A boom in e-commerce and a sharp tax cut are propelling sales higher for chocolates in rural India, spurring global confectioners like Mondelez International Inc, Nestle SA and relative newcomer Hershey Co to invest further in the still small but rapidly expanding market.
Illinois-based Mondelez, India’s No.1 chocolate maker, told Reuters “the big bulk” of a $150 million increase in global investment this year – the first hike in five years – will be in rural India.
The company, which first started providing Indian store owners with free display coolers in early 2000s, ramped up their distribution to rural areas over the last year. It now plans to be in about 75,000-100,000 villages in the next three years, up from 50,000 in 2018.
To that end, it is also expanding its fleet of refrigerated trucks and building a database that maps India’s small neighborhood stores and monitors sales of its products at those shops.
“There’s a misconception that rural consumers are poor. Not all of them are. There are rich farmers, who are coming into the consuming class,” Deepak Iyer, Mondelez’s managing director for India told Reuters.
Iyer said Mondelez was targeting villages with as few as 3,000 people. “There are families aspiring for premium products because they see them through mobile connectivity today.”
Cadbury’s vast, decades-old distribution network in India was a key attraction for Kraft Food in its $19.6 billion takeover of the brand in 2010. Kraft later split into two firms with its global snacks business renamed Mondelez.
“It’s not going to be easy (for rivals) to carve out space, to be really be noticed in the store,” he said an interview, adding that Mondelez has consistently grown market share in India for several years.
Mondelez says it now commands 66% of the Indian chocolate market. Cadbury, a 195-year old British confectionery brand, entered India in 1948 and its Dairy Milk, Silk and 5Star products have since made it a household name. The Dairy Milk brand alone accounts for 40% of the market.