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A STUDY ON THE CHOCOLATE
INDUSTRY
Market Study of Cadbury India Ltd.
SUBMITED BY:-
LUCKY SINGH
05524001809
BBA(B & I)
3rd
sem
SUBMITED TO:- DEEPTI
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1. INTRODUCTION :-
Purpose of study
Research objectives
Research methodology
2. Companies profile
3. About the topic
4. Analysis of the study
5. Suggestions
6. Conclusion
7. Bibliography
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RESEARCH OBJECTIVES
The basic objective of this project is to perform a thorough market
analysis of the Chocolate Industry and the company Cadbury
India Ltd. along with a detailed analysis of its major product
Cadbury dairy milk. The analysis incorporates ± market
segmentation, company analysis, competitor analysis, market
analysis, corporate strategies and our recommendations.
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RESEARCH METHODOLOGY
Type of Research: - Exploratory and Descriptive.
Sample Units:-Two of the Number One brands in India namely
Cadburys and Nestle, respectively, were chosen on the basis of their
market shares. These two industries were chosen on the basis of the
usage of the products, as the usage of FMCG¶s and is high and noticeable.
Sample Design:- Non-probability sampling was resorted to and the
methods used is Convenience sampling and Judgment sampling.
Samples size:- The total sample size is 109, which includes consumers
of all the two brands, retailers of Cadburys and Nestle.
Data Collection:- Data was collected both from secondary sources as
well as primary data was also collected. A structed questionnaire method
was used to collect primary data. Secondary data was soured from various
published sources which include magazine like A&M, Business India and
Business world. Newspaper like Brand Equality, Brand wagon and The
Times of India were also used. Annual Report of Cadburys and Nestle were
also referred.
Data was analyzed manually and with the help of computer software
EXCEL, to make graphs and pie charts.
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Limitation of the project:-
1. For generalization of the results a study needs to be undertaken
based in a larger sample across different industries.
2. Since the study is confined to Delhi only, the findings cannot be
applied to other parts of the country.
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COMPANIES PROFILE
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 approximately140,000 people and have operations in more than 70 countries.
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,
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Mumbai, Kolkota and Chennai). The corporate office is in Mumbai.
Our core purpose "make today delicious" captures the spirit of what we are
trying to achieve as a business. We make delicious foods you can feel
good about. Whether watching your weight or preparing to celebrate,
grabbing a quick bite or sitting down to family night, we pour our hearts into
creating foods that are wholesome and delicious.
Currently, Cadbury India operates in four categories viz. Chocolate
Confectionery, Milk Food Drinks, Candy and Gum category. In theChocolate Confectionery business, Cadbury has maintained its undisputed
leadership over the years. Some of the key brands in India are Cadbury
Dairy Milk, 5 Star, Perk, Éclairs and Celebrations.
Cadbury enjoys a value market share of over 70% - the highest Cadbury
brand share in the world! Our billion-dollar brand Cadbury Dairy Milk isconsidered 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
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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
advise them on the cultivation aspects from planting to harvesting. We alsoconduct farmers meetings & seminars to educate them on Cocoa
cultivation aspects. Our efforts have increased cocoa productivity and
touched the lives of thousands of farmers. Hardly surprising then that the
Cocoa tree is called the Cadbury tree!
Today, as a combined company with an unmatched portfolio in
confectionery, snacking and quick meals, we are poised in our leap
towards quantum growth. We are the world's No.1 Confectionery
Company. And we will continue to ³make today delicious´!
THREAT AND OPPORTUNITIES PROVIDED BY THE COMPETITORS
First let us examine the threats and opportunities as posed by the form
competitors:
1. Snack Foods
2. Soft Drink
Snack Foods
Organized snack foods market stands at around 35,000 tonnes of the totalmarket of 300,000 tonnes. The major competition to chocolates comes
from traditional Indian snacks and desserts, which are available in the
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unorganised sector. These are available at every nook and corner at very
low prices, which lead to increased usage. A large part of consumer in this
segment has an attitude that chocolate is some junk food from the west.
Organized snack food market can be considered as substitute for
chocolates. According to a recent research on heavy consumer of snack
foods in the organized sector, results suggest that these are the people
who are also becoming heavy consumers of chocolates due to their high
per capita consumption on snack foods and related products. Rather heavy
advertisements and promotions done by International majors like KFC,
Pizza Hut etc. is helping improving the attitude of the consumers towardssnack food in general.
After years of effort and a few hundred crore gone into advertising and
promotions, the category remains pitifully small. One countermanding
factor is guilt. The mother still feels that her children are being fed junk
food, and this guilt factor needs careful handling by the marketers.
Contributions to this change in attitudes are well known. More women areworking, disposable incomes are rising, more Indians are travelling abroad,
the attitudes of retailers and distributors are changing, more people are
trying to keep up more with the Joneses, children are becoming stronger
influencers of purchase decisions and growing exposure to -dare one say
the s-word? -Satellite TV. A rise in the number of double income families
and a change in attitudes will certainly cause a shift towards conveniencegoods.
Soft drinks
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With the onslaught of the fountain soft drinks and the increasing availability
of soft drinks , this category has become increasingly a major threat to the
chocolate category as they vie for the share of the budget spend on
impulse purchases. The Indian soft drink market is estimated at aroundRs.3000 crore and the major players in this market along with their market
shares can be summarized as followed:
MARKET SHARE
Company Brand Market Share
Pepsi ± Cola PepsiMirinda
Others (7 Up, Mangola,Slice, Duke's Soda,Duke's Lemonade
27.1%7.3%
10.3%
Coca - Cola Thums Up
Coca ± Cola
Fanta
Limca
Gold Spot
Others (Bisleri ClubSoda, Rim Zim, Maaza)
16%
10.8%
5%
10%
1.5%
5%
CadburySchweppes
All brands
(Crush, Canada Dry,Campa ± cola, CampaOrange, Campa Lemon)
3.2%
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Cadbury Schweppes Beverages India Ltd (CSBIL), a 100 per cent
subsidiary of non-cola beverages major Cadbury Schweppes Plc, has
chalked out a multi-pronged strategy to increase market shares in this
highly competitive Indian soft drink market. The company will spend Rs. 70crores over the next five years to introduce and establish key international
brands in India and strengthen its distribution and bottling network. In
keeping with the trend in the market, the company has offered its major
brands including the orange drink Crush, and lemon and ginger drink
Canada Dry, to customers in 1.5 litres PET bottles and 330 ml cans in
addition to the conventional glass bottles. CSBIL is also gearing up to
launch the globally popular non-cola orange drink, Dr. Pepper, in India.
The reason that soft drinks are being viewed as a substitute for chocolates
is because
y Soft drinks are increasingly becoming an impulse purchase with
the increasing availability and also ease in the usage pattern
(fountain glasses).
y There is a relatively larger acceptance among adults as far as the
soft drink consumption goes as compared to chocolates.
y There is a widening perception that consuming the cola is the in
thing and leads to a feeling of peer acceptance and group
belonging.
Now we move on to the analysis of the industry competitors of Cadbury¶s
Dairy milk.
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Nestle India Limited
Nestle ended 1997 with a 41% increase in their net profit with Rs. 74.3
crores. The net sales of the company amounted to Rs. 1425 crores, which
is an 18% increase over last year. Out of this, chocolates had a 31%
increase in the sales turnover.
Nestle is a strong player in chocolates worldwide but it entered the Indian
market much later (in 1991) than one of its global competitor Cadbury.
Nestlé¶s initial foray into the Indian market was not very successful. The
problem was in the formulation of the product. They were soft chocolates
with high fat content which were unsuitable to the Indian climate. Also, the
distribution focus had been on the larger cities and urban areas, which
limited their customer base.
It was with the launch of KitKat that the company¶s strategy changed with
respect to both product and distribution. It increased its distribution network
to cover small towns and interiors as well, so as to increase their customer
base. It also modified the formulation of the moulded chocolates to suit the
Indian conditions. The company used three layers of foil packaging so that
KitKat could survive the summer heat.
Today Nestle poses a formidable threat to Cadbury. KitKat has captured a
sizable chunk of the market within a short span of launch. Nestle, as of
1996-97, commands 20% of the market share, with KitKat alone accounting
for 11.5% market share points. Nestle Bar One is another brand with a
market share of 5.5%. Nestle recently withdrew its Nestle Bitter chocolate
brand. The other brands of Nestle are Nestle Milky bar and Nestle Crunch.
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Nestle have also entered the sugar confectionery market, in direct
competition with Cadbury by offering Allen's Splash, and Allen's Koffees,
and Allen's Butterscotch. With eroding margins and increasing competition,
Nestle has also started to look at exports to boost its turnover.
The advertising for the company in India is being handled by Ammirati
Puris Lintas. Nestle has been increasing its advertising budget, with the
1996 figure being Rs. 16 crores.
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ABOUT THE TOPIC
Market Segmentation
This can be done in two ways: Product Forms & Customer Based.
With Respect To Product Forms
There are four major segments in the Indian Chocolate Industry:
Moulded Chocolate Segment
This segment constitutes 50% of the total market.
Cadbury¶s Dairy Milk (CDM) ± Cadbury¶s flagship
brand ± has 50% of this segment market. To position
CDM in this segment Cadbury used the traditional
demographic variables of age, socio-economic
groups and usage intensity. CDM was positioned as
a product that elders (parents) bought for children.
Cadbury has actually associated itself to enduring and emotional values of
love, sharing, parental affection, and reward. Considering that CDM
practically acts as a trend setter for all the brands in this segment, this
limited the positioning of the entire category towards children only. Amul
attempted to expand the category by bringing in teenagers, but it was not
successful.
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The Cadbury brands in this segment are CDM, Fruit & Nut, Crackle,
Bournville. CDM is basically the leading brand here, and the others act as
an endorser basket for the company.
Nestle forms 25% of this segment and the company¶s major brands are
Nestle Classic, Nestle Milk Chocolate and Nestle Crunch.
Today, this segment grows at 40% per annum, and is likely to remain an
important segment for further growth.
Countline Bars Segment
This segment forms 33% of the chocolates market. This segment is mostly
targeted at teenagers.
Major Cadbury brands are 5-Star, Break, Real, Krisp, and Double Decker.
5-Star is doing well here (about 50% of the segment) while the rest of the
brands act as endorser brands.
Nestle has a minor presence in this category with its product Bar-One.
Growth Of A Sub Segment: Chocolate Wafers
Chocolate wafers are the new products being offered by chocolate
companies today in order to expand the market. In 1995, Cadbury and
Nestle launched Perk and KitKat respectively. These were wafer±enrobed
chocolates in a new context and a different benefit offering. Both
chocolates had a snack positioning. Perk offered the anytime
anywhere snack proposition ± µThodi si Pet Puja¶, whereas KitKat
tried to promote snacking through µHave a break, Have a KitKat.
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All of these brands have been used by Cadbury to drive variety, induce
gifting practices and serve to some specific taste preferences. Cadbury
does not advertise these brands. They have been used as flanker products.
The opportunity for growth in this segment is high what with the imminent
entry of multinationals like Mars and Hersheys. This is also likely to pose a
threat to Cadbury, what with its complacency.
Sugar Panned Segment
This segment form 15% of the total market and Cadbury has about 98% of
this segment, its major brands being Gems and Eclairs.
Eclair has been used strategically to foster chocolate consumption among
children as well as adults by offering a tiny µguilt free, eat no more than a
biteful¶ at a convenient price point. (65% of Eclairs eaters are from the
households earning less than Rs. 4000/- per month.)
Gems are still Cadbury¶s primary tool to protect its franchise in the child
segment. It was previously associated in its commercials with theinternational spy character, James Bond. Around 1995, Gems was
repositioned to broadbase its appeal from 3-6 years old to teenagers as
well. However this failed due to the product form which has become deeply
rooted with kids and hence the company has reverted back to the target
segment of kids with a new offering of 'Chocogems'.
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With Respect To The Consumer Buying Power
These are:
1. High income customers (price greater than Rs. 25 for 40 gm.) who will
go in for premium chocolate brands.
2. Middle income customers (price between Rs. 10 ± 25) who are price
sensitive.
3. Children, who are mostly price driven and will consume more of toffees
in the price range of Rs. 0.50 ± 1.
Psychographics And Demographics
This is attempted in terms of the consumers.
1. High income customers ± it is estimated the age group buying the
chocolates will be 22 onwards. The income level is estimated to be
Rs. 8000 per month. The customers are mostly urban, and are mostly
professionals (engineers, doctors, executives, etc.)
The psychographic profile:
They can either be individuals indulging themselves, or they
could be indulging their children. They are inner directed people
who form their own values and norms and believe in not
adhering blindly to social norms. They are somewhat occasion
driven in their buying behaviour.
2. Middle income customers ± it is estimated that the age group in this
segment will be 15 plus. The income level is estimated to be around
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Rs. 5000 per month. The consumers can be urban, semi urban, and
is currently spreading to rural areas.
The psychographic profile: they are likely to be variety seeking in their
behaviour. They are self expressing by nature and inner directed to an extent.
They like to indulge themselves.
3. Children ± the upper age limit is estimated to be 12 years. They
mostly purchase their chocolates with their pocket money. The
consumers can be urban, semi urban, and rural, though their is a
somewhat greater emphasis on urban.
The psychographic profile: they are novelty seeking in behaviour. They are alsofun loving.
THE PRODUCT CATEGORY
Needs satisfied by product category
In its present form chocolate fulfills many needs by satisfying a state of felt
deprivation of some basic satisfactions. They satisfy basic physiological
needs like need for food and also some socio-psychological needs like
belonging, affection, social and aspirational needs. However, not all the
chocolate variants may satisfy all the needs and there may be certain
variants taking care of some specific needs.
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y Food
Hunger
Sweet tooth gratification Taste
Chocolates may be used to satisfy the basic need of hunger. In India
they are neither typically seen as having wholesome and nutritional food
value nor are they perceived as stomach filling. Some of them were
positioned as an instant energy provider but they also were given some
emotional overtones along with the rational appeal of food. Thesnacking concept has just caught up in India with the introduction of
wafer chocolates and there also they are used to satisfy only small
pangs of hunger and are used as a between meal snacks. This concept
has gained more importance and with the launch of Picnic in the last
year, chocolates are now intended to be used as near meal substitute. It
is also used by many users as dessert; however it has still not
substituted the traditional dessert of sweets. Nestle, to counter this has
brought out 'MithaiMagic'. Also, Nestle has already come up with its
chocolate 'After Eight', positioned as a desserts, and we foresee that
with the changing taste if the consumers, this might be a lucrative
market in the future.
y
Belonging: The consumption of chocolates in India is now days seen as
contemporary and trendy. The chocolate consumption is identified with
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the feeling of self-expression and spontaneity. Many young people
nowadays therefore eat chocolates to have a feeling of belonging to a
group which is trendier, free from inhibitions imposed by society. Not
only are the younger people, in the current scenario, chocolates alsotargeted at the child ego state of the adults.
y Affection:
Human being by nature wants to get affection and return it. In India
many parents have traditionally purchased chocolates for their children
to show their love and affection. There was a time when the chocolate
industry was primarily thriving on the satisfaction of this emotional need.
This emotional platform is now being modified to incorporate the rational
platform.
y Social:
There were many people who want to become a part of the strata of
society which is westernized and upwardly mobile, exchange chocolatesas gifts (on festivals). For example, Cadbury was a pioneer in starting
the concept of 'Chocolate Days' and 'Éclair Days' in colleges and
schools, which led to substantial increase in the sales, which enabled
the company to give discounts upto 20%.
y Aspiration:
A segment of consumers who cannot afford chocolates and generallyconsume sugar confectionery, sometimes eat chocolate éclairs (a
product which gives taste of chocolate at far less price) as they aspire to
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eat better things in life like chocolates. This satisfies his aspirational
needs.
Consumer Buying Behaviour In Product Category
The product category comes under Fast Moving Consumer Foods (FMCG)
and the product is generally purchased as a convenience good. The
general characteristics of this product are:
It is a low involvement product, but there are significant differences in various
brands in market. The following matrix may help in studying the behavior of
consumer for this particular product category.
High Involvement Low involvement
Significant differences Complex buying behavior Variety seeking behaviour
Between brands * chocolates
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.
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Potential Chocolate Consumers
Income Groups
(Rs. '000 pa)
Age-groups Total
5 ± 14 15 ± 19 20 ± 24 25 -3
4
Rural
(Millions)
62 ± 86 2.2 0.8 0.7 1.2 4.9
>86 13.5 4.8 4.3 7 29.6
Total 15.7 5.6 5.0 8.2 34.5
Urban
(millions)
62 ± 86 7.0 2.5 2.2 3.7 15.4
>86 18.8 4.9 4.4 7.2 30.2Total 20.8 7.4 6.6 10.8 45.7
Total 36.5 13.0 11.7 19.0 80.2
Using the figures as mentioned in the table above, we can arrive at a rough
estimate of the potential consumers of chocolate in the country. For this
purpose, we have considered the population in the age groups of 5yrs to
35yrs falling in the income -groups having an annual household income of
Rs 62000 and above. The total population in this group is about 80 million
split into 45.7 million urban consumers and 35 million rural consumers.
As the consumption of chocolates is skewed towards the urban consumers,we estimate that 80% of the chocolate consumed is in urban areas. Using
this figure, the per capita consumption for the relevant target populations is
as given in the table below.
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Chocolate Consumption
Share of
Market
Tonnage Relevant
target
population in
millions
Gms per
consumer
Urban
sales
80% 12800 45.7 280
Rural
sales
20% 3200 34.5 40
Total 100% 16000 80.2 200
Comparing these figures to the world average, we feel that there is a very
high potential for the chocolate market.
As eating habits of large part of Indian society (at least 200 million) are
becoming consistent with rest of the world; the category is poised for a
significant growth. With global majors like Mars, Hershey likely to enter the
Indian market, excitement in this category is already high. The Wafer war
between Perk and KitKat in an interesting indication of the times to come
and it reached almost the same intensity as that of the cola wars!! As these
new players and existing companies introduce new type of chocolates,
distinction between chocolates, biscuits, ice cream will become less andmany hybrid products will grow. Along with this the potential to expand the
consumer base by incorporating a wider array of tastes and needs of the
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consumers. Segmentation of market based on consumer age is
increasingly becoming irrelevant. There are expected to be many products
target at specific new segments (e.g. segments on basis of attitude, level of
health consciousness etc.). This is very obvious with the emergingsegmentation policy of using the ego states. We also estimate a shift in
media strategy of various companies. Instead of present use of mass
media, specialized media targeted at different segment (e.g. health
magazine for health for health conscious) will catch fancy of media
planners. At the same time we see an increasing association between the
brands and various highly publicised events in order to increase the brand
equity in the minds of all the stakeholders. Further there will lot of
improvement in packaging and modification of -products as per Indian
conditions. We foresee a trend in the future wherein this innovative packing
can be used as a differentiating factor in order to increase the usage of the
product. We believe that chocolate consumption will percolate down to the
majority of rural India, with the increase in the rural incomes, and lowering
prices and also increasing marketing. Along with this the need to innovately
package one¶s chocolates in such a way so as to enhance consumption, by
making the need to stock it in refrigerators, will be a key driving force to
success. We also see the focus of the chocolate giants slowly shifting to
the large untapped interiors, with the increasingly saturating market in the
urban Aries and also increasing clutter. We feel that the first mover
advantage by monopolising the distribution network will work in greatfavour of the company, and hence recommend Cadbury¶s to move in
before any of the other companies can realise what hit them.
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BIBLIOGRAPHY
Kapferer, Jean-Noel. "S trategic Brand Management " . The Free Press. A
division of Macmillan, Inc. 1992 Edition
Kotler, Philip. " Marketing Management " Analysis, Planning,
Implementation, and Control Prentice-Hall, Inc. Eighth Edition
Aaker, David, et al, "Advertising Management "
Prentice-Hall, Inc. Fourth Edition
Business Line 'Catalyst' ± Thu. Feb 19,1998.
Financial express 'Brand Wagon' ± Fri, Oct. 27, 1995
Internet Sources:
y www.business-standard.com
y www.financialexpress.com
y www.economictimes.com
y www.hinduonline.com
y www.indiaserver.com
y www.expressindia.com
y www.indiainformer.com
y www.cadbury.co.uk
y www.india-today.com/btoday