From Luxury Shelves To Kirana Stores: The Delectable Growth Of Indian Premium Chocolate IndustryWith disposable Income and health awareness increasing among all age groups, many consumers are switching to a more expensive and premium range of chocolates

Chocolate is more than just a piece of delight. It has the superpower to boost moods and the dark fantasy stays loyal to humans, thanks to its control over the stress hormone-Cortisol.

With disposable Income and health awareness increasing among all age groups, many consumers are switching to a more expensive and premium range of chocolates.

"Premium chocolates category accounts for about 20-30 per cent of the chocolates category in India. The overall Indian chocolate market is expected to grow at a CAGR of 8 to 10 per cent over next five years," said Rajat Wahi, partner, Deloitte India.

Festive blast

Whether it is birthdays, festivals, weddings or anniversaries, chocolates are the new preferred gift alternative for Indians. "Festive gifting contributes to approximately 55 per cent of the premium gifting segment," said Geetika Mehta, managing director, Hershey India.

ITC's brand Fabelle witnessed a tremendous increase in purchase during the recent Raksha Bandhan gifting season as compared to last year. "We expect a significant pent-up demand across product categories - whether it is for corporate gifting or personal gifting. We are bullish that this will continue and expect to see strong demand throughout the festive season," said Anuj Rustagi, chief operating officer –chocolates, coffee and confectionary, foods division, ITC Ltd.

Indian customers are evolving and are seeking different experiences. This trend has given an opportunity to companies to expand their market share and come up with expensive and premium ranges.

"Many Indian buyers believe that chocolate selection gifts are more hygienic, premium and durable. This trend has aided sales during festivities and today, Ferrero Rocher has struck a chord with consumers not just in metros but also in smaller cities," said Zoher Kapuswala, marketing head, Pralines,Ferrero India.

Consumers believe that chocolate selections in gift boxes are more hygienic, premium and durable. "This contributes to the sale of chocolates as seasonal gifts across both offline and online channels," added Wahi, partner, Deloitte India.

Size matters

India is a country of small transactions and understanding this, manufacturers of packaged consumer goods have turned their attention to low unit packs (LUPs) across all product categories as consumers migrate to smaller, less expensive packs to reduce expenditure in the face of rising prices.

"We have noticed that some consumers are now using low-cost packets, or LUPs, to manage their monthly spending. Keeping with this trend, we have created a Ferrero Rocher Moments pack of 12 pieces priced at INR 175/- to cater to this growing segment," said Kapuswala.

Increasing awareness around health benefits associated with dark chocolates and those with nuts, raisins, pralines and other ingredients such as turmeric, can be leveraged to enter the premium gifting segment. Approximately 38 per cent Indians associate dark chocolate as a premium product while 39 per cent consider the chocolates for ideal gifting.

"Indian consumers are getting more health conscious, hence they are looking for bite-sized single piece options to indulge without guilt. Bite size options are more affordable with a wide variety in a single pack," added Wahi.

Understanding the evolving needs of consumers, Hershey India uses affordable packing as trials for premium products. "Consumer benefit is over-indexed to large packs and the same is communicated through 'value' call out. Equally, we have affordable low-price packs, basic category consumption behavior (approximately 50 for chocolates, sachets for syrup, single consumption packs for beverages) to drive consideration and trials for our range of premium products," said Mehta, managing director, Hershey India.

However, ITC's brand Fabelle, has not seen any downtrading in the premium category. "We are seeing an increasing interest for top end gourmet products among the consumers. People are seeking a unique luxurious chocolate experience," added Rustagi.

Overcoming challenges

Inflationary pressures due to high raw material and commodity costs coupled with the price-sensitive consumers are the key concerns for the luxury chocolates industry. Rising sugar and cocoa prices are putting a lot of pressure on companies to innovate with ingredients and packaging to offer better prices to capture the mass market segment.

To overcome challenges, companies need to Innovate and lean on rigorous consumer insighting and qualification. This process has helped Hershey India in several successful innovations over the past few years. To cater to the increasing demand of consumers for personalized products and considering their preferences, the company has launched Hershey's Kisses variant with 30 per cent less sugar and same taste.

"Our new launch, Hershey's Kisses Hazelnut 'n' Cookies, under the platform 'Nutty-For-You' is a unique combination of crunchy roasted hazelnut and signature cookie bits, giving consumers another way of expressing their affection to their loved ones. Our innovations and best-in-class packaging designs have won several industry awards," added Mehta.

Fabelle's innovation during Covid-19, amassed huge success. "As boutique services were not accessible during Covid, we commenced home delivery of Fabelle chocolates via food-delivery apps as well as grocery platforms. We discovered a high demand and used these channels to meet it. To further scale up, we are now collaborating with Cloud kitchens to set up Fabelle infrastructure and doubling down on e-commerce," said Rustagi.

Another challenge for the premium chocolate industry is to have end-to-end cold storage to maintain its shape and packaging, especially at the point of sale (kiranas and shops) where the product can be available for weeks and even months before it is purchased. "Maintaining quality and taste becomes a major consideration and companies should keep working on this," added Wahi.