Sweet Business of Dark Delights

Whether it is the Valentine’s Day or any other special occasion, chocolates are sure to win over the hearts of the recipients. As a gifting option chocolates take the cake! Chocolate comforts us and brings people closer.

Besides, the cocoa present in chocolate is also known for its health benefits. This makes one want to binge more on chocolates. For entrepreneurs, the chocolate market in India is brimming with sweet opportunities.

Ashok Malkani views the market for chocolates in India and also the production, segmentation and application of chocolates.

Chocolates satiate the sweet tooth of almost all ages. There is nothing like chocolate products  to lift up your mood when you are feeling down in the dumps.

There is no doubt that Indians love chocolates. Even during festivals, a portion of the market of traditional mithais (sweetmeats) has been now taken by the chocolates. However, the misconception about chocolate being harmful to health has proved a deterrent for some health conscious people. Chocolate has received a lot of bad press due to its high content of sugar and fat. Acne, obesity, high blood pressure, coronary artery and diabetes have been associated with this delicacy. 

However, according to a review of chocolate’s health effects published in the ‘Netherlands Journal of Medicine,’ the authors point to the fact that cocoa, the key ingredient in chocolate, contains biologically active phenolic compound. 

Research into how chocolate can impact aging and conditions such as oxidative stress, blood pressure regulation and atherosclerosis has been changing people’s views on consumption of chocolate. Chocolate’s antioxidant potential could have an array of health benefits. The higher the cocoa content, as in dark chocolates, the more benefits there are. In fact, eating chocolate may have benefits like lowering of cholesterol level, preventing cognitive decline and reducing the risk of cardiovascular problems.  

So satiating your sweet tooth through these dark delights need not be full of guilt. And everyone is aware of India’s love for sweets! This is one of the reasons that is going to push the demand for chocolates in India, in the near future. 

Chocolate Production

For a person who wants to enter chocolate production it may be mentioned that chocolate production starts with harvesting cocoa which comes f r o m tropical green cocoa trees. The seed pods of cocoa are collected; the beans are selected and placed in piles. These cocoa beans are then ready to be shipped to the manufacturer for mass production.

The beans have to undergo fermentation process during which the beans turn brown. This process takes about 5-8 days. After fermentation, the cocoa seeds must be dried before they can be scooped into sacks and shipped to chocolate manufacturers.

Once the cocoa beans have reached the machinery of chocolate factories, they are ready to be refined into chocolate. 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 f r o m fine chocolates.

After roasting, cocoa nibs are ground into ‘cocoa liquor’, which is also known as unsweetened chocolate or cocoa mass. The cocoa liquor is mixed with cocoa butter and sugar.

Chocolate comprises of chocolate liquor, cocoa solids and cocoa butter.

Chocolate liquor is a paste made f r o m ground cacao beans and gives the chocolate its core flavour. Chocolate liquor is composed of cocoa solids suspended in cocoa fat. The name liquor refers to the warm chocolate’s liquid state. When chocolate liquor hardens, it is commonly known as unsweetened chocolate.

Cocoa solids are particles of fiber, protein and starch, suspended in cocoa butter.  Cocoa solids impart flavour to the end product while fat makes it smooth.

Cocoa butter is the naturally occurring fat in cacao beans. It impacts the chocolate’s texture, shape, and melting qualities. It is often added during manufacture of the chocolate.    

Segmentation and Application

Edible chocolates which we find in market could be segmented by the different ingredients used into three divisions – milk chocolate, white chocolate and dark chocolate.

Milk chocolate contains as little as 10 percent cocoa while dark chocolate has more than 60 percent cocoa with very little or no milk. The ingredients of milk chocolate are sugar, milk or milk powder, cocoa powder, cocoa liquor, cocoa butter, Lethicin and vanilla.

White chocolate contains sugar, milk or milk powder, cocoa liquor, cocoa butter, Lethicin and vanilla.

Plain dark chocolate contains cocoa powder, cocoa liquor, cocoa butter, sugar, Lethicin and vanilla.

But when one speaks of chocolate being much in demand in India, one is not merely referring to chocolate bars and slabs but also chocolate confectionery items like chocolate cakes and chocolate drinks. There are even chocolate laddoos. From brownies to birthday cakes to mousse, chocolate is playing a leading role in today’s Indian bakery & confectionery industry.

Let us examine the applications of various types of chocolates being used in bakery and confectionery production.  There are seven types of chocolates which are used in baking, namely baking chocolate, dark chocolate, milk chocolate, white chocolate, chocolate morsels, chocolate  flavoured coating, and cocoa powder.

Baking chocolate comes in a bar. But don’t even think of taking a bite f r o m it because it contains no sugar, and is extremely bitter! Basically, it is 100 percent solidified chocolate liquor (the center of cocoa beans ground to a liquid). It is primarily used in recipes like brownies, fudge icing or cakes. These are recipes which call for sugar; which will bring out the flavour and sweetness of the chocolate. A word of caution: Do not use baking chocolate in recipes that don’t include sugar.

Dark chocolate should have an ideal balance of cocoa liquor, cocoa butter and sugar. It imparts a rich colour and flavour to the end product. It can be eaten out of hand or used in recipes. It can be used for fillings, for which more flavourful chocolates with high cocoa percentages are required.

Milk chocolate contains higher percentage of fat due to the milk. It is commonly made by adding dry milk solids (like powdered milk) to the chocolate. However, its high sugar content makes it sensitive to heat; so it may burn if you try to substitute it in recipes that call for semisweet chocolate.

It is easiest to handle milk chocolate in no-bake recipes such as sauces, as a topping for already-baked treats, or as fillings or icings. It is mainly used as flavouring and in production of candies and moulded pieces.

White chocolate has sugar as its main ingredient. It has no cocoa liquor but only cocoa butter. It is used mainly as a flavouring in desserts, and in production of candies and cookies.

Chocolate morsels are also used in bakery production. They are tiny morsels which are stirred into cookies. Morsels are not meant to melt entirely. They are meant to hold some shape so that they form chips in your cookies.  

Chocolate flavoured coating is type of candy coating. Since it melts well and is rather malleable and can be easily moulded, it can be used in moulds. It is often used for coating truffles, cake pops and other treats. 

Cocoa powder is made when the cacao liquor is pressed to remove the cocoa butter, resulting in a fine, unsweetened powder. It comes in two forms viz natural and Dutched. Natural cocoa powder retains the cacao’s natural acidity, while Dutched is neutralised with an alkali chemical and hence it is less acidic, having a darker colour and more mellow flavour.  

The Impressive Market

According to the global market intelligence agency Mintel, the country’s chocolate market is expected to touch Rs. 32,000 crore by 2020, up f r o m Rs. 12,000 crore in 2015. Mintel stated in 2017 that India was now one of the world’s fastest growing chocolate confectionery markets. “India’s chocolate confectionery market has had a strong CAGR (compound annual growth rate) of 19.9 percent, in retail market value, between 2011 and 2015, and is expected to grow at a CAGR of 20.6 percent f r o m 2016 to 2020,” Mintel stated.

As far as the Indian chocolate confectionery market is concerned, according to the industry reports, it has registered a double digit volume growth in 2017. Marcia Mogelonsky, the Director of Insight at Mintel Food and Drink, has, in a statement, said, “Our research indicates that consumers in India believe chocolate to be beneficial and convenient—seemingly the key reasons behind the growth of the country’s chocolate confectionery market, both in value and volume.” 

According to Mintel, the sales of chocolate confectionery in retail markets grew by 13 percent between 2015 and 2016 in India, followed by Poland which saw sales growth of 2 percent  during the same period. In comparison to the rest of the world, Poland and India were the only two markets to see sales of chocolate grow in 2016.

One can say that the chocolate market in India has a positive outlook primarily due to the growth in India’s confectionery industry, rising per capita income and growing gifting culture in India. Of course, there are other reasons too for the impressive growth of the chocolate market in India.

According to the estimates of Mintel’s research, India consumed 228 thousand tonnes worth of chocolate in 2016, which was 50 percent higher than 152 thousand tonnes of chocolate consumption in India during 2011.

According to TechSci Research’s report titled ‘India Chocolate Market Forecast & Opportunities, 2020’, chocolate market in India was projected to surpass 17 billion USD by 2020. The report was published in September 2015. “Product innovations, strong marketing strategies and increase in variety of products are driving consumer chocolate sales in India,” observed the report.

The findings of ValueNotes also indicate a promising future market for chocolates in India. According to the research report of ValueNotes titled Chocolate Industry in India 2014-2019, the chocolate industry in India was valued at Rs.58 billion in FY 2014. It was estimated by ValueNotes that the industry would be worth nearly Rs. 122 billion by FY 2019, growing at a CAGR of 16 percent. “Increasing disposable income, changing lifestyle, rising trend of gifting chocolates instead of traditional Indian sweets, and a surge in the sale of dark chocolates are expected to drive the industry growth,” noted the report. Here it deserves a mention that ValueNotes is a market and competitive intelligence firm, based in Pune, Maharashtra.

The above-mentioned report by TechSci Research maintained that over the last decade, chocolate market in India had been growing at a significant rate, on account of expanding middle class population and increasing use of chocolates in various confectionery products. It opined that expansion of organised retail industry in India and rising disposable income levels of consumers had been further propelling growth in the country’s chocolate market. The report by TechSci Research pointed out that manufacturers were luring consumers by expanding their product portfolios and increasing availability of chocolates in various price ranges. 

No wonder the per capita chocolate consumption in India has increased f r o m 50 gm in 2005 to 120 gm in 2013. But still it is much less. For example, an average Indian shopper presently buys less than 150 gm of chocolate a year, while a typical UK shopper buys more than 6 kg of chocolate every year.  The fact that still the per capita consumption of chocolate products is much less in India as compared to that of many developed western countries also indicates a huge potential for the growth of chocolate market in India, in the backdrop of the present day socio-economic scenario of the country.

Players and Potential

With such low per capita consumption of chocolates in the country, and with socio-economic condition being conducive to the growth in chocolate consumption, India provides a huge opportunity to the marketers. There is huge untapped potential for the growth of India’s chocolate market, which the entrepreneurs can explore well. 

No wonder, several prominent players in chocolate business have forayed into the Indian market. Some of the international players who have already entered the Indian market are Ferero, Mondelez, Hersheys, Mars, Nestle, Kraft. These companies have already made their mark in the global chocolate market.

The Indian chocolate market is full of opportunities for enterprising people, not only for manufacturing chocolates but also chocolate confectioneries. India’s chocolate market is expected to touch Rs. 122 billion in 2019.

Among the international players ruling India’s chocolate market, Mondelez India, Ferrero and Nestle India are expected to have significant impact.  However, despite its presence in the country since 2008, Ferrero India doesn’t have a significant share in India’s chocolate market as compared to Mondelez, which still dominates with a 65 percent share of the chocolate segment in the country. Homegrown brand Amul is also slowly trying to gain the momentum in India’s chocolate business.

ChocOn, another Indian brand, which started manufacturing chocolates in 1998 and has not looked back since then, is also worth watching. ChocOn Coconut, ChocOn milcreme are some of their brands.

Chocolate Trends

The latest trend in India is towards dark and sugar-free chocolates. Companies like Mondelez and Nestlé have already successfully introduced their dark chocolate brands such as Bournville and Nestlé Dark Chocolate in to the Indian market. 

Manufacturers are also coming up with new chocolate products, which they claim are antioxidant and have low/no/reduced trans fat and calories. The market growth in this segment is expected to be positive. For the calorie-conscious customers, there are now handmade chocolates which are guaranteed high on taste and low on calories. With increasing health consciousness in India during the recent years, there is now ample scope for the growth of this segment.

Health consciousness is also responsible for introduction of sugar-free chocolates in India.  Globally the market (in volume) for sugar-free chocolate is estimated to grow at the rate of about 6.85 percent f r o m 2017 to 2023.

Global sugar-free chocolate market is highly dominated by America due to high production capacity and cultivation of cocoa in the region. The production of sugar-free chocolates f r o m the European region is also anticipated to grow at a high rate in the upcoming years. In India, though this market is miniscule, the scope for its growth is immense.

Another trend is that of pricey chocolates. According to Mintel, the entire chocolate market in India is booming, but pricey chocolates are especially in demand as the country’s growing middle and upper class develops a taste for luxury goods. This is an opportunity for luxury chocolate makers in the US and some other countries to break out f r o m a crowded home market and expand into the fast growing emerging market of India.  

The Research & Markets’ report titled ‘India Chocolate Market Outlook, 2022,’ states that affluent urban Indian consumers are now demanding premium chocolates, irrespective of their price. The manufacturers, keen to tap this section of consumers, are thus introducing premium or higher-priced products, which are fast becoming a trend in the urban markets. 

Looking at India’s swelling population of chocolate lovers, some US manufacturers like Brown & Haley  are planning to come to India but high import taxes, paucity of modern supermarkets and a distribution network that is still primitive compared to the west, is making them hesitate, according to Brown Haley’s Chief  Operating Officer, John Melin.

Chocolates being presented as gift items during festivities and other forms of celebrations are also gaining currency in urban India.

Now how can chocolate products’ market share in the total sweet market of India be enhanced in the near future? Besides bolstering of infrastructure and moderation in pricing, enhancement of consumer consciousness in relation to chocolate products is also needed to increase the market of chocolates in the country even faster, as well as further and deeper.

Succinctly, unless the industry makes a sincere endeavour to educate the palates of its chocolate products’ consumers and potential consumers, and unless our cold chain infrastructure gets bolstered, we cannot hope to develop the Indian chocolate industry in real sense, despite its current impressive growth rate.

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