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Cocoa surplus helps sustain chocolate prices

Aarati Krishnan

PRICES of branded chocolates have displayed divergent trends over the past year. On one hand, there has been an increase in the maximum retail prices (MRPs) of the larger pack sizes of established brands. On the other hand, the MRP of the popular pack si zes and brands appear to be heading southwards.

For instance, between September 1999 and September 2000, the MRP of Cadbury's Dairy Milk (80 g) was hiked from Rs 26 to Rs 30. Cadbury's Eclairs and Cadbury's Fruit and Nut also saw price increases. But, Cadbury's Perk, Picnic and Nestle's Kitkat have al l seen their price lines revised downward.

The past couple of years have seen the availability of a large number of imported brands, and intensifying competition in the domestic chocolate market. Pricing strategies have largely responded to this situation. The two major domestic players -- Cadbu ry India and Nestle India -- have adopted a major strategy to pep up their flagging volume growth. They have focussed on lower price points.

In the recent times, both players have tried to expand the number of products available in the popular price points of Rs 5 and Rs 10.

Over the past year, Cadbury India has introduced smaller pack weights of its Perk and Picnic range in order to reduce the MRPs of these brands to the Rs 5 and Rs 10 range.

Similarly, Nestle India has retaliated with the launch of Rs 10 versions of its brands, Munch and Charge.

Meanwhile, declining prices of the key input for chocolate -- cocoa, have probably helped the players a great deal in sustaining this pricing strategy. A global cocoa surplus for the year, coupled with the forecast of high cocoa output for the 1999-2000 (October to September) season, has helped bring about a steady decline in cocoa prices over the past one-and-a-half years.

International prices have declined from around $1,200 per tonne in March last to levels of around $800 per tonne at present.

Since both Cadbury and Nestle outsource a substantial portion of their cocoa requirements, the decline in cocoa prices has probably given both players a larger leeway when it comes to reducing their price levels.