CADBURY INDIA- R1(GROUP-6)

Marketing Management

Project -

CADBURY INDIA LIMITED

BY Group-6 (R-1)

Submitted To: Mr. S. Suresh Submitted by:

10609043-Radha Shekhar

10609053- Shivam Sinha

10609015- Aziz Lakhani

10609004- Abhishek Sood

10609007- Akshay Misra

10609057- Sumit Saini

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TABLE OF CONTENTS

S. NO TOPIC PAGE NO.

1. EXECUTIVE SUMMARY 3

2 CADBURY PROFILE 4

3 INDUSTRY STRUCTURE 5

4 ENVIRONMENT 6

5 PRODUCT 10

6 PRICE 14

7 PHYSICAL DISTRIBUTION 17

8 PROMOTION 19

9 FINANCIAL ANALYSIS 21

10 CUSTOMER SURVEY ANALYSIS 26

11 SUGGESTIONS 34

12 APPENDIX

(A) SAMPLE CUSTOMER QUESTIONNAIRE 35

(B) SAMPLE DEALER QUESTIONNAIRE 36

(C) FINANCIAL STATEMENTS 37

13 BIBLIOGRAPHY 39

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Executive Summary

It is the primary project on Cadbury Chocolates. The main objective of this project is to acquire knowledge of understanding, analyzing and prepare report on companies marketing strategies. In order to prepare this report we divided the report in two parts – data collection and analyzing of data. We have collected data from various sources like company website to collect information on company history and industry structure, website of Nestle and Amul who are the major competitors of Cadbury in India, we did a small survey company dealers and customer survey in order to know more about the decision making process of the company, annual report of the company was to analysis the financial status and growth of the company in last four years i.e 2005-2008. All this data was collected in order to conclude the company’s performance and decision marketing strategies from time to time to sustain its market share from time to time. Cadbury India is a fully owned subsidy of Kraft Foods Inc. The combination of Kraft Foods and Cadbury creates a global powerhouse in snacks, confectionery and quick meals. 

With annual revenues of approximately $50 billion, the combined company is the world's second largest food company, making delicious products for billions of consumers in more than 160 countries. We employ approximately 140,000 people and have operations in more than 70 countries. 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. 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'.

Currently there are number of competitors in chocolate industry Cadbury in order to increase and sustain its market share needs to innovate some new products company should use more marketing tools to advertise its products and improve on it distribution network so as to make all its products available across the country. At the same time Cadbury should come out with more attractive gift packs more during the festive when people buy chocolates to give as gift to family and relatives. At the end we have come up with some suggestions that Cadbury to take up sales promotions techniques, provide good commission to the dealers, improve distribution network and makes all Cadbury products available for the consumers and innovate and maintain the quality of Cadbury chocolates so to sustain their market share in chocolate market.

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CADBURY- A Brief Company Overview

Cadbury is a British confectionary company, and it is the industry's second-largest company after the combined Mars-Wrigley. It was founded by John Cadbury back in 1824. John Cadbury and his brother Benjamin after realizing the potential of the business formed a company and in 1853 they received the Royal Warrant as manufacturers to Queen Victoria. Cadbury is today a global brand making its presence felt in all parts of the world. Cadbury has been acquired by Kraft Foods, which bought a whopping 71% of its shares before sealing the deal in February 2010. Cadbury employs over 45,000 employees and has been accounting for 12% growth rate over 5 years and accounts for 11% of the market share in the global market.

CADBURY INDIA- A Brief History

In India Cadbury has set gold standards in the chocolate industry.

Cadbury India was incorporated on 19th July, 1948 as a private limited company under the name of Cadbury-Fry (India) Private Limited and commenced business soon thereafter. Manufacturing facilities were set up gradually. Cadbury introduced the `Five Star and Gems' chocolates in 1967 and 1968 respectively. In 1977 the name of the Company was changed from Cadbury-Fry (India) Pvt. Ltd., to Cadbury India Pvt. Ltd. It was converted into a public limited company on 11th June. An agreement was entered into with Cadbury Overseas Ltd., (COL) U.K., for technical services concerning new products and processes.

Today, Cadbury has approximately 70% of the market share in the chocolate industry in India and is still growing. The size of the chocolate market in India is about 4,000 tonnes and is valued at Rupees 6500 million (US$ 130 million). Cadbury India has the biggest market share at 70 per cent while Nestle is the second largest at 20 per cent. Cadbury’s reaches 0.6 million retail outlets.

With brands like Dairy Milk, Gems, 5 Star, Bournvita, Perk, Celebrations, Bytes, Chocki, Delite and Temptations, there is a Cadbury offering to suit all occasions and moods.

The company today employs nearly 2000 people across India. It’s one of the oldest and strongest players in the Indian confectionary industry with an estimated 68 per cent value share and 62 per cent volume share of the total chocolate market. It has exhibited continuously strong revenue growth of 34 per cent and net profit growth of 24 per cent throughout the 1990’s. Cadbury is known for its exceptional capabilities in product innovation, distribution and marketing.

Cadbury India's four factories in India churn out close to 8,000 tonnes of chocolate and the company sells a million bars every day.

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Board of Directors at Cadbury India

INDUSTRY STRUCTURE

Chocolates which use to be considered unaffordable till the 80’s, are now considered mid-priced. Due to the convenience over Mithai in terms of packaging and shelf life, the middle class and rich Indians opt for chocolates. The chocolate industry which was earlier targeted only towards the youth has changed its approach and is also targeting young adults and adults. According to AC Nielsen Chocolate market is estimated to be around 1500 crores and is growing at 18-20% per annum

The global chocolate market is worth $75 billion annually. The Indian chocolate market alone is valued at Rs. 650 crores (i.e. Rs. 6.50 billion) a year. The Indian chocolate bazaar is estimated to be in the region of 22,000-24,000 tonnes per annum. Chocolate penetration in the country is a little over 4 percent, with India's metros proving to be the big draw clocking penetration in excess of 15 percent. Next, come the relatively smaller cities/towns where consumption lags at about 8 percent. Chocolates are a luxury in the rural segment, which explains the mere 2 percent penetration in villages.

The market presently has close to 60mn consumers and they are mainly located in the urban areas. That is approximately 70% of total consumption of chocolate. The chocolate wafer market (Ulta Perk etc) is around 35 % of the total chocolate market and has been growing at around 13% annually.

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Chairman- C.Y. Pal

Managing Director- Matthew Cadbury

Vice-Chairman- Rajiv Wahi

Director- Jaithirth Rao

Director- S.N. Talwar

Director- Rajeev Bakshi

Director- Harsh Mariwala

Director- N.V. Iyer

Director- David Kappler

Executive Director- B. Puri

Executive Director- P. Chhaya

Executive Director- J. Strydom

Executive Director- G. Shridhar

Executive Director- G.M. Bhat

The Indian Chocolate market can be sliced into four parts.

Moulded Chocolate Segment - comprising slab chocolates like Dairy milk chocolates, etc. These are made by pouring the ingredients into moulds.

Countline Segment - comprising bars like 5 star, Bar One, Perk, Kit Kat, etc. These have ingredients other then chocolate and are usually Bar shaped, making for chunky bites.

Choco-Panned Segment - comprising chocolate forms like Butterscotch, Nutties, Tiffins, etc. Panned variety has different cores/centers which are covered with a layer of chocolate.

Sugar-Panned Segment - comprising chocolate forms such as Gems, Chocolate eclairs, etc. These generally have a sugar coating on the outside.

Major Players & their Market Share

The major players in the Indian Chocolate Industry are:

1. Cadbury’s India Limited

2. Nestle India

3. The Gujarat Co-operative Milk Marketing Federation (GCMMF) – AMUL

4. Cocoa Manufactures and Processors Co-operative (CAMPCO)

Cadbury dominates the Indian chocolate market with above 65 – 70 % market share. Next close comes Nestle with 20% of the market share and the remaining is shared by the Amul, CAMPCO and smaller companies operating in the unorganized sector.

The per-capita consumption of chocolate in India is 300 gm as compared to 1.9 kilograms in developed markets such as that of UK and US. Surprisingly Cadbury Celebrations range alone accounts for a market share of 6.5% in the Indian market,

Trends in the Industry

With socio-economic changes rapidly taking place, the young and not so young population will lead a new life style and chocolate eating is definitely going to be widespread and acceptable.

In the industry, both population and family incomes as well as urbanisation are on the increase.

There has been a significant growth in the middle class, with 5.8 million people having upgraded to the quoted middle class.

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There is quantified data on FMCG usage having increased (NRS-VI & IRS’98 figures)

ENVIRONMENT

At present there are three major players Nestle, Cadbury’s and Amul in the Indian Chocolate market. Campco initially tried to break into market but failed. Brief profile of the same has been entailed below:

Cadbury India Ltd.

Cadbury India Ltd, has been in India since 1948. Its brands: Dairy Milk, 5 Star, Gems and Chocolate Eclairs are the households names in India today. In all the segments i.e. molded chocolates, count chocolates and panned chocolates, it is undoubtedly the market leader.

Cadbury’s has its manufacturing units at Thane (Mumbai), Malanpur, Indori (near Pune), Mithuri and Kolapur. It has a strong distribution network with about 500 distributors in North India and more than 3 lac retail outlets being serviced all over India.

In 1997, Cadbury planned to pump in Rs.80-crore to up production capacity at a couple of Cadbury’s factories. This cash is exactly double of what’s been invested in 1996.

The Company launched Perk, a wafer enrobed chocolate in 1995. This was reactionary to the launch of Kit Kat and has been able to counter competition.

Cadbury’s Dairy Milk (CDM) - The Flagship brand

CDM, the oldest of Cadbury’s brands was launched in 1956. In the early 90s, a rise in the prices of cocoa, increase in the excise duty and a fall in the demand inspired the idea of repositioning. Two years in the process after relaunch Cadbury’s Dairy Milk’s market share stood at 25 percent with sales rising by an average 40 percent per annum.

Besides CDM Cadbury’s has a number of endorser brands such as Fruit’n’Nut, Nut Milk etc. Even though contribution of these brands to the company’s bottom-line is very small, they are required in order to make a complete portfolio of offering.

The Company developed a concentration strategy on CDM, Five Star, Cadbury’ Gems, Cadbury’s Eclairs, Perk and the latest of its offering Picnic (which has drawn a good response in the market).

The Company has also identified sugar confectionery, as a growth sector. Its first offering Googly.

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Nestle India Ltd.

Nestle India Ltd. has been in India for more than 35 years now. The world’s largest marketer of chocolates (became world number one when it acquired Rowntree Macintosh of the UK) - Nestle, made its foray in the Indian chocolate Industry in November 1990. It launched three products - the milk chocolate, the bitter chocolate and Crackle (a crunchy chocolate) - in the slabs category and Bar One in count lines.

Cadbury’s was quick to react, and launched a whole host of products in succession: All Silk milk chocolate, Creamy Bar, and a new version of 5 Star.

Nestle, in the beginning did not have its own manufacturing facility. It had an alliance with Campco to manufacture chocolates. Later, in 1995 a state-of-art manufacturing plant was set up at Ponda, Goa at a cost of Rs. 50 crores. This unit took care of the entire Kit Kat production. However, the production tie-up with Campco still continued.

Launch of Kit Kat

Kit Kat, one of world’s most popular chocolate, was launched in India in 1995. Within months of its launch, it fulfilled every target Nestle had set. Its launch was accompanied by the launch of Cadbury’s Perk in order to counter Kit Kat and safeguard the flagship brand – CDM. Kit Kat has been able to define a new segment in the industry in the form of the wafer enrobed any time snack.

Kit Kat outsells Perk in the outlets where both are available. In the crucial markets of Bombay and Delhi both are running neck-and-neck. It has even said to have threatened the mother brand, Cadbury Dairy Milk.

Amul Chocolates

Gujarat Cooperative Milk Marketing Federation (GCMMF) launched the Amul Chocolate way back in 1974. With its milk chocolates, Badam Bar, Crunch and Fruit n Nut has a market share of about 5 %.

Due to lack of focus and with multinationals spending huge amounts on advertisements its market share has been falling.

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GCMMF is involved in a large number of products, of which chocolates constitutes just 1-2 %. The company is not concentrating much on its chocolate business. As of now, Amul chocolates are not on company’s focus.

Interestingly, Kaira District Cooperative Milk Producers Ltd. (KDCMPL) - the manufacturer of Amul chocolate - is selling whatever it produces. Limited capacity is also a reason for the share it has.

However, Amul’s memorable advertising campaign positioning it as a “A Gift for Someone You Love”, saw the sales graph rising. Amul’s sales grew by 39% then. Ever since, Amul has maintained a low profile.

Other Domestic Players

The only other organized player in the market is Campco, which has an insignificant share of the market. It is supplying its production to Nestle. Apart from this Campco did come up with its new brands like Treat. But crunch of resources grossly effected the pace of the company and is hardly to be heard of today.

PRODUCT

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The development of strong brands has always been a feature of the confectionery market. The market for chocolate bars is highly competitive. There are a small number of large firms in the industry - Cadbury, Nestlé and Amul being the most well known. Many of the brands in the market have been in existence for a long time and have a high amount of brand loyalty. Openings for new products therefore are limited. There are many examples of products that have been launched and which have been withdrawn because they could not sustain long term sales success. The market for certain types of chocolate bar has changed in recent years. The growth of the Dairy Milk chocolate became popular as people ate chocolate on the go as opposed to sitting down in a room with a traditional bar of chocolate. Companies had to respond to these changes. Rowntree (now owned by Nestlé) changed the shape of their Munch bar and Cadbury brought out a rival bar called Bonbon. Both of these were designed to exploit this growing market. The market is still changing but using chocolate as a snack as opposed to sharing a bar amongst a family or giving chocolate as a gift is still a growing part of market.

Cadbury came up with the 'Dairy Milk' concept which was developed after market research identified the growth of snacking and a definite gap in the market for a more chocolaty snack. A number of ingredients were devised and tested following a survey which questioned consumers about their snacking habits and preferences. A research and development team was then asked to develop a number of product recipes which addressed the needs expressed by consumers. Not all products successfully emerge from the product development phase. Research and development involves combining various ingredients to develop potential new products. Considerable development time was spent on Dairy Milk, carefully engineering the ingredients in order to deliver the right balance of chocolate, food elements and texture. More than 250 ingredients were tried and tested in various combinations before the recipe was finalized.

Today Cadbury has four major products at this price point which are as follows:

Cadbury’s Dairy Milk (CDM):

Cadbury’s Dairy Milk is the flagship brand of Cadbury’s not only in India but world wide. CDM is the single largest selling unit in India. It has annual sales to the tune of Rs 200 crore. CDM not only accounts for 30 per cent of the total chocolate market in value, but commands nearly 26 per cent in volume terms and close to 30 per cent of Cadbury’s annual turnover. Moving from a predominantly adult positioning in the days of the legendary dancing girl ad, to the teens and the tweens, when the Cyrus Broacha ads hit the airwaves, CDM has made a long sweet journey. In

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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. Cadbury dairy Milk bar is the single largest selling SKU of Cadbury.

As an international brand, Cadbury Dairy Milk carries the same distinctive image all over the world. Wherever you buy a bar of Cadbury Dairy Milk the pack design will be exactly the same, only the language will be different. The famous slogan "glass and a half of fresh liquid milk in every half pound" with the picture of milk pouring into the chocolate bar, is one of the all-time greats of British advertising.

Cadbury 5star (Crunchy):

Cadbury 5 Star is unique because of its format and any communication highlighting this uniqueness, made it even more alluring to the TG. From 'deliciously rich, you'd hate to share it', to the 'lingering taste of togetherness' & 'Soft and Chewy 5 Star', the communication always paid homage to the product format Cadbury launched 5 Star Crunchy in 2005 to give the chocolate lovers one more reason to join the 5 Star fold. 5 Star Crunchy has the same delicious Cadbury 5 Star with a dash of rice crispies. The variant was such a run away success that 5 Star’s market share jumped by almost 50% post it’s launch! Cadbury now aims to continue the upward trend for 5 Star. This different and delightfully tasty chocolate is well poised to rule the Indian market as an extremely successful brand. One of the unique features for 5 Star’s popularity is the delicious dual (5 Star is an exemplary combination of Chocolate & Caramel) eat experience that it provides to the consumer.

Cadbury Perk:

Cadbury Perk began its journey in 1996 as the Indian market started to get global competition in the chocolate market.  It is renowned to have been the first wafer chocolate brand in India. The light, crisp wafer and chocolate construct targeted the casual snacking space, traditionally the

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domain of chips and salty wafers. It was a quick light snack. It was a quick light snack.On the back of popular advertising, Perk became the delicious ‘anytime, anywhere’ light snack. Its unique brand of advertising that features bubbly, mischievous teenagers who get out of ‘stuck’ situations with a Perk ensured its popularity among its prime consumers, the youth. In time, as the messaging progressed the offerings became varied. Value for money brands increased the competition in the wafer chocolate segment.  Cadbury Perk stepped up with these changing times and consumers saw the dawn of Perk XL , Perk XXL , Perk Slims and Perk Minis. Cadbury Perk has kept pace with the evolving market with the launch of a lower price-point offering. One of the key players in the Indian chocolate market and Cadbury’s representative in the chocolate wafer biscuit category, Perk is poised for growth with it’s capability to expand the chocolate market and strong franchise of loyal consumers.

Cadbury’s Temptation:

Cadbury’s Temptation is premium chocolate brand aimed for high value consumption. Various variants available are Almond, Rum, Cashew & Orange. Cadbury’s temptation is priced at Rs. 40 Cadbury’s Celebration Cadbury India launched its premium Celebrations range, which contains traditional Indian dry fruits wrapped in Dairy Milk chocolate. This gifting option combines the pleasure of giving away dry fruits — which Indians traditionally consider a premium, healthy gift — with chocolate. Cadbury now has 90 per cent market share in this profitable segment.

PRODUCT REVAMPING & INNOVATIONS

Cadbury’s chocolate brands registered double-digit growth in 2002, touching an astounding19 per cent in the second half of that calendar year. Getting the power brands right was the firstpriority, so genuine re-launches of the products were made.However, the growth rate was declining after that. The growth went down from 19 per centin 1999 to 12 per cent in 2000 to single-digits, with seven per cent in 2001. If it staged a smartrecovery to nearly 10 per cent in 2002, it was largely on the back of Chocki and the revampedpower brands.

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PRODUCT INNOVATIONS:

5 STAR:Consumer feedback suggested that the old 5 Star was too chewy, and people complained of itsticking to their teeth. It was made softer and melted easily in the mouth & introduced as 5 StarCrunchy

PERK:Perk was made much lighter and the size of the bar increased to match Nestle’s Munch. Perkhad been under fire from Nestle’s deadly duo of KitKat and Munch, but after the relaunch, itsmarketshare is two per cent more than KitKat’s. And, the five-year-old brand is now almost asbig as the decades-old 5 Star in size, both in the region of Rs 50-55 crore.

HEROES:Packaging innovation has played a vital role in revamping of various Cadbury’s brands.Heroes brand is simply a multi-pack with miniatures of all its most popular brands in a singleouter case.

PRICE

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If a company is to sell a new product it has developed, choosing the correct price is vital. If the price is set too high it may be more than the product’s target customer can afford, more expensive than similar products sold by other companies, meaning that few will be sold. However, if it is set too low, the company will make less profit and customers may think that the product is inferior to similar products at a higher price. There are many different pricing strategies, and some companies use mark-up pricing to decide the price of their product. This means they take the average cost of making each product and add on a percentage of the price as profit. The percentage added will depend on several factors, for example how much other companies charge for similar products and the image of the product. If a business has developed a product that they want to have a luxurious feel, seem exclusive and special, it is likely to have a higher price.

After the roaring success of Nestle’s Munch and Chocostick, Cadbury’s empire struck back hard. The Rs 5 price point accounts for more than half of all chocolate sales. Nestle had seized the initiative at this price point, with its launch of Munch, now a roaring success (and the largest selling product at that price point). Today, Cadbury has four products at this price point: CDM, Perk, 5 star and Gems — and the five-rupee CDM bar is its single largest-selling SKU.

“This is a potent price point in India, because the average purchasing power is abysmally low,” is what industry analyst have to say. Nestle kicked off one of the biggest success — the liquid chocolate category with its brand Chocostick priced at Rs.2 — three months ahead of competition. Cadbury did react with Chocki, priced at Rs 2, expanding the concept of sachetisation to new frontiers. Chocki has been the single biggest growth driver for Cadbury as well as the entire chocolate category. The novelty of the format endeared itself to the existing customer. In less than one year, it constituted nearly 10 per cent of the total chocolate market, split equally between Cadbury and Nestle. Volume led growth strategy Cadbury has followed a well-planned strategy of fuelling volume growth by introducing smaller unit packs at lower price points. Simultaneously, the company seems to have astutely juggled with the larger pack sizes and raised prices to a degree higher than what appears at face. The strategy has driven volumes in the last two years and we expect the volume growth to continue in the next two years.

Generally used pricing strategies:

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Based price - This is a price that is nearly the same as the competition has charged.

Loss leader - Price is below the true cost of the product to encourage consumers to buy product.

Penetration or destruction price - This is a low price to encourage loyalty and to gain market

share. Later the price is raised

Cost plus price - Cost of product plus a markup of profit.

Psychological price - This is when a price is set at e.g. INR 6.99 rather than INR 7.00 so it

encourages people to think it is cheaper.

The Pricing Strategy

Cadbury has followed a well- planned strategy of fuelling volume growth by introducing small

unit packs at lower price points. Simultaneously, the company seems to have astutely juggled

with the larger pack size and raised price to a degree higher than what appears at face. Cadbury

went for base pricing since it was also being used by their competitors. It was a market oriented

strategy, so they set the R.R.P. at 33p. They did this because if they priced it too high then no

one would buy it since they could purchase other chocolate bars for less. They couldn’t set it too

low because they have an oligopolistic market. Hence, if they priced it too low, for example 20p

they would be selling at a price less than the rest but then the other companies would also have to

lower their prices because of which the overall the prices of chocolates would fall and the profits

of all the companies would go down. So Cadbury priced the chocolate bar appropriately but not

too low so Cadbury still earns a fair bit of profit. The price would never really change throughout

the life cycle of the product since there are lots of other brands which are also selling their

products of the same category at similar prices.

Different people have different level of sensitivities when it comes to prices. Some people prefer

to buy without caring about the fact that they could get a better deal and some other always want

to land up with the best deal. This logic applies to Cadbury Dairy Milk just a tiny bit because

people don't look for the best buy on a chocolate bar because it is an impulse buy. An impulse

buy is just when you walk in a shop and buy something quickly without much thought before the

purchase. This means that large quantities of Dairy Milk should be sold for the company to break

even. The firms will then in turn use flow production and benefit from economies of scale. This

will help them by saving money and time because they will be buying and making in bulk. From

my findings I have seen that Dairy Milk has under charged people for their chocolate bars. Dairy

Milk could have increased the price and still got the same amount of sales because not many

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people care how much their chocolate bar costs since most of these purchases are impulse

purchases. So a slight increase in price could have been more beneficial since Dairy Milk has to

sell a lot to breakeven, even though Cadbury have very good economies of scale.

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Physical Distribution

Cadbury has 5 company owned manufacturing units along with 4 sales offices located in India with its Head office located in Mumbai. The manufacturing units are located at:

Thane Induri (Pune) Malanpur (Gwalior) Bangalore Baddi (HP)

These factories churn out close to 8,000 tonnes of chocolate annually.

The sales offices are at: New Delhi Mumbai Kolkata Chennai

Distribution, in the case of chocolates, is a major deterrent to new entrants as the product has to be kept cool in summer and also has to be adapted to suit local tropical conditions. Cadbury's distribution network used to encompasses 2100 distributors and 450,000 retailers. The company has a total consumer base of over 65 million. Besides use of IT to improve distribution logistics, Cadbury is also attempting to improve distribution quality. To address the issues of product stability, it has installed VISI coolers at several outlets. This helps in maintaining consumption in summer, when sales usually dip due to the fact that the heat affects product quality and thereby off take.To avoid cannibalization of its higher priced products from lower priced ones, Cadbury is setting up two separate distribution channels – one for CORE business & other for MASS markets, with different stockists, wholesalers and retailers. One set will be dedicated to Cadbury’s high-end products and traditional chocolates. The other will cater to the mass market brands namely Bytes, Halls, Eclairs etc — all products priced below Rs 3.

Today, Cadbury's distribution network reaches out to six lakh outlets each for its chocolate & confectionery brands (i.e. total reaching12 lakh outlets).

Places where Cadbury products are sold

Retail outlets – shops, supermarkets, garages Vending machines –train stations Restaurants and cafés Cinemas, theatres, theme parks Travel – buffet cars, on board airlines, motorway service stations

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Chocolates are easily available at all types of stores ranging from Kirana Stores, Gift Gallerires, Chemists, Canteens, Supermarkets etc. When you go to a store the chocolate counter is easily identifiable and is usually located near the cash counter. Chocolates are products that are bought mainly on impulse and hence they are strategically placed at positions where they would be able to gather maximum attention.

90% of the chocolates are sold by Cadbury directly to the retailer due to the problem of melting and the rest 10% of the produce follows the conventional distribution channel.

Cadbury India employees the bottom 2 distribution channels or networks.

Qualities that Cadbury looks for while selecting dealers:

Business capacity and salesmanship Experience and previous expertise in the line Credit worthiness Financial capacity and willingness to invest in the line Social status Good relation with the customers, especially bulk consumers and and sub-dealers.

PROMOTION

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Companies have to plan effectively for their advertising and promotions because a slight misunderstanding or misinterpretation of company views can compel consumer to have a different perception so in order to remove this communication barrier a lot has to be planned. So under this section we will try to understand.

Today the brand Cadbury has become synonymous with chocolate. The company has moved its focus from targeting the youth to the adults and young adults.

The basic purpose behind advertising is: To position the product as a “high quality brand” with a wide range of offering providing

at anytime. To create awareness about new flavors Induce consumer trails. build corporate image To undertake competitive advertisement

Cadbury India has very well captured the Indian advertising scenario as far as the chocolate Industry is concerned. It rules chocolate advertising on television. It is also clearly evident that the number of advertisements goes up during festival season which is from September till mid- November. Approx. 70-75% of the advertisements of chocolates on television are of Cadbury chocolates as a whole and 30% out of these are of CDM alone.

The brand has also been successful in roping in some of the biggest celebrities. From Preity Zinta, Genelia D’souza to the living legend Amitabh Bachan, the brand has tried to put its best foot forward.

The CDM advertisements:

In early 90’s the advertisement ‘ Real Taste of life’ was used wherein the ad tried to shift the focus of CDM which was earlier just for kids to adults and young adults. Through this campaign the CDM became the perfect expression of good feelings and spontaneity. The ad that is best etched out in the minds of the people under this campaign is the girl dancing on the cricket field celebrating the victory of her lover.

After this campaign the horizon was further widened and the focus of the product was being shifted to the masses at large. The campaign was ‘ Khane Walon ko Khane ka Bahana Chahiye’. The ads under the campaign were made so as to make chocolate acceptable in the society for adults and masses.

After this the ‘Pappu Paas Ho Gaya’ campaign was taken and the CDM was being showcased as a product that one eats while celebrating any occasion.

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The latest advertisement are those which maintain the slogan ‘ Meetha hai Khana’. These ads have been made once again to celebrate pay day and try to show that a CDM is a must for every occasion.

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FINANCIAL ANALYSIS

The Indian FMCG sector has been the outperformer for some last years. In 2008 when almost all the stocks were tumbling on Dalal Street, the one sector which completely outperformed the market was FMCG. Despite sensex almost lost 50 percent but FMCG only lost around 10 percent. This sector has seen strong gains from 3000 in 2003 to 21000 in 2008. Hence we believe FMCG is strong and defensive sector and one should consider this sector for his/her portfolio and invest some amount of it seeing the euro crisis at present.

CADBURY INDIA Ltd. deals with variety of products but they are leader in chocolates. The Indian chocolate market is growing at an rate of nearly 20 percent and Cadbury india enjoys the lions share of 71 percent . Cadbury is the largest confectioner in the country with turnover of around Rs 2000 crore and annual sales growth being 20 percent. NESTLE and AMUL are its biggest competitor but they are lagging behind. But if Cadbury is ahead of these companies then its mainly due to huge amount it spends on advertising, marketing and distribution channel. And yes It’s also the oldest in the market.

As we analyse the financial statement of the company over the last few years Cadburys share capital has increased by issuing shares to public in lieu of fund. It can be seen from liabilities side in balance sheet that secured loans have increased from 1.28 Cr in FY07 to 32.02 Cr IN FY08. Secured loan is issued against some asset. Asset is kept as collateral security. Here Secured loan must have been taken to secure the creditor. Cadburys total debt has increased which indicates firm owes to outsiders. It has increased from 8.76 % in FY07 to 41.70% IN FY 08.

If we go to assets side inventories have increased from 98 in FY04 to 222 in FY 08 with 151 in FY 07. This can be seen from inventory turnover ratio also . it has 7.86/12 months stock with it. Which mean an inventory of 45 days which is great. Capital work in progress has also increased a great amount, almost making it five times of its previous year. From 25 cr in FY07 to 125 cr in FY08. More the working capital less financial strain company experiences. It infact shows best position of a company. It reveals more of financial condition of a company. It tells us what would be left if a company raises all its short term resources and used to pay its short term liabilities. Companies current assets have decreased , which may be a reason for increase in working capital. Company has followed huge disinvestment policy as its investment have came down. Companies current liabilities have increased which means they have creditors standing at their doorstep . Cash has also increased a great amount , which shows management has the ability to pay dividend and even repurchase share. It can also provide extra room for expanding.

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FINANCIAL RATIOS

Ratio analysis is used to interpret the financial statement so that strength and weakness of a firm can be known and its current financial condition can be assessed and determined.

1. LIQUIDITY RATIOS

RATIO DEC 04 DEC 05 DEC 06 DEC 07 DEC 08

CURRENT

RATIO

1.02 0.85 0.61 0.61 1.12

QUICK

RATIO

0.45 0.38 0.20 0.22 0.79

DEBT EQUITY RATIO

0.2 0.2 0.3 0.2 0.9

CURRENT RATIO

This ratio is a major test of liquidity. It has improved over the years from 0.61 to 1.12 almost making it 2 times of it. This ratio measures the surplus or deficit of current assets over the amount due. Ratio of 2:1 is considered ideal. So here this ratio is not a healthy one. Banks consider 1.33:1 ratio as minimum acceptable level for providing working capital finance.

QUICK RATIO

current assets , loans and advances — inventories /current liabilities and provisions — bank overdraft

This ratio tries to develop a relationship liquid assets and Current Liabilities. Here quick ratio is 0.79. It shows company is paying Its current obligations quite well. 1:1 ratio is considered good. This ratio also helps in cross checking inventories.

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DEBT EQUITY RATIO

Debt /Equity

This ratio indicates what proportion of equity and debt that the company is using to finance its company. It measures the relative claim of creditors and owners in a business organization. 0.9 ratio indicates that equity is used for finance with some part of debt also in use. It also gives indication of sound financial position of Cadbury India.

OTHER RATIOS

RATIO DEC 04 DEC 05 DEC 06 DEC 07 DEC 08

INTEREST

COVER

27.36 48.73 77.60 106.72 39.80

INVENTORY TURNOVER RATIO

7.96 8.77 8.78 11.04 7.86

DEBTORS TURNOVER RATIO

31.36 49.89 95.97 105.54 96.83

GROSS PROFIT MARGIN

12.45 12.33 14.11 10.62 11.45

INTEREST COVER

It has very steep fall from 106 to 39. It shows excessive use of debts . The firm should make efforts to improve the operating efficiency. High rate shows firm is conservative in using debt and low rate indicates excessive use of debt.

INVENTORY TURNOVER RATIO

Here it can be said Cadbury is turning its inventory of finished goods into sales quite well. 7.9 times a year means it holds an average inventory of 1.5 months or 45 days.

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DEBTORS TURNOVER RATIO

Credit sales / Average debtors

It indicates the number of times debtors turnover each year. Here ratio is 96 percent which means management of credit is good. Higher the rate more beneficial it is .

GROSS PROFIT MARGIN

Gross profit × 100 / sales [ sales—cost of goods sold ]×100 /sales

This ratio shows gap between revenue and expenses at a point after which an enterprise has to meet the expenses related to the non-manufacturing activities like advertising, marketing. Cadbury India spends huge amount on advertisements and marketing. Profit has declined over the years since there are more competitors in the market which has lowered the profit margin. 11.45 percent indicates the capability of the company has decreased to cover its overheads. Leaving less profit for shareholders.

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The above graph states that the Gross Profit of the company had an upward trend for the year 2004, 05 and 06. For the year 2007 Gross Profit of the company declined and again in 2008 saw it regained its momentum.

Note: X-axis denotes Years and Y-axis depicts percentage change in gross profit.

EARNING PER SHARE

This ratio shows the amount earned in a year on each ordinary share in issue. It also measures economic performance of the company. Higher means better capital productivity. 51 percent from 35 percent shows managerial efficiency as it has increased over the years. It shows good track of profitability.

RETURN OF CAPITAL EMPLOYED

Net profit / capital employed

40 percent is a good amount. It means investors have earned a good profit. This ratio tells us how much profit we earn from the investment. This can be improved if profit margin is increased and investment is increased. But chocolate industry operates with low margin.

DIVIDEND PER SHARE

Dividends paid to equity shareholders / Average number of issued equity shares

This ratio is very similar to EARNING PER SHARE; EPS shows what shareholders earned by way of profit for a period whereas DPS shows how much the shareholders were actually paid by way of dividends. Cadbury India has paid regular dividend to its shareholders. Rs 2 is distributed per share as dividend by Cadbury India.

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CUSTOMER SURVEY ANALYSIS

Q 1. Do you buy chocolates?

From the above graph we see that a good number of people consume chocolate.

Q 2. Which brand do you prefer most?

From the graph we study that maximum number of chocolate consumers prefers to buy Cadbury chocolates compared to Nestle and Amul.

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Q 3. How have you come to know about the Brand?

The above graph shows that Cadbury use a medium of television to advertise its brands in the market television reaches to the mass thus orienting a all sort of age group people.

Q 4)Which product do you buy most?

It is clear from the graph that Dairy Milk is the highest selling product of Cadbury it has a huge sale compared to 5 star, gems or any other Cadbury product available in the market.

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Q 5) Do you think that the price is reasonable?

This graphical representation states that all Cadbury products are prices reasonable and can be easily affordable by the consumers.

Q 6) What makes you buy the product?

The above graph shows that consumers intent to buy Cadbury products again n again because of the taste of the products.

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Q7) Are you satisfied with the product?

From the graph above we can study that maximum number of consumers of Cadbury products are satisfied.

Q 8.) Do you receive any complain about the products from the customer?

From the graph above we see a very less number of complaints are received by the consumers of Cadbury products.

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DEALER SURVEY ANALYSIS

Q 1.) Do you sell chocolates?

The graphical representation states that almost all dealer sell Cadbury chocolates.

Q 2.) Which of the following brand is available in your store ?

The graph above shows that dealers sell more of Cadbury products compared to Nestle or Amul.

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Q 3.) Which brand sells most?

The above graph explains that Cadbury chocolate has the maximum market share with maximum sale of chocolates compared to its competitors like Nestle and Amul.

Q 4.) Which product of Cadbury has the highest sale in a day?

It is studied from the above graph that Cadbury Éclairs which is very popular among kids has the maximum sale of all Cadbury products available in the market.

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Q 5) Which age group buy’s most ?

The graph shows that Cadbury Chocolates are mostly consumed by people of age group between 11yrs to 20yrs and minimum consumption by age group of 21yrs to 40yrs

Q7.) Are you satisfied with the commission you earn on selling Cadbury products?

It is studied from the above graph that most of the Cadbury dealers are not satisfied with the commission they earn on selling Cadbury products.

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Q 8) How do you find the packaging of the product?

The above graph shows that maximum dealers of Cadbury Chocolate find packing of Cadbury Chocolates good

Q 9) Which product give you the highest margin?

The above graph shows that a Cadbury Chocolate dealer earns maximum margin of profit on sale of Cadbury Dairy Milk compared to Celebrations which also has a good profit margin.

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SUGGESTIONS

After conducting the customer and dealer survey analysis a clear understanding about Cadbury market standing can be evaluated . Moreover factors affecting customer choice can easily be understood. During customer survey analysis it was clearly evident that chocolates as a product has got a potential market as only one of the respondent answered that he does not buy chocolate which could be even regarded as exception . Cadbury as a brand had its product most sought after followed by Nestle, others, and Amul. One of the primary reasons is due to easy availability and high advertising. This clearly indicates that the distribution channel of Cadbury is well established .Customers on the other hand are also satisfied with the product as eighteen of the twenty respondent replied yes. Price has again been significantly important factor in determining customer choice as customer invariably look for a Rs. 10 chocolate such as Dairy milk even today as it was five year earlier. Coming to the dealer point of view, the response given by them easily synchronizes with responses of the consumer. Almost every dealer sells Cadbury products, but they are not satisfied with the commission they are earning on the selling the products in case of any of the brand be it Nestle, Amul , Others due to stiff competition in the fast moving consumer goods segment. Dairy milk has once against emerged as the most sought after product in the product width of Cadbury. Packaging too in case of introducing a new or differentiated product into the market plays an important role in escalating the product to customer as suggested by dealer.

In the end, I would like to suggest that though Cadbury has a good market positioning it must provide its dealers with more sales commission this will directly motivate the dealers to sell more of Cadbury products. In order to pump up the sale of other Cadbury products with comparatively low sales volume Cadbury should come out with some festive offers from time to time to attract more and more potential customers of chocolates in the market thus increasing its market share. Cadbury should come out with some high end range of products in order to compete with other imported chocolate which are sold in Indian market these days. Cadbury has an advantage being manufactured in India itself it can compete with them not only in case of quality but also the price.

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APPENDIX

SAMPLE CUSTOMER QUESTIONNAIRE

Q 1. Do you buy chocolates?

a)Yes b) No

Q 2. Which brand do you prefer most?

a)Cadbury b)Nestle c)Amul d) Any other

Q 3. How have you come to know about the Brand?

a)Television b)Radio c)Newspaper d)Hoardings E)Word of Mouth

Q 4) Which product do you buy most?

a)Dairy milk b)Fruit and nut c)5 star d) Cleberation e)Temptation f)Eclairs g)Bournville

h) Gems

Q 5) Do you think that the price is reasonable?

a)Yes b) No

Q 6 ) Do you have any complain about the product? If yes, Please specify?

a)Yes b) No

………………………………………………………………………………………

Q 7) What makes you buy the product?

a) Taste b) Packet c)Price d)Availability

Q 8) What would you substitute chocolate for?

……………………………………………………………………………………………….

Q9) Are you satisfied with the product?

a) Yes b) No

Q10) Any Suggestions?

…………………………………………………..

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SAMPLE DEALER QUESTIONNAIRE

Name of dealer……………………………………

Address/contact n0…………………………………………...

Q 1.) Do you sell chocolates?

a) Yes b) No

Q 2.) Which of the following brand is available in your store?

a) Cadbury b) Nestle c) Amul d) others

Q 3.) Which brand sells most?

a) Cadbury b) Nestle c) Amul d)others

Q 4.) Which product of Cadbury has the highest sale in a day?

a) Dairy milk b) Fruit & nut c) 5 star d) Temptation e) Bourneville f) Éclairs g) Gems

Q 5) Which age group buy’s most?

a)4-10 b)11-20 c)21-40 d)40-60 e)60-80

Q 6.) Do you receive any complain about the products from the customer?

a)Yes b)No

Q7.) Are you satisfied with the commission you earn on selling Cadbury products?

a)Yes b) No

Q 8) How do you find the packaging of the product?

a)Good b) Average C)Poor

Q 9) Which product gives you the highest margin?

a) Dairy milk b) Fruit & nut c) 5 star d) Temptation e) Bourneville f) Éclairs g) Gems

Q10.) Any suggestions?

………………………………………………………………

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Profit & Loss account of Cadbury India

------------------- in Rs. Cr. -------------------

Dec '04 Dec '05 Dec '06 Dec '07 Dec '08

12 mths 12 mths 12 mths 12 mths 12 mths

IncomeSales Turnover 885.28 1,006.02 1,149.97 1,441.92 1,751.24Excise Duty 121.23 126.24 91.73 148.45 162.65Net Sales 764.05 879.78 1,058.24 1,293.47 1,588.59Other Income 13.44 17.87 8.71 7.68 25.07Stock Adjustments 13.48 10.44 -2.54 17.29 51.32Total Income 790.97 908.09 1,064.41 1,318.44 1,664.98ExpenditureRaw Materials 222.49 246.22 441.53 563.06 732.53Power & Fuel Cost 16.17 19.62 20.83 25.30 29.70Employee Cost 76.49 94.38 93.93 107.36 130.22Other Manufacturing Expenses 124.52 138.85 57.63 76.61 96.01Selling and Admin Expenses 0.00 0.00 266.54 323.54 2.45Miscellaneous Expenses 256.33 292.11 35.88 43.13 430.46Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00Total Expenses 696.00 791.18 916.34 1,139.00 1,421.37

Dec '04 Dec '05 Dec '06 Dec '07 Dec '08

12 mths 12 mths 12 mths 12 mths 12 mths

Operating Profit 81.53 99.04 139.36 171.76 218.54PBDIT 94.97 116.91 148.07 179.44 243.61Interest 2.41 1.70 2.22 2.03 5.20PBDT 92.56 115.21 145.85 177.41 238.41Depreciation 33.95 34.07 33.41 34.32 36.52Other Written Off 0.00 0.00 0.00 0.00 0.00Profit Before Tax 58.61 81.14 112.44 143.09 201.89Extra-ordinary items 0.00 0.00 0.00 19.23 0.00PBT (Post Extra-ord Items) 58.61 81.14 112.44 162.32 201.89Tax 22.24 35.19 43.62 44.67 36.11Reported Net Profit 41.29 45.95 68.81 117.65 165.78Total Value Addition 473.51 544.96 474.80 575.93 688.83Preference Dividend 0.00 0.00 0.00 0.00 0.00

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Equity Dividend 7.14 7.14 6.87 6.64 6.44Corporate Dividend Tax 1.00 1.00 0.96 1.13 1.09Per share data (annualised)Shares in issue (lakhs) 357.10 357.10 343.57 332.04 321.83Earning Per Share (Rs) 11.56 12.87 20.03 35.43 51.51Equity Dividend (%) 20.00 20.00 20.00 20.00 20.00Book Value (Rs) 110.89 121.48 114.12 122.32 144.30

Source : Religare Technova

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Bibiliography

1. Wikipedia

2. Google

3. Cadbury- Official Website

4. Religare Technova

5. Financial Management by I.M. Pandey

6. www.moneycontrol.com

7. www.investopedia.com

8. Marketing Research by C.R. Kothari

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