Indian joint venture Godrej Hershey is reported to be introducing chocolate products into amdist strong competition from dominant players such as Cadbury and Nestlé.
Up until now the alliance, established in 2007, was focused on supplying food and sugar confectionery products only in India – the Indian company holds 49 per cent stake in the venture and 51 per cent is held by US based Hershey’s .
"The company (Godrej Hershey) is planning to get into the chocolate business, which is the main business Hershey's has all over the world," Godrej Industries Ltd chairman Adi Godrej said during the company's latest investor conference call.
The alliance has already introduced chocolate syrup into the Indian market from Hershey's portfolio.
Euromonitor claims India is deservedly the focus of many companies' expansion policies as it is a good example of a market in which economic growth is positively impacting demand for more expensive chocolate confectionery items, and there is room for growth.
The growing Asian economies and rising consumer affluence have resulted in consumers gradually trading up from sugar to chocolate confectionery. And the category is expected to outperform both sugar confectionery and gum over the 2008-2013 forecast period, according to a report from market analysts, Euromonitor, last July.
However, competition in the attractive Indian chocolate confectionery market is very strong from rival international players, said the industry researchers.
Cadbury, now Kraft owned, commands almost a 70 per cent share of the fast growing Indian chocolate confectionery market and together with number two Nestlé, their overall value share in 2007 exceeded 90 per cent.
Per capita consumption of chocolate confectionery in India in 2008, noted Euromonitor, was still significantly below that of developed markets, at less than 0.1kg per year compared to 5.4kg in North America.
Hershey's has been establishing joint ventures and manufacturing partnerships in the Asian region to exploit its potential.
In 2007, it started the joint venture with Godrej Beverages and Foods to benefit from the dynamic growth of the Indian confectionery market, and in China, it set up a business agreement with Korean conglomerate Lotte Group to produce Hershey and certain Lotte products for the Asian market.
Hershey's expansion strategy in new Asian markets is delivering dynamic revenue growth, said Euromonitor, noting that in 2008 the US chocolate manufacturer achieved eight per cent value growth in its net sales generated outside the US compared to three per cent in its domestic US market.
The analysts state that keeping up the speed of expansion in new markets is vital if Hershey is to remain competitive in the international confectionery arena against the likes of newly-merged Kraft-Cadbury and Nestlé.
And Euromonitor stresses that although expansion in new markets offers good growth opportunities, it also demands significant investment in marketing and brand building.