Chocolate comes from trees, Manam founder Chaitanya Muppala, 35, says for the second time in as many days over video call. Among the newest entrants on the Rs 18,000-crore Indian chocolate scene, Hyderabad-headquartered Manam has been at pains to break away from both commercial chocolate (think Cadbury's, but also Lindt, etc.) as well as bean-to-bar chocolate makers in the country (those who buy cacao beans from the market, including many artisanal small-batch chocolate makers). Instead, it emphasizes its connection to 150 cacao farmers in south India, mostly in the West Godavari region of Andhra. All of this comes with certain costs and benefits, of course.
A bar of Indian-made craft chocolate can go for anywhere between Rs 300 and Rs 595 (and a box of bonbons can go for as much as Rs 1,250), rates that are comparable with imported chocolates like a box of Ferrero Rocher.
Additionally, as with Indian whiskeys, there now seems to be a conjoined effort in the Indian craft chocolate space to build solid foundations for the industry. You see that in the way that people seem to be joined in their ambition to create greater awareness around Indian cacao and Indian chocolate.
In another parallel with the Indian whisky space, Indian chocolate makers are winning international chocolate awards year after year. Paul & Mike has won International Chocolate Awards (World) for variants like 64% Dark Sichuan Pepper and Orange Peel Vegan Chocolate, and 64% Dark Gin and Candied Ginger Chocolate. And the year-old Manam has won Academy of Chocolate Awards for variants like its Indian Single Farm Cacao 62% Dark Chocolate (Rs 400 a bar) and Crunchy Hazelnut & Sea Salt Chocolate Spread - 67% (Rs 750 a jar).
But why does it cost so much to buy Indian chocolate? What is the value proposition? What is their pricing strategy? What is the cost of entering the Indian craft chocolate space, and to do it well? Read on to know the economics of craft chocolate in India.
Type of chocolate makers
What goes into making a chocolate and how it is made, naturally, have an impact on the price it goes for. Consider the commercial Rs 5-250 chocolate bar available everywhere. What their makers have nailed is a standardized chocolate experience at massive volumes, with budgets for listing and advertising products to boot. For these chocolate makers, volumes matter and 'the same taste in every bite' matters. They source cacao from multiple estates and process them all together. The amount of cacao in the bar can be as low as 10-15 percent, with sugar and fat making up the rest. The goal: to make palatable chocolate that tastes the same everywhere and can be sold at relatively low prices despite global spikes in the price of raw cacao.
The next set of chocolate makers may be artisanal chocolatiers who buy baking chocolate or couverture (contains cacao butter, international brands include Weinricht's 1895, Lubeca, Barry Callebaut, Pacari, Vivani and Valrhona) from the market, to use in cakes and handmade chocolates. These chocolates tend to be more expensive, and the taste, mouthfeel and snap of the chocolate can vary depending on the skill of the maker.
Next, there are the bean-to-bar chocolate makers. A lot of craft chocolatiers in India and abroad follow this model: buying the cacao beans and processing them to make their own chocolate. To be sure, there are different levels of sophistication - in terms of skill and machinery - here too. For example, this approach allows chocolatiers to be selective about the estates from where they buy their cacao beans, and to process them separately for small-batch, single-origin chocolate.
Finally, there are the farm-to-bar chocolatiers who source cacao pods instead of dried beans. The reason: they are usually as interested in the cacao butter as they are in the bean. They are also interested in how the beans are dried and fermented. In the case of Manam, Muppala says he eventually wants to work with geneticists to pick the best cacao south India has to offer, and cultivate that.
In terms of cost, commercially produced chocolate benefits from scales of economy, and choices dictated by the need to keep the cost of transporting and storing it in different kinds of establishments as low as possible and making this chocolate relatively affordable for a large section of the population.
Handmade artisanal chocolates, bean-to-bar chocolates and farm-to-bar chocolates are typically small-batch. And the pricing can vary widely, with some well-known chocolatiers charging a premium.
Cost of making craft chocolate in India: Ingredients, equipment, logistics
Before getting into the costs, here's a quick step-by-step guide to how farm-to-bar chocolate is made.
First come the cacao pods - a single mature tree (aged 3 years and above) can produce up to 30 pods at a time. (Photo by Hashim Badani, courtesy Manam)
Some chocolatiers like Paul & Mike and Soklet grow some of their own cacao, and source the rest from farmers in India (Kerala, Andhra [West Godavari] and Tamil Nadu [Coimbatore]) and abroad. Cacao grows in the shade of trees like coconut and palm, and the world over, most cacao farms are small to mid-sized up to 5-6 acres. Countries like Ghana and Ecuador are known for their excellent cacao. Indian chocolate makers like Manam are now also investing in identifying the best genes for flavour in Indian cacao, for better and yummier yields in the future.
These pods need to be harvested, broken open, fermented and dried. (Photo courtesy Manam)
The pods can be sundried out in the open, or in a warehouse where they can be protected from dust, bugs and other matter. The process can take two to three weeks after the pods are harvested.
Fermentation is a crucial step where farm-to-bar chocolatiers are changing things up. Traditionally, Indian cacao was grown as a commodity product, and growers often sold expensive cacao butter to big chocolate makers in India and abroad. Now, some chocolatiers are keeping this butter to ferment the chocolate in its own sugars. "For me, cacao butter is the flavour component of chocolate, not just its fat component," Muppala says, adding that it tastes like mangosteen and litchi with citrus and pineapple flavours.
Cacao being fermented in boxes lined with cacao leaves. (Photo by Hashim Badani via Manam)
Next, the beans are roasted, ground into a fine paste, conched to re-work some of that cacao butter back in, and turned it into chocolate products from couverture and bars to cocoa powder and chocolate spread.
Now depending on how much chocolate you want to make, how many variants and how well, a craft chocolate set-up can cost anywhere from Rs 1 crore to Rs 5 crore - not counting the money needed to transport and market Indian chocolates or list them in supermarket chains.
Paul & Mike co-founder Vikas Temani, 42, offers this breakup of the biggest list items: "The major capex is on machinery because most of it needs to be imported," he says over phone from Kerala, where his operation is. There is the equipment for cracking the pods and winnowing the husk, space for drying and fermenting the pods, a drum roaster - "arguably the most important machine... is close to Rs 50 lakh" each - then there are the refiner - for grinding the dried, fermented and roasted beans into a fine paste - and conch - each of these is about "a couple of crores". The equipment alone costs around Rs 3 crore. Additional costs include a building or structure to dry, store and process the pods, storage tanks and filters, air-conditioning, and refrigeration units. Adding more variants, Temani says, is a double-edged sword: while more flavours and infusions may be desirable, it requires greater investment in more machines.
Cacao beans drying at the Manam cacao fermentery in West Godavari District, Andhra. (Photo by Hashim Badani)
Cheaper alternatives exist, but there are trade-offs in terms of quantity and quality. For example, replacing the melanger for making a smooth chocolate paste with a wet grinder (a modified version of a dosa mix grinder) can cut the cost by tens of lakhs, but craft chocolatiers say the result is markedly different. Hand tempering or semi-automated is cheaper than tempering chocolate entirely in machines but can be less consistent. Expensive drum roasters, too, may be replaced with low-end roasters or even baking ovens - but this again limits the volumes even highly skilled chocolatiers can process reliably well.
Fermented and dried cacao is then roasted and ground into a fine paste. (Photo by Siddharth Govindan via Manam)
There's more: once tempered, craft chocolate doesn't travel as easily or cheaply as commercial chocolate, especially in a tropical country like India. (This is partly because of the higher ratio of cacao butter in craft chocolate.) And this is an expensive logistical challenge for Indian chocolate makers, too. Temani, a biochemical engineer from the Indian Institute of Technology, Delhi, adds that economies of scale play a huge part here. Whereas big industrial FMCG companies typically have their own fleet of refrigerated trucks, smaller chocolate makers often need to work with third-party logistics companies. Indeed Paul & Mike also charges delivery fee of Rs 50 for orders under Rs 900. This goes towards shipping "chocolates via express shipment in thermally insulated packaging with ice gel", as per the Paul & Mike website. Soklet charges up to Rs 150, and Manam charges up to Rs 160 for delivery.
Machines for conching and tempering chocolate can offer more consistent results at higher volumes, but they add significantly to the capex. (Photo by Siddharth Govindan via Manam)
All this, without even counting the cost of the raw material: the price of dried cacao beans has spiked to about Rs1,000 a kilo, according to an April 2024 report in 'The Hindu'. Or the cost of transporting and listing the chocolate in supermarkets and retail spaces where buyers of premium chocolate are likely to see it.
"One kilogram of cacao beans will give you about 1.2 kg of chocolate. There's a lot of loss in terms of skin and fat and moisture because you're roasting, but then you're adding other ingredients like sugar, etc.," Muppala explains. "And then you package it and you either sell it as retailers, like we have chosen to be (at the Banjara Hills 'karkhana' or processing unit-cum-retail store) or you distribute it, you export it."
Another thing to account for if you are considering going into the cacao pod-to-chocolates business is the lead time: it can take two to three years to set up the business and start seeing any returns at all. Temani started Paul & Mike from within Synthite Industries headquartered in Kolenchery, Kerala, in 2017. From planting the trees and setting up, it took about two years for the first bar of Paul & Mike chocolate to be ready-for-market.
A chef working at the Manam Chocolate Karkhana in Hyderabad. (Image courtesy Manam)
Indian chocolate market size, revenue streams
The size of the market, Manam's Muppala says, is roughly Rs 4,600 crore. This represents the market for premium chocolates in India, of which Indian craft chocolates make up about Rs 400 crore currently. A third of the Rs 18,000 crore market, Muppala adds, is cornered by commercial chocolate makers who, he says, could make products that have as little as 10-15 percent cacao - the rest is sugar, butter and other ingredients like nuts and raisins.
The customer he's targeting is the same as a Ferrero Rocher or Godiva in India, he says - the top 1 crore household in terms of income bracket. (Temani agrees that this is the right end of the market for his business, too.)
Like other chocolatiers in the space, Muppala is also interested to corner the corporate and wedding gifting market - it was one of the reasons why he got into the chocolate business. Muppala's family own the 35-year-old Almond House, a popular sweet shop in Hyderabad. Muppala became interested to dip his toes in the chocolates business when he observed a growing trend in bulk gifting - from traditional sweets to chocolate boxes.
To capitalize on this trend, Manam launched on Independence Day 2023, ahead of peak wedding and festivals season in India.
Getting into the craft chocolates business is typically for people with deep pockets (or people with access to big money and patience to see it through - remember, cacao trees take three years to mature and it takes roughly two years before the first bar of chocolate rolls out).
Manam has taken it a few notches farther. Whereas most craft chocolatiers launch with fewer than a dozen chocolate variants, Manam launched with 300-plus products including 48 bars of chocolate, hot chocolate powder, bonbons, thins, hampers, as well as options for customizing chocolate. The Manam karkhana space and design - including a chocolate fountain in the window that Muppala says has become a bane because it sometimes distracts visitors from what's going on inside - the Manam cafe and merch - all of this required a humongous upfront investment.
How does Muppala hope to recover all of this?
"We have multiple revenue streams that we've built into our own business model. One is of course our multi-format retail, which is the primary driver of our revenues. We want to open many stores over many cities over the next three years, but we also are building a business of selling B2B couverture (chocolate that contains cacao butter)... (and) we do e-commerce," Muppala says.
Paul & Mike's Temani says brand collaborations are another way to get your brand noticed. Paul & Mike has partnered with Sula Vineyards and Eleftheria Cheese in the past. "Collabs are like limited editions, for injecting freshness into the brand. For a bootstrapped brand, it is also a way to access another brand's customers at no extra cost - basically some effort we have put in," he says.
To be sure, for some craft chocolatiers, making chocolate is one part of their business. For example, Synthite, which bankrolled the setting up of Paul & Mike, makes essential oils and herbal extracts, among other things.
And Regal Foods, the Karthikeyan Palaniswamy started Soklet, an Indian craft chocolate maker, from his wife's family's cacao farms. Between 2003 and 2015, the family sold cacao as a commodity, to chocolate makers like Mondelez. Almost a decade ago, a small experiment to try and "get more value from the farm" led Palaniswamy towards chocolate-making. The trial batch was made for friends and family. "What the bean-to-bar market wanted was vastly different from the kind of commodity grade cacao we were growing," Palaniswamy says over the phone. He made some adjustments, and by 2016-17, a fermentry was up and running. By 2017, he says, beans from the farm also improved to export quality. Soklet's chocolate products now retail under the Annamalai Origin brand, and the company - registered as Regal Foods - still makes 80 percent of revenues from exporting beans.
Adding variants can seem attractive, but it increases the amount of effort and cost that goes into the operation. (Image of Manam Chocolate indulgence Collection, photo courtesy Daniel D'souza)
Chaitanya Muppala, founder, Manam Chocolate. (Photo credit: Daksh Chindalia via Manam)
Chocolate retail - online and offline experiments
Another feather in its cap: Manam's Banjara Hills karkhana was picked among the "100 extraordinary destinations to explore" in Time Magazine's 'The World's Greatest Places of 2024' list.
The 10,000-sq ft Manam Chocolate Karkhana in Banjara Hills, Hyderabad. (Photo credit: Pankaj Anand via Manam)
Built over 10,000 sq ft in Hyderabad's tony Banjara Hills neighbourhood, the Manam Karkhana is as much a window to craft chocolate making as it is a retail outlet. In a video call from the karkhana, Muppala points to chocolate roasters and refiners that visitors can see through glass windows. There are tiny figurines of cacao farmers and realms of literature about the chocolate-making. There's a chocolate fountain that Muppala jokes is the bane of his existence. There are counters for signature chocolates and shelfs full of bars (almost 50 different kinds) and jars. There are bags full of chocolate rocks and nibs for snacking. There's a merch shop and an ice-cream bar, too. A hip cafe serves things apart from chocolate. But even perhaps more interestingly, there's a place for visitors to customize their chocolate bars.
"Say you want to make your own recipe, you can pick how dark you want the chocolate to be, if you want an infusion (with nuts, raisins, flower petals, etc.), and how many pieces you want - say you want 500 pieces of your chocolate recipe. You can even customize the packaging to say recipe by... (your name)," says Muppala.
Indeed, Manam seems to have put a lot of thought into the design. It seems to start with the bar itself, which is divvied into uneven blocks so you can pick whether you want a big or small piece without breaking the chocolate into shards. The bar breaks cleanly, in the way that only well-tempered and transported chocolate can.
Chocolate lab at Manam Chocolate Karkhana. (Photo by Pankaj Anand via Manam)
Why South India is becoming the hub of growing Indian cacao and making Indian craft chocolate
Cacao, an agricultural product, needs to be fermented and dried close to where it is grown. (Once the beans are dried and bagged, they have a longer shelf life.) And since Indian cacao is grown in the southern states of India, this is where craft chocolatiers have set up. As mentioned above, Manam is headquartered in Hyderabad with its cacao pods coming mainly from the West Godavari region in Andhra (Manam does "distinct origin" Indian chocolates made with cacao from this region). Paul & Mike is in Pollachi, Kerala. Soklet, made by Regal Foods & beverages is headquartered in Pollachi, Tamil Nadu. The state is home to another Indian craft chocolate maker - Mason & Co - which sources cacao from plantations in Kerala, Karnataka and Tamil Nadu.
While some chocolate makers also import beans from places in Africa and South America, there is an effort to use and improve Indian cacao as well. There has been cross-fertilization over the years, Muppala says, the fruit from one cacao tree can taste different from the pods on the tree next to it. He adds that while commercial chocolate makers must mix cacao from multiple locations in the same vat to do the volumes they do, craft chocolatiers and small-batch chocolate makers can explore single origin chocolates - so you can pick "distinct origin" chocolate not just from India but more specifically from West Godavari or from Karavali in Karnataka.
With Diwali 2024 less than 10 weeks away, Indian craft chocolatiers could be pulling out more stops. Perhaps along the way, they could create demand for Indian chocolate in the same way that people today seek out Swiss or Belgian chocolates.
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