In an orbit of its own

Why Mars could have a long wait ahead if it’s looking for success in the Cadbury-dominated Indian chocolate market

Vishal Koul

My children were thrilled when they heard I was joining a chocolate company,” recalls MV Natarajan. Perhaps his 13-year-old daughter and 7-year-old son had images of Willy Wonka’s chocolate factory in mind. From all accounts, the Mars manufacturing facilities in the US aren’t far removed from that fictional candy plant (albeit, not as colourful) — giant vats of chocolate, sorting machines that automatically size, check and reject odd-shaped M&M candy-coated chocolates and, perhaps best of all, vending machines that give employees all the chocolate they want, all day long, all free. Mars International India is more staid in comparison — no factories, no vending machines — although Natarajan admits to keeping a stash of his favourite Galaxy bars on hand and sneaking a bite or three when he’s alone. “I can’t stay away from chocolate for too long,” admits the head of the American confectionery giant’s Indian arm. And his children are much the same, Natarajan adds. 

 What gives him a bigger sugar rush is that his family isn’t the only one with a sweet tooth — across India, craving for chocolate is on the rise. “You will see a lot of action in the chocolate market soon,” Natarajan predicts. “It will be similar to what happened with the telecom or auto sectors in early 2000. The inflection point is approaching even as we speak.” Which makes it even more surprising that Mars has made such a low-key entry into India: three years after it set up a wholly-owned subsidiary in India, it has formally launched only two brands, Snickers and Galaxy. Is this part of a deliberate strategy or has Mars India been knocked out of its orbit?

Surprisingly slow

The developed world seems to have had its fill of chocolate these past few years. Western markets aren’t turning away from chocolate, but growth in those markets is decidedly sluggish, thanks to increasing concerns over obesity and lifestyle diseases. Shoppers, too, have become discerning: with chocolate becoming a treat once again, they prefer to spend a little more on artisan companies, unusual flavours and premium ingredients, rather than just pick up what’s available at the supermarket. 

Very, very chocolate-y

The domestic chocolate market has been growing at 20% a year

On the other hand, markets such as India seem to be only just peeling off the wrapper on their share. Indeed, India is believed to be the fastest-growing chocolate market in the world, clocking over 20% growth in the past five years, which has taken the market from 547,000 tonne in 2008 to 1,292,000 tonne in 2013 (see: Very, very chocolate-y). But it’s still a small bite compared with others — per capita chocolate consumption in the UK is 10.2 kg a year and 5.6 kg in the US, whereas Indians still put away just 100 gm a year. Even that is dominated by one player — Cadbury, synonymous in India with chocolate, rules the category with 57% market share, followed by Nestlé (21%) and Ferrero Rocher (4.7%). (see: Sweet nothings)

With growing disposable incomes and changing consumer tastes, chocolate looks set to become a part of regular consumption instead of a special occasion eat. And, as Natarajan happily points out, it’s no longer only for children. “If I were to rewind to before 2000, chocolate was considered a kids’ product. If an adult ate chocolate in public, he would almost be laughed at.” Mars India’s marketing director Raghav Rekhi points to another encouraging trend in the Indian market: “The market isn’t growing only because the same people are consuming more and more chocolate, but because more people are getting into the category every month.”

Why hasn’t Mars brought out its heavy artillery to take on the established players in the market and quickly reproduce its global leadership here as well? The $33-billion, family-owned business, which has interests ranging from confectionery to pet food, has over 29 chocolate brands sold in 74 countries, including five that are billion-dollar global brands — Mars (called Milky Way in the US), Snickers, Galaxy (also called Dove), M&M and Twix. This is in addition to the various gum, mint and hard candy brands it owns under Wrigley, a company it acquired in 2008 along with Warren Buffett’s Berkshire Hathaway. Mars India, though, has a puny arsenal of just Snickers and Galaxy (launched only in November 2013), although Mars bar, Twix and Bounty are also available in metro markets. (Wrigley India is a separate company.) “We could, hypothetically, launch more brands. But each brand is like a baby. You need to nurture it and do justice to it from the point of view of establishing brand credentials and ensuring its availability,” Natarajan explains. 

Sweet nothings

Most players have minuscule shares in a market dominated by Cadbury

Just what does nurturing brands entail? At Mars India, it first means steering clear of playground fights with the big boys in the yard. Even though the two companies battle it out in developed markets such as Western Europe (the largest market for chocolate) and the US (the biggest consumer by volume), Natarajan is clear that Mars will not play David to Cadbury’s Goliath in the Indian market, nor will it compete head-on with Nestlé and Ferrero Rocher (which is present in India with its iconic spherical hazelnut chocolate as well as Kinder Joy). So much so that he says he has set no market share target for Mars India. “The objective is not to start with a market share. Our play will be to add and be a part of the category growth story in India. So market share will be a derivative of our efforts, not a starting point.” 

He may not have — or may actually not be willing to disclose — market share targets, but Natarajan certainly has a deadline in mind: five years. “We can be in the league of large players by 2019. We’ve come to India with a long-term perspective,” he says.

What will help, believes Natarajan, is that the chocolate market in India is not a zero-sum game, unlike in developed markets. It’s not necessary to take a bite from anyone’s share of the pie — the pie itself can be made larger, creating room for more players. “In a situation where a reasonably large category of a billion dollars is growing upward of 20%, there’s no need to look at it as a pie at all,” he adds. And the trick behind making the market grow enough to accommodate everyone? Make chocolate more than an occasional indulgence.

Seeking satisfaction

Relying on the rising tide to lift all boats seems a risky strategy, especially since the other players in the market are following aggressive growth plans of their own. Market leader Cadbury has been innovating over the past few years with smaller pack sizes and low-priced variants and recently launched 5-Star Chomp that will take Snickers head on, even as group company Toblerone brought out its iconic triangular bar. Cadbury was also the first to venture into the traditional mithai space with its Celebration range, a space new entrant Ferrero Rocher has also staked a claim to. The Italian brand has effectively straddled the two most active segments of the market — gifting among adults with the flagship hazelnut chocolate and children with Kinder Joy — that has led to it getting 4.7% of the market in a few short years. 

Mars, in contrast, still has just over 1% of the market, although Snickers has been around for several years now. Analysts believe that may have something to do with the positioning of the chocolate bar — not as a treat, but as a snack. In keeping with its global positioning, its chocolate is for “anybody between 15 and 50 years”, says Natarajan, but the target group is teenagers. Launched in the US in 1930 and named for a favourite horse of the Mars family, Snickers was initially promoted for its key ingredient — peanuts. By the 1970s, the communication moved to how the chocolate bar was all about satisfaction. 

That positioning has stayed with the brand in India as well, where it aired its first full-length ad film in 2008. The Hindi tagline “Hunger bajaye char, toh Snickers khol yaar” made it pretty clear this was more than a chocolate: it was snack meant to satiate. This was followed by on-ground activations in major metros, aimed at young men in the 16 to 24 age group, involving team sports (tying in with the TVC, which featured a football match) as well as extensive sampling.

Four years later, Mars returned to television with another TVC, this one following its global tagline of “You’re not you when you’re hungry”. The US ads, launched in 2010, had featured Betty White, Aretha Franklin and Liza Minelli. Similar campaigns ran in 55 countries around the world, and the Indian adaptation showed hungry cricketers transformed into tantrum-throwing drama queens (portrayed by Urmila Matondkar and Rekha in a casting coup), till they munch on a Snickers bar. The tagline was also duly adapted to “Hunger achhe achhon ko badal deta hai”. “This just goes to show that sensibilities and the pulse of the consumer is universal for a basic instinct such as hunger,” says Navneet Virk, executive creative director, RK Swamy BBDO, Mars India’s ad agency. Rekhi seconds that thought. “The campaign has done more than its fair share of driving sales. We continue to leverage it even now,” he says. Targeting students also means making the product available at places they are likely to frequent, which means retail stores as well as university canteens as well as having a presence on social media — the Snickers India Facebook page has 1.4 million ‘likes’.

As brand positioning, Snickers as a snack certainly draws attention. But in a country that has a rich tradition and repertoire of snack foods — from samosa, vada pav, dhokla and idli, to sandwiches, frankies and chaat, will chocolate ever be a 4-o’-clock food? Harminder Sahni, founder of retail consultancy Wazir Advisors, agrees. “For ₹15, a consumer can buy two samosas or, by adding another ₹10, a McDonald’s burger. I’m not sure Indians buy chocolate for killing hunger. It continues to be super-discretionary spending and should be positioned as such.”

That’s exactly what Mars is doing with Galaxy. The moulded chocolate bar was formally launched last year with actor Arjun Rampal as brand ambassador. The ad shows Rampal playing himself and sharing the chocolate with a journalist who’s waiting to interview him — the scene is one of pure self-indulgence, underlined by the tagline, “Reshmi ehsaas, resham se bhi khaas”. The Hindi tagline takes last year’s international tagline “Why have cotton when you can have silk?” a step further and also makes a less-than-subtle dig at Cadbury’s Silk chocolate — not that either company or ad agency acknowledge that. 

“Celebrities, if used judiciously and intelligently, can help you break the clutter. Rekha and Arjun Rampal were not used simply to endorse our products. They had clear roles to play in the stories of Snickers and Galaxy as they complement the brand values. They also offered a surprise element,” says Virk. 

The desi touch

If Mars has adopted its global advertising mandate in India as well, the company has shown more flexibility in its products for the local market. Prices have been kept deliberately low. Snickers was soft launched in 2004 at ₹30 for a 54-gm pack, but is now available at a more affordable ₹15 (25 gm) — it’s also recently introduced Snickers miniatures, priced at ₹99 for a 150-gm bag. Galaxy, too, has been launched at ₹15. Rekhi points out that these are the cheapest chocolates by Mars in any market. “These are products we innovated at Mars Inc specifically for India,” he says. Interestingly, Mars India doesn’t manufacture in India yet — the company is scouting for suitable land and should set up its plant in the country in the next 12-15 months, says Natarajan. 

But while it currently imports all of its products from Russia, Holland and Dubai, Mars has nevertheless made significant changes to suit local tastes. In end-2010, Mars launched a vegetarian version of Snickers, minus the eggs found in the original recipe. The ‘green dot’ Snickers sells alongside the regular version, at the same price. “In a country where one third of the population is vegetarian, it was critical to have vegetarian Snickers,” says Natarajan. 

And if you need proof that it is serious about not competing with Cadbury and Nestlé: Mars doesn’t have a rural India strategy. “Chocolates have gained popularity even in rural areas. You can see brands such as Cadbury Dairy Milk Shots and Nestlé Munch priced at ₹2 and Nestlé 5-star priced at ₹5 in village kirana stores. These lower-priced versions compete with sugar confectionery brands that are priced at ₹1,” says Ina Dawer, senior research analyst, Euromonitor. 

Indeed, villages with population over 10,000 are estimated to account for 5% of total chocolate sales in India and the market leaders have all drawn elaborate plans for increasing their penetration into the hinterland. Cadbury, for instance, wants to tap 75% of all villages with population under 5,000 by 2015. 

In sharp contrast, Mars is available in just 100 cities and 100,000 outlets, with a focus on modern trade outlets. Its products are available in 3,000 supermarkets and hypermarket outlets across the country, many of which sport dedicated Snickers stalls. “It brings us within arm’s reach of the modern consumer,” says Natarajan. 

Unlike other FMCG companies, Mars has its own network of distributors who reach out to retailers directly, visiting stores once a week. “We want to ensure the quality of chocolate for the consumers, so we are dealing with retailers directly, investing in chilling infrastructure at kirana stores,” Natarajan says. So far, Mars has supplied a significant number of chillers to small stores for free. The personal touch is
a good idea on a small scale, but the strategy will be difficult to sustain once Mars finally steps out of the cities to expand across the country. And that should happen sooner, rather than later, warn industry observers. “Cadbury is available at 10 times more places than Mars. Reach and availability can make or break the company at this stage,” says Wazir’s Sahni. Natarajan is non-committal. “We are scanning the retail landscape in India,” he says, declining to share details of expansion.

The road ahead for Mars isn’t going to be easy. It is a late entrant in a market where big players enjoy immense brand recall, deep distribution networks and have wide product portfolios to appeal to different customer groups. “At a fundamental level, share has to be taken from traditional sweets and mithaiwalas, not so much other players. The challenge is to reach the right counter, to create the right kind of pull for its brands,” says Sahni. 

Natarajan, though, is optimistic. “We are at the right place at the right time, at least,” he says. He agrees that the Indian consumer is very different from his American counterpart and there is the need to be efficient at every level. “To be sustainable in India, you need to have scale business,” says Natarajan. And he’s certain Mars is getting there. Only, it will take some time: five years, to be precise.