rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Kraft plans India foray with confectionery

Kraft plans India foray with confectionery

Last updated on: June 22, 2010 03:15 IST

The Kraft-Cadbury combine is likely to herald its presence in India with confectionery products. The reasons are evident.

For one, this February, when shareholders of British candy maker Cadbury Plc approved Kraft Foods' $19.5-billion takeover, it created the world's largest confectioner. Second, industry sources aver that Kraft is betting on the confectionery segment since, globally, 29 per cent (highest contributor) of its revenues in 2009 came from this division.

Third, in India, the confectionery market is Rs 4,500 crore in size -- double that of the chocolate market, which is closer to Rs 2,000 crore, estimate industry observers. Confectionery, too, is growing at a steady clip of about 15 per cent, which Kraft would want to capitalise on.

Confectionery is definitely an area that requires beefing, say persons familiar with the development.

Though Cadbury has an over 35 per cent share in confectionery with two candies — Halls and Eclairs — and one gum called Bubbaloo, there is more that can be done.

Kraft, they add, may leverage Cadbury's international portfolio to expand the confectionery side of the business.

Anand Kripalu, managing director, Cadbury India, and president, South Asia and Indo-China, for the combined Kraft Foods entity (which is yet to be christened), declined to divulge any details or give any timeline for launch of the products. "I cannot comment on the integration and how it will pan out. Kraft in India is small. Three products are being distributed -- Tang, Toblerone and Oreo. At some stage in the future, the operations of this will be routed through the merged entity. It is too early to speak about the integration at this stage."

However, an executive of a rival FMCG firm says: "The purpose of the Cadbury acquisition was to give Kraft a strong presence in chocolates and confectionery — two areas they see as high-growth and high-margin. It makes sense to give the confectionery business a boost. It's in line with their global strategy."

Kraft, however, will not leave the chocolate segment unattended. It has Toblerone, which is already distributed in India through distributors Universal Corporation and Barakat Foods & Tobacco. This will be routed through the merged entity. Cadbury remains the dominant player in the chocolate category, with an over 70 per cent share in the country. Toblerone, say industry sources, will sit at the premium end of the merged entity's chocolate portfolio.

This strategy of identifying premium products, they say, is likely to drive Kraft through the categories it marks its presence in. "I am not surprised if the company is looking to do that," says Shirish Pardeshi, senior FMCG analyst at brokerage firm Anand Rathi. "Barring chocolates, where Cadbury is present, attempting to enter allied food categories from the lower end is not going to be easy. You have strong incumbents sitting there, plus regional and unorganised players. The premium end is a bit less crowded in that sense. You are also not dependent on pricing alone, which you are at the lower end of the market," he says.

Once chocolates and confectionery are taken care of, Kraft is likely to devote its attention to biscuits -- a segment where it already has a strong brand, Oreo, distributed by Universal and Barakat. Kraft is likely to restrict itself to the premium end -- something that rival Britannia has been doing over the last few years. Says Pardeshi, "In biscuits, value-for-money is driven by the glucose platform, dominated by Parle. If you have to make a difference, you have to move up, which is what Britannia, even ITC, have been doing," he says. "Kraft would probably have to play the same game whether it is with Oreo, which is a cookie, or Nabisco, which rides on the health platform."

After biscuits will follow Kraft's much-awaited dairy foray. People in India are already familiar with the blue-coloured circular box that has the picture of a cow on it. Kraft cheese has been circulating in India through grey channels for long. The company, say industry sources, is likely to leverage this familiarity that Indians have for the product by formally launching it in India. Though Kraft is known for its cheese, in 2009, it derived only 14 per cent of its revenues from this business.

Even as it gears up for a likely foray into these segments, Kraft is said to be looking at a debut in foods as well. "This will be interesting to watch," says the managing director of a rival FMCG firm. That is because Kraft takes on a whole host of established players in the segment — from arch rival Nestle to Hindustan Unilever to ITC Foods. Globally, Kraft derived 10 per cent  and 8 per cent of its revenues from convenient meals and grocery, respectively.

Cadbury India, meanwhile, has effected management changes to head the Kraft Foods and Cadbury combine in Indo-China and South Asia. The new team is headed by managing director Anand Kripalu, who is president, South Asia and Indio-China, Kraft, while Chandramouli Venkatesan, earlier in charge of HR, will now manage the chocolate portfolio, besides heading strategy, and Narayan Sundararaman, an internal candidate, has been put in charge of powdered beverages, gum and candy.

Viveat Susan Pinto in Mumbai
Source: