How a blank cheque scripted Cadbury's success story in

India
Aug 14, 2014, 04.19AM IST

Tags:

Oreo|
Mondelez International|
Kraft Foods|
Dairy Milk|
Cadbury

(The device used to accomplish)

By: Sanjay Khosla & Mohanbir Sawhney

Not long after Kraft Foods bought Cadbury, the British-based chocolate company, in early 2010, a group of Kraft
leaders visited the team responsible for Cadbury in India. If the Indian managers thought they could catch their breath
after the long and rancorous walk-up to the deal, they got a major surprise.

How a blank cheque scripted Cadbury's success story in

India
Aug 14, 2014, 04.19AM IST

Tags:

Oreo|
Mondelez International|
Kraft Foods|
Dairy Milk|
Cadbury


(The device used to accomplish)

By: Sanjay Khosla & Mohanbir Sawhney

Not long after Kraft Foods bought Cadbury, the British-based chocolate company, in early 2010, a group of Kraft
leaders visited the team responsible for Cadbury in India. If the Indian managers thought they could catch their breath
after the long and rancorous walk-up to the deal, they got a major surprise.

How a blank cheque scripted Cadbury's success story in

India
Aug 14, 2014, 04.19AM IST

Tags:
Oreo|
Mondelez International|
Kraft Foods|
Dairy Milk|
Cadbury


(The device used to accomplish)

By: Sanjay Khosla & Mohanbir Sawhney

Not long after Kraft Foods bought Cadbury, the British-based chocolate company, in early 2010, a group of Kraft
leaders visited the team responsible for Cadbury in India. If the Indian managers thought they could catch their breath
after the long and rancorous walk-up to the deal, they got a major surprise.

How a blank cheque scripted Cadbury's success story in

India
Aug 14, 2014, 04.19AM IST

Tags:
Oreo|
Mondelez International|
Kraft Foods|
Dairy Milk|
Cadbury


(The device used to accomplish)

By: Sanjay Khosla & Mohanbir Sawhney

Not long after Kraft Foods bought Cadbury, the British-based chocolate company, in early 2010, a group of Kraft
leaders visited the team responsible for Cadbury in India. If the Indian managers thought they could catch their breath
after the long and rancorous walk-up to the deal, they got a major surprise.

How a blank cheque scripted Cadbury's success story in

India
Aug 14, 2014, 04.19AM IST

Tags:
Oreo|
Mondelez International|
Kraft Foods|
Dairy Milk|
Cadbury


(The device used to accomplish)

By: Sanjay Khosla & Mohanbir Sawhney

Not long after Kraft Foods bought Cadbury, the British-based chocolate company, in early 2010, a group of Kraft
leaders visited the team responsible for Cadbury in India. If the Indian managers thought they could catch their breath
after the long and rancorous walk-up to the deal, they got a major surprise.

The Kraft leaders quickly announced the new target: Increase revenues for Cadbury in India by 25 per cent by the
end of the year, from $400 million to $500 million.
The Cadbury team was still reeling when Kraft announced the other side of the stunning goal: Kraft would pay what it
took to get there. Before the end of the year, Cadbury in India had hit the $500-million target. The device used to
accomplish that remarkable surge was a blank cheque: the one-two punch of a mind-bogglingly big goal and a
promise to provide the resources necessary to achieve it.
The success is grounded in a fairly basic principle: If people are freed from budget constraints, their imaginations can
soar. They take a broader look at what's possible. And, as was the case with Cadbury, they take a harder look at what
really works.
We have seen blank cheques triumph in assorted contexts and different geographies. Kraft used it to turn Oreo into a
best-selling cookie in China after the American favourite had struggled there for a decade trying to break into the
market.
Fonterra Brands, the New Zealand-based dairy cooperative, built a thriving food service business with an igniting
boost from a blank check. This powerful device shouldn't be used to give a one-shot boost to earnings. The point is to
create sustainable, profitable growth, growth that will build on itself. Before company leaders sign the blank cheque,
the team receiving it has to come up with a business model that shows genuine promise.
And once the cheque is signed, leaders need to monitor progress closely. If milestones aren't met after a certain
point, turn off the spigot, learn from the failure. But blank cheques succeed far more often than they fail. Team
managers feel the pressure of the faith placed in them. And they feel as if they own the project.

Where does the money to fund the blank cheque come from? Every business has operations that lag or move
inefficiently. Those need to be trimmed or cut to channel resources to the blank cheque. That means company
leaders have to make some tough decisions about priorities. But leaders do that all the time. The blank cheque
should provide the momentum to be particularly aggressive about it. Savings can help fund the cheques.
Once the Cadbury blank cheque team recovered from the shock of its huge new target, the members got to work on
a plan. Given the short time frame, team members decided to double down on Cadbury's strongest asset in India, the
Dairy Milk chocolate bar.
The team knew that the best sales came in retail outlets that displayed Dairy Milk in so-called visi coolers,
refrigerated glass cases that showcased the candy and kept it from melting in the summer heat.
So the blank cheque underwrote an increase in locations with visi coolers from 20,000 to 40,000. At the same time,
the team raised the visibility of Dairy Milk, doubling the number of in-store displays from 5,000 to 10,000 and
expanding distribution into 2,100 additional towns and villages.
The budget for advertising and promotions jumped by 45 per cent. Perhaps most important, that frightening new goal
forced the Cadbury blank cheque team to re-evaluate the positioning of Dairy Milk.
The team moved Dairy Milk from competing in the category of chocolates into the larger market of sweets in general,
in the process expanding the occasions when consumers would reach for a Dairy Milk bar.
The overall results beat expectations. Cadbury in India hit the $500 million target ahead of schedule, making the year
the unit's best ever, with almost 28% revenue growth. Things went so well that the team even returned some of the
blank cheque allocation. And the success has legs. Cadbury in India continued to perform well. (Since the breakup of
Kraft in 2013, Cadbury is part of Mondelez International.)
Sanjay Khosla is former President, Kraft Foods, Developing Markets. Mohanbir Sawhney is Director, Center for
Research in Technology & Innovation, Kellogg School of Management.

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The Story of Cadbury

Early Days - A One Man Business

Birmingham 1824
John Cadbury was one of ten children of Richard Tapper Cadbury, a prominent Quaker who had moved to Birmingham,
England from the West Country in 1794.
In 1824, 22-year-old John Cadbury opened his first shop at 93 Bull Street, next to his father's drapery and silk business in
the then fashionable part of Birmingham.

Apart from selling tea and coffee, John Cadbury sold hops, mustard and a new sideline - cocoa and drinking chocolate,
which he prepared using a mortar and pestle.
Cocoa and drinking chocolate had been introduced into England in the 1650s but remained a luxury enjoyed by the elite of
English society. Customers at John Cadbury's shop were amongst the most prosperous Birmingham families, the only ones
who could afford the delicacy. Cocoa beans were imported from South and Central America and the West Indies.
Experimenting with his mortar and pestle, John Cadbury produced a range of cocoa and chocolate drinks, the latter with
added sugar. The products were sold in blocks: customers scraped a little off into a cup or saucepan and added hot milk or
water.
John Cadbury had a considerable flair for advertising and promotion. "John Cadbury is desirous of introducing to particular
notice 'Cocoa Nibs', prepared by himself, an article affording a most nutritious beverage for breakfast," announced his first
advertisement in the Birmingham Gazette in March 1824.
He soon established himself as one of the leading cocoa and drinking chocolate traders in Birmingham. The popularity and
growing sales of John Cadbury's cocoa and drinking chocolate of 'superior quality' determined the future direction of the
business.
In 1831, John Cadbury rented a small factory in Crooked Lane not far from his shop. He became a manufacturer of drinking
chocolate and cocoa, laying the foundation for the Cadbury chocolate business.
These early cocoa and drinking chocolates were balanced with potato starch and sago flour to counter the high cocoa butter
content, while other ingredients were added to give healthy properties.
By 1842, John Cadbury was selling sixteen lines of drinking chocolate and cocoa in cake and powder forms.

The Quaker Influence

The Cadbury family were prominent members of the Society of Friends or Quakers, one of the many nonconformist religious
groups formed in the 17th century. Their strong beliefs carried into campaigns aimed at ending poverty and deprivation and
many prominent Quaker-run businesses were part of reforms of social and industrial society in Victorian Britain.
John Cadbury's lifelong involvement with the Temperance Society influenced the direction of his business enterprise. By
providing tea, coffee, cocoa and chocolate as an alternative to alcohol he felt he was helping to alleviate some of the
alcolohol-related causes of poverty and deprivation amongst working people. He also incorporated some of these principles
in his industrial relations philosophy. (See A Progressive Workplace)

Cadbury Brothers of Birmingham

John Cadbury
As the enterprise prospered, in 1847 John Cadbury rented a larger factory in Bridge Street, off Broad Street, in the centre of
Birmingham and went into partnership with his brother Benjamin - trading as Cadbury Brothers of Birmingham.
The retail side of the business in Bull Street was passed to a nephew, Richard Cadbury Barrow in 1849. Barrow Stores, as it
became, traded in Central Birmingham until the 1960s.
A major turning point for the cocoa and chocolate industry came in the mid-1850s, when taxes on imported cocoa beans
were reduced by Prime Minister William Gladstone. The previously prohibitive chocolate products were now within the reach
of the wider population.
Cadbury Brothers received their first Royal Warrant on February 4, 1854 as 'manufacturers of cocoa and chocolate to Queen
Victoria.' The company continues to hold royal warrants of appointment.
During the 1850s business began to decline. The partnership between the first Cadbury brothers was dissolved in 1860, a
difficult time in the company's history.
John Cadbury's sons Richard and George, who had joined the company in the 1850s, became the second Cadbury brothers
to run the business when their father retired due to failing health in 1861.
John Cadbury devoted the rest of his life to civic and social work in Birmingham until his death in 1889.
Although they had worked in their father's business for some years, the prospects for Richard. 25, and George, 21, were
daunting. Their first five years were a period of unremitting toil with few customers, long hours and very frugal living. Both
seriously considered taking up other vocations - Richard as a surveyor in England and George as a tea planter in India.
George was focused on manufacturing, and Richard with sales, but in the early days both brothers went out and promoted
their goods. Due to their dedication, sheer hard work and improvements in the quality of Cadbury cocoa products, the
business survived and prospered.

Technological Advancements

Historic packaging
Dissatisfied with the quality of cocoa products, including their own, the Cadbury brothers took a momentous step in 1866
that not only had a bearing on their business but revolutionised the whole of the British cocoa business.

Until that time English cocoa had been heavily adulterated with starch substances like potato flour or sago to mask the
excess cocoa butter. The cocoa drink, as described by George Cadbury himself, was a "comforting gruel".
Following a visit to the Van Houten factory in Holland to see their new cocoa press, the brothers introduced this new process
to their Bridge Street factory. The press removed some of the cocoa butter from the beans, producing a less rich and more
palatable cocoa essence - the forerunner of the cocoa we know today.
There was no need to add flour and Cadbury's new cocoa essence was advertised as 'Absolutely pure...therefore Best'
At that time there was much concern in Parliament about the adulteration of food, including cocoa. The new unadulterated
Cadbury's cocoa essence was heralded as a major breakthrough and resulted in the passing of the Adulteration of Food
Acts in 1872 and 1875. Cadbury received a remarkable amount of free publicity during this period and sales increased
dramatically.
The marketing of this cocoa essence helped turn a small business into a vast worldwide company.
The introduction of cocoa essence was not the only innovation that improved the Cadbury Brothers' trade. The plentiful
supply of cocoa butter remaining after the cocoa was pressed made it possible to produce a wide variety of new kinds of
'eating chocolate,' leading to the development of the smooth creamy chocolate produced today.
The quality of the chocolates made by the company following the introduction of the cocoa press was such that in the 1870s,
Cadbury broke the monopoly which French producers had previously enjoyed in the British Market.

Cadbury's Chocolate Box

A chocolate for eating had been produced at the Cadbury factory since 1849 but it was not, by today's standards, a very
palatable product. With the availability of cocoa butter a new chocolate recipe produced chocolate similar to that which we
enjoy today.
Refined plain chocolate was made for moulding into blocks or making bars and chocolate creams that with chocolatecovered fruit-flavoured centres.
Cadbury's "fancy chocolates"- or assortments as they are now called - were sold in decorated boxes, with small pictures that
children could cut out to stick into scrapbooks.
Richard Cadbury applied his considerable artistic talents to introduce more ambitious and attractive box designs from his
own paintings, using his own children as models or depicting flowers and scenes from his travels. They were the first Britishmade fancy chocolate boxes and were very popular. Some of his original boxes still exist.
Elaborate chocolate boxes were much prized as special gifts by the late Victorians as they could later be used as trinket or
button boxes. Chocolate box designs ranged from superb velvet covered caskets with bevelled mirrors and silk lined jewel
boxes to pretty boxes with pictures on the lid.
The popularity of these splendid Cadbury boxes continued until their disappearance during the Second World War. Victorian
and Edwardian chocolate boxes are now collector's items.

Cadbury Brothers Ltd

The business became a private limited company - Cadbury Brothers Limited - in 1899 following Richard Cadbury's sudden
death at the age of 63.
George Cadbury became chairman of the new board and his fellow directors were Barrow and William A. Cadbury, sons of
Richard and two of his own sons, Edward and George Cadbury Junior.

By 1899, the Bournville factory had trebled in size with more than 2,600 employees. With the formation of the limited
company, Bournville entered a new era as the younger members of the Board introduced new ideas - analytical laboratories,
advertising and cost offices, a sales department, works committee, medical department, pension funds, education and
training for employees.
The Bournville factory site became a series of factories within a factory, as everything needed for the business was
produced on site, including tin box pressing plants, carton making units, a design studio and printing plant.
This policy continued until well after the Second World War when the rationalisation of the business to mainstream activity production and marketing of chocolate confectionery- led to the use of outside specialised suppliers for ancillary items.
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