
considered a fun-to-eat snack rather than
occasional luxuries and an important item in
consumers' grocery baskets.
This information indicates that different people
eat chocolates for different purpose. Some
people eat chocolates for relaxation, sharing,
and hunger and for rejuvenation. Others also
eat for indulgence, celebration, health and
romance.2
2
http://articles.economictimes.indiatimes.com/2013-08-01/news/40963259_1_chocolate-consumption-chocolate-
market-indian-consumers
13-19
28%
20-25
23%
26-30
19%
30-40
30%
Profile of Chocolate Eaters
(Age in years)

Chapter-2
RESEARCH
METHODOLOGY

Chocolate Industry
2.1 OBJECTIVE OF THE STUDY OF PRODUCT MARKET ANALYSIS
 Main objective:
To study the macro environment factors affecting chocolate industry
 Sub-objective:
1. To study the characteristics of chocolate industry
2. To study political, economic, social and technological factors affecting chocolate industry
3. To study opportunities and threats for the chocolate industry
4. To find out the global trends in production, consumption, product development and Marketing
5. To analyze driving forces for the chocolate industry
6. To identify the porter‘s five forces and its impact on chocolate industry
7. To draw conclusion from the BCG Matrix
8. To identify the level of competition between different players in chocolate industry
9. To find out the key success factor in chocolate industry
10. To analyze the value chain of chocolate industry
2.2 INFORMATION NEEDS
We need the following information:
 Global Scenario of Industry
 Characteristics of Global Industry
 Political, economic, social and technological factors
 Study of Indian Market
 Product Profile
 Demand determination of the Industry
 Players in the Industry
 Key Issues and Current Trends
 Michel Porter‘s Five Force Model
 Opportunities and threats

Chocolate Industry
2.3 RESEARCH DESIGN
We have used exploratory research design.
2.4 DATA COLLECTION & SOURCES
We have obtained the secondary data from various sources like reports, magazine, journals and
different websites.
2.5 ANALYSIS PLAN
We have used the following models in chocolate industry analysis:
 PEST Analysis
 Michel Porter‘s Five Force Model
 BCG Matrix
 Strategic Group Mapping
 GE Nine-Cell
 Driving Forces
 Key Success Factors
 Value Chain Analysis
2.6 LIMITATIONS
 The whole study is based on secondary data
 It is assumed that whole data is authenticated and on that basis conclusion is derived. So
it is may possible it is not in proper manner.
 The level of reliability may be less as it is based on secondary data
 Financial data of some companies were not available at the time of the study

Chapter-3
STUDY OF WORLD
MARKET

Chocolate Industry
3.1 GLOBAL SCENARIO OF CHOCOLATE INDUSTRY
 Market size
Global chocolate market will grow to $98.3 billion in 2016 from the 85 billion it was at in
2013. This growth is largely fueled by the increased global demand for premium chocolate.
The major developing countries such as China and India are expected to offer great opportunities
to the global chocolate industry; thanks to the use of chocolate as a functional food. Organic and
fair trade chocolate is a rapidly growing segment of the industry.
Chart : 2

Chocolate Industry
With consumers developing more awareness regarding
environment-friendly products, this segment is expected to
rise rapidly in the next five years. One of the major
concerns for the chocolate industry is the rising number of
counterfeit products. This is a great threat for the overall
confectionery market and chocolate is no exception.
The global chocolate market is highly consumer driven and
companies need to focus on their development and
marketing strategies towards capturing a larger consumer
base, and acquiring new markets. The major strategies used are consolidation of processes, and
enhancement of brand image through corporate social responsibility.
Cocoa is the main raw material for chocolate production and has no other substitute. Moreover, it
can only be grown within 10 degrees (latitudes) of the equator. Due to this constraint, global
production of cocoa is highly concentrated in West African countries such as Ghana, Cote
d'Ivoire, Cameroon, and Nigeria. The cocoa fruit is harvested twice a year in the form of a main
crop and an intermediary crop (also termed as mid-crop). The main crop is larger than the mid-
crop though the relative size varies according to the country where it is produced. Emulsifiers are
basically used in food and pharmaceutical applications.
The global emulsifier market was valued at around $1
billion in 2010. Lecithin has the highest share of around
30% of the global emulsifiers market. Vanilla is the most
preferred flavor in the chocolate industry. A number of
other important flavors such as mint, coffee, strawberry,
and orange are being increasingly used these days, as the
consumer is more open to experimenting.

Chocolate Industry
Traditional occasions already drive a large
proportion of global chocolate sales but there are
plenty of opportunities to develop existing events
and reach out to emerging markets. Seasonal events
still drive global chocolate sales. In 2013, for the
first time in five years, the seasonal market grew in
every area of the world. In Brazil, Easter is
estimated to account for up to 30% of annual sales.
Mintel reports that the South American giant is
home to 17% of the world‘s Easter launches, more
than any other country. In the UK, where 13% of
confectionery sales are seasonal, more chocolate is
sold at Christmas than during the Easter period. In
the US, chocolate makers enjoyed an unexpected
7.1% surge in sales in 2014 as Easter generated
US$1.34bn in revenue.
Compound annual growth rate (CAGR)

Chocolate Industry
3.2 CHARACTERISTICS OF CHOCOLATE INDUSTRY
 Compound Annual Growth Rate (CAGR)
The estimated compound annual growth rate of the chocolate industry in emerging markets
between 2011 to 2017.
Chart : 3
This statistic depicts the estimated compound annual growth rate of the chocolate industry in
emerging markets between 2011 to 2017, by region. During this time, the compound annual
growth rate of the Indian chocolate market is estimated to amount to 21 percent.
21%
12% 11%
9%
8%
7%
4%
0%
5%
10%
15%
20%
25%
India Latin
America
Brazil China Russia Eastern
Europe
Mexico
Compound Annual Growth Rate

Chocolate Industry
 Per Capita Chocolate Consumption, by country (2014)3
Table : 1
Country Per Capita Consumption (Kg)
Switzerland 9
Germany 7.9
Austria 7.8
Ireland 7.5
United Kingdom 7.5
Norway 6.6
Estonia 6
Slovakia 5.4
Sweden 5.4
Kazakhstan 5.3
Russia 5.3
Finland 5.3
Belgium 5.2
Australia 4.9
Netherlands 4.7
New Zealand 4.5
USA 4.3
France 4.2
Denmark 4.2
 India's per capita chocolate consumption is about 120 gm in 2013.
3
http://www.confectionerynews.com/Sectors/Chocolate/Chocolate-consumption-by-country-2014

Chocolate Industry
Forecast Growth of Cocoa Ingredients Against Per Capita Consumption of Chocolate
Confectionery by Region (Source: Euromonitor International)
Latin America, Asia Pacific and the Middle East and Africa hold significant potential for long-
term cocoa demand, given their current low per capita consumption of chocolate confectionery.
For example, if per capita consumption of chocolate confectionery in Asia were to double from
its low base of 200g to a highly possible 400g, cocoa demand in the region would increase by
30%.

Chocolate Industry
 Segment of the chocolate industry
The market is segmented into various products such as,
 Dark chocolate
 Milk chocolate
 White chocolate
Additionally, the market is segmented based on sales frequency such as
 Daily chocolate
 Premium chocolate
 Seasonal chocolate
 Main manufacturers of chocolate in the world4
Company Net Sales 2013 (US$ millions)
Mars Inc (USA) 17,640
Mondelēz International Inc (USA) 14,862
Nestlé SA (Switzerland) 11,760
Meiji Holdings Co Ltd (Japan) 11,742
Ferrero Group (Italy) 10,900
Hershey Foods Corp (USA) 7,043
Arcor (Argentina) 3,700
Chocoladenfabriken Lindt & Sprüngli AG (Switzerland) 3,149
Ezaki Glico Co Ltd (Japan) 3,018
Yildiz Holding (Turkey) 2,500
4
http://www.icco.org/about-cocoa/chocolate-industry.html

Chocolate Industry
 Innovation
The industry‘s innovation hub is Europe, which initiated 45% of launches between 2008 and
May 2013, yet Asia-Pacific (23%) and the Middle East/Africa (8%)
 Personalizing chocolate: Customization is a strategy the industry has only begun to fully
embrace. In the Middle East, ―customization is one of the most important trends,‖ They
want their logos, names and printed ribbons manufactured to their specification.
 The 3D printing revolution: The thought of 3D printing chocolate seems unimaginable
considering the complexity of the chocolate production process. Roasting and fermenting
the cocoa beans are delicate matters and make a significant impact on the taste of the final
product.

Chocolate Industry
3.3 COCOA SUPPLIERS
Cocoa is a cash crop and critical export for producing countries and is a key import for
consuming countries, which typically do not have suitable climates for cocoa production.
Traveling along a global supply chain, cocoa beans go through a complex production process
that includes farmers, buyers, shipping organizations, processors, manufacturers, chocolatiers,
and distributers.
Cultivation of cocoa is a delicate process, as the trees are susceptible to changing weather
patterns, diseases, and insects. Unlike larger, industrialized agribusinesses, the vast majority of
cocoa comes from small, family-run farms, which often rely on outdated farming practices and
have limited organizational advantage. Steadily increasing demand from worldwide consumers
encourages a number of global efforts and funds committed to support and improve cocoa farm
sustainability.
Cocoa trees grow in tropical environments, within 15 to 20 degrees latitude from the equator.
The ideal climate for growing cocoa is hot, rainy, and tropical, with lush vegetation to provide
shade for the cocoa trees. The primary growing regions are Africa, Asia, and Latin America. The
largest producing country by volume is Côte d‘Ivoire, which produces 33% of global supply.
 Major cocoa producing countries in each region
include:
• Africa: Côte d‘Ivoire, Ghana, Nigeria, Cameroon
•Asia/Oceania : Indonesia, Malaysia, Papua New Guinea
• Americas : Brazil, Ecuador, Colombia
Africa
68%
Americas
15%
Asia
17%
Global Cocoa Production
www.worldcocoa.org

Chocolate Industry
Chart : 4

Chocolate Industry
3.4 GLOBAL TRENDS
Chocolate Innovation: The top 10 trends driving the global chocolate confectionery market
1) Beyond orange. Manufacturers are increasingly experimenting with
other types of citrus in chocolate. Indeed, the number of chocolate
products flavored with lemon has doubled over the past year globally.
And beyond simply lemon, we are seeing more elaborate variations –
products with lemon, yogurt and pepper, or with lemon oil. For
example, in Germany, Gepa The Fair Trade Company has launched a
white organic yogurt chocolate bar with lemon zest and pepper.
2) Dessert as an ingredient. Chocolate used to be an ingredient in
desserts, but now desserts have become an ―ingredient‖ in chocolate
confectionery. From crème brulée to crepes and tiramisu‘ – and a
whole other range of desserts – desserts are becoming flavors. Beyond
baked desserts, we are also seeing things like milkshake and ice
cream flavored chocolate being launched. The German company
Kaoka, for example, has launched an organic dark chocolate with
buttery crispy crépes.
3) Vegetables in chocolate. One of the vegetable-chocolate
combos we have seen are chocolate covered potato chips, which
could be considered more of a salty snack plus chocolate
(similarly we have seen other salty snacks transitioning to
chocolate e.g. chocolate covered pretzels and popcorn). The
other Asian-inspired vegetable-based chocolate we have seen is
edamame covered with chocolate – seemingly the next step after

Chocolate Industry
wasabi flavored chocolate, which was a big trend last year. In Japan, Mujirushi Ryohin has
launched Mujirushi Ryohin Purple Sweet Potato Chocolate, with white chocolate and purple
potato paste.
4) Unusual fruits : We have already seen a wide range of fruit –
including strawberry, raspberry and cherry – added to chocolate, but
there are now a lot more types of fruit being integrated. Peach is one
of the fruits that have become more common, as seen in Poland with
Luximo Premium, which launched Luximo Premium Praliny
Nadziewane o Smaku Brzoskwiniowym (Chocolates with Peach
Flavoured Filling).
5) Going nuts. Hazelnut is the top nut ingredient in chocolate,
followed by almond and peanut. But there is also a growth in
pistachio, which has figured in more products this year, and there are
a number of blends of nuts and seeds or nuts and other ingredients.
For example, in Canada Rogers‘ Chocolates has launched Rogers‘
Chocolates Natural Dark Chocolate Chipotle Almonds, which
comprises fresh California almonds cooked in small batches of cane
sugar and a blend of chillies and spices.

Chocolate Industry
6) Not just for breakfast: Cereals moving into chocolate.Certain
cereals have been included within chocolate such as granola and
muesli – that give the chocolate more texture. Other grains moving
into chocolate include quinoa, as seen in the Agave Quinoa Sesame in
Milk Chocolate bar from US company Seattle Chocolate.
7) A greater variety of “fine” and “rare” cocoa. In Vietnam,
chocolate brand Marou launched Marou Ba Ria 76% So Co La
Den (Ba Ria 76% Dark Chocolate), featuring a bold and fruity
chocolate made from Trinitario cocoa, which is sourced directly
from family-owned farms in Ba Ria province.
8) Florals. While floral notes in chocolate products are still
occasional, this is an avenue that has the potential to be explored
more. For example, American Wild Ophelia has launched Wild
Ophelia All Natural Southern Hibiscus Peach Milk Chocolate Bar
containing 41% cacao with Angelus peaches which are said to be
high in potassium and vitamins and offer healthy protein and dietary
fibre.

Chocolate Industry
9) White chocolate. We are seeing an increasing number of white
chocolate launches on the market, with a lot of different and
innovative fillings and flavorings. One example of this is Gepa The
Fair Trade Company Weiße Bio-Jogurt-Schokolade mit Mango und
Kokos (White Yogurt Chocolate with Mango & Coconut)
in Germany.
10) Building and layering flavors : Recent quirky and interesting new product launches have
included beer and chocolate (as seen in the Netherlands with Voor Jou! Real Belgian Chocolate
Glasses of Beer), red wine and marzipan (as seen in Germany with MK Mark Chocolate with
Red Wine Marzipan), smoked BBQ potato chips (as seen in Wild Ophelia Smokehouse BBQ
Potato Chips Dark Chocolate Bar) and other fun products that demonstrate the extent to which
chocolate serves as a great base for building and layering flavors.5
Other trends
Innovation in packaging and in flavour profiles are two major trends. Flavours include dried
fruits, such as cranberries, blueberries, physalis, goji and acai berries, chilli, but also flower
petals, spices and other ingredients known as superfoods.6
5
http://www.mintel.com/blog/food-market-news/chocolate-innovation-the-top-10-trends-driving-the-
global-chocolate-confectionery-market
6
http://organicwellnessnews.com/en/tag/chocolate-trends/

Chocolate Industry
CocoaAction
Major players in the global cocoa and chocolate industry are working together in an effort to
drive up cocoa production to meet growing demand. Eleven of the world‘s biggest cocoa and
chocolate companies are sharing information about farming practices and crop yields among
themselves.
CocoaAction is a strategy that brings the world‘s leading cocoa and chocolate companies
together to sustain the cocoa industry and improve the livelihoods of cocoa farmers.
CocoaAction will develop meaningful partnerships between governments, cocoa farmers, and the
cocoa industry to boost productivity and strengthen community development in Côte d‘Ivoire
and Ghana – the largest cocoa producing countries in the world.
CocoaAction aims to increase cocoa yields and farmer incomes through good agricultural
practices and the use of new trees and fertilizer. In addition, the program has community
development goals that the companies hope will recruit the next-generation of cocoa farmers.
The strategy is being coordinated by the World Cocoa Foundation.7
The companies that have committed to CocoaAction are:
Cargill Ferrero
The Hershey Company Mars Incorporated
Mondelēz International Nestlé
7
http://worldcocoafoundation.org/about-wcf/cocoaaction/

Chapter-4
STUDY OF INDIAN
MARKET

Chocolate Industry
4.1 HISTORY OF CHOCOLATE INDUSTRY IN INDIA
The ancient Maya are believed to be the first people to make chocolate, over 2,000 years ago.
Cacao trees, native to Central and South America, provided the beans used to make a bitter,
spicy chocolate drink. In the fourteenth century the Aztecs dominated Central Mexico and they
developed a sophisticated trade network of cacao until the Spanish conquered the region in 1521.
Conquistador Hernán Cortés is often credited with introducing cacao to Spain in 1528, but no
one truly knows when and how cacao traveled to Europe.
Cacao trade
Spain could not keep chocolate a secret for very long, and the rest of Europe quickly fell in love
with the drink. By the seventeenth century, as Britain, France, and the Netherlands colonized
countries around the world, they established cacao plantations in tropical locations such as
Ceylon (Sri Lanka), Venezuela, and the West Indies, respectively. These equatorial areas were
critical to developing cacao production because cacao trees thrive in tropical regions, which
provide continual moisture and a temperate climate.
Once a trade network was established to keep Europe well-supplied in chocolate, European land-
owners in the Caribbean looked to Africa for their workforce. For over two hundred years cacao
plantations relied on enslaved Africans for labor. Cacao was one of many products in the
triangular trade network between Europe, West Africa, and the Caribbean.
Chocolate consumption
Originally, chocolate was exclusively consumed as a drink. Because Europeans did not like the
bitter taste, they added sugar and cinnamon. Gradually chocolate was mixed with milk instead of
water to produce a much lighter and smoother drink, and in 1657 the first known chocolate house
opened in London. Like taverns, and later coffee houses, chocolate houses were comfortable
places for socializing.

Chocolate Industry
Until the mid-eighteenth century chocolate was an expensive drink, a luxury reserved for the
wealthy. The main reason for the high cost was that cacao was ground by hand. The use of
powered machinery began, not in Europe, but in the American colonies, after New England
began trading cacao from the West Indies in the 1750s. The earliest known machine-powered
chocolate producers were Obadiah Brown of Providence, Rhode Island, in 1752 and John
Hannon of Milton, Massachusetts, in 1765. Water-powered mills were able to mass-produce
chocolate at a much faster pace and in greater quantities. This early industrialization dramatically
reduced the cost of the final product and chocolate became affordable to the general public.
The world continues to consume great quantities of chocolate. Statistics calculated in 2002
average the world‘s yearly chocolate intake at approximately 1.2 pounds per person. The average
European consumes just over four pounds per year. The Americas come in second at 2.6 pounds
per person, with Africa at a third of a pound, then Asia and the Pacific islands at just under a
quarter pound per year.
Today's cacao producing regions
Today cacao is grown in the Ivory Coast, Ghana, and Indonesia, with Nigeria and Brazil
rounding out the top five countries. Many of the cacao regions established centuries ago still
grow the beans today, along with dozens of new regions located along the equator.The
Netherlands, the United States, Ivory Coast, Brazil, and Germany are the top five importers of
cacao beans.8
8
http://www.bostonhistory.org/sub/bakerschocolate/choc_industry.html

Chocolate Industry
4.2 INDIAN SCENARIO OF CHOCOLATE INDUSTRY
India's chocolate market is estimated at around Rs 3,000 crore
while the organized confectionery market is around Rs 2,000
crore. The overall chocolate market is growing 15% a year,
while the growth in modern retail is almost double of that. As
per a recently published report, India's chocolate market is
expected to reach $3.2 billion by 2018 due to increasing gifting
culture in the country and increase in the income bracket. The
chocolate market in precedent years has been witnessing
tremendous growth in terms of value as well as volume. Indian
chocolate industry has registered a growth of 15% per annum
from 2008 to 2012 and is projected to grow even at a higher
rate in future. The industry has a positive outlook due to
phenomenal growth in the confectionery industry.
According to India Chocolate Market Forecast &
Opportunities, 2018, the per capita consumption of chocolates
is increasing in the country which will continue to flourish the
market revenues. It is expected that India chocolate industry
will be growing at the CAGR 23% by volume between the
years 2013-2018 and reach at 3,41,609 Tons. Dark Chocolates
are said to lead the milk chocolates in consumption and use of
organic raw materials like herbs in making chocolates is likely
to boost the unorganized chocolate industry in India.9
9
http://www.indianmirror.com/indian-industries/2014/chocolate-2014.html

Chocolate Industry
Continuous rise in per capita income,
changing consumer preferences and
growing gifting tradition are boosting
chocolate consumption in India.
Consumer preferences in India have
gradually transitioned from traditional
sweets to chocolates over the last
couple of decades. Moreover, targeted
promotional campaigns by chocolate
companies over the last decade have
encouraged the consumers to gift
chocolates on festive occasions. Per
capita consumption of chocolates has also grown tremendously from 40 grams in 2008 to 120
grams in 2013. Currently, Cadbury is the market leader in terms of total chocolate sales,
followed by Nestlé.
 India’s chocolate sales (2008-2018)
Mondelez
India
62%
Nestle,18%
Mars, 6%
Ferrero,3%
Amul, 3%
Others, 8%
India Chocolate Market Share. Source: ValueNotes

Chocolate Industry
 Consumption of chocolate by region
The western region is where the biggest market share is
going to be, next is the North of India followed by
Southern India. Western India accounts for 40% of
chocolate consumption in the country, followed by 23%
in North India and 22% in Southern India.10
10
http://www.confectionerynews.com/Markets/Rural-India-chocolate-market-set-for-growth
Consumption of chocolate
by region:
Western India 40%
North India 23%
Southern India 22%
Eastern India 15%
Source: ValueNotes

Chocolate Industry
Chocolate is a sweet that is thousands of years old, which today is made of the mass of cocoa
beans and cocoa butter obtained by processing roasted cocoa beans and powdered sugar, in the
case of milk chocolate, milk raw material is added to the ingredients.
5.1 INGREDIENTS
Chocolate is a natural product made of these ingredients:
 Chocolate Liquor: Cocoa beans with their shells removed that have been fermented,
roasted and ground until they liquefy. This liquid is made up of cocoa butter and cocoa
solids; both are naturally present in the bean.
 Cocoa Butter: Natural fat from the cocoa bean; extra cocoa butter enhances chocolate‘s
flavor and mouthfeel.
 Sugar, Lecithin: An emulsifier, often made from soy, that makes the ingredients blend
together.
Chocolate Liquor
Chocolate
Lecithin
Sugar
Cocoa Butter
Vanilla, Fruits,
Nuts

Chocolate Industry
 Vanilla or vanillin and other flavors which includes caramel
 Milk- For milk chocolate, Fruits, Nuts and other Add-ins: For specialty chocolates11
5.2 TYPES OF CHOCOLATE
There are three main kinds of chocolate:
11
http://www.thestoryofchocolate.com/What/ingredients.cfm?ItemNumber=3305

Chocolate Industry
 White Chocolate: White chocolate is a confection based on sugar, milk, and cocoa butter
without the cocoa solids.
 Milk Chocolate: Milk chocolate is solid chocolate made with milk in the form of milk
powder, liquid milk, or condensed milk added. "Hershey process" milk chocolate is popular
in North America.
 Dark Chocolate: It is also called "black chocolate"; it consists mainly of cocoa bean mass,
cocoa butter, sugar, lecithin and vanillin used for highlighting the flavor.
Share of milk, white and dark chocolate in total sales of chocolate12
Chart : 5
12
http://www.valuenotes.biz/knowledge-centre/short-industry-report/chocolate -industry-india-2014-19/
Milk
75%
White
16%
Dark
9%
Milk chocolate is currently the most
popular category in India, contributing
to 75% of the total sales of chocolates.
Cadbury dairy milk is the market
leader in the milk chocolate segment
Dark chocolate, with only a 9% share
of the market, is expected to be the
fastest growing segment due to its
health benefits and increasing
awareness among Indian consumers

Chocolate Industry
5.3 MANUFACTURING PROCESS OF CHOCOLATE
Once the cocoa beans have reached the machinery of chocolate factories, they are ready to be
refined into chocolate. Generally, manufacturing processes differ slightly due to the different
species of cocoa trees, but most factories use similar machines to break down the cocoa beans
into cocoa butter and chocolate (International Cocoa Organization, 1998).
Firstly, fermented and dried cocoa beans will be refined to a roasted nib by winnowing and
roasting. Then, they will be heated and will melt into chocolate liquor. Lastly, manufacturers

Chocolate Industry
blend chocolate liquor with sugar and milk to add flavour. After the blending process, the liquid
chocolate will be stored or delivered to the molding factory in tanks and will be poured into
moulds for sale. Finally, wrapping and packaging machines will pack the chocolates and then
they will be ready to transport.
Step 1: Roasting and Winnowing the Cocoa
The first thing that chocolate manufacturers
do with cocoa beans is roast them. This
develops the colour and flavour of the beans
into what our modern palates expect from
fine chocolate. The outer shell of the beans is
removed, and the inner cocoa bean meat is
broken into small pieces called "cocoa nibs."
The roasting process makes the shells of the
cocoa brittle, and cocoa nibs pass through a
series of sieves, which strain and sort the
nibs according to size in a process called
"winnowing".
Step 2: Grinding the Cocoa Nibs
Grinding is the process by which cocoa nibs are
ground into ―cocoa liquor", which is also known as
unsweetened chocolate or cocoa mass. The grinding
process generates heat and the dry granular
consistency of the cocoa nib is then turned into a
liquid as the high amount of fat contained in the nib
melts. The cocoa liquor is mixed with cocoa butter

Chocolate Industry
and sugar. In the case of milk chocolate, fresh, sweetened condensed or roller-dry low-heat
powdered whole milk is added, depending on the individual manufacturer's formula and
manufacturing methods.
Step 3: Blending Cocoa liquor and molding Chocolate
After the mixing process, the blend is further
refined to bring the particle size of the added
milk and sugar down to the desired fineness.
The Cocoa powder or 'mass' is blended back
with the butter and liquor in varying quantities
to make different types of chocolate. After
blending is complete, molding is the final
procedure for chocolate processing. This step
allows cocoa liquor to cool and harden into
different shapes depending on the mold.
Finally, the chocolate is packaged and
distributed around the world.13
13
http://www.sfu.ca/geog351fall03/groups-webpages/gp8/prod/prod.html

Chapter-6
DEMAND
DETERMINATION OF
CHOCOLATE INDUSTRY

Chocolate Industry
6.1 PRICE
Table : 2
Year Price (gift boxes)14
Demand (US dollar billion)
2009 55 0.5
2010 90 0.7
2011 110 0.9
2012 160 1.2
2013 320 1.5
However, the price of chocolate increased, demand also increased because the preference for
chocolates over traditional sweets in the country is increasing at a rapid pace due to changing
tastes because of increasing health consciousness. It shows that increase in prices have no impact
on demand of chocolates. Demand is continuously increasing. Traditional sweets are
comparatively rich in calories, which contribute highly to diabetics and other health problems.
Targeted promotional campaigns from global manufacturers have generated a growing trend for
gifting chocolate at Indian festivals.
14
http://www.choco-house.com/price.htm

Chocolate Industry
6.2 INCOME OF TARGETED CUSTOMERS
Table : 3
Year Per capita income (US dollar) Demand (US dollar billion)
2009 885 0.5
2010 948 0.7
2011 1032 0.9
2012 1086 1.2
2013 1123 1.5
Continuous rise in per capita income, as we can see in the above table the demand for chocolate
has continuously increased. Changing consumer preferences and growing gifting tradition are
boosting chocolate consumption in India. Consumer preferences in India have gradually
transitioned from traditional sweets to chocolates over the last couple of decades. Per capita
consumption of chocolates has also grown tremendously from 40 grams in 2008 to 120 grams in
2013. Thus, the above table shows the positive relationship between per capita income of
consumers and demand of chocolates.
6.3 PENETRATION LEVEL
Demand for chocolates as a gift item has increased by almost 40 per cent with the advent of the
festive season. Adulteration in traditional sweets eroding consumers‘ confidence along with dry
fruit prices going through the roof and other significant multiple factors like growing acceptance
of chocolates amid varied Indian palate, attractive packaging, consistency in quality, factors are
driving the demand for chocolates,‖ according to a survey conducted by The Associated
Chambers of Commerce and Industry of India (ASSOCHAM). Several Indian homes now have
chocolates as dessert, which increases the frequency of consumption.15
15
http://www.assocham.org/prels/shownews-archive.php?id=4216

Chocolate Industry
6.4 PROMOTION SCHEMES
Promotional schemes by chocolate companies over the last decade have encouraged the
consumers to purchase chocolates. Following is the example of promotion scheme given by
Cadbury India.

Chapter-7
DISTRIBUTION
CHANNEL IN
CHOCOLATE INDUSTRY

Chocolate Industry
The following distribution channel that is two levels distribution is used in chocolate industry in
India. Chocolate manufacturers produce chocolates then it is sold to wholesaler, wholesaler sale
to the retailers, retailers sold chocolates to the consumer.
Producer: Producers are the manufacturer of products. It includes chocolate manufacturing
companies like Mondelez India, Nestle, Mars, ferrero. They produce chocolates and then sell
it to the wholesaler.
Wholesaler: wholesalers are the agency or trading companies which purchase the chocolates
in bulk and then sell it to the retailers.
Retailer: Retailers of chocolates are pan parlors, kirana stores, shopping malls, bakery shops,
stationery stores, fast food centers, restaurants, online and college canteen.
Consumer: Consumers are who finally consume the product. Through retailers it is possible
to have chocolates in each and every place easily. In this way distribution channel plays an
important role in distributing the products to the final consumers.
Producer
Wholesaler
Retailer
Consumer

Chapter-8
KEY ISSUES &
CURRENT TRENDS

Chocolate Industry
 KEY ISSUES
 Child Labor and Slavery in the Chocolate Industry
 Western African countries, mostly Ghana and the Ivory Coast, supply more than 70% of the
world‘s cocoa. The cocoa they grow and harvest is sold to a majority of chocolate companies,
including the largest in the world.
 The children of Western Africa are surrounded by intense poverty, and most begin working
at a young age to help support their families. Most of the children laboring on cocoa farms
are between the ages of 12 and 16, but reporters have found children as young as five.
 Other children climb the cocoa trees to cut bean pods using a machete. Once they cut the
bean pods from the trees, the children pack the pods into sacks that weigh more than 100
pounds. Approximately1.8 million children in the Ivory Coast and Ghana may be exposed to
the worst forms of child labor on cocoa farms. But, this type of issue is not prevailing in
India.16
 Rise in price of raw material
 Rising hazelnut prices are putting further pressure on chocolate manufacturers who are
already contending with mounting cocoa costs.
 Chocolate industry is a big buyer of hazelnuts. Ferrero is the world‘s largest hazelnut buyer.
It recently acquired Turkey‘s largest hazelnut processor Oltan to improve supply of
hazelnuts for its products including Nutella, Ferrero Rocher and Kinder Bueno.
 Rising costs for other commodity, particularly cocoa have already led big players such as
Mars, Hershey, Mondelez and Nestle to raise wholesale price of chocolate.
16
http://www.foodispower.org/slavery-chocolate/

Chocolate Industry
 If production of healthy cocoa beans does not increase, the increased cost of chocolate will
either be absorbed by the companies that produce chocolate or be pushed forward to the
consumer.
 In order to keep the cost of a chocolate bar reasonable, industry experts expect chocolatiers
to use imitation flavorings such as palm oil rather than the vegetable fat produced in real
chocolate.
 CURRENT TRENDS
 Demand for Dark Chocolates
With the change in lifestyle, the Indian consumer is becoming very health-conscious. Few
researches have also shown that dark or high cocoa content chocolates reduce cholesterol levels
and as a result consumers prefer dark chocolates. Demand for dark chocolate has been growing
at a CAGR of around 17% between 2009-13.
 Consumption of chocolates
Urban cities account for nearly 80% of the consumption of chocolates. Although distribution in
rural India is improving, this segment still remains largely untapped. Poor infrastructure –
inadequate transportation and warehousing facilities – is their biggest challenge. Smaller
chocolate packets weighing less than 30g and priced up to INR 10 is the fastest growing segment
in rural areas.17
 Occasion and celebration
Occasion and celebration is a factor that affects the selling and production of chocolate and
ultimately leads the increased company revenue, which boosts industry growth.
17
http://www.marketpressrelease.com/Demand-for-dark-chocolate-to-drive-Indias-chocolate-industry-
1412161585.html

Chocolate Industry
 Packaging
Latest trends witnessed in the industry reveal that companies are constantly engaged in
improving the packaging and adapting the flavour of the chocolate according to the taste of the
consumers.18
 Premium chocolates
Another visible trend, that of adult consumers' demand for premium chocolates continued to
grow in 2014. Sales of premium chocolates have been supported further with consumers
preferring to gift premium chocolates on festive and celebratory occasions. For instance, during
Raksha Bandhan, Ferrero Rocher introduced special gift packs. at select modern and traditional
retail stores.
18
http://green.tmcnet.com/news/2014/09/29/8041387.htm

Chocolate Industry
―PEST analysis – an analysis of the political, economic, social and technological factors in the
external environment, which can affect industry‘s activities and performance.‖
PEST or PESTEL analysis is a simple and effective tool used in situation analysis to identify the
key external (macro environment level) forces that might affect an industry. These forces can
create both opportunities and threats for industry. Therefore, the aim of doing PEST is to:
 Find out the current external factors affecting industry
 Identify the external factors that may change in the future
 To exploit the changes (opportunities) or defend against them (threats) better than competitors
would do.
9.1 Political factor
Political factors refer to the degree of government intervention in the economy. The legal and
regulatory factors included are labor laws, tax policies, consumer protection laws, employment
laws, environmental regulations, and tariff & trade restrictions. Cocoa comes from cocoa beans
that grow in trees. Although those trees are native to South America, much of the world‘s
production now comes from West Africa, and weather and political instability are affecting
production in that part of the world.
 Increasing price of cocoa
Cocoa comes from cocoa beans that grow in trees. Although those trees are native to South
America, much of the world‘s production now comes from West Africa, and weather and
political instability are affecting production in that part of the world.

Chocolate Industry
Chart: 6
The above chart shows the trend of cocoa price, which is continuously increasing for the last four
years. In the year 2014 it is increased by 14.08%. Therefore, it is a negative sign for the
chocolate manufacturers.
 Increasing price of hazelnut
About 70% of the world's hazelnuts are grown on steep slopes near Turkey's Black Sea coast, but
this year's harvest is likely to be sharply down after hail storms and frost in late March destroyed
hazel flowers at a critical moment in the growing season.
The price of the nuts has reached $10,500 (£6,300) per tonne, compared with $6,500 (£3,900)
per tonne in February(2014), according to Michael Stevens, a trader at Edinburgh-based
Freeworld Trading. It is unfavorable for the chocolate industry.
 Cold chain facility
The objective of the scheme of Cold Chain, Value Addition and Preservation Infrastructure is to
provide integrated cold chain and preservation infrastructure facilities without any break from
the farm gate to the consumer. NABARD provides concessional finance for construction of
warehouses, godowns, and cold storage units. So, it is favorable for chocolate industry.
2200
2431
2825
3223
0
500
1000
1500
2000
2500
3000
3500
2011 2012 2013 2014
US Dollars Per Metric Ton
Source:indexmundi.com

Chocolate Industry
 Mandatory Labeling & other FSSAI norms
 A label shall not contain any statement, claim, design, device, fancy name or abbreviation
which is false or misleading in any way particularly concerning the food contained in the
package, or concerning the quantity, quality or the nutritive value of the food
 Contents on the label shall be clear, unambiguous, prominent, conspicuous, indelible and
readily legible by the consumer under normal conditions of purchase and use.
 Where a package or combination of product packages is provided with an outside container
or wrapper, such container or wrapper shall also contain all the declarations which are
required to appear on the package.
 Every package of food shall carry the following information on the label-
The Name of Food, List of Ingredients
Declaration of Food Additives
Net Quantity or Net Weight
Lot/Code/Batch identification
Name and address of the manufacturer
Date Marking, Best Before, Date of manufacture and/or packing
In addition to the best before or Use by Date, any special conditions for the storage
Veg/ Non Veg declaration
Calculation of Nutritional output
 FSSAI also insists that importers should not use stickers indicating details such as product
type, price and nutritional value, and the manufacturing / producing company must print the
product details on the packs that are to be shipped to India.

Chocolate Industry
 100% sampling of containers of imported goods coming into the country, which leads to
huge delays in clearance.19
 Encouragement to private sector
 100 percent export-oriented units are allowed to sell up to 50 per cent of their produce in the
domestic market
 Export earnings are exempted from corporate taxes
 Relaxed FDI norms
 100 percent FDI (except for alcohol, beer, and sectors reserved for small-scale industries)
 Repatriation of capital and profits permitted
 Incentives for development of storage facilities
 Tax incentive of 100 percent deduction of capital expenditure for setting up and operating
cold chain facilities (for specified products), and for setting up and operating warehousing
facilities (for storage of agricultural produce)
 Full excise duty exemption for goods that are used in installation of cold storage facilities20
19
http://www.fssai.gov.in/Portals/0/Pdf/covering%20letter%20for%20draft%20regulation.pdf
20
www.ibef.og

Chocolate Industry
Table : 4
Factors Favorable Unfavorable
Increasing price of cocoa √
Increasing price of hazelnut √
Cold chain facility √
FSSAI norms √
Encouragement to private sector √
Relaxed FDI norms √
Incentives for development of storage facilities √
The above table shows which factors are favorable for chocolate industry and which are
unfavorable. The favorable factors are cold chain facility, encouragement to private sector,
relaxed FDI norms and incentives for development of storage facility. On the other hand
unfavorable factors are increasing price of cocoa, increasing price of hazelnut and FSSAI norms.
Favorable factors are more as compared to the unfavorable factors. So, overall conclusion is that
political factor is favorable for chocolate industry.

Chocolate Industry
9.2 Economical factor
Economical factors include the inflation rate, exchange rate, interest rate, employment/
unemployment rate and other economic growth indicators. The economic factors faced by an
organization have a significant impact on how a business carries on its operations in the future.
The exchange rates affect the organization by affecting the cost of imported and exported goods.
Furthermore, the interest rates prevailing in the economy influence the cost of capital available to
the organization and hence play an important role in the expansion and growth of the
organization. Continuous rise in per capita income, changing consumer preferences and growing
gifting tradition are boosting chocolate consumption globally.
 Gross Domestic Product
Chart : 7
The above chart shows GDP growth rate from 2010 to 2014 (estimated). GDP refers to the total
market value of all goods and services that are produced within a country per year. It is an
important indicator of the economic strength of a country. India's GDP growth was at about 4.7
percent in the year 2012. From 2012 it has increased to 5.02% and it is estimated to increase in
the year 2014 which is positive sign for the chocolate industry.
10.26%
6.64%
4.74% 5.02%
5.63%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2010 2011 2012 2013 2014*
GDP growth rate
Source: statista.com

Chocolate Industry
 Per capita income
Chart : 8
There is continuous rise in per capita income of consumers in India. This leads to the more
consumption of chocolates. Per capita consumption of chocolates has also grown tremendously
from 40 grams in 2008 to 120 grams in 2013. Therefore, rising per capita income is favorable
factor for chocolate industry.
 Inflation rate
Chart : 9
948
1032 1086 1123 1165
0
200
400
600
800
1000
1200
1400
2010 2011 2012 2013 2014
Per Capita Income (US dollar)
Source: tradingecocomics.com
11.99
8.86
10.25
9.65
8.28
0
2
4
6
8
10
12
14
2010 2011 2012 2013 2014
Inflation Rate (%)

Chocolate Industry
The statistic shows the inflation rate in India from 2004 to 2014. India‘s inflation rate has been
on the rise over the last decade. However, it has been decreasing slightly since 2010. In 2014 it is
8.28%, which is low as compared to the previous year (reduce by 14.91%). It is favorable for the
chocolate industry.
 Unemployment trends
Chart : 10
The above graph reveals that Unemployment rate in India is reducing from 2010 to 2012, which
is 10%., 9.8% and 8.5% in 2012 and then it increased by 3.52% in 2013. It is unfavorable for the
industry.
10
9.8
8.5
8.8
8
8
9
9
10
10
11
2010 2011 2012 2013
Unemployment Rate (%)

Chocolate Industry
Table : 5
Gross domestic product √
Per capita income √
Inflation rate √
Unemployment trends √
The above table shows the overall conclusion of economic factor affecting chocolate industry.
By doing the analysis of the above factors which includes GDP, per capita income, inflation rate
and unemployment trends we come to know about that economic factor is favorable for the
chocolate industry. There is minor increase in unemployment trend, but it can be said that overall
it is favorable.

Chocolate Industry
9.3 Socio-cultural factor
Social factors include different cultural and demographic aspects of society that form the macro-
environment of the organization. Social factors include career attributes, age distribution,
population and its growth rate, health consciousness and safety awareness.
 Age Distribution
Chart : 11
This statistic depicts the age distribution of India from 2002 to 2013. In 2012, about 29.43
percent of the Indian population fell into the 0-14 year category, 65.37 percent into the 15-64 age
group and 5.2 percent were over 65 years of age. It shows that majority of the people fall in the
15-64 year age group. It is the group of young adult. It means that it is favorable for the
chocolate industry. In chocolate industry customer base is more.

Chocolate Industry
 Culture
It is culture in India that when any person go to the another person home it is require to have
sweets to give them. But now a days trend has been changed. Due to the various types of
chocolates available in different attractive packaging size there is rising trend in gifting
chocolates rather than traditional Indian sweets. So because of many festivals and occasions in
India, there is good scope for chocolate manufacturers. Now in India every occasion is celebrated
with the chocolates.
 Eating habits
Urban consumers now buy chocolates and confectionery for everyday consumption. Earlier, they
would buy them mostly during festivals. Also, more and more Indian consumers are replacing
traditional sweets with chocolates. "Chocolates are now considered a fun-to-eat snack rather than
occasional luxuries and an important item in consumers' grocery baskets. Several Indian homes
now have chocolates as dessert, which increases the frequency of consumption. People today do
not believe that eating chocolates make them fat rather they are open to try new.
 Health consciousness
Indian consumers are now more health conscious. Because of this Dark chocolate is expected to
be the fastest growing segment due to its health benefits and increasing awareness among Indian
consumers. It is the positive force for the chocolate industry.
Table: 6
Age distribution √
Culture √
Eating habits √
Health consciousness √

Chocolate Industry
The above all the factors which are included in the table are favorable for the chocolate industry.
All factors are positively affecting chocolate industry. Because of many festivals and occasions
in India, there is good scope for chocolate manufacturers. Change in eating habits and health
consciousness among the people have increased the consumption of chocolate. Therefore, socio-
cultural factor is favorable for chocolate industry.
9.4 Technological factor
Technology is evolving at a rapid pace and consumers are becoming extremely tech-savvy. With
the advent of new technology, older technology gets outdated and obsolete. The technological
factors an organization faces include technological changes, R&D activity, obsolescence rate,
automation and of course, innovation. If an organization does not look out for technological
changes, it can lag behind its competitors.
Personalizing chocolate and the 3D printing revolution are the technological changes in
chocolate industry. 3D printing can be used to develop the chocolate industry‘s seasonal markets,
such as Easter, Halloween, Christmas, Valentine‘s Day, and even occasions like Mid-Autumn
festival and Diwali. Therefore it is favorable for the chocolate industry.

Chapter-10
MICHEL PORTER’S
FIVE FORCE MODEL

Chocolate Industry
―Porter’s five forces model is an analysis tool that uses five forces to determine the profitability
of an industry and shape a firm‘s competitive strategy‖
Five forces model was created by M. Porter in 1979 to understand how five key competitive
forces are affecting an industry. The five forces identified are:

Chocolate Industry
10.1 Intensity of rivalry among competitors in an industry
 Number of players: There are more than five players in chocolate industry in India. This
includes Mondelez India, Nestle, Mars, Ferrero, Amul, Hershey‘s, Lotus and Lindt. So, it can
be said that numbers of players in chocolate industry are more. Therefore rivalry among
competitors is very high.
 Market growth rate: The market growth rate in chocolate industry is 15% in 2013, which is
a double digit growth rate. So, we can say that market growth rate is high. Result will be high
rivalry among competitors.
 Rivals become equal in size: All the companies in chocolate industry like Mondelez India,
Nestle & Mars have strong presence in the market in terms of distribution channel. As we are
able to purchase chocolates of our choice at anywhere. It is the result of effective distribution
channel of different companies in chocolate.
They are also equal in size in terms of the advertisement done by them. Companies spent
large amount on the TV ads. We can see that Mondelez India use celebrities for the
promotion like Amitabh Bachchan. They have done TV ads with Bollywood actors Aditi Rao
Hydari and Raj Kumar Yadav for their premium chocolate brand Cadbury glow.
In case of Mars, the brand ambassador for Galaxy chocolate was Arjun Rampal and in other
brand which is snickers they had used Rekha brand ambassador. In the same way Nestle also
compete by doing the TV ads.
 Switching cost of buyers: The switching cost of buyers is very low in chocolate industry
because of availability of various substitute products. In addition to this buyers are not loyal
to one particular brand.

Chocolate Industry
Table : 7
Parameters Description
Very High
(1)
High
(2)
Medium
(3)
Low
(4)
Very Low
(5)
Number of
players
More √
Market
growth rate
High √
Rivals
become
equal in size
Yes √
Switching
cost of
buyers
Low √
Frequent &
aggressive
moves
Yes √
10.2 Threat of new entrants
 Profit Margin: The profit margin of existing players in chocolate industry is good. Ferrero
India posted a 68% rise in sales at 575 crore during the year-ended August 2013, Nestle India
registered net sales of Rs 2,348.3 crore during the third quarter of 2013, which indicated an
11 per cent increase over the corresponding quarter of last year. Mondelez India posted 23
per cent income growth at Rs 5,324 crore for the year ended December 2013. Due to this
Others will attract to enter into the industry. Therefore threat of new entrants is high.

Chocolate Industry
 Industry outlook: The industry has a positive outlook due to phenomenal growth in the
confectionery industry. It is expected that Indian chocolate industry will be growing at the
CAGR 23% by volume between the years 2013-2018.
 Industry growth rate: In chocolate industry growth rate is high (15%). Therefore threat of
new entrants is high.
 Access to distribution channel: Chocolates are easily available to all the retail stores
because of the easy access to distribution channel.
 Access to raw material: The main raw material which is used in chocolate manufacturing is
cocoa. Production of cocoa is highly concentrated in West African countries such as Ghana,
Cote d'Ivoire, Cameroon, and Nigeria. So, it is difficult to have access over raw material. In
addition to this transportation cost is also high.
 Capital requirement: In chocolate industry capital requirement is high because of because
of high investment in land and various machines used in chocolate manufacturing. Mondelez
has already announced plans to invest $190 million to build the country's largest chocolate
manufacturing plant near Hyderabad.21
 Customer loyalty: Customer loyalty is very less in case of chocolate industry due to the easy
availability of various substitute products. In addition to this switching cost is also low.
21
http://articles.economictimes.indiatimes.com/2014-06-24/news/50825997_1_cadbury-india-mondelez-
international-mondelez-india

Chocolate Industry
Table : 8
Very High
(1)
High
(2)
Medium
(3)
Low
(4)
Very Low
(5)
Existing players
struggling to
earn good profit
Profit margin is
good
√
Industry outlook
is risky
Good future √
Industry growth
rate
High √
Economies of
scale
Required √
Access to
distribution
channel
Easy √
Access to raw
material
Difficult √
Capital
requirement
High √
Switching cost
of buyers
Low √
Customer
loyalty
Low √

Chocolate Industry
10.3 Threat of substitute products (soft drinks, snacks, sweets, dry fruits)
 Availability of substitute product: Substitute of chocolate which includes soft drinks,
snacks, sweets and dry fruits are easily available. Substitute products can also be identified
on the basis of need of customers. If customer needs gift then chocolates will have
competition with all the gift items, but if the customer need refreshment competition will be
with soft drinks or juices. In the same way if customer is hungry, he/she may purchase
chocolates or other substitutes like fast foods. Therefore threat of substitute product is very
high in chocolate industry.
 Price of substitute product: Price of substitute products which are listed above except dry
fruit is less. So consumers are easily switching over the substitute products. In this case threat
of substitute product is high.
 Switching cost: The switching cost of buyers is very low in chocolate industry because of
availability of various substitute products. In addition to this buyers are not loyal to one
particular brand. Table : 9
Very High
(1)
High
(2)
Medium
(3)
Low
(4)
Very Low
(5)
Availability
of substitute
product
Easily
available
√
Price of
substitute
product
Low √
Switching
cost
Low √

Chocolate Industry
10.4 Bargaining power of suppliers (cocoa)
 Number of suppliers: In chocolate industry number of suppliers of cocoa are few. They are
concentrated to southern states of India which includes Tamilnadu, Andhra Pradesh and
Karnataka. Therefore bargaining power of supplier is more.
 Price of raw material: The main raw material used in chocolate manufacturing is cocoa. It‘s
price is increasing day by day.In the year 2014 it is increased by 14.08% from 2825 US $
metric ton to 3223 US $ metric ton.
 Substitute of raw material: There is no substitute of cocoa is available. Cocoa is the main
raw material in chocolate manufacturing. So. Bargaining power of supplier is high.
 Suppliers are concentrated: Suppliers of cocoa are concentrated to southern states of India
which includes Tamilnadu, Andhra Pradesh and Karnataka. Globally 68% of cocoa comes
from Africa which includes Côte d‘Ivoire, Ghana, Nigeria, Cameroon.
Table : 10
Very High
(1)
High
(2)
Medium
(3)
Low
(4)
Very Low
(5)
Number of
suppliers
Few √
Price of raw
material
High √
Substitute of
raw material
available
No √

Chocolate Industry
Suppliers are
scattered or
concentrated
Concentrated √
Bargaining power of suppliers (Milk powder)
 Number of suppliers: Suppliers of milk powder in India are more. It includes Amul, Sagar,
Nandini (Karnataka Milk Federation), Parag Milk Foods Pvt Ltd., Padamshri, Sterling agro
industries ltd., Kwality Ltd., and D. S. Group. Therefore bargaining power of supplier is less.
 Price of raw material: Prices of skimmed milk powder, a key constituent in chocolates,
have come down significantly globally and in India due to surplus supplies and lower offtake
during the past two months. In India, SMP prices have declined to Rs 232-240 per kg from a
high of Rs 280-290 early this year.22
Thus bargaining power of supplier is less.
 Substitute of raw material: There is no substitute of milk powder which can be used in
chocolate production. So, bargaining power of supplier is more.
 Suppliers are concentrated: Bargaining power of supplier is also depends on whether the
suppliers are scattered or concentrated. In case of milk powder suppliers are scattered.
Therefore bargaining power of supplier is less.
22
http://articles.economictimes.indiatimes.com/2014-09-11/news/53811417_1_milk-powder-flush-
season-smp-prices

Chocolate Industry
Table : 11
Very High
(1)
High
(2)
Medium
(3)
Low
(4)
Very Low
(5)
Number of
suppliers
More √
Price of raw
material
Low √
Substitute of
raw material
available
No √
Suppliers are
scattered or
concentrated
Scattered √
10.5 Bargaining power of buyers
 Number of buyers: In case of chocolate industry number of buyers are many. Buyer of
chocolates can be children, youth or adults. Therefore, the bargaining power of buyers is less.
 Buyers are well informed: Though customers are well educated and informed about
products available in the market due to the more education level and awareness. But, it is not
vegetable or clothes which can be bargained by the buyers, it is FMCG product so there is
less chance of bargaining.
 Buyers are scattered or concentrated: Buyers of chocolate are not concentrated to one
particular country, state or region, they are scattered. So, bargaining power of buyer is high.

Chocolate Industry
 Buyers are loyal: Buyers are not loyal to one particular brand. Because there is lots of
substitute product available in the market as well as switching cost is also low.
Table : 12
Very High
(1)
High
(2)
Medium
(3)
Low
(4)
Very Low
(5)
Number of
buyers
Many √
Buyers are
well informed
Yes √
Buyers are
scattered or
concentrated
Scattered √
Buyers are
loyal
No √
 Conclusion
Rivalry among competitors Very High
Threat of new entrants Medium
Threat of substitute products Very High
Bargaining power of suppliers High
Bargaining power of buyers Low

Chocolate Industry
Above table shows, that rivalry among competitors and threat of substitute products is very high.
threat of new entrants is medium and bargaining power of suppliers is high. On the other hand
we analyze the bargaining power of milk powder supplier we come to know about that it is less.
Bargaining power of buyers is low. So we can conclude that forces driven by the industry is very
high to high. In addition to this rivalry among competitors and threat of substitute products, and
bargaining power of supplier is negative force for the chocolate industry on the other side threat
of new entrants and bargaining power of buyer is positive force.
Competitive
Rivalry
Threat of
new entry
Buyer powerSupplier
power
Threat of
substitute

Chapter-11
OTHER PORTFOLIO
MODEL

Chocolate Industry
Companies that are large enough to be organized into strategic business units face the challenge
of allocating resources among those units. In the early 1970's the Boston Consulting Group
developed a model for managing a portfolio of different business units (or major product lines).
The BCG growth-share matrix displays the various business units on a graph of the market
growth rate vs. market share relative to competitors. Resources are allocated to business units
according to where they are situated on the grid as follows:
Cash Cow - a business unit that has a large market share in a mature, slow growing
industry. Cash cows require little investment and generate cash that can be used to invest in
other business units.
Star - a business unit that has a large market share in a fast growing industry. Stars may
generate cash, but because the market is growing rapidly, they require investment to
maintain their lead. If successful, a star will become a cash cow when its industry matures.
Question Mark -a business unit that has a small market share in a high growth market.
These business units require resources to grow market share, but whether they will succeed
and become stars in unknown.
Dog -a business unit that has a small market share in a mature industry. A dog may not
require substantial cash, but it ties up capital that could better be deployed elsewhere.
Unless a dog has some other strategic purpose, it should be liquidated if there is little
prospect for it to gain market share.
(11.1) BCG MATRIX

Chocolate Industry
Table : 13
Company Name Market Share (%) Relative Market Share (%)
Mondelez India 62 1
Nestle 18 0.29
Mars 6 0.1
Ferreo 3 0.05
Amul 3 0.05
In the above matrix vertical axis shows industry growth rate and horizontal axis shows
relative market share. The growth rate of the industry is 15%. The relative market share of
different companies is shown in the above table.

Chocolate Industry
Mondelez India falls in the star category, as it possess high market share as compared to the
other competitors. Because the market is growing rapidly, company requires investment to
maintain its lead.
Nestle, Mars, Ferrero and Amul falls in question mark category. In this case industry growth
rate is high but market share is low. These companies require resources to grow market
share. Company can adopt the harvest or hold strategy.

Chocolate Industry
―GE-McKinsey nine-box matrix is a strategy tool that offers a systematic approach for the
multi business corporation to prioritize its investments among its business units.
The industry attractiveness and business strengths scores can be used to portray the strategic
positions of each business in a diversified company. Industry attractiveness is plotted on the
vertical axis and competitive strengths on the horizontal axis.
A nine-cell grid emerge from dividing the vertical axis into three regions (High, Medium, Low
attractiveness) and the horizontal axis into three regions (Strong, Average, & Weak competitive
strength).
Industry Attractiveness
Table : 14
Factors Weight Rating* Industry Atrractiveness Score
Political factor 0.04 6 0.24
Economic factor 0.05 8 0.4
Social factor 0.06 8 0.48
Intensity of competition 0.20 5 1
Market Size 0.15 7 1.05
Projected Growth Rate 0.25 9 2.25
Seasonal influence 0.15 9 1.35
Opportunities 0.06 7 0.42
Threats 0.04 5 0.2
Weighted industry
attractiveness scores
1
7.39
*Rating Scale: 1 = very unattractive , 10 = very attractive
(11.2) GE NINE CELL MATRIX

Chocolate Industry
Competitive Strength
Table : 15
Factor Weight Rating* Competitive Strenghts
Mondelez Nestle Mars Ferrero Amul Mondelez Nestle Mars Ferrero Amul
Relative
market share
0.15 9 7 6 5 5 0.9 0.7 0.6 0.5 0.5
Brand image
& reputation
0.15 8 7 6 6 9 1.2 1.05 0.9 0.9 1.35
Advetisement 0.10 9 6 5 5 8 0.45 0.3 0.25 0.25 0.4
Packaging 0.20 8 8 7 8 6 1.6 1.6 1.4 1.6 1.2
Product
innovation
0.15 6 6 5 6 4 0.9 0.9 0.75 0.9 0.6
Geographical
coverage
0.10 9 8 9 9 8 0.9 0.8 0.9 0.9 0.8
Different
product line
0.15 7 8 4 5 9 1.05 1.2 0.6 0.75 1.35
Weighted
competitive
strength
score
1 7 6.55 5.4 5.8 6.2
*Rating Scale: 1 = very weak, 10 = very strong

Chocolate Industry
High priority for resource allocation
Medium priority for resource allocation
Low priority for resource allocation
A E D CB

Chocolate Industry
Company Symbol
Mondelez India A
Nestle B
Mars C
Ferrero D
Amul E
In the above matrix vertical axis denotes industry attractiveness and horizontal axis denotes
competitive strengths. Industry attractiveness involves consideration of the conditions of
each business‘s macro-environment as well as competitive environment.
On the other hand competitive strengths includes appraisal of each companies strengths and
competitive position in its industry. It does not only reveal the chance for success but also
provide a basis for ranking the companies from competitively stronger to competitively
weakest.
After the set of attractiveness measures and competitive strength has been identified, each
attractiveness measure and competitive strengths are assigned a weight reflecting its relative
importance in determining industry attractiveness and competitive strengths.
Weighted attractiveness scores and competitive strengths are then calculated by multiplying
the industry‘s rating on each measure by the corresponding weight. Then nine cell matrix is
drawn.
As we can see in the matrix all the companies which are listed in the above table fall in the
upper left corner which is denoted by the pink area. It is the high priority area for the
resource allocation. It means that company can adopt grow and build strategy which
includes new market, new product launching, merger, acquisition, and increasing
manufacturing capacity.

Chocolate Industry
Since competing companies commonly sell in different price/quality ranges, emphasize different
distribution channels, incorporate product features that appeal to different types of buyers, have
different geographic coverage, and so on, it stands to reason that some companies enjoy stronger
or more attractive market positions than other companies. Understanding which companies are
strongly positioned & which are weakly positioned is an integral part of analyzing an industry‘s
competitive structure.
A strategic group is a cluster of industry rivals that have similar competitive approaches and
market positions. Strategic group mapping is a technique for displaying the different market or
competitive positions that rival firms occupy in the industry. Strategic group mapping reveals
which companies are close competitors and which are distant competitors.
We have made the group mapping of five companies which are listed as below:
1. Mondelez India
2. Nestle
3. Mars
4. Amul
5. Lotus
We have selected two variables - Price and Number of brands. Price and number of brands both
are divided into three categories which is as per the below table
Price Number of brands
Low 0-10 Less than 7
Medium 10-20 7-9
High More than 20 More than 9
(11.3) STRATEGIC GROUP MAPPING

Chocolate Industry
Company Symbol
Mondelez India
Nestle
Mars
Amul
Lotus

Chocolate Industry
The above strategic group mapping shows two variables – Price (vertical axis) and number
of brands (horizontal axis). The bubbles show the position of different companies in the
different categories. After analyzing the above strategic group mapping we have concluded
that within the group there is more competition.
We have also found out that Cadbury is the market leader in the chocolate industry and it
offers chocolate in all price range which is affordable to every customers as well as it has
more than nine brands.
Nestle and Lotus has more competition. Nestle also offers chocolates in all price range but
Lotus does not offer chocolates in high price range. So, if wants to compete with Nestle, it
can offer chocolate in the high price range.
In the same way Amul and Mars have more competition. Amul and Mars chocolates are
available in medium and high price range. Both companies have opportunity to cover more
market by offering chocolates in the low price range.

Chocolate Industry
Festivals
India is a country of festivals. Gifting is an integral part of Indian culture and festivals . Globally
chocolates are extremely popular for gifting and while the trend does exist in India. So, festivals
are the positive driving force for the chocolate industry.
Change in who buys the chocolates
In the early 90s, chocolates were perceived as being meant for kids. However, in the mid 90s,
Cadbury used an advertising campaign to redefine the concept of eating chocolates, and shifted
its focus from ‗just for kids‘ to ―the kid in all of us‖. This communication is aimed at all age
groups from Children to the Youth and even Adults. Now a days all people eat chocolates.
―Chocolate is the new trend in the Indian F&B industry. People today do not believe that eating
chocolates make them fat rather they are open to try new.‖
Change in long-term industry growth rate
The industry has a positive outlook due to phenomenal growth in the confectionery industry,
rising per capita income and gifting culture in the country. It is expected that India chocolate
industry will be growing at the CAGR 23% between the years 2013-2018.
Technological changes
To make the gifting experience truly personalized Cadbury Glow has launched a unique gifting
website that connect both the gifter and recipient. The website www.cadburyglow.in allows
consumers to experience the world of Cadbury Glow, and to add a personal touch to their gift of
Cadbury Glow by writing a personal note, sending a lovely song or experiencing again fond
memories by videos and photos.
(11.4) DRIVING FORCES

Chocolate Industry
Product innovation
Consumer awareness of the many health benefits of chocolate will be a key driver of industry
growth. Vitamin- and calcium-rich sugar-free chocolates, dark chocolate, and organic and
natural products are some products expected to escalate the chocolate industry toward high
growth rates in future. In terms of health and wellness concerns, consumers are embracing low-
calorie or sugar-free chocolate products.
An industry‘s key success factors are those competitive factors that affect industry members
ability to survive and prosper in the marketplace- the particular strategy elements, product
attributes, operational approaches, resources, and competitive capabilities that spell the
difference between being a strong competitor and a week competitor- and between profit and
loss. Key success factors vary from industry to industry, and even from time to time within the
same industry, as drivers of change and competitive conditions change.
The key success factors of chocolate industry are as under:
 Tradition of gifting sweets in India
 Shift in consumer preference from traditional mithai to chocolates
 Rising income levels
 Attractive packing i.e. marketing innovation
 Pricing which is suitable to every pocket
(11.5) KEY SUCCESS FACTORS

Chocolate Industry
“Value chain analysis (VCA) is a process where a firm identifies its primary and support
activities that add value to its final product and then analyze these activities to reduce costs or
increase differentiation.‖
M. Porter introduced the generic value chain model in 1985. Value chain represents all the
internal activities a firm engages in to produce goods and services. Value chain is formed
of primary activities that add value to the final product directly and support activities that add
value indirectly.
Its goal is to recognize, which activities are the most valuable (i.e. are the source of cost or
differentiation advantage) to the firm and which ones could be improved to provide competitive
advantage.
Production Marketing
Crop
Harvest
Ferment, dry
Trading
Storage,
transport
Processing
Roasting
Grinding
Pressing
Chocolate
Mfg.
ConsumerDistribution
PrimaryActivitiesSupportActivities
Research & development
Human resource management
Technical assistance
General administration
(11.6) VALUE CHAIN ANALYSIS

Chocolate Industry
 Primary Activities
Growing: Cocoa trees grow on small farms in tropical environments, within
15-20 degrees of latitude from the equator. Cocoa is a delicate and sensitive
crop, and farmers must protect trees from wind, sun, pests, and disease. With
proper care, cocoa trees begin to yield pods at peak production levels by the
fifth year, and they can continue at this level for ten years.
Harvesting: Ripe pods may be found throughout the continuous growing
season; however, most countries have two peak production harvests per year.
Changes in weather patterns can dramatically affect harvest times and yields,
causing fluctuations from year to year.
Farmers remove pods from the trees using long-handled steel tools. Pods are
collected and split open with a sturdy stick or machete, and the beans inside are
removed. A farmer can expect 20 to 50 beans per pod, depending on the variety
of cocoa. Approximately 400 beans are required to make one pound of
chocolate.
Fermenting and Drying: Farmers pack the fresh beans into boxes or heap
them into piles covered with mats or banana leaves. The layer of pulp that
naturally surrounds the beans heats up and ferments the beans. Fermentation
lasts three to seven days, and it is the critical step that produces the familiar
chocolate flavor. The beans then dry for several days in the sun or under solar
dryers.
Marketing: After the dried beans are packed into sacks, the farmer sells them
to a buying station or local agent, who transports the bags to an exporting
company. The exporter inspects the cocoa and transports it to a warehouse near
a port.

Chocolate Industry
Packing and Transporting: The exporter ships the beans to the processing
location, where the cocoa is moved to a pier warehouse until needed. The buyer
conducts a quality check to accept delivery and the cocoa is stored until requested
by the processor or manufacturer. Trucks or trains carry the cocoa in
large tote bags or loose in the trailer to the manufacturer‘s facility, on a ―just-in-
time‖ basis.
Roasting and Grinding: Before processing, the beans are thoroughly inspected
and cleaned. The inside of the cocoa bean is called the nib. Depending on the
manufacturer‘s preferences, beans can be roasted whole, or the nib can be roasted
alone. Once the beans have been shelled and roasted (or roasted and shelled), the
nib is ground into a paste. The heat generated by this process causes the cocoa
butter in the nib to melt, creating ―cocoa liquor.‖
Pressing: The cocoa liquor is fed into hydraulic presses that divide liquor into
cocoa butter and cocoa cakes. The cocoa cake can be sold into the generic cocoa
cake market, or ground into a fine powder.
Chocolate Making: To make chocolate, cocoa liquor is mixed with cocoa
butter, sugar, and sometimes milk. The mixture is poured into conches—large
agitators that stir and smooth the mixture under heat. Generally, the longer
chocolate is conched, the smoother it will be. Conching can last from a few
hours to three full days. After conching, the liquid chocolate may be shipped in
tanks or tempered and poured into block molds for sale to confectioners, dairies,
or bakers.
Consumer: Today, people around the world enjoy chocolate in thousands of
different forms, consuming more than 3 million tons of cocoa beans annually.

Chocolate Industry
 Support Activities
 Research and development
Research and development is one of the means by which business can experience future growth
by developing new products or processes to improve and expand their operations. Marketing
innovation like packaging of chocolate which are very much attractive and product innovation
like sugar free chocolates these are supported by R & D only. Therefore it is one of the important
support activity in value chain of chocolate industry.
 Human resource management
Human resource that is skilled manpower is one of the important supporters for the achievement
of company‘s goal. It includes the activities and costs associated with the recruitment, hiring,
training, development, and compensation of all type of personnel, labour relation activities and
development of knowledge-based skills and core competencies.
 Technical assistance
It is an assistance provided by the expert with specific technical knowledge. In chocolate
industry large scale machineries are used for the production purpose. So it is necessary that
company must have technical expert for suggestion and improvement of production process with
less wastage.
 General administration
General administration includes the activities relating to general management, accounting and
finance, legal and regulatory affairs, safety and security, management information system and
other functions.

Chocolate Industry
Each activity in the value chain gives rise to costs. For a company to remain competitive, it is
critical for it to perform its activities cost effectively. There are links between activities such
that the manner in which one activity is done can affect the cost of performing other activities.
Anything a company can do to help its suppliers drive down the costs of their value chain
activities or improve the quality & performance of the items being supplied can enhance its
own competitiveness.
Mondelez India Foods Limited provides seeds at a subsidized rate to farmers as well as free
technical know-how to farmers to achieve self-sufficiency in the production and procurement
of cocoa beans. Cocoa department produces over latest million hybrid seedlings annually and
distributes among farmers in Kerala, Andhra, Tamil Nadu and Karnataka.
Technical staff travel all over the cocoa growing areas giving farmers advice and assistance in
all aspects of cocoa cultivation. In this way it reduces the cost of quality checking and
improves the quality of final product.
There are various keys to driving down costs which includes economies of scale, learning &
experience, capacity utilization, input costs, & production technology & design. In the same
manner keys to creating differentiation includes customer service, production R & D,
technology & innovation, employee skill & training.

Chocolate Industry
Table : 16
Profitability Ratio (%) Mondelez India
(2011)
Nestle (2012) Lotus (2012)
Gross Profit Margin 12.60 18.59 -1.05
Operating Profit Margin 10.81 21.92 -0.16
Net Profit Margin 8.43 12.76 -3.73
Cash Profit Margin 10.35 16.09 -3.06
Return on Capital
Employed
43.01 55.43 -2.38
Return on Equity 33.86 59.38 26.62
Return on Total Assets 14.28 186.53 -6.09
Profitability Ratio (%) Mondelez India
(2012)
Nestle (2013) Lotus (2013)
Gross Profit Margin 10.42 17.77 -3.39
Operating Profit Margin 8.71 21.39 -2.29
Net Profit Margin 7.10 12.16 -3.26
Cash Profit Margin 8.96 15.60 -2.20
Return on Capital
Employed
31.61 47.79 -6.83
Return on Equity 25.93 47.16 16.40
Return on Total Assets 11.70 245.68 -7.28
RATIO ANALYSIS

Chocolate Industry
GROSS PROFIT MARGIN
Gross margin ratio is a profitability ratio that compares the gross margin of a business to the net
sales. This ratio measures how profitable a company sells its inventory. Gross margin ratio is
calculated by dividing gross margin by net sales.
Chart : 12
A company with a high gross margin ratio means that the company will have more money to pay
operating expenses like salaries, utilities, and rent. In the above chart, it is shown that gross profit
margin of nestle is high as compared to Cadbury and lotus. But if we compare data with the last
year figure we come to know about that it has reduced in the year 2013. In addition to this if we
conclude from industry point of view then also it has reduced by 5.70%. It is not good for the
industry.
10.42
17.77
-3.39-5
0
5
10
15
20
Mondelez India Nestle Lotus
Gross Profit Margin

Chocolate Industry
OPERATING PROFIT MARGIN
The operating margin ratio demonstrates how much revenues are left over after all the variable or
operating costs have been paid. Conversely, this ratio shows what proportion of revenues is
available to cover non-operating costs like interest expense.
Chart : 13
A higher operating margin is more favorable compared with a lower ratio because this shows
that the company is making enough money from its ongoing operations to pay for its variable
costs as well as its fixed costs. When we look at the above chart we can see that Nestle has high
operating profit margin as compared to other two. In the year 2013 it has reduced. If we make the
average of three companies then also this has reduced by 14.79%. It is not favorable for the
industry.
8.71
21.39
-2.29-5
0
5
10
15
20
25
Operating Profit Margin

Chocolate Industry
NET PROFIT MARGIN
Net profit margin is a ratio of profitability calculated as after-tax net income (net profits)
divided by sales (revenue). It shows the amount of each sales dollar left over after all expenses
have been paid. Net profit margin is a key ratio of profitability. It is very useful when comparing
companies in similar industries. A higher net profit margin means that a company is more
efficient at converting sales into actual profit.
Net profit margin = Profit (after tax) / Revenue
Chart : 14
The above graph shows that net profit margin of Nestle is high as compared to Mondelez India
and lotus. If we analyze the ratio of individual companies it comes to know about that it has
reduced. But on the other side if we evaluate overall industry wise it has increased by 18.07%
from 4.52 to 5.33%. Therefore it is good for the industry.
7.1
12.16
-3.26
-6
-4
-2
0
2
4
6
8
10
12
14
Net Profit Margin

Chocolate Industry
CASH PROFIT MARGIN
The Cash Flow Margin is a measure of how efficiently a company converts its sales dollars to
cash. The higher the percentage, the more cash available from sales.
Cash Profit Margin = Cash Flows from Operating Activities/Net Sales
Chart : 15
The above graph shows the cash profit margin for the year 2013 for the three companies. We can
see that Nestle has high cash profit margin. It means that it efficiently convert its sales to cash. If
we see individual companies ratio, it has reduced in the year 2013. But when we have analyzed
the ratio of chocolate industry it has increased by 14.26%. Therefore it can be concluded that it is
good for the industry.
8.96
15.6
-2.2-4
-2
0
2
4
6
8
10
12
14
16
18
Cash Profit Margin

Chocolate Industry
RETURN ON CAPITAL EMPLOYED
Return on capital employed or ROCE is a profitability ratio that measures how efficiently a
company can generate profits from its capital employed by comparing net operating profit to
capital employed. In other words, return on capital employed shows investors how many dollars
in profits each dollar of capital employed generates.
Chart : 16
ROCE indicates the efficiency and profitability of a company's capital investments. A higher
ratio is more favorable to investors because it shows that the company is more effectively
managing its assets to produce greater amounts of net income. The above chart shows the ROCE
for the year 2013. We can see that Nestle has more ROCE but, this ratio has reduced in the year
2013. We have also concluded that ROCE of chocolate industry has also reduced.
31.61
47.79
-6.83-10
0
10
20
30
40
50
60
Return on Capital Employed

Chocolate Industry
RETURN ON EQUITY
The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to
generate profits from its shareholders investments in the company. In other words, the return on
equity ratio shows how much profit each dollar of common stockholders' equity generates.
Chart : 17
In case of ROE ratio, investors want to see a high return on equity ratio because this indicates
that the company is using its investors' funds effectively. In the year 2013, Nestle has high ROE
which is 47.16% as compared to Mondelez India and Lotus. When we have compared ratio of
industry, we come to know about that it has reduced from 43% to 24.19%. which is not good for
the industry.
25.93
47.16
16.4
0
5
10
15
20
25
30
35
40
45
50
Return on Equity

Chocolate Industry
RETURN ON TOTAL ASSETS
The return on assets ratio, often called the return on total assets, is a profitability ratio that
measures the net income produced by total assets during a period by comparing net income to the
average total assets. In other words, the return on assets ratio or ROA measures how efficiently a
company can manage its assets to produce profits during a period.
Chart : 18
ROA shows how efficiently a company can covert the money used to purchase assets into net
income or profits. In the above graph we can see that Nestle has high ROA, which is 245.68. A
higher ratio is more favorable to investors because it shows that the company is more effectively
managing its assets to produce greater amounts of net income. If we see industry ratio, it has
reduced by 7.59%. It means company is not managing its assets efficiently.
11.7
245.68
-7.28-50
0
50
100
150
200
250
300
Return on Total Assets

Chapter-13
OPPORTUNITY &
THREAT ANALYSIS

Chocolate Industry
OPPORTUNITY
 Increasing gifts cultures
Due to the various types of chocolates available in different attractive packaging size there is
rising trend in gifting chocolates rather than traditional Indian sweets. So because of many
festivals and occasions in India, there is good scope for chocolate manufacturers. Now in India
every occasion is celebrated with the chocolates.
 Increasing health consciousness
In terms of health and wellness concerns, consumers are embracing low-calorie or sugar-free
chocolate products. Vitamin- and calcium-rich sugar-free chocolates, dark chocolate, and
organic and natural products are some products expected to escalate the chocolate industry
toward high growth rates in future.
 Increase reach in rural markets
Urban cities account for nearly 80% of the consumption of chocolates. Although distribution in
rural India is improving, this segment still remains largely untapped. Poor infrastructure –
inadequate transportation and warehousing facilities – is their biggest challenge. Smaller
chocolate packets weighing less than 30g and priced up to INR 10 is the fastest growing segment
in rural areas.
 Acquire competition
We have concluded from the five force analysis that rivalry among competitor is very high. So,
companies can reduce the competition by merger and acquisition. If companies merge it can
work as complementary.

A Chocolate Industry Project Report

A Chocolate Industry Project Report

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A Chocolate Industry Project Report