Cadbury Project
Cadbury Project
Cadbury Project
ON
CADBURYS
SUBMITTED IN PARTIAL FULFILLMENT FOR
THE AWARD OF THE
DEGREE OF MASTER OF BUSINESS
ADMINISTRATION
SUBMITTED BY: PUNEET NARULA
MBA (International Business) 3rd Semester
Amity School of distance Learning
STUDENT UNDERTAKING
This is to certify that I have completed the Project titled(PROJECT ON CADBURY) in
Masters Of
PUNEET NARULA
CERTIFICATE
This is to certify that the project titled ____________________
is an academic work done by __________________ submitted in the
partial fulfillment of the requirement for the award of the degree of Masters
Of Business Administration from Amity School of distance Learning , Delhi,
under my guidance & direction. To the best of my knowledge and belief the
data & information presented by him/her in the project has not been
submitted earlier.
ACKNOWLEDGEMENT
This project work, which is my first step in the field of
professionalism, has been successfully accomplished only
because of timely support of my well wishers. I would like
to pay my sincere regards and thanks to those, who
directed me at every step in my project work.
First of all, I would like to express my thanks to for giving
me such a wonderful opportunity to widen the horizons of
my knowledge.
I extend my thanks to my project guide for his scholarly
guidance, constant supervision and encouragement. It is
due to her personal interest and initiative that the project
work is published in the present form.
Last but not the least, I would also thank all the staff
members of AMITY, friends and parents who have
directly or indirectly contributed in making this project a
success. It is a tribute for there valuation.
Despite all efforts, I have no doubt that error and
obscurities remain that seen to afflict all writing projects
and for which I am culpable.
EXECUTIVE SUMMARY
4
In India, Cadbury began its operations in 1948 by importing chocolates. After 60 years of
existence, it today has five company-owned manufacturing facilities at Thane, Induri
(Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and 4 sales
offices (New Delhi, Mumbai, Kolkota and Chennai). The corporate office is in Mumbai.
Our core purpose "creating brands people love" captures the spirit of what we are trying
to achieve as a business. We collaborate and work as teams to convert products into
brands. Simply put, we spread happiness!
Currently Cadbury India operates in four categories viz. Chocolate Confectionery, Milk
Food Drinks, Candy and Gum category. In the Chocolate Confectionery business,
Cadbury has maintained its undisputed leadership over the years. Some of the key brands
are Cadbury Dairy Milk, 5 Star, Perk, clairs and Celebrations. Cadbury enjoys a value
market share of over 70% - the highest Cadbury brand share in the world! Our flagship
brand Cadbury Dairy Milk is considered the "gold standard" for chocolates in India. The
pure taste of CDM defines the chocolate taste for the Indian consumer.
In the Milk Food drinks segment our main product is Bournvita - the leading Malted
Food Drink (MFD) in the country. Similarly in the medicated candy category Halls is the
undisputed leader. We recently entered the gums category with the launch of our
worldwide dominant bubble gum brand Bubbaloo. Bubbaloo is sold in 25 countries
worldwide.
Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India.
For over two decades, we have worked with the Kerala Agriculture University to
undertake cocoa research and released clones, hybrids that improve the cocoa yield. Our
Cocoa team visits farmers and advises them on the cultivation aspects from planting to
harvesting. We also conduct farmers meetings & seminars to educate them on Cocoa
cultivation aspects. Our efforts have increased cocoa productivity and touched the lives of
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thousands of farmers. Hardly surprising then that the Cocoa tree is called the Cadbury
tree!
Today, we are poised in our leap towards quantum growth. We are a part of the Cadbury
PLC, world's leading Confectionery Company. Yes, like we said we will continue to
spread happiness!
INTRODUCTION
RELEVANCE OF STUDY
Todays Indian chocolate market, an overview
Chocolate consumption in India is extremely low. Cadbury dominates the chocolate
market with about 70% 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 a
large unorganized market in the confectionery segment too. Leading national players are
Parry's, Ravalgaon, Candico and Nutrine. MNC's like Cadbury, Nestle, Perfetti, are recent
entrants in the sugar confectionery market. Other competing brands such as GCMMF's
Badam bar and Nestls Bar One have minor market shares.
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.
Indian chocolate market grew at the rate of 10% pa in 70's and 80's, driven mainly by the
children segment. In the late 80's, when the market started stagnating, Cadbury
repositioned its Dairy Milk to any time product rather than an occasional luxury. Its
advertisement focused on adults rather than children. Cadbury's Five Star, the first count
chocolate, was launched in 1968. Due to its resistance to temperature, the chocolate has
become one of the most widely distributed chocolate in the country.
In the early 90's, high cocoa prices compelled manufacturers to raise product prices and
reduce their advertisement budget affecting the volumes significantly. The launch of
wafer chocolates Kit Kat and Perk spurred volume growth in the mid 90's. These
chocolates positioned as snack food rather than on the indulgence platform compete with
biscuits and wafers. A strong volume growth was witnessed in the early 90's when
Cadbury repositioned chocolates from children to adult consumption. The mid 90's saw
the entry of new players like Nestle, which created categories like wafer chocolate and
spurred growth.
Chocolate Manufacturing
Cocoa, common name for a powder derived from the fruit seeds of the cacao tree and for
the beverage prepared by mixing the powder with milk. When cocoa is prepared, most of
the cocoa butter is removed in the manufacturing process. After the fat is separated and
the residue is ground, small percentages of various substances may be added, such as
starch to prevent caking, or potassium bicarbonate to neutralize the natural acids and
astringents and make the cocoa easy to dissolve in liquids. Cocoa has a high food value,
containing as much as 20 percent protein, 40 percent carbohydrate, and 40 percent fat. It
is also mildly stimulating because of the presence of Theo bromine, an alkaloid that is
closely related to caffeine.
The processing of the cacao seeds, better known as cocoa beans, is complex. The fruit
harvest is cured or fermented in a pulpy state for three to nine days, during which the
heat kills the seeds and turns them brown. The enzymes activated by fermentation
impart the substances that will give the beans their characteristic chocolate flavor later
during roasting. The beans are then dried in the sun and cleaned in special machines
before they are roasted to bring out the chocolate flavor. They are then shelled in a
crushing machine and ground into chocolate. During the grinding, the fat melts,
producing a sticky liquid called chocolate liquor, which is used to make chocolate
candy or is filtered to remove the fat and then cooled and ground to produce cocoa
powder.
The beans are sold in international markets. African countries harvest about two-thirds of
the total world output; Ghana, Cte d'Ivoire, Nigeria, and Cameroon are the leading
African cocoa producers. Most of the remainder comes from South American countries,
chiefly Brazil and Ecuador. The crop is traded on international commodity futures
markets. Attempts by producing countries to stabilize prices through international
agreements have had little success.
Types of chocolate
Sweet chocolate, usually dark in colour is made with chocolate liquor, sugar, cocoa
butter, and such flavourings as vanilla beans, vanillin, salt, spices and essential oils.
Sweet chocolate usually contains at least 25-35% chocolate liquor content. The
ingredients are blended, refined (ground to a smooth mass), and conched. Viscosity is
then adjusted by the addition of more cocoa butter, lecithin (an emulsifier), or a
combination of both.
Milk chocolate is formulated by substituting whole milk solids for a portion of the
chocolate liquor used in producing sweet chocolate. It usually contains at least 10%
chocolate liquor and 12% whole milk solids. Manufacturers usually exceed these values,
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frequently going upto 12-15% chocolate liquor and 15-20% whole milk solids. Milk
chocolates, usually lighter in colour than sweet chocolate, are milder in taste because of
its lower content of bitter chocolate.
Products And Segmentation
Chocolate market can be segmented as follows:
Large units bars/ slabs,
Count lines,
Panned varieties,
Toffees
Chewing candies
Chewing gum
Bubble gum
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Sugar confectionery
Gum based
Bars/ Slabs
Hard boiled
Chewing gum
Count lines
Toffees
Panned (Gems)
Soft chew
Bubble gum
Eclairs
Jelly candies
Assorted
Deposit candies
Lollipops
Mints, etc.
Chocolate Segmentation
Chocolate market can be segmented into moulded chocolates, count chocolates, panned
chocolates, clairs and assorted chocolates.
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Type of chocolates
Moulded
37%
Count
30%
Eclairs
20%
Panned
10%
Others
3%
Panned
10%
Others
3%
Moulded
37%
Eclairs
20%
Moulded
Count
Eclairs
Panned
Others
Count
30%
Moulded chocolates, like Dairy Milk, Truffle, Amul Milk Chocolate, Nestle Premium,
Nestle Milky Bar, is the largest segment accounting for more than 1/3rd of the market.
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Count lines (5 Star, Perk, Kit Kat, and Picnic) are the second largest segment accounting
for 30% of the volumes. The Count Line segment has been growing at a faster pace
during the last three years driven by growth in Perk and Kit Kat volumes.
Panned products include Cadburys' Gems, Nutties, and Nestls Marbles. In panned
segment, Cadbury dominates with over 95% market share.
clairs (droplets of hard caramels with soft chocolate fillings) are a low unit priced
product. Cadbury clairs was launched in 1972. Parle Products launched Melody in
1991. Nestle is a recent entrant in the segment. Nutrine's clairs has done extremely well
in the market.
Chocolates Market Share
Cadbury is the market leader in all categories with over 65% market share. Its main
competitor is Nestle India. Nestle has identified chocolate and confectionery as one of the
thrust areas for growth. It has launched some of its international brands like Quality
Street, After Eight, and Lions in India. In 1998, Cadbury launched a new count bar
Picnic. Nestle immediately followed it with the launch of Charge. Gujarat Co-operative
Milk Marketing Federation (GCMMF), which is normally known as Amul and Central
Arecanut and Cocoa Manufactures and Processors Co-operative (CAMPCO) are other
two significant players. Both are local manufacturers.
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Market Share
Moulded segment
Count segment
clairs
Cadbury
70%
Cadbury
76%
Cadbury
49%
Nestle
23%
Nestle
20%
Nutrine
37%
GCMMF
5%
Campco
3%
Nestle
12%
Others
2%
Others
1%
Parry's
1%
Others
1%
Confectionery
Confectionery, processed food based on a sweetener, which may be sugar or honey, to
which are added other ingredients such as flavorings and spices, nuts, fruits, fats and
oils, gelatin, emulsifiers, colorings, eggs, milk products, and chocolate or cocoa.
Confectionery, usually called candy in the United States, or sweets in Great Britain, can
be divided into two kinds according to their preparation and based on the fact that
sugar, when boiled, goes through different stages from soft to hard in the crystallization
process. Typical of soft, or crystalline, candysmooth, creamy, and easily chewed
are fondants (the basis of chocolate creams) and fudge; typical hard, noncrystalline
candies are toffees and caramels. Other favorite confections include nougats,
marshmallows, the various forms of chocolate (bars or molded pieces, sometimes
filled), pastes and marzipan, cotton candy (spun sugar), popcorn, licorice, and chewing
gum.
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Records show that confectionery was used as an offering to the gods of ancient Egypt.
Honey was used as the sweetener until the introduction of sugar in medieval Europe.
Among the oldest types of candies are licorice and ginger from the Far East and marzipan
from Europe. Candy-making did not begin on a large scale until the early 19th century,
when with the development of special candy-making machinery it became a British
specialty. In the U.S. the candy industry began to grow rapidly during the mid-19th
century with the invention of improved machinery and a cheaper process for powdering
sugar. In 1911 the first candy bars were sold in baseball parks; by 1960 candy bars made
up almost half of U.S. confectionery production. By the 1980s annual world production
of confectionery totaled many millions of kilograms.
Confectionery Market Share
The confectionery market is highly fragmented with several players with strong regional
presence. Leading national players are Nutrine, Parry's, Parle, Cadbury, Nestle, Ravalgon,
Candico, Perfetti, Wrigleys and Joyco India. The entire market can be divided into 7
major categories, namely Hard Boiled Candies(HBC), Toffees, Eclairs, Chewing Gum,
Bubble Gum, Mints and Lozenges. While HBCs form 51% of the entire market, 18% is
formed by toffees and 18% by chewing gum & bubble gum collectively. Eclairs form just
5% of the entire market. Mints and Lozenges form 4% and 3% of the market respectively.
Nutrine with a strong base in southern India has emerged as the reigning number one
player in the sugar confectionery market with 24% share. Over last one year or so it has
launched various products in the sugar confectionery market. It is the market leader in
hard-boiled confectionery as well as toffees. It has share of 37% in eclairs market and is
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reigning at second position behind Cadbury's. Nutrine gets around 50% of its turnover
from southern India, 20% from Eastern region and rest equally from westerns and
northern region. Its biggest brand is Mahalacto followed by Asay and Kokonaka
respectively. Total tonnage sold by Nutrine in the confectionery market is around 36650
tonnes.
The second largest player, Parle has strong presence in orange candies (hard boiled)
supported by its Melody toffees, Mango Bite and Kismi Toffee bar. Besides this the
company also has brands like Rola Cola, Poppins, Peppermint etc. in its portfolio.It has
market share of 16% in the total confectionery market with a tonnage of 16800 tonnes. It
is number two in both HBC and Toffee market with 30% and 21% market share
respectively.
Parry's has emerged as the third largest player in the market with 13% market share and a
tonnage of 14500 tonnes.The company has brands like LactoKing, Coconut Punch,
Madras Cafe, Coffy Bite etc. in its portfolio. Though in the over all confectionery market
it is at number three, it is at par with Parle in toffees market with 21% share.
Cadbury has been one of the leaders with Cadbury eclairs with chocolate inside. It was
the most successful in 1972 when it was launched because of its initial introductory price
of 25 paise and was instant hit. It continues to be one of the biggest brands. Cadbury
made a foray into the sugar confectionery segment with Googly, a hardboiled sweet in
late 1996.Googly the tangy, fizzy candy, Cadbury took the market by surprise and marked
the entry of Trebor into the fast growing Indian market. The product is sold under license
16
from Trebor Bassett, UK. Googly was extended nationally in early 1997. Cadbury has
also launched Mocka, a coffee based sugar confectionery.
Market shares in sugar confectionery market
Company
Nutrine
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Ole, Nutrine Eclairs,SuperStar, Caramella,
Wild Coffy, Dishum, Aasay,Naturo, Fruit Bar
Melody, Mango bite, Kismi, Poppins, Rola
Parle's
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cola, LuxDairy, Peppermint, Rosemint
Coffy Bite, Lacto king, Coconut punch,
Parry's
13
Cadbury's
Mocka,
English
toffee,
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Frutus, Gollum, Eclairs, Pops.
Polo, Allen's Splash, Soothers, Toffo Butter,
Nestle
8
Fruit Rings, Fox's
Pan pasand, Mango mood, Coffee break, Hi-
Ravalgaon
7
soft, Supreme, Cherries, Juicy
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Company
Market Share
Major brands
Dabur
3%
Hajmola
P&G
2.5%
Vicks
Warner Lambert
2.5%
Anti-cold/OTC brands such as Halls, Vicks, Clorets, etc are increasingly being sold on
the fun positioning rather than for their medicinal properties, competing directly with
other confectionery brands. Halls and Vicks are available in various flavours.
Others
21%
Nutrine
24%
Ravalgaon
7%
Nestle
8%
Parle's
16%
Parry's
13%
Cadbury's
11%
Nutrine
Parle's
Parry's
Cadbury's
Nestle
Ravalgaon
Others
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Financial Analysis
Cadbury had sold the land near its factory at Thane for Rs 11 crore early this year. The
company says it has struck an agreement with Kalpataru Properties, Thane, for selling the
land, which measured about 27,520 square metres. The deal helped Cadbury unlock the
value of its investments and helped it to shore up its bottomline.
Recently Cadbury India also refurbished its old office block in Mumbai and is now
planning to lease out the extra space available after the renovation, with a view of earning
some funds.
Cadbury India has three factories, which it operates on its own, while three other facilities
are run through arrangements with third parties.
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Cadbury Schweppes recently hiked its stake in the Indian company to 90 per cent by
buying out around 39 per cent of the public shareholding. Cadbury India has already
made an application for delisting.
31-Dec-2001
Period ending (months)
Net sales
Other Income
Total Income
Cost of goods sold
OPBDIT
PAT
Gross Block
Equity capital
EPS (Rs.)
DPS (Rs.)
BV (Rs.)
P/E range (x)
Debt / Equity (x)
28-Dec-2003 (12)
7298.11
93.32
7391.43
6293.08
1098.34
456.50
3267.69
357.10
12.78
2.00
99.78
0.0 - 0.0
0.03
20
29-Dec-2002 (12)
6846.58
11.45
6858.03
5683.02
1175.01
727.21
2860.47
357.10
20.36
2.00
89.71
0.0 - 0.0
0.04
(12)
6258.34
13.98
6272.32
5163.55
1108.77
595.40
2690.13
357.10
16.67
6.00
70.73
0.0 - 0.0
0.03
14.9
6.2
17.1
10.6
17.7
9.5
1. The study of pricing of Cadbury different products and which techniques they
use to maximize the profit.
2. We study the how Cadbury increase their profit by introducing new product.
3. We have done a comparison of Cadbury by its competitors.
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RESEARCH METHOLOGY
It refers to the method adopted to collect the relevant data and other information, which
forms the basis of the thesis writing. So for the effective writing of the thesis report, the
data must be quality oriented. My research is divided into two stages:
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II.
STAGE II: Analysis In this stage all the collected data had been analyzed and then
a Report had been written.
LITERATURE REVIEW
Cadbury's holds its price, despite its troubles
Independent, The (London), Nov 17, 2006 by Andrew Dewson
Some traders are convinced that something is going on at Cadbury Schweppes. Despite a
"sell" recommendation from the broker Goldman Sachs on Wednesday and yesterday's
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confirmation of an investigation into alleged accounting malpractice at its 50 per centowned Nigerian operations, the shares still managed to close in positive territory.
The Nigerian operation is a tiny part of Cadbury's business, but the market never likes to
get wind of accounting problems. EMI Group shares lost more than 15 per cent when it
discovered accounting fraud at its Brazilian operations three weeks ago - the shares have
still not recovered.
Cadbury's closed 5p firmer at 532p, valuing the group at more than [pound]15bn,
including debt. The word among traders is that Cadbury's is poised to face a take over,
most likely from a private equity group, in what would be the largest ever UK buyout.
Traders said a change of management might be the best way for it to move forward and
that could mean an attempt to take it into private hands.
The insurance sector remained in focus following Legal& General's promise to return
[pound]1bn to investors and a round of corporate activity speculation. The Swiss
investment bank UBS raised its target for the shares to 165p as it reiterated its "buy"
advice, sending the shares 3.25p better to 149.75p. Meanwhile, Royal& SunAlliance
firmed another 1.5p to close at 153p as bid talk continued to do the rounds.
It has been five years since shares in Aggreko traded at 400p; the power supply group's
stock collapsed to 100p in late 2001, but the turnaround looks to be complete. A bullish
trading update yesterday surprised even the most upbeat analysts. ABN
Amro, Citigroup and Evolution Securities published upbeat notes as the shares climbed
19p to close at 404p. Shares in the London Stock Exchange had another bad day on the
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back of news that a consortium of investment banks is putting together a rival exchange.
The shares fell through 1,200p for the first time since the beginning of September before
a late afternoon rally saw the stock close 4p worse at 1,230p.
Company profile
Throughout history chocolate has been associated with romance and sharing.
Today the richness and smoothness of Cadbury chocolate is what makes it one of the
world's favorite treats.
Discover everything here that you want to know about Cadbury and chocolate, from
historical facts to delicious recipes.
Youll also find facts about our exciting new product such as Cadbury snaps and Cadbury
dairy milk wafer.
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Discover the history of Cadbury, from its social pioneering to the perfection of the
recipe for Cadbury Dairy Milk; first launched in 1905, and still a market leader today.
Find out all there is to know about making chocolate, and amaze yourself with the brand
stories and brand timeline that show how many Cadbury brands have been favorites since
the early 1900s
When chocolate finally reached England in the 1650s, the high import duties on cocoa
beans meant it was a drink only for the wealthy. Chocolate cost the equivalent of 50-75
pence a pound (approximately 400g), when pound sterling was worth considerably more
than it is today. Gradually chocolate became more freely available. In 1657, London's
first Chocolate House was opened by a Frenchman, who produced the first advertisement
for the chocolate drink to be seen in London:
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Fashionable chocolate houses were soon opened where the people could meet friends
and enjoy various rich chocolate drinks, many of which were rather bitter to taste, while
discussing the serious political, social and business affairs of the day or gossiping
The Cadbury family were closely involved in the evolution of drinking chocolate.
From his grocery shop in Birmingham, where he sold mainly tea and coffee, John
Cadbury started preparing cocoa and drinking chocolate, using cocoa beans imported
from South and Central America and the West Indies. He experimented with a mortar and
pestle to produce a range of cocoa and drinking chocolates with added sugar.
By 1831 the cocoa and drinking chocolate side of the business had expanded, so he
rented a small factory in Crooked Lane not far from his shop and became a 'manufacturer
of drinking chocolate and cocoa'. This was the real foundation of the Cadbury
manufacturing business as it is today. The earliest preserved price list of 1842 shows that
John Cadbury sold sixteen lines of drinking chocolate and cocoa in cake and powder
forms. Customers would scrape a little off the block and mix it with hot milk or water. A
solid chocolate for eating was introduced by John Cadbury in 1849, which by today's
standards wouldn't be considered very palatable.
In 1866 George Cadbury (John 's son) brought to England a press developed in Holland
by Van Houten. The press changed the face of cocoa and chocolate production, as it was
designed to remove some of the cocoa butter, enabling a less rich and more palatable
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drink to be produced. There was no longer any need to add the various types of flour and
Cadbury's new cocoa essence was advertised as 'Absolutely pure...therefore Best'.
Established by Richard and George Cadbury, two Victorian businessmen with great
industrial and social vision, Bourneville Village is a story of industrial organization and
community planning covering well over a century. It embraces the building of a factory
in a pleasant 'green' environment (in stark contrast to the oppressive conditions of the
Victorian industrial scene), the enhancement of employees' working conditions and
overall quality of life and the creation of a village community with a balanced residential
mix (both employees and non-employees).
George Cadbury was a housing reformer interested in improving the living conditions
of working people in addition to advancing working practices. Having built some houses
for key workers when the Bourneville factory was built, in 1895 he bought 120 acres near
the works and began to build houses in line with the ideals of the embryonic Garden City
movement.
Motivation for building the Bournville Village was two-fold. George Cadbury wanted
to provide affordable housing in pleasant surroundings for wage earners. But as the
Bournville factory grew, local land increased in value and was ready to fall into the hands
of developers. The last thing the brothers wanted was that their 'factory in a garden'
would be hemmed in by monotonous streets.
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Dame Elizabeth Cadbury was involved in the planning of Bourneville with her
husband, George. Her memoirs tell us how these plans became reality:
"When I first came to Birmingham and we were living at Wood Brooke, morning after
morning I would walk across the fields and farmland between our home and the Works
planning how a village could be developed, where the roads should run and the type of
cottages and buildings.
Gradually this dream became reality, houses arose and many of the first tenants being
men in Mr Cadbury's Adult School Class - which met every Sunday morning at 8.00am
in Bristol Street - who had previously lived in the centre of the city and had never had a
garden. Also workers in the factory became tenants.
They too enjoyed their homes in the healthy surroundings, cultivating their gardens,
rewarded in many instances by splendid crops of apples from the belt of apple trees
which each tenant found at the bottom of his garden."
The consequent availability of cocoa butter led to the development of the smooth
creamy chocolate we know today.
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Manufacturing process
Cadbury makes a variety of chocolates for different purposes but the two main types
are Cadbury Dairy Milk, milk chocolate and Cadbury Bourneville plain chocolate.
The taste and texture of Cadbury chocolate are based on long traditions of expertise in
recipe and processing unique to Cadbury. Techniques are improving all the time and new
technology enables the whole process to be finely tuned to match evolving tastes and
preferences.
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Production starts at the Chirk cocoa factory, where the highest quality cocoa beans are
processed to produce cocoa mass containing 55% cocoa butter plus extracted cocoa
butter, the basis for all chocolate products.
When plain chocolate is made the 'mass' goes straight to the Bourneville factory in
Birmingham while the 'mass' for milk chocolate production is taken to the Cadbury milk
factory at Marl brook, Herefordshire, in the heart of English dairy country.
At the milk processing factory fresh liquid full cream milk is cooked with sugar and
condensed to a thick liquid. Cocoa mass is added, making a rich creamy chocolate liquid,
which is then evaporated to make milk chocolate crumb. As these ingredients are cooked
together the very special rich creamy taste of Cadbury chocolate is produced. 95,000
tonnes of crumb a year are produced at Marl brook to be made into chocolate at the
Cadbury chocolate factories at Bourneville, Birmingham and Somerdale, Bristol.
On arrival at the chocolate factory the crumb is pulverized by heavy rollers and mixed
with additional cocoa butter and special chocolate flavorings. The amount of cocoa butter
added depends on the consistency of the chocolate required: thick chocolate is needed for
molded bars, while a thinner consistency is used for assortments and covered bars.
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selected vegetable oils similar in nature to cocoa butter: African Shea, Indian Sal and
Malaysian Palm oils are all part of the recipe.
Both milk and plain chocolate, which has had sugar and cocoa butter added to the mass
before pulverizing, undergo the same final special production stages, producing the
famous smoothness, gloss and snap of Cadbury chocolate.
CADBURY PRODUCTS
Cadbury Perk
A pretty teenager; a long line, and hunger! Rings a bell? That was how Cadbury launched
its new offering; Cadbury Perk in 1996. With its light chocolate and wafer construct,
Cadbury Perk targeted the casual snacking space that was dominated primarily by chips
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& wafers. With a catchy jingle and tongue in cheek advertising, this 'anytime, anywhere'
snack zoomed right into the hearts of teenagers.
Raageshwari started the trend of advertising that featured mischievous, bubbly teenagers
getting out of their 'stuck and hungry' situations by having a Cadbury Perk. Cadbury Perk
became the new mini snack in town and its proposition "Thodi si pet pooja" went on to
define its role in the category.
As the years progressed, so did the messaging, which changed with changes in the
consumers' way of life. To compliment Cadbury Perk's values, the bubbly and vivacious
Preity Zinta became the new face of Perk with the 'hunger strike' commercial in the mid
90's.
In the new millennium, Cadbury Perk moved beyond just owning 'hunger' to a "Kabhi bhi
kaise bhi" position, because the urge for Cadbury Perk could strike anytime and
anywhere.
With the rise of more value-for-money brands in the wafer chocolate segment, Cadbury
Perk unveiled two new offerings - Perk XL and XXL.
The temptation to have more of Cadbury Perk was made even greater with the launch of
Cadbury Perk Minis in 2003 for just Rs. 2/In 2004, with an added dose of 'Real Cadbury Dairy Milk' and improved wafer', Perk
became even more irresistible. The product was supported in the market with a new look
34
and a new campaign. The advertisement spoke of the irresistible aspect of the brand, with
'Baaki sab Bhoola de' becoming the new mantra for Cadbury Perk.
Did you know:
Cadbury Perk advertising has been a launch pad for Bollywood stars - Preity Zinta,
Raageshwari, Gayatri Joshi and Amrita Rao, were all Perk models before they made it big
on cinema screens.
Chocolate lovers for a quarter of a century have indulged their taste buds with a Cadbury
5 Star. A leading knight in the Cadbury portfolio and the second largest after Cadbury
Dairy Milk with a market share of 14%, Cadbury 5 Star moves from strength to strength
every year by increasing its user base.
Launched in 1969 as a bar of chocolate that was hard outside with soft caramel nougat
inside, Cadbury 5 Star has re-invented itself over the years to keep satisfying the
consumers taste for a high quality & different chocolate eating experience.
One of the key properties that Cadbury 5 Star was associated with was its classic Gold
colour. And through the passage of time, this was one property that both, the brand and
the consumer stuck to as a valuable association.
Cadbury 5 Star was always unique because of its format and any communication
highlighting this uniqueness, went down well with the audiences. From 'deliciously rich,
35
you'd hate to share it' in the 70's, to the 'lingering taste of togetherness' & 'Soft and
Chewy 5 Star' in the late 80's, the communication always paid homage to the product
format.
More recently, to give consumers another reason to come into the Cadbury 5 Star fold,
Cadbury 5 Star Crunchy was launched. The same delicious Cadbury 5 Star was now
available with a dash of rice crispies.
Cadbury 5 Star & Cadbury 5 Star Crunchy now aim to continue the upward trend. This
different and delightfully tasty chocolate is well poised to rule the market as an extremely
successful brand.
36
The story of Cadbury Dairy Milk started way back in 1905 at Bournville, U.K., but the
journey with chocolate lovers in India began in 1948.
The pure taste of Cadbury Dairy Milk is the taste most Indians crave for when they think
of Cadbury Dairy Milk.
The variants Fruit & Nut, Crackle and Roast Almond, combine the classic taste of
Cadbury Dairy Milk with a variety of ingredients and are very popular amongst teens &
adults.
Recently, Cadbury Dairy Milk Desserts was launched, specifically to cater to the urge for
'something sweet' after meals.
Cadbury Dairy Milk has exciting products on offer - Cadbury Dairy Milk Wowie,
chocolate with Disney characters embossed in it, and Cadbury Dairy Milk 2 in 1, a
delightful combination of milk chocolate and white chocolate. Giving consumers an
exciting reason to keep coming back into the fun filled world of Cadbury.
Our Journey:
37
Cadbury Dairy Milk has been the market leader in the chocolate category for years. And
has participated and been a part of every Indian's moments of happiness, joy and
celebration. Today, Cadbury Dairy Milk alone holds 30% value share of the Indian
chocolate market.
In the early 90's, chocolates were seen as 'meant for kids', usually a reward or a bribe for
children. In the Mid 90's the category was re-defined by the very popular `Real Taste of
Life' campaign, shifting the focus from `just for kids' to the `kid in all of us'. It appealed
to the child in every adult. And Cadbury Dairy Milk became the perfect expression of
'spontaneity' and 'shared good feelings'.
The 'Real Taste of Life' campaign had many memorable executions, which people still
fondly remember. However, the one with the "girl dancing on the cricket field" has
remained etched in everyone's memory, as the most spontaneous & un-inhibited
expression of happiness.
This campaign went on to be awarded 'The Campaign of the Century', in India at the
Abby (Ad Club, Mumbai) awards.
In the late 90's, to further expand the category, the focus shifted towards widening
chocolate consumption amongst the masses, through the 'Khanewalon Ko Khane Ka
Bahana Chahiye' campaign. This campaign built social acceptance for chocolate
consumption amongst adults, by showcasing collective and shared moments.
More recently, the 'Kuch Meetha Ho Jaaye' campaign associated Cadbury Dairy Milk
with celebratory occasions and the phrase "Pappu Pass Ho Gaya" became part of street
38
language. It has been adopted by consumers and today is used extensively to express joy
in a moment of achievement / success.
The interactive campaign for "Pappu Pass Ho Gaya" bagged a Bronze Lion at the
prestigious Cannes Advertising Festival 2006 for 'Best use of internet and new media'.
The idea involved a tie-up with Reliance India Mobile service and allowed students to
check their exam results using their mobile service and encouraged those who passed
their examinations to celebrate with Cadbury Dairy Milk.
The 'Pappu Pass Ho Gaya' campaign also went on to win Silver for The Best Integrated
Marketing Campaign and Gold in the Consumer Products category at the EFFIES 2006
(global benchmark for effective advertising campaigns) awards.
During the 1st World War, Cadbury Dairy Milk supported the war effort. Over 2,000 male
employees joined the armed forces and Cadbury sent books, warm clothes and chocolates
to the front.
39
Kuch meetha ho jaye suggests Cadbury India, its brand ambassador Amitabh Bachchan
smiling down the hoardings lined along Mumbai's Marine Drive right down to the
company's corporate head office at Mahalakshmi. While the chocolate major is waiting
for Diwali to see a turnaround in its business after the worms controversy, at the moment
it's all about driving growth for the category, which has seen a decline since the 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.
40
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
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.
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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 is 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.
42
"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.
43
"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 paise 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 has tasted success with its ageold 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
44
malted food brand Bournvita, Cadbury decided to introduce a milk additive brand such as
Delite, just to give its consumers the real taste of chocolate. Delite has added flavors such
as strawberry and mango and is not expected to encroach upon Bournvitas 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
lakh outlets each for its confectionery and chocolate brands.
With the worms episode behind it, there are other issues bothering the company,
especially that 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.
45
Pricing battle
Cadbury's efforts to exploit untapped potential and reach every pocket have a lot to do
with outwitting Nestle in the war of the wafers.
Its latest annual report states: `Cadbury is all set to satisfy untapped potential. With brand
launches, re-launches and new products, the thrust is on reaching every individual,
satisfying different palates and being within varying budgets. Basing its operations on
this vision, Cadbury is charting a new course of action. With the product, place, price and
promotion synergies working in tandem, it won't be long before we find a Cadbury in
every pocket.'
This may sound like a reiteration of its earlier claims, but in its heart of hearts, Cadbury
India, in spite of being the leader in the chocolate market, is still trying to settle scores
with Nestle in the wafer-coated chocolate market, where it has yet to grab a dominant
share.
46
Creating new launches and extensions may be an ongoing exercise for the Rs 511-crore
chocolate multinational, but lately it has set its sights on the Swiss food giant, Nestle,
which is going through a rough patch with its flagship brand, Kit Kat.
In fact, the wafer chocolate war started in 1995 when both Perk (from Cadbury) and Kit
Kat (from Nestle) were launched. It had Cadbury running for cover to protect its largest
brand, Cadbury's Dairy Milk, which it did by extending its positioning on the adult
platform. The power-packed campaign from HTA (`Have a Break') did wonders for the
Kit Kat brand at that point of time, but its premium pricing proved to be the main hitch,
which has seen its volumes dipping from 15 per cent in 1997 to 9.5 per cent this June, as
per ORG-Marg figures.
Despite its share of the volumes coming down, Kit Kat still has a dominant share in the
market while Cadbury's Perk has seen steady shares between 1997 and 2000 with present
volume shares at 8.8 per cent, as per ORG-Marg figures. Perk has also stretched itself to
variants such as Mango, Strawberry and Mint to generate some excitement around the
brand.
So, while Kit Kat has taken a battering with its premium pricing and image, Cadbury
India is taking this chance to put its might behind its wafer category, with Perk and the
newly-launched Milk Treat, to beat Nestle in this category.
But then, the price points in the wafer chocolate category were redefined by Nestle when
it launched Munch at Rs 5 last year. Cadbury had to react to this lowering of price within
the wafer chocolates category and had to stretch Perk-to-Perk Slims at Rs 5 to counter it.
47
Explains Rajat Sabharwal, an analyst with Kotak Securities, ``the growth rates have come
to a standstill in wafer chocolates and the market is not buoyant in this category. With
Nestle coming out with a lesser-priced brand, Cadbury is responding now.'' So, despite
Nestls flagship brand suffering to a certain extent, a flanking brand such as Munch has
taken care of the dipping shares.
Highlights Nirav Sheth, an analyst with SSKI Securities, ``In the first three years since
the launch of Kit Kat, its price rise has been too fast and this has backfired. Today, its
price cuts have been prompted by competitive pressures and the purpose is obviously to
gather volumes.'' But then, the prices of cocoa have also been crashing, perhaps helping
Nestle absorb the price cuts, which, possibly it would not have been in a position to do
otherwise.
Today, Nestle seems content with its strategy and admits that though shares of Kit Kat
have dipped, Munch has succeeded in doing what it was expected to do. Says Sanjay
Sehgal, Executive Vice-President (Marketing), Nestle India, ``Cadbury has reacted to us.
In fact, Munch could also be responsible for eating into the shares of Kit Kat along with
Cadbury's own brand. There has been a redefinition of pricing strategy for KitKat and we
are hoping it will show.''
KitKat continues to sell at a slight premium to Perk though it is now offering a price
discount of nearly 20 per cent, which indicates that Nestle either had great margins on the
brand earlier, or is in trouble.
48
For Cadbury, Perk is basically a fighter brand being used to flank the mother brand. In
fact, the fight is almost similar to what HLL did with Wheel (though it was not making
money on the brand) to counter Nirma in the detergent market while Surf sat pretty as the
mother brand in Lever's portfolio.
However, in the case of wafer chocolates, it is not a very happening category since
consumers have realized that they are not paying for pure chocolate, but for a chocolatecoated biscuit. For Cadbury, its cash cow will always remain its Cadbury's Dairy Milk.
Both are players fighting with their higher reserves, trying to establish themselves with a
dominant share in the wafer chocolate category.
The new Perk has four wafer layers covered with chocolate and is lighter and crisper. Its
packaging has also undergone a change and has used Cadbury's trademark purple
background with the dark brown wave of chocolate on the wrapper, indicating the
presence of pure dairy milk chocolate, to set it apart from a common biscuit chocolate.
Cadbury is targeting a 12 per cent volume share for the Perk brand after this relaunch and
expects to overhaul Kit Kat. As Bharat Puri, Director (Sales & Marketing), Cadbury
India, declares: ``our objective is to be the largest wafer-coated brand in the country.''
A new campaign has been developed for the relaunch of the brand where through three
commercials the differences in the new Perk are highlighted through dialogues alluding
to match fixing -- Khule Aam Khayiye. Kabhi Bhi. Kahin Bhi.
Explains Piyush Pandey, National Creative Director, Ogilvy & Mather, ``Through the
commercials we are trying to bring out various explanations about the changes in Perk.''
49
The original campaign of Thodi Si Pet Pooja, Kabhi Bhi, Kahin Bhi will continue
through another new commercial, of a lady secretly eating Perk on the occasion of Karwa
Chauth.
Meanwhile, another wafer chocolate brand that has been targeting kids is Milk Treat, four
wafers with butterscotch-flavored cream embedded in milky white chocolate. Though
Cadbury did have a white bar, Creamy Bar, it was never treated as a major brand. Milk
Treat is pitted against Nestls Milky Bar though it is in a moulded form unlike the
former, which is in count form. There are expected to be more variants under the Milk
Treat brand for children. Both Milk Treat and Perk are priced on par at Rs 10 for 27 gm.
Despite all the action in the chocolate wafer segment, growth for Cadbury has always
come from its mother brand - the Rs 117-crore Cadbury's Dairy Milk which today
straddles all possible price points.
Explains an analyst with Motilal Oswal Securities, ``For Cadbury, its growth has been
coming from Cadbury's Dairy Milk and what it is doing to Perk is just to gather
momentum in the chocolate market which thrives on innovation and excitement.''
In 1999, Cadbury recorded an eight per cent turnover growth in chocolate confectionery
led by its flagship brand Cadbury's Dairy Milk, which registered a growth of over 40 per
cent. The malted food drinks category reported a growth of 14 per cent while the sugar
confectionery segment rose a mere three per cent. The clairs brand grew by a healthy 14
per cent.
50
In fact, Cadbury has consciously stayed away from meddling too much with its heritage
chocolate brands -- Dairy Milk and 5 Star. Explains Puri, ``As a marketer, it is best not to
do too much to these heritage brands which already have strong equity. Not that we will
never relaunch them but right now they enjoy a strong equity.''
But, it did relaunch its heritage brand of malted drinks, Bournvita, last year when it lost
share to the white drinks segment. There are plans to extend this strong brand in the
future, about which Cadbury does not want to reveal its plans right now. Interestingly,
there already exists a similar sounding dark chocolate brand for adults, Bourneville, in its
kitty for many years, which has not seen much advertising.
While its chocolate brands are continuing to get broad based, its sugar confectionery
brands will get upgraded to higher price points. For instance, its hard-boiled sweets such
as Googly, Mocka and English Toffee are gradually being phased out, while the new
brands such as Frutus, a chewy sweet (Re 1) and the jelly, Gollups (Rs 2), are expected to
see some healthy growth. Adds Puri, ``It is not possible to build brands at such low price
points. While there are volumes, the margins are thin in this category.''
Besides, the latest Budget has hiked the duties of sugar confectionery products from eight
per cent to 16 per cent, which in any case has led to an increase in prices and thereby
affected brands such as Googly.
But one thing that Cadbury has realized through all this is that it has got cheaper with
more products in the Rs 3-5 category. Its premium brands such as Cadbury Gold, Truffle
and even Picnic have never really been accepted in the chocolate market. Today, Cadbury
51
is constantly looking at pushing volumes at the lower end of the market and brands such
as Relish, Break, 5 Star and Dairy Milk have Rs 5 variants catering to this lowest price
point. Perk Slims is the latest Rs 5 brand to be added to this list.
As for taking the chocolate wafer war to the enemy camp, it might take a while because
Nestle also has deep pockets and has established itself in the chocolate wafer category in
spite of dipping shares. However, Cadbury will always be the leader with its heritage
brands. As Rajat Sabharwal, an analyst with Kotak Securities states, ``Nestle may be a
key player in the Indian chocolate market but there is no possibility of it emerging as a
category leader.''
52
53
Cadbury Dairy Milk, the flagship brand, contributed 30 per cent to the company's Rs
687.30 crore (Rs 6.87 billion) turnover in 2002.
Ten Cadbury chocolate bars were on Monday sent to the Maharashtra Food and Drug
Administration laboratory in Dadar, Mumbai, for testing whether they contained worms.
The move came three days after the state government expressed satisfaction at the
'hygienic condition' being maintained at the manufacturing unit of Cadbury.
FDA sources said the chocolates, from a shop in Kurla, central Mumbai, were handed
over to police, who in turn deposited them with the FDA at around 1530 IST.
The chocolates were found to have holes in them, they said. On October 10, Minister of
State for Food and Drug Administration Anil Deshmukh had said that the judiciary would
decide whether to prohibit the sale of the seized stock.
Meanwhile, FDA Commissioner Uttam Khobragade alleged that Cadbury officials were
trying to put political pressure on him.
But "I will not come under any political pressure", he said.
Khobragade said, "Instead of admitting their fault, Cadbury are saying that it's dealer's
fault. Why are they forgetting that those are their dealer so it's their responsibility to make
the product safe?"
54
He also said he would not visit the Cadbury factory. "I have no business to visit their
factory. What I want is that the products coming into the market should be perfect."
Asked if it was lobbying the government, a Cadbury official told rediff.com: "We
reiterate that we will continue to cooperate with the authorities."
She said the company was confident that "our products are of the highest standards".
Asked why Cadbury had not followed the FDA commissioner's suggestion to withdraw
its products from the market and repack them, she said, "As a part of our standard
procedure we regularly take back any damaged or date expired stocks back from our
retailers."
She said the company had not received any intimation about a case being registered
against it. "However, we will continue to extend all cooperation to the authorities because
like the FDA, Cadbury is also conscious of its commitment to society in general and
consumers in particular."
Regarding Deshmukh's visit to the Cadbury plant, she said the minister "inspected the
hygiene standards and manufacturing practices adhered to" by the company.
She admitted the controversy would affect the sales during the festival season. "However,
we would like to reiterate that all through the 55 years of leadership in India, Cadbury has
remained synonymous with chocolates and we have remained committed to high quality
and consumer satisfaction.
55
As Cadbury India finds itself mired in the worms controversy, Gujarat Co-operative
Milk Marketing Federation, which makes Amul chocolates, has witnessed a surge in
sales.
After selling 60 tonnes of chocolate in September, the company was on course to report
sales of 150 tonnes in October and had projected sales of 250 tonnes in November, a
GCMMF executive told Business Standard.
In Mumbai, which accounts for almost 10 per cent of the 4,000 tonne, Rs 650 crore (Rs
6.50 billion) a year chocolate market in India, the company plans to raise its market share
from 2 per cent in the beginning of October to 15 per cent by the end of the month.
"We will sell 20 tonnes this month in Mumbai, against only 2 tonnes in October last
year," the GCMMF executive said.
According to the executive, while 20 per cent of the growth in Amul's sales in recent days
has been because of the Cadbury factor, the recent brand launches by the company and
the increased focus of GCMMF on chocolates have contributed 40 per cent each to the
rise in the numbers.
In an attempt to boost sales, the company has launched three new chocolates in Mumbai
under the brands Fundoo, Bindaas and Almond Bar. While the first two have been priced
at Rs 10 for a 30 gm stick, Almond Bar carries a price tag of Rs 10 for a 35 gm chocolate.
56
As a result, the company's festival season pack "Rejoice" now comes with six chocolates
in the city, up from three during the festive season last year.
"A national launch of the three brands is likely to happen in a month's time," the official
added.
Encouraged by the rising numbers, GCMMF has drawn up plans to make its chocolate
business a separate division of the company.
"We think that the business requires a special focus and this is the best way to do it," the
official added. Cadbury India is the largest player in the Indian chocolate market,
followed by Nestle India and Amul.
Cadbury bids to worm way into public good books with Big B
endorsement
The Big B is going to promote the Big C in the chocolate business - Cadbury in India.
Indian cine superstar Amitabh Bachchan has signed on to become the brand ambassador
of the chocolate major for two years.
AB will play a pivotal role in all communication relating to Cadbury's products and
brands, be it in print, on television or the great outdoors, the company's managing
director Bharat Puri has been quoted as saying in media reports
Cadbury India Ltd has announced that mega star Amitabh Bachchan will be the
company's new brand ambassador.
57
He will endorse and promote Cadbury chocolates for a period of two years. As brand
ambassador, he will play a key role in brand and product communication on television, in
print and outdoor media.
Cadbury has launched a strengthened, new 'purity sealed' packaging for Cadbury Dairy
Milk. The new packaging for 13g (Rs 5) is double wrapped for maximum protection. The
chocolate is wrapped in aluminum foil and enclosed in a poly flow pack, which is
completely sealed on all sides. In the second phase, the larger Cadbury Dairy Milk packs
will come in poly-coated aluminium foil, which will be heat-sealed and then wrapped in
the branded outer package. Both these steps are a 'first ever' in chocolate packaging in
India.
Amitabh Bachchan is Cadbury brand ambassador.
Cadbury India Ltd has announced that mega star Amitabh Bachchan will be the
company's new brand ambassador.
He will endorse and promote Cadbury chocolates for a period of two years. As brand
ambassador
"Over the last few months, we have had some cases of infestation due to improper
storage conditions. As a company committed to ensuring that our consumers enjoy a
pristine bar of chocolate each time, we decided to take steps to reduce dependency on
storage conditions to the extent possible," said Bharat Puri, managing director, Cadbury
India Ltd. "Cadbury will do everything it can to ensure that every bar of chocolate that a
consumer buys comes full of goodness and rich taste."
58
59
CADBURYS PRICING
Organizational structure of Cadbury
Hierarchical structure is based on distinct chain of commands from Managing director to
Clerical Support assistants (according to Cadbury). Decisions are made at the top and
pass down. Such organizational are usually based on clearly defined procedures and
roles.
60
And in pricing, you need to look clearly at your business goals. Do you want to:
- Sell your products or services?
- Dominate the market?
- Force the market to purchase your product?
- Have fun?
61
You may try different strategies at different times depending on what result you are after.
If you a new to a market, then you may employ an early adopter strategy to achieve
some presence and reference. Later in the lifecycle, you may use a strategy that achieves
greater returns in a more traditional manner.
With our LINC product in 1980, we identified we had only four potential clients IBM,
Burroughs, NCR, and Digital. So we had to prepare strategies, which would achieve the
business goals we wanted to establish our company as a developer of good
development and deployment environments, and to earn and excellent stream of
profitable revenue for several years. We sold LINC to Burroughs for US$1 plus the rights
to continue manufacturing new feature content for on a predefined costed basis and to
provide product support. Thus profitability was guaranteed so long as product quality
levels were maintained. So knowing your costs is important if you wish to position your
prices for profitability.
But knowing your costs is not enough. You also need to know all about yourselves as a
company and position your business. You need to:
- Know what exactly is your business solution?
- Who exactly are your potential clients?
- What is your unique customer advantage?
- What is your business identity?
- What is your elevator statement?
62
Without this business knowledge, you do not have a hope of pricing your product to meet
your business goals and to effectively compete in the market place.
In my days in the fishing industry, selling Orange Roughy frozen fish fillets, we were one
of several players in a market place for a variety of fish that was not a household name
but was distinctive. We needed to differentiate ourselves as the product to be sought after
ahead of other fish brands, and competitor products. Our objective was to be the fish fillet
provider of choice in the Great Lakes region of the United States of America. We
launched our Fletcher Quality Orange Roughy brand at a 10% premium price over our
competitors. We launched as the top quality product, a USA hygienic clean white fish
meat (some would say tasteless), in a special display pack. And in a market where
everyone delivers late, delivery on time. So our differentiators were top quality, special
display pack and delivery on time. Orange Roughy was a distinctive name. People were
amazed that such a good-looking fish fillet could have such a horrid name, yet if we
could get them to try the fish, they would love it and would tell all their neighbours and
friends. The name Orange Roughy was a memorable name and by making the fish look
in a class of its own in the shop window display pack, we captured a strong market.
Within a year, Fletcher brand Orange Roughy was commanding a 30% margin and was
selling ahead of any other brands.
So knowing your business, your unique customer advantage, who you are, and what you
are pitching is vital to your success.
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And we are not the only industry that unbundled our investment. The best known
unbundled today is the motor vehicle industry where a simple $7995 on the windscreen
represents $10,000 plus when you add registration, bullbars, CDStacker, leather trim,
electric aerial, insurance, 3 year warranty etc.
In our software industry the best unbundlers I have come across are Oracle. I have never
really met anyone who could understand easily what the Oracle purchase components
would add up to for a particular configuration. Just as well Oracle ASAP arrived as a
fixed price deal to reduce the confusion.
But back to the components, each of these ingredients has its own equation, which sends
a message to a prospective purchaser:
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PRODUCT LICENCE could be purchase, lease, and rental, bundled with another
element. You will all no doubt remember when OS2 was it and Windows was the small
player with a lower level of capability. Microsofts master stroke was to almost give their
Office suite of products away to Windows users to get them to use their Windows
operating system and ensure that it became the international leader.
SUPPORT in some cases, the cost of a product in insignificant beside the level of
support cost, which shows the ability to have an ongoing relationship with a supplier
when using a product. In a development, a high level of support content may denote a
low quality initial development.
TRAINING in the case of a development environment such as Jade, VB or C++, people
need to be trained to make effective use of your product. It is the concept of a fool with
a tool still being a fool unless he/she has effective training in the skills to use the tool.
The first introduction course is always justifiable by a company so you can price this
well. What businesses struggle with is justifying an Advanced Course. They feel that if
they are training a developer in a new product, then the developer should be able to pick
the balance of the product up by themselves. People such as Microsoft and Cisco have
got around this by putting together an Academy programmed including a tiered hierarchy
of courses clearly differentiated in content and adding to become a package of
knowledge. A clever move.
DOCUMENTATION nobody reads it but without it, no prospective purchaser will
purchase your product. So what is it worth to a purchaser? Certainly not what it costs.
And if you priced it based upon hours of use by a purchaser, it would be a highly variable
commodity. Most treat it as a nominal cost and unbundled it, or pay third party providers
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to build documentation for them. One of the better books I have seen recently is the
Python Cookbook, which is a very easy how to for their development environment and
published by a third party.
CONSULTANCY you dont need it, but if you have it you may make progress much
quicker than you would without it. So consultancy should be priced to cover costs and
allow a margin. If you do not charge enough, it is likely not to be valued by the client
enough.
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SERVICE LEVEL OPTIONS Platinum, Gold, Silver, Bronze, pay as you go. It is
probably better to sell a service contract up front than to hit clients credit cards with
charges when they are having a tough time with bugs in your product.
The second case. With the company who has built a product to help students learn
English more quickly and better has changed their market, target distribution, and
widened his market.
They are now not selling their product to a limited number of NZ English language
colleges. They are now promoting their product to students using the English language
colleges as their distributors.
The deal they now take out is a distribution offer to colleges to make money selling their
product. And not just through NZ colleges but as an international offering. They have had
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to readjust their expectations on price to allow for single student use, change their
security structure to give the required control, and have had to forgo some of their
distribution margin. But they have more multipliers in place, more feet on the ground,
and their product is being offered to millions of people in more countries than they had
ever hoped to holiday in. The jury is out on the charges but the opportunity looks solid
and the distribution network is enthusiastic.
The third case was the developer who was barely covering costs. He proposed the
development of a new application for an existing client where he budgeted to make a
40% profit. He planned the project properly, outlined the phases and costs for each and
the timeline for these, and, was accused by the client of holding the client to ransom. He
offered to take some phases out of the equation and asked which phases the client wished
him to remove.
The client did not know how to respond to this. Acceptance testing was discussed as a
possible option, but the caveat on this was that support cost increases and likely
application instability were then discussed. The developer had decided to forgo the client
rather than to do the job on any other basis than that he has proposed.
Hard ball. The client finally agreed but then wanted the system installed earlier. The
developer asked the client which phases of the project he would agree could be done
without.
The development finished on the original time, the client is happy and is now a reference
site, the application is delivering sound business results, and another two applications are
under development on the same new basis. The client is learning to respect the value of
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what is being delivered, and has a vastly better understanding of the elements which
make up a successful application implementation.
The fourth case is work in progress at present. This was the company that had set its
price based on the report from a Big 5 consultant. Nothing wrong with the report or its
accuracy. But lots wrong with the brief proposed to the consultants as regards the
business goals and market positioning the pricing strategy was to assist with. As I
mentioned earlier, the pricing strategy for Jade has changed dramatically. Large numbers
of pre-alerted international clients were set to download Jade from the Jade website
from15 June.
Price is only one of the factors that are changing to take Jade from being an
internationally boutique product into the realm of being a pervasive and widely used
development and deployment environment. Yes, some of the costs are being unbundled
but access to the development environment will be free. I look forward to reporting on
the success of this strategy in a year or so.
Pricing is an art where if you are challenged with Is your price right?, you can
truthfully respond It depends.
Pricing is an important key to your business success, but not the only key.
Cadbury is going to need all the help it can get in the coming years. Last year the
company initiated its major foray into one of the toughest consumer markets in this
country: the Rs 1,600-crore sugar confectionery industry. Sugar confectionery
contributed 13% to its 1998 turnover, of which 9% came in from the leading brand in the
clair market, Cadbury's clair. So far the confectionery foray has been watchful and
conservative. All of that is set to change this year. A spanking new plant in Pune
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that
go
into
making
it
complicated
market.
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way to drive up volumes in this business is to expand the consumer base. One way of
doing it is to take the company's products down the price line. That exercise is well
underway. The other is to make chocolates appeal to a wider audience (read adults). This
is a tactic that's close to Bakshi's heart and now that the company is in fine trim, will
perhaps be his next big challenge.
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Over the past year, Cadbury India has introduced smaller pack weights of its Perk and
Picnic range in order to reduce the MRPs of these brands to the Rs 5 and Rs 10 range.
Similarly, Nestle India has retaliated with the launch of Rs 10 versions of its brands,
Munch and Charge.
Meanwhile, declining prices of the key input for chocolate -- cocoa, have probably
helped the players a great deal in sustaining this pricing strategy. A global cocoa surplus
for the year, coupled with the forecast of high cocoa output for the 1999-2000 (October to
September) season, has helped bring about a steady decline in cocoa prices over the past
one-and-a-half years.
International prices have declined from around $1,200 per tonne in March last to levels of
around $800 per tonne at present.
Since both Cadbury and Nestle outsource a substantial portion of their cocoa
requirements, the decline in cocoa prices has probably given both players a larger leeway
when it comes to reducing their price levels
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75
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promising was Flake, which at that time only sold as a 2d line, and therefore had to be cut
with a knife to reduce its size. It proved very successful and its popularity quickly
spread. After successive introductions of half penny and 1d Flake, both of which were
sold with ice cream, the Sales Committee finally agreed to produce a special size to fit
the sandwich and Mr Berry visited a number of Italian customers in the area. After this of
course the cornet with the Flake placed temptingly in the top of the ice cream became
very popular.
In the days of the monarchy in Italy the King has a specially chosen guard consisting of
99 men, and subsequently anything really special or first class was known as "99" - and
that his how "99" Flake came by its name.
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Unfortunately for these reasons we are not able to use any ideas from members of the
public.
Cadbury
Nestle
Amul
Others
price
quality
brand andorsement
taste
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0
Dairy
milk
Five
star
S1
Nuties Byets
Percentage
product
Ratio analysis
Financial statements can be analyzed by shareholders, the financial press, and others to
check how well a company is performing. Ratios are determined from a company's
financial information and used for comparison purposes, e.g. operating profit to sales.
This can be set out in the form:
Operating Profit : Revenue
Alternatively, it can be set out as a percentage.
Operating Profit Margin=Operating profit x 100
Revenue
This is very helpful because it shows how much profit is made for each 1 of sales made.
An improvement in Operating Profit margin would see this figure rising over time showing that Cadbury Schweppes' customers are prepared to pay more for their
purchases and/or that the company has made savings by improving the way it makes or
ships its products. The operating profit margin of Cadbury Schweppes can be compared
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from year to year e.g. comparing 2005, 2006 etc, with 2004. Cadbury Schweppes' profit
margin can also be compared with that of other companies.
If you refer back to the Profit and Loss Account, you can see that the operating profit
margin was:
916x100=13.6%
6738
The figure above is crucial to Cadbury Schweppes as it relates to the second performance
goal.
Here is another ratio you will find in your current course. This ratio shows whether the
company owes more money to its suppliers and bankers than the assets it holds in the
form of stocks, debtors and cash. If this number is less than 1, then the company's shortterm or liquid assets are greater then its short-term liabilities.
Current asset
CURRENT RATIO =
Current liability
If you refer back to the Balance sheet, you can see that the current ratio for Cadbury
Schweppes is:
2240/2393=0.94
This ratio is used in different ways for small and large companies. Businessmen and
women considering whether to trade with a new small company would prefer to see this
figure at 1.5 or above - as an indication that the company is solvent and will be able to
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pay its debts. For large established companies with good credit ratings, a lower ratio
indicates an efficient use of capital.
In addition to the Balance Sheet and Income Statement, Cadbury Schweppes values the
information provided in its Cash Flow Statement. This statement simply sets out the
incomings and outgoings of cash in a business during a particular period of time e.g. one
year. It shows how the main categories of cash flow have changed the cash balance in
particular periods.
In 2004, Cadbury Schweppes achieved free cash flow generation of 265 million. Cash
flow is very important to the company because cash enables the business to pay its bills,
pay dividends to its shareholders and, in addition, to make acquisitions.
In recent times Cadbury Schweppes has focused on acquiring new businesses, increasing
sales and innovation, cutting costs, and integrating existing businesses to achieve its aims
of:
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Conclusion
Cadbury Schweppes prepares financial statements because:
Cadbury Schweppes wants to communicate a true and fair picture of the financial
state of the company to its shareowners and external analysts.
The company values transparency and honesty and aims to reflect this is all its
communications, both internally and externally.
Cadbury
won
the
Communication
of
Corporate
Strategy
Award
at
the
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LIMITATIONS
The following study does not represent overall idea of any company.
The data collected is from secondary source hence it is not 100% accurate.
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CONCLUSION
Price plays an important role in the purchase of a product like dairy milk they
have introduced dairy milk the most popular chocolate in Rs.5 also which is
within the reach of every customer.
Consumer prefers quality goods at lower price like Cadbury people just
introduced bytes, which is a snack, which is sweet.
Consumer is loyal to brand so its necessary to pay attention to the brand image.
In todays world most of the people see the image of the product and then
purchase it. So its necessary to make an image in market.
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Price should be according to the competitors price .i.e the price of Cadbury
should be less or same as the competitors price.
RECOMMANDATION
There should be difference in pricing strategy of Cadbury i.e. in term of rural and
urban areas.
It should show more and more ad of the chocolates that it is offering. For
Example, Cadbury only emphasis on Dairy milk chocolate the most and not the
other products.
It should introduce different schemes like giving mask to the children with their
product to attract children the most.
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The packaging of the Cadbury product should be made more attractive so that
more and more people attractive towards it. Every customer likes changes if not
they get used to it but they should take risk.
Bibliography
www.cadburyindia.com
www.findarticles.com
www.cadbury.co.uk
www.economictimes .com
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www.wikipedia.org
ANNEXURE
INTERVIEW
Why does the taste of the same product often differ from country to country?
Why does the taste of the same product often differ from brand to brand?
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QUESTIONNAIR
1. Which chocolate do you prefer?
Cadbury
Amul
Nestle
Other
Brand endorsement
Taste
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Dairy milk
Five star
Nutties
Byets
Yes
No
Yes
No
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