GROWING BANGLADESH MIDDLE-CLASS BOOSTS DEMAND FOR QUALITY WESTERN CONFECTIONERYFebruary 28th, 2017
BY A.Z.M. ANAS, in Dhaka
EVERY time apparel industry executive Israfil Alam and his wife buy groceries, one item doesn’t elude them: chocolate for their 13-year-old son Isman Sayer.
“Isman’s favourite is Kit Kat Chunky,” Alam, a Dhaka-based general manager at knitwear maker Magpie Group, told Confectionery Production. He was enjoying International Mother Language Day – a public holiday in Bangladesh – as he shopped at a Meena Bazar supermarket, before heading for dinner at a branch of South African restaurant Nando’s, just opposite the store, in Dhaka’s upscale Dhanmondi district.
The couple’s routine illustrates the life enjoyed by an urbanised middle-class prospering in Bangladesh’s thriving economy, which according to the World Bank surged 7.1% in the 2016 financial year. Growth has lifted 20 million people out of poverty in Bangladesh the past two decades and some of this disposable income is spent on confectionery and sweet bakery products.
Market researcher Euromonitor International told Confectionery Production that draft data on retail sales of confectionery within Bangladesh during 2016 generated receipts of USD302.79 million last year. This was up from
USD270.05 million in 2015.
Data made available to Confectionery Production showed confectionery sales in this south Asian economy expanded year-on-year at 12.12% in 2015-2016
The middle-class, defined as those living on USD2-USD3 a day, now constitutes one-fifth of Bangladesh’s 160 million population, according to a 2015 study of the state think-tank Bangladesh Institute of Development Studies (BIDS).
The study conducted by its research director Dr Binayak Sen projected that a quarter of Bangladeshis will join the middle-class by 2025.
And this group’s consumerism has boosted demand for western confectionery.
A visit to the capital city’s major superstores, such as Agora and Meena Bazar, demonstrates this point – their branches all have sizable dedicated corners for western confectionery products. Locally-made confectionery is having a tough time competing: “You can’t make product like Cadbury Dairy Milk. None [of the local manufacturers] can catch up with the foreigners,” Rupom Roy, the UK-educated manager in charge of the Dhanmondi Meena Bazar told Confectionery Production.
A peer at Agora Superstores Ltd echoed these comments: “Customers look down their nose at locally-made chocolates,” Shahriar Al-Ahad, a floor supervisor at Dhanmondi Agora told Confectionery Production.
Cadbury Dairy Milk, Kit Kat and Eclairs are the most sought-after confectionery products among his store’s customers, he said.
While few global confectionery giants have direct sales operations in this South Asian country, market insiders said importers, distributors and third party on-selling ‘grey channels’ are able to meet the demand for quality candies and chocolates.
Only Italian-Dutch Perfetti Van Melle, whose Center Fruit and Alpenliebe brands are popular in this market, has a production and marketing facility in the country, in Sreepur, Gazipur, north Dhaka’s, which focuses on making caramel candy, lollypops and chewing gum.
The Dhaka-based Transcom Distribution Company Ltd is an authorised dealer of Mars, Snickers and Galaxy, while the Gemcon Group, (parent of Meena Bazar), and the Kallol Group are other direct importers of western branded confectionery.
Bangladesh imports these products wholesale mainly from India, Malaysia, and Thailand.
Rupom said sales of general and confectionery products at Meena Bazar were driven mostly by middle-class buyers, the target group of the retail chain founded in 2002.
A.K.M. Moinul Islam Moin, a general manager, business operation
(confectionery) of Dhaka-based Pran Foods Ltd, said: “Twenty years ago, a middle-class kid would get [Bangladesh Taka] BDT2 [USD0.03 cents] pocket money, today he gets BDT20 to BDT30 [USD0.30 – USD0.38 cents]. The confectionery market will keep growing,” he told Confectionery Production.
And despite the strength of foreign brands, Bangladesh lines, such as those made by Pran, have a solid position in rural retail markets. Bangladesh companies today control as much as 70% of the country’s confectionery market, with the rest being held by imported foreign brands, he said.
Pran, Abul Khair, Olympic and Partex are among the local players who lead sales. They have wide ranges. Pran produces hard candy, chocolate, toffees, lollypops, chewing gum, fruit bars and edible jellies, for instance.
Today, Pran’s confectionery products reach 40 export destinations across the world including India, Australia and most countries in the Middle East and Africa, Moin said.
The company, which was launched in 1981 and today employs 85,000 people, has won the best brand award in the last three consecutive years at the Bangladesh Brand Forum.
Meanwhile, Anisur Rahman Badsha, president of the Bangladesh Lozenge Manufacturing Association, said only demand for high-quality confectionery items was growing – low-quality producers are struggling to survive.
“Bangladeshi people are lavish. Unlike Indians, they don’t think about savings. That’s why, they are leaning on branded confectioneries,” he told Confectionery Production.
This consumer trend has helped force many small confectionery manufacturers out of business, for instance Tatka in the past year alone, according to industry leaders and executives. Only 50 to 60 smaller confectionery manufacturers are in business now these managers told Confectionery Production.
Another reason for these closures has been rising sugar prices – up from USD0.48 to USD0.67 per kilogramme over the past year, these industry executives claimed.
More troubles await small players, Mr Badsha said. If implemented, a planned flat rate 15% VAT on all consumer goods sales from July (2017) would have a major impact, he warned. Currently, traders pay a USD150 lump sum annually to meet VAT liabilities – they may have to increase prices as a result.
This is increasing the pressure to perform: “Confectionery is an ‘impulse’ product. You have to be innovative to sustain in the market,” Moin argued. “Many brands have suffered their demise, because they didn’t nurture their brand.”
Overall, however, the association boss is bullish, predicting the confectionery business will gain momentum through to 2021, by when Bangladesh aspires to join the club of World Bank-assessed middle-income nations.
The country’s per capita income reached USD1,465 the fiscal year ending June 30, 2016, according to the state-run Bangladesh Bureau of Statistics.
Dr Khursheed Jahan, a professor of the Institute of Nutrition and Food Science at Dhaka University, saw good potential for the confectionery industry, through rapid urbanisation, rising income, population growth and product availability.
“The more the population grows, the more urbanisation takes place, the more the confectionery industry will expand,” she told Confectionery Production.
More than one-third of Bangladeshi people now live in urban areas in 2015, according to World Bank data. A Euromonitor expert predicted Bangladesh would gain 1.6 million urban residents annually through 2030 – equivalent in size to the US city of Philadelphia in each year.
Until the middle of 2016, Nestlé produced Munch Rollz chocolate confectionery in its factory at Sreepur, near Dhaka, but the Swiss multinational last year ceased production in the country – a spokesperson would not explain why. In the meantime, Nestlé relies on third party wholesalers to get its product to Bangladesh: “As a company, we don’t bring chocolates in the Bangladesh market on our own at this moment,” the spokesperson told Confectionery Production. “Importers bring in Nestlé chocolates on their own.” Hershey and Cadbury did not respond to questions from Confectionery Production about Bangladesh sales – although products from both companies are also imported into the country by independent wholesalers.