CHAPTER I – Introduction
This study of the chocolate goods industries is integrated with classification. The way that these classifications are made and inferences deducted, have a primary method of establishing principles used in roasting and grinding, as well as in the shelling of the cocoa beans for the intention of being able to produce liquor made out of chocolate, from the very source that cocoa butter as well as cocoa powder are obtained.
The chocolate and cocoa goods industry has been traditionally subjected to the significant fluctuations in its stipulate. These Chocolate products are tended to be recurring in nature, with increasing stipulate sharply and frequently during the holidays. Characteristically the third and fourth billet reflects the premier sales. In addition to it, numerous consumer trends have had an impact on its requirement. These take account of intensifying sales of premium-priced chocolates and the on increase apprehension about the fitness risks associated with the consumption of such a high-fat commodity similar to chocolate.
The figure of establishments producing chocolate and cocoa goods in the United States was 995 in figures in the year 2000. California and Pennsylvania boasted the prevalent amount pertaining to such levels of establishments, containing approximately 107 unique apieces of different kinds of estabilshments. Retail sales of these chocolate goods for the year 2001 were $13.1 billion. And the Total chocolate consumption in the same year was 3.1 billion pounds.
Each of the cocoa beans goods processed by some of the major manufacturers in the U.S. are supposed to e imported, by means of having a direct metho dfor purchasing else through the services of a negotiator/middleman, as cacao trees requires a tropical type of weather to flourish itself. The Growers are being rewarded for the beans at its marketplace price, which is determined for the most part by the quality and accessibility of the yield worldwide. An confirmation to the cocoa products significance as a product is the extension of the cocoa product exchanges, similar to the regular stock exchanges, in cities like Hamburg, London, Hamburg, also New York City, and Amsterdam. These beans there are then processed to create some type of chocolate as a liquors, which is then used to produce supplementary products such as syrups of chocolate, cocoa, and chocolate chips and also baking bars. The liquor chocolate is mostly and often sold to the other manufacturers related that combines it with some additional ingredients to fabricate confections, bakery goods, and daily usage dairy goods.
The beans are roasted, shelled, and grinded to produce unsweetened chocolates, the chocolate liquor which is the essential ingredient of all the chocolate products. Additional dispensation of chocolate liquor falls mainly into two categories namely as the cocoa production and the chocolate production.
In the cocoa production the component of fat is pushed from the chocolate liquor, with leaving the cocoa cake that is then trampled to form powdered cocoa. This powder may or may not be sugared and is sold as a beverage of cocoa else left unsweetened for its use in the bakeries and other dairy products and for some home cooking use too. For the Cocoa butter, the fat is detached from the chocolate liquor, and is used mainly in sugared chocolate, but it is also worn as a moisturizer in many soaps, creams, and life saving medications.
The accumulation of sugar or some other additional sweetners and cocoa butter to liquor chocolate is required for the production of chocolate. Milk solids are sometimes also added in the production of milk chocolates. Volume quantities of sugared chocolate, mostly blocks of at least 4.5 kilograms or more are well thought-out as chocolate coating and are used for normally used as candy coverings on baked goods. The Chocolate coating is commonly much more expensive and costlier than the confectioners’ coatings which are normally used and which are made from cocoa powder.
These Chocolate manufacturers puts these semi-processed cocoa products on the market to other firms that uses these substance in the production of other confectionery, some baked goods, and a few dairy products such as chocolate milk, etc. In addition to this, some manufactures also produce their own self made confectioneries. An export of these chocolate goods consists chiefly of the confectionery items rather than those of the semi-processed chocolate items. (Reference For Business)
Statement of the problem
The statement of problem here is the issues related to the unheard problem faced by a chocolate factory management system, labor unions, and other goods quality and customer satisfaction issues in the chocolate and cocoa industries. Being familiar with the problems faced by the chief and budding industries all around the world there are still many issues in the chocolate industries that are jagged and requires deep strategies to be resolved correctly. The statement of problem majorly compressing the issues related to the customer satisfaction among the possible chocolate and cocoa consumers and the bakery and dairy circuits. With a direct reference from India as a Multi- cultural area with a vast number in population and various food chains, the consumption of chocolate in India is eye widening. But the issue arises with the disintegration in groups among the main stream population. While most of the consumers are in the urban parts, the distributions of chocolate goods in the rural areas are at a very low scale. The major issue that is to be resolved today in India is to increase the distribution of these chocolate goods in the rural areas with increase in the quality of these products. These issues can be held with simple strategies like direct distribution, lesser import resistances, and quality manufacture equipments. These factors are easy to accomplish and has a wide scope to flourish.
Purpose
The whole market of chocolates and other food products are purely based on cocoa powder (chocolate flavored drinks, desserts and sweets) and it is growing rapidly. The accessibility of the required raw materials & substances and good marketplace prospects make the asset in the cocoa bean processing unit a very profitable scheme which has a broad spectrum investment and healthy blooming future benefit.
Significance of the study
This report study covers very crucial aspects of the chocolate and cocoa industry around the world. This report specifically elaborates on the positive and negative points of an industry built up like the chocolate factory. And the significance of this study lies beneath the fact that the chocolate industry is a very deserted field of work, no many entrepreneurs invest in this field. The risk of getting trouble bugged here is quite high. This report will help in the outline and inline pathways to a chocolate factory built-up and its management strategies. The other issues related to the chocolate factories are the background, the literature of such field, and the terms chiefly used only in the field of cocoa processing are described in this study with all the possible statement problems, the study of findings and the overall recommendation of a chocolate factory asset. This report is an easy guide to the chocolate world. (Rocky Mountain Chocolate Factory)
CHAPTER II – Background
Literature Review
Kids crave for it, Japanese women gift it to their men on Valentine’s Day and Chinese give it as gifts to couples at their weddings. The demand for luxurious chocolates is recovering power among Asians after the region’s financial crisis had cut down incomes and made a large number of people jobless. Consumption of chocolate in India has been dropped by around 20% because of the crisis with Japan which is the largest chocolate consumer in India. It is said by the market insiders that although there were no accurate statistics which show the current consumption of chocolate in Asia, there are signs recovery in many economies which should mean that the sales should now pick up and the worst is almost over.
Mr Ian Chan, marketing manager of The Sime Darby Edible Products, said that chocolate consumption took a hit here in Asia recently because the food here was seen as a big thing.“Chocolate is a luxury food in Asia. That is why it got hit rather badly during the crisis,” he said. “In the economy recovers (in Asia), I am sure the consumption of chocolates will also improve.” Chocolates have been priced out of Indian because of high taxes, said be a genuine industry source. “Indians are sweet-toothed people. The potential for the chocolate market will be tremendous once the trade is more liberalised,” he added. Per capita chocolate consumption in India is as low as 200 grams as compared to a whooping per capita consumtion of 8.5Kg of chocolates in Switzerland. Experts say that the drop in demand of chocolates in Asia id due to the extreamly low prices to which cocoa and its by-products have fallen down to in the last year. These days though chocolate craving in Asians is sated by compund chocolates which are made by vegetable fat instead of cocoa butter. (BNET)
Very explicitly, most of the criticism is legit. The chocolate industry lately has been market by a lot of takeovers. Almost all famous chocolates are made by more than five different companies.If we look at the chocolate packet carefully we will be surprised by seeing the actual manufacturer of that chocolate. Even though there is vast room in the confections industry. All of us are familiar with hand-dipped chocolates which are made and found at local stores. Almost all towns and cities have stores or shops of this kind. In this context the industrial giants and the multi-nationals can never compete with the local stores as they can never provide that kind of care, service and satisfation to their customers.Moreover, perfect quality truffles and other related products cannot be sold and distributed by industry giants because of the manual labour required and very short shelf life of these products.
This opens options and chances of success of the small scale industries and home bases industries. Out goal should be just to make the best quality chocolate as because out plicy should not be to setup a company just for selling a product. Our background in business should tell us that we are allowed to make many acquisitions. We have seen a lot of times that whatever the promises are made by the purchasing company, after the company is actually taken over, the corporate culture changes and very often destroyes of what it was when it was a great company. The top personnel would be sacked or asked to leave or often demoted which results in overturned lives and in conclusion the quality would definitley be affected. We see that most of the times this is not justified to the employees who build the company and not at all fair to the consumers who eventually have build a relationship with that company.
No matter how we market the product or sell it or let the word out, the answer finally is in one word i.e “Quality”. When we share out final product chocolate with the mass they should get amazed and astounded by the outstanding product quality that has been achieved and that too in such a short span of time. We can find people who love dark chocolate now and in the past they never really liked it very much but now they will order it not only for them but also for their friends and family. In the end it’s all about quality which matters, people will respond especially if they have strong passion for chocolates and what we do.
For a lot of years the public have been adultrated with a number of mediocre products and in this are of business the small scale manufacturer cannot compete. The larger companies and industries which manufacture chocolate have always had a monopoly and will probably have forever. However, there is always room at the high end and in the speciality unconventional markets where the huge industrial set ups cannot compete. As a matter of fact a company has too many niches to fulfill. Moreover these large companies measure their sales in thousands of tons and sales in millions of dollars whereas a small scale or home made set up easily measures it in much smaller numbers.
The small chocolate maker is always in a position ready to innovate. Just as in the chocolate industry, you shall see this in the software market, it’s always the smaller software companies who regularly innovate and move the industy and apperently lead them to future. Of course then the biggies just copy them or buy them but it is only the few brave companies who make a fight and push the envelope. And as much has a company like Microsoft has always wanted to chuck off the small programming shops out of the market, they have never been able to do it in reality. This analogy holds for the chocolate industry too. (About.com)
Definition of Terms
Competition
The chocolate retail industry is exteamly competitive. We and our franchisees contend over for numerous businesses for which we offer confectionery goods. Most of the great names and recognited peorsonnal are competitors in this business which have even more financial, marketing and other possessions than we do. In calculation, there is severe competition among the retailers for the real estate sites, store human resources and eligible franchisees. Bloodthirsty market conditions could have a substance adverse effect on us and our consequences of operations and our capability to expand fruitfully.
Consumer Tastes and Trends
The product sale is a lot of times affected by changes in eating habits and consumer tastes, which also includes views on chocolate consumption. There are also a number of other factors which are apperently uncontrollable like demographic trends, weather conditions, traffic patterns and other influences on the sale of products as well as the economic conditions. There could be material adverse effects due to any of these factors and the operational results.
Inflation – Costs of Ingredients and Labor
The increase in the cost of ingredients, energy and also the labour and other inflationary factors also has direct effect on the operations. Other things which are subject to inflation are leases for the cost of living, the taxes and also the maintenances expences. Moreover, the real estate costs for the new facilities and their construction will also be affected by inflation. But, as this becomes a serious concern, there is no surity that these increased costs would be passes on to the customers.
Ingredients Subject to Price Fluctuations
Several of the principal ingredients used in our products, including chocolate and nuts, are subject to significant price fluctuations. Although cocoa beans, the primary raw material used in the production of chocolate, are grown commercially in Africa, Brazil and several other countries around the world, cocoa beans are traded in the commodities market, and their supply and price are therefore subject to volatility. We believe our principal chocolate supplier purchases most of its beans at negotiated prices from African growers, often at a premium to commodity prices. The supply and price of cocoa beans, and in turn of chocolate, are affected by many factors, including monetary fluctuations and economic, political and weather conditions in countries in which cocoa beans are grown. We purchase most of our nut meats from domestic suppliers who procure their products from growers around the world. The price and supply of nuts are also affected by many factors, including weather conditions in the various regions in which the nuts we use are grown. Although we often enter into purchase contracts for these products, significant or prolonged increases in the prices of chocolate or of one or more types of nuts, or the unavailability of adequate supplies of chocolate or nuts of the quality sought by us, could have a material adverse effect on us and our results of operations.
Suitable Sites for Franchised Stores at Reasonable Occupancy Costs
Our expansion plans are critically dependent on our ability to obtain suitable sites at reasonable occupancy costs for our franchised stores in the regional center environment. There is no assurance that we will be able to obtain suitable locations for our franchised stores and kiosks in this environment at a cost that will allow such stores to be economically viable. (Rocky Mountain Chocolate Factory)
CHAPTER III – Results
The hypothesis of setting up a chocolate factory in a multi-cultural area was analyzed. A multi-cultural country, India was taken up and with past data and information regarding chocolate manufacturing, cost of production and selling, and demands taken from other countries like the USA, UK, South Africa a tentative idea was generated for the implementation of the hypothesis in India. Sales factors in India were hence modified to suit the climatic, geographical, and economical conditions currently relevant in India. The demands of the chocolate consumers for various cocoa products were studied and the report thus comes to surmise the following:
- India is an economically weaker country than its western counterparts. However, due to its excellent growth, the number of the luxury seeking rich has been growing at an exciting rate. The quantity of chocolate consumed in the country is thus growing at an excellent rate of over 10% per year.(Scribd)
- Chocolate consumption per annum per capita in India is abysmally low as compared to other nations. An Indian eats only 200 grams of chocolate per year as compared to over 7kgs per year in most developed nations. However the gross consumption in India is as high as 22000 tonnes a year due to its huge population. (Scribd)
- The market of chocolate has grown by around 10-20% and this growth has been consistently at 14-15% over the past five years. This trend is expected to follow for at least the next five years. (Scribd)
- The total consumers in the chocolate market are close to 60 million and these are concentrated in the urban areas. Due to low-income levels in the rural areas, chocolates have not penetrated the household in these areas. Hence, rural India is almost “chocolate-free”. (Scribd)
- Low-priced packets, increased advertisement, increased product outreach and new launches are keeping this growth sustained at around 15%. Due to the low-pricing of some packs, an increase in consumers has been noted who are increasingly looking for a lifestyle not limited to sweets, and chocolates which were earlier viewed as an elitist gift item, are now matching the sales of traditional sweets items during the holiday gifting season.
- Competition in India among the various chocolate manufacturers is high. Several companies like CadburyIndia, Nestle, and Amul apart from various local chocolate manufacturers and home-made chocolate producers compete with international chocolate producing brands.
- Apart from competition with other chocolate manufacturers, a chocolate company must compete with traditional Indian sweets to remain in the sweets industry. This is despite the fact that these chocolate companies are already huge, and have vast amount of capital at their disposal. The various traditional Indian sweets manufacturers, as a single entity gives stiff competition to these chocolate manufacturers.
- Chocolate distribution is governed by traffic patterns, weather conditions, demographic trends and economic conditions which are uncontrollable by any man-made process or entity. Hence, these play a major role in determining the success of newly-started companies.
- Over the past few years, chocolate prices in India have risen substantially due to the increasing taxation on such eatables. The tax structure in India limits the consumption of chocolate for the common man. However, this consumption is hoped to increase once the structure is liberalized.
- Increased costs of labour and raw materials limit the profitability of companies especially since it is difficult to pass on the increased production costs upon the general consumer.
- Sales are seasonal in nature, that is, the demand of chocolate and chocolate based goods increases drastically during the festive seasons.
CHAPTER IV – Conclusions and Recommendations
Summary
The study was made upon various chocolate manufacturing units in India in and around Delhi. Problems related to these companies were discussed with some company officials. These discussions formed the basis of the research for the various problems assaulting the Chocolate Industry. Some deep searching on the internet led one to conclude and surmise the above results, which were found with the help of the references (given in the references section).
The tax structure governing the sales of chocolates in India was studied and analyzed and data pertaining to the sales of chocolates during the various seasons and festivals were observed. This led one to conclude that the sale of chocolates in India mirrors that of the rest of the world – It booms during New Years, Diwali, Raksha Bandhan and Holi.
Rural areas in India were visited and the causes of the low sales in such areas were studied by talking to as many locals as possible. The different mindset of the rural people and their low income gives a perfect explanation for the difference in sales of chocolates in the urban areas to the rural areas.
Thereafter, the multicultural area of Delhi was picked as the target location for the inquisition amongst urban people. Chocolate sales were compared with that of rural areas like the surrounding and nestled villages in the city of Delhi and were matched with that of South Delhi markets.
Next the pioneer of a recently started chocolate company was contacted over the internet and by whose help the process of setting up a plant was come about. In his own words, the setting up process was difficult and time consuming. (About.com)
Discussion
India which shares a vast difference with the USA however, shares a love for sweet consumables. However due to it’s completely different outlook towards life, and lower per capita income, it has always avoided chocolates. Due to this companies in India find it hard to make as much profit as those made by companies in the USA. Despite the lower cost of setting up a manufacturing unit in India, a company in India will not be able to match one in the US.
However looking at it from a completely objective view, Urban India is a good consumer of chocolates. Along with an increasing affinity for the premium-priced chocolates, the general love for the lower bracketed chocolates helps the growth of the chocolate industry in India.
Recommendations
An increasing growth in chocolate consumption in India makes this country a good starting point for a Chocolate based company. The important thing to keep in mind is the availability of raw materials, which may be self produced or imported from other tropical countries, and the availability of labour. This suggests an accessible area of the country which has well established trade routes and has availability of cheap labour. Port areas near Mumbai attract good amount of labour from Bihar, and hence this area seems ripe for the establishment of a factory.
This area is close to the urban area of Mumbai, Pune and other urban areas of South India, which would allow for the need of good demand for chocolate based products. Moreover, these areas are well-connected. Inter and intra transportation is excellent in these areas due to the already established industrial areas nearby.
A new company might face stiff competition from well-established companies. However most of these companies deal in lower-priced chocolates. A market in premium-priced chocolates is still open for the taking. Coupled with an extravagant increase in taste acquired for darker chocolates, this seems as a viable option.