Sales of candies, toffees and chewing gum bars overcame years of stagnation last fiscal to surge to a record at nearly 40 billion units, indicating preference for affordable sweet treats during a period when disposable cash wasn’t always plentiful for many consumers in the Covid-ravaged economy.

Officials citing Nielsen said the overall confectionery market expanded 13% to ₹12,127 crore. Companies said they managed to buck the slowdown in several other discretionary categories due to the affordability of their products.

“It is an affordable treat since 80% of the sales come from a one-rupee product,” said Rajesh Ramakrishnan, managing director of Perfetti Van Melle India, the company that makes Alpenliebe hard-boiled candies and Mentos soft candies. “Increase in innovation and direct reach also helped. From our company’s standpoint, positioning of our brands has also become far sharper.”

In general, confectionery products are largely cash-driven impulse purchases, and consumption has trended lower since late 2016. During the first year of the pandemic, the confectionery market shrank by a fifth before recovering strongly in FY22, but on a much lower base. Companies said growth in FY23 reflects robust consumer demand as the industry expanded – and on a higher base.

“While large players have contributed to the demand, there is an influx of smaller regional and local players in the category, that have been driving the growth, especially at a sub-rupee price point,” said Krishnarao Buddha, senior category head of Parle Products, the maker of Melody coffee-flavoured candies and Mango Bite. “School reopenings last year also helped, and we expect the traction to continue this year.”

Large companies such as Mondelez, Nestle and Mars dominate the chocolate category, with a combined market share in excess of 90%. Smaller players make an impact
But regional firms account for more than 35% of the overall market in the confectionery space, with some of the players restricted to just a few states – or even districts.

Over the past several years, the entire industry has gradually moved to the ₹1-per-unit price point to absorb increases in sugar, other raw materials and packaging costs.

“Candy is not really a discretionary category and there has been a smooth transition from a 50-paise product to Re 1 a unit, even though it’s a 100% jump. So, the category is relatively insulated from inflation despite price increases,” said Koteshwar LN, business head at Flipkart Wholesale, an online B2B marketplace of the ecommerce platform.

Margin expansion a challenge
Companies said runaway inflation in input costs during the pandemic, exacerbated by the Ukraine-Russia war, prevented operating profit margins from expanding in lockstep with revenue.

The leader in the ₹12,500-crore confectionery market, Perfetti, said all raw material and packaging costs have surged.

“So, the challenge is more on the profitability side, instead of growth. We must continuously look at value engineering because there is a limit to which we can drop grammage,” added Ramakrishnan.Chocolate and confectionery combined is a Rs 25,000-crore market, with each category accounting for roughly half the overall industry in value terms.

Companies said they are facing stiff competition from categories such as salty snacks and biscuits. “When one wants small moments of happiness, the consumer opts for a packaged snack, either biscuit or chocolate and chips,” Kalpesh R Parmar, general manager of Mars Wrigley Asia, told ET in an earlier interaction.