THE CHOCOLATE INDUSTRY HISTORY

Chocolates had its beginnings in the times of the Mayas and the Aztecs
Hershey Food Company was the first to bring out chocolates in the currently popular solid form. The main ingredient of chocolates -: cocoa (40% OF Cost factor) sugar milk solids permitted emulsifiers

CHOCOLATE AS A PRODUCT
Product category comes under Fast Moving Consumer Foods (FMCG)

Purchased as a convenience good.

General characteristics of this product are: low involvement product lot of brand switching

Needs Satisfied :
Physiological needs - satisfy the basic need of hunger. Belonging - seen as contemporary and trendy. Affection - parents have traditionally purchased chocolates for their children to show their love and affection. Social - westernized and upwardly mobile, exchange chocolates as gifts. Aspiration A lot of people still can not afford chocolates

Chocolate Industry in India

The chocolate industry in India has a size of 23,000 tonnes Worth about Rs. 650 crores. Chocolate market is predominantly urban with coverage of 95%.

The Major Players

The major national players in the chocolate market in India are: 1. Nestl India Limited 2. Cadbury India Limited 3. Gujarat Cooperative Milk Marketing Federation Limited (Amul)

MAJOR PLAYERS
Market Share

4%

24% nestle cadbury amul

72%

Nestl India Ltd.

Nestl is one of the oldest food MNC operating in India, with a presence of over a century. Nestl forayed into chocolates & confectionery in 1990.

The category contributes 14% to Nestls turnover.

Product Portfolio-:

Kit Kat Munch Charge

Amul
Gujarat Co-operative Milk Marketing Federation markets chocolates under the Amul brand. Product portfolio-:
Amul Milk Chocolate Amul Fruit & Nut Amul Crisp Amul Crunch Amul Orange Amul Bitter Amul Badambar.

It does not enjoy leadership in the segment. But this year it has chalked out an aggressive plan to revive its chocolate products

Market Segmentation With Respect To Product Forms

1. Moulded Chocolate Segment

This segment constitutes 50% of the total market

Today, this segment grows at 40% per annum, and is likely to remain an important segment for further growth. Brands in this segment Cadbury-CDM, Fruit & Nut, Crackle, Bournville Nestle-Nestle Classic, Nestle Milk Chocolate and Nestle Crunch.

2. Countline Bars Segment

This segment forms 33% of the chocolates market. Brands in this segment-: Cadbury brands 5-Star, Break, Real, Krisp, and Double Decker. Nestle -Bar-One.

3. Chocolate Wafers
Worth over Rs. 100 crores. The growth rate of this segment is 15-20% annually. It is a very lucrative segment. 60% to 70% of the total advertisement budget of major companies on this segment.

Brands in this segment-: Cadbury brands-Perk, Picnic Nestle-KitKat

4. Choco Panned Segments

This segment forms 4% of the total market.

Cadbury has 100% of the market in this segment. The major brands are Nutties, Caramels, Butterscotch and Tiffins.

5. Sugar Panned Segment

This segment forms 15% of the total market. Cadbury has about 98% of this segment, its major brands being Gems and Eclairs.

Company Overview
Cadbury India
Subsidiary of Cadbury Schweppes plc.

First factory set up in India in 1947.

The term Cadbury synonymous with chocolates in India

Company Overview
Manufactures and sells chocolates confectionaries, drinking chocolate, malted food drinks and recently forayed into the Bagged snack Category with Cadbury Bytes.

Has a presence in the entire range, starting from low priced hard boiled sweets and sugar confectionery to the premium range of chocolates.
Cadbury Dairy Milk flagship brand.

Product Mix
Moulded Chocolate Segment
Cadbury Dairy Milk
Largest chocolate brand in the country One in every four bars of chocolate consumed is dairy milk 50% of moulded chocolate segment CDM was positioned as a product that elders (parents) bought for children Acts as a trend setter for all the brands in this segment Brand stands for family togetherness, individual enjoyment and purity

Product Mix
Moulded Chocolates-: Solid chocolate bars, blocks or tablets shaped by pouring melted chocolate into moulds, with or without added ingredients such as fruit and/or nuts .

Product Mix
Product line of Dairy Milk
Dairy Milk Crackle Fruit& Nut Roast Almond Double Deck Chunky 2 in 1

Pop magic

Cadbury Temptation

Product Mix
Countline Bars Segment
5 Star
Break

Chocolate Panned Segment

Nutties Caramels Butterscotch Tiffins

Product Mix
Sugar Panned Segment
Gems
clairs

Chocolate Wafers Segment

Perk

Assorted Chocolates
Celebrations
Heroes

PRODUCT LIFE CYCLE

In 1993-94, it looked that chocolates had completed the mature of PLC and was passing through its decline stage Volumes had fallen. The total tonnage decreased from 12,000 tones to 8,000 tonnes. Cadbury bounced back in 1994 when cocoa prices again fell to their normal level. Changed positioning which had been safely nurtured over many years, that lead to a dramatic growth in tonnage from 10,000 tonnes to 16,000 tonnes in period 1994-96. .

PRODUCT LIFE CYCLE

The strategy of the company was to bring about a change in adult's attitude towards chocolate eating. However, there was another increase in the prices of cocoa, which led to the decline in the sales till early mid 1997. Since then the cocoa prices stabilized leading to a reversal in the declining trend.

Thus, PLC for the category can be described as scalloped PLC as industry moved back from mature stage to growth stage.

Quality Control Measures

At Cadbury India the internationally accepted HACCP (Hazard Analysis & Critical Control Points) program is followed. This is the most comprehensive food safety system to ensure that products are free from any physical, chemical and microbiological issues.

Quality Control Measures

The manufacture of chocolates involves a conching process that takes place at high temperatures, making it impossible for any infestation to take place during the process.
Further samples from every batch are kept in the factory both under ambient conditions and also in an air-conditioned room so that these can be reverted to in case subsequent investigation is required.

Packaging
Launched a strengthened, new 'purity sealed' packaging for Cadbury Dairy Milk. The 13g (Rs 5) double wrapped for maximum protection. Wrapped in aluminum foil and enclosed in a polylaminated flow pack, which is completely sealed on all sides. The larger Cadbury Dairy Milk packs come in polycoated aluminium foil, which are heat-sealed and then wrapped in the branded outer package.

Packaging
Every Cadbury product label mentions the care instruction: 'Store in a cool, hygienic and dry place.
Cadbury Dairy Milk comes in a purple branded outer cover which is the official colour for Cadbury.

PLACE
Distribution: Chocolate being an impulse purchase, wide
and heterogeneous distribution channels are important. Visibility - for an impulse purchase: the consumer makes the decision most often than not when he sees the products displayed at the retail point. A recent in-depth survey carried out by Cadbury showed that more than 35% of the total sales of chocolates are on impulse. Thus visibility will surely spur the purchase of chocolates.

PLACE
Unfortunately, storing in refrigerators defeats this very purpose

the consumer should have it within arm's length of desire.

It should be observable to have top of the mind awareness In India, distribution for chocolates gain special significance due to the very hot weather conditions during summer months.

PLACE
Cadbury India has a wide distribution network and a unique strategy to handle distribution of its supplies. Total no. Distributors of 2,100

Retail Outlets

450,000 (80,000 outlets added during 1999)

Cadbury's distribution network encompasses

2100 distributors and

450,000 retailers. brands distributed through 6lakhs outlets across the country. The company has a total consumer base of over 65mn. Cadbury is also attempting to improve distribution quality. Visi coolers-To address the issues of product stability, it has installed 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.

PLACE
Nestl has a retail distribution network of: 0.65mn outlets reaching 3300 towns, serviced by a network of over 4000 distributors. Nestl is expanding its retail distribution reach and expects to cover 1mn outlets Over the 40 years that Nestl has been in India , it has invested in 6 factories and developed relationships with many co-packers and suppliers.

RAW MATERIAL PROCUREMENT

almost 50 % of Cadbury's requirements of cocoa is met through imports, makes it very sensitive to the availability of cocoa impact of import duties, the company has decided to establish backward linkages to local cocoa farmers whose products closely match the international standards of Ghana.

RAW MATERIAL PROCUREMENT

the company has set up a cocoa research center near Kozhikode (Kerala) with seedling nurseries and distribution centers. An educational campaign was launched among the local farmers to grow cocoa. For the first two years the parent company provided seeds and other inputs free of cost. the Mangalore-based multi-state co-operative society, the Central Aeronaut and Cocoa Marketing and Processing Co-operative Ltd (Campco) has struck a major deal with Cadbury's

RAW MATERIAL PROCUREMENT

The short-term objective of the company is to develop brands with mass franchise and widen out its distribution network further into the rural sector.

PRICE
With Respect To The Consumer Buying Power

1. Premium price segment

Price greater than Rs. 25 for 40 gm- who will go in for premium chocolate brands. Cadburys brands in this segment are: Celebrations- gift packs for different occasions Temptations Heroes- box of assorted miniature size chocolates

PRICE
2. Middle price segmentPrice between Rs. 10 25 this segment being most price sensitive Cadbury brands in this segment are Dairy milk Fruit&nut Crackle 5star Tiffins

PRICE
3. Low price segment:
Price range of Rs. 0.50 10- Caters to mostly children, who are mostly price driven and will consume more of toffees. Cadbury brands in this segment are Perk, Perk minies Chocki Dairy milk 2-in-1 clairs Magic Pop

PRICE SENSITIVITY
At the outset, the chocolate market appears to be pricesensitive. This is starkly brought out in the following cases: When the excise-duty on chocolates was raised from 16.5% to 27.5%

cocoa prices rose by 25%in 1992-93,

the retail prices went up by 30%. the sales and consumption fell by more than 30% in the next two years.

Due to 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. 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
Cadbury has done

Line stretch upwards by introducing brands like temptations

Line filling by having chocolates for all price ranges and different sizes

CORPORATE STRATEGY
1.
2.

3. 4.

5.

CIL being the market leader had to take the onus of expanding the market size. Distinct presence in all segments with different proposition for all the products. The company follows a multi branding strategy. The game plan for the company is to increase the consumption of chocolate and confectionery among adults by offering products in convenient packs at affordable price. Local manufacturing route.

POSITIONING
The company is aiming at overall growth rate of 18%. The company has increased its advertising spending by 40% over the year 2003. The Cadbury account in India which is handled by O&M, is worth Rs. 40 crores.

Currently if we see, the company has its products focused around three basic propositions
1)Drives attitudes and behavior (DAIRY MILK)

2)Drives Snacking Consumption (5 STAR, PICNIC)

3)Drives variety, gifting and taste preference (ECLAIRS)

Drives attitude Drives snacking and behavior and consumption

Endorsers Dairy Milk 5-Star Perk Picnic Break

Drives variety, gifting and taste preference

Gems, Dairy Milk clairs Butterscotch Caramels Nutties Tiffins All Silk

Flankers

Bournville Crackle Nut Milk Fruit & Nut

Prodigals

Marketing Strategy
There were three basic strategies Cadbury could have taken to capture the downfall in its sales, in 1994. Market Modification To look for new markets and market segments and thus find new buyers for the product. To stimulate the increased usage of the product among present customers. To repositioning the brand to achieve larger brand sales.

Product Modification
To bring about improvement in the product and increase in the functional values and thus generating new users. To come out with the new variants of the product, with clear differentiation from the existing product and try to tap a different set of users for the product. Marketing Mix Modification To cut prices to draw new segments To push the product through trade promotions. To search for a new and brilliant advertising appeal that wins the customers attention and favour.

Advertising Strategy
Cadbury's research team, after conducting a study, found that chocolates were linked to love, emotion and romance whereas CDM stood for core rational values lie in wholesomeness, purity, taste, and goodness of milk. To operationalise these objectives advertising agency sources say they took in to consideration following issues. 1.The target audience - The target audience of the Cadbury's campaign was the adult.

2.The ultimate behavior the advertising is attempting to change or influence. 3.The process that will lead to the desired behaviour and the role of advertising in it

Our Evaluation Of The Advertising Strategy

Marketing Right Advertisin Right g CDM Five Star Perk Picnic Cadbury's All Silk Strategy Wrong Amul Chocolates

Strategy

Wrong

Bar - One.

Creative Strategy
O&M advertising agency on CDM account revealed that the CDM Real Taste of Life campaign is based on the creative approach that rely on emotions or feelings. The AD Gurus call it the slice of life advertising. The old man kicking the football, The pregnant woman craving a chocolate, Young girl breaking into a sprint and the Young man tossing a bar of chocolate at his sweetheart departing in a bus. Adult consumption of chocolates after this campaign was increased by 20%.

PRIMARY SURVEY
OBJECTIVES OF THE SURVEY:
1. Gauge the chocolate consumption habit of the consumers. To find out the important attributes of the product that affects the buying decision of the consumer. Effect of the Worm controversy on the perception of the consumer.

2.

3.

PRIMARY SURVEY
Q. Do the respondents like having chocolates ?
Chocolate Prefrence

Yes No

PRIMARY SURVEY
Reasons for not liking chocolates
Reasons for not liking Chocolates

High Fat Diabetic Prefer sweets Do not like the taste

PRIMARY SURVEY
Q. Which chocolate do the consumers prefer?
CHOCOLATES PREFERED

DAIRY MILK FIVE STAR PERK NESTLE KITKAT NESTLE MILKIBAR AMUL OTHERS

PRIMARY SURVEY
Q. Do consumers purchase chocolate for selfconsumption?
SELF PU R C HA SE OF C HOC OLA T ES

CHOCOLATE GIFTED BY SOMEONE

YES NO

YES NO

PRIMARY SURVEY
Q. What is the frequency with which the consumer buys chocolates every week?
PURCHASE RATE

RESPONDENTS

30 25 20 15 10 5 0

Series1

EE K

CE

TW IC

YD

ER

EV

IC

TH

FREQUENCY

CA

SI O

AL LY

AY

PRIMARY SURVEY
Q. How much does the consumer spend during his each purchase?
Purchase Am out 60 50 40 30 20 10 0 Rs. 1-5 Rs. 6-10 Rs. 11-15 Rs. 16+ Price Band

Respondents

Series1

PRIMARY SURVEY
Q. The key attributes that affect the buying behaviour of consumers?

Series1, 18% Series1, 22%

Series1, 36%

Price Taste Packaging Brand

Series1, 24%

PRIMARY SURVEY
Q. The primary reason why the consumer buys a Cadburys Dairy Milk
Self Consumptio n 22% Both 47% Self Consumption Gift Both Gift 31%

PRIMARY SURVEY
Q. Which are the ads that have high recall factor in minds of the prospects
1. 2. 3. 4. Khane Walon ko khane ka bahana chahiye. The Pappu pass ho gaya ad. Kuch baat hai zindagi mein. Amitabh Bachhan Quality control AD.

PRIMARY SURVEY
Is the consumer able to recall the current Brand Ambassador of Cadbury Dairy Milk?
Brand Ambassador Recall

Yes No

PRIMARY SURVEY
Do the customer know about the latest Worm controversy?
90 80 70 60 Responden 50 ts 40 30 20 10 0 Yes No

PRIMARY SURVEY
Has the controversy affected the buying behaviour of consumers?
80 70 60 50

Responden 40 ts 30 20 10 0 Yes, Reduced No, remains same

PRIMARY SURVEY
Do the consumers know about the quality control steps taken by the company after the controversy?
80 70 60 50 40 30 20 10 0 Yes No

PRIMARY SURVEY
Are the Cadbury chocolates easily available & clearly visible at you local neighborhood shop?
Availability of Cadburys

Yes No

Can be made available in: 1)Peanut 3)Hazelnuts 2)Almonds 4)Crunchy 5)regular Chocolate spread can be used on bread and almost anything for chocolate lovers Nutritious (substitute butter and jams) Positioned as a snack Packed in plastic jars Can also be made available in sachets for one time use (close to something like cadburys chocki)

Co Branding cadburys and splenda What is splenda? Sugar free and suitable for people suffering from diabetes and obesity

 Expansion in the rural/semi-urban markets, (here Nestle have an upper hand compared to Cadbury's at present) Introduce small packs (1 piece of chocolate per pack)

Chocolate sauces, particularly used as toppings for ice creams are getting popular in India. Chocolates in the shapes of alphabets and different figures focusing on the children's segment.

Possible Strategies That Cadbury should adopt:

Expand into sugar confectionery market. (the volume of chocolates is around 16000 tons whereas sugar confectionery is approximately 2 lakh tons). Cultivate cocoa beans, (which accounts for 50% of the total raw material costs) domestically which is 50% cheaper than imported ones.