CADBURY INDIA LIMITED

THE WORM CRISIS

COMPANY BACKGROUND Cadbury India Limited was established in the year 1947. It is the leading manufacturer of cocoa based chocolates in India and enjoys a market share of 70%. In the year 2003, its sales turnover was Rs. 700 crores. It sold its chocolates through a network of over 650000 retailers across the length and breadth of the country. It was one of the most respected names in the corporate world. In the year 2003, it was voted amongst the best managed corporate in India and had also been names among the best work places. Although Cadbury was a public limited company, its public holding was less than 10% and in the month of February that year, it had been delisted both from the BSE and NSE.

YEAR 2003 Year 2003 proved to be one of the most eventful years in the history of Cadbury India Ltd. It had been rated amongst the best managed companies in India, had been rated amongst the best work places in corporate India. During the Raksha Bandhan festive season that year, the company had recorded sales which surpassed its expectations. But suddenly, in the month of October, all hell broke loose. CNBC TV announced that worms had been found in two of its Dairy Milk bars in Mumbai and that the customer had complained to the FDA Commissioner, Mumbai. Later, enquiry was to reveal that the customer had complained at the behest of the retailer. It turned out that the retailer was a disgruntled retailer and had been complaining to the company about the margins not being good enough. The FDA announced that they had seized some stocks and had sent the samples for testing. They also raided the manufacturing facility at Thane, some redistributors and the storage depot of the company. It appears that this type of complaint was not new for the company. It had been receiving, on an average about 50 complaints per month from the market. But they had always been warded off saying that the infestation was a storage problem at the retailer level and that there was no problem at the manufacturing level or the company storage level. Within 48 hours of the news first appearing in the media, the minister concerned visited the Thane manufacturing facility and announced that the conditions inside the plant were

totally hygienic. The problem seemed to have been warded off. But, fresh instances of infestations were reported from Nagpur and the minister promptly retracted his statement. It was clear now that this time the problem was not a routine one. IMPACT ON CONSUMER TRADE In less than a week, sales were down by over 30% and this during the Diwali festival season. Research of 200 samples in 7 cities in India showed that 69% of the respondents would not buy Cadbury for their kids. Retailers stopped stocking the product and in order to avoid answering embarrassing questions, the frontline sales force retracted from the market. CHALLENGES FACED BY THE COMPANY The biggest challenge faced by the company as to win back the trust of the consumers as well as the trade partners. The company also had to look after the morale of the employees which was sagging. FIGHTBACK Faced with the above challenges, the company embarked on a fire fighting mission. The Company launched Project Vishwas a three pronged program that addressed the trade, consumers, media and employees. A retail monitoring and education program was launched that performed quality checks at over 50000 retail outlets and educated over 190000 retailers and wholesalers regarding storage requirements. A press a regarding facts about Cadbury was launched in 55 national dailies informing channel members regarding the remedial measures being taken by the company. A media cell was set up to answer the queries of the media as well as the trade partners. Statement was issued by the company stating that the infestation was a storage problem. The companys MD urged the media to assure the consumers that it was safe to eat the chocolates but the customers must exercise the same caution as they would while buying any other food item. But the biggest challenge, that of winning back the confidence of the consumer, had still to be addressed.

UNDERSTANDING CUSTOMERS After the infestation incident, Cadbury had 4 types of customers:1. LOYALISTS : Those who had unflinching loyalty and trust towards Cadbury. : Those who were not sure whether to believe or not.

2. FENCE SITTERS

3. PSEUDO REJECTORS : Those in their hearts wanted to believe Cadbury, but required tangible action. 4. RABID REJECTORS Those who had already condemned Cadbury.

It was the latter three types which was worrying Cadbury more than anything else. It was clear that the company had to do something tangible to reassure the consumers. In order to do this, the company immediately changed the packaging of the product. The new packaging was safer and reduced the chances of infestation greatly. A purity logo was also introduced on the package. The company then embarked on a media campaign involving both Electronic and print media. For this purpose, they chose no lesser a personality than Mr. Amitabh Bachchan as their brand ambassador. Mr. Amitabh Bachchan had become extremely popular due to the Kaun Banega Crorepati show. He had a fan following that transcended all age groups. He had risen like phoenix after the KBC show, and had earned tremendous amount of credibility for himself. In order to reassure the consumer that the manufacturing process was completely hygienic, the company brought out advertisements that depicted the manufacturing facility. In the advertisement, the company gave facts about the company, the manufacturing process, the packaging etc. Everything that would reassure the consumer about the quality and purity of the product. In the ads, the company owned its mistakes but also talked about the steps it had taken to ensure that the problems did not arise again. The trade partners were also reassured through press ads giving facts about manufacturing, storage etc. The employees were reassured through internal mails and were each given Rs. 1000/- to purchase Cadbury chocolates and reassure themselves about the quality of the product. All these efforts bore fruits. Within a period of 24 weeks, sales again started picking up indicating that the consumers had forgotten and forgiven.

Q1. What are the Business lessons learnt from the Cadbury Worm Crisis? Q2. Evaluate the role played by integrated marketing communications in the worm crisis? Q3. What IMC tools were used in the campaign and what was their individual objectives? Which tool do you think played the biggest part in mitigating the crisis? Justify your answer.