wer yu opas g zxcv nmqwer yu pasdfghjklzxcvbnmqwertyuiopasdfg klzxcvbnmqwertyuiopasdfghjklzxcvb mqwertyuiopasdfghjklzxcvbnmqwer yuiopasdfghjklzxcvbnmqwertyuiopas fghjklzxcvbnmqwertyuiopasdfghjklz vbnmqwertyuiopasdfghjklzxcvbnmq ertyuiopasdfghjklzxcvbnmqwertyui asdfghjklzxcvbnmqwertyuiopasdfghj lzxcvbnmqwertyuiopasdfghjklzxcvb qwertyuiopasdfghjklzxcvbnmqwertiopasdfghjklzxcvbnmqwertyuiopasd hjklzxcvbnmqwertyuiopasdfghjklzxc bnmqwertyuiopasdfghjklzxcvbnmrtiopasdfghjklzxcvbnmqwertyuiopasd hjklzxcvbnmqwertyuiopasdfghjklzxc A STUDY ON THE CHOCOLATEINDUSTRYMarket Study of Cadbury Ind ia Lt d. SUBMITED BY:-LUCKY SINGH 05524001809 BBA(B & I) 3 rd sem SUBMITED TO:- DEEPTI
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Few differences Dissonance reducing Habitual buying
Between brands buying behavior behaviour
In this category, consumers are often found to do a lot of brand switching.
Although the consumer expects some benefits from chocolates, but he
chooses a brand without much evaluation, and evaluate it during
consumption only. But next time, quite often he may reach for another
brand out of boredom or a wish for a different taste. Brand switching occurs
for the sake of variety rather than dissatisfaction.
Since Cadbury has 70 % of market share, this variety-seeking behavior had
not affected its sales negatively. This had been possible due to various
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factors like lack of strong competition. However, with the new entrants in
the market, there has been stiff competition. There are few segments like
wafer chocolates segment where company faces strong competition from
Nestle, the second major player in the market. In these segments companyshould try to increase brand loyalty for its brands. This increased consumer
loyalty will also act as deterrent towards development of strong competitors
in other segments. Further to increase the overall size of market, company
should try to increase consumers¶ involvement with chocolates. (Company
can use consumer involvement achieved by soft drink marketers in USA as
a benchmark. In USA, consumer involvement in soft drinks is much higher
than other beverages like coffee).
How To Build Consumer Interest In The Product Category?
Following are the possible strategies for increasing consumer interest in the
product category.
y Frequent reminder advertising and maintain a top of mind awareness for
the product.
y Emphasize functional benefits like nutritious value of chocolates. In
India chocolate is considered as a junk food. Creating consumer
awareness about functional benefits can help in weakening this negative
image. Here, the industry can follow the example of Max ice creams,
wherein they are using the nutritional/health (more milk protein) plank to
sell the ice creams to the buying unit ± mothers ± who can feel less
guilty of buying 'junk food'.
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y Company can try to satisfy higher level needs of consumers like social
needs, belongingness, and aspirational needs.
Our Recommendations:
Out of these possible strategies, we recommend that company should try to
focus on building high top-of-mind awareness, increasing reminder
advertisements and educate consumers about functional benefits of
product. Educating consumers about nutritious, calorific value of chocolates
may be significant as per capita expenditure on food in India is significantly
high and chocolates get very little of it. Also there is a need to educate the
customer¶s of the various need satisfactions that can be fulfilled by the use
of chocolates apart from treating it like a light snack, in between kind of
food item. Company has already taken a positive step in this direction with
the launch of its Picnic ads wherein it has educated the customers about
the heavy snacking aspect of chocolates.
How To Increase Brand Loyalty For Cadbury's Brands?
y Build strong relationship for different Cadbury's brands with consumers
in various segments.
y By dominating the shelf space and avoid getting out of the shelf space.
y The company can also maintain the consumer loyalty by offering a
variety brands from its own stable so that even if the consumer looks for
variety, he goes in for some of that company's own stable.
y By increasing the range of its products so as to increase the evoked set
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in the minds if the consumers.
Our Recommendations:
Company already has a very strong relationship with consumers in
traditional segments like moulded chocolates. Parents were using Cadbury
to express their love towards their children. In fact various market
researches carried out revealed that consumers see Cadbury as a
synonym for chocolates. This relationship building strategy should be
extended to emerging high growth segments like wafer chocolates. Apart
from advertising, company can form kids clubs and sponsor various
competitions like quizzes, games and music events to build a continuous
relationship with target segment. Food MNC Nestle successfully utilized
this strategy by forming children clubs for its noodles brand Maggi.
Company's flagship brand CDM is already available in many variants and
thus consumer opting for competitor's brands in moulded chocolate
segment is very less. In other segments like wafer chocolates, company
should offer more variety to retain customers. The company is already
working on this strategy and has decided to launch around three to four
new brands every year to offer customer¶s more variety and at the same
time displace the strong competitor brands from the shelf and increase its
own shelf space.
Company already has highest shelf space among chocolate companies
and its distribution is strong enough to keep continuous availability. So
there is not much scope of strengthening this network without going for
increasing geographical coverage. Keeping this in mind the company has
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increased its retailer network by over 60% and is targeting the semi-urban
areas. Chocolates are a perishable item, which means that the shelf life of
the product is not very long and it is important that the product moves fast.
Also, it is an impulse purchase item. Most of the time the consumer decideto consume the product at the spur of the moment. The companies can
actually use this as an advantage and increase their sales since it does not
involve any rational evaluation and then reaching a decision to consume.
How to overcome this seasonality factor?
The seasonality factor in the sales can be eliminated by improving logistics
and packaging in order to make the product more durable and long lasting
in intense heat too. Therefore we feel that the company should pay
immediate attention towards increasing logistics. It can perhaps,
incorporate some strategies or experience of the ice-cream players in the
market. These companies have extensively used cold chains and tie up
with regional players to overcome problems created by the high
temperatures in the summers. In fact, KitKat had succeeded in counteringthe temperature problem with its packaging. Cadbury¶s had also to some
extent managed to counter this problem with its packaging for Perk ,
however it has to innovate and improve significantly to counter this heat
problem and be able to use this as a differentiating factor while selling its
chocolates.
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PRODUCT LIFE CYCLE
In 1993-94, it looked that chocolates had completed the mature of PLC and
was passing through its decline stage. In 1992-93, volumes had fallen by
15.6% and in 1993-94 volumes fell by 17%. As a result, in the period the
total tonnage decreased from 12,000 tones to 8,000 tonnes.
Everybody was sure that this industry was on the way to demise, but
industry leader Cadbury (with around 70% --market share) bounced back in
1994 when cocoa prices again fell to their normal level. The company also
changed its positioning which had been safely nurtured over many years
that lead to a dramatic growth in tonnage from 10,000 tonnes to 16,000
tonnes in period 1994-96. However, there was another increase in the
prices of cocoa, which led to the decline in the sales till early mid 1997.
Since then the cocoa prices had stabilised leading to a reversal in the
declining trend. Thus, PLC for the category can be described as scalloped
PLC as industry moved back from mature stage to growth stage. The PLC
graph as revealed by the industry is shown in the figure.
PRICE SENSITIVITY
At the outset, the chocolate market appears to be price-sensitive. This is
starkly brought out in the following cases:
1) When the excise-duty on chocolates was raised from 16.5% to 27.5%
and cocoa prices rose by 25%in 1992-93, the retail prices went up by
30%. As a result, the sales and consumption fell by more than 30% in
the next two years.
2) The major players have successfully launched small-size packs of
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chocolates. Keeping in mind the price sensitive nature of the market, the
companies are reducing the pack sizes to be able to offer chocolates at
affordable prices, and fit them to a Rs. 6-8 bracket. Due to the
broadbasing of the chocolate market there is a drive towards smaller,convenient packs for a larger audience and it also increases trial.
However, the upper segments of the consumer base are not price-
sensitive. For example, a chocolate like Kit-Kat, which is, priced 30% above
its rival Perk, has a similar market share of 8%.
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ANALYSIS OF THE STUDY
CORPORATE STRATEGY
CADBURY'S BUSINESS STRATEGY
Cadbury realizes that being market leader in the chocolate market it will
have to bear the onus of expanding the size of the market; there was not
much scope of increasing the market share at the expense of existing
players. Thus resulting business strategy consists of having a presence in
all the segments with a clear differentiation among offerings in different
segment and a different proposition for each of them. Further, the companyfollows a multi branding strategy i.e. having more than one brand cater to a
particular segment that may even lead to the cannibalization of sales of one
brand. The gameplan for the company is to increase the consumption of
chocolate and confectionery among adults by offering products in
convenient packs at affordable price. To achieve this it has chosen the
local manufacturing route. This also makes business sense it sources
almost every raw material locally (except cocoa, one third of which is
imported from south east Asia and Africa since the domestic production is
falling short).
Short Term Objective And Future Plans
The short-term objective of the company is to develop brands with mass
franchise and widen out its distribution network further into the rural sector.
This is in keeping with the awareness that new product development
provides the key to growth in this market.
The company plans to launch one new product every year and extend its
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sugar confectionery range. The overall strategy is to launch three or four
products every year, but only one of the brands will be a big launch, the
rest being soft launches. This year the company chose Picnic as its big
launch.
The company is also focusing on exports. The current exports constitute
2.5% of the total turnover of Rs. 354.14 crores. The company has clear
intentions of improving margins which will be achieved by controlling
indirect costs, reduced wastage, freeze manpower, and cut non profit
expenditure. The company expects healthy cash flows in the future due to
decline in the capital expenditure depreciation, which will further bring downthe interest costs. T he future strategy of the company is to maintain is
dominance.
The company has started to associate the umbrella name of Cadbury's with
events like the Filmfare awards, and Zee Cine Awards, and movie
screenings like Air Force One to promote the brand name further and also
to simulate recall.The company is aiming at overall growth rate of 18%. In keeping with this
objective the company has increased its advertising spending and
marketplace investments by 40% over the year 1997. The Cadbury account
in India which is handled by O&M, is worth Rs. 29.62 crores.
Currently if we see, the company has its products focussed around three
basic propositions.y Drives attitudes and behaviour: This is led by the company's flagship
brand Cadbury Dairy Milk (CDM). CDM is currently positioned on the
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emotional plank of spontaneity and self-expression and is targeted
mainly on the adult consumer.
y Drives Snacking Consumption: It has three main brands in this
category - 5 Star, Perk and Picnic. However the three brands are
positioned in a slightly different manner. Perk is positioned as a any time
snack anywhere, whereas 5 star is positioned as a Energy Bar. Picnic is
positioned as a heavy snack bar which can be had as a near meal
substitute
y Drives variety, gifting and taste preference: The two brands in this
category are Gems and Eclairs. However, there is a lot of difference
between these two brands. While Gems is targeted primarily at children,
Eclairs is a chocolate simulator, which simulated the taste and the feel of
the chocolate but has to popped in the mouth like a toffee.
Drives attitudeand behaviour
Drives snackingand consumption
Drives variety,gifting and tastepreference
Endorsers Dairy Milk5-Star Perk
Picnic
Gems
Dairy Milk Eclairs
Flankers
Bournville
Crackle
Nut Milk
Fruit & Nut
Creamy Bar
Roast Almond
Break
Butterscotch
Caramels
Nutties
Tiffins
Relish
Truffle
Mocka
Prodigals
Overtures (nowwithdrawn)
All Silk
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Besides these endorsing brands, Cadbury traditionally has maintained a
whole battery of flank and satellites in its brand portfolio. It has always
focused on preempting any moves by a competitor by launching a brand of
its own. The threat of Nestle's entry led to the launch of tactical brands likeAll Silk, Crackle and Break. Therefore, in the Cadbury's brand system, the
flanker brands are used for the tactical purpose of plugging a gap in the
segment where the threat of entry by a rival brand was imminent. Cadbury
has also entered the sugar confectionery range of Googly and Mocka with
the intention of expanding its range further.
However, Nestle's successful entry through KitKat in the wafer segmentproved that unless you support your flank brands actively, they are not
going to be of any use in blocking competition. And hence Cadbury is
showing some active interest in the area.
CADBURY'S DAIRY MILK (CDM)
Cadbury Dairy Milk (CDM) is the flagship brand of Cadbury's. This is the
endorser brand in the Cadbury's stable. Its success can be attributed to a
variety of factors. This was the first chocolate to hit the Indian market.
Therefore, in the minds of the consumer - chocolates became synonymous
with Cadbury's Dairy Milk Chocolate. CDM is at the center of an array of
support brands that complete the product line. These brands, though
unadvertised, lend support to CDM by attracting customer attractionthrough increased retailer shelf space. I n early 90s, the chocolate market in
India was a virtual monopoly of Cadbury's India Ltd., with the company
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commanding almost 80% of the market share. However, the market leader
was not in a very comfortable position due to the various problems in the
chocolate market:
y rising prices of cocoa,
y rising excise duty
y small consumer base consisting primarily of children
y The perception that chocolates as a product is nothing but a junk food
and an occasional indulgence.
The outcome of the above problems was that per capita chocolate
consumption in India was very low as compared to the International
standards. The problem was further accentuated when the sales volume for
chocolate industry fell drastically in period 91-92 to 93-94 largely due to the
increasing prices of cocoa, and the decline of the volumes for the market
reflected in the decline of sales for the market leader Cadburys as well.
Added to this was the increasing threat posed by Nestle which madeCadbury's squirm in their seats, especially after the success of KitKat.
Marketing Strategy
The company's marketing strategy was mainly based on remarketing the
product category. lts objective was to revitalize the faltering demand and to
search for new marketing propositions to start a new life cycle for the
declining product. The onus of this marketing task was more on Cadbury
than on any other player in the market. Being a market leader, it was the
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both the responsibility and necessity for the company to revive and
increase the market. This was very true in the context of the theory that the
market leaders stand to gain the maximum with an increase in the market
size. With the entry of Perk and KitKat in 1995, CDM's performance wasaffected because consumers attention was diverted by the variety and
excitement now available in the market place. In addition to this, primarily in
metros the CDM consumers were graduating to functional offerings like
KitKat or Picnic. So in the future, CDM's primary focus would be to widen
franchise in smaller tows where penetration is currently low, and also to
stress on the platform of mood upliftment rather than hunger satisfaction.
Possible Marketing Strategies For Achieving Above-Mentioned
Objectives
There were three basic strategies Cadbury could have taken to capture the
downfall in its sales, in 1994.
1. Market Modification
To look for new markets and market segments and thus find new
buyers for the product.
To stimulate the increased usage of the product among present
customers.
To repositioning the brand to achieve larger brand sales. 2. Product Modification
To bring about improvement in the product and increase in the functional
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values and thus generating new users.
To come out with the new variants of the product, with clear
differentiation from the existing product and try to tap a different set of
users for the product.
3. Marketing Mix Modification
To cut prices to draw new segments
To push the product through trade promotions.
To search for a new and brilliant advertising appeal that wins the
customers attention and favour.
THE NESTLE PORTFOLIO
KITKAT
KitKat is a wafer-enrobed chocolate, which was introduced by Nestle just
two years ago, but has already made a big impact in the market. Success,
though, did not come easily for KitKat - the international version of the
chocolate had to undergo quite a few changes before it could be launched
in India. The chocolate was first tropicalised to suit Indian conditions. Its
packaging was changed to prevent melting of the chocolate in the hot
Indian summer.
The strategic reason of Nestle launching KitKat seem to be displacing CDM-something which it could not do with the help of Nestle Milky Bar. The
company's aim is to pull ahead of the country's largest selling brand by the
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end of 1997. It was thought to be doubtful if this wafer-enrobed chocolate
could displace the dominance of milk chocolate, which is too deeply
embedded in the mind of Indian consumers. However, with KitKat now
proving to be a big success and Cadbury's Perk lagging behind, KitKat hasindeed proved to be a potent threat to CDM.
Marketing Strategy
The product was targeted at the casual consumers of chocolates - primarily
adults through a clear proposition of fulfilling a snacking need which
basically took advantage of the fact that the existing chocolates in the
market were too heavy to be had as a light snack. The company sees a
huge potential in the wafer covered with milk chocolate, not only in the
chocolate market but also in the premium biscuit market. The company is
trying to expand the market in this direction by portraying it as a product
taken during the breaks.
The distribution and packaging are in harmony with the broad marketing
plans of the company. Nestle followed a strategy of distributing its
chocolates in ice-lined Sintex tanks to protect them. KitKat currently has the
maximum reach in terms of the number of outlets it accesses. This has
helped the company to increase the consumer base and to sell the new
concept. KitKat packaging synergies with the total brand appeal. It has
been packaged to keep the product fresh, crisp and protected from theharsh climactic conditions in the country. Special packaging is also integral
to KitKat break ritual, which plays a part in the brand mystique.
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The current perception is that before the entry of KitKat, the wafer market
was not ready in India. However, the main reason one could cite for KitKat
being the first wafer chocolate to succeed in India was that - its
international reputation was very strong and resulted in a high awarenesslevel even before launch. This meant that the consumers were already
favourably inclined towards the product. Also KitKat's product form helped
increase consumption since the finger product form allowed one to eat one
finger at a time and store the rest for later. At the same time it facilitated
sharing the chocolate among family and friends.
Recently KitKat came up with a 'four plus one' offer which is significant as itis meant to block out Picnic, so that the brand trials were slowed down.
Advertising Strategy
Advertising in this category is aggressive. It is funky, whacky, and
humorous. Nestle uses various situations to bring out the core value of
KitKat, the wafer, in its ads. For example, the karate master, the traffic
policeman, or the classical dancer all advertising the same concept. The
company sources came with following objectives behind their
advertisement campaign.
To highlight the use/benefit of the product
To clearly define KitKat's consumption process and occasion of use.
The latest television commercial for KitKat shows a typical rural Indian
endorsing the product (and the freebie offered) which is a subtle take off
on the Udham Singh commercial for Chekkers.
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Our Evaluation Of The Advertising Strategy
The functional benefit was important to highlight as the chocolate was
targeted at the snacking segment and the consumption process was in line
with the international tradition of the brand and it helps the consumer to
identify himself with the KitKat fraternity and thus helps in building a long
term relationship with the brand.
KitKat campaign won the silver in the best TV advertising of 1996 category
at the sixth A&M awards in New Delhi.
Creative Strategy
The advertising agency operationalised this objective by showing
recognizable situations and characters speaking in colloquial language and
having crisp Kit-Kat fingers during any small break in daily hectic schedule.
The creative strategy was to appeal to consumer ethos. It focussed on
taking endorsement from people who are in love with brands. It resulted inshowing several -brand devotees (taking break from diverse activities)
instructing their followers on the right way to eat the chocolate - First, you
strip the chocolate of its red sleeve. Next, you press the shiny inner foil to
locate the lengthwise grower that separate the wafer-draped in chocolate
fingers. Then, you use your thumb to draw a neat laceration in the foil, split
it and pop it into your mouth; and yes, relish it.
O ur Evaluation O f The Creative Strategy
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was the only chocolate that was promoted on the plank of snacking- the
"something in the middle and something in between". This brand mainly
suffered due to lack of commitment from company in opening snack
segment Perhaps company gained valuable experience through this brandwhich helped in launch of its international wafer chocolate brand KitKat.
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1. How to Build Consumer Interest in the Product Category?
2. How to Increase Brand Loyalty for Cadbury's Brands?
3. How to overcome this seasonality factor?
4. How to Exploit Impulse Purchase Behaviour?
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CONCLUSION
LOOKING AT THE FUTURE
The consumption of chocolates in India is among the lowest in the world. ,
a comparison with the world wide industry average is an eye opener. In
India the average per capita consumption is a mere 20 gm compared to the
world average per capita consumption of 2.24 kgs. Moreover, data on
worldwide chocolate consumption indicates that - in the mature markets
this figure is as high as 9.36 kgs, while even the -emerging markets total
upto 1.16 kgs. While looking at the consolidated averages -would be
misleading, even the consumption among the potential consumers of
chocolates is extremely low as compared to world average.