"The new entrants (HLL, GCMMF, & ITC) must have seen an opportunity here" Stefano Pelle, Managing Director, Perfetti India

A highly price-sensitive, extremely low-value, distribution-driven market crawling at 2 per cent growth for the past two years. Not exactly the scenario that gets marketers salivating. So, just why are some of the country's biggest marketers such as Hindustan Lever Ltd (HLL), Gujarat Co-Operative Milk Marketing Federation (GCMMF), and even cigarette czar ITC eager for a lick of the Rs 1,200-crore confectionery market, which includes hard-boiled sugar confectionery, toffees, eclairs, lollipops, fruit rolls, and gum?

Because, it appears, the scenario isn't one of gloom at all. Having weathered the excise whammy (excise was doubled to 16 per cent in 2000), the confectionery market is set to ride a wave like it did until 2000, when the 30 per cent annual growth seemed set to fulfill the prediction of a McKinsey-ficci report that the market would soar to Rs 6,000 crore by 2004. So, has the two-year slump upset the calculations? ''I think it'll (the growth) just happen,'' believes Siva Mohan Reddy, Executive Director of Nutrine Confectionery Company, almost dismissing any adverse impact of the MRP-based excise imposed on this category starting April 1, 2002.

''For us it proved to be attractive. They (HLL, GCMMF, and ITC) must have seen an opportunity here,'' says Stefano Pelle, Managing Director of the Rs 250-crore Perfetti India Private Limited, which rode to leadership position just by seeding the hitherto non-existent segment of deposited-candy with its brand Alpenliebe. Or Rs 185-crore Joyco India, which together with Perfetti grew a laggard segment in gums, where consumption shot up by a phenomenal 20 times over the last five years. Today, Joyco's Boomer bubble gum brand lords over the Rs 165-crore market with more than a 40 per cent share.

Everything for everyone

''It's a fill-in-the-blanks category,'' says Santosh Desai, Executive Vice President, McCann Erickson, explaining how the confectionery market operates. For the category's primary consumers, the 4-10 year-old kids, it is a means to satisfy their 'psychedelic' needs of heightened sense of taste, colour, even sound, with the crackling of the wrapper, the bursting of the bubble. For teens and adults, who are increasingly becoming an extended audience for most marketers and brands, it is a means of oral gratification-the need for something sweet, mouth freshening, or even a convenient way to square off small change.

The beauty of this category is that for most marketers it makes for a natural extension. Take HLL's year-old foray into the hard-boiled confectionery (HBC) segment with ChocoMax, MaxMasti and MaxMagik. With a successful brand in Max, HLL has the advantage of a deep understanding of children (through existing categories like ice cream), unparalleled distribution strength (8.5 lakh urban outlets), and years of experience in managing low-unit price packs like sachets.

Ditto ITC, which reportedly has acquired the Mint-o brand from Candico India, and can literally feed its 2.5 million-strong cigarette-led distribution channel with candies and toffees. Even the Rs 2,258-crore GCMMF, which last year launched two products, Chocolairs and Milklairs, in the Rs 105-crore eclairs segment, did so because of its strengths in milk procurement and manufacturing.

And yet, being an impulse-driven category serving kids, who at best are fickle, the rules of this market are completely different. ''The entire product strategy is price-point led,'' says Sanjiv Kumar, Chairman & Managing Director, Candico. For two reasons. Due to problems of loose change, 25 paise, 50 paise and Re 1 have become intuitive price-points. So you had gcmmf ''launching a Re 1 confectionery,'' in the words of its Managing Director, B.M. Vyas, on Amul's entry into the eclairs market last year. Even HLL is restricting itself to 25 paise and 50 paise in hard-boiled confectioneries.

The bigger reason, however, has to do with pocket-size of its principal consumers, children. Unlike ice-creams and chocolates, which are typically funded by the parents, confectionery are impulse items purchased out of a child's pocket money, which averages Rs 4 per day even for the rich kids in Mumbai and Delhi. Therefore, pricing has to be under Re 1.

Possibly for that reason too, prices of key brands across the industry have remained the same for the past five-to-six years. ''There is a tremendous pressure on margins,'' says Arun Hegde, Managing Director, Joyco India. Little wonder then that companies across the board are making an attempt to move from candies/toffees to higher-priced products like gums, chocolate confectionery, and lollipops, where margins are better. The other option is to target high-volume categories like that of Alpenliebe that target the entire family and not just the kid. ''We can play the realisation game better with gums, and hence shifting our focus from candies to gums,'' notes Karan Gupta, Director, Candico.

"The entire product strategy is price-point led " Sanjiv Kumar, Chairman & MD, Candico

Joyco India is also betting big on two of its recent launches-a Rs 2 chocolate chew, Cloud Nine, and a Re 1 chewing gum called Trex-and reviving its almost forgotten Rs 2 lollipop brand, Pim Pom. Implicit in this product-price migration is the extension of target audience to teenagers and young adults. And if that means having to launch a functional product like a teeth-cleansing chewing gum with baking soda (Perfetti's HappyDent White), so be it. ''The good news is that a lot of adults are consuming confectioneries now,'' points out Perfetti's Pelle.

Why? It could be because consumers have grown and stayed on with the category, or simply because of availability. But nobody knows for sure, or even cares. But what they know is this: you just have to nab the adult consumer. Ergo, everyone but everyone has either launched or launching a product in the fastest-growing Alpenliebe segment. Joyco has Solano, HLL its ChocoMax, and Nutrine is working on an early-July launch of a fruit-flavoured caramel-deposited candy.

Everything Is A Brand

In an historically unbranded category, where there are nearly 6,500 labels in hard-boiled candy segment alone, examples like Perfetti's Alpenliebe point to both the importance and the perils of building a strong brand (Alpenliebe's success has spawned tens of imitators). Brands, as most marketers understand, are about delivering consistency over time. But children look for novelty and excitement all the time. The key, then, is to constantly renew the brand, both through product-variants and promotions. ''The child consumes much more seamlessly than the adult,'' points out McCann's Desai. However, the brand and the promotion is not disaggregated by the kid. Rather they are seen as one.

And yet sometimes this simple fact misses even the seasoned marketer. ''It took both Perfetti and Joyco close to a year to respond to our bubble gum brand Loco Poco's dry tattoos. By then we had swept the market and become number one,'' claims Candico's Gupta. Or take Cadbury and Nestle, two of the world's biggest players in confectioneries, but at the margins of non-chocolate confectioneries in India.

"There is a tremendous pressure on margins" Arun Hegde, Managing Director, Joyco India

The point: It isn't enough to launch a great product or a brand. The trick is to keep on innovating-with flavours, variants, packaging, communication, or just about anything. HLL's strategy of using the mother brand Max, either as prefix or a suffix to sub-brands seems to be born out of this need. In fact, Candico has not spent even a single rupee on television advertising in the past two-years, choosing to put its Rs 4 crore ad budget on just point-of-purchase props, promotions and communicating directly to some 3.5 lakh children in its database.

''There is no grand strategy. You fail with 10 products and the 11th one just beats even your wildest dreams,'' says Candico's Gupta. That, then, is the hope that drives marketers. Perfetti is hoping to achieve that with its recently launched centre-filled chewing gum brand, Center Shock, which could perhaps be the next big thing for Perfetti in India after Alpenliebe. Perfetti India is also in the process of streamlining its acquired brands such as Mentos and Marbels, as a result of Van Melle acquistion worldwide. Similarly, Nutrine is hoping for a hit with its Mango Crème Candy and Parry's with its Joozy Mangoh. Both the companies have virtually exited the gum market and betting solely on candies and toffees. Even Nestle India, which is becoming active in sugar confectioneries after a long hiatus, launched Fox's last year and in March, 2002, Fruitips, a fruit candy priced at 50 paise and Re 1.

Look around and there seems to be a deluge of imported confectionery, at least in the metros. Courtesy: the lifting of QRs in April last year. There is some concern due to brands from countries such as Indonesia, or even the Middle East, being able to launch products not accessible to companies in India. For example, ingredients such as multidol, zylitol and isomalt that go into the making of sugar-free candies are-for health reasons-banned in India.

But the local players aren't too worried. To achieve any critical mass, the imported brands will need to be pumped through at least 7 lakh outlets across the country. A task that a mere importer-distributor is unlikely to come up to. That could also be a deterrent to the entry of international biggies such as Mars, Hershey, Nabisco, Stork and Arcor. But they can always look for acquisitions (Warner Lambert has already signed a distribution agreement with Joyco)), which is another reason why India's confectionery players are all teeth.