India's expanding economy and rising disposable incomes are fostering growth in indulgence food categories, such as chocolate confectionery and sweet and savoury snacks. Francisco Redruello of Euromonitor International analyses the latest market trends and looks ahead.
Economic growth and rising disposable incomes in India are fostering growth across a number of indulgence food categories. As disposable incomes rise, Indian consumers are able to spend more on non-essential food products, while products such as chocolate confectionery, sweet and savoury snacks and ice cream are benefiting from the increasing importance of snacking among middle-class professionals, particularly within urban areas.
One of the clear beneficiaries of this trend has been the ice cream category.
Euromonitor International estimates that retail value sales of ice cream in India reached INR13.5bn £158m in 2007, up by 24% on the previous year. Research shows that this strong growth was underpinned by increases in disposable income and a gradual change in the consumption of ice cream which has gone from being a summer product to one that can be consumed all year-round.
While sales of artisanal ice cream remain strong, Indian consumers in urban areas are trading up to branded and packaged ice creams. The best-selling flavour is vanilla, which is popular with all ages, followed by chocolate and strawberry which are in great demand among younger consumers.
Interestingly, unit price increases within ice cream were only marginal, according to Euromonitor International. In February 2006 the Government removed the 16% excise duty on ice cream, which helped to counterbalance the impact on final prices stemming from price increases in milk and sugar in 2006 and 2007. Research shows that ice cream is mainly consumed during the summer months of March to June, but Indian consumers, particularly in urban areas, are showing an increasing inclination to consume ice cream as a dessert throughout the year.
Chocolate confectionery is another indulgence sector benefiting from the country's strong economic growth. Euromonitor International estimates that retail sales of these products grew by 19% in local retail value in 2007.
According to Euromonitor, low per capita consumption of chocolate products in India, coupled with a booming Indian economy and rising consumer affluence, has seen consumers upgrade from sugar confectionery to chocolate confectionery.
Among the major companies eager to capitalise on this trend are Godrej Group and Hershey which formed a joint venture in April 2007. Godrej also acquired Nutrine Confectionery in August 2006, signalling its interest in becoming a major player in packaged food. Other multinationals, such as Mars Inc. and ITC Ltd, are also said to be firming up plans to enter the chocolate confectionery sector in India.
In product terms, boxed assortments saw the strongest growth within chocolate confectionery in 2007, with sales rising by over 20% in local retail value. Euromonitor believes these products benefited from the growing popularity among urban consumers of offering chocolates rather than traditional Indian sweets as gifts. Manufacturers have invested heavily in promoting chocolates as gifts through advertising, such as Cadbury's "Kuch Meetha Ho Jaye" or "Let's Have Something Sweet" campaign, starring Bollywood star Amitabh Bachchan. The campaign was designed to encourage the culture of giving chocolate confectionery as a gift during the festive season, especially Diwali, and on other special occasions such as St Valentine's Day and Mother's Day.
The sweet and savoury snacks sector is also showing strong growth in the Indian market. Euromonitor International estimates that these products grew by 16% in local retail value in 2007 to reach INR18.6bn. Sales within this sector benefited from the entry of ITC Ltd and the measures taken by Frito Lay to protect its leading position. Both companies advertised their brands extensively during the year, helping to drive the positive development of the sector. Other leading companies were also very active in their marketing efforts, trying to increase consumer interest in their various brands by launching new products, revamping packaging and offering special promotions.
Chips/crisps witnessed the strongest growth within the sweet and savoury snacks category, with sales growing by over 20% in retail value in 2007. Its dynamism was partly due to ITC's introduction of its Bingo brand, available in a range of flavours. The company also invested heavily in a promotional campaign. Frito Lay was also very active in terms of promotion, employing Hindi movie celebrity Saif Ali Khan as its brand ambassador. Furthermore, research shows that chips/crisps benefited considerably from the consumer trend of moving away from unpackaged products to packaged ones, attracted by higher quality, convenience and a greater range of flavours.
Looking ahead, research shows that the popularity of eating ice cream throughout the year is set to increase among Indian consumers in the medium term. Meanwhile, greater consumer sophistication and higher disposable incomes are set to result in a gradual expansion in the number of ice cream flavours available on the market. This might include limited editions of exotic fruit combinations targeting the premium end of the market, Euromonitor International suggests.
Chocolate confectionery is set to keep growing strongly in the medium term, particularly within fast-growing cities such as Delhi and Bombay. These cities will also see a steady expansion of the snacking culture among middle-class consumers, which is set to have a positive impact on the sales of categories such as chocolate countlines and tablets. The increasing importance of snacking in India will also foster further growth in sweet and savoury snacks, particularly premium and family concepts sold through supermarkets and hypermarkets in urban areas.
