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.

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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

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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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