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Mars’s late entry into India means that the firm will need to work harder to gain market share. Photo: Bloomberg
Mars’s late entry into India means that the firm will need to work harder to gain market share. Photo: Bloomberg

Mars to invest $100m in Pune manufacturing unit

Firm will look at localizing supply of peanuts, sugar, milk and packaging materials, seeking to grow its market share in the `5,800 cr chocolate market

New Delhi: The local arm of American chocolate maker Mars Inc. is set to start domestic production of its chocolate brands with an investment of close to $100 million in a manufacturing unit in Pune. Mars International India Pvt. Ltd hopes to reduce its dependence on imports by doing this, said top executives at the chocolate company.

“By early next year, we will start production for our brand Snickers and then evaluate the remaining portfolio," said M.V. Natarajan, general manager, chocolate, at Mars International India.

The company’s move to localize production comes four years after the maker of M&M’s candies and Twix chocolates started selling chocolate brands Snickers and Galaxy in India.

The company that currently sells chocolates in the top 100 cities in the country, is seeking to build scale to satiate consumer demand for the packaged food category that has seen an average of 20% growth every year for the last five years.

“There is no alternative to local manufacturing as we look to build sustainable and scalable business," Natarajan said.

The firm will look at localizing supply of peanuts, sugar, milk and packaging materials as it seeks to grow its market share in the 5,800 crore chocolate market.

Currently, Mars International India has a minuscule market share (in value terms) of 1.1%, in 2014, as per data sourced from research agency Euromonitor. Mondelez India Foods Pvt. Ltd (formerly Cadbury India), maker of Dairy Milk and 5 Star leads the market with a 56% share.

A late entrant into India, Mars International India Pvt. Ltd started operations in the country in 2011 with the launch of Snickers priced at 15 a bar, subsequently launching an eggless version of the same brand and Galaxy chocolate in November 2013. Both brands are currently imported from the company’s overseas operations in West Asia and Europe.

Local production will also help widen the distribution reach of the brand, Natarajan added. In 2016, locally made Snickers will be available in the market.

Volatility in cocoa prices for most of 2014 weighed heavily on chocolate makers globally as cocoa farmers in the Ivory Coast and Ghana that account for nearly 60% of world’s cocoa bean supply feared the spread of Ebola virus.

“Overall there has been a price increase of close to 8% across the category owing to raw material and packaging led inflation," said Natarajan. “However, we’ve been stable for close to four years now."

Chocolate consumption in India has expanded in the past decade with large foreign firms such as Mondelez International, the maker of Dairy Milk and Gems, as well as Nestle India, growing their range and reach.

“Chocolates are getting into the mainstream," said Natarajan. The category has traditionally been driven by children; adults were not seen having chocolate in the public space. “That has undergone a massive change now, propelling higher spends on bars of chocolates," he said.

Mars’s late entry into India means that the firm will need to work harder to gain market share, according to analysts tracking the sector. “It will need more time and investments in product and marketing to stand-out", said Ankur Bisen, senior vice-president at consulting company, Technopak Advisors.

Food firms have begun to push chocolates into the mainstream. As a result, most firms see the category as more mass market than niche, Bisen said. “Clearly Mars, too, has picked up the signs from the market."

Despite growth in recent years, per capita chocolate consumption in India remains low at 250g a year with cities accounting for nearly 70% of the total consumption, according to the company.

A January report by research agency Euromonitor said chocolates are gaining popularity, as they are used in gifting around festivals and also from occasion-led purchases. Its emergence as a popular snack option especially among adults, will also continue to drive growth for the category, the report added.

Mars Inc. also owns the Pedigree pet food business and Wrigley’s chewing gums.

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