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LBSIM 2012-14 Page i
PREFACE
The global markets have witnessed major shifts in the consumers’ behavior that have been
much influenced by the change of technology, innovation, research and development. The
consumers’ needs thus dynamically change in order to respond to the change in the social
and business environment. The corporate and business strategies of companies thus being
developed in the light of capitalising the potential from the markets but however, how the
customer would react to the products and services of companies in new and existing
markets remain the major question. The analysis of consumer behavior thus became the
inevitable and critical part of the overall planning and decision making functions in the
organisation that helped to match the core competencies and capabilities of the
organisation with the needs of the customers that are largely influenced by number of
socio-demographic and psychological factors.
Sweet-toothed Indians have increasingly moved towards premium chocolates due to
growing preference for better quality chocolates. Consumption of premium chocolates by
rural consumers also witnessed a sharp rise in 2012. Interestingly, small pack sizes
experienced a rapid increase in sales across rural areas and tier III cities owing to the
affordability attached to it. In line with the preference for small pack sizes, volume sales of
mini chocolates launched by Mars also started to emerge in 2012.
Consumers are trading up to luxury and premium chocolate, which has given an opportunity
to international brands to enter the Indian market and increase their penetration by
creating an affordable Premium space for the aspirers. Many Indian consumers consider
chocolate assortment boxes to be premium and to be more hygienic and longer-lasting than
traditional Indian sweets. This mindset has contributed to increased sales as the popularity
of seasonal gifting of chocolate, particularly during Diwali, has grown in recent years.
This project is an attempt to understand the industry, its key success factors and draw a
framework for developing a road map for success.
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DECLARATION
I AbdurRahman the undersigned, a student of LalBahadurShastri Institute of Management,
New Delhi, declare that this project report titled “Understanding the Determinants of Consumer
Decision Making Process in Premium Chocolate Category” is submitted in partial fulfillment of
requirement for the Theme Paper during the Post-Graduation Program in Management.
This is my original work and has not been previously submitted as a part of any other degree
or diploma of another Business school or University.
The findings and conclusion of this report are based on my personal study and experience.
LBSIM 2012-14 Page iii
ACKNOWLEDGEMENT
Through this acknowledgment, I express my sincere gratitude to all those people who have
been associated with this project and have helped me with it and made it a worthwhile
experience.
First and foremost, I would like to thank my supervisor of this project, Prof. S.K. Tyagi for his
valuable guidance and advice. He inspired me greatly to work on this project. His willingness
to motivate me contributed tremendously to my project.
Besides, I would also like to thank Ms. Nandi Nailwal (Librarian), for providing me access to
various research journal portals and always helping me out in searching the required papers.
An honorable mention goes to the other library staff of Delhi University for always allowing
me to access their e-library.
I also thank the entire teaching faculties of LalBahadurShastri Institute of Management,
New Delhi, for their kind help in enabling me to conduct this project.
I also extend my thanks to the various people who have shared their opinions and
experiences through which I received the required information crucial for our report.
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EXECUTIVE SUMMARY
Chocolate consumption is gaining popularity in India due to increasing prosperity coupled
with a shift in food habits, pushing up the country's cocoa imports. Chocolate market in
India is pegged at Rs 2,000 crore and is growing at the rate of 18 - 20 per cent per annum.
The global chocolate market is estimated around $80 billion. The Indian chocolate market is
seen growing at a compounded annual growth rate of 15-20%. The Indian chocolate market
is thought to be worth some R1,500 crore and has been hailed as offering great potential for
Western chocolate manufacturers as the market is still in its early stages. Over 70% of
chocolate consumption takes place in the urban areas. Chocolate consumption in the rural
areas is negligible in India. Chocolate market is a highly concentrated market, with Cadbury
having 70 per cent and Nestle around 20 per cent. The two giants have been instrumental in
building up the chocolate market in India with huge investments in product development,
advertising and brand building. Modern trade constitutes about 10% of the overall
chocolate category, or roughly Rs 320 crore, according to Nielsen. Of this, brand Cadbury
Dairy Milk has a share of 35%, while Bournville and Silk together account for 18%.
The premium Chocolate Category is still in nascent stage in a country like India where a large
chunk of the population is under the age of 30 which is considered as the major consumer
of chocolates. Indian stands nowhere when we compare the per capita consumption of
chocolate with other emerging economies as well as developed countries. It therefore
becomes necessary to understand what the Indian customers want and prefers if we want
to tap the vast market. Adding to the burden of the chocolate manufactures is the
traditional mind setup of Indian consumers who are more inclined to consume ‘mithai’
(traditional Indian sweets), as well as gift these sweets on festive occasions. It therefore
becomes an even difficult task for marketers of premium chocolate category to understand
the psyche of Indian consumers.
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TABLE OF CONTENTS
Particulars Page No
Chapter 1: Introduction 1
Chapter 2: Literature Review 5
Chapter 3: Chocolates: A Historical Perspective 9
Chapter 4: Overview Of Some Premium
Chocolate Brands
14
4.1 Lindt 14
4.2 Ferrero 14
4.3 Hershey’s 15
4.4 Godiva 16
4.5 Mars, Inc. 16
4.6 Nestle 16
Chapter 5: Research Methodology 18
5.1 Methodology 18
5.2 Research Design 18
5.3 Objective Of The Study 18
5.4 Scope Of The Study 18
5.5 Sampling Plan 19
5.6 Data Collection 19
5.7 Sources 19
5.8 Questionnaire Design 20
5.9 Methods 20
5.10 Limitations Of The Study 20
Chapter 6: Analysis & Interpretation 21
6.1 Data Interpretation 21
6.2 Analysis 23
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Particulars Page No
Chapter 7: Findings & Recommendation 34
7.1 Findings 34
7.2 Recommendation 35
Chapter 8: Conclusion 37
Annexure
38
References 43
LBSIM 2012-14 Page 1
CHAPTER 1
INTRODUCTION
If people thought that chocolates were just restricted to kids think again. According to a
recent study conducted by a major chocolate brand in India the major consumers of
chocolates apart from kids are teenagers and people between the ages of 15 - 35.
Chocolates which were considered expensive once have now become affordable by one and
all. Most of the chocolate brands in India produce chocolates in different sizes that are
priced according to their sizes. Chocolates like Diary Milk and Five Star can be got for
just ` 10. Chocolates in India are slowly and steadily substituting the mithai or traditional
Indian sweets. Due to the increasing levels of social consciousness people prefer gifting well
wrapped chocolate packets rather than sweets on occasions and festivals. Taking advantage
of this situation the top chocolate brands in India are now concentrating on the packaging
and are introducing well packaged chocolates for specific occasions.
Chocolate consumption is gaining popularity in India due to increasing prosperity coupled
with a shift in food habits, pushing up the country's cocoa imports. Chocolate market in
India is pegged at Rs 2,000 crore and is growing at the rate of 18 - 20 per cent per annum.
The global chocolate market is estimated around $80 billion. The Indian chocolate market is
seen growing at a compounded annual growth rate of 15-20%. The Indian chocolate market
is thought to be worth some R1,500 crore and has been hailed as offering great potential for
Western chocolate manufacturers as the market is still in its early stages. Over 70% of
chocolate consumption takes place in the urban areas. Chocolate consumption in the rural
areas is negligible in India. Chocolate market is a highly concentrated market, with Cadbury
having 70 per cent and Nestle around 20 per cent. The two giants have been instrumental in
building up the chocolate market in India with huge investments in product development,
advertising and brand building. Modern trade constitutes about 10% of the overall
chocolate category, or roughly Rs 320 crore, according to Nielsen. Of this, brand Cadbury
Dairy Milk has a share of 35%, while Bournville and Silk together account for 18%.
India, stands nowhere even near to these countries when compared in terms of Per Capita Chocolate Consumption. (Data sourced from LMC International, The world cocoa market outlook).Chocolate and confectionary market is valued around US$ 282.6mn and which is divided into three main sectors or groups namely sugar boiled confectionery with US$ 65.2mn, next comes chewing and bubble gums with US$ 87mn and the major chunk goes to milk chocolate with US$ 130mn.Chocolate Consumption Structure by age groups are as follows-
Children 55%
Adults 12%
Young Adults 33%
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(Data sourced from Overview of Indian consumer goods)
The chocolate market in India grew by 19 per cent and reached the market value of INR 17.9bn(2007), low consumption patterns have been changing due to the raising
economy(www.just-food.com). The market is divided into two segments urban and rural segments, the consumption of chocolate is higher in urban areas and lower in rural segment,the growth rate of urban is higher( Data sourced from Overview of Indian consumer goods). This poses a high potential for chocolate manufacturers as the raise in population who are opting for chocolates as alternatives as local mithai's, as a part of cultural transition due to the high influence of western cultures at work and other areas(The Dark Chocolate Rush).
As per a recently published report by TechSci Research, India's chocolate market is expected to reach $3.2 billion by 2018 due to increasing gifting culture in the country and increase in the income bracket.
DevendraChawla, president (Food Bazaar) at the country's largest retailer Future Group, says Indian consumers are upgrading their mithai consumption with chocolates, leading to premiumisation in the category.
Chocolate consumption in India has almost doubled since 2008, with sales of chocolate increasing from $418 million in 2008 to $857 million in 2011. Volume has grown strongly too in the past few years, to reach 88 thousand tonnes in 2011 – up from 50 thousand tonnes in 2008. This equates to a per capita consumption of 70 grams in 2011 – up from 40 grams in 2008.
While domestic consumption in India is currently low if compared with other more mature markets, such as Germany at 8 Kg per head, or the United Kingdom and France at 6 Kg respectively, there is huge potential for the Indian chocolate market to grow even further.
DeepaDsouza, Trend and Innovation Consultant – India at Mintel, said: “Chocolate consumption in India has seen an incredible growth rate in the past few years, especially in urban and semi-urban areas. Until a few years ago, chocolate confectionery was considered a premium in comparison to sugar and gum confectionery, but major players in the market have found channels to manufacture and distribute their products at more affordable prices than before. This has given the Indian consumer an array of choice whilst giving manufacturers a level game field to compete, especially in the Premium and Affordable Premium segments. Local companies are much smaller in volumes and operate at more regional levels.”
The chocolate confectionery industry has been quick to respond to this untapped market opportunity. Looking at new product launches in India, Premiumisation as a claim has seen a 100% growth over last three years, from 4% of launches in 2008 to 6% in 2011.
Also Seasonal launches have proved to be particularly dynamic across the market, with 300% increase between 2008 and 2011, accounting for 7% of total launches in 2011 vs 2% in 2008.
LBSIM 2012-14 Page 3
Consumers are trading up to luxury and premium chocolate, which has given an opportunity to international brands to enter the Indian market and increase their penetration by creating an affordable Premium space for the aspirers. Many Indian consumers consider chocolate assortment boxes to be premium and to be more hygienic and longer-lasting than traditional Indian sweets. This mindset has contributed to increased sales as the popularity of seasonal gifting of chocolate, particularly during Diwali, has grown in recent years.” Deepa explains.
However, all is not as sweet as it appears. The chocolate confectionery market in India is facing challenges, such as keeping costs low for mass markets and health issues.
“The key challenges that the chocolate market is facing in India are inflationary pressures on raw material prices, lack of government initiative, high entry barriers due to duopolistic market and price-sensitive consumer. Rising sugar and cocoa prices are putting pressure on companies to innovate with ingredients and packaging to offer better prices for the mass market.” Deepa concludes.
Moreover, as the chocolate confectionery category suffers from being associated with negative health, brands are working to manage this perception and introduce elements of enhanced health messaging. Indeed, according to Mintel’s research, new product development with Antioxidant claims grew 400% in the past four years (2008/2011) and Low/No/Reduced Transfat, Low/No/Reduced Calorie and Diabetic claims all posted 200% growth in the same period, suggesting that the prospects for market growth in this segment are very positive
While the Indian chocolate confectionery industry is thriving, more mature chocolate markets across Europe are experiencing a slowdown. For example, in Germany volume consumption declined from 770 thousand tonnes in 2008 to 700 thousand tonnes in 2011, and in the UK it fell from 362 thousand tonnes in 2008 to 350 thousand tonnes in 2011.
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CHAPTER 2
LITERATURE REVIEW
Consumer behavior can be defined as “the behavior that consumers display in searching
for purchasing, using, evaluating, and disposing of products and services that they
expect will satisfy their needs” (Schiffman&Kanuk, 2004). Consumer behavior pays
attention to people’s consumption-related activities and explores the reasons and the
forces that impact the choice, purchase, use, and disposition of goods and services, so
as to satisfy individual’s needs and wants (Hanna & Wozniak, 2001). It is influenced by
consumers’ internal processes in terms of choices and tendencies, for instance, their
own thinking, feelings, and desires. It is also affected by some environmental factors, for
example, social forces, economic, situational, retail, and promotional considerations.
- Willingness to Buy
Dodds et al. (1991) defined the willingness to buy as the probability linked to a
purchaser’s intent to purchase a product. Purchase intention is thus synonym with
willingness to buy, since it is, as Dodds et al. (1991) and Grewal et al. (1998) pointed
out, the willingness of a consumer to buy a particular product. Purchase intention can
be defined as a consumer’s intention to purchase a product or service. It relates to
one’s purchase behavior even though it does not necessarily lead to consumers purchase
behavior (Chandon et al., 2005; Fitzsimmons & Vicki, 1996; Morrison, 1979; Morwitz et
al., 1993). It is considered the best predictor of individual behavior as it reflects a
consumer’s purchase probability, independently of other relevant factors that could
influence consumer behavior and decisions (Young et al., 1998).
- Perceived Value for Money
When consumers make a purchase decision about one foreign-branded product, they not
only consider the price of the products, but also the product characteristics, quality
and perceived value (Smith & Sparks, 1993; Omar, 1995; Burt & Sparks, 1995). Consumer
demonstrates an anticipation of expected or purchase perceived value from the
purchase of a foreign product or service based on future benefits and sacrifices.
These purchase sacrifices expectations include purchase, use, repair and psychological
costs. It also includes the time to purchase, use and repair, at the time of the
consumer’s purchase. Some of these costs can be evaluated, and some will be unknown
(Spreng et al., 1993). It can be argued that in so doing, the consumer perceives the value
for money. As Tsai et al. (2004) indicated, the perceived value of products will have a
positive impact on the willingness to buy. Numerous leading companies are now fully
aware that the creation of outstanding consumer value is the only secure way to
achieve sustainable financial and market success (Coopers & Lybrand, 1998). Monroe
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(1990) considered perceived value to be an antecedent to a person’s willingness to
buy. It is also the result of perceived product quality and perceived sacrifice.
- Country Image
Academics studying consumers’ willingness to buy foreign-branded products have paid
much attention to the influence of country image on a product (e.g. Amine et al., 2005;
Hsieh et al., 2004; Laroche et al., 2005; Lee & Ganesh, 1999; Mossberg &Kleppe, 2005;
Peterson &Jolibert, 1995; and Pereira et al., 2005). Consumers tend to have a favorable
attitude toward products made in foreign countries. And many of them base their
evaluations of products on the country image factor. Pereira et al. (2005) pointed out that
country-of-origin is rooted in the country image construct. Country image can be defined
as “the total of all descriptive, inferential, and informational belief about a particular
country” (Martin &Eroglu, 1993). It refers to information pertaining to where a product is
made. In addition, as Bone and France (2001) argued, graphical representations have a
significant and long-term influence on product beliefs and purchase intentions, even if
extremely tangible verbal information is used. Country image can refer to “country of
manufacture”, “country of assembly” and “country of design” (Han &Terpstra 1988;
Hamzaoui&Meruka 2006; Ahmed &Astous 1996; Bilkey&Nes 1982; Klein et al., 1998). It is
considered a cue capable of summarizing information on products, brands and companies
from different countries.
- Product Beliefs
Product beliefs with respect to a given origin are considered to have a positive effect on
consumers’ willingness to buy products of foreign origin (Hsieh et al., 2004; Laroche et
al., 2005; Orbaiz& Papadopoulos, 2003). Typical – and somehow stereotyped - reactions
to foreign products include: ‘German, Swedish and Japanese cars are excellent’ (Jaffe
&Nebenzahl, 2001); ‘French wines are superb’; and ‘Japanese home electronics are
reliable’ (Liefeld, 1993), which are quite different from the perception and evaluation say
of Russian cars (unreliable and outdated), Brazilian electronics (unsafe and flimsy), or
Israeli fashion (unglamorous) (Baughn&Yapark, 1993; and Verlegh&SteenKamp, 1999).
In addition, a positive country image could result in positive beliefs about the country’s
products, and positive beliefs could result in positive willingness to buy, product beliefs
in a given origin is regarded to have positive effects on one’s willingness to buy products
of origin (Hsieh et al., 2004; Laroche et al., 2005; Orbaiz& Papadopoulos 2003).
- World-Mindedness
As the global market is embedded in broadly shared values and practices that reflect
global social needs, all the world’s people share the benefits of globalization. World-
mindedness helps consumers know and accept foreign brands. Today’s global
awareness means the global market is embedded in broadly shared values and
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practices that reflect the effects of globalization (Mushkat, 2003). Consumers around the
world are developing a common taste and desire for international brands, which on the
other hand seek to establish some uniformity of taste among consumers through their
marketing and advertising campaigns. World-mindedness can be defined as a mixture of
cultures with an appreciation for world sharing and common well-being (Sampson &
Smith, 1957).
As Barnes and Curlette (1985) argued, realistic patriotism and a global perspective are
not diametrically opposed. Most Indian consumers have a greater tendency to tolerate
other cultures. Their consumption tends thus to be open and does not limit itself to
domestic products, all the more as consumers do travel more and more, experiencing
thereby attitudes and lifestyles in other countries directly. And through global media
and the internet, consumers’ awareness of the others and interest in other cultures are
growing; hence, today’s greater cultural openness and adaptability as well as a willingness
to try unfamiliar products typical of other cultures’ lifestyles. According to Rawwas et al.
(1996),consumers with high levels of world-mindedness tend to give higher quality
ratings to foreign branded products.
Though consumer perceptions of price, quality, and value are considered pivotal
determinants of shopping behavior and product choice (Bishop 1984 Doyle 1984;
Jacoby and Olson 1985, Sawyer and Dickson 1984, Schlechter 1984), research on
these concepts and their linkages has provided few conclusive findings. Research
efforts have been criticized for inadequate definition and conceptualization (Monroe
and Krishnan 1985; Zeithami 1983), inconsistent measurement procedures (Monroe
and Krishnan 1985), and methodological problems (Bowbrick 1982; Olson 1977; Peterson
and Wilson 1985). One fundamental problem limiting work in the area involves the
meaning of the concepts: quality and value are indistinct and elusive constructs that
often are mistaken for imprecise adjectives like "goodness, or luxury, or shininess, or
weight" (Crosby 1979). Quality and value are not well differentiated from each other
and from similar constructs such as perceived worth and utility.
Because definition is difficult, researchers often depend on unidimensional self-report
measures to capture the concepts (Jacoby, Olson, and Haddock 1973; McConnell 1968;
Shapiro 1973) and thus must assume shared meanings among consumers. What do
consumers mean by quality and value? How are perceptions of quality and value
formed? Are they similar across consumers and products? How do consumers relate
quality, price, and value in their deliberations about products and services? This article
is an attempt to provide answers to these questions by:
. defining the concepts of price, quality , and value from the consumer's perspective,
. relating the concepts in a model, and
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. developing propositions about the concepts, examining the available evidence in
support of the propositions, and suggesting areas where research is needed.
THE LUXURY BUYER
The luxury chocolate market continues to embrace the mainstream –and not justin
developed economies. “The psychology is that even expensive chocolate is an affordable
luxury,” says Marcia Mogelonsky, Global Food Analyst at researcher Mintel. Chocolate is
becoming increasingly premiumized, and brands such as Godiva and Lindt have become
almost mass market as consumers develop ataste for everyday glamour. Godiva, which has
increased its sales from US$400m to almost US$700m in 10 years and is now owned by
Turkey’s Yildiz Holdings, plans to become a staple for the health-conscious, sweet toothed
consumer. “Our revenues have increased in all our markets, especially in China and Japan,
which are the most important markets right now,” Godiva CEO Jim Goldman has said.
“*Marketing our product+ is a balancing act. And it’s different in every country. We do retain
our prestige… but we have to be relevant.” In Russia, the chocolate market is expected to
grow 45% over the next five years, to reach US$11.6bn, says Euromonitor. Belgian artisan
chocolatier Jean-Philippe Darcis has his eye on the country, predicting: “The market will
evolve and people will have more buying power.” Lindt is enjoying double-digit sales growth
in the Middle East. In China, rich dark chocolate is thriving, with Ferrero Rocher and artisan
chocolate maker Senz launching exclusive premium dark brands in the last two years.
Unsurprisingly, larger manufacturers are keen to get abite of this burgeoning sector but,
without the personal story required to sell such products, they can struggle. The solution:
purchase artisan brands and market them as separate entities –large producers’ economies
of scale mean this phenomenon makes life hard for surviving artisan brands. Mars has Ethel
M, Nestlé bought MaisonCailler and Hershey owns Dagoba and Scharffen Berger. “It may
sound counterintuitive, but what’s happening in the *global financial+ crisis is aquest by
consumers for value, for more affordable products, but also for products that overtake their
expectations,” says Laurent Freixe, head of Nestlé’s European business. However, large
manufacturers with designs on artisan businesses must be careful. “Consumers like artisan
companies because they are high quality and unique,” warns Mary Nanfelt, Food Analyst at
IBISWorld. “That uniqueness and independence must remain.”
The literature review also provides clear evidence that information about food products
may shape the tasting experience of consumers (Deliza and MacFie, 1996). Experiments
have shown that hedonic and analytic sensory judgments can be influenced by information
about a food product and/or its production. For instance, information about the origins of
the flour from which a bread was made—organic versus non-organic—was found to change
the preferences for bread (Kihlberg et al., 2005). Consumer preferences toward a beer were
found to be influenced by information about its manufacturing technology (Caporale and
Monteleone, 2004).
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CHAPTER 3
CHOCOLATE: A HISTORICAL BACKGROUND
The story of chocolate began in the new world with the Mayans, and also the word
chocolate comes from the Mayan word xocoatl, and the word cocoa from the
azleccacahuati, who drank a dark brew called cacahuaquchtl. Later, the Aztec consumed
chacahoua and used the cocoa bean for currency. In 1523, they offered cocoa beans to
Cortez, who introduced chocolate to the world, where it swiftly became a favorite food
among the rich and noble of Europe.
From the beginning, turning raw, bitter cocoa beans into what one 17th century writer
called “the only true food of the gods” has been a fine art, a delicate mixture of alchemy and
science. Centuries ago it was discovered that fermenting and roasting the beans could
create an almost otherworldly flavor. In 1875, after years of trying, a 31-year-old candy
maker in vevey named Daniel peter figured out how to combine milk and cocoa power.
The ancient Aztecs believed chocolate
To be the “FOOD OF THE GOD”
Firstly, there is a need to know about the chocolate…that what is chocolate. Why chocolate
is the most popular dessert flavoring around.
The word chocolate comes from the Mayan word xocoatl, and the word ‘cocoa’ from the
Aztec cacahuatl. In Mexico, the beverage was called chocolath, from lath (water) and choco.
Supposedly the Spaniard found the Mexican word har to pronounce and called it cacao.
Chocolath, chocolath, chocolath. Puff puff. See? I did it! (But let’s stick to cocoa) *LoI*
From cocoa to chocolate
Sorting, clearing, frying, crushing, grinding is the only small part of stages of production
cycle transforming cocoa beans in chocolate, which we eat.
Chocolate is really the unique product, tasty, highly nutritive (about 550 kkal in 100gm of a
product), capable to be stored by years without change of properties. It contains 50-55% of
carbohydrates, 32-35% of fat, 5-6% of fibers. And also tannin substances (4-5%),
stimulators-the bromine and caffeine (1-1.5%), microelements Na, K, Mg, P, Fe and vitamins
B1, & B2.
The discovery of cocoa was only a first step in the direction of chocolate. The Mayas were
the first to cultivate the cocoa bean for the fruits it yielded. They used the beans as an
ingredient in their favorite chocolate drink ‘xocotlatl’.
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Legend suggests that the first beans came out of paradise and lent wisdom and power to
the person that ate them. For obvious reasons, the use of cocoa was kept to a minimum by
the emperors.
Before the Spanish explorers discovered the New World, chocolates and other “exotic”
foods were totally unknown in Europe. Columbus was the first European to become
acquainted with cocoa, but he wasn’t exactly impressed.
During one of his conquest in the New World he met the Aztecs. For many generations, they
drank an infusion of grilled seeds and spices. This mixture tasted disgusting and it also
contained cocoa beans. The Aztecs adopted the ides of cocoa consumption from the Mayas.
However the conquistadors pizzaro and, in particular, Cortes did show interest in the bean.
Fernando Cortes reached the east coast of Mexico in 1519. as an honored guest of
Montezuma (Aztec emperor and inveterate chocolate fanatic) he was offered xocotlatl –a
small portion of aromatic chocolate drink mixed eith vanilla, pepper and other herbs.
For the Mayas, cocoa beans were very important, not only were they a poplar means of
exchange, they also had a religious value. The Mayas sacrificed cocoa beans at the funerals
of the upper class.
EVOLUTION OF CHOCOLATE
(1753-1849)
1753 Swedish biologist Carolus Linnaeus revealed his feeling for chocolate while attending
to the task of classifying organisms in a binomial system. To the chocolate
tree he gave the botanical name of theobroma cacao. Cacao refers back to the original
native language. Theobroma is a Latin term that translates to “food of the gods”.
In 1765 the Englishman James Watt invented the steam engine and in doing so set in
motion what we now refer to as the industrial revolution. Around the same time in the
colony of Massachusetts one of the first machine oriented chocolate manufacturing
businesses was being established. The partnership of John Hannon, an Irishman, and Dr.
James Banker of the Massachusetts colony formed the company Hannon’s Best chocolate.
Through the use of an old grist mill, cacao beans were ground into chocolate liquor, pressed
into cakes of paste for eventual use as a chocolate beverage. During a routine trading
mission to the West Indies, Hannon was presumed dead when his ship failed to returned.
The name of the company subsequently changed to the Baker Company. It was not until
1927 that the Baker family sold their business to General Foods.
1774 The mysterious rumors that surrounded the death of pope clement XIV, give
credence to the notion that chocolate had become a favorable way of distinguish poison.
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The pope died after consuming a chocolate beverage, which also killed the unwritten
confectioner who shared in the consumption. Through there is no proof, the Jesuits are
suspected to have arranged his demise. The pope had been in opposition to the Jesuits, and
they were known chocolate drinkers. So the conclusion, while not provable, is not
unfounded.
1819 Francois Louis Cailler opened a chocolate factory on lake Geneva near Vevey. He
used machinery he had developed himself, making him a pioneer in the evolution of Swiss
chocolate.
1828 Chocolate maker and chemist Coenraad Van Houten developed the process now
known as “Dutching.” His patented invention involved the removal of close to half of the
cocoa butter from chocolate liquor through the use of hydraulic pressure. The removal of
the cocoa butter resulted in a commensurate decrease in fat content. Instead of fifty
percent, the hard cake that was let from this process had a fat content of only Twenty-Five
percent. The cake could then be crushed into a powder. The use of alkaline salt allowed for
easier mixing with warm water. It also made the color darker and had the pleasing affect of
a less bitter taste. This invention would be the key in the development of chocolate as a
confection.
1847 Joseph Fry was a Quaker who began manufacturing chocolate under the name of
Joseph Fry & Sons. While the original Joseph Fry left the company to become a type
founder, his sons continued the business. One of his sons, another Joseph Fry, purchased a
Watts steam engine in 1789 to more efficiently grind cacao. A great-grandson of the original
Joseph Fry led the business toward the development of edible chocolate. Hoe found that by
remixing some of the cocoa butter back into the processed “Dutched” cocoa powder and
adding sugar, a paste was formed that could be pressed into molds. The effect of this was a
chocolate bar that gathered as much attention as chocolate beverages had.
1849 Ghirardelli, an Italian native, planned early on having a chocolate business. However,
he traveled first to Uruguay and then to Peru before setting in California in 1849. Though he
had been attracted by the Gold Rush, he soon learned that there was more reliable profit to
be had selling tents to other gold miners than in actual mining. He used the money he saved
and started the Ghirardelli chocolate factory, which is still located in San Francisco.
(1850-1986)
1850’s Prime Minister William Gladstone, in an effort to boost the economy, lowered the
taxes on cacao beans, allowing British manufacturers to expand their market.
1860 British FDA is founded. A British journal called the Lancet discovered that many
chocolate manufacturers were employing various methods of “Cutting” chocolate with
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something less expensive. One report revealed that cocoa powder was being thinned with
brick powder. Stirred to respond, the British government passed its first food and drug act in
1860.
1868 John Cadbury was another Qyaker who became interested in chocolate production.
In 1824 he had opened a Grocery store in Birmingham, England. Cadbury featured cacao
beans that he would roast and grind himself. In time he realized the interest and
profitability in changing his focus to manufacturing of chocolate. Cadbury became so
renowned that he received a Royal Warrant in 1854 to be the single cocoa and chocolate
provider for Queen Victoria. Richard and George Cadbury took over their father’s business
and in 1866 purchase a Van Houton machine. They began to market Cadbury cocoa powder.
By 1868, the Cadbury Company produced the first box of chocolate candies. Their business
continues to flourish, and in 1879 they took over the Birmingham suburb of Bourneville. The
factory they built there supported a town, providing both worker housing and recreational
facilities.
1879 During the same period that Cadbury was developing into a formidable chocolate
force, a Swiss chocolate manufacturer was struggling to find a way to combine chocolate
with milk. Daniel Peter could not produce something with a smooth consistency because the
milk could be made more shelf-stable for use a baby formula. The product of Nestle’s
experimentation was a sweetened condensed milk. The new milk, which had lesser water,
was mixable with chocolate and made a product that would not spoil easily. Henri Nestle
and Daniel Peter formed a company in 1879. Today, the largest food company in the world
is Nestle.
1879 A conching machine was created in 1879 that allowed for the smoothest chocolate
yet. Rudolf Lindt used a concave granite bed where chocolate liquor, sugar, and milk if
desired, would be ground back and forth by heavy rollers. Lindt named his chocolate
Fondants because their texture was as smooth as the popular creamy candies. The process
of conching soon became a part of common chocolate manufacturing. In addition, the
friction of the rollers produced a heat that made roasting an unnecessary steps. Today, the
rollers in conching machines are kept at a controlled temperature for an even higher quality.
1893 Milton Suavely Hershey was a Mennonite from Pennsylvania who owned a caramel
manufacturing plant. When he visited the world Colombian Exposition in Chicago his
interest was initially to purchase and use machines to make chocolate covered candies. His
interest changed course after visiting Europe and researching the many chocolate
manufacturers there. Hershey then decided to focus his business on chocolate production
and in 1900 he introduced to the world the milk chocolate Hershey bar. It was followed five
years later by the Hershey kiss. With business expanding beyond expectation, Milton
Hershey took over the town of Derry Church, Pennsylvania and renamed it Hershey.
Thought he also developed a Hershey, Cuba around a sugar mill he owned, Milton Hershey
LBSIM 2012-14 Page 13
was focused out of Cuba in1959 when Castro gained control. Today Hershey, Pennsylvania is
an impressive tourist attraction.
1908 The triangular Toblerone chocolate bar was created and launched into market by
Swiss chocolate maker Jean Tobler.
1913 Swiss chocolate maker Jules Sechaud invented the chocolate filled bonbon.
1929 At the end of the twentieth century Cella’s Confections, on West Broadway and
canal, was a part of many factories that made up New York City’s confectionary district. In
1929 their candy factory began manufacturing chocolate-covered cherries. Today, while the
other confectioneries have disappeared, Cella’s remains.
1936 Philip Silverstein owned a candy company on Delancey Street in New York City. In
1936 he created a thick, nut and raisin filled chocolate bar, known as the Chunky Bar.
1940’s As the United States geared up for a war in Europe, Militon Hershey suggested an
addition be made to the standard soldier’s “D-Ration.” The American military began to
include three 4 ounce, 600 calorie chocolate bars in each “D-Ration.” While from today’s
perspective this may seem odd, the Aztecs had used chocolate for the edification of their
own warriors. In addition to lifting the energy and spirits of the troops during World War II,
the chocolate bars became associated with peace, as malnourished holocaust survivors
were rescued by American troops offering chocolate.
1986 When Jim Walsh left his life as an adventures executive in Chicago, he decided to
move to Hawaii to start a chocolate business. He purchased plantations on Kea’au and Kona,
and decided to use the fine criollo cacao beans for his foundation. The beans he harvested
are sent to California, after they have been fermented and dried, and are processed into
high quality chocolate. Only available through mail order, the chocolate is used primarily by
pastry chefs.
LBSIM 2012-14 Page 14
CHAPTER 4
OVERVIEW OF SOME OF THE PREMIUM CHOCOLATE BRANDS
4.1 LINDT
The origins of the company date back to 1845. David Sprüngli-Schwarz and his son, Rudolf
Sprüngli-Ammann owned a small confectionery shop in the old town of Zurich, to which two
years later a small factory was added to produce chocolate in solid form.
With the retirement of Rudolf Sprüngli-Ammann in 1892, the business was divided between
his two sons. The younger, David Robert, received two confectionery stores that became
known under the name ConfiserieSprüngli. The elder brother, Johann Rudolf, received the
chocolate factory. To raise the necessary finance for his expansion plans, Johann Rudolf
converted in 1899 his private company into "ChocolatSprüngli AG". In that same year, he
acquired the chocolate factory of RodolpheLindt in Bern and the company changed its name
to AktiengesellschaftVereinigteBerner und
ZüricherChocoladefabrikenLindt&Sprüngli (United Bern and Zurich Lindt&Sprungli Chocolate
Factory Ltd.).
In 1994, Lindt&Sprüngli acquired the Austrian chocolatier, Hofbauer, and integrated it along
with its Küfferle brand into the company. In 1997 and 1998, respectively, the company
acquired the Italian chocolatier, Caffarel and the American chocolatier, Ghirardelli, and
integrated them into the company as wholly owned subsidiaries. Since then, Lindt&Sprüngli
has expanded the once-regional Ghirardelli to the international market.
On March 17, 2009, Lindt announced the closure of 50 of its 80 retail boutiques in
the United States because of weaker demand in the wake of the late-2000s recession.
Lindt&Sprüngli has six factories located in Kilchberg, Switzerland; Aachen, Germany; Oloron-
Sainte-Marie, France; IndunoOlona, Italy; Gloggnitz, Austria; and Stratham, New Hampshire
in the United States. The factory in Gloggnitz, Austria manufactures products under the
Hofbauer and Küfferle brand in addition to the Lindt brand. Caffarel's factory is located
in Luserna San Giovanni, Italy and Ghirardelli's factory is located in San Leandro, California in
the United States.
After Lindt recorded net profits of 4.7 million in the 2011 calendar year, it was stated by the
marketing team that its market share amounted to 29%, surpassing its past year.
4.2 FERRERO
Ferrero SpA (Italian pronunciation: *ferˈrɛːro+) is an Italian manufacturer of chocolate and
other confectionery products. It was founded by confectioner Pietro Ferrero in 1946 in Alba,
Piedmont,Italy. The company saw a period of tremendous growth and success under
Pietro's son Michele Ferrero, who in turn handed over the daily operations to his sons. His
LBSIM 2012-14 Page 15
son Pietro (the founder's grandson), who oversaw global business, died on April 18, 2011, in
a cycling accident in South Africa at the age of 47. Reputation Institute's 2009 survey ranks
Ferrero as the most reputable company in the world. Ferrero SpA is a private company
owned by the Ferrero family and has been described as "one of the world's most secretive
firms". The Ferrero Group worldwide – now headed by CEO Giovanni Ferrero – includes 38
trading companies, 18 factories and approximately 21,500 employees. Ferrero International
SA's headquarters is in Luxembourg. Its German factory is the largest of all and Pasquale
Giorgio is its current CEO. In July 2013, Ferrero entered Myanmar markets, being granted
permission to distribute its products locally.
In 1946, Pietro Ferrero invented a cream of hazelnuts and cocoa, derived from Gianduja and
to be spread on bread, and called it Pasta Gianduja. Ferrero created the new company to
produce and market it. Later on his sons became joint chief executives. Michele
Ferrero modified his father's recipe to produce Nutella, which was first sold in 1964 and has
become popular around the world.
The company places great emphasis on secrecy, reportedly to guard against industrial
espionage. It has never held a press conference and does not allow media visits to its
plants. Ferrero's products are made with machines designed by an in-house engineering
department.
In addition to Nutella, Ferrero produces many other products, including Ferrero
Rocher, Pocket Coffee, Mon Chéri, Giotto, ConfetteriaRaffaello coconut cream
candy, Hanuta chocolate hazelnut-filled wafers, the Kinder line of products, as well as
the Tic Tac breath mints. A dark chocolate version of the Ferrero Rocher is also available,
called the Ferrero Rondnoir, which contains a pearl of dark chocolate in the center instead
of a hazelnut, chocolate cream instead of hazelnut cream and crunchy chocolate bits instead
of crushed hazelnuts. There is also acoconut version, ConfetteriaRaffaello, which contains
coconut cream surrounding an almond and covered with meringue and shredded coconut.
The Ferrero Prestige collection is a set of threepralines: Rocher, Rondnoir, and a coconut
version called Garden Coco. The Garden Coco candy is similar to the ConfetteriaRaffaello,
but has milk cream instead of coconut cream.
4.3 HERSHEY’S:
The Hershey Company, known until April 2005 as the Hershey Foods Corporation and commonly called Hershey's, is the largest chocolate manufacturer in North America. Its headquarters are in Hershey, Pennsylvania, which is also home to Hershey's Chocolate World. It was founded by Milton S. Hershey in 1894 as the Hershey Chocolate Company, a subsidiary of his Lancaster Caramel Company. Hershey's products are sold in about sixty countries worldwide. In addition, Hershey is a member of the World Cocoa Foundation.
Hershey is one of the oldest chocolate companies in the United States, and an American icon for its chocolate bar. It is one of a group of companies established by Milton Hershey. Other companies include Hershey Trust Company, and Hershey Entertainment and Resorts
LBSIM 2012-14 Page 16
Company, which runs Hersheypark, a chocolate-themed amusement park, the Hershey Bears minor professional hockey team, Hersheypark Stadium and the Giant Center. Most of the employees for the factory come from the surrounding counties, towns, and boroughs, such as Lebanon County, Hummelstown, South Hanover, and Harrisburg.
4.4 GODIVA
Godiva Chocolatier is a manufacturer of premium chocolates and related products. Godiva, founded in Belgium in 1926, was purchased by the Turkish Yıldız Holding, owner of the ÜlkerGroup, on November 20, 2007. Godiva owns and operates more than 600 retail boutiques and shops in the United States, Canada, Europe, and Asia and is available via over 10,000 speciality retailers.
In addition to chocolates, Godiva also sells truffles, coffee, cocoa, biscuits, dipped fruits and sweets, chocolate liqueur, shakes, wedding and party favors and other items arranged in gift baskets. Godiva's signature package is the Gold Ballotin (French for "small, elegant box of chocolates"). Godiva also produces seasonal and limited-edition chocolates with special packaging for all major holidays. Godiva also has license agreements for the production of ice cream, cheesecake, coffee pods and liqueur that comes in several chocolate-related flavors.
4.5 MARS, Inc.
Mars: Mars, Inc. is an American global manufacturer of confectionery, pet food, and other food products with US$30 billion in annual sales in 2012, and is ranked as the 3rd largest privately held company in the United States by Forbes. Headquartered in McLean, unincorporated Fairfax County, Virginia, US, the company is entirely owned by the Mars family. Mars operates in six business segments in the US: Chocolate (Hackettstown, New Jersey), Petcare (Franklin, Tennessee), Wm. Wrigley Jr. Company (Chicago, Illinois), Food (Los Angeles, California), Drinks (West Chester, Pennsylvania), and Symbioscience (Germantown, Maryland).
Mars was founded by Frank C. Mars and is a company that is known for the confectionery items that it creates,[7] such as Milky Way, M&M's, Twix, Skittles, Snickers, and the Mars bar. They also produce non-confectionery snacks, such as Combos, and other foods, including Uncle Ben's Rice and pasta sauce brand Dolmio, as well as pet foods, such as Whiskas andPedigree brands.
Orbit gum is among the most popular brands, managed by the Mars subsidiary brand Wrigley. During World War II, Wrigley was selling their eponymous gum only to soldiers, while Orbit was the gum made available to the public. Though abandoned shortly after the war, about 60 years later Orbit made a comeback in America during the gum craze.
4.6 NESTLE
Nestlé S.A. (French pronunciation: *nɛsle+; English /ˈnɛsleɪ/, /ˈnɛsli/) is a Swiss multinational food and beverage company headquartered in Vevey, Switzerland. It is the largest food company in the world measured by revenues.
LBSIM 2012-14 Page 17
Nestlé's products include baby food, bottled water, breakfast cereals, coffee, confectionery, dairy products, ice cream, pet foods, and snacks. 29 of Nestlé's brands have annual sales of over 1 billion Swiss francs (about $1.1 billion), including Nespresso, Nescafé, Kit Kat, Smarties, Nesquik, Stouffer's, Vittel, and Maggi. Nestlé has around 450 factories, operates in 86 countries, and employs around 328,000 people. It is one of the main shareholders of L'Oréal, the world's largest cosmetics company. On 4 September 2013, software and search-engine giant Google announced that they would be naming the next Android release, version 4.4, after the ever-popular chocolate wafer "KitKat" with Nestle's legal permission. Nestlé, confirming the team-up, announced the distribution of around 50 million KitKats worldwide, featuring the Android mascot in the covers.
Nestlé was formed in 1905 by the merger of the Anglo-Swiss Milk Company, established in 1866 by brothers George Page and Charles Page, and FarineLactée Henri Nestlé, founded in 1866 by Henri Nestlé. The company grew significantly during the First World War and again following the Second World War, expanding its offerings beyond its early condensed milk and infant formula products. The company has made a number of corporate acquisitions, including Crosse & Blackwell in 1950, Findus in 1963, Libby's in 1971, Rowntree Mackintosh in 1988, and Gerber in 2007.
LBSIM 2012-14 Page 18
CHAPTER 5
RESEARCH METHODOLOGY
5.1 METHODOLOGY
Research methodology is a way to systematically solve the research problem. It deals with
the various steps that are generally adopted by a researcher in studying the research
problem along with the logic behind them.
5.2 RESEARCH DESIGN
A research design is the arrangement of conditions for collection and analysis data in a
manner that aims to combine relevance to the research purpose with economy in
procedure.
The type of research design selected for this study is Descriptive in nature. A descriptive
research uses a set of scientific methods and procedure to collect raw data structures that
describe the existing characteristics of a defined target population of a market structure.
The data and information generated through this descriptive design can provide the
decision makers with evidence that can leave to course of action.
5.3 OBJECTIVES OF THE STUDY
To study the factors affecting the consumption of premium chocolates.
To predict the type Premium Chocolate consumers prefer based on their age, gender and annual family income. Based on this study it will be easy for the manufactures as well as marketers of premium chocolates to target the right audience with the right product which would help in increasing the revenue as well as market share.
The objectives of the study will help up us get an insight into the consumers mind and
understand the factors which govern the buying behavior. The study will also help us to
understand the importance price plays while selection and purchase of premium chocolates.
5.4THE SCOPE OF THE STUDY
The study was conducted in Delhi/NCR region and many people were interviewed with
questionnaires which had structured questions both capturing the qualitative and
quantitative aspects
Area :Delhi ,India
Time: The primary data collection and analysis was conducted between 30nd November
2013 and 11thJan 2014.
LBSIM 2012-14 Page 19
5.5 RESEARCH METHODOLOGY
Research is initiated by examining the data available with the previous research which help
us to identify the problem.
The research design to be used for this particular project would be a descriptive one as we
need to study and describe certain factors which create the tension in the subject.
Descriptive studies portray these variables by answering who, what, why and how
questions.
5.6 SAMPLING PLAN
Since it is not possible to study whole population, it is necessary to obtain representative
samples from the population to understand its characteristics.
Sample size refers to the number of items to be selected from the respondents to constitute
a sample. This acts as a representative to the whole respondents where the results and
suggestions are derived from analyzing representative samples.
Sampling Elements - men, women, teenagers
Sampling Technique – Representative Sampling
Sample Size - 313
5.7 DATA COLLECTION
The sources of data are primary and secondary in nature. For the purpose of collection of
primary data, a questionnaire is prepared.
Data collection is the process of obtaining information from the respondents. It can be
obtained from primary or secondary sources. Primary data are the data obtained firth stand
by the researcher. Here the data is collected through primary sources.
The method used for collecting data is through a structured questionnaire that is personally
administered. The researcher has personally met the population consuming edible oil. By
personally administering the questionnaire the researcher could collect all responses within
a short period of time and the doubts of the respondents are clarified on the spot.
5.8 SOURCES
The primary data has been collected from the samples defined in the research plan
The secondary data sources are:
1) Books
LBSIM 2012-14 Page 20
2) Magazines/ Project report
3) Internet
5.9QUESTIONNAIRE DESIGN
The questionnaire was designed based on the literature review done as well as with the
views of the industry experts. The questions in the questionnaire helped us correlate and
find out the relative importance of various factors that are responsible for defining the
personality traits of the products taken into consideration for the study. The relationship
has been found using Logistic regression analysis on the data collected from the various
respondent.
The secondary data would be collected from the articles, newspapers, management books,
and the internet if required.
5.10METHODS
The methods for collecting primary data for this research project would be by making use of
mail surveys and physical data collection in malls and market.
5.11 LIMITATIONS OF THE STUDY
The study suffers from some limitations due to the problems encountered during the
project study.
Sample size was limited to the time constraints, thus the results cannot be generalized for
the whole, and hence the result may be biased.
Some of the respondents were reluctant to part with certain information on the text of
sensitivity of the information.
The magnitude of the influence of these limiting factors can have a bearing on the report,
but is too little to alter the basic objectives of the report.
LBSIM 2012-14 Page 21
Chapter 6
ANALYSIS AND INTERPRETATION
6.1 Data Interpretations: The data was collected over form the sample the samples that were identified. The total sample size was 313. The data collected has a good representation from both the gender. The total number of male participants were 191 and female were 118 . This is equivalent to 62% of the male respondent and 38 % of female respondents data was collected.
The study was carried out in Metropolitan city and according to the findings we can conclude that most of the respondants belong to upper middle class families with greater disposable income. 42% of the respondants were from households with a family income of more than 10 lacs. 22% of the respondants had a family income between 8 – 10 lacs. 29% of the respondants had family income between 5 to 8 lacs. While only 7% represented households with annual income of upto 5 lacs.
Male62%
Female38%
Sex ratio
LBSIM 2012-14 Page 22
According to the findings of the study it can be interpreted that a large number of the respondents were in the age group of 26 to 30. They comprised as34% of the total respondents. 26% comprised of people in the age group 21 to 25. 17 % and 21% represent people in the age bracket of 15 to 20 and 31 to 35 respectively. Based on our findings it can be concluded that responds were either aware of or had tasted the premium chocolates in question. As expected most of the respondents said they were aware of Ferrero Rocher. 85% of the respondents were either aware of or had tasted Ferrero Rocher beforehand. 67% of the respondents were aware about Nestle Alpino. 56% of the respondants had either tasted or heard about Mars. While 51% had heard about Lindt and 41% had heard about Hershey’s. 37% of the respondents were aware about Godiva. It can therefore be concluded that people in the metropolitan areas are both aware as well have a sound knowledge of the premium chocolate market. It can also be inferred that Supermarkets and Retail stores are playing an important part in creating awareness as most of them put these niche brands in and around the billing counters which makes it impossible to miss.
upto 5 lac7%
5 lac - 8 lac 29%
8 lac -10 lac22%
10 lac and above42%
Family Income
LBSIM 2012-14 Page 23
From the study we find that a large number of people prefer white chocolate and crunchy chocolate. They represent 25% and 23% respectively. Indians are known to have a sweet tooth and it was interesting to find out that 16% and 13% of the respondents preferred dark chocolates and Sugar free chocolates. The trend also suggests that young adults are increasingly becoming aware of their health and people are accepting and embracing the fact that chocolates need not necessarily be sweet in taste. 6.2 ANALYSIS OBJECTIVE 1 : To find the factors which affect consumer buying behavior of premium chocolates FACTOR ANALYSIS In factor analysis there is no dependent or independent variable. In factor analysis there has
to be multicollinearity amongst variables. This technique is used to group various attributes
into some factors.
Suppose we have 8 variables (v1, v2, v3, v4,….., v8) and suppose that three factors (f1, f2,f3)
are obtained after applying factor analysis through SPSS, then equations obtained would be:
Vi = (Ai1*f1) + (Ai2*f2) + ……. + (Ain*fn) + (ui*vi)
Fi = (Wi1*v1) + (Wi2*v2) + ……. + (Wi8*v8)
-
Ai1, Ai2, …..,Ain = Regression coefficient
266
118
162
125
210
174
0
50
100
150
200
250
300
ferrero rocher
Godiva Lint Hershey's Nestle Alpino
Mars
Ряд1
LBSIM 2012-14 Page 24
Fi, f2, f3 = Factor
Ui = Unique Factor
Wi1, Wi2, ……Wi8 = Factor score coefficient
Null hypothesis in our study is that Variables are uncorrelated.
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling
Adequacy. .659
Bartlett's Test of
Sphericity
Approx. Chi-Square 2549.133
df 66
Sig. .000
The Measure of Sampling Adequacy is measured by the Kaiser-Meyer-Olkin (KMO) statistics. As a measure of sampling adequacy, the KMO predicts if data are likely to factor well based on correlation and partial correlation. KMO can be used to identify which variables to drop from the factor analysis because they lack multicollinearity. There is a KMO statistic for each individual variable, and their sum is the KMO overall statistic. KMO varies from 0 to 1.0. Overall KMO should be 0.50 or higher to proceed with factor analysis. If it is not, remove the variable with the lowest individual KMO statistic value one at a time until KMO overall rises above 0.50, and each individual variable KMO is above 0.50. In the above table of KMO & Bartlett’s test we can see that the KMO value is coming out to be 0.659 which is greater than 0.5 so we can proceed with the factor analysis. Also we can see that the significance of Bartlett’s test is less than 0.05 so we can say that sufficient correlations exist between the variables and thus we can proceed with our analysis.
LBSIM 2012-14 Page 25
SCREE PLOT ANALYSIS
We know that Scree plot tells us ideally how many factors should be there. From the scree plot given we can easily say that there just 5 points whose value is greater than or equal to one over the y-axis i.e. there are only 5 points in the plot whose Eigen value is greater than or equal to 1 so, we can say that ideally there should be 5 factors in this situation. TOTAL VARIANCE ANALYSIS
Total Variance Explained
Comp
onent
Initial Eigenvalues Extraction Sums of Squared
Loadings
Rotation Sums of Squared
Loadings
Total % of
Varianc
e
Cumula
tive %
Total % of
Variance
Cumula
tive %
Total % of
Varianc
e
Cumulati
ve %
1 2.741 22.840 22.840 2.741 22.840 22.840 2.681 22.346 22.346
2 2.606 21.717 44.557 2.606 21.717 44.557 2.298 19.149 41.495
3 1.696 14.136 58.692 1.696 14.136 58.692 1.741 14.512 56.006
4 1.467 12.228 70.920 1.467 12.228 70.920 1.563 13.025 69.032
5 1.239 10.329 81.249 1.239 10.329 81.249 1.466 12.218 81.249
6 .921 7.674 88.923
7 .551 4.590 93.513
LBSIM 2012-14 Page 26
First step in interpreting the output is to look at the factors extracted, their Eigen values and the cumulative percentage of variance as shown in the above table. We can see from the cumulative percentage column that the three factors extracted together account for 81.249% of the total variance (information contained in the original 12 variables). This is pretty good bargain, because we are able to economize on the number of variables (from 12, we have reduced them to 5 underlying factors) COMMUNALITY Communality is the other issue. The proportion of variance in any one of the original variables which is captured by the extracted factors is known as communality. It should be noted that the initial Eigen value of each of the variables independently is always assumed to be 1 and after performing factor analysis we compare the extracted values as shown in the table of communalities.
Communalities
Initial Extractio
n
Price 1.000 .716
Packaging 1.000 .884
Brand reputation 1.000 .858
Shape / Design of
product 1.000 .752
Occasions and
Festivities 1.000 .831
Product Country of
Origin 1.000 .679
Advertising 1.000 .849
Available information
(offline) 1.000 .647
Available information
(online) 1.000 .891
Ingredients 1.000 .874
Variety 1.000 .856
Ease of accessibility 1.000 .912
8 .302 2.519 96.032
9 .219 1.826 97.858
10 .156 1.297 99.155
11 .071 .591 99.746
12 .030 .254 100.00
0
Extraction Method: Principal Component Analysis.
LBSIM 2012-14 Page 27
Extraction Method: Principal Component
Analysis.
ROTATED COMPONENT MATRIX ANALYSIS
Rotated Component Matrixa
Component
1 2 3 4 5
Price -.760 .273 .098 .042 .229
Packaging .923 .083 .102 -.022 .115
Brand reputation .848 .230 .114 .125 .239
Shape / Design of
product .001 .173 .072 .847 -.004
Occasions and
Festivities -.595 .097 .497 .397 .251
Product Country of
Origin .198 .741 .074 -.152 -.251
Advertising -.018 -.040 .905 .150 -.074
Available information
(offline) .059 .723 .279 .203 -.038
Available information
(online) .206 .305 .703 -.500 .104
Ingredients -.248 .825 -.241 .121 .242
Variety -.142 .517 .027 -.563 .500
Ease of accessibility .102 -.096 -.010 -.035 .944
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 7 iterations.
To study the factors which affect the buying behavior first of all 12 variables were identified. They were:
1. Price 2. Packaging 3. Brand Reputation 4. Shape and Design of the product 5. Occasion and Festivities 6. Country of origin 7. Advertising 8. Available information (online) 9. Available information (offline) 10. Ingredients
LBSIM 2012-14 Page 28
11. Variety 12. Ease of accessibility
Rotated Component Matrixa
Component
1 2 3 4 5
Price -.760 .273 .098 .042 .229
Packaging .923 .083 .102 -.022 .115
Brand reputation .848 .230 .114 .125 .239
Shape / Design of
product .001 .173 .072 .847 -.004
Occasions and
Festivities -.595 .097 .497 .397 .251
Product Country of
Origin .198 .741 .074 -.152 -.251
Advertising -.018 -.040 .905 .150 -.074
Available information
(offline) .059 .723 .279 .203 -.038
Available information
(online) .206 .305 .703 -.500 .104
Ingredients -.248 .825 -.241 .121 .242
Variety -.142 .517 .027 -.563 .500
Ease of accessibility .102 -.096 -.010 -.035 .944
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 7 iterations.
Component Transformation Matrix
Componen
t
1 2 3 4 5
1 -.975 .077 .012 .200 .053
2 .064 .852 .401 -.120 .307
3 .114 -.083 .643 .650 -.380
4 -.108 -.485 .640 -.471 .350
5 .141 -.160 -.130 .549 .798
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
LBSIM 2012-14 Page 29
Based on the rotated component matrix and component transformation matrix the 12 variables will be grouped in 5 factors.
Factor Variable Factor name
1 Price
Brand Reputation
Occasion and Festivities
Premiumness
2 Product Country of origin
Ingredients
Originality
3 Advertising
Available information (online)
Promotion
4 Shape and Design of Product
Variety
Packaging
Assortment
5 Ease of accessibility Availability
OBJECTIVE 2: The second objective of the study was to predict the type Premium Chocolate consumers prefer based on their age, gender and annual family income. Based on this study it will be easy for the manufactures as well as marketers of premium chocolates to target the right audience with the right product which would help in increasing the revenue as well as market share. At times we want to classify some objects of data into groups. Eg: users & non users or
normal customers & loyal customers. This can be achieved by applying discriminant analysis.
Here to achieve our 3rd objective, this technique was applied to do predictive modeling.
D=b + b1x1 + b2x2 + b3x3 + …………. + bnxn
Where:
D -> discriminant score of discriminant function
b -> constant coefficient
b1, b2, …. , bn -> weights or unstandardized discriminant function coefficients
LBSIM 2012-14 Page 30
For the purpose of this study the type of chocolates were classified into 6 groups
namely:
1. Hard
2. Crunchy
3. Nutty
4. Dark Chocolate
5. Sugar Free
6. White Chocolate
The annual income group was segmented based on:
1. Up to 5 lac
2. 5 – 8 lac
3. 8 – 10 lac
4. 10 and above
The age group for the purpose of this study was:
1. 15 – 20
2. 21 – 25
3. 26 – 30
4. 31 – 35
5. 35 and above
Gender
1. Male
2. Female
Classification Resultsa
I prefer Premium
chocolates which
are (select all
relevent)
Predicted Group Membership Total
Hard Crunchy Nutty Dark Sugar-free White
Or
igi
na
l
Cou
nt
Hard 29 0 5 0 11 2 47
Crunchy 7 29 1 5 0 1 42
Nutty 2 0 21 2 7 0 30
Dark 0 0 8 61 1 14 73
Sugar-free 0 0 13 4 37 21 71
White 0 0 0 1 0 50 50
% Hard 61.7 .0 10.6 .0 23.4 4.3 100.0
Crunchy 16.7 69.0 2.4 .0 .0 2.4 100.0
LBSIM 2012-14 Page 31
Nutty 6.7 .0 70.0 .0 23.3 .0 100.0
Dark .0 .0 11.0 83.5 1.4 19.2 100.0
Sugar-free .0 .0 18.3 .0 52.1 29.6 100.0
White .0 .0 .0 .0 .0 100.0 100.0
a. 72.52% of original grouped cases correctly classified.
First of all we look at the classification results table. From the above table we can see
that for Hard Chocolates, 29 no. of the data are correctly classified, for Crunchy29 are
correctly classified, for Nutty21, for Dark Chocolates50, for Sugar - free37, for White
Chocolates 50 are correctly classified.
Hit ratio = (29 + 29 + 21 + 61 + 37 + 50 ) / 313 = 72.52 %
So, we can say that model is fit since, hit ratio is above 70%.
Wilks' Lambda
Test of Function(s) Wilks' Lambda Chi-square df Sig.
1 through 3 .058 547.071 32 .000
2 through 3 .236 150.188 15 .000
3 .968 10.148 3 .017
Eigenvalues
Function Eigenvalue % of Variance Cumulative % Canonical
Correlation
1 1.297a 83.9 83.9 .688
2 .639a 13.0 96.9 .349
3 .034a 3.1 100.0 .180
a. First 3 canonical discriminant functions were used in the analysis.
Next, we need to look at the Eigen value and Wilk’s Lambda table to determine how
statistically significant is the discriminant function. We know that higher the Eigen value
better it is and lower the Wilk’s lambda, better it is. In Wilk’s lambda, value closer to 0
means that group means seem to be different while value closer to 1 means that group
means seem to be similar. Eigen value determines the strength of the discriminant
function and if discriminant function is strong, we would be able to classify effectively.
In the table above we can see that Eigen value is highest for function 1 (1.297) and
Wilk’s lambda is lowest for function 1 through 3 (0.034). So, we can say that function 1
represents the most statistically significant discriminant function.
LBSIM 2012-14 Page 32
Canonical Discriminant Function Coefficients
Function
1 2 3
Age 1.239 .103 -.243
Gender .681 .875 1.842
Annual Family Income -.210 .997 -.320
(Constant) -3.614 -4.451 -.937
Unstandardized coefficients
From the above table we get to know about the values of the constant and the weights for
the discriminant function. Since we are considering function 1 only, putting the values in the
discriminant function, we get:
D= -3.614 + 1.239*(age) + 0.681* (gender) – 0.210*(annual family income)
Functions at Group Centroids
I prefer Premium chocolates
which are (select all relevent)
Function
1 2 3
Hard -.201 -.493 .270
Crunchy -.594 .153 .215
Nutty -.147 -.828 -.309
Dark -1.074 .297 -.067
Sugar-free .378 .171 -.148
White 1.809 .157 .058
Unstandardized canonical discriminant functions evaluated at group
means
From the table functions at group centroids we can set a scale and place each of the
considered brand on that scale based on its value in this table. Here also we will
consider only function 1.
-1.074Crunchy-0.201Nutty0.378White
LBSIM 2012-14 Page 33
Dark -0.595 Hard-0.147 Sugar-free1.809
Now, in the discriminant function obtained earlier as follows:
D= -3.614 + 1.239*(age) + 0.681* (gender) – 0.210*(annual family income)
If we will put the value of age, gender, etc. in the above equation we will get the value
of discriminant score, D. Now, this value is compared with the scale above and on the
scale the type of chocolate which is closest to that value is most probable to cater to
that consumer.
LBSIM 2012-14 Page 34
CHAPTER 7
FINDING & RECOMMENDATIONS
5.1 FINDINDS
Substantial amount of time was spent in gathering data and information from various
secondary sources and equal emphasis was given to the sample of population for the
primary data findings. The data analysis was carried out to discuss and underpin the issues
using the broad as well as narrow analysis approach. However, consumer behaviour
remained the underlying basis and inseparable part of the overall research report that
aimed to explore and test the various theories in context to research subject.
Premium Chocolate segment is a booming market also as the literature review suggests
among the chocolate segment premium chocolate segment is growing at the fastest pace.
The consumer preference is changing and it is evident from the study also. As disposable
income is increasing among the Indian Middle class the urge to try new things is also
increasing. The other factor which is influencing the buying of premium chocolate
manufactures are tapping on the psyche of the Indian Consumer’s mindset. For example
Ferrero Rochere is tapping the market by selling Rochere and marketing it extensively
during the festive seasons.
The findings of the study also suggest that people prefer gifting premium chocolates during
the festivals. It means that people are breaking away from the traditional way of giving
sweets and mithai and preferring giving away Premium chocolates. The reason can be that
Premium Chocolates have more shelf life and people feel more classy and stylish for people
to give.
The choices of the premium chocolate which was given to the respondents also suggests
that Ferrero Rocher is the most popular brand and maximum number of respondents had
either tried it or heard about it. Nestle Alpino which is a relatively new entrant in this
segment was also enjoys good know how among the respondents. The reason can be
aggressive promotional activity done by Nestle. Brands like Mars which is known for its
LBSIM 2012-14 Page 35
energy bars is also relatively popular among the masses. Brands like Hershey’s, Lindt and
Godiva also enjoy consumer mind space but not as much as the other brands. One probable
reason can be that the relatively high price of these chocolates may be detriment for people
to indulge in such chocolates.
Another important finding of the study was that the type of chocolate preferred by various
people is dependent on factors like age, sex and annual family income.
5.2 RECOMMENDATION
It is evident from the study that Indian consumers are becoming increasingly aware of the
premium segment market of any category in general and premium chocolate market in
particular. Indian consumers are breaking away from the traditional shackles in all possible
way and have become more globally aware because of easy availability of information and
have become indulgent because of higher disposable income.
The study shows us the five factors which the Indian consumers look for when they buy
premium chocolates namely Premiumness, Originality, Promotion, Assortment, and
Availability. It is therefore recommended to the marketers of premium chocolates to keep
into account these factors when they are designing their marketing as well as sales
activities.
An important finding of the study was that majority of the people were of the opinion that
premium chocolates are not as easily available as they would like. It is therefore necessary
to have a proper distribution network as well as motivated sales force who are ready to go
the extra mile to push the products. The marketers need to understand the importance of
unorganized retail stores in the Indian context. ‘Kirana’ stores plays an important part in the
whole scheme of things. These ‘kirana’ stores only keep products from Cadbury and Nestle.
Many of them even keep large quantity of chocolates like Bournville, Dairy Milk Silk,
NeslteAlpino etc. which are considered premium by many Indians. These entry level
premium chocolates are priced nearly the same as other premium chocolates. It therefore
becomes necessary to push the premium brands in these types of stores if one wants to
boost sales as well as capture the largely untapped market.
LBSIM 2012-14 Page 36
The premium chocolate market need to focus on advertising. Even though the study shows
that most of the respondents don’t give much importance to advertisement of premium
chocolates, but it becomes important if one wants customers to keep their offerings in the
consumer’s consideration set. Customers buy what they already know about a product. It is
necessary to make a footprint in the customer mind space.
Promotional activities are another recommendation which can be suggested to the
marketers. Bundling of chocolates can be done to tempt the customers to buy more. If a
particular variety of chocolate is very costly it should be introduced in small pack sizes to
encourage peopleto try the offerings. If consumers like the products they try in small
quantity they might become repeat customers also they will encourage their friends and
relatives to try such offerings.
Premium chocolate companies should start sponsoring college fests and they should open
counters where students can taste there offerings for free. Chocolates can be sold at
discounted price to students to encourage them to become regular users.
LBSIM 2012-14 Page 37
CHAPTER 8
CONCLUSION
The study attempts to understand the factors which affect the consumer buying decision of
premium chocolates and also how the marketers can profile the different customers to
target the right audience with the right product. There is a huge potential for premium
chocolate market in India and there are various reasons for that. Economic prosperity,
greater indulgence by the middle class, more information are some of the factors which has
affected the buying behavior. The findings of the study also suggest that people prefer
gifting premium chocolates during the festivals. It means that people are breaking away
from the traditional way of giving sweets and mithai and preferring giving away Premium
chocolates. The reason can be that Premium Chocolates have more shelf life and people feel
more classy and stylish for people to give.
It can therefore be concluded there is immense potential in this category which can be
tapped by proper profiling of users based on their preference which can be used as a
marketing strategy. Also the marketers need to be aware of the factors which the customers
look for when they buy premium chocolates. With the right marketing strategy the premium
chocolate makers can increase both their customer base as well as revenues.
LBSIM 2012-14 Page 38
ANNEXURE
QUESTIONNAIRE
I associate myself as someone who *
1 - strongly disagree 5- strongly agree
1 2 3 4 5
...is proud of my
Heritage
...likes to indulge
...is cautious about
my purchases
...is easily
influenced by
other's experiences
/ views
...is proud to show
my wealth
...is willing to try
new things
I purchase Luxury / Premium chocolates *
o Not at all
o Rarely
o Once in a few months
o Once a month
o More than once a month
o Once a week or more
o Daily
I purchase Luxury / Premium Chocolates for : (check on all relevant) *
o Myself only
o Sharing
o Gifting
I purchase Luxury / Premium chocolates only for Occasions/Festivals *
o Yes
o No
Luxury / Premium Chocolates are *
LBSIM 2012-14 Page 39
1- Strongly Disagree 5 - Strongly Agree
1 2 3 4 5
Desirable
Affordable
Easily available
Unique
Classy
Stylish
Purchasing Luxury / Premium chocolates for myself indicates I... *
1 - Strongly Disagree 5 Strongly Agree
1 2 3 4 5
...have an
appreciation for
premium quality
and taste
...am classy
...am trendy /
stylish
...am Globally
aware
...spend wisely
...am unique /
different from
everyone
Purchasing Luxury / Premium chocolates for gifting / sharing indicates I... * 1 - Strongly Disagree 5 Strongly Agree
1 2 3 4 5
...have an
appreciation of
premium quality
and taste
...am classy
LBSIM 2012-14 Page 40
1 2 3 4 5
...am trendy /
stylish
...am social
...am generous
...am Globally
aware
I am affected by the perceptions and views of the following sets of people, towards Luxury / Premium chocolates * 1- Strongly Disagree 5 Strongly Agree
1 2 3 4 5
Close family
members
Close friends
Peers and
colleagues
Celebrities
I can purchase Luxury / Premium chocolates whenever I wish to *
1 2 3 4 5
Strongly Agree Select a value from a range of 1,Strongly Agree, to 5,Strongly Disagree,.
Strongly Disagree
The following factors control my purchase of Luxury / Premium Chocolates *
1- Strongly Disagree 5 Strongly Agree
1 2 3 4 5
Price
Packaging
Brand reputation
Shape / Design of
product
Occasions and
Festivities
Product Country
LBSIM 2012-14 Page 41
1 2 3 4 5
of Origin
Advertising
Available
information
(offline)
Available
information
(online)
Ingredients
Variety
Ease of
accessibility
I prefer Premium chocolates which are (select all relevent) *
o Hard
o Nutty
o Crunchy
o Dark Chocolate
o Sugar free
o White Chocolates
I have consumed/ tasted / heard of the following premium Chocolate brands *
o Godiva
o Ferrero Rocher
o Lint
o Hershey's
o Nestle'sAlpino
o Mars
Age *
o 15-20
o 21-25
o 26-30
o 31-35
o 40 and above
LBSIM 2012-14 Page 42
Gender *
o Male
o Female
Annual Family Income *
o Up to 5 lac
o 5 lac - 8 lac
o 8 lac - 10 lac
o 10 lac and above
LBSIM 2012-14 Page 43
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