CADBURYS INDIA LTD

I. INTRODUCTION
Cadbury Schweppes is one of the leading global companies in beverages and confectionery businesses. It has operations in over 190 countries. Its leading global brands are: BeveragesCrush, Dr Pepper, Indian Tonic Water, Canada Dry, Crystal Light like Confectionery/ chocolate - Dairy Milk, Mr Big, Timeout, Twirl, Perk, Sour Patch, Hazel Nut, Temptation. In India, Cadbury is launched as a subsidiary of Cadbury Schweppes and has been a dominating player in the countrys chocolate market with strong brands like Dairy Milk, Five Star, Perk, etc. Dairy milk is in fact the largest chocolate brand in India. Cadbury India, now stands only second to Cadbury UK in sales of Dairy Milk. Chocolates contribute to 64% of Cadburys turnover. Confectionery sales, accounting for 12% of turnover, is contributed largely by Eclairs. The company attempted expanding its confectionery product portfolio, with launch of sugar based confectionery Googly and Frutus, without much success. Cadbury also has a strong brand Bournvita in the malted health drink category, which accouts for 24% of turnover.

Chocolate consumption in India, compared to 8-10kg in the developed countries is extremely low. Per capita consumption is around 160gms in the urban cities. In rural areas, it is even lower. Chocolates in India are consumed as indulgence and not as a snack food. A strong volume growth was witnessed in the early 90's when Cadbury repositioned chocolates from children to adult consumption. The biggest opportunity is likely to stem from increasing the consumer base. Plant locations Cadburys manufacturing operations started in Mumbai in1946, which was subsequently transferred to Thane. In 1964, Induri Farm at Talegaon, near Pune was set up with a view to promote modern methods as well as improve milk yield.

CURRENT PROFIT & SALES FIGURES: Growth Percentage Year Net sales PBT Tax(%ofPB T) PAT (5.4) 41.2 40.0 41.8 Dec 97 12.2 (16.9) 30.6 98 21.0 41.4 31.3 99 19.8 63.0 33.2 2000 10.8 32.8 36.2

Source: Profit & Loss A/c- refer Appendix

Over the past two years the company has been facing a decline in the growth rate, which was 19.8% in 1999 and came down to 10.8% in 2000. However the PAT figures show that the Profit

has been more or less constant and thus it means that the company has been focusing more on reducing the costs in view of the declining revenues.

Expected growth trends

The Cadbury management has cut down on its growth target by setting a 10% average volume growth target for the next three years (as against previous growth target of 12% volume growth and 20% value growth). Coupled with inflationary price

increases, this could translate into a topline growth of 14-15%

yoy. This target also appears difficult to achieve given the consumer slowdown and the fact that the company is dependent on a single category - Chocolates to drive growth. In the malted food drinks category the company faces stiff competition from SmithKline Beecham, and market share has been stagnant at around 14% despite the companys efforts and investments in repositioning the brand. Efforts at expanding confectionery portfolio have also not yielded desired results. The management has declared its intention to focus only on Eclairs (which forms a major portion of its 4% share in the confectionery segment) for the time being in this category. In chocolates too, the onus remains on the 2-3 key brands such as CDM, Perk and Eclairs, which have supported growth in the past.

II. PRODUCT PORTFOLIO & THEIR MARKET ENVIRONMENT

Cadbury dominates the Indian chocolate market with about 70% market share. Besides, it has a 4% market share in the organized sugar confectionery market and 14% market share in milk/malted food segmented.

Chocolates turnover)

and

confectionery

products

(76%

of

For more than five decades now, Cadbury has enjoyed a leading position in the Indian chocolate market to the extent that 'Cadbury has become a generic name for chocolate products. The fact that Cadbury cultivates its own cocoa beans, gives the company an edge over others; as imported cocoa beans are not only expensive but have a different taste, not really liked by the Indian taste buds. Cadbury has leading brands in all the segments viz bars (Dairy Milk, Truffle), count lines (5 star, Picnic), panned confectionery (Gems) and wafer chocolates (Perk), eclairs (Cadburys' Eclairs), tofees (English Toffee, Byte). Cadbury launched a new brand Milk Treat targeting kids segment. Increase in both the rural and urban consumer base by focussing on the twin proposition of affordability and availability

is being followed to drive future growth. Small affordable priced packs have been launched, which have helped improve

penetration. Cadbury entered the hard-boiled sugar confectionery market with the launch of Googly in 1996. In 1997, the company launched a coffee based sugar confectionery product Mocka. A new variant Googly Mint was launched in 98.

Food drinks (24% of turnover)

Cadburys Bournvita is the leading brand in the brown drinks segment of milk/ malted food products. Overall share in the malted food drinks market is estimated at 14%. Brown drinks earlier positioned as taste enhancers were losing market to white drinks during the last few years. Cadbury relaunched Bournvita with a new formulation and advertising campaign

positioning it on the health benefit platform to compete with white drinks. Cadburys other products include Cadburys Drinking Chocolate and Cadburys Cocoa powder.

Changing product mix

Contribution to turnover in 1994 Chocolate Sugar Confectionery Food drinks Source: India infoline 59% 9% 32%

Contribution to turnover in 2000 64% 12% 24%

Current market share

Chocolate Sugar Confectionery Food drinks

Source: India infoline

69.2% 4.0% 14.2%

III. MARKET COMPETITION

The

following

diagram

gives

glance

at

the

prevailing

competition in the market and also the share that each of the players have in the game.

5% 2%

23%

cadburys nestle gcmf others 70%

Source: India Infoline

The above charts denotes that cadbury dominates the Indian Choclate industry with 70% market share. Nestle only second to cadbury marketing with 23%. G.C.M.M.F with 5% -Gujarat market co-operative share and milk is

federation

2%

contrbuted by others. Cadbury continues to dominate the chocolate market with about 70% market share. Nestle has emerged as a significant

competitor with about 20% market share. Key competition in the chocolate segment is from co-operative owned Amul and

Campco, besides a host of unorganized sector players. There exists an even larger unorganized market in the confectionery segment. Cadbury holds 4% of the market share in this segment. Leading national players are Nutrine, Parry's, Ravalgaon,

Candico, Parles, Joyco India and Perfetti. The MNCs such as Joyco and Perfetti have aggressively expanded their presence in the country in the last few years. Gujarat Co-operative Milk Marketing Federation (GCMMF) and Central Arecanut and Cocoa Manufactures and Processors Co-operative (CAMPCO) are other two significant players. Both are local manufacturers.

Competitive Strategy
1-

Differentiation- It is the act of designing a set of meaningful

differences to distinguish the companys offering from

competitors offerings. Cadburys competitive strategy is definitely one of differentiation. The company presents their products through advertisements and other forms of mass media giving it a feel of Indian customs. It is through marriage ceremonies and other Indian customs that they are being presented. Also the chocolate mix, which has been made in India is just right for the Indian taste.

It is a bit on the sweeter side as compared to their international products that are comparatively bitter.

2- Pro-active Strategies:
The company has always taken a lead position in coming up with innovative ideas whether it is relating to marketing or to modification to the product itself. Cadbury has been pro-active in all its decision taking process, no matter how much risky the step might be e.g: It was the first one to position chocolate in the Indian adult category, followed by others such as Amul. Also it got into the chocolate wafer segment by launching Perk before Nestle could come up with its Charge.

IV. ENVIRONMENTAL ANALYSIS

a. PEST-G ANALYSIS:
External forces will influence cadburys marketing environment and thus it is necessary for cadburys to consider these forces before implementing their marketing strategies. These forces

are political, economical, social, technological and geophysical all of which are extremely dynamic and susceptible to change.

Political:
One of the main areas where the factor makes an influence in the companys operations are in determining the prices of the raw material i.e. the Cocoa bean. Changes in custom duties and foreign exchange fluctuations have a major impact as more than 25% of raw material is imported. Further the company also has to bear the Excise duties that is levied on malt and chocolate. All this has a significant impact on margins.

Economical:
Chocolate has never been seen as a basic or necessary commodity and thus does not enjoy a high preference in the consumers domestic purchase list. The impact of this is that in case of a low expected income, the purchase volumes show a radically declining trend. This kind of situation is building up in the current economic environment, as the individual income is on a decreasing trend (in view of the decreasing interest on savings and a high unemployment rate), and thus the company will have to plan its strategy keeping in mind the above.

Social:

The social attitude has always had a major role to play in the purchase decision process of the consumer. Some of the issues that Cadbury has already fought out have been the adult negative view towards chocolates and the affordability to middle class. But the issues that still remains to be sought out are the opposing dental advise to the children and chocolates not seen as Snack food. These two can be tackled with an appropriate advertising campaign targeting the same.

Technological:
The main challenge that the company needs to address to is that of the logistics, distribution and inventory planning. Although the companys financial backing is quite strong to use all the modern technologies yet when it comes to driving in the Indian tropical extreme climatic conditions, the risk factor goes up. And so the company cannot use one single formula for distribution and storage and have to mould its methods according to the regional sensitivities.

Geophysical:
The company needs to be aware of its geophysical environment. The waste matter should be disposed in such a manner that it should not pollute the environment or cause any unnecessary damage to it. On the other hand a company of Cadburys image

should set an example for others by using environmental friendly systems.

b. SWOT ANALYSIS:
Strengths
1- Market Share:
Cadbury has continued to dominate the chocolate market with about 70% market share. This has placed it in a very strong position where it can afford to take risks without worrying much about the implications. Also this kind of Market share bars the entry of any new competition in the market. The new players might play in areas where Cadburys is not targeting but would not even dream to come in its way.

2- Distribution
Chocolate needs to be distributed directly, unlike other FMCG products like soaps and detergents, which can be sold through a wholesale network. 90% of the products are sold directly to retailers. Cadbury's distribution network has expanded from 1,900 distributors last year to 2100 distributors and 450,000 retailers. The company has a total consumer base of 60mn. Distribution, in the case of chocolates, is a major deterrent to new entrants as the product has to be kept cool in summer and also has to be adapted to suit local tropical conditions.

Besides use of IT to improve distribution logistics, Cadbury is also attempting to improve distribution quality. To address the issues of product stability, it has installed Visi coolers at several outlets. This helps in maintaining consumption in summer, when sales usually dip due to the fact that the heat affects product quality and thereby offtake.

3- Financial Strength
Cadburys has always given a very superior value to all its shareholders. This not only increases the goodwill or the reputation of the firm but also provides surplus funds for further investments in technological advancements. The following figures give us an insight into the shareholders earning in the past years.
Year (per share in rupees). Net Earnings EPS Dividend pay out Dividend % of PAT Dec.97 Dec.98 Dec.99 Dec.2000

7.8

11

15.4

14.6

3.5 45.0

6.1 54.9 Refer to appendix

7.3 47.2

6.1 42.1

Weakness
1- Customer Relation: One of the major drawback in Cadburys customer relation strategy is that there is a very rare chance of direct contact with the consumer. As we know that the sales are made on a very impersonal front as it is done through retailers so it is difficult for the company to approach the consumer or vice versa, in case of any complaints or suggestions. For this purpose Cadburys should maintain a more active Customer

relation cell, which can work through a call center and the consumers can contact with only a single number tele-line. 2- Product Dependence: Cadbury has been relying on the Chocolate segment too heavily and although there seems no threat to its position but it might face one in the near future, as the Indian government has opened doors for large imports. So keeping this in view Cadbury should increase its focus on other product segments and make a strong hold in those too.

Opportunity
1- Chocolate consumption in urban India itself is a largely untapped. The figures reveal that only 60mn people out of the urban middle class population of about 280mn consume chocolates. 2- Coffee Bars: With the recent popularity of Coffee bars spreading in the main Indian metropolis, Cadbury too can use it to expand its current product portfolio and also add some new products to the list. Cadbury has already built up a brand name known for superior quality and thus it can use the same to establish into the Coffee product line. The coffee bars will also help Cadbury to re-enter into the beverage market, from which it had withdrawn after the failure of Canada Dry.

Threats
1- New Competition: With removal of Quantity Restrictions all the major international chocolate brands specially Swiss brands would become freely available in the market. Competition from MNCs like Nestle and threat of entry of new global players. Increasing competition puts pressure on advertisement budget and margins, however, the positive side to this is that it helps in expanding the market.

V. MARKETING STRATEGY
Cadbury in every pocket has been the punch line for the companys marketing strategy. It aims at achieving this vision by growing the market by appropriate pricing strategy that will create a mass market and to have offerings in every category to widen the market. The business strategy has hinged on focusing on key drivers of growth namely: 1- Increase the width of chocolate consumption, through low price point packs and distribution focus. 2- Increase depth of consumption, targeting regular chocolate consumers through generating impulse and a dominant

presence at Point of Sale.

Segmentation
Another division that Cadbury has made is in Rural vs. Urban segmentation. The company has no plans to penetrate strongly into the rural segment as, most of their sales

come from urban areas. The companys target of adding 10mn consumers annually can be achieved from the urban areas itself.

Besides storage and logistics will also be a problem in the rural area.

Targeting
In the earlier times when cadburys was introduced, the target market were the children. A strong volume growth was witnessed in the early 90's when Cadbury repositioned

chocolates from children to adult consumption. All the marketing strategies were directed to attract the adults in this market. The biggest opportunity is likely to stem from increasing the consumer base. The growth will come from the expansion of the target size, which will grow as more people move upwards in the income pyramid.

Positioning
On snack food positioning for chocolates. Snack food is a good "enabler". It helps in softening people for consumption, where the consumer feels that "yes, I can consume this product". There is an intended message behind the positioning of chocolates as snack food, there is a perceived message and then there is the actual use of the product. The positioning change however does not really affect market growth. Behaviorally, it is still consumed as a chocolate and not as a filler. Perk still competes with Dairy Milk and not with biscuits/ other snack foods. India is still far

away from using chocolates as a snack food. You need to have an offer that adds value. At the end of the day, how many Indians can afford a snack food priced at Rs16-17 for 50gms? In fact the Asian markets itself are very mixed for chocolates Pakistan, Burma and Thailand have very poor chocolate market whereas Malaysia has a large chocolate market. The chocolate market has grown rapidly in Bangladesh once we introduced our products. Also earlier on chocolates were consumed by children only or they were used for gifting. Grown up adults would feel guilty about eating chocolate, akin to stealing a child' food. About 6 years ago due to the changes in the marketing strategies , cadburys has repositioned chocolates from children to adults.

VI. FUTURE STRATEGIES AND TACTICS

Various measures that are being undertaken in all areas of operations to create value for the future are: 1) New channels for marketing such as Gifting and Child connectivity and low end value for money products for

expanding the consumer base have been identified . 2) In terms of manufacturing, management focus is on

optimizing manufacturing efficiencies and creating a world class manufacturing location for CDM and Eclairs. The company is today the second best manufacturing location of Cadbury Schweppes in the world. 3) Efficient sourcing of key raw material ie Cocoa through forward purchases of imports, higher local consumption by entering into long term contracts with farmers and undertaking efforts in expanding local cocoa area development. The

initiatives in terms of developing a long term domestic cocoa sourcing base would yield maximum gains when commodity prices start moving up. 4) Use of IT to improve logistics and distribution competitiveness The company is in the process of atomising its entire logistics planning functions. This would need a huge fixed capital

investment initially but is sure to pay off in the years to come by reducing the inventory and transportation problems. 5) Expand the consumer base. The company has added 8mn new consumers in the current year and now has a consumer base of about 60mn. Although the growth in absolute numbers is lower than targeted, the company has been able to increase the width of its consumer base through launch of low priced products.

CONCLUSION
The project encompasses a general as well as an analytical review of Cadburys operations in Indian market. We have seen how the companys inherent strategies have raised it to a powerful front in the current competition. The companys strong products and financial backing proves to be its major strength and provides a good platform for any future launchings that the company would want to go into. We have already discussed some of the steps being taken internally to improve future operations and profitability. At the same time we have also given recommendations in view of the external changes taking place in the competitive environment in form of free imports, lower barriers to trade and the advent of all global players into the country. Infact, the company can convert the free import era from threat to an opportunity, wherein it could optimally use the global Cadbury Schweppes portfolio. The company would be able to not only provide greater variety, but it would also be more cost effective to test market new products as well as improve speed of response to change in consumer preferences through imports. The only concern that the

company has in this regard is the current high level of duties, which limit the opportunity to launch value for money products.

Lastly, it is worth mentioning that Cadburys management is proficient at maintaining image leadership through a superior marketing mix. And a richer product mix, innovative marketing strategies and focused advertising campaigns, would continue to unveil the magic of being the number one brand in the heart of its customers.

REFERENCES

1) Cadburys Annual Report 2) India Infoline 3) Kotler Phillip

CONTENTS
I. INTRODUCTION (a) Plant Locations (b) Current Profit and Sales Figures (c) Expected Growth Trends II. PRODUCT PORTFOLIO & THEIR ENVIRONMENT III. MARKET COMPETITION (a) Competition (b) Competitive Strategy IV. ENVIRONMENTAL ANALYSIS (a) PEST -G Analysis (b) SWOT Analysis V. MARKETING STRAGEGY (a) Segmentation (b) Targeting (c) Positioning VI. FUTURE STRATEGIES AND TACTICS VII. CONCLUSION VIII. REFERENCES IX. APPENDIX 14 15 16 12-13 7-11 3-4 5-6 1-2

CADBURY'S INDIA