Market environment of India's gum industry

Indian market includes hard-boiled candies, toffees, sugar-based candies and gum based products.

Market Demand

The global market continues to grow, despite of the fact that certain sectors of the confectionery industry have reached maturity in many parts of the world. Most of this recent growth has come from developing regions and countries by growing base of increasingly affluent consumers in places such as Russia, China and India. In the developed world, much of the market’s recent growth can be attributed to sectors, such as low-fat, low-sugar and organic products. New product innovation remains critical to future success within the industry, with many of the world’s leading suppliers investing heavily in this area.

Size of the Gum Market in India

India has one of the fastest growing gum categories worldwide. According to AC Nielsen, the size of India’s total gum category is around Rs 1,000 crore. Chewing gums and bubble gums account for approximately 44% and 56% of the category respectively. In India the bubble gum segment is larger than the chewing gum segment, whereas in the rest of the world it is the other way round.

According to the Nielsen report, in 2008 the gum industry in India was growing at about 20% per annum.

Market Growth

The $122 billion gum market is growing by 3 per cent a year, a decent rate for food but within that, sales of sugarless gum are rising by 15 per cent a year. The magic ingredient in modern sugarless gums is Xylitol, a sweetener made by a Danish firm from silver-birch pulp. A study in the Journal of Medicine found that Xylitol cuts tooth decay by 70 per cent by inhibiting growth of oral bacteria. The sweetener is central to a battle in Asia to find the next cure-all gum.

The gum category in India is growing at a healthy 20%.

Market segmentation

Chewing gums and mints are a preferred worldwide. Their market has generated high revenue from Rs 500 million to Rs 3000 million in just three years and is currently placed at Rs 3,500 million.

Market Analysis

If we look at the per-capita consumption of chewing gum in India it is only 8 per year as compared to 2000 per year in U.S.A & 1000 in Russia. Market share of gums has increased by 20% in 2008.The current size of the Indian chewing gum market is estimated to be about 1000 Crores (INR) and it provides wide opportunities to new arising companies. It has risen as the new style-of-living market having great market potential.

According to the survey, more emphasis can be given to the west zone but other areas are also potential market. The target customers are youth and our target market also includes people who belong to middle-middle and upper-middle class families as confectionary items specially chewing gums are normally luxury items.

Competitive environment

Identifying Competitors

After the market segmentation, our next task is to identify the competitors of our company. After analyzing the market we came to know that Perfetti is our major competitor. Because “Happydent” the product produced by Perfetti is providing some similar substances as in Chew-den at almost same cost.

Analysis of Perfetti

Strategy

The Indian confectionery market is divided in three categories: Candies and toffees, gums and mints. Perfetti’s advantage is that it is the only company with products for each of the three categories. Perfetti puts humour (Mentos and Center Fresh), emotion (Alpenliebe), bizarreness (Happydent and Chlor-Mint) and fun in liberal measures in all its commercials. One way to create a difference in the mind of consumers, Perfetti has realized, is to coin taglines for all its flagship products. Like, there is Zubaan par rakhe lagaam for Center Fresh, Dobara mat puchna for Chlor-Mint and Dimag ki batti jala de for Mentos. These are all expressions borrowed from everyday usage of the youth – the bulk of confectionery buyers are between four and 24 years. Perfetti have also done a clever thing by giving its products to retailers in plastic jars. This makes life convenient for the retailer and gives the company the opportunity to place its brands prominently at the outlet.

Objective

The Perfetti is looking for maximizing its profits, sales growth and market share. Perfetti also intends to work for children, to provide health service and to impart vocational training. Their aim is also to target the youth through advertisements that involves a fun and happy-go-lucky attitude.

Strength

The biggest strength of Perfetti is that it has already broadened its market by launching products in different categories. The other one is that it has more market knowledge and a good position in market. The company already has a established name in market and holds a 40% of market share of confectionary segment.

Weakness

The company is providing all the benefits to the customers but their product is not able to protect the teeth from teeth decay and mouth odour.

Competitive strategy

As we are new in the market so we do not have a huge number of market share. Thus we will be looking for making our market share. That’s why we come under the market follower category. Our company come under the category of imitator because we will provide our product with some differentiation factor of packaging and advertising. So our primary aim is to make a value in the market and making the maximum profit by establish our product by acquiring customer satisfaction.

Competitive forces

Threat of intense segment rivalry: Wrigleys, Perfetti van de melle, Cadbury

Threat of new entrants: both entry and exit are high

Threat of substitute products: candy like cholormint, Mintofresh

Identifying competitors: Wrigleys, Perfetti van de melle, Cadbury and many more

Economic environment

Creating customer value & satisfaction

In our business a customer can easily switch the brand because the product price is not high. So our prime motive is to maintain healthy relation with customers by providing them best quality product and services in this segment.

Customer perceived value

It is the difference between the prospective customer’s expectation of all the benefits and all the costs of an offering and the perceived alternatives.

We will offer price as per the market and add cloves, Xylitol and cardamom as ingredients which helps in tooth decay and breathe freshening. We will maintain supply chain management to create a value delivery network. We will do survey on monthly basis initially to know the customer perception about our product.

Other Macro-environmental Forces

Demographic environment

People from all age group in terms of size, location, age, gender, occupation, consume Chewing Gum.

Social and Cultural environment

Made up of institutions and other forces that affect a society’s basic values, perceptions, preferences and behaviours.

Technological environment

Allows the existing products to be made more cheaply and thereby expanding the market for such products by lowering down prices.

Allows new and easy methods of distributing goods. It also provides new opportunities to communicate with the targeted customers.

Political environment

Consists of laws, government agencies and other groups that influence or limit various organisational activities.

6) Financial Projections

a.) Break-even Analysis

Break-even analysis is a technique, mainly used by production management and management accountants. It is a method of categorising production costs between the variable costs that change according to the number of units produced and fixed cost which is not directly related to the volume of production.

Here, total variable costs and fixed costs are compared with total sales revenue in order to determine the level of total sales volume at which the business neither makes a profit nor a loss. It is called break-even point.

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b.) Sales Forecast

Sales forecasting is the most critical process in business. It is one of the most difficult areas of marketing management. There are mainly two types of forecasting that can be described as macro and micro. Macro forecasting is more concerned about evaluating the present level of marketing demand for the existing products and forecasting the market demand of the same in future. Micro forecasting is concerned with determining the present number of units produced and forecasting sale of units in future. It is also about determining product’s market share in the industry and forecasting the position of market share in future. Sales forecasting process is mainly used to make the decisions regarding,

Labour force requirement

Investment required for increasing the production capacity

Evaluate the future demand of the existing products

Additional investment required to meet the expenses of new promotional activities for marketing the products in future.

Determining what will happen to the market share of the product in future.

c.) Expense forecast

Expense forecast is a must for every organisation to evaluate the present investment on production cost and forecasting the relative increase in different costs in order to increase the production volume. Salaries, raw materials, business taxes, office rent, equipment leases, phone bills, postage and other expenses are associated with running a business. It mainly includes the forecasting of the following costs

Start up costs such as deposits, office furniture, leasehold improvements, signage, licenses and permits.

Variable costs such as raw materials, supplies, packaging and transportation. Direct labor costs, such as sales commissions, also fall into this category.

Fixed costs such as taxes, office rent, utility bills, phone bills, insurance, legal and professional fees, postage, supplies, salaries and advertising and marketing costs.

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