The growth in the chocolate confectionery segment slowed down last year as compared to a healthy 19 per cent growth in volumes during 1996. Even as the volumes growth dropped, the total market size increased by 26 per cent to Rs 430 crore in 1997, from Rs 340crore.

With the slowdown in volumes, companies adopted a cautious approach to undertake price hikes, cutting short the universal consumption-to-price ratio, so as to circumvent any major impact on their bottomlines. In a scenario of low volumes offtake, price increase was prudently undertaken in addition to cost cutting and better financial management. This worked in tandem to maintain profitability in the short term.

Prices of chocolate confectionery products have escalated in the range of 10-20 per cent across the board on almost all products. The price increase is also because of a higher cost of production. This trend has been carried forward in 1998 as well. However, analysts feel, the same tactics will not augur well in the long run, especially when chocolate consumption and purchase in the country is largely driven by impulse. Prices are expected to go up every year by 5-10 per cent in consonance with the inflation rate. This has been the case every year. However, last year was a difficult onewhere companies went on a price hike drive. So far, this year has not been different from what it was in 1997 --low volumes offtake. It is unpredictable as to how the current year would fare for the chocolate confectionery industry. This is notwithstanding the healthy targets set by companies for the current year. Cadbury India has stated that its volumes will increase by 12 per cent per annum for the next three years.

The volumes are expected to come largely from its fast growing sugar confectionery business where the growth has jumped 53 per cent over last year. Sugar confectionery contributes 22 per cent to its total turnover. For 1997, while Cadbury India's total volumes growth (including sugar confectionery and malted food drinks) was around 6 per cent only, the value turnover increased by over 12 per cent. In the case of Nestle India, the sales growth in chocolates and sugar confectionery has been 31 per cent. The volumes growth in the chocolate confectionery segment are said to be more or lessstagnant. Cabdury India has also said that it would launch one major product every year. Product launches have helped a segment beef up demand in the short term, as has been the case with the wafer chocolate or snacking category. This category is seen as fast emerging in the chocolate confectionery industry and is expected to steer the total market growth. However, after an initial phase of an anticipated good growth in this segment, it is said to be tapering out now, say industry observers. Looking at the chocolate confectionery market, the year 1997 did not witness any major activity as far as major brand launches are concerned. Nestle's last major product launch in this segment was KitKat, launched two years back. The company did not launch a chocolate brand of the KitKat stature during 1997. The lack of any great brand initiative and offering is one reason for the slackness, analysts opine. Nestle's leading snack food brand KitKat (competing with Cadbury's Perk) has managed to pick up volumes of 2,500tonnes in the 4,500 tonnes snack food category, nearly half the volumes of Cadbury's flagship brand `Cadbury Dairy Milk'. The growth in this segment is not expected to be as high as previously, and companies will have to supplement this with the launch of new brands in the same category, as in Picnic.

Or, as Cadbury India has spelt it out: the company is willing to go in for low price alternatives for mass franchise to sustain growth. This will help in growing volumes through demand percolation in the non-consuming categories.