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Cadbury, is one of the British fastest and a rapid growing confectionery company among all
multinationals and national companies engaged in their well-known dairy and milky products.
From 2010 to 2012, Cadbury is managed by Kraft Foods then followed by Mondelz
International who now operates the company from 2012 to present. In 1824, Cadbury was
established in Birmingham by John Cadbury, one of ten children of Richard Tapper Cadbury, a
prominent Quaker who sold tea, coffee and drinking chocolate. Cadbury then developed the
business with his brother Benjamin in 1847, followed by his sons Richard and George who had
joined the company in the 1850s and became the second Cadbury brothers to run the business. In
21st century, the expansion of business has widened to more than 70 countries. The main head
office is located in Uxbridge, England which occupies 84,000 square feet (7800 ) of space inside
and consists of 71,657 employees (Wikipedia, 2008).
The company manufactured and marketed mainly different kinds of confectionery products such
as chocolates, snacks, beverages, candy and gums. Dairy milk is one of the renowned and bestseller chocolate brands among the other Cadbury products.
The following shows the global market share and research indicates that Cadbury consists of
70% market share all over the world. The dairy milk chocolate alone has accounted for 30% of
market. Besides, research also found out that an estimated number for chocolate bars are sold in
every year consists of 120 billion and about 60 million of these are manufactured by Cadbury.
Cadbury then becomes the second largest confectionery company in the world.
Competition
Price of Complementary Goods
Cooling Weather and Recession
Determinants of Supply
number of supplier
expected price
price of input costs
want less of it or change to other brand. Income changes and lower priced substitutions could
affect their taste and a cheaper priced alternative could become a new preference.
Expected price is also included. If consumer expects that the price of a certain
commodity will rise in future, the demand will increase as the product is under the current lower
price before the price rise. Inversely, consumers may believe that a price of a good will be
reduced in future; they will delay on purchasing the product until the price reduces to the lower
rate. Many consumers may purchase Cadbury products if they know that the price is going to be
increasing in the near future. On the other hand, consumers may wait to buy the products if they
know the prices are going to drop in the near future.
Competition is also other factors that affect the demand of Cadbury products. In this
market, consumers can find a lot variety of different brands of chocolate that are available such
as Nestle Kit-Kat, Ferrero Roche, Hershey,Mars and so on. All chocolates are sold according to
the market price including Cadbury. So it is a tough competition for all confectionery companies.
In order to increase the demand for Cadbury products, the price of the competitors have to be
increase. In vice versa, if the price of the competitors decrease, the demand of Cadbury products
not much affected by it as it is considered as consumers brand loyal but the sales volume is not
much as the previous. In the results, the profits will not that high as before the changes of price
of competitors.
Furthermore, price of complementary goods is also another determinant. If the price of
complementary goods increases then there will be no change in the demand as Cadbury has
referred to normal goods. It becomes every people daily needs. But there is another consideration
that the demand will be affected if the price of complementary goods increases highly. For
example, in 2009 a shortage of cocoa was reported in UK. The cost of cocoa has increased
drastically to 2,055 a ton, the highest since 1985. The sale revenues dropped drastically as many
consumers may be unwilling to buy the product. They would rather to purchase sweet or candy
rather than buy chocolate.
Other factors for affect the change in demand could be related to the cooling weather and
to the recession. Cooler weather encourages the increase in sales of chocolate and the recession
could mean that people are staying at home rather than going out to eat. In 2009, Cadbury have
that a stay-at-home culture that have helped increase Cadburys UK sales by 12% in the first
half year (BBC News, 2009). Thus, the weather affects the demand curve shift from left to right
as demand increases.
confectionery companies including Cadbury. (mail online, 2009).The increases in the price of the
related good (cocoa) will affect less supply on the confectionery products although the price of
the product remains constant. This shifts the supply curve to the left.
Besides, the number of suppliers also will affect supply. For example, as Cadbury
expands their business to more than 70 countries, there are a lot of supplies for Cadbury product.
An increase in number of suppliers shifts the supply curve rightward. The greater the number of
suppliers in the market, the greater the supply of Cadbury products in the market. There will be
more Cadbury products to go around for the consumers.
Expected price of the good also determines the supply of Cadbury products. Producers
may delay the production of Cadbury in the current period if they expect the price of the
products to rise. They will be more willing to sell the products at a higher price rather than
selling and producing at the lower price. The higher price will increase their net revenue.
In 2008, Cadbury announced that its profit before tax was down at 112 million
compared to 134 million. However, its sales revenue rose from 2440 million in 2008 to 2767
in 2009. (BBC NEWS, 2008).
The profits earned for inelastic demand is higher than elastic demand when the price
increases. Revenue is calculated as Price Quantity demanded. When p= $1.27, Qd=95 units,
TR= $1.27x 90 = $120.65. Original price, p = $1.20, Qd=100 units, TR = $1.20 x 100 =$120.
In 2010, Kraft, the worlds second largest food company took over Cadbury. Kraft said
the combination of the two companies could create a global confectionery giant as Kraft are
now able to increase their market shares and growth overseas, while Cadbury could expand its
markets and place itself as a competitor among the US confectionery market. Kraft indicates that
the combination of two companies allowed them to invest in economies of scales, meaning sales
and distribution would increase and deliver 640m in revenue synergies.(BBC News, 2010)
CONCLUSION
In conclusion, Cadbury has had much market power in the confectionery industry all over the
world. Cadbury realises their success depends significantly on the value of the Cadbury brand
while relying on its excellent reputation for their product quality and flavour, accessible, and
affordable price. In the current economic state, they are still facing and need to sort out the issue
of the deficit of cocoa and the price increases in cocoa. Besides, they need to compete with other
chocolate brands as many firms have entered freely in the market. To remain a major player in
the confectionery industry, they need to be effective in the current market by introducing more
new products and react to the alternatives within the market.
REFERENCES
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http://news.bbc.co.uk/2/hi/business/7252144.stm [Accessed 19 February 2008]