Lotte Corporation, South Korea’s fifth-largest business group, decided to enter India sometime early last decade. The opportunity presented itself when it picked up Chennai-headquartered Murugappa Group’s confectionery business, Parry’s Confectionery Limited (PCL), in 2004. Lotte, which is a huge conglomerate, started as a confectionery company.

However, Lotte did not enter the Indian market with a big bang. “We took a few years to understand the business,” adds Wahi. Lotte had to choose the slow and steady path as the subsidiaries are only given seed money and are expected to stand on their own feet.

While it was studying the market, Lotte India decided to launch the Choco Pie in India, which turned out to be a good decision. Until 2014, the company was importing and selling the product. “There was a good response for the Choco Pie. It’s a unique product, a snack consisting of two layers of biscuits with marshmallow filling covered by chocolate,” says Wahi. Lotto decided to go in for manufacturing the Choco Pie locally.

By 2014, the factory was working to full capacity. Sales were booming in the North and the East. “We decided to open another factory in Rohtak, Haryana, which is one-and-a-half times larger than the Chennai factory. Recent research shows that we can target everybody for the Choco Pie. The rural market is good, too. The export market is also growing. We export to the Middle East and South Asia.”

Lotto India has a turnover of Rs 300 crore. It is a profitable operation. “We have paid back 70% of the loans. We can think of expansion and aggressive marketing,” says Wahi. The company has decided to re-launch the Coffy Bite, one of PCL’s most successful brands launched 32 years ago. The Coffy Bite had lost out to Kopiko from Indonesia, in the many years of neglect.

Wahi says that now Lotte India has five brands (Choco Pie, Eclairs, Coffy Bite, Lacto King and Caramilk), and each one is powerful on its own. However, Lotte will have to work really hard to expand its presence. Confectionery market in the country is huge, amounting to Rs 1,00,000 crore, including gums. The top-three players are Parle, ITC and Perfetti. They spend a lot on brand building, which Lotte had not been able to match till now.

There is also a lot of competition from the unorganised sector, which imports cheap machinery from China and rolls out toffees, sweets and sugar confectionery. “We have been hit by these local players as we can’t offer 40-50% margins to the retailers. Lotte has been working on how to move the products to higher value.”

In sugar confectionery, the margins are wafer thin. “We have created Rs 5 packs, and we get 50% of our income from these. But we are fighting all kinds of other products in this price range, such as biscuits. The Rs 5 pack is a Rs 40,000 crore market in India. We have to figure out how to make products that sell at Rs 5. We also have to be in states like Uttar Pradesh, Bihar and Chhattisgarh, where sweets sell at 50 paise. The price points keep changing,” says Wahi.

Lotte has also been hit by the slowdown in the economy. Wahi admits that there are challenges ahead. The company is relying on its strong distribution set-up, with 5 lakh outlets. “Confectionery won’t go away in the country. There are huge opportunities. We will double our presence in the next 4-5 years,” says Wahi.