Rural Markets Aid Mondelez’s Growth In India

Mondelez International Inc.'s India unit grew in double-digits for the second straight year in 2018 as the nation's largest maker of chocolates expanded its distribution in rural areas and launched new products.

“We continue to see double-digit volume growth in this year and a share gain as well,” Anil Vishwanathan, executive director (chocolates) at Mondelez India Foods Pvt. Ltd., told BloombergQuint in an interaction.

The maker of Oreo cookies and Dairy Milk chocolates said its India sales took a hit in 2016 due to demonetisation.

Mondelez India—the No. 1 player in the nation's chocolate market pegged at $1.8-billion by Euromonitor International—has nearly two-thirds of the market share.

The company said 20-22 percent of its revenue and more than 25 percent of its profits come from rural areas, that is villages which have a population of about 5,000 people.

“Chocolates like Perk, Five Star and Gems, which are available for Rs 5 and Rs 10, see more demand in rural India,” said Hemant Rupani, director of sales at Mondelez India.

Also, Ankur Bisen, senior vice president (retail and consumer products) at Technopak Advisors, said, Mondelez has a wider range of offerings at lower price points compared to peers such as Nestle, which typically has Kit-Kat and Munch at Rs 5 and Rs 10.

A reason these lower price-point chocolates work for Mondelez India is because they can be stored at higher temperatures, and coolers and refrigerators are still not prevalent in rural markets.

Of the 300,000 coolers Mondelez has in India, only 10,000 are in rural areas. But the company is planning to install more coolers in rural India so that it can also stock-up premium chocolates like Cadbury Dairy Milk Silk, Rupani said, adding there's demand for premium products as well in these areas.

Last year, the company launched Rs 100 bar of Cadbury Dairy Milk for the rural market, and Rupani said it “did very well as it was used for gifting”.

The company's growth comes at a time the Rs 13,646.69-crore chocolate category grew at 11.7 percent by value last year, according to Euromonitor International. That compares with 18.9 percent and 13.6 percent rate of growth for the ice cream and savoury snacks category, respectively, during the period.

“India's per capita consumption of chocolate is at 300 grams a year, lower than 5-10 kilograms consumed in the U.S. and the U.K.,” Vishwanathan said.

This implies that there's still a lot of scope to expand in the chocolate market in India.

“Mondelez's chocolates have been around for a really long time in the country due to which chocolates in India have become synonymous with Cadbury,” Bisen said.

There isn't too much competition in chocolates against Mondelez, the company's distributor in western part of Maharashtra said, adding chocolates like Perk, Gems and Dairy Milk see higher demand from smaller towns as well.

Mondelez also sees demand for Dairy Milk Lickables from towns which have a population of around 20,000 people, the distributor said.

The company recently launched Dairy Milk Spready—a chocolate spread—to tap the spreads market in India. The spreads market is estimated at Rs 1,500 crore, of which 30 percent is chocolate spread, according to Nielsen.

Watch the interaction with the management here: