Comparative Analysis

ON

INDIAN CHOCOLATE INDUSTRY

Submitted in the partial fulfillment of the

3rd MBA
Submitted by: Prashant miroliya Vikrant Kansara Pradip Chitara Rinku Mevada Trupti Makwana Dimple (Maya)
(MBA IV SEM)

V. M. Patel Institute of Management

Ganpat University Kherva

ACKNOWLEDGEMENT
I would like to pay my gratitude to Mr. MAHENDRA SHARMA (HOD), V. M. PATEL Institute of Management. Again, I greatly appreciate the diligent support provided by all my colleagues, both academic and professional and the faculty members if V. M. PATEL Institute of Management for their wholehearted support and co-operation. Last but not the least, I would like to thank Ms. Harsha jariwala, my project guide for his valuable insight and unending guidance. Above all, I thank God for giving me courage and wisdom to complete this piece of work successfully in time.

Prashant miroliya Vikrant Kansara Pradip Chitara Rinku Mevada Trupti Makwana Dimple (Maya)

Contents
Titles 1. Introduction 2. Objective 3. Research Methodology 4. Chocolate Industry 5. Chocolate in a Bloom 6. Chocolate Industry in India 7. Major Players 8. Amul 9. Nestle 10. Cadbury 11. SWOT analysis of Cadbury 12. Market Segmentation 13. Psychographics and Demographics 14. Product Positioning 15. Product Market Boundary 16. Price Sensitivity 17. Consumer Buying Behavior 14. 15. 16. 17. 18. 19. 20. 21. 22. Industry Structure and Dynamics The Rural Conundrum Key Success Factors Product Life Cycle Positioning Procter's 5 Force Model Suggestions Conclusion Bibliography

18. Rural Market Initiatives

EXECUTIVE SUMMARY

The Cadburys Indias number one chocolate is able to share with their market insights based upon unparalled breath of chocolate experience.

The merge in 1969 with Schweppes and the subsequent development of the business have led to Cadbury Schweppes taking the led in both, the confectionery and soft drink market intech UK and becoming a major force in the international market. Cadbury Schweppes today manufactures product in 60 countries and a trade in staggering 120.

This project is a sincere effort to look for the market potential in

chocolate and

confectionery industry. A descriptive research procedure had been applied to come to the conclusions of the project. The project later concluded in recommending the market potential of the chocolate and confectioneries.

INTRODUCTION
Chocolates had its beginning in the times of the Mayas and the Aztecs when they beat cocoa into a pulp and made bitter frothy chocolate out of them. They first became popular in Europe in a highly unrefined form. Then the Hershey Food Company was the first to bring out chocolates in the currently popular solid form. The main ingredients of chocolate is cocoa grown mainly on equatorial zones and of the consumers looks for variety he goes in for some of that companys own sugar milk solids and permitted emulsifiers. Cocoa constitutes nearly 40% of the total raw material cost. The following report studies the chocolate industry in India and in particular the position of the chocolate brand - Cadbury. The brand name chosen is the umbrella brand as it was felt that the corporate name is recognized as brand not so much its individual products. The study focuses on the marketing and the advertising, employed by Cadbury in the context of the Indian macro environment and industry structure. The advertising strategy is studied with respect to Cadburys business and marketing objectives. The strategies adopted are then analyzed for each product offering. Considering the strategies of Cadburys major competitor follows the analysis, nestle India ltd. to get an understanding as to where Cadburys stands. The report initially focuses on an examination of the industry environment and the product class. The product then goes on to analyze the corporate, marketing and advertising strategies adopted by the selected company and its main competitor. It concludes by looking at the future challenges for the industry and the company It is also to be noted that the data used for analysis is of 2001-2003. This was the most recent data available under whose purview the companies marketing and the advertising strategies are studied.

OBJECTIVE OF THE PROJECT

The major objective is to study the Marketing Segmentation of Chocolate and: To understand the Consumer Buying Behavior of Chocolate. And also to study the Industry Structure and Dynamics.

RESEARCH METHODOLOGY
Sample Units: Three of the Number One brands in India namely Cadbury, Nestle and Amul respectively, were chosen on the basis of their market shares. These three industries were chosen on the basis of the usage of the products, as the usage of FMCGs and is high and noticeable. Sample Design: Non-probability sampling was resorted to and the methods used is Convenience sampling and Judgment sampling. Data Collection: Data was collected from Secondary data. Secondary data was soured from various published sources which include magazines like Business India and Business World. Newspapers like Brand Equity, Brand Wagon and The Times of India were also used. Annual Report of Cadburys and Nestle were also referred Data was analyzed manually .

Emerging markets drive growth for malt and chocolate drinks

Malt- and chocolate-based drinks are often seen as relatively unsophisticated in developed markets in the west, but in many countries, in particular in Latin America, they are big business indeed, marketed mostly as an excellent source of nutrition in countries where food quality is often poor. But improving sales in other countries will depend on finding premium positioning. Global retail volume sales of both malted and chocolate-based hot drinks reached 956,702 tones in 2003, according to a recent report from market analysts Euro monitor, with Latin America alone accounting for over one third of total sales. Indeed, Latin America accounts for two of the top three markets for chocolate-based drinks (Brazil and Mexico, the third being Spain), and manufacturers are increasingly focusing their marketing efforts on young people in these countries, according to the report. This goes hand-in-hand with the widespread introduction of value-added products in these markets. In recent years, for example, the Mexican market saw the launch of a number of chocolate-based powders in new packaging, formats and formulas - often with new flavors. These products generally targeted consumers prepared to pay a premium, though some were aimed at low-income segments of the population, according to Euro monitor. Brazilian manufacturers also met consumer demand by offering premium chocolatebased products, helped by the fact that Brazilian consumers are more aware of health issues than many of their Latin American counterparts. Brazilian consumers often

upgrade by purchasing healthier chocolate-based products such as low-calorie and diabetic-friendly alternatives, Euro monitor said, highlighting the 2003 launch of Toddy Light by PepsiCo as an example of this trend. Malt drinks, meanwhile, are most popular in India, which accounts for 22 per cent of the worlds retail volume sales. They are traditionally consumed as milk substitutes there and marketed as a nutritious drink, mainly consumed by the old, the young and the sick. Sales have also been aided by improved retail and distribution in recent years, combined with a large child and youth consumer base, the report said. India also recorded the highest growth (53 per cent in US$ terms) during 1998-2003, again spurred by consumers trading up to value-added products. In 2003, for example, Glaxo Smith Kline re-launched Horlicks for Kids, specifically targeted at young children, as well as launching Horlicks in three new flavors. With its Horlicks brand (often seen as an old-fashioned drink in its home market in the UK) Glaxo Smith Kline in fact accounts for 70 per cent of malt-based hot drinks, with India alone contributing nearly 60 per cent of the companys global sales of the product. Other major players include Cadbury Schweppes and Nestl. But if developing nations have a growing taste for malt- and chocolate-based drinks, other more sophisticated markets have yet to catch on. Indeed, the report shows that the performance of malt- and chocolate-based drinks in mature western markets was characterized by of stagnation and decline during 1998-2003. The US, for example, has seen a sharp decline in value sales of both malt- and chocolatebased drinks over the past few years, mainly as these products largely remained outside the overarching consumer trend for premium and healthy products. In fact, malt-based drinks have an almost negligible presence in the US, with manufacturers largely failing to attract the important child and youth consumer groups a category more interested in soft drinks. The performance of malt- and chocolate-based drinks in Western Europe was more positive than that of the US, but nonetheless there was little in the way of growth during

1998-2003. A relative lack of innovation and marketing activities, allied to demographic factors such as falling birth rates, saw important western European markets such as Germany record modest growth, according to Euro monitor. The warmer winters experienced in Western Europe in recent years also contributed to the lower demand for chocolate- and malt based drinks. The UK experienced sharp decline of 13 per cent in retail volume terms in malt-based drinks and only moderate growth in chocolate drinks during 1998-2003. Looking forward, the emerging markets will, not surprisingly, continue to provide the best opportunities for growth in this category, Euro monitor suggests. Market such as Indonesia and Mexico are expected to see strong growth in both malt- and chocolatebased drinks by 2008, with large youth populations and a rising number of middle class consumers as the key driving factors. Among major markets, China is forecast to be the fastest growing market in both chocolate-based (up 35 per cent by value) and malt-based (up 29 per cent by value) up to 2008. Chinas booming economy along with rising levels of disposable income and increased availability of quality products will encourage further consumption, the analysts predict. Following Chinas accession to WTO, multinationals are also expected to penetrate the country further, driving up demand and in turn prompting more local manufacturers to get involved in production.

Chocolate in a Bloom
Is a white bloom enough to put you off your chocolate? Scientists are hard at work to find out exactly how this bloom forms and how to stop it, as Emma Davies finds out Next time you reach out for your favorite chocolate bar you will probably pay little attention to its fat crystals. However, should you be unfortunate enough to peel back the wrapping to reveal a chocolate covered in a mouldy-looking white 'bloom', and then perhaps you might spare a thought for its crystal structure? The chocolate industry ploughs a lot of money into investigating chocolate crystals and bloom. The industry takes bloom seriously - not only because it is unsightly, but also because it can change the texture and the flavor release properties of the chocolate. Manufacturers are keen to invest in research, using expensive techniques such as X-ray scattering and atomic force microscopy (AFM), to help understand exactly how bloom forms and how to stop it forming. With the average person in the UK eating 10kg chocolate each year (according to Cadbury's confectionery review of 1999), it is easy to see why the industry wants to create a perfect chocolate bar that stays temptingly glossy with a good 'snap'.

Chocolate bloom develops naturally with time, but it can be brought on prematurely. How many of us have left a chocolate bar on the car dashboard in

Temper, temper

the sun and been disappointed to find Tempering is a crucial stage of chocolate that it has been spoilt by a bloom? In manufacture, which ensures that the fat in the this case, the bloom develops because chocolate crystallizes in a thermodynamically the crystals melt and then re-crystallise stable crystal form. in a different form when the temperature drops again. Chocolate The process generally involves cooling the bloom can also form if the molten chocolate (held at about 45C) to a manufacturing process doesn't include a temperature (about 27C) that induces tempering step (see Box 1), when the crystallization in both stable and unstable temperature is carefully raised and crystal forms (polymorphs). Raising the lowered to ensure that fat crystals grow temperature slightly (to about 30C) then melts in the correct form, size, shape and out the unstable crystal forms leaving only the number. stable crystals to seed the crystallization of the Chocolate crystals Cocoa butter, perhaps the bulk chocolate in a stable polymorphic form. most To help crystals to grow, the chocolate is mixing blades.

important ingredient of chocolate, is usually stirred as it is cooled using scraping composed of a mixture of saturated and and unsaturated fats (triglycerides), the relative proportions of which depend on The temperatures needed to temper a chocolate the country of origin. Some of the depend on the composition of its fat phase. unsaturated triglycerides in cocoa butter Manufacturers need to find the right have low melting points, making it combination of stirring forces and temperatures partly liquid at room temperature. for their ingredients. Adding milk fat to chocolate raises the level of unsaturated triglycerides and

increases the proportion of liquid fat, which explains why milk chocolate is so much softer than its dark counterpart. The fat crystals in cocoa butter pack together in six different formats (polymorphs). The chocolate industry labels these polymorphs forms I to VI (form I being the least stable) and aims to get the cocoa butter to crystallize in a stable form V to give the chocolate a glossy appearance and a good snap.

Table 1. What goes into a typical milk chocolate? Ingredient Cocoa mass Milk powder Sugar Added cocoa butter Lecithin Vanillin Surface science The surface of a good quality chocolate contains lots of tiny fat crystals that can reflect light, giving it a glossy appearance. Any cracks or crevices (or even fingerprints) on the surface of the chocolate can encourage small, spiky fat crystals to grow. When the crystals reach a size that can diffuse the reflection of light from the surface they give it a dull appearance. Although the exact mechanism of bloom formation remains disputed, most scientists agree that it involves fat crystals transforming from form V to form VI. Because form VI crystals are more stable than form V, chocolate should inevitably form a bloom at some stage, unless preventive measures are taken. Per cent 11.78 19.08 48.73 19.98 0.35 0.08

Richard Hartel at the department of food science in the University of Wisconsin, US, believes that although the form V to form VI transformation always accompanies bloom formation, it does not necessarily cause it. With John Bricknell at Mars in New Jersey, US, he has analyzed a 'model' chocolate using X-ray spectroscopy, to identify the types of fat crystals that develop. Their model chocolate contains amorphous sugar particles created by spray drying a mixture of corn syrup and sucrose and sieving the mixture to ensure that all the particles are the same size. The chocolate is made by blending and tempering a mixture of cocoa butter, lecithin (an emulsifier), sieved cocoa powder, milk fat and the amorphous sugar. Because the model chocolate contains no crystalline sucrose, the researchers were able to see clearly the changing polymorphic forms of the cocoa butter. They also used a colorimeter to measure the amount of white bloom that developed on the chocolate samples, enabling them to link changes in polymorphic form to the onset of visual bloom. They discovered that the form V to form VI crystal transformation took place not only in all of the samples that developed a visual bloom but also in some of the samples that remained bloom-free. Hartel says that 'most people thought they understood bloom formation in chocolate to be the polymorphic transition of cocoa butter. What our results show is that the polymorphic transition indeed occurs, but that something else is needed to create visual bloom'. Hartel's research team has come up with a theory to explain how visual fat bloom develops in well-tempered chocolates. They suggest that, first of all, liquid fat must be able to get to the surface of the chocolate. The 'pumping action' required to do this could be induced by temperature fluctuations, which cause the fat crystals to melt and then to re-crystallise. Fat crystals with high melting points 'dissolve' in this liquid fat and are taken along to the surface where they can re-crystallise as spiky crystals. Any cracks and crevices can help the liquid fat get to the surface. The way that the spikes grow from the surface of the chocolate, says Hartel, is 'open for debate' although the 'nature of the sites available for growth undoubtedly plays a role in their formation'.

An interesting and unexpected result emerged from Hartel's study: the amorphous sugar used to make the 'model' chocolate seemed to be able to prevent a visual bloom developing. When the researchers looked at the samples through a microscope, they saw that the fat crystals on the surface of the model chocolate were smooth, rounded and flat, causing little more than a slight dulling of the surface. These crystals were markedly different to the spiky, needle-like crystals of 'real' chocolate that can take away its gloss. Hartel thinks that, because the smooth, spherical sugar particles pack together more tightly than the irregular-shaped sugar crystals in commercial chocolate, this reduces both the rate of liquid fat migration and hence the rate of bloom formation. Despite the success of the amorphous sugar at inhibiting fat bloom, Hartel says that it could not be used in commercial chocolate because the sugar 'picks up moisture easily and gives a gummy texture in the mouth'. By adding high melting point milk fat fractions to their chocolate mix, Hartel and his team have been able to delay substantially the transition from form V to form VI. Indeed, milk fat is commonly used to inhibit fat bloom, and skimmed milk powder is better than whole milk at preventing bloom formation. How milk fat reduces bloom formation remains a mystery, but minor lipids in the milk fat (e.g. mono- and diglycerides) are generally thought to influence the kinetics of cocoa butter crystallization. The denser crystal structures that form could potentially stop liquid fat from moving to the surface and re-crystallising. The minor lipids could also affect the amount and type of high-melting lipids that dissolve in the liquid fat and could even slow down the transformation of crystals from form V to form VI. Another theory is that because milk fat can decrease the rate of fat crystallization, the chocolate contracts less on cooling. Fewer microscopic cracks appear, reducing the likelihood of liquid fat reaching the surface. Hartel predicts that 'understanding how the chocolate microstructure influences the rate of bloom formation will ultimately allow the chocolate manufacturer to produce high quality chocolates with enhanced resistance to bloom'.

Making chocolate

An even temper
Researchers at the University of Leeds have been working with Cadbury to help make its tempering process more efficient and reduce the amount of money it spends on heating and cooling vast quantities of chocolate during tempering. Industrial tempering usually involves applying shear forces (stirring) while changing the temperature. The shear rate has to be chosen carefully because if it is too low then not enough crystals will be generated, and if it's too high the crystals could melt. Scott Macmillan and Kevin Roberts, from Leeds' chemical engineering department, have developed a method that enables them to look at crystal changes during tempering, with the aim of optimizing the process in order to guarantee the growth of form V fat crystals. They have designed a temperature-controlled shear 'cell', similar to the cone and plate system commonly used in rheometers, placing the fat sample on the bottom plate and rotating the top 'cone'. This set-up allows the researchers to heat and cool fat mixtures while at the same time varying the shear rate. Using the small angle X-ray scattering (SAXS) facility at dares bury, they have been able to monitor changes in crystal structure in the shear cell during tempering. When no shear stress was applied to cocoa butter samples, the fat crystals transformed slowly from form III to form IV. However, on shearing the samples, the crystals transformed from form III to form V. Macmillan believes that because the results 'give a strong indication of the inherent mechanisms taking place', they should be able to help

Cadbury determine the optimum shear rate and temperature to ensure that the chocolate crystallizes in form V. Soft in the middle Those of you with sufficient self-restraint to put aside a half-eaten selection box of chocolates may have noticed, on reopening the box, that the pralines are generally the first to develop a bloom. The nut-based filling contains fat that is liquid at room temperature and, as this fat migrates from the filling to the chocolate exterior, some of the cocoa butter in the chocolate moves in the opposite direction. The appealing texture contrast between the inside and the outside of the praline can then be lost as the liquid fat softens the chocolate exterior and the cocoa butter hardens the soft centre. The liquid fat that moves to the surface of the chocolate can also drag some of the cocoa butter with it, which can re-crystallise at the surface and form a bloom. These problems can be solved to a certain extent by adding a layer of a harder fat (more saturated triglycerides) in between the outer chocolate layer and the soft interior, or alternatively to the centre where it can act as a sponge for the liquid fat. Paul Smith and researchers at the Institute for Surface Technology in Stockholm, Sweden, are working on the problem of fat bloom in soft-centered chocolates and have developed a technique using radiolabel led (14C) triglycerides to study the fat exchange process. They use differential scanning calorimetry (DSC) to determine the polymorphic form of the triglyceride crystals and a 14C radio detector to follow the movement of the radiolabelled compounds. So far, they have worked mainly on model fat systems, adding unlabelled fat crystals to an oil saturated with a
14

C labelled triglyceride and gently

stirring the mixture. At regular intervals they remove samples and measure how many of the 14C triglycerides in the liquid oil phase crystallize out. Preliminary results suggest that the exchange rate between fat crystals and dissolved fat is relatively fast when the crystals are small but slow when the crystals are large. Smith is currently using atomic force microscopy (AFM) to study the changes in the structure of the surface of the chocolate that occur when bloom forms. The diamond tip

of the AFM probe moves over the surface of the chocolate and deflects as it passes over any undulations. Smith has chosen the technique over the standard methods of scanning electron microscopy or optical microscopy which can generate artifacts, he says. Optical microscopy, explains Smith, is difficult to use with chocolate because of its dark Colour. In addition, the limit of resolution means that only the large crystals can be picked up. Smith has yet to release the results of the study but hopes to use them to help understand the methods of bloom formation and to observe the early onset of bloom. There is clearly more work to be done on bloom but new techniques and R & D investment should lead the chocolate industry to its holy grail: a long-lasting chocolate that doesn't lose its gloss with storage.

THE CHOCOLATE INDUSTRY IN INDIA

The chocolate industry in India has a size of 20000 tones and is worth about Rs 400 crores. The chocolate market has been growing by nearly 35 %. However there has been some slowdown in the last two years. The chocolate market is predominantly urban with coverage of 95 %. The sales volume has decreased by 5% in the last year and the chocolate market had declined with the average consumption coming down by 25% from 16000 tones to the current level of 125000 tones Chocolate consumption in India is extremely low. Per capita consumption is around 160gms in the urban areas, compared to 8-10kg in the developed countries. 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. Leading players like Cadbury and Nestle have been attempting to do this by value for money offerings, which are affordable to the masses. Cadbury, a subsidiary of Cadbury Schweppes is a dominating player in the Indian chocolate market with strong brands like Dairy Milk, Five Star, Perk, and Gems etc. Dairy milk is the largest chocolate brand in India. Chocolates & Confectionery contribute to 75% of Cadburys turnover. Cadbury also has a strong brand Bourn vita in the malted health drink category, which accounts for 24% of turnover. The parent Cadbury Schweppes during 2001 made an open offer for acquiring the 49% non-promoter holding in the company. It has already acquired over 90% of the equity and proposes to buy back the balance equity and delist the stock from Indian bourses.

THE MAJOR PLAYERS

The major national players in the chocolate market in India are: Cadbury India Ltd. Nestle India Ltd. Gujarat Cooperative milk marketing federation limited (Amul) The combined chocolate and clair market is dominated by two giants Cadbury and nestle together they have 90 % share of the entire market. Amul holds a 5% share and is present only in the molded chocolate segment of the market

The CHOCLATE CHRONOLOGY 1956 - Cadbury milk chocolate launched 1957 - Cadbury 5 star launched 1970 - Cadbury clairs launched 1974 - Amul chocolate launched 1986 - Cadbury milk chocolate re-launched as Cadburys dairy milk 1990 - Cadbury launches premium chocolate brand overtures 1991 - Nestle chocolates launched. Cadbury counters nestles entry with all silk and unfurls huge consumer promotion campaign. Cadbury diary milk revamped. Nestle launches Milky bar: Cadbury counters creamy bar 1994 - Cadburys real taste of life and 5 star reach for the stars campaign launched clairs revamped and renamed diary milk clairs 1995 - Cadbury launches perk, preempting nestles Kitkat Overtures is withdrawn 1997 - Cadbury launches truffle 1998 - Cadbury launches Gold, Picnic (all these launches took place in the month of December i.e. Dec 96 and dec-97 to be more precise in keeping with the company policy

of launching new brands at the new year eve. However the hit the market at the month of January only

AMUL: THE FLIGHT WHICH FAILED TO TAKE OFF

Gujarat cooperative milk marketing federation limited (Amul) Amul is the third player in the chocolate market in India. The brand doesnt have any international lineage and is miniscule in terms of market share in chocolates and compared to the two other players Cadburys and nestle. Amul had an extremely focused positioning for someone you love albeit not target to a group however Amul failed to capitalize on seemingly due to the following reasons. a. Chocolates have never been Amuls products and hence there was lack of organizational has or on on never pushed the commitment. its This drastic reflects cutback The company supported really main of a gift single it

chocolates.

advertisement which mind has its top of awareness

expenditure for its chocolates the level b. The company has enjoyed a high customer equity and pulls in butter and so it offered a very low retailer margin of 3.1 % as against the industry average of around 7-8 % Amul tried the same technique in chocolates too. However since it was neither leader nor enjoyed a customer pull like in butter the company got very little support for its chocolates c. Amul chocolates have shown a very limited product differentiation and have not really given any important additional benefit to the consumers. The product line also negatively affected

suffered in comparison to the portfolios of the competitor Cadbury and nestles. Its only strength was its low price

Following are the major brands Amul Amul premium Milk Amul badam bar Amul orange Amul fruit and nut Amul crisp

of

NESTLE: A BRIEF INTRODUCTION

Nestle India limited Nestle is a strong player in the chocolates world wide but it entered the Indian market much later in (1991) than one of its global competitor Cadbury. Nestle initial foray into the Indian market was not very successful. The problem was in the formulation of the product. They were soft chocolates with high fat content which were unsuitable to the Indian climate. Also the distribution focus has been on the larger cities and urban areas which limited their customer base. It was with the launch of Chitchat that the companys strategy changed with respect to both product and distribution. It increased its distribution network to cover small towns and interiors as well so as to increase the customer base .It also modified the formulation of Moulded chocolate to suit the Indian condition. The company used three layers of foil packaging so that Kitkat could survive the summer heat. Today nestle poses a formidable threat to Cadbury. Kitkat has captured a sizeable chunk of the market within a short span of launch. Nestle, as in 2002-2003 has around 24 % market share with Kitkat alone accounting for 12% market share points. Nestle Bar One is another brand with a market share of 6%. Nestle recently withdrew its Nestle bitter chocolate brand. The other brands of nestle are nestle milky bar and nestle crunch. Nestle have also entered the sugar confectionery market in direct Compton with Cadbury by offering Allens splash and Allens coffees and Allens Butterscotch. Amul has also entered into another foray of the confectionery team that being ice creams. The distribution of this has been pretty good with Amul ice-cream being available all around India. The advertising for the company in India is being handled by love lints. Nestle has been increasing its adverting figure the latest being in 2002 RS 25 crores. Major Chocolate Products

Crunch: Crunch Chocolate is one of the best-loved foods everywhere in the world. It is one of life's little pleasures. The attractive tastes and textures of chocolate and chocolate products the senses of ages. Introduced in today Crunch Nestls third 1938, is largest delight all

confectionary brand sold in about 40 countries worldwide. Nestl Crunch is available in the following varieties: Nestl Crunch, Nestl White Crunch, Nestl Crunch Pieces, Nestl Bunch Crunch and new products Nestl Crunch with caramel and Nestl Crunch assorted minis. Launched in 1938 in the USA, Crunch was the first chocolate bar to combine milk chocolate and crunchy crisps. Crunch is a unique combination of smooth Nestl chocolate and crisped rice, which delivers an exciting eating sensory experience of distinctive taste, texture and sound. Kitkat: Kitkat Chocolate is one of the best-loved foods everywhere in the world. It is one of life's little pleasures. The attractive tastes and textures of chocolate and chocolate products delight the senses of all ages. The developed launched product, as in Wafer

Crisp, was initially London, UK in September 1935 as Rowntree's Chocolate Crisp. It became 'Kitkat' in 1937, two years before the Second World War. Within two years of launch Kitkat was established as Rowntree's leading product, a position that it has maintained ever since. During the Second World War Rowntree Kitkat was seen as a valuable wartime food and advertising described the brand as 'What active people need'.

For most of its life Rowntree Kitkat has appeared in the well-known red and white wrapper. It did, however, change to a blue wrapper in 1945, when it was produced with a plain chocolate covering due to a shortage of milk following the war. This blue packaging was withdrawn in 1947 when the standard milk chocolate Kitkat was reintroduced. No one can be absolutely sure where the name Kitkat came from but it is believed to be from the famous 1920's Kitkat Club in South East London which had some influence. As the building had very low ceilings, it could only accommodate paintings which were wide and not very high. In the art world, these paintings were known as 'Kats'. It's believed that Kitkat derived its name from paintings, which had to be snapped off to fit into the rooms with the low ceilings.

Reinventing Nestle
A detail analysis by the companies management to turnaround nestle Top line growth, bottom-line contribution, difficult market situations. Nestle India's trademark `renovate and innovate' strategy is churning with action. Catalyst finds out more. JUST how much can a housewife influence a Rs 1,688-crore company? She's someone whose needs we anticipate Take, for example, the exhaustive experimental kitchen and sensory laboratory at the plush corporate headquarters of Nestle India at Gurgaon. It's obviously a first-of-its-kind facility and research centre for any food company in India. The objective? Consistent product development. Also, achieving a preference ratio of 60:40 for every Nestle product as opposed to competition. The kitchen comprises a panel of application groups and 15 professional tasters checking out new products for consistency in quality and product evolution on a regular basis. The exercise, has resulted in the creation of two different flavors of Maggi noodles (curry and tomato), Fruitips candy, besides new formulations of Nescafe and Bar One chocolate in recent months. "And this research model isn't a substitute for consumer research, or regular test-marketing with the real consumer.

Based on an international research and development model proprietary to Nestle SA, the kitchen is just one component of the Rs 3,000 crore allocated for a centralized research and development cell for the foods conglomerate worldwide, against Rs 2,500 crore spent on the same earlier. Another component is the third in a series of multi-cuisine recipe collections cutting across all Nestle products, in place of the two earlier ones which centered on Milkmaid and Maggi. The Nestle `renovate and innovate' mantra, meanwhile, is on in full swing. Four existing brands - Nescafe, Milo, Bar One chocolates and Maggi super seasonings have been re-launched in new tastes, packaging and pack sizes. And another variant of Kitkat - white chocolate - has just been rolled out. On the launch block a month from now are 10 new product variants spread across the culinary and confectionery segments. The restructuring exercise of Excelcia Foods Ltd the joint venture company in which Nestle acquired management control following Dabur India's decision to exit non-core areas - has neared completion. Following that, Nestle proposes to enter fresh product categories such as biscuits in the forthcoming months. Beverage Partners Worldwide (BPW), the joint venture between Nestle SA and the Coca Cola Company too is looking to tap the Indian market for possible coffee and tea variants. But it's the food major's most keenly awaited venture - ice-cream - that's got the FMCG industry abuzz. They are very much interested in the domestic ice-creams market. Of course, that requires putting in place a cold chain, besides stabilizing its milk and UHT businesses first. Meanwhile, though there's no confirmation from Nestle, the industry grapevine suggests that Nestle has begun negotiations with Vadilal for manufacturing and marketing ice-cream. Another category where Nestle could give Hindustan Lever a run for its money is candy. The company has recently rolled out a candy brand by the name of Fruitips. On the beverage front, following the introduction of chocolate-and-coffee formulation Choc Cafe and Frappe under the Nescafe umbrella, Nestle has been setting up slosh-type vending machines for iced tea in two flavors - peach and lemon. In an economy that's in a

downturn, Nestls performance has been impressive. Net sales for third quarter this year were Rs 533 crore against Rs 469 crore in the same period last year, recording a growth of 13.5 per cent. While domestic sales grew at 11.4 per cent in value terms, export sales for the quarter increased by 24.6 per cent. Sales during the first nine months of the year improved by 17.4 per cent, with a net profit increase of 28.6 per cent over the same period last year. Despite excellent top line and impressive bottom-line contribution, the uncertain and difficult domestic and international market environment, coupled with seasonality factors, will affect their performance in the fourth quarter. Market analysts warn that incremental selling and advertising expenditure on new launches would dampen margins and that it would take time before the new products begin contributions to turnover or profitability. While the success of the new variants is yet to be gauged, Nestls star performers remain Nescafe, baby food Cerelac, Maggi and Everyday. Nestls biggest strength lies in creating brands with distinct positioning. Hence, Nescafe is generic to coffee, just the way Maggi has become generic to instant noodles. Maggi noodles face no direct competition, with Top Ramen barely managing to hold ground in the instant noodles category. Another winner has been Maggi ketchup, which, FMCG analysts say, has been built from scratch to market leadership position, outperforming Kissan. While Nestle has done exceptionally well in Western food categories such as ketchup, condensed milk, noodles, coffee and weaning foods, the company hasn't been able to handle Indian product categories such as pickles and tea too well. No one is really making money in pickles. Not only is the unorganized and made-at-home sector too wellentrenched, even the consumer shows no brand loyalty towards pickles. What drives her purchase pattern is new taste and not brand preference. The market for ready-to-cook mixes and soups too has been largely fragmented with a distinct skew towards the unorganized sector. In chocolates, while Cadbury India continues its stranglehold of the market, Nestls Kitkat, Bar One, Munch and Classic have been performing reasonably. Two recent

entrants to this category have been ChocoStick and Milky bar Chocolate, the latter soft chewy fudge in stick format priced at Rs 5. In the chilled dairy segment, Nestle dahi has recently been extended to Mumbai and Pune. While the market for this continues to be very small with only Mother Dairy and Amul giving Nestle competition in the organized sector, milk in cartons is a concept that's yet to go down well with the Indian consumer. Apart from being expensive, the Indian consumer is still not ready to consume milk without boiling it. And research has proved that three-fourths of Indians prefer hot milk. On the pricing front, Nestle continues to target the premium segment. They make inroads into markets which represent not only potential for consumption, but also potential for bottom-line. Nestls premium pricing strategy is a strength that's worked in most categories it operates in. Fruitips, therefore, occupies price points of 50 paisa and Re 1 per unit against HLL's Max which attacks the unorganized sector with an extremely aggressive 25 paisa per unit price. It's the association with quality that works in Nestls favour in most product categories. That this hasn't really worked in case of Nestls bottled water brand, Pure Life, is more distribution-related, feel industry watchers. Pure Life, launched earlier this year at a price point of Rs 12, has been a lukewarm performer compared to Coca-Cola's Kinley and Pepsi Aquafina besides, of course, market leader Bisleri. Discounting at the trade level has been a problem area with bottled water. And while spends on advertising have been raised at a macro level, brand-wise spends have been re-allocated accordingly. According to the A&M Annual survey on India's top 200 ad and marketing spenders, Nestle was the country's sixth largest advertising spender in 2000-01, recording an ad spend of Rs 128.46 crore which amounts to a 13.6 per cent growth over the previous year.

Nestle Business

Nestle has a presence in the following categories - Baby Food, Milk products, Beverages (Coffee, malted beverage), Chocolates & confectionery and other processed food products. Category wise turnover breakup and growth % Milk Products Beverages Culinary Products Chocolate & Confectionery Total Beverages Beverages like coffee, tea and health drinks contribute to about 30% of Nestls turnover. Beverage sales registered a 15% yoy growth during 2001. While about 14% of sales come from domestic market, exports contribute to about 16% of sales. Nestls Nescafe dominates the premium instant coffee segment. Nestls other coffee brand Sunrise has also been re-launched under the Nescafe franchise to leverage on the existing equity of the brand. Nestle has focused on expanding the domestic market through price cuts and product repositioning. However it has been losing share in the domestic market, where it has a 37% market share. Milo, a brown-malted beverage was launched in 1996. It has an estimated volume share of about 3% in the malted food drink segment. Nestle has launched non-carbonated cold beverages such as Nestea Iced Tea and Nescafe Frappe during 2001. Nestle is one of the largest coffee exporter in the country. Key export market is Russia, besides Hungary, Poland and Taiwan. Nestle has received an award for highest export of instant coffee and highest export of coffee to Russia and CIS for FY00 and FY01. Turnover contribution from exports registered a 17.5% volume growth in F12/01. Nescafe sales to Russia accounts for 80% (Rs2.5bn) of Nestls Rs3bn export turnover. Infant food/ milk products contribution 2001 Rs mn. 8159 5627 2764 2646 19197 2000 Rs mn. 7375 4903 2310 2179 16768 % yoy 10.6% 14.8% 19.7% 21.5% 14.5%

to turnover 43 29 14 14

Milk based products and baby food contributes to 43% of Nestls turnover. For ensuring regular procurement of good quality milk, Nestle has developed a network around its Moga factory for collection of fresh milk everyday from the farmers. Nestle has a dominating 87% market share in the baby weaning foods with its Cerelac and Nestum brands. Infant milk powder is sold under the Lactogen and Nestogen brands. Brand loyalties are very high in categories such as infant food and weaning cereals, enabling the company to command a price premium Other milk products include dairy whiteners (21% market share) sold under the EveryDay and Tea Mate brands, sweetened condensed milk and ready to cook mixes for traditional Indian sweets sold under the Milkmaid brand. The company also markets ghee (6% market share) under the EveryDay brand. Nestle has expanded its milk product portfolio with the launch of new dairy products such as UHT milk, Curd and Butter. Huge investments are being made in building a diversified dairy business and the distribution infrastructure for the same. Milk products sales registered a 10.6% yoy growth during 2001. Chocolates & Confectionery Nestle forayed into chocolates & confectionery in 1990 and has cornered a fourth share of the chocolate market in the country. The category contributes 14% to Nestles turnover. It has expanded its products range to all segments of the market The Kitkat brand is the largest selling chocolate brand in the world. Other brands include Milky Bar, Marbles, Crunch, Nestle Rich Dark, Bar-One, Munch etc. The sugar confectionery portfolio consists of Polo, Soothers, Frootos and Milkybar clairs. All sugar confectionery products are sold under the umbrella brand Allen's. Nestle has also markets some of its imported brands like Quality Street, Lions and After Eight. New launches such as Nestle Choco Stick and Milky Bar Choo at attractive price points to woo new consumers. Chocolate confectionery sales registered a strong 21.5% yoy growth in 2001 aided by good volume growth in Munch, Kitkat and Classic sales. Nestle re-launched Bar-One during the year Culinary products

Ready to cook food/ cooking aides are sold under the umbrella brand name Maggie. Culinary product account for about 14% of Nestls turnover. Maggie is the market leader in the noodles (45% market share) and the ketchup (43% market share) categories. Other products, sold under the umbrella brand Maggie, are ready-to -cook gravy/sauces, soups, seasonings, as well as traditional Indian foods such as pickles and instant snack mixes. New taste variants are continuously launched to add variety to the product offerings. Culinary product sales registered a 20% yoy growth during 2001. Future prospects Nestle is focused on product expansion and improvement of distribution efficiency. The Dairy business is being expanded and is expected to drive growth in the long run, although short-term profitability may be impacted in the investment stage. The companys entry into the mineral water segment is a concern, as the segment is already overcrowded and the company faces stiff competition especially from the Cola manufacturers. Acquisition of an established brand could catapult Nestls position in the segment. In categories like beverages, culinary products and chocolate confectionery, the company is looking at driving growth through launch of smaller SKUs, thus enabling affordability to a wide section of the population.

Earnings sensitivity factors

Success of new category launches (Milk and Mineral Water) which involve considerable investment for promotional schemes and ad-spend and yield returns only after a few years.

Continued exports to Russia, Nestls main market for coffee exports. Good monsoon ensures adequate availability of raw materials, which are mainly agricultural in nature. Raw material prices have significant influence on margins. Government policies in terms of licensing, duties, movement of agricultural commodities etc. Market growth driven by overall economic growth and urbanization.

Rupee depreciation improves export realizations

DIRECTORS' REPORT (7th March, 2001) 1. Operations: Domestic Sales grew by 7% in value and 15% in volume terms, during the year. Export Sales grew by 16% in value and 32% in volume. Profit after Tax grew by 20% from Rs985mn to Rs1186mn. The market and economic growth continued to be sluggish during 2000. Concerted efforts of the management to maintain the price of products (in some cases even reduction of prices), better working capital management, continuous improvement of supply chain and a focus on flagship brands, contributed significantly towards the above profitability. The favourable impact of the commodity prices during parts of the year and the product mix, also contributed significantly towards improvement in profitability. During the year, the Company retired certain fixed assets from active use at various locations and the impairment loss on such fixed assets has been charged to the Profit and Loss Account. Out of business prudence, the Company supplemented the Contingency Provision with further amount in 2000 of Rs295mn (net) to provide for various contingencies resulting from matters mainly relating to issues under litigation, dispute and management discretion. Your Company's overall sales and profit progression during 2000 can be considered satisfactory and in line with the expectations. The current year has commenced as per plan in the domestic market and your Directors are hopeful of continued good results. However, with the current level of inflation and economic indicators pointing towards a sluggish market, it would be difficult for the

Company to maintain the level of earnings unless the Company takes price increase on finished products which would depend on market conditions and competitor activities.

2. Exports: Export Sales for the year at Rs2655mn have grown by 32% in volume terms, over the last year. This has been mainly due to the higher exports of NESCAFE to Russia, buoyant sales of Instant Tea and good performance of the culinary products. However, depressed green coffee prices in domestic and international markets kept the export realizations low. Measures taken for tapping new market and product opportunities have also contributed to this growth. The export competitiveness of value added instant coffee manufactured in India continues to be adversely affected by the purchase tax levied on green coffee. Efforts continue to tap new market and product opportunities. 3. Dividends: Interim dividend of Rs. 8.00 per equity share, including Rs4.50 per equity share out of undistributed profits of the previous financial years, was paid during 2000. Your Directors are pleased to recommend to the Annual General Meeting a final dividend of Rs6.00 per equity share. The dividend, if approved, shall be payable to the shareholders registered in the books of the Company and beneficial owners furnished by the Depositories, determined with reference to the book closure from 16th June, 2001. 4. Business Development: In line with the Company's objective to provide superior value in every product category and market sector, efforts were focused to provide quality products to customers at attractive price points. While the Company continued to generally maintain price points across all the product categories, the pricing of some products were also reduced to meet consumer expectations.

MAGGI Noodles re launched in 1999 in response to popular consumer taste preference, continued to boost sales during 2000 in the culinary segment. New flavour profiles were introduced in the bouillon business. The market continued to react positively to the initiatives taken in the recent past to grow the consumption of instant coffee in the domestic market. The new NESCAFE pricing and bringing the popular SUNRISE brand under NESCAFE umbrella to benefit from its association continued to strengthen the category. NESCAFE Frappe a blend of coffee, mocha and vanilla, which makes a delicious frothy cold coffee, was launched in select metropolitan cities in the third quarter. This was another strategic launch and seeks to address consumer with preference for cold drinks. NESCAFE Frappe has received encouraging response. In the area of Chocolate and Confectionery NESTLE MUNCH Crisp wafer biscuit with chocolayer, which was launched in select markets in1999, was rolled out nationally during 2000 and had good growth. Continuing with the efforts to meet consumer expectation on price points, the pricing of KITKAT was also reduced during the later half of the year. Moulded Chocolates and clairs also showed satisfactory growths. This has also helped in improving the infrastructure and distribution reach of the Company in the Chocolate and Confectionery segment. In the milk and cereal categories, EVERYDAY Dairy Whitener and cereals had satisfactory growth. NESTLE Growing up Milk; a new product offering superior nutrition, launched in 1999 was rolled out nationally during the year. Your Company has also entered the Chilled Dairy business with the recent launch of NESTLE Dahi in select cities of the North. The initial response has been very encouraging and your Company is working on plans to further leverage the international expertise of Nestle Group, Switzerland in the area of Chilled Dairy. The performances of other products were generally in line with expectations. A few products whose performance was not considered satisfactory are under constant review for corrective action.

Your directors are pleased to report the implementation of the two new projects undertaken by the Company during 2000 packaged milk and packaged drinking water. Both the projects seek to leverage the worldwide experience and knowledge of Nestle Group, Switzerland who are the leaders in these product categories. In line with its objective of long term growth and entry in significant value added food segments, the Company forayed into the Ultra Heat Treated (UHT) liquid milk business in April 2000 by launch in Mumbai. Packaged UHT milk seeks to address growing consumer concerns on adulteration and product safety and brings with it reliability, complete hygiene and safety. It offers convenience to the consumer, in terms of a shelf life without any deterioration in the product quality and easy usage without refrigeration or boiling. UHT Milk has received encouraging response and has been rolled out in select cities of the West, South and North. The project for bottled water was implemented at the Samalkha factory and water launched in February, 2001 under the brand NESTLE PURE LIFE and is available in select cities. NESTLE PURE LIFE contains a balance of essential minerals and a light pleasant taste and is manufactured under stringent quality control. The packaging has been specially designed to maximize safety for the consumer and protect from possible tampering. The new categories like bottled water and liquid milk are lower margin categories and will require considerable investments. Your Company sees them as strategic and as requiring support on a sustained basis. The two new Sales Branches at Bangalore and Chandigarh set up in 1999 to further strengthen the flexibility of the Sales organization and for speedier response to the market conditions, have started showing positive results during the year. With a view to expand distribution and increase penetration in smaller towns, a concerted drive was undertaken to make products affordable and accessible to consumers. An initiative taken includes more penetrative pricing and smaller packs covering brands such as EVERYDAY Dairy Whitener, MAGGI Noodles, MILO Chocolate Energy Drink and NESCAFE Instant Coffee. The response has been encouraging.

The Alternative Trade Channel unit created in 1999 undertook initiatives to tap the opportunities for out of home consumption, particularly for instant coffee and chocolate and confectionery and to extend availability of product to nontraditional outlets. The outcome of these initiatives has been encouraging and is being consolidated. Availability of NESCAFE has been enhanced through an expansion of the vending machine network and new consumption opportunities for Chocolates and Confectionery were identified and developed in areas like railway platforms, college canteens and major events. On the manpower development front, programmes during the year continued to be focused on the operational front more particularly sales and production. To support the growth plans and distribution strategy, and simultaneously improve the operational efficiency, the thrust on strengthening supply chain continued to receive attention during the year. In addition to consolidating the improvements made over the last two years, significant progress was recorded in following areas: a) Reduction in finished goods inventory pipeline to improve freshness of stocks and reduce working capital. b) Control of distribution costs through innovative measures, despite steep increases in cost of fuel. c) Sustained improvement in customer service level to improve product availability across all geographies and channels. d) Reduction in obsolescence of materials. 5. New Head Office: The Company moved into its new Head Office at Gurgaon. The new Head Office has been designed to provide the employees with work environment that enhances white collar productivity. The new Office design seeks to stimulate improved internal communication and enhance transparency in working. State of the art facilities for

training, tasting, and a fully equipped test kitchen, have been made available that will facilitate the efforts for innovation and renovation.

6. Technology from Nestle: The Company being a part of Nestle Group, Switzerland benefits from its access to proprietary technology, technical and non technical expertise and the fruits of the extensive centralized Research and Development. The diversified knowledge and expertise have contributed significantly to the operations of your Company over the years. Some of the key areas, which have benefited are: a) Manufacture of products of truly international quality. Product quality, which encompasses taste, appearance, convenience and overall value for money, is a critical factor in consumer choice and in a competitive market like India could determine the very survival of the products. The high quality of products of your Company is borne out by the position and image the products enjoy in the market and your Company continuing to be a leading exporter of value added Instant Coffee in the country. b) Benchmarking of products against competition to achieve an advantage in product quality, for increasing competitiveness. c) Access to latest technological developments, such as Spear point Technology for Cocoa based products implemented during 2000 which would improve product quality and competitiveness and the MUCH technology for instant coffee manufacture implemented during 1999, which would enhance the productivity by increased extraction of coffee solids from coffee beans. d) Implementation of project for bottled drinking water. e) Product innovation and renovation some illustrations are MUNCH Crisp wafer biscuit with chocolayer; Nestle Dahi; Nestle Milk (UHT); Junior Foods; NESCAFE Frappe; KITKAT Milky; new and improved flavours profiles of bouillons; and re-launch of MAGGI Noodles. f) Enhancement of skill and competence of Company personnel due to the training received.

g) Implementation of environmentally sound business practices. h) Technical expertise in various forms including Information Technology, which has enabled the business of your Company to grow and sustain. I) Providing assistance by way of improved technical and quality standards to local manufacturers, who have contract manufacturing arrangements with your Company. Your Directors are pleased to report the signing of the General License Agreement with the collaborator providing license of all intellectual property rights for the products manufactured and sold by the Company using such intellectual property. The General License Agreement which is effective 1st January, 2001 aligns the Company with the global practice of Nestle Group and would be beneficial to the Company. Undoubtedly, without the know-how provided and ongoing technical assistance, your Company would have found it difficult to achieve the progress that has been attained. Your Directors note with satisfaction that being a part of Nestle Group, the ongoing technology transfer and access to the fruits of extensive Research and Development and authorization to use internationally famous brands, would help the Company significantly in its efforts to remain competitive in the market. 7. Moga Milk District: Your Company which started milk collection in Moga in 1961 with a daily collection of 510 kg of milk from 180 farmers has expanded its operations to an average daily collection of 540,000 kg of milk with total yearly collection of around 200 million. Kg of milk from nearly 81,000 farmers in its milk district. The Company owns no farms or cattle but through its Agricultural Services world wide initiative of Nestle Group, works closely with the farmers to obtain the highest quality raw material. Recognized as "Partners in Progress", Nestle Agricultural Services at Moga factory has contributed its mite to the up-liftment of the milk district. Some significant steps taken by the Company in the recent past are: a) Installation of farm coolers.

b) Milk Collection Centers provided with new and improved equipment to enable on the spot testing of quality. c) Initiation of mechanization of large dairy farms. d) Farmer development programmes. The Company has over the past decades been providing facilities and support to the dairy farmers in areas such as veterinary services, breed improvement; balanced cattle feed mixture, feeding for dairy herds, fodder seeds and training for improved farm management practices. The milk district is a reflection of your Company's commitment to nurturing quality, technology and improved systems in the community and the company's initiatives to improve living in the region. 9. Information Technology: Your Company continued to make significant investments in the Information Services of Technology area to cope with the growing information needs necessary to manage operations more effectively in a complex supply chain environment. 10. Community Health: Recognizing its responsibility to the community in which it operates, the Company over the years has been taking initiatives in the area of community health at locations around its factories. Some of the initiates taken in the recent past are: a) Provide Government and village schools with facilities for toilets and hygiene drinking water including deep bore wells, where necessary. b) Support to health officials in Pulse Polio programmes. C) Sponsorship of treatment of TB patients at clinic runs by NGO.

d) Healthcare Programmes with focus being on well being of employees and their families covering vaccination, awareness programmes and health check up.

CADBURY: THE
Cadbury, a Schweppes in the market with Dairy Milk, Dairy milk chocolate Cadbury

LEADER
subsidiary of Cadbury is a dominating player Indian strong chocolate brands like

Five Star, Perk, etc. is in fact the largest brand in India. India now stands only

second to Cadbury UK in sales of Dairy Milk. The company is pushing the gifting segment, through occasion linked gifts. Chocolates contribute to 64%of Cadburys turnover. Confectionery sales, accounting for 12% of turnover, is contributed largely by clairs. 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 Bourn vita in the malted health drink category, which accounts for 24% of turnover. Chocolate consumption: in India is extremely low. Per capita consumption is around 160gms in the urban areas, compared to 8-10kg in the developed countries. 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. Competition: Cadbury continues to dominate the chocolate market with about 69% 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. Malted food drinks: Category consists of white drinks and brown drinks. White drinks account for almost two-thirds of the 82,000 ton market. South and East are large markets for food drinks, for the largest sales. is drink drink Horlicks the accounting

proportion of all India Cadburys Bourn vita leader in the brown (cocoa based) segment. In the white segment, SmithKlines

is the leader. Other significant players are Heinz (Complan), Nestle (Milo), GCMMF (Nutramul) and other SmithKline brands (Boost, Maltova, Viva). Cadbury holds 14% market share in food drinks segment. Performance: Despite tough market conditions & increased competition Cadbury managed to record a double digit (11%) top line growth in 2000. The company achieved a volume growth of 5.2%. This was achieved through innovative marketing strategies and focused advertising campaigns for flagship brand Dairy Milk... Net profit rose sharply by 41.8% to Rs520mn. Reduced material and energy costs and tighter control over working capital and capital expenditure enabled the company to improve profitability. Company added 8mn new consumers and saw its outlets grow to 4.5 lakhs and consumers to 60mn. Outlook: 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 top line growth of 14-15%. 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 clairs (which form 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 clairs, which have supported growth in the past.

Cadburys Ad Campaign
Kuch meetha ho jaye suggests Cadbury India, its ambassador Amitabh Bachchan smiling down hoardings lined along Mumbai's Marine Drive down to the company's corporate head office at Mahalakshmi. While the chocolate major is for Diwali to see a turnaround in its business worms controversy, at the moment it's all about growth for the category which has seen a decline first quarter of this year. Being the market leader in chocolates with a 70 per cent share, the company has attempted to stretch the boundaries within chocolate confectionery. It has also been adventurous in unleashing a brand new category within chocolate early this year. Introducing the concept of sweet snacking, it launched Cadbury Bytes in the south with the positioning `Snacking ka meetha funda.' The product is a crunchy wafer pillow with a choco-cream centre and is being rolled out nationally. Explaining the need to introduce this new category, Bharat Puri, Managing Director, Cadbury India, says, "While we were sure of our core competencies, there was need for innovation to deliver double-digit growth. What we found was that we were underrepresented in the area of snacking on the go and that there was a need for a light crunchy snack." While entry into salted snacks was ruled out, sweet snacks were the obvious choice, and Bytes is unique to the chocolate major's Indian portfolio. Getting the right product and packaging was a challenge for the company. It has subcontracted the product to get the volumes and is poised for a national launch. Adds Puri, "After all this was the first category anywhere in the world that Cadbury was entering and waiting after the driving since the brand the right

we did not have the expertise. So the best way was to test-market the product and today we find that it has already bagged five per cent of the chocolate market." The company has no apprehensions of cannibalization of its chocolate brands. It believes that while its chocolates are more of indulgence products, Bytes is about snacking when one is hungry and can be treated as a snack in between meals. In the past when Cadbury tried out a biscuit brand, Chocobix, there was fear about some amount of cannibalization. After all, it was simply a biscuit coated in chocolate, and was perceived to be another chocolate brand in Cadbury's portfolio. Stresses Puri, "Cadbury Bytes is adjacent to chocolates and in the markets that we have launched it, there has been no cannibalization. Chocolates are largely an indulgence product while Bytes is about between-meals snacking. A product which is consumed when one is feeling hungry or peckish." Another thrust area Cadbury has been re-evaluating is confectionery. While growth rates in this segment are healthier compared to chocolates, it has always been a difficult market to crack. Cadbury's own experiences have led it to withdraw certain brands but now with Warner's Lambert's international kitty under its fold, there are chances of reconsidering the segment once again. "Through the acquisition of Warner Lambert, there is a great set of brands already available to us. We are still examining which are the right brands for the Indian market," says Puri. Cadbury has already identified Halls as the strongest brand in Warner Lambert's portfolio and re-launched the brand early this year. Adds Puri, "Halls was not doing well for a while so we re-launched it this year. When you have the existing assets, it is necessary to get them right first. Halls is the first brand that we have revived and it is now doing well." In April 2003, Cadbury India's foreign parent acquired Pfizer's interests in the confectionery business for $4.2 billion. That included the Warner-Lambert product portfolio, known best for Halls, Clorets and Chiclets. The acquisition is now poised to become a growth area for Cadbury India, whose confectionery brands include clairs and

Googly. But instead of selling confectionery through its existing chocolate network, Cadbury has set up an entirely new network. While Halls has been revived with new packaging, there has been no change in the status of its other brands. Chiclets had been discontinued long before it belonged to Cadbury and Clorets continues to sell with a small franchise. But now Cadbury is looking closely at Warner Lambert's gums portfolio (it is one of the world's largest gum manufacturers) and is considering its viability for the Indian market. Sugarless gum brands such as Dentyne Ice and Trident White have been known for their functional benefits worldwide but steep pricing may be a deterrent to their entry into the country. "The gum market has not done well in India. But gum has functional properties and is not merely a breath freshener. We are now evaluating whether there is a market for them in India and whether it is going to be worth our while," says Puri. The confectionery market may be huge in volumes but making money on it remains a tough task with its low margins. Governed by price points, one can sell at only at a Re 1 or 50 paisa unit price. "The issue is not of garnering volumes but making money out of those volumes. The offer should be one which can get you both top and bottom lines," states Puri. Having shifted focus from Googly, Cadbury had been tasting success with its age-old clairs which continue to bag almost 50 per cent of the market. "There is scope in the market. Our clairs has been growing and this has been evident in our past numbers," claims Puri. At the same time the sugar confectionery market is highly competitive and it's all about finding the right consumer proposition and a business model that can deliver both top line and bottom-line growth. In spite of the new categories being explored by Cadbury, its star brand remains Cadbury Dairy Milk (CDM) which continues to corner almost 30 per cent of the chocolate market. It is followed by brands such as 5-star, Perk and Gems. Each of these has been revamped over the years to generate excitement for the category. For instance, recently Perk was rejuvenated as a crunchier wafer while CDM came up as a white-and-brown variant in the market.

"The chocolates category thrives on excitement. It's all about giving the consumer a choice and taste which they enjoy," adds Puri. For instance, in beverages, in spite of its malted food brand Bourn vita, Cadbury decided to introduce a milk additive brand such as Delite, just to give its consumers the real taste of chocolate. Delite has added flavours such as strawberry and mango and is not expected to encroach upon Bourn vitas shares. According to Puri, "There is still a large section of people who do not add anything to milk. This will apply to children for whom milk is a problem and having an additive will make it a pleasurable experience." Making changes in its distribution network, Cadbury split its sales and marketing team between its mass (confectionery) and core brands last year. "Chocolates needed to get retailed at larger and better outlets while all the products below Rs 3 needed a different distribution network," says Puri. Today Cadbury's distribution network reaches out to six lakhs outlets each for its confectionery and chocolate brands. With the worms episode behind it, there are other issues bothering the company, especially which of the rising input costs of cocoa sugar and milk. Although Cadbury has been able to maintain prices, it is still grappling with the upward trend in prices for its basic raw materials. But its challenge remains that of growing the chocolate market in spite of the odds. Posting a turnover of Rs 729 crore last year, Cadbury is waiting for Diwali to make a turnaround for both itself and the category which has been through troubled times. Getting growth should not be an issue, according to analysts tracking the company. As Nikhil Vora, Senior Vice-President (Research), SSKI Securities, observes, "Considering the company was getting growth before the infestation episode occurred, it should not be a tall order to get back to those levels. The company should be able to record a 15 per cent compounded rate of growth over the next few years." That would be a sweet recovery indeed for Cadbury.

Cadbury follows small packs strategy

Small has indeed proved to be beautiful for Cadbury. The company, after finding exceptional the launch of small Perk chocolate, has launched Picnic in packs of 26 Gms. Rs 10. The 43-gm still available and at Rs 15. Cadbury has embarked on a strategy which involves increased consumption of its products through enhanced reach, affordability and visibility, which it feels can be attained by creating new markets, widening the depth of its distribution network and working towards a comprehensive portfolio with brands across all price segments. On the distribution front, the company aims to increase the number of its distribution outlets from the present 4 lakhs to 5 lakhs by the year 2000. To attain the objectives of affordability, over the past two years Cadbury has been changing its product portfolio from pure chocolate items to confectionery which includes caramel, nuts, raisins and wafers. The aim is to bring down the price line and enter other markets than the purely urban ones. In line with this, it launched Googly in early 1997, and followed it up with products like Mocka and English Toffee. The strategy of the company has been to launch one major product and follow it up with smaller products, for instance, the launch of Picnic was followed by Cadbury Gold and a couple of sugar confectionery launches. success in packs of now small priced at packs are are priced

Intense competition from Nestle is one of the reasons Cadbury has reworked its product range and made efforts to enter the mass product segment. In 1998, the company moved into smaller sized versions of Diary Milk and Perk and found to its delight that the introduction of economy priced models led to more people eating chocolate. In the same year, small packs increased chocolate volumes of Cadbury by 19 per cent and market share to 70 per cent from 69 per cent in the previous year. Cadbury now has a market share of 70 per cent of the chocolates market. It manufactures chocolates, sugar confectionery and malted drinks. Chocolates constitute 71 per cent of the total turnover, malted drinks 22 per cent, and sugar confectionery 7 per cent. Nestle, with a 20 per cent share in the chocolates market, is expected to respond with Munch, a chocolate brand meant to counter Picnic.

Cadburys Business
Cadbury dominates the Indian chocolate market with a 65% market share. Besides, it has a 4% market share in the organized sugar confectionery market and a 15% market share in milk/ malted foods segment. Changing product mix Contribution to turnover Contribution Chocolate Sugar Confectionery Food Drinks 1994 59% 9% 32% 2001 65% 10% 24% to turnover

Current market shares Chocolate 69.2%

Sugar Confectionery Food Drinks

4.0% 14.2%

Expanding distribution reach 2100+ distributors 450000 retail outlets 60mn Consumers

Future strategy

Maintain dominance in chocolate confectionery and market leadership in brown drinks. New channels such as Gifting, child connectivity and Value for Money offerings to be the ley growth drivers Grow volume sales at 10% pa over the next three years. Achieve the goal of best manufacturing location in Cadbury Schweppes world for Dairy Milk and clairs One new major product launch every year

Chocolates and confectionery products (75% of turnover) For more than five decades now, Cadbury has enjoyed leadership position in the Indian chocolate market to the extent that 'Cadbury has become a generic name for chocolate products. Cadbury has leading brands in all the segments viz bars (Dairy Milk, Crackle, Temptations), count lines (5 star, Milk Treat), panned confectionery (Gems) and wafer chocolates (Perk), clairs (Cadburys' clairs), toffees (English Toffee). During 2001, Cadburys chocolate sales (65% turnover) registered a 9% value growth, aided primarily by growth in the flagship brand Dairy Milk. Dairy Milk contributes an estimated 30% to Cadburys sales. Gems and Five Star were re-launched during the year to stem their de-growth. Perk registered a de-growth during 2001 despite launch of new

variants. New brand initiatives included the launch of Temptations in the premium segment and Chocki a low priced chocolate confectionery targeted at children. 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. Cadbury has a 4% market share in the confectionery segment, largely contributed by clairs. Other confectionery brands such as Gollum, Frutus, Nice Cream, etc launched in the last two years did not receive a good market response and the company has decided to minimize focus on those brands. clairs was re-launched with unique packaging in cartons during 2001. Food drinks (25% of turnover) Cadburys Bourn vita 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 15%. Brown drinks earlier positioned as taste enhancers were losing market to white drinks during the last few years. Cadbury re-launched Bourn vita with a new formulation and advertising campaign positioning it on the health benefit platform to compete with white drinks. The brand was re-launched in the South the largest food drink market in the country, during 2001. Bourn vita sales registered a 12% growth in value terms in 2001 to Rs, contributing 24% to total turnover. Cadburys other products include Cadburys Drinking Chocolate and Cadburys Cocoa powder. These account for only 1% of Cadburys turnover. Distribution Cadbury's distribution network encompasses 2100 distributors and 450,000 retailers. The company has a total consumer base of over 65mn. 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 off take.

Strategy Increasing the consumer base by focusing 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. Also advertising for chocolates is aimed at changing consumer perception and eating habits by creating new reasons for consumption.

Cadbury's Market Segments

The marketplace for any product is comprised of many different segments of consumers, each with different needs and wants. Market segmentation can be defined in a number of ways, such as:

demographic variables (e.g. consumers' age groups, gender, marital status, income etc) the lifestyle of consumers (i.e. their interests and activities) The benefits which consumers look for in a product or n the occasions when the product might be consumed.

Cadbury takes into account all of these factors when producing a range of products. It targets different segments within the market, such as the:

break segment - products which are normally consumed as a snatched break and often with tea or coffee, for example Cadbury's Timeout and Snack range Impulse segment - these products are most often purchased on impulse, eating there and then. They include products such as Cadbury's Twirl, Moro, Star bar, Crunchie, Fuse and Dairy milk

take-home segment - this describes products that are normally purchased in supermarkets, taken home and consumed at a later stage

Gift segment - boxes of chocolates and other products purchased for gift occasions

Earnings sensitivity factors

Cocoa bean prices: Domestic as well as international prices of key raw material - cocoa have significant impact on margins. Excise duties: Changes in excise levied on malt and chocolate influences end product prices and thereby volume growth as well as margins. Changes in custom duties and foreign exchange fluctuations, as 20% of raw material is imported. Competition from MNCs like Nestle as well as imported brands. Increasing competition puts pressure on advertisement budget and margins. However on the positive side, it helps in expanding the market.

CADBURYS FAILURES:
How Cadburys positioning went haywire with `gems` Gems present an unusual case of how a textbook-perfect, ultra-sharp positioning can actually become a disadvantage At 34, Gems is one brand in Cadburys portfolio that refuses to grow up. Of course, that is not such a liability now that children a key role as consumers. What it does mean, however, is that Cadbury has to constantly work at keeping its ageing brand forever young. How has it managed so far? Gems was a sluggish performer in the late nineties and its market share slid dramatically. Now, the brand appears to be regaining some of its toddler energy and a campaign that is scheduled to break in 2003 is expected to help further. Gems presents an unusual case of how a textbook-perfect ultra-sharp positioning can actually become a disadvantage. Of course, Cadbury doesnt consider this a problem yet. Cadbury actually consider Gems one of our power or advantage brands simply because it was specifically developed for the kids segment. And it has no competition at all in India. Cadburys problem is that Gems which is technically called a sugar-panned confectionery item that comes in colourful little buttons has traditionally been so sharply targeted at children below ten years that it did not lend itself readily to brand stretch as its target audience grew older. Even as Cadbury successfully extended its appeal from children to adults from 1996 onwards for its regular chocolates, the company learnt a bitter lesson when it tried doing the same with Gems. Through the seventies and eighties, Gems was one of the few options available to the Indian consumer, and more specifically the child, in terms of chocolate brands, the others being CDM, Cadburys Five Star and Amul chocolates. play the

The other major advantage that Gems enjoyed probably created problems for Cadburys later the fact that it never faced competition. Nestle and Mars never brought their global brands Smarties and M&M respectively. This was because, both the international brands are not developed keeping the climatic rigours of India in mind. So as against Gems, which is a product formulated specifically for India, the sugar shells of Smarties and M&M cracked easily in a tropical climate. The result was that Cadburys never had the chance to benchmark its performance as far as Gems was concerned. Other than ads in storybooks and comics like Champak, Tinkle and Amar Chitra Katha, there was little focus on advertising till the late eighties. The first significant commercial for Gems broke in 1989. This Gems Bond campaign was an animated commercial based on the character of James Bond, which was used in promotional stickers. However, the campaign was taken off in the early nineties. It was actually the storyline and the animation that was working. The character was not for the child. The early nineties saw the emergence of pester power. Strangely, Cadbury did not capitalize on this trend. What made Cadbury sit up was the entry of brands in the early nineties, like Wrigleys, Freshmint, Boomers, Big Babool and candies from Perfetti, Candico and Parle Products, all of which were priced at Re 1 or Rs 2 compared with Rs 5 for a 20 gm pack of Gems. So it was no longer just chocolates vying for the childs attention but chips, candy, and sugar boiled sweets, bubblegum, all of which were upping their noise levels. This was worrying for Cadburys, as almost half Gems sales came from impulse purchase. Meanwhile, international players like Nestle were expected to enter the scene with brands like Kit-Kat and Milkybar. In 1994, Cadbury re-launched Dairy Milk with the theme line The real taste of Life, positioning it as chocolate with universal appeal. Just as Cadbury flanked Perk to target young adults and reworked Cadbury Dairy Milks appeal to include adults, in 1996 it attempted to extend Gems appeal to teenagers. The new campaign was pegged on the baseline Smart, very smart derived from Mad magazine. The trouble was that this campaign was not backed by product changes, so

teenagers, who were always edgy about being associated with a childrens brand, were unimpressed. By 1997, the overall slowdown in the fast moving consumer durables market had affected the chocolate segment. In spite of the re-launch, Cadburys net profit dropped by 5 per cent to Rs 18.6 crore. Perk had not overtaken Kit-Kat as expected. The only Cadbury brand doing reasonably well was the low-priced sugar boiled confectionery Googly which went on to become a Rs 15-crore brand in its first year. Gems had staggered down to a growth rate of 3 to 5 per cent and its market share slipped to 6 or 7 per cent from 10 to 12 per cent in the early nineties. In 1998, the company went back to Gems imagery of a childrens brand. A new campaign was launched to target the urban child. It now included a whole range of Chocogem characters, who were supposed to symbolize a childs partners in fun (Masti ka partner). Also, for the first time, the communication emphasized the chocolate content. However, this re-launch did not really contribute to the brands revival simply because the brand still lacked excitement. This was when the company decided to look at market trends abroad. Internationally, brands targeted at younger children sold because they offered value-ads like toys. Also consumer research revealed that the chocolate flavour and CDMs equity was not being utilized fully. So the company decided to constantly change the packaging and include add-ons like play value around Gems core proposition. The problem was that in the Indian market, promotions like toys on smaller stock keeping units (SKUs) at low cost can be very difficult. So the company had to opt for innovations on pack sizes and formats first. In early 2001, the company introduced Re 1 packs, with four buttons, solely to increase penetration. Later, tube packs priced at Rs 15 with flip tops and a maze-ball game on the top were also introduced. Then in early 2002, new cricket ball packs were introduced. This combined play value along with low costs. The innovation seems to be paying off: This is equal to that of Rs 5 pouches, which were the highest contributors to the total sales. The Re 1 packs now contribute to about

20 per cent of sales. The company claims that these SKUs have now enabled Gems to stabilize its market share. But this does not mean Gems problems are over. For one, the competition to Gems has extended to a further range of low-priced impulse purchases, which are crowding retail stores. For another, CDM, with a wider network of SKUs, and Perk are having the biggest bite of the consumer mindshare. So Cadbury seems to be lying low on Gems, especially on the advertising front. The brand has been losing out to its portfolio siblings when it comes to retail visibility and booking order size as the number of SKUs of other Cadbury brands have increased. External face of the brand has been far less glamorous than other Cadbury brands. But all this is being compensated for by promos and innovations in packaging for instance; Cadbury has introduced new stand-up trays for the tube packs to ensure counter visibility. However, as Gems picks up lost growth rates, there is a new movement that could create problems one that is partly Cadburys creation. The newly-launched popsicle Chocki launched to counter Nestls ChocoStick priced at Rs 2, has started eating into Gems equity. In fact, this segment has grown to 11 to 12 per cent of the chocolate market at the cost of Gems. Unless Cadburys is able to come up with more gems of innovation it may find one of its oldest young brands succumb to old age.

TEMPTATION CHOCOLATE GIANT LIVED TO REGRET

It is a problem faced by multinational companies: how do they tap into the concerns of local consumers to make their advertising more relevant? The marketing people at Cadbury's India thought they would try to sell more chocolate by playing on the biggest issue facing the world's largest democracy. That is Kashmir, which continues to threaten to plunge India and its neighbour, Pakistan, into nuclear war.

Newspaper advertisements for the Temptations range of chocolate showed a map of Kashmir alongside the riddle: "I'm good. I'm tempting. I'm too good to share. What am I? Cadbury's Temptations or Kashmir?" To make matters worse, the ad was timed to coincide with Indian Independence Day, when nationalist feelings were running at their highest. Cadbury's India is a wholly owned subsidiary of Cadbury Schweppes which has operated in the country for more than 50 years. It apologized after protests against the advertisement whipped up by the ruling Bharatiya Janata Party (BJP), which plays on Hindi nationalism

SWOT ANALYSIS OF CADBURY INDIA

Strengths Strong Brand names like Cadbury dairy milk, Five Star and clairs Rich Product Mix Support from the parent Cadbury Schweppes

Weakness Ltd. Key products, only one central brand (CDM). Pralines range totally wising in India. Lack of launching products in rural India

Opportunity The Indian market and more specifically the urban areas where the penetration of Chocolates is low can be developed as a future market through affordability and availability Threat Stiff competition in confectionary segment The company has large exposure to foreign currency exchange rate risk mainly on account of imported cocoa beans and cocoa butter in US Dollar and Pound Sterling

MARKET SEGMENTATION
This can be done in two ways, product forms and customer based With respect to product forms There are four major segments in the chocolate industry A. Moulded chocolate segment This segment constitutes 50 % of the total market Cadbury diary milk Cadbury s flagship brand has 50 % of this segment market .To position CDM in this segment Cadbury used the traditional demographic variables of age, socio economic groups and usage intensity. CDM was positioned as a product that elders brought for their children and recently it has shifted this positioning and has not only included parental love but has said that it is gift for someone you love and that can be anybody not only parents and children Cadbury has associated itself to enduring and emotional values of love sharing and affection and reward considering that CDM acts as a trendsetter for all the brands in this segment. Amul tried to be different and at its initial product launch as Cadbury had targeted children they had targeted teenagers but unfortunately they were unsuccessful. The Cadbury brands in this segment are Cadbury diary milk, Cadbury fruit and nut and Cadbury temptation CDM is the leading brand here and others act as an endorser of the brand here. From around 1993 this segment began showing signs of maturity. This was hurting CDM. This led to Cadbury attempting to rejuvenate the segment. They changed their core customer from children to that of the universe, which means from children to adults this attempts to redesign the market to enticing all age groups, helped bring about changes in this segment. Today the notion associated with the consumption of chocolates is that of casual ness instead of just product consumption. Today this segment grows at 40 % per annum and is likely to remain an important segment for further growth. B. Count line Bars Segment This segment forms 33 % of the chocolate market. This segment is mostly targeted to the teenagers. Major Cadbury brands are 5 star, break, crisp, and double decker, perk. 5 star

in doing well here about 50 % of the segment while the rest of the brands acts as endorser nestle has a minor presence in this product category with bar one. Growth of a sub segment chocolate wafers: Chocolate wafers are the new products being offered by the chocolate companies today in order to expand the market. In 1995 Cadbury and nestle launched perk and Kit Kat respectively. These were wafer-enrobed chocolates in a new context and a different benefit offering. Both chocolates had a snack positioning. Perk offered the anytime anywhere snack proposition thodi se pet puja whereas Kitkat tried to promote snacking through have a break have a Kitkat the growth rate of this segment is 15 %- 20 % annually and is estimated to be worth over Rs 100 crores making it a very lucrative segment. Internationally confectionery products like wafer chocolates have a very high tonnage and have a much bigger future than plain chocolates. Market research and succeeds of these two brands suggest that Indian consumers and ready to accept wafer chocolate proposition. This conviction of both Cadbury and nestle towards this segment can be gauged from the fact that both brands are seeking unprecedented allocation of funds to the tune of 60 to 70 % of the total advertisement budget of both companies and chocolates. A new entrant in this category is Cadburys Picnic it is three layered chocolate coated wafer bar with dry fruits and caramel and crispies priced at Rs 14 for 40gm bar. Picnic will be used not only to expand the functional segment of the market but also to counter kit Kat and other important bars (Snickers, Mars, and Lion) as against perk which is positioned as a light snack picnic is positioned as a heavy near meal substitute. In keeping with the company new strategy of expanding the market this product has been launched to develop the snacking area in the chocolate market. C. Choco-panned segments This segment forms 4 % of the total market and Cadbury has 100 % of the market in this segment. The major brands are nutties caramels butterscotch band tiffins. All of these brands have been used by Cadbury to drive variety induce gifting practices and serve to some specific taste preferences. Cadbury doesnt advertise these brands they have been used as flanker products.

The opportunity for growth in this segment is high with the imminent entry of multinationals like mars and Hersheys. This is also likely to pose a threat to Cadbury what with its complacency. D. Sugar panned segment This segment forms 15 % of the total and Cadbury has about 98% of this .Its major brands being gems and clairs. clairs has been used strategically to foster chocolate consumption among children as well as adults by offering ` guilt free eat no more than a bite full at a convenient price point (65% of clairs eaters are from the household earnings less than RS 4000 per month)
E.

A gem is still Cadburys primary tool to protect its franchise in the child segment. Its been previously associated in its commercial with the international spy character James bond. Around 1995 gems were repositioned to broad base its appeal from 3 to 6 yr. olds to teenagers as well. However this failed due the product form which has become deep-rooted with kids and hence the company has reverted back to its target segment of kids with a new offering of choco gems

Market Segmentation with respect to the consumer buying power These are High-income customers (price greater than Rs 25 for 40gm) who will go in for premium chocolate brands. Middle income customers (Price between Rs 10-25) who are price sensitive Children who are mostly price driven and will consume more of toffees in the price range of Re 0.50 Re 1

PSYCHOGRAPHICS AND DEMOGRAPHICS

This is attempted in terms of the consumers a. High income customers

It is estimated the age group buying the chocolates would be 232 on wards the income level is estimated to be Rs 8000 per month. The customer are mostly urban and are mostly professional (engineers doctors executives) The psychographic profile: They can either be individuals indulging themselves or they could be indulging their children. They are inner-directed people who form their own values and norms and believe in not adhering to the social norms. They are some what occasion driven in their buying behavior
b.

Middle income customers

The age group of this segment will be 15 plus. The income level is estimated to be around Rs 5000 a month. The consumers can be urban semi urban and is currently spreading to rural areas The Psychographic profile: They are likely to be variety seeking in their behavior. They are self expressing by nature and inner directed to the extent. They like to indulge themselves but with a little bit of cushion support.

c. Children The upper age limit is estimated to be 12 yrs. They mostly purchase their chocolates with their pocket money or get as gifts from elders. The consumers can be urban, semi urban and rural though there is somewhat greater emphasis on urban The psychographic profile: There is novelty seeking in their behavior. They are also fun loving.

PRODUCT POSITIONING
The differentiation planks used in the Indian chocolate market are Product quality (levels of fat /cocoa) e.g. Kit Kat though priced higher then perk sells more due to better quality. Chocolate with additives likes fruit and nut.

Packaging: A chocolate being predominantly an impulse driven purchase category, packaging is an important mode of attracting attention at the display counter International heritage of its product Functional attributes like the energy bar As a gift item As a snack the positioning of a chocolate as a gift item is receding now it more itself being positioned as a snack or a quick meal substitute Size small sizes to increase trial rates this is gaining tremendous today since the companies in a bid to offer chocolates at affordable prices are reducing their packing size. Shape (e.g. chocolates in the shape of toys targeted at children) for Christmas season chocolates were shaped as Mickey mouse and this proved very successful for the season also the shape has to be such the product is worth sharing this has been attributed as a major season for the success of third launch of kit Kat.

.Evaluation of the Advertising strategy Marketing strategy Right CDM Right Advertising Strategy Wrong Five Star Perk Picnic Cadburys Temptation Cadburys All Silk Gems Bar-One Amul Chocolates Wrong

Product market boundary

For deciding the product market boundary the [product market will be defined as the set of those products which at as substitutes to satisfy the specific needs that are already identified of the customer. Further for defining the product market the consumer judgment of similarity And substitution will be used which are going to be more reliable then the categories defined by the industry classification. To refine the categories further only those products that fall in the processed food category are considered the following

Ice cream - Ice cream is eaten as a desert or milk based snack. People also consume it to feel themselves as a part of a upper strata of society (this is the attitudinal aspect associated with eating out in famous parlors like Basin Robbins). It satisfies the need for food social belonging and hence competes with chocolates for money spend by the consumers to satisfy the needs.

Biscuits with mew variant of biscuits like chocolate cream elaichi cream puffed biscuits launched in India biscuits are increasingly becoming snack budget of the consumers further glucose biscuit are positioned as a source for energy same as some chocolates like 5 star which are positioned as energy bars, hence they compete with each other directly.

Wafer chips and packaged nankeens: with their high visibly easy availability and aggressive advertising by multinationals like Pepsi chips are competing with snacks like wafer chocolate which are purchased by consumer on impulse basis.

Fast food: fast food consists of western food like pizzas burgers and traditional Indian food like samosa and pakoras. Many chocolate marketing companies realized that if they want to position chocolates as snacks they would have to compete with these fat foods directly through their advertisement.

Sweet / Pans: sweets and sweet pan consumed after dinner as a desert directly competed with chocolates which is also eaten many times after eight.

Sugar based confectionery chocolate clairs directly compete with many sugar based confectioneries particularly toffees in Indian market many of these toffees like pan pasand coffee bite melody have become popular and eroded the market share of chocolate clairs from time to time.

Soft drinks with the advent of fountain machines soft drinks have become easily accessible and convenient for consumption. This has therefore resulted in soft drinks being increasingly perceived as a n impulse purchase item with this occurrence chocolate have come in direct competition with cold drinks.

Chewing gum this segment is also experiencing a rapid growth with its worth about Rs 150 crore. There is a virtual explosion of the chewing gum in the re1 segment and it cannibalizes the chocolates in the lower price segment.

The product market boundary can be illustrated as follows:

Foods Snacks Desserts Soft Drinks Fast Food Ice cream

Moulded Chocolate Bars

Count Line

Choco Sugar Panned Panned Sugar Based Sweets Confectionary Chewing Gum Wafers & Namkeens Biscuits

PRICE SENSITIVITY
At the outset the chocolate market appears to be price sensitive. This is starkly brought out in the following cases When the excise duty on chocolates was raised from 16.5 % to 27.5 % and cocoa prices raised by 25 % in 1992-93 the retail prices went up by 30 %. As a result the sales and consumption fell by more than 30% in the next two years The major players have successfully launched small size packs of chocolates. Keeping in minds the price sensitive nature of the market the companies are reducing the pack sizes to be able to offer chocolates at affordable prices and fit them to a RS 6-8 bracket. Due to the broad basing of the chocolate market there is a drive towards smaller convenient packs for a larger audience and it also increases trial. However the upper segments of the consumer base are not price sensitive. For example chocolate like Kit Kat which is priced 30 % above its rival perk has a similar market share of 8%.

Consumer Buying Behavior

The product comes under Fast Moving consumer Foods (FMCG) and the product is generally purchased as a convenience good. The general characteristics of this product are:

It is a low involvement product, but there are significant differences in various brands in market. The following matrix may help in studying the behavior of consumer for this particular product. In this product, consumers are often found to do a lot of brand switching. Although The consumer expects some benefits from chocolates, but he chooses a brand without much evaluation, and evaluates it during consumption only. But next time, quite often he may reach for another brand out of boredom or a wish for a different taste. Brand switching occurs for the sake of variety rather than dissatisfaction. Consumer Buying Behavior High Involvement Significance Difference in Complex buying behavior Brands Few Difference in Brands Dissonance buying behavior reducing Habitual buying behavior Low Involvement Variety seeking behavior

Cadbury has 70% of market share, and hence this variety-seeking behavior had not affected its sales negatively. This had been possible due to various factors like lack of strong competition. However, with the new entrants in the market, there has been stiff competition. There are few segments like water chocolates segment where company faces strong competition from Nestle, the second major player in the market. In these segments company should try to increase brand loyalty for its brands. This increased consumer loyalty will also act as deterrent towards development of strong competitions in other segments. Further to increase the overall size of market, company should try to increase consumers involvement with chocolates. (Company can use consumer involvement achieved by soft drink marketers in USA as a benchmark. In USA, consumer involvement in soft drinks is much higher than other beverages like coffee).

INDUSTRY STRUCTURE AND DYNAMICS

With Cadbury cornering almost 65 % market share and nestle getting another 24 % industry has all the characteristics of a duple. This industry is characterized by a near total absence of unorganized sector as compared to its substitutes like ice creams chips etc. Various internationally famous brands such as mars Hershey etc are either imported in a very small quantity or are smuggled to avoid high import duty. Other chocolates like Toblerone Twix snickers are being imported through California foods in India. These help in expanding the premium imported segment of the chocolate market. As these brands have miniscule volumes and high price they are not giving any serious competition to Indian brands. The market has been stable over a long period of time with two major companies Cadbury and nestle occupying the major share in the market. . However with the threat of entry of new competitors and also the broad basing of the market the repositioning of the entire chocolate eating concept we foresee a lot of action in the market. This is already seen in the war of perk and Kitkat, which had very nearly taken on the intensity of cola wars. Nestle has started threatening the long enjoyed lead of Cadbury and Cadbury is all set to defend its territory.

Market Share
5% 24% 65% 6%

Cadbury

Nestle

Amul

Others

There have not been many changes in the competitive strategies, Marketing practices product modification of different brands till 1994. All major brands have been repositioned once or twice only. But with the maturing market the new marketing strategy is to target a new breeds of consumer the consenting adult rather then the indulged child. In keeping with this market redefinition a lot of brands have been repositioned onto a new plank the most successful plank being Cadbury diary milk which led to an increase in 20 % of consumption. Till now frequency of the new product development was also very low but after the launch of Kitkat this industry is experiencing a lot of action. Cadbury came with perk in response to Kitkat in a very share time frame. Cadbury had also launched relish a brand in count line bar segment there has not been significant technological development in India in chocolate. But to create excitement and growth in the category Cadbury has launched many new products, which led to change in consumer taste and preferences. These products are based on strong international R &D capability of the chocolate majors. Kit Kat is manufactured in a newly commissioned plant in go and due to cumulative production volume nestle is not likely to enjoy the benefits of learning curve. But apart

from relative cost advantage Cadbury has pursued vigorously product differentiation strategy. Apart from manufacturing products suitable for Indian taste and distribution Cadbury has established strong brand equity and brand loyalty among Indian consumers. Seasonal factors like weather festival etc do affect the demand for chocolates. In summers due to lack of cold chain at all places chocolate are not able to bear the heat and humid condition. Thus retailer do not stock them this shows high bargaining power of the retailers. Chocolates have emerged as a gift item to be used during traditional Indian festivals like deepawali and New Year. Companies like Cadbury come with special gift packs thus demands shoot up during festival season Demand is also sensitive to economic factors like recession in economy or substantial increase in price of chocolates. However in the year 1997, chocolate manufacturers were spending only 80 % of the festival budget as compared to the previous year. Advertisements spent across corporate India were pruned in the last festival seasons which led to a fall in demand. Companies are hopeful of being able to reverse the trend for the current year. Entry barriers Brand image Requirement of specialized machinery Lack of raw materials (cocoa) in sufficient quantities Government regulation in the form of excise duties Need of heterogeneous and wide distribution (being an impulse purchase category)

Exit barriers Government regulation Specialized assets like machinery cold chains etc

The rural conundrum

Ratna Bhushan

Big opportunity, large masses to be tapped. Yet success in rural India has eluded several corporates. Can India Inc really make it big in rural markets? CII's recent Summit had experts introspect on the subject.

IT is not a oneact, not or a a of It marketing gimmick Waterloo companies.

time

sound the many involves 700

byte. It has been

addressing some

million potential consumers, over 40 per cent of the Indian middle-class, and about half the country's disposable income. Rural marketing, a much-talked about and hotly debated subject, was once again the focus of attention of FMCG majors such as Nestle India and Coca-Cola. Last week's Marketing Summit in New Delhi hosted by the Confederation of Indian Industry saw heads of these companies express diverse points of view on the issue.

Carlo Donati, Chairman & Managing Director Carlo Donati, Chairman and Managing Director, Nestle India, observed that `generalizing the rural market can be dangerous'. "It is true that in today's congested and difficult markets, both local and global, all FMCG as well as other companies or corporations look and search for new opportunities, consumers and markets. Going rural is a question any marketing person must have reflected on many times," he said. Drawing attention to the 700 million potential consumers in rural India, Donati pointed out that the rural market presented both an opportunity and a problem, given that this market has been characterized by unbalanced growth and infrastructural problems.

So is Nestle going rural? "Our product portfolio is essentially designed for urban consumers; but all the same we are closely monitoring the rural consumer," Donati said. Nestls rural initiatives have largely been based on price-led initiatives. Brands such as Maggi noodles and Kitkat chocolates have been priced at Rs 5, and few other candy and chocolate brands are priced at Rs 2 per unit. These price points not only help Nestle reach more retail formats in urban markets, but also help in making inroads into rural markets. Currently, rural markets account for below 10 per cent of the food major's revenues.

Key Success Factors:

Research and Development:

With increasing competition in the industry R&D may become an important and critical factor for success in newly emerging segments of the market. Indian players like Amul are not able to launch chocolates in fast growing count line wafers segment of the market, as they dont have appropriate technology. But still moulded chocolates which constitute 62 % of the market do not require any special R&D. Price

Price can be used as a basis for competition in the industry. In 1995 perk was launched at a price Rs 4 less than Kitkat was. This brand was specially produced for Indian markets and successfully competed with internationally famous Kitkat. But low on price without brand equity may not really help as Amul and various regional brands are priced lower then category leaders without having much success. International Lineage

The international image associated with chocolates acts as a propeller for the sales considering the significance of user imagery and aspirational aspect of this product category. The lead can be attributed to the international lineage despite the higher price compared to the price of perk However this has to be taken into consonance with the price factor considering that the Indian consumer is price sensitive. Product Quality

Product quality per se may not be critical success factor. But many instances prove that poor product supported with high decibel advertising is; likely to be a failure Cadbury has constantly improved the product quality along with rest of the marketing mix as a tool to create growth in the category. Distribution

Chocolate being an impulse purchase wide and heterogeneous distribution channels are important so that the consumers have it within arms length of desire. In India distribution of chocolates gain special significance due to very hot weather condition during summer months Availability of capital

Chocolate manufacturing is a capital intensive business and clear lack of unorganized sector underlines the importance of capital availability. Quickness of response

With the increasing competition fast response is assuming significance. For example perk was launched 15 days of the launch of Kitkat to counter the threat.

Product Life Cycle

Market research is a process designed to link managers to consumers through information. It is used to identify opportunities and make better-informed decisions about products, which have future market potential. Market research has revealed that Chocolate play more of a functional role than one of pure indulgence: they are often a meal substitute. Research also shows that successful snack brands in the confectionery category tend to have more 'foody' values and often contain ingredients such as cereal, wafer, biscuits, peanuts and fruit to break up the chocolate delivery. Cadbury's philosophy is to continue as a driving force in the confectionery market, and thus constantly analyze its offerings for consumers. The core objective of Cadbury's innovation programme is to generate incremental volume for the company and achieve the vision of market leadership in every segment in which it operates. The role of innovation is critical as it allows Cadbury to develop ahead of its competitors in those areas of the market which are new or growing. 1. Product Development Cadbury set out two objectives for the development of Fuse: 1. to grow the market for chocolate confectionery; 2. To increase Cadbury's share of the snacking sector. The concept was developed after market research identified the growth of snacking and a definite gap in the market for a chocolatier snack. A number of ingredients were devised and tested following a survey which questioned consumers about their snacking habits and preferences. A research and development team was then asked to develop a number of product recipes which addressed the needs expressed by consumers. Not all products successfully emerge from the product development phase. Research and development involves combining various ingredients to develop potential new products. Considerable development time is spent on all brands of Cadburys, carefully engineering the ingredients in order to deliver the right balance of chocolate, food elements and

texture. More than 250 ingredients were tried and tested in various combinations before the recipe was finalized. Any new product in the snacking sector must establish points of difference from existing products within the market - thus creating a unique selling proposition (USP) i.e. a product with unique appeal which is not shared by any of its competitors. Whereas other confectionery snacking products focus primarily upon ingredients, with chocolate used only to coat the bar, the product developers decided to use Cadbury's chocolate to ''fuse'' together a number of popular snacking ingredients such as raisins, peanuts, crisp cereal and fudge pieces. 2. Early Consumer Testing As products are developed, they must be tested to ensure that consumers would be willing to buy them. As approximately 85% of all new products launched into the grocery and allied trade sectors fail in their first year, extensive research helps to reduce the risk of launching a new product into an already competitive market. The brands go through two extensive 'in home placement' tests. The results of these tests were multiplied into repeat purchase and purchase frequency figures to allow. Cadbury to anticipate the volume of bars required for the launch of any new brands. A key element of any new product launch is the development of a strong brand name The design brief for the brands require two objectives: 1. To communicate the dynamic and slightly wacky personality of the new product and create interest at the point of purchase (i.e. in store) 2. To bring the brand name to life by communicating the fusion of Cadburys chocolate with the snacking ingredients. 3. Pack Design Packaging enables a manufacturer to convey both the tangible and intangible attributes of a product. The packaging for Cadbury's new product sought to position it as a unique, exciting and delicious chocolate snack which would stand out from its competitors. It was important to emphasize the qualities and appeal whilst at the same time reinforcing that it was a Cadbury brand.

The packaging achieved impact by using bright, fiery colours for the product name and contrasting them against the deep and instantly recognizable 'Cadbury purple', which communicated the manufacturer's heritage. The colours were also used in a gun powder style to suggest an explosive taste. The vibrancy of the design aimed to differentiate it from other products in the sector so that it would have an immediate point-of-sale impact both on-shelf and in store display units. Three different packaging formats are developed in order to maximize the various multipurchase opportunities available. The key pack size was the single bar, designed to entice trial and to encourage repeat purchase. The 'treat size' and the multi-packs were aimed at families.

Brand name: Like packaging, brand names play a critical role in the success of a product, by helping to create a product's 'personality'. The new product aimed to have broad appeal to 16-34 year olds, although it was primarily targeted at 16-24 year olds. The name of the new brand is chosen to communicate the idea. The logo is also in association with the brands name.

4. Further Consumer Testing Testing is vital throughout the entire product development process. It helps to provide valuable information that can be used to fine-tune the product and minimize many of the launch risks. In research, brands are tested for texture, 'interesting eat' and combination of ingredients, than its competitors and each carries a rating. 5. The launch strategy The launch strategy of any new product is critical. Cadbury has two targets for its products - trade customers who stock the product and consumers who buy it. In recent years, product launching has become an art which can make or break a product. A successful launch makes potential customers aware of the new product and keen to try it.

Before consumers could try the product, however, it was important for Cadbury to gain the support of its trade customers. Retailers had to view it as helpful in encouraging customers to visit their shops. If the product had failed to interest retailers and distributors, the costs of investment would not have been met and they would not have stocked the product. Cadbury conducts one-to-one briefings with over 70 key trade customers. This helped Cadbury build awareness and commitment to the launch and obtain significant orders for in-store displays and merchandising ahead of the launch date. The trade commitment was reflected in high levels of display support in store during the launch. Traditionally, new confectionery products are initially launched in one region of the country, in order to gauge the product's success, before moving on to other regions over a period of time. Time Out and Wispa Gold, for example, were launched in this way. There were certain key requirements to the co-ordination of the launch: Secrecy had to be paramount! Marketers who had identified the gap in the market had to work closely with individuals from research and development as well as other external agencies. Manufacturing operations, in conjunction with marketing and finance, had to evaluate a new factory investment for Board approval. Having a catchy 'hook' for a new launch helps to make consumers notice the product. Cadbury selects a date and then christens that day as that brands day. This involved tight management of stock distribution, with more than 40 million bars being moved from Cadbury depots into the trade only a few days prior to the launch date. Press releases were tailored to specific audiences. In each case, a strict embargo was imposed to ensure that the impact of the day was not diluted. The only exceptions were briefings with The Grocer, and Marketing (trade publications) and the media, which reviewed the product in its business pages. Public relations (PR) support was substantial. It told the story of the brand being launched explained that it had taken so many years to develop, the investment incurred, the plant in which it is being manufactured and the advertising cost involved. The results

of the TV campaign and PR campaign were so successful that Cadbury was under pressure to meet repeat orders post-launch! 6. Post-launch results After a new product launch, it is important to analyze whether the product has managed to meet its launch objectives. Cadbury tries to find out as to how much increase has their been in the percentage of its market share with the launch of the new product. One way of evaluating the effectiveness of advertising and promotional campaigns is to ask market research volunteers to identify advertisements using prompts in a recall test. The Fuse launch had created massive awareness of the new brand; achieving greater prompted awareness Cadbury's competitors reacted to the success of Fuse by increasing their own new product activity. Control Institutions Facilitating Institution

Government

Nestle/Foreign Brands MRTP

Advertisin g Agencies O& M Management Media MR Agencies

Cadbury U.K.

Positioning With Respect To the Price Segments

Positioning Price Drives and behaviour attitude Drives and Consumption Cadburys Temptation High (above 25 For 40 gms.) Rs. Kitkat Cadburys fruit & Nut Cadburys Roast Almond Cadburys Bounville Cadburys Nut Milk Tangro Almond snacking Drives variety, gifting preferences and taste

Tango Fruit & Nut Medium (Rs. for 40 gms.) 10-25 Cadburys crackle Cadburys Milk diary Cadburys Perk Cadburys Creamy Bar Tango Cashew Tango Crispy Amul Fruit & Nut Nestle Crunch

Amul Milk Chocolate Low (Below 10 For 40 gms.) Rs. Nestle Premium Milk Nestle Classic Tango Milk Amul Bitter Amul Orange Amul Crisp Cadburys Relish Nestle Rich Dark Mystique

Price, Positioning and Ad Descriptions of All the Brands

Company Brand Weight Price Positioning Advertisement campaign

Cadbury Dairy Milk 48 gm. Rs. Product for people who are The real taste of Nestle Kit Kat 36gm Rs 15 Snack for routine usage Have a break Chocolate 15 Natural and spontaneous Life Have a Fruit & Nut 50 gm. Rs. Piggybacking on Cadburys Kit Kat Have a Kit Kat Roast 80 gm. 19 dairy Milk Play it Cool Almond 35 gm. Rs. Milky Bar 40gm Rs 13 Milkybar , give me the Nutrition for children and Creamy bar 40 gm. 38 power sugary taste Bourmville Rs.Fun Product Crunch 40gm Rs 13 Chicken or Egg 11 Have a Crunch Bar One 50 Rs 10 Rs.Snack For those in between times Classic Crackle clairs Premium 5Star Milk Perk Orange Crisp Break Fruit & nut gm 13 40gm gm. 10 Rs. Rs 40 Product for teenagers, fun Crack, Crack, 7gm Rs0.50 12 Alternative to Diary Milk Crackle 40gm gm. 10 Rs.Gift Source of energy for body for someone bar love Rs for all ages Gift & Energy you 40 40gm Rs 10 10 expression of love mind 35 gm. Rs. Anytime, anywhere snack Thodi si pet puja 40gm Rs8.50 40gm Rs 12 12 25 gm. Rs. 6 40gm Rs10 1.00 Light chocolate bar to fulfill a I want a break snack need rather than just taste Close to chocolate with a twin clairs teenagers taste tough from outside and jo bhi khaye duniya soft creamy Filing within. Relish Nutties Tiffins 17gm 40gm Rs 3 Rs 13 Rs 12 bhool jaye

Amul

Bitter Diary Milk clairs

Procters 5 Forces Model

Substitution Substitutes like ice cream, Potato chips, biscuits, Soft drinks, chewing gum are a source of threat as well as opportunity for market New entrants Imminent entry of global Expansion Hersheys, Mars majors like etc is bound to change the power equation in the Indian chocolate market Competitors Duopoly Both the major players have financial muscle to sustain their brands All players following a pull strategy Buyers Since chocolates do not satisfy any immediate needs, it is not a necessary item. Consumer power is very high and consumers need to be persuaded through various positioning planks to consume chocolates

Suppliers Major raw materials suppliers are cocoa produced in Latin America countries Due to negligible domestic products in India , suppliers enjoy high bargaining power Milk supply also fluctuates therefore in summers months milk suppliers gain sufficient bargaining power

Rural Market Initiatives

Contrary to most FMCG players, Cadbury is not looking at the rural markets for growth. Most of the sale comes from urban areas. Chocolate consumption in urban India itself is low. There is a large untapped demand in urban market alone. Only 60mn people out of the urban middle class population of about

280mn consume chocolates. Why should they go to rural areas? The target of adding 10mn consumers annually can be achieved from the urban areas. Besides storage and logistics is also a problem. 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. Building such a direct network in rural areas is a daunting task. Currently, Cadbury is looking at growth through expansion of the target size, which will grow as more people move upwards in the income pyramid.

SUGGESTIONS
Looking at the Future The consumption of chocolates in India is among the lowest in the world. A comparison with the world wide industry average is an eye opener. In India the average per capita consumption is a mere 20 gm compared to the world average per capita consumption of 2.24kg. Moreover data on world wide chocolate consumption indicates that in the mature markets this figure is as high as 9.36kg, while even the emerging markets total up to 1.16 kg. While looking at

the consolidated averages would be misleading, even the consumption among the potential consumers of chocolates is extremely low as compared to the world average. Potential Chocolate Consumers Income Groups (Rs`000 p.a.) 5-14 15-19 20-24 25-34 Total Age Groups

Rural (Millions)

62-86 >86 Total 62-86 >86 Total

Total

2.2 13.5 15.7 7.0 18.8 20.8 36.5

0.8 4.8 5.6 2.5 4.9 7.4 13.0

0.7 4.3 5 2.2 4.4 6.6 11.7

1.2 7 8.2 3.7 7.2 10.8 19.0

4.9 29.6 34.5 15.4 30.2 45.7 80.2

Using the figures as mentioned in the table above one can arrive at a rough estimate of the potential consumers of chocolate in the country. For this purpose the populations in the age groups of 5 yrs to 35 yrs falling in the income groups having an annual household income of Rs 62000and above have been reconsidered. The total population in this group is about 80 million split into 45 million urban consumers and 35 million rural consumers. As the consumption of chocolates is skewed towards the urban consumers, it can be estimated that 80 % of the chocolate consumed is in urban areas. Using these figures the per capita consumption for the relevant target population is as given in the table below

Chocolate Consumption
Share market Urban Sales 80 % 12800 of Tonnage Relevant population (millions) 45.7 target Gms. consumer 280 per

Rural Sales Total

20 % 100 %

3200 16000

34.5 80.2

40 200

Comparing these figures to the world average, it can be concluded that there is a very high potential for the chocolate market. As eating habits of large parts of Indian society are becoming consistent with the rest of the world; the category is poised for a significant growth. The wafer wars between Perk and Kit Kat is an interesting indication of the times to come and it has reached almost the same intensity as the cola wars!! As these new players and existing companies introduce new type of chocolates, distinction between chocolates, biscuits, ice-cream will become less and many hybrids product will grow. Along with this the potential to expand the consumer base by incorporating a wider array of taste and needs of the consumers. Segmentation of market based on consumer age is increasingly becoming irrelevant. There are expected to be many products target at specific new segments. This is very obvious with the emerging segmentation policy of using the ego states. A shift in media strategy of various companies can also be estimated. Instead of present use of mass media, specialized media targeted at different segment will catch the fancy of media planners. At the same time one can see an increasing association between the brands and various highly published events in order to increase the brand equity in the minds of all the stake holders .Further there will be lot of improvement in packaging and modification of products as per Indian conditions. A trend in the future wherein the innovative packaging can be used as a differentiating factor in order to increase the usage of the product can be foreseen. It is seen that the chocolate giants is slowly shifting to the large untapped interiors, with the increasingly saturating market in the urban areas and also increasing clutter. The first mover advantage by monopolizing the distribution network will work in great favor of the company; hence it can be recommended that Cadburys should move in before any of the other companies can realize what hit them.

CONCLUSION
The objective of the study was to study the Marketing Segmentation of Amul, Nestle, and Cadbury, Consumer Buying Behavior of Chocolate Industry and also to study the Industry Structure and Dynamics. a. Advertising plays an important role in creating brand awareness, brand recall and brand recognition which are important in helping a customer make purchase decision of that brand. b. Brand should adopt itself to the local culture. c. Brand should be kept alive. d. The styles and code to the brand should change as clientele advance and grow. e. Brand should continuously evolve with the culture and the product should innovate. Thus, we can say that companies which want to make their brands No. 1 should adopt the above findings in their brand building exercise. However for generalization of the results, a study needs to be undertaken based on a larger sample across different industries.

BIBLIOGRAPHY
1. Kotler, Philip. Marketing management 2. Aaker, David et al, Advertising Management 3. Business Line Catalyst 4. Financial Express Brand Wagon 5. Times Of India Brand Equity 6. Strategic Brand Management 7. Internet Sources

www.cadbury.co.in www.business-standard.com www.financialexpress.com www.economictimes.com www.hinduonline.com www.indiaserver.com www.indiainformer.com www.india-today.com