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chocolate Industry Overview

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  Industry Overview In 2018   Indian chocolate market reached a value of US$1,495 MILLION this is because Consumers are now buying chocolates for everyday consumption rather than just special occasions. Due to change in lifestyle, westernization, growth of food sector it is estimated that the indian chocolate market will reach revenues worth US$ 3,281 million, growing at a rate of 14% DURING 2019-24. Market structure Oligopoly In oligopoly market structure there is competition among two or more firms. Therefore, there is scope for strategic interdependence between the firms. Every oligopolistic firm is large enough to influence the market conditions; therefore it has market power, which affects the market conditions faced by all the rival firms. The two giants Cadbury with 70 per cent and Nestle around 20 per cent have been instrumental in building up the chocolate market in India with huge investments in product development, advertising and brand building. Due to the dominance of large-scale production dynasties, franchises and small businesses tend to focus on unique or specialty items or services. Unique chocolates may be from a region famous for a particular technique, baked on-site or offer a different take on tradition, while specialty services tend to focus on gift-packaging or delivery. MAJOR PLAYERS OF CHOCOLATE INDUSTRY There are a few major players in the INDIAN CHOCOLATE INDUSTRY Cadbury India Limited Nestle India Gujarat Co-operative Milk Marketing Federation  Amul Milk Chocolate Nature of the Industry 1.The chocolate industry in India works at different levels that include chocolate giants like Cadbury's , Dairy Milk, etc, small chocolate manufacturers, chocolate retailers, chocolate importers and people who make chocolates at home 2. Diversification and innovation is the need of the hour and chocolatiers are exactly doing that to increase their client-base. 3. The population of India presents multiple avenues for companies to foray into India. "The regulatory environment, too, has become conducive for foreign players to operate in the country. There is immense scope that the country presents to players in terms of hiring  home grown talent to grow business, given the educational boom. This clearly means that the three main factors like demand for products, conducive regulations and customized talent are abundant in India, which makes it inevitable for foreign players to ignore India. Price: Indian customers are very price sensitive and the price of a chocolate bar can easily determine its sales. If the prices are too low then it affects the company profits while higher might mean diminished sales. Therefore Cadbury Dairy Milk resorts to the reasonable and affordable price mission while Cadbury Silk caters to the customers wiling to spend more on a chocolate bar. Cadbury caters to all types and all classes with 5 Star, Cadbury Dairy Milk, and Perk being in the reasonable price range and Cadbury Silk and Bourneville being the premium chocolates. Nestle has adopted a similar method. As the two firms are in great competition, similar chocolat es have similar prices. But the new Nestlé‟s Alpino is the premium chocolate competing   against Cadbury‟s Silk as a gifting and a higher chocolate.  Amul also have a strategy of low cost pricing. To cater all customer segments amul has launched various products. Thus every customer segment has different price expectation from the product. Amul also have fun animal shape Choco  –   bites called “Chocozoo” specially targeting children.   PRODUCTION Production is the creation of goods and services from inputs or resources, such as labour, machinery and other capital equipment, land, raw materials, and so on. The various ingredients used to produce chocolates as raw materials are Full Cream Milk, Sugar, Cocoa Mass, Cocoa Butter, Milk Solids, and Emulsifiers, traces of nuts, cocoa solids and milk solids. As there are four factors of production i.e. land, labour, capital and entrepreneurship. According to Chocolate Industry, only labour will be a variable factor where as all others will be fixed factors during short run. If a particular Chocolate company such as Cadbury wants to increase its sales to meet the demand of the consumers it will in    crease its labour to produce more chocolates during that particular period of time. Such situations generally occur during festive seasons like Diwali in which the chocolates become most demanding product. In the long Run, all the factors of production are variable. According to Chocolate Industry, the production of the products is executed keeping in mind the demand of the customers during different times. For this, the chocolate companies may increase or decrease their capacity by increasing their capital through funds or any other means or can introduce new technologies according to the needs of changing trends. LAW OF DIMINISHING MARGINAL PRODUCT The principle states that as the number of units of the variable input increases, other inputs held constant, a point will be reached beyond which the marginal product decreases. In case of Chocolate Industry also the law of diminishing marginal product will apply. As more number of labours will be employed other inputs remaining constant, a time will come when the numbers of products produced could be produced by employing less labour which would reduces the cost and increase the marginal product. COST In the Short Run the cost is partly fixed and partly variable. The total of fixed cost and variable cost will make Short Run Total Cost. According to Chocolate Industry, the fixed cost can be the cost of rent paid for the factory, machinery where as variable cost will be the cost of employing labour, raw material for producing output. In the long Run since all the factors of production are variable the cost will vary according to the plans of the chocolate companies keeping in mind the cost charged by various suppliers, or the cost of attaining factors of production throughout the long run. DEMAND OF CHOCOLATES if we put the quantity of Chocolates on the x or horizontal axis of a graph and the price of Chocolate on the y or vertical axis and plot the information we just discussed, we would start to see a picture of demand or a visual relationship between the two variables: The line that is created when we connect the points on the graph slopes downward. This downward slope means that there is an inverse (or opposite) relationship between price and quantity demanded. When price increases, quantity demanded decreases, and when price decreases, quantity demanded increases. In fact, we could recreate this same scenario with almost any good or service and get the same result-a downward-sloping line. This downward-sloping line is called a demand curve   The demand curve is a helpful tool, but it is not static (or unchanging). It shifts back and forth as conditions in the market change. For example, if you heard of an impending Chocolate shortage, you might expect Chocolate prices to rise in the future. As a result, you might run to your favourite candy store and buy extra Chocolates before chocolate prices increase. In this case, the srcinal  demand curve no longer tells the whole story; it must shift to the right to accurately reflect the change in chocolate demand. Or put another way, your chocolate bar demand curve shifted to the right because the quantity of chocolate bars you-and your fellow chocolate lovers-demand would be greater at each of the given prices.   SUPPLY OF CHOCOLATES if we put the quantity of Chocolates on the x- (horizontal) axis of a graph and the price of Chocolate on the y- (vertical) axis and plot the information we just discussed, we would start to see a visual relationship between the two variables: The line that is created when we connect the points on the graph slopes upward. The upward slope means that there is a direct relationship between price and quantity supplied: When price rises, the quantity supplied rises, and when price falls, the quantity supplied falls. In fact, we could recreate this same scenario with almost any good or service and get the same result-an upward-sloping line. This upward-sloping line is called a supply curve . The supply curve is a helpful tool, but it is not static (or unchanging). It shifts back and forth as conditions in the market change. For example, if a raw material supplier sold cocoa at cheaper rate which allowed the chocolate producing companies to produce Chocolate at a substantially lower cost than the current production cost, the increased profit would cause to increase the production of Chocolate. In this case, the srcinal supply curve no longer tells the whole story: It must be shifted to the right to accurately reflect the new Chocolate supply. Or put another way, the Dairy Milk supply curve shifted to the right because the quantity of Chocolate supplied by me-and other chocolate sellers-would be greater at each of the given prices. Barriers :- Anyone can enter the chocolate market in India by creating a new recipes and start off with a cottage industry, which can later evolve into a large scale business. However there are many obstacles that a new company have to overcome in order to be successful. There are many companies who are already existing and doing an amazing job, like Cadbury which currently holds 70% of India’s chocolate. In order to compete with giant s like these a new company has to be extremely creative and different from other companies. Even after the company become successful the company need to produce more of chocolates and produce new kinds of chocolate to maintain its position in the market. This is how you get into chocolate market in India Trend :- The new trend in chocolate market is of dark chocolate. Consumers nowadays are more concerned about the impact of their food intake on their health and wellness. Since health benefits associated with dark chocolates are high, owing to high percentage of cocoa present in it.   Therefore the high-quality premium dark chocolates are consumed comparatively more and consumers are ready to pay for premium and high-quality products, thus the penetration is
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