Despite years of stagnant growth, the sales of candies, toffees, and chewing gum bars witnessed a remarkable turnaround in the last fiscal year, reaching a record-breaking figure of nearly 40 billion units. This surge in sales reflects a clear preference for affordable sweet treats, especially during a period of economic hardship caused by the Covid pandemic, where disposable income was limited for many consumers.
According to Nielsen, officials have reported that the confectionery market witnessed significant growth, expanding by 13% to reach INR 12,127 crore. Companies have attributed their success in defying the slowdown experienced in various discretionary sectors to the affordability of their products.
“It is an affordable treat since 80% of the sales come from a one-rupee product,” said Rajesh Ramakrishnan, Managing Director of Perfetti Van Melle India, the company that makes Alpenliebe hard-boiled candies and Mentos soft candies.
“Increase in innovation and direct reach also helped. From our company’s standpoint, positioning of our brands has also become far sharper,” he added.
Typically, confectionery products heavily rely on cash-driven impulse purchases, and their consumption has been declining since late 2016. The confectionery market faced a significant contraction of one-fifth during the initial year of the pandemic, but it managed to make a strong recovery in FY22, albeit from a much lower starting point. Companies have attributed the growth observed in FY23 to resilient consumer demand, as the industry expanded on a higher base.
“While large players have contributed to the demand, there is an influx of smaller regional and local players in the category, that have been driving the growth, especially at a sub-rupee price point,” said Krishnarao Buddha, senior category head of Parle Products, the maker of Melody coffee-flavoured candies and Mango Bite.
“School reopenings last year also helped, and we expect the traction to continue this year,” he added.
The chocolate category is largely dominated by major companies like Mondelez, Nestle, and Mars, collectively holding a market share of over 90%.
However, regional firms make up more than 35% of the entire confectionery market, with certain players operating in limited states or even specific districts.
In recent years, the confectionery industry as a whole has progressively transitioned towards the INR 1-per-unit price point to accommodate rising costs of sugar, other raw materials, and packaging.
“Candy is not really a discretionary category and there has been a smooth transition from a 50-paise product to Re 1 a unit, even though it’s a 100% jump. So, the category is relatively insulated from inflation despite price increases,” said Koteshwar LN, business head at Flipkart Wholesale, an online B2B marketplace of the ecommerce platform.
According to companies, the significant inflation in input costs during the pandemic, further aggravated by the Ukraine-Russia conflict, hindered the expansion of operating profit margins in tandem with revenue.
Perfetti, the frontrunner in the INR 12,500-crore confectionery market, stated that there has been a substantial surge in all raw material and packaging costs.
“So, the challenge is more on the profitability side, instead of growth. We must continuously look at value engineering because there is a limit to which we can drop grammage,” added Ramakrishnan. Chocolate and confectionery combined is a INR 25,000-crore market, with each category accounting for roughly half the overall industry in value terms.
Companies have expressed that they are encountering intense competition from categories like salty snacks and biscuits. Kalpesh R Parmar, General Manager of Mars Wrigley Asia, mentioned in a previous interaction, “When consumers seek small moments of joy, they often choose between packaged snacks such as biscuits, chocolates, and chips.”