100751256 Cadbury Project Autosaved

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PROJECT REPORT ON CADBURY'S MARKETING STRATEGIESSUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION 2009-10 UNDER THE GUIDANCE OF Mrs. MINISHA FACULTY, MAIMS SUBMITTED BY: ANKUSH GUPTARoll no8460 Batch No.(BBA SEM 3rd B Section)

MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIES Affiliated to Guru Gobind SinghIndraprastha University, Delhi PSP Area, Plot No. 1, Sector 22, Rohini Delhi 110086


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Table of contents

S.N.O 1. 2. 3. 4. 5.

CONTENTS Student declaration Certificate from guide Acknowledgement Executive Summary Chapter 1 1.1 Introduction 1.2 Relevence of studies 1.3Objectives of the project

PAGE NO.

6. 7. 8. 9 10

1.4 Research Methodology Chapter 2 Company Profile Chapter 3 Results and Analysis Chapter 4 Suggestions Chapter 5 Conclusions and Limitations Bibliography

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STUDENT UNDERTAKING

This is to certify that I have completed the Project titledCadbury`s marketing stratergiesin Maharaja agrasen institute of management studiesunder the guidance of Ms. MINISHAin partial fulfillment of the requirement for the award of degree of Bachelor of Business Administration at Maharaja Agrasen Institute of Management Studies, Delhi. This is an original piece of work & I have not submitted it earlier elsewhere.

Name of the student ANKUSH GUPTA

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CERTIFICATE

This is to certify that the project titled Cadbury`s marketing strategiesis an academic work done by ANKUSH GUPTAsubmitted in the partial fulfillment of the requirement for the award of the degree of Bachelor Of Business Administration from Maharaja Agrasen Institute of Management Studies, Delhi, under my guidance & direction. To the best of my knowledge and belief the data & information presented byhim/her in the project has not been submitted earlier.

Name of the Faculty Guide Mrs. MINISHA

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ACKNOWLEDGEMENT

This project work, which is my first step in the field of professionalism, has been successfully accomplished only because of timely support of my well wishers.I would like to pay my sincere regards and thanks to those, who directed me atevery step in my project work.

First of all, I would like to express my thanks to Dr. N.K Kakar (director, MAIMS) for giving me such a wonderful opportunity to widen the horizons of my knowledge.

I extend my thanks to my project guide Mrs. MINISHA for her scholarly guidance,constant supervision and encouragement. It is due to her personal interest and initiative that the project work is published in the present form . Last but notthe least, I would also thank all the staff members of MAIMS, friends and parents who have directly or indirectly contributed in making this project a success.It is a tribute for there valuation.

Despite all efforts, I have no doubt that error and obscurities remain that seento afflict all writing projects and for which I am culpable.

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EXECUTIVE SUMMARY

Cadbury is a leading global confectionery company with an outstanding portfolioof chocolate, gum and candy brands. They employ around 50,000 people and have direct operations in over 60 countries, selling the products in almost every country around the world.

In India, Cadbury began its operations in 1948 by importing chocolates. After 60years of existence, it today has five company-owned manufacturing facilities atThane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and 4 sales offices (New Delhi, Mumbai, Kolkota and Chennai). The corporateoffice is in Mumbai. Their core purpose "creating brands people love" capturesthe spirit of what They are trying to achieve as a business. They collaborate and work as teams to convert products into brands. Simply put, They spread happiness!

Currently Cadbury India operates in four categories viz. Chocolate Confectionery, Milk Food Drinks, Candy and Gum category. In the Chocolate Confectionery business, Cadbury has maintained its undisputed leadership over the years. Some of the key brands are Cadbury Dairy Milk, 5 Star, Perk, clairs and Celebrations. Cadbury enjoys a value market share of over 70% - the highest Cadbury brand share inthe world! Their flagship 6


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brand Cadbury Dairy Milk is considered the "gold standard" for chocolates in India. The pure taste of CDM defines the chocolate taste for the Indian consumer.

Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India. For over two decades, they have worked with the Kerala Agriculture University to undertake cocoa research and released clones, hybrids that improve the cocoa yield. Thier Cocoa team visits farmers and advises them on the cultivation aspects from planting to harvesting. They also conduct farmers meetings & seminarsto educate them on Cocoa cultivation aspects. Their efforts have increased cocoa productivity and touched the lives of thousands of farmers. Hardly surprisingthen that the Cocoa tree is called the Cadbury tree!

Today, they are poised in thier leap towards quantum growth. They are a part ofthe Cadbury PLC, world

s leading Confectionery Company , and their moto is to continue to spread happiness!

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CHAPTER 1INTRODUCTION

RELEVANCE OF STUDY Today's Indian chocolate market, an overview

Chocolate consumption in India is extremely low. Cadbury dominates the chocolatemarket with about 70% market share. Nestle has emerged as a significant competitor with about 20% market share. Key competition in the chocolate segment is from co-operative owned Amul and Campco, besides a host of unorganized sector players. There exists a large unorganized market in the confectionery segment too. Leading national players are Parry

s, Ravalgaon, Candico and Nutrine. MNC

s like Cadbury, Nestle, Perfetti, are recent entrants in the sugar confectionery market.Other competing brands such as GCMMF s Badam bar and Nestl`s Bar One have minor market shares.

Chocolate consumption in India is extremely low. Per capita consumption is around 160gms in the urban areas, compared to 8-10kg in the developed countries. In rural areas, it is even lower. Chocolates in India are consumed as indulgence andnot as a snack food. Indian chocolate market grew at the rate of 10% pa in 70

sand 80

s, driven mainly by the children segment. In the late 80

s, when the market started stagnating, Cadbury repositioned its Dairy Milk to any time productrather than an occasional luxury. Its advertisement focused on adults rather than children. Cadbury

s Five Star, the first count 8


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chocolate, was launched in 1968. Due to its resistance to temperature, the chocolate has become one of the most widely distributed chocolate in the country.

In the early 90 s, high cocoa prices compelled manufacturers to raise product prices and reduce their advertisement budget affecting the volumes significantly.The launch of wafer chocolates Kit Kat and Perk spurred volume growth in the mid90

s. These chocolates positioned as snack food rather than on the indulgence platform compete with biscuits and wafers. A strong volume growth was witnessed in the early 90

s when Cadbury repositioned chocolates from children to adult consumption. The mid 90

s saw the entry of new players like Nestle, which created categories like wafer chocolate and spurred growth.

Chocolate Manufacturing

Cocoa, common name for a powder derived from the fruit seeds of the cacao tree and for the beverage prepared by mixing the powder with milk. When cocoa is prepared, most of the cocoa butter is removed in the manufacturing process. After thefat is separated and the residue is ground, small percentages of various substances may be added, such as starch to prevent caking, or potassium bicarbonate toneutralize the natural acids and astringents and make the cocoa easy to dissolve in liquids. Cocoa has a high food value, containing as much as 20 percent protein, 40 percent carbohydrate, and 40 percent fat. It is also mildly stimulatingbecause of the presence of Theo bromine, an alkaloid that is closely related tocaffeine.

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The processing of the cacao seeds, better known as cocoa beans, is complex. Thefruit harvest is cured or fermented in a pulpy state for three to nine days, during which the heat kills the seeds and turns them brown. The enzymes activated by fermentation impart the substances that will give the beans their characteristic chocolate flavor later during roasting. The beans are then dried in the sun and cleaned in special machines before they are roasted to bring out the chocolate flavor. They are then shelled in a crushing machine and ground into chocolate.During the grinding, the fat melts, producing a sticky liquid called chocolateliquor, which is used to make chocolate candy or is filtered to remove the fat and then cooled and ground to produce cocoa powder. The beans are sold in international markets. African countries harvest about two-thirds of the total world output; Ghana, Cte d

Ivoire, Nigeria, and Cameroon are the leading African cocoa producers. Most of the remainder comes from South American countries, chiefly Brazil and Ecuador. The crop is traded on international commodity futures markets. Attempts by producing countries to stabilize prices through international agreements have had little success.

Types of chocolate

Sweet chocolate, usually dark in colour is made with chocolate liquor, sugar, cocoa butter, and such flavourings as vanilla beans, vanillin, salt, spices and essential oils. Sweet chocolate usually contains at least 25-35% chocolate liquorcontent. The ingredients are blended, refined (ground to a smooth mass), and conched. Viscosity is

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then adjusted by the addition of more cocoa butter, lecithin (an emulsifier), ora combination of both.

Milk chocolate is formulated by substituting whole milk solids for a portion ofthe chocolate liquor used in producing sweet chocolate. It usually contains at least 10% chocolate liquor and 12% whole milk solids. Manufacturers usually exceed these values, frequently going upto 12-15% chocolate liquor and 15-20% whole milk solids. Milk chocolates, usually lighter in colour than sweet chocolate, aremilder in taste because of its lower content of bitter chocolate.

Products And Segmentation

Chocolate market can be segmented as follows:

Large units bars/ slabs,

Count lines, Panned varieties, Small value added units.

Confectionery products can be categorized as

Hard boiled sugar candies, lollipops, jellies Toffees Chewing candies Breath freshners, digestives, throat relievers

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Gum based products are

Chewing gum Bubble gum

TABLE 1.01

Chocolates and Confectionery Industry Chocolates Sugar confectionery Gum based

Bars/ Slabs

Hard boiled

Chewing gum

Count lines

Toffees

Sugar coated chewing gum

Panned (Gems)

Soft chew

Bubble gum

Eclairs

Jelly candies

Assorted

Deposit candies

Lollipops

Mints, etc.12


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Chocolate Segmentation

Chocolate market can be segmented into moulded chocolates, count chocolates, panned chocolates, clairs and assorted chocolates.

SHARE OF CHOCLATES IN THE MARKET

TABLE 1.02

Type of chocolates Moulded Count Eclairs Panned Others

% Share in chocolate market 37% 30% 20% 10% 3%

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SHARE OF COCLATE IN THE MARKET

CHART 1.01

Others Panned 3% 10% Eclairs 20% Moulded 37%Moulded Count Eclairs Panned Others

Count 30%

Moulded chocolates, like Dairy Milk, Truffle, Amul Milk Chocolate, Nestle Premium, Nestle Milky Bar, is the largest segment accounting for more than 1/3rd of the market.

Count lines (5 Star, Perk, Kit Kat, and Picnic) are the second largest segment accounting for 30% of the volumes. The Count Line segment has been growing at a faster pace during the last three years driven by growth in Perk and Kit Kat volumes. Panned products include Cadburys

Gems, Nutties, and Nestl`s Marbles. In panned segment, Cadbury dominates with over 95% market share.

clairs (droplets of hard caramels with soft chocolate fillings) are a low unit priced product. Cadbury clairs was launched in 1972. Parle Products launched Melodyin 14


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1991. Nestle is a recent entrant in the segment. Nutrine

s clairs has done extremely well in the market.

Chocolates Market Share

Cadbury is the market leader in all categories with over 65% market share. Its main competitor is Nestle India. Nestle has identified chocolate and confectionery as one of the thrust areas for growth. It has launched some of its international brands like Quality Street, After Eight, and Lions in India. In 1998, Cadburylaunched a new count bar Picnic. Nestle immediately followed it with the launchof Charge. Gujarat Co-operative Milk Marketing Federation (GCMMF), which is normally known as Amul and Central Arecanut and Cocoa Manufactures and Processors Co-operative (CAMPCO) are other two significant players. Both are local manufacturers.

MARKET SHARE

TABLE 1.02

Moulded segment Cadbury Nestle GCMMF 70% 23% 5%

Count segment Cadbury Nestle Campco 76% 20% 3%

clairs Cadbury Nutrine Nestle 49% 37% 12%

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Others

2%

Others

1%

Parry

s Others

1% 1%

Confectionery

Confectionery, processed food based on a sweetener, which may be sugar or honey,to which are added other ingredients such as flavorings and spices, nuts, fruits, fats and oils, gelatin, emulsifiers, colorings, eggs, milk products, and chocolate or cocoa. Confectionery, usually called candy in the United States, or sweets in Great Britain, can be divided into two kinds according to their preparation and based on the fact that sugar, when boiled, goes through different stagesfrom soft to hard in the crystallization process. Typical of soft, or crystalline, candysmooth, creamy, and easily chewed are fondants (the basis of chocolate creams) and fudge; typical hard, noncrystalline candies are toffees and caramels. Other favorite confections include nougats, marshmallows, the various forms of ch

ocolate (bars or molded pieces, sometimes filled), pastes and marzipan, cotton candy (spun sugar), popcorn, licorice, and chewing gum.

Records show that confectionery was used as an offering to the gods of ancient Egypt. Honey was used as the sweetener until the introduction of sugar in medieval Europe. Among the oldest types of candies are licorice and ginger from the FarEast and marzipan from Europe. Candy-making did not begin on a large scale until the early 19th century, when with the development of special candy-making machinery it became a British specialty. In the U.S. the candy industry began to grow rapidly during the mid-19th century with the invention of improved machinery and a cheaper process for powdering 16


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sugar. In 1911 the first candy bars were sold in baseball parks; by 1960 candy bars made up almost half of U.S. confectionery production. By the 1980s annual world production of confectionery totaled many millions of kilograms.

Confectionery Market Share

The confectionery market is highly fragmented with several players with strong regional presence. Leading national players are Nutrine, Parry

s, Parle, Cadbury,Nestle, Ravalgon, Candico, Perfetti, Wrigleys and Joyco India. The entire market can be divided into 7 major categories, namely Hard Boiled Candies(HBC), Toffees, Eclairs, Chewing Gum, Bubble Gum, Mints and Lozenges. While HBCs form 51% ofthe entire market, 18% is formed by toffees and 18% by chewing gum & bubble gumcollectively. Eclairs form just 5% of the entire market. Mints and Lozenges form 4% and 3% of the market respectively.

Nutrine with a strong base in southern India has emerged as the reigning numberone player in the sugar confectionery market with 24% share. Over last one yearor so it has launched various products in the sugar confectionery market. It isthe market leader in hard-boiled confectionery as well as toffees. It has shareof 37% in eclairs market and is reigning at second position behind Cadbury

s. Nutrine gets around 50% of its turnover from southern India, 20% from Eastern region and rest equally from westerns and northern region. Its biggest brand is Mahalacto followed by Asay and Kokonaka respectively. Total tonnage sold by Nutrinein the confectionery market is around 36650 tonnes.

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The second largest player, Parle has strong presence in orange candies (hard boiled) supported by its Melody toffees, Mango Bite and Kismi Toffee bar. Besides this the company also has brands like Rola Cola, Poppins, Peppermint etc. in itsportfolio.It has market share of 16% in the total confectionery market with a tonnage of 16800 tonnes. It is number two in both HBC and Toffee market with 30% and 21% market share respectively.

Parry

s has emerged as the third largest player in the market with 13% market share and a tonnage of 14500 tonnes.The company has brands like LactoKing, CoconutPunch, Madras Cafe, Coffy Bite etc. in its portfolio. Though in the over all confectionery market it is at number three, it is at par with Parle in toffees market with 21% share.

Cadbury has been one of the leaders with Cadbury eclairs with chocolate inside.It was the most successful in 1972 when it was launched because of its initial introductory price of 25 paise and was instant hit. It continues to be one of thebiggest brands. Cadbury made a foray into the sugar confectionery segment withGoogly, a hardboiled sweet in late 1996.Googly the tangy, fizzy candy, Cadbury took the market by surprise and marked the entry of Trebor into the fast growingIndian market. The product is sold under license from Trebor Bassett, UK. Googlywas extended nationally in early 1997. Cadbury has also launched Mocka, a coffee based sugar confectionery.

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SHARE IN SUGAR CONFECTIONERY MARKET

TABLE1.04

Company

Market share (%) Major brands Mahalacto, Kokonaka, HoneyFab, Aam Ras, Chuma- Chuma, Gulkand, Funda, Gum Yum,

Nutrine

24 Ole, Nutrine Eclairs,SuperStar, Caramella, Wild Coffy, Dishum, Aasay,Naturo,Fruit Bar Melody, Mango bite, Kismi, Poppins, Rola

Parle

s

16 cola, LuxDairy, Peppermint, Rosemint Coffy Bite, Lacto king, Coconut punch,

Parry

s

13

Caramilk, Madras Cafe, Soft-Spot, Flavoured Candy, Mango, Sunshine, Shakti, Pineapple Googly, Mocka, English toffee,

Cadbury

s

11 Frutus, Gollum, Eclairs, Pops. Polo, Allen

s Splash, Soothers, Toffo Butter,

Nestle

8 Fruit Rings, Fox

s Pan pasand, Mango mood, Coffee break, Hi-

Ravalgaon

7 soft, Supreme, Cherries, Juicy

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Company Dabur P&G Warner Lambert

Market Share 3% 2.5% 2.5% Hajmola Vicks

Major brands

Halls, Chiclets, Clorets

Anti-cold/OTC brands such as Halls, Vicks, Clorets, etc are increasingly being sold on the fun positioning rather than for their medicinal properties, competingdirectly with other confectionery brands. Halls and Vicks are available in various flavours.

SHARE IN SUGAR CONFECTIONERY MARKET CHART 1.02

Others 21% Ravalgaon 7% Nestle 8% Cadbury

s 11%

Nutrine 24%

Parle

s 16% Parry

s 13%

Nutrine Nestle

Parle

s Ravalgaon

Parry

s Others

Cadbury

s

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Financial Analysis

Cadbury India net profit at Rs 190 million.

Mumbai:

Cadbury India Ltd has posted a net profit of Rs 190 million for the quarter ended 16 June 2008 as compared to Rs 93.60 million for the quarter ended 17 June 2007.

The total income has increased from Rs 1,206.80 million for JQ07 to Rs 1,363.40million for JQ08. The other income for the current quarter is at Rs 127.70 million (corresponding quarter last fiscal: Rs 21.90 million) out of which Rs 107.70million is on account of the profit on sale of excess immovable property at Thane, Maharashtra.

Cadbury had sold the land near its factory at Thane for Rs 11 crore early this year. The company says it has struck an agreement with Kalpataru Properties, Thane, for selling the land, which measured about 27,520 square metres. The deal helped Cadbury unlock the value of its investments and helped it to shore up its bottomline.

Recently Cadbury India also refurbished its old office block in Mumbai and is now planning to lease out the extra space available after the renovation, with a v

iew of earning some funds.21


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Cadbury India has three factories, which it operates on its own, while three other facilities are run through arrangements with third parties.

To overcome the negative impact of sluggishness in the fast-moving consumer goods market on its performance, the company undertook cost-cutting exercises over the past one year, say analysts. As a future strategy, it plans to reduce manufacturing and supplychain costs.During the past few months, Cadbury India had offered a voluntary retirement scheme to 29 employees in order to bring down costs.

Cadbury recently hiked its stake in the Indian company to 90 per cent by buyingout around 39 per cent of the public shareholding. Cadbury India has already made an application for delisting.

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Cadbury India Ltd Brief Financials (in Rs. Mn.) Detailed Quarterly TABLE 1.05 31-Dec-2006 Period ending (months) 28-Dec-2008 (12) 29-Dec-2007 (12) (12) Net sales Other Income Total Income Cost of goods sold OPBDIT PAT Gross Block Equity capital EPS (Rs.) DPS (Rs.) BV (Rs.) P/E range (x) Debt / Equity (x) Operating margin (% of OI) Net margin (% of OI) 7298.11 93.32 7391.43 6293.08 1098.34 456.50 3267.69 357.10 12.78 2.00 99.78 0.0 - 0.0 0.03 14.9 6.2 6846.58 11.45 6858.03 5683.02 1175.01 727.21 2860.47 357.10 20.36 2.00 89.71 0.0 - 0.0 0.04 17.1 10.6 6258.34 13.98 6272.32 5163.55 1108.77 595.40 2690.13 357.10 16.67 6.00 70.73 0.0 -0.0 0.03 17.7 9.5

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OBJECTIVE OF THE PROJECT 1. The study of pricing of different products of Cadbury`s and techniques used to maximize the profit. 2. The study of strategy of Cadbury of increasing their profit by introducing new product. 3. The study of comparison of Cadbury and its competitors competitors. 4. The study of cadbury`s place inmarket. 5. The study of ongoing battle in the confinery market. 6. The difficulties, which Cadbury had faced, in past years

.

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RESEARCH METHOLOGY

It refers to the method adopted to collect the relevant data and other information, which forms the basis of the thesis writing. So for the effective writing ofthe thesis report, the data must be quality oriented. My research is divided into two stages:

STAGE I: Data Source. Secondary Data- Secondary data represents information thatalready exists somewhere, having been collected for another purpose. The secondary data sources that came to be utilized by me in these were as followsI Internal Sources- In-house magazine - Annual Reports of the banks - Corporate magazines etc II. External Sources- British counsil library - college library - Internetservices STAGE II: Analysis In this stage all the collected data had been analyzed and then a Report had been written.

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LITERATURE REVIEW Cadbury

s holds its price, despite its troubles Independent, The (London), Nov 17, 2006 by Andrew Dewson

Some traders are convinced that something is going on at Cadbury Schweppes. Despite a "sell" recommendation from the broker Goldman Sachs on Wednesday and yesterday

s confirmation of an investigation into alleged accounting malpractice at its 50 per centowned Nigerian operations, the shares still managed to close in positive territory.

The Nigerian operation is a tiny part of Cadbury

s business, but the market never likes to get wind of accounting problems. EMI Group shares lost more than 15 per cent when it discovered accounting fraud at its Brazilian operations three weeks ago - the shares have still not recovered.

Cadbury

s closed 5p firmer at 532p, valuing the group at more than [pound]15bn,including debt. The word among traders is that Cadbury

s is poised to face a take over, most likely from a private equity group, in what would be the largest ever UK buyout. Traders said a change of management might be the best way for it to move forward and that could mean an attempt to take it into private hands.

The insurance sector remained in focus following Legal& General

s promise to return [pound]1bn to investors and a round of corporate activity speculation. The Swiss investment bank UBS raised its target for the shares to 165p as it reiterated its "buy" advice, sending the shares 3.25p better to 149.75p. Meanwhile, Roya

l& SunAlliance firmed another 1.5p to close at 153p as bid talk continued to dothe rounds. 26


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It has been five years since shares in Aggreko traded at 400p; the power supplygroup

s stock collapsed to 100p in late 2001, but the turnaround looks to be complete. A bullish trading update yesterday surprised even the most upbeat analysts. ABN

Amro, Citigroup and Evolution Securities published upbeat notes as the shares climbed 19p to close at 404p. Shares in the London Stock Exchange had another badday on the back of news that a consortium of investment banks is putting together a rival exchange. The shares fell through 1,200p for the first time since thebeginning of September before a late afternoon rally saw the stock close 4p worse at 1,230p.

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CHAPTER 2COMPANY PROFILE

Throughout history chocolate has been associated with romance and sharing. Todaythe richness and smoothness of Cadbury chocolate is what makes it one of the world

s favorite treats.

Discover everything here that you want to know about Cadbury and chocolate, fromhistorical facts to delicious recipes. You`ll also find facts about our excitingnew product such as Cadbury snaps and Cadbury dairy milk wafer.

Think delicious chocolate, think Cadbury.

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History of the company Cadbury has been synonymous with chocolate since 1824, when John Cadbury opened his first shop, establishing a flourishing dynasty that today provides the world with many of its favorite brands of chocolate.

Learn about the fascinating history of chocolate: How cacao is the Mayan word for God Food`; when and how chocolate was first introduced to Europe; how xocolatl a itter frothy drink, beloved by Montezumamade the transaction into food centurieslater, how it`s reputation for heightening pleasure made it the stuff of myth andlegend.

Discover the history of Cadbury, from its social pioneering to the perfection ofthe

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recipe for Cadbury Dairy Milk; first launched in 1905, and still a market leadertoday. Find out all there is to know about making chocolate, and amaze yourselfwith the brand stories and brand timeline that show how many Cadbury brands have been favorites since the early 1900s

When chocolate finally reached England in the 1650s, the high import duties on cocoa beans meant it was a drink only for the wealthy. Chocolate cost the equivalent of 50-75 pence a pound (approximately 400g), when pound sterling was worth considerably more than it is today. Gradually chocolate became more freely available. In 1657, London

s first Chocolate House was opened by a Frenchman, who produced the first advertisement for the chocolate drink to be seen in London:

The history of Cadbury as manufacturers of chocolate products in Birmingham dates back to the early part of the 19th century, when John Cadbury opened a shop inthe centre of the city, trading as a coffee and tea dealer. Soon a new sidelinewas introduced - cocoa and drinking chocolate, which he prepared himself usinga mortar and pestle. His lifelong involvement with the Temperance Society led him to provide tea, coffee and cocoa as an alternative to alcohol, believed to beone of the causes of so much misery and deprivation amongst working people in Britain at that time.

Fashionable chocolate houses were soon opened where the people could meet friends and enjoy various rich chocolate drinks, many of which were rather bitter to taste, while discussing the serious political, social and business affairs of the

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The Cadbury family were closely involved in the evolution of drinking chocolate.From his grocery shop in Birmingham, where he sold mainly tea and coffee, JohnCadbury started preparing cocoa and drinking chocolate, using cocoa beans imported from South and Central America and the West Indies. He experimented with a mortar and pestle to produce a range of cocoa and drinking chocolates with added sugar.

By 1831 the cocoa and drinking chocolate side of the business had expanded, so he rented a small factory in Crooked Lane not far from his shop and became a

manufacturer of drinking chocolate and cocoa

. This was the real foundation of theCadbury manufacturing business as it is today. The earliest preserved price listof 1842 shows that John Cadbury sold sixteen lines of drinking chocolate and cocoa in cake and powder forms. Customers would scrape a little off the block andmix it with hot milk or water. A solid chocolate for eating was introduced by John Cadbury in 1849, which by today

s standards wouldn

t be considered very palatable.

In 1866 George Cadbury (John

s son) brought to England a press developed in Holland by Van Houten. The press changed the face of cocoa and chocolate production, as it was designed to remove some of the cocoa butter, enabling a less rich and more palatable drink to be produced. There was no longer any need to add the various types of flour and Cadbury

s new cocoa essence was advertised as

Absolutely pure...therefore Best

.

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Established by Richard and George Cadbury, two Victorian businessmen with greatindustrial and social vision, Bourneville Village is a story of industrial organization and community planning covering well over a century. It embraces the building of a factory in a pleasant green environment (in stark contrast to the oppressive conditions of the Victorian industrial scene), the enhancement of employees

working conditions and overall quality of life and the creation of a village community with a balanced residential mix (both employees and non-employees).

George Cadbury was a housing reformer interested in improving the living conditions of working people in addition to advancing working practices. Having built some houses for key workers when the Bourneville factory was built, in 1895 he bought 120 acres near the works and began to build houses in line with the idealsof the embryonic Garden City movement. Motivation for building the Bournville Village was two-fold. George Cadbury wanted to provide affordable housing in pleasant surroundings for wage earners. But as the Bournville factory grew, local land increased in value and was ready to fall into the hands of developers. The last thing the brothers wanted was that their

factory in a garden

would be hemmedin by monotonous streets.

Dame Elizabeth Cadbury was involved in the planning of Bourneville with her husband, George. Her memoirs tell us how these plans became reality:

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"When I first came to Birmingham and we were living at Wood Brooke, morning after morning I would walk across the fields and farmland between our home and the Works planning how a village could be developed, where the roads should run and the type of cottages and buildings.

Gradually this dream became reality, houses arose and many of the first tenantsbeing men in Mr Cadbury

s Adult School Class - which met every Sunday morning at8.00am in Bristol Street - who had previously lived in the centre of the city and had never had a garden. Also workers in the factory became tenants.

They too enjoyed their homes in the healthy surroundings, cultivating their gardens, rewarded in many instances by splendid crops of apples from the belt of apple trees which each tenant found at the bottom of his garden."

The consequent availability of cocoa butter led to the development of the smoothcreamy chocolate we know today.

Manufacturing process

Cadbury makes a variety of chocolates for different purposes but the two main types are Cadbury Dairy Milk, milk chocolate and Cadbury Bourneville plain chocolate.

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The taste and texture of Cadbury chocolate are based on long traditions of expertise in recipe and processing unique to Cadbury. Techniques are improving all the time and new technology enables the whole process to be finely tuned to matchevolving tastes and preferences.

Production starts at the Chirk cocoa factory, where the highest quality cocoa beans are processed to produce cocoa mass containing 55% cocoa butter plus extracted cocoa butter, the basis for all chocolate products.

When plain chocolate is made the

mass

goes straight to the Bourneville factoryin Birmingham while the

mass

for milk chocolate production is taken to the Cadbury milk factory at Marl brook, Herefordshire, in the heart of English dairy country.

At the milk processing factory fresh liquid full cream milk is cooked with sugarand condensed to a thick liquid. Cocoa mass is added, making a rich creamy chocolate liquid, which is then evaporated to make milk chocolate crumb. As these ingredients are cooked together the very special rich creamy taste of Cadbury chocolate is produced. 95,000 tonnes of crumb a year are produced at Marl brook to be made into chocolate at the Cadbury chocolate factories at Bourneville, Birmingham and Somerdale, Bristol.

On arrival at the chocolate factory the crumb is pulverized by heavy rollers andmixed with additional cocoa butter and special chocolate flavorings. The amount

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added depends on the consistency of the chocolate required: thick chocolate is needed for molded bars, while a thinner consistency is used for assortments and covered bars.

In the UK up to 5% vegetable fat is added to compensate for variations in cocoabutter, allowing the melting properties of the chocolate to be controlled to a precise standard, and preserving the full taste and texture of the chocolate. Cadbury use carefully selected vegetable oils similar in nature to cocoa butter: African Shea, Indian Sal and Malaysian Palm oils are all part of the recipe.

Both milk and plain chocolate, which has had sugar and cocoa butter added to themass before pulverizing, undergo the same final special production stages, producing the famous smoothness, gloss and snap of Cadbury chocolate.

CADBURY PRODUCTS

Cadbury Perk

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A pretty teenager; a long line, and hunger! Rings a bell? That was how Cadbury launched its new offering; Cadbury Perk in 1996. With its light chocolate and wafer construct, Cadbury Perk targeted the casual snacking space that was dominatedprimarily by chips & wafers. With a catchy jingle and tongue in cheek advertising, this

anytime, anywhere

snack zoomed right into the hearts of teenagers.

Raageshwari started the trend of advertising that featured mischievous, bubbly teenagers getting out of their

stuck and hungry

situations by having a CadburyPerk. Cadbury Perk became the new mini snack in town and its proposition "Thodisi pet pooja" went on to define its role in the category.

As the years progressed, so did the messaging, which changed with changes in theconsumers way of life. To compliment Cadbury Perk s values, the bubbly and vivacious Preity Zinta became the new face of Perk with the

hunger strike

commercial in the mid 90

s.

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In the new millennium, Cadbury Perk moved beyond just owning

hunger

to a "Kabhi bhi kaise bhi" position, because the urge for Cadbury Perk could strike anytime and anywhere.

With the rise of more value-for-money brands in the wafer chocolate segment, Cadbury Perk unveiled two new offerings - Perk XL and XXL.

The temptation to have more of Cadbury Perk was made even greater with the launch of Cadbury Perk Minis in 2003 for just Rs. 2/-

In 2004, with an added dose of

Real Cadbury Dairy Milk

and improved wafer

, Perk became even more irresistible. The product was supported in the market with anew look and a new campaign. The advertisement spoke of the irresistible aspectof the brand, with

Baaki sab Bhoola de

becoming the new mantra for Cadbury Perk.

Did you know: Cadbury Perk advertising has been a launch pad for Bollywood stars- Preity Zinta, Raageshwari, Gayatri Joshi and Amrita Rao, were all Perk modelsbefore they made it big on cinema screens.

Cadbury Five Star

Chocolate lovers for a quarter of a century have indulged their taste buds witha Cadbury 5 Star. A leading knight in the Cadbury portfolio and the second large

st after Cadbury37


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Dairy Milk with a market share of 14%, Cadbury 5 Star moves from strength to strength every year by increasing its user base.

Launched in 1969 as a bar of chocolate that was hard outside with soft caramel nougat inside, Cadbury 5 Star has re-invented itself over the years to keep satisfying the consumers taste for a high quality & different chocolate eating experience.

One of the key properties that Cadbury 5 Star was associated with was its classic Gold colour. And through the passage of time, this was one property that both,the brand and the consumer stuck to as a valuable association.

Cadbury 5 Star was always unique because of its format and any communication highlighting this uniqueness, went down well with the audiences. From

deliciouslyrich, you

d hate to share it

in the 70

s, to the

lingering taste of togetherness

&

Soft and Chewy 5 Star

in the late 80

s, the communication always paid homage to the product format.

More recently, to give consumers another reason to come into the Cadbury 5 Starfold, Cadbury 5 Star Crunchy was launched. The same delicious Cadbury 5 Star wasnow available with a dash of rice crispies.

Cadbury 5 Star & Cadbury 5 Star Crunchy now aim to continue the upward trend. This different and delightfully tasty chocolate is well poised to rule the market

as an extremely successful brand.Cadbury Dairy milk

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The story of Cadbury Dairy Milk started way back in 1905 at Bournville, U.K., but the journey with chocolate lovers in India began in 1948.

The pure taste of Cadbury Dairy Milk is the taste most Indians crave for when they think of Cadbury Dairy Milk.

The variants Fruit & Nut, Crackle and Roast Almond, combine the classic taste ofCadbury Dairy Milk with a variety of ingredients and are very popular amongst teens & adults.

Recently, Cadbury Dairy Milk Desserts was launched, specifically to cater to theurge for

something sweet

after meals.

Cadbury Dairy Milk has exciting products on offer - Cadbury Dairy Milk Wowie, chocolate with Disney characters embossed in it, and Cadbury Dairy Milk 2 in 1, adelightful combination of milk chocolate and white chocolate. Giving consumers an exciting reason to keep coming back into the fun filled world of Cadbury.

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Our Journey:

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 ora 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

tothe

kid in all of us

. It appealed to the child in every adult. And Cadbury Dairy Milk became the perfect expression of

spontaneity

and

shared good feelings .

The

Real Taste of Life

campaign had many memorable executions, which people still fondly remember. However, the one with the "girl dancing on the cricket field" has remained etched in everyone

s memory, as the most spontaneous & un-inhibited expression of happiness.

This campaign went on to be awarded

The Campaign of the Century

, in India at the Abby (Ad Club, Mumbai) awards.

In the late 90

s, to further expand the category, the focus shifted towards widening chocolate consumption amongst the masses, through the

Khanewalon Ko Khane

Ka Bahana Chahiye

campaign. This campaign built social acceptance for chocolateconsumption amongst adults, by showcasing collective and shared moments.

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More recently, the

Kuch Meetha Ho Jaaye

campaign associated Cadbury Dairy Milkwith celebratory occasions and the phrase "Pappu Pass Ho Gaya" became part of street language. It has been adopted by consumers and today is used extensively to express joy in a moment of achievement / success.

The interactive campaign for "Pappu Pass Ho Gaya" bagged a Bronze Lion at the prestigious Cannes Advertising Festival 2006 for

Best use of internet and new media

. The idea involved a tie-up with Reliance India Mobile service and allowed students to check their exam results using their mobile service and encouraged those who passed their examinations to celebrate with Cadbury Dairy Milk.

The

Pappu Pass Ho Gaya

campaign also went on to win Silver for The Best Integrated Marketing Campaign and Gold in the Consumer Products category at the EFFIES2006 (global benchmark for effective advertising campaigns) awards.

During the 1st World War, Cadbury Dairy Milk supported the war effort. Over 2,000 male employees joined the armed forces and Cadbury sent books, warm clothes and chocolates to the front.

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Cadbury

s big Bytes

Kuch meetha ho jaye suggests Cadbury India, its brand ambassador Amitabh Bachchan smiling down the hoardings lined along Mumbai s Marine Drive right down to thecompany

s corporate head office at Mahalakshmi. While the chocolate major is waiting for Diwali to see a turnaround in its business after the worm`s controversy,at the moment it

s all about driving growth for the category, which has seen adecline since the first quarter of this year.

Being the market leader in chocolates with a 70 per cent share, the company hasattempted to stretch the boundaries within chocolate confectionery. It has alsobeen adventurous in unleashing a brand new category within chocolate early thisyear. Introducing the concept of sweet snacking, it launched Cadbury Bytes in the south with the positioning

Snacking ka meetha funda.

The product is a crunchy wafer pillow with a choco-cream centre and is being rolled out nationally.

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Explaining the need to introduce this new category, Bharat Puri, Managing Director, Cadbury India, says, "While we were sure of our core competencies, there wasneed for innovation to deliver double-digit growth. What we found was that we were underrepresented in the area of snacking on the go and that there was a needfor a light crunchy snack." While entry into salted snacks was ruled out, sweetsnacks were the obvious choice, and Bytes is unique to the chocolate major

s Indian portfolio.

Getting the right product and packaging was a challenge for the company. It hassubcontracted the product to get the volumes and is poised for a national launch. Adds Puri, "After all this was the first category anywhere in the world that Cadbury was entering and we did not have the expertise. So the best way was to test-market the product and today we find that it has already bagged five per centof the chocolate market."

The company has no apprehensions of cannibalization of its chocolate brands. Itbelieves that while its chocolates are more of indulgence products, Bytes is about snacking when one is hungry and can be treated as a snack in between meals.

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In the past when Cadbury tried out a biscuit brand, Chocobix, there was fear about some amount of cannibalization. After all, it was simply a biscuit coated inchocolate, and was perceived to be another chocolate brand in Cadbury

s portfolio.

Stresses Puri, "Cadbury Bytes is adjacent to chocolates and in the markets thatwe have launched it, there has been no cannibalization. Chocolates is largely anindulgence product while Bytes is about between-meals snacking. A product whichis consumed when one is feeling hungry or peckish."

Another thrust area Cadbury has been re-evaluating is confectionery. While growth rates in this segment are healthier compared to chocolates, it has always beena difficult market 44


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to crack. Cadbury

s own experiences have led it to withdraw certain brands but now with Warner

s Lambert

s international kitty under its fold, there are chancesof reconsidering the segment once again.

"Through the acquisition of Warner Lambert, there is a great set of brands already available to us. We are still examining which are the right brands for the Indian market," says Puri. Cadbury has already identified Halls as the strongest brand in Warner Lambert

s portfolio and re-launched the brand early this year. Adds Puri, "Halls was not doing well for a while so we re-launched it this year. When you have the existing assets, it is necessary to get them right first. Hallsis the first brand that we have revived and it is now doing well."

In April 2003, Cadbury India s foreign parent acquired Pfizer s interests in theconfectionery business for $4.2 billion. That included the Warner-Lambert product portfolio, known best for Halls, Clorets and Chiclets. The acquisition is nowpoised to become a growth area for Cadbury India, whose confectionery brands include clairs and Googly. But instead of selling confectionery through its existing chocolate network, Cadbury has set up an entirely new network.

While Halls has been revived with new packaging, there has been no change in thestatus of its other brands. Chiclets had been discontinued long before it belonged to Cadbury and Clorets continues to sell with a small franchise. But now Cadbury is looking closely at Warner Lambert

s gums portfolio (it is one of the world

s largest gum manufacturers) and is considering its viability for the Indian

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Dentyne Ice and Trident White have been known for their functional benefits worldwide but steep pricing may be a deterrent to their entry into the country.

"The gum market has not done well in India. But gum has functional properties and is not merely a breath freshener. We are now evaluating whether there is a market for them in India and whether it is going to be worth our while," says Puri.

The confectionery market may be huge in volumes but making money on it remains atough task with its low margins. Governed by price points, one can sell at onlyat a Re 1 or 50 paise unit price. "The issue is not of garnering volumes but making money out of those volumes. The offer should be one which can get you bothtop and bottom lines," states Puri. Having shifted focus from Googly, Cadbury has tasted success with its ageold clairs which continue to bag almost 50 per centof the market.

"There is scope in the market. Our clairs has been growing and this has been evident in our past numbers," claims Puri. At the same time the sugar confectionerymarket is highly competitive and it

s all about finding the right consumer proposition and a business model that can deliver both top line and bottom line growth.

In spite of the new categories being explored by Cadbury, its star brand remainsCadbury Dairy Milk (CDM), which continues to corner almost 30 per cent of the chocolate market. It is followed by brands such as 5-star, perk and Gems. Each of

these has been revamped over the years to generate excitement for the category.For instance, recently Perk was rejuvenated as a crunchier wafer while CDM cameup as a white-and-brown variant in the market.

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"The chocolates category thrives on excitement. It

s all about giving the consumer a choice and taste which they enjoy," adds Puri. For instance, in beverages,in spite of its malted food brand Bournvita, Cadbury decided to introduce a milkadditive brand such as Delite, just to give its consumers the real taste of chocolate. Delite has added flavors such as strawberry and mango and is not expected to encroach upon Bournvita`s shares. According to Puri, "There is still a largesection of people who do not add anything to milk. This will apply to children for whom milk is a problem and having an additive will make it a pleasurable experience."

Making changes in its distribution network, Cadbury split its sales and marketing team between its mass (confectionery) and core brands last year. "Chocolates needed to get retailed at larger and better outlets while all the products belowRs 3 needed a different distribution network," says Puri. Today Cadbury

s distribution network reaches out to six lakh outlets each for its confectionery and chocolate brands. With the worm`s episode behind it, there are other issues bothering the company, especially that of the rising input costs of cocoa, sugar and milk. Although Cadbury has been able to maintain prices, it is still grappling withthe upward trend in prices for its basic raw materials. But its challenge remains that of growing the chocolate market in spite of the odds. Posting a turnoverof Rs 729 crore last year, Cadbury is waiting for Diwali to make a turnaround for both itself and the category which has been through troubled times.

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Pricing battle

Cadbury

s efforts to exploit untapped potential and reach every pocket have a lot to do with outwitting Nestle in the war of the wafers.

Its latest annual report states:

Cadbury is all set to satisfy untapped potential. With brand launches, re-launches and new products, the thrust is on reachingevery individual, satisfying different palates and being within varying budgets. Basing its operations on this vision, Cadbury is charting a new course of action. With the product, place, price and promotion synergies working in tandem, itwon

t be long before we find a Cadbury in every pocket.

This may sound like a reiteration of its earlier claims, but in its heart of hearts, Cadbury India, in spite of being the leader in the chocolate market, is still trying to settle scores with Nestle in the wafer-coated chocolate market, where it has yet to grab a dominant share.

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Creating new launches and extensions may be an ongoing exercise for the Rs 511-crore chocolate multinational, but lately it has set its sights on the Swiss foodgiant, Nestle, which is going through a rough patch with its flagship brand, Kit Kat.

In fact, the wafer chocolate war started in 1995 when both Perk (from Cadbury) and Kit Kat (from Nestle) were launched. It had Cadbury running for cover to protect its largest brand, Cadbury

s Dairy Milk, which it did by extending its positioning on the adult platform. The power-packed campaign from HTA (

Have a Break

) did wonders for the Kit Kat brand at that point of time, but its premium pricing proved to be the main hitch, which has seen its volumes dipping from 15 per cent in 1997 to 9.5 per cent this June, as per ORG-Marg figures.

Despite its share of the volumes coming down, Kit Kat still has a dominant sharein the market while Cadbury

s Perk has seen steady shares between 2000 and 2006with present volume shares at 8.8 per cent, as per ORG-Marg figures. Perk has also stretched itself to variants such as Mango, Strawberry and Mint to generatesome excitement around the brand.

So, while Kit Kat has taken a battering with its premium pricing and image, Cadbury India is taking this chance to put its might behind its wafer category, withPerk and the newly-launched Milk Treat, to beat Nestle in this category.

But then, the price points in the wafer chocolate category were redefined by Nes

tle when it launched Munch at Rs 5 last year. Cadbury had to react to this lowering of price within the wafer chocolates category and had to stretch Perk-to-Perk Slims at Rs 5 to counter it.

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Explains Rajat Sabharwal, an analyst with Kotak Securities,

the growth rates have come to a standstill in wafer chocolates and the market is not buoyant in this category. With Nestle coming out with a lesser-priced brand, Cadbury is responding now. So, despite Nestl`s flagship brand suffering to a certain extent, a flanking brand such as Munch has taken care of the dipping shares.

Highlights Nirav Sheth, an analyst with SSKI Securities,

In the first three years since the launch of Kit Kat, its price rise has been too fast and this has backfired. Today, its price cuts have been prompted by competitive pressures andthe purpose is obviously to gather volumes.

But then, the prices of cocoa havealso been crashing, perhaps helping Nestle absorb the price cuts, which, possibly it would not have been in a position to do otherwise.

Today, Nestle seems content with its strategy and admits that though shares of Kit Kat have dipped, Munch has succeeded in doing what it was expected to do. Says Sanjay Sehgal, Executive Vice-President (Marketing), Nestle India,

Cadbury has reacted to us. In fact, Munch could also be responsible for eating into the shares of Kit Kat along with Cadbury

s own brand. There has been a redefinition of pricing strategy for KitKat and we are hoping it will show.

KitKat continues to sell at a slight premium to Perk though it is now offering aprice discount of nearly 20 per cent, which indicates that Nestle either had great margins on the brand earlier, or is in trouble.

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For Cadbury, Perk is basically a fighter brand being used to flank the mother brand. In fact, the fight is almost similar to what HLL did with Wheel (though itwas not making money on the brand) to counter Nirma in the detergent market while Surf sat pretty as the mother brand in Lever s portfolio.

However, in the case of wafer chocolates, it is not a very happening category since consumers have realized that they are not paying for pure chocolate, but fora chocolatecoated biscuit. For Cadbury, its cash cow will always remain its Cadbury

s Dairy Milk. Both are players fighting with their higher reserves, tryingto establish themselves with a dominant share in the wafer chocolate category.

The new Perk has four wafer layers covered with chocolate and is lighter and crisper. Its packaging has also undergone a change and has used Cadbury s trademarkpurple background with the dark brown wave of chocolate on the wrapper, indicating the presence of pure dairy milk chocolate, to set it apart from a common biscuit chocolate.

Cadbury is targeting a 12 per cent volume share for the Perk brand after this relaunch and expects to overhaul Kit Kat. As Bharat Puri, Director (Sales & Marketing), Cadbury India, declares:

our objective is to be the largest wafer-coatedbrand in the country.

A new campaign has been developed for the relaunch of the brand where through three commercials the differences in the new Perk are highlighted through dialogue

s alluding to match fixing -- Khule Aam Khayiye. Kabhi Bhi. Kahin Bhi.Explains Piyush Pandey, National Creative Director, Ogilvy & Mather,

Through the commercials we are trying to bring out various explanations about the changesin Perk.

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The original campaign of Thodi Si Pet Pooja, Kabhi Bhi, Kahin Bhi will continuethrough another new commercial, of a lady secretly eating Perk on the occasion of Karwa Chauth.

Meanwhile, another wafer chocolate brand that has been targeting kids is Milk Treat, four wafers with butterscotch-flavored cream embedded in milky white chocolate. Though Cadbury did have a white bar, Creamy Bar, it was never treated as amajor brand. Milk Treat is pitted against Nestl`s Milky Bar though it is in a moulded form unlike the former, which is in count form. There are expected to be morevariants under the Milk Treat brand for children. Both Milk Treat and Perk arepriced on par at Rs 10 for 27 gm.

Despite all the action in the chocolate wafer segment, growth for Cadbury has always come from its mother brand - the Rs 117-crore Cadbury

s Dairy Milk which today straddles all possible price points.

Explains an analyst with Motilal Oswal Securities,

For Cadbury, its growth hasbeen coming from Cadbury

s Dairy Milk and what it is doing to Perk is just to gather momentum in the chocolate market which thrives on innovation and excitement.

In 2007, Cadbury recorded an eight per cent turnover growth in chocolate confectionery led by its flagship brand Cadbury

s Dairy Milk, which registered a growthof over 40 per cent. The malted food drinks category reported a growth of 14 pe

r cent while the sugar confectionery segment rose a mere three per cent. The clairs brand grew by a healthy 14 per cent.

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In fact, Cadbury has consciously stayed away from meddling too much with its heritage chocolate brands -- Dairy Milk and 5 Star. Explains Puri,

As a marketer,it is best not to do too much to these heritage brands which already have strong equity. Not that we will never relaunch them but right now they enjoy a strongequity.

But, it did relaunch its heritage brand of malted drinks, Bournvita, last year when it lost share to the white drinks segment. There are plans to extend this strong brand in the future, about which Cadbury does not want to reveal its plansright now. Interestingly, there already exists a similar sounding dark chocolatebrand for adults, Bourneville, in its kitty for many years, which has not seenmuch advertising.

While its chocolate brands are continuing to get broad based, its sugar confectionery brands will get upgraded to higher price points. For instance, its hard-boiled sweets such as Googly, Mocka and English Toffee are gradually being phasedout, while the new brands such as Frutus, a chewy sweet (Re 1) and the jelly, Gollups (Rs 2), are expected to see some healthy growth. Adds Puri,

It is not possible to build brands at such low price points. While there are volumes, the margins are thin in this category.

Besides, the latest Budget has hiked the duties of sugar confectionery productsfrom eight per cent to 16 per cent, which in any case has led to an increase inprices and thereby affected brands such as Googly.

But one thing that Cadbury has realized through all this is that it has got cheaper with more products in the Rs 3-5 category. Its premium brands such as Cadbury Gold, Truffle and even Picnic have never really been accepted in the chocolatemarket. Today, Cadbury

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Cadbury faces prosecution

Bureaus in Mumbai Laboratory tests by the Maharashtra Food and Drug Administration of samples of Cadbury s products confirmed the presence of two dead and one live organisms. The unspecified product was manufactured by Cadbury

s factory near Pune.

Cadbury India is now liable to be booked under the provisions of the food adulteration law. Confirming this, FDA Commissioner Uttam Khobargade told Business Standard: "As per FDA norms this is a clear case of adulteration. We will charge the manufacturer. We have not found any instance of this adulteration in the Thaneunit of Cadbury India."

Khobargade added that while the company had offered the plea that faulty storageby a dealer was responsible for the incident, it was the manufacturer

s responsibility to ensure that quality storage conditions were available with the dealers.

In a late night media release, Cadbury said: "We are not aware which samples have been tested by the Food and Drugs Administration. Neither have we received anyofficial report from their office. We would therefore not like to comment untilwe have had a chance to see the formal report. However, we have checked the relevant factory control samples and have found them to be of good quality and freeof any traces of infestation."

On October 3, acting on a consumer complaint, the Maharashtra FDA seized stocksof Dairy Milk chocolates in Maharashtra. A consumer found worms in a Dairy Milkchocolate bar, bought from a shop in Mumbai

s western suburb of Andheri.

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Cadbury Dairy Milk, the flagship brand, contributed 30 per cent to the company

sRs 687.30 crore (Rs 6.87 billion) turnover in 2002.

More infested Cadbury chocolates found

Ten Cadbury chocolate bars were on Monday sent to the Maharashtra Food and DrugAdministration laboratory in Dadar, Mumbai, for testing whether they contained worms.

The move came three days after the state government expressed satisfaction at the

hygienic condition

being maintained at the manufacturing unit of Cadbury.

FDA sources said the chocolates, from a shop in Kurla, central Mumbai, were handed over to police, who in turn deposited them with the FDA at around 1530 IST.

The chocolates were found to have holes in them, they said. On October 10, Minister of State for Food and Drug Administration Anil Deshmukh had said that the judiciary would decide whether to prohibit the sale of the seized stock.

Meanwhile, FDA Commissioner Uttam Khobragade alleged that Cadbury officials weretrying to put political pressure on him.

But "I will not come under any political pressure", he said.

Khobragade said, "Instead of admitting their fault, Cadbury are saying that it

sdealer

s fault. Why are they forgetting that those are their dealer so it

s their responsibility to make the product safe?"

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He also said he would not visit the Cadbury factory. "I have no business to visit their factory. What I want is that the products coming into the market shouldbe perfect."

Asked if it was lobbying the government, a Cadbury official told rediff.com: "Wereiterate that we will continue to cooperate with the authorities."

She said the company was confident that "our products are of the highest standards".

Asked why Cadbury had not followed the FDA commissioner

s suggestion to withdrawits products from the market and repack them, she said, "As a part of our standard procedure we regularly take back any damaged or date expired stocks back from our retailers."

She said the company had not received any intimation about a case being registered against it. "However, we will continue to extend all cooperation to the authorities because like the FDA, Cadbury is also conscious of its commitment to society in general and consumers in particular."

Regarding Deshmukh

s visit to the Cadbury plant, she said the minister "inspected the hygiene standards and manufacturing practices adhered to" by the company.

She admitted the controversy would affect the sales during the festival season.

"However, we would like to reiterate that all through the 55 years of leadershipin India, Cadbury has remained synonymous with chocolates and we have remainedcommitted to high quality and consumer satisfaction.

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Cadbury

s loss is Amul

s gain

As Cadbury India finds itself mired in the worm`s controversy, Gujarat Co-operative Milk Marketing Federation, which makes Amul chocolates, has witnessed a surgein sales.

After selling 60 tonnes of chocolate in September, the company was on course toreport sales of 150 tonnes in October and had projected sales of 250 tonnes in November, a GCMMF executive told Business Standard.

In Mumbai, which accounts for almost 10 per cent of the 4,000 tonne, Rs 650 crore (Rs 6.50 billion) a year chocolate market in India, the company plans to raiseits market share from 2 per cent in the beginning of October to 15 per cent bythe end of the month.

"We will sell 20 tonnes this month in Mumbai, against only 2 tonnes in October last year," the GCMMF executive said.

According to the executive, while 20 per cent of the growth in Amul

s sales in recent days has been because of the Cadbury factor, the recent brand launches bythe company and the increased focus of GCMMF on chocolates have contributed 40 per cent each to the rise in the numbers.

In an attempt to boost sales, the company has launched three new chocolates in M

umbai under the brands Fundoo, Bindaas and Almond Bar. While the first two havebeen priced at Rs 10 for a 30 gm stick, Almond Bar carries a price tag of Rs 10for a 35 gm chocolate.

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As a result, the company

s festival season pack "Rejoice" now comes with six chocolates in the city, up from three during the festive season last year.

"A national launch of the three brands is likely to happen in a month s time," the official added.

Encouraged by the rising numbers, GCMMF has drawn up plans to make its chocolatebusiness a separate division of the company.

"We think that the business requires a special focus and this is the best way todo it," the official added. Cadbury India is the largest player in the Indian chocolate market, followed by Nestle India and Amul.

Cadbury bids to worm way into public good books with Big B endorsement

The Big B is going to promote the Big C in the chocolate business - Cadbury in India. Indian cine superstar Amitabh Bachchan has signed on to become the brand ambassador of the chocolate major for two years.

AB will play a pivotal role in all communication relating to Cadbury

s productsand brands, be it in print, on television or the great outdoors, the company

s managing director Bharat Puri has been quoted as saying in media reports

Cadbury India Ltd has announced that mega star Amitabh Bachchan will be the comp

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He will endorse and promote Cadbury chocolates for a period of two years. As brand ambassador, he will play a key role in brand and product communication on television, in print and outdoor media.

Cadbury has launched a strengthened, new

purity sealed

packaging for Cadbury Dairy Milk. The new packaging for 13g (Rs 5) is double wrapped for maximum protection. The chocolate is wrapped in aluminum foil and enclosed in a poly flow pack, which is completely sealed on all sides. In the second phase, the larger Cadbury Dairy Milk packs will come in poly-coated aluminium foil, which will be heat-sealed and then wrapped in the branded outer package. Both these steps are a

first ever

in chocolate packaging in India. Amitabh Bachchan is Cadbury brand ambassador.

Cadbury India Ltd has announced that mega star Amitabh Bachchan will be the company

s new brand ambassador.

He will endorse and promote Cadbury chocolates for a period of two years. As brand ambassador

"Over the last few months, we have had some cases of infestation due to improperstorage conditions. As a company committed to ensuring that our consumers enjoya pristine bar of chocolate each time, we decided to take steps to reduce dependency on storage conditions to the extent possible," said Bharat Puri, managingdirector, Cadbury India Ltd. "Cadbury will do everything it can to ensure that e

very bar of chocolate that a consumer buys comes full of goodness and rich taste."

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Commenting on Amitabh Bachchan as brand ambassador for Cadbury chocolates, Purisaid, "There is a perfect fit between Amitabh Bachchan and Cadbury chocolates -their timelessness, and the love and trust they both share with the people across India, makes this an ideal partnership.

Moreover, Mr Bachchan has a universal appeal that extends to everyone from 6 to60, just as our chocolates do. We believe his endorsement of Cadbury Dairy Milkwill go a long way towards our objective of increasing chocolate consumption among all ages of consumers."

Amitabh Bachchan said, "Most of you may not know this, but I have been a brand ambassador for Cadbury for the last 55 years. Only, now it is official. Bringingsmiles, spreading happiness and joy amongst millions of people in India is whatCadbury and I shall be continuously working towards."

The new 13g (Rs 5) Cadbury Dairy Milk packaging is currently available only in Maharashtra and the national rollout will take place over the next three weeks. New packaging for the larger bars of Cadbury Dairy Milk, Fruit & Nut, Crackle, Bournville, Caramello, and Double Deck will be completed in six weeks.

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CADBURY'S PRICING

Organizational structure of Cadbury

Hierarchical structure is based on distinct chain of commands from Managing director to Clerical Support assistants (according to Cadbury). Decisions are made at the top and pass down. Such organizational are usually based on clearly defined procedures and roles.

Cadbury organization is based on more democratic. Decisions are made as a resultof a consultation process involving various members of the organization (Cadbury). Ideas would be discussed and thought through collectively. Within Cadbury organization we can find a Democratic structure, Because Cadbury tends to be foundin situation were it is felt to be important for all members of the organization to understand what they are doing, were decisions require individual initiative, and where member of staff need to work as a team.

How management style, Culture and Organizational structure interrelate Management style, culture and organizational structure interrelate together in Cadbury because they all work together to help the business to achieve its objectives; inorder to lead a successful business.

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Cadbury has strategies for the organization, continually to motivate members ofstaff to support this process, and market change within the organization.

Management style, culture and organizational structure interrelate together in Cadbury because they all work together to:

UNDERSTANDING COSTS AND PRICING FOR SUCCESS We have many ways of pricing our products or services. The first thing to understand is the cost elements that makeup our offering. This unbundling of cost must be known prior to setting prices,however it may have only limited influence in the price finally set. You may deliberately price an element at a loss, and another at a huge profit because the market with bear this. The loss leading offering maybe the carrot required to differentiate you from your competition, make your offering seem fresh and market leading, and your competitions offering, old hat. But if you haven`t done your forecasts and understood your cost models properly before going to market, then theend result of your sales success could be a huge loss.

And in pricing, you need to look clearly at your business goals. Do you want to:- Sell your products or services? - Dominate the market? - Force the market topurchase your product? - Have fun? You may try different strategies at different

times depending on what result you are after. If you a new to a market, then you may employ an early adopterstrategy to achieve 63


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some presence and reference. Later in the lifecycle, you may use a strategy thatachieves greater returns in a more traditional manner.

With our LINC product in 1980, we identified we had only four potential clients IBM, Burroughs, NCR, and Digital. So we had to prepare strategies, which would achieve the business goals we wanted to establish our company as a developer of good development and deployment environments, and to earn and excellent stream ofprofitable revenue for several years. We sold LINC to Burroughs for US$1 plus the rights to continue manufacturing new feature content for on a predefined costed basis and to provide product support. Thus profitability was guaranteed so long as product quality levels were maintained. So knowing your costs is importantif you wish to position your prices for profitability.

But knowing your costs is not enough. You also need to know all about yourselvesas a company and position your business. You need to: - Know what exactly is your business solution? - Who exactly are your potential clients? - What is your unique customer advantage? - What is your business identity? - What is your elevator statement?

Without this business knowledge, you do not have a hope of pricing your productto meet your business goals and to effectively compete in the market place.

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In my days in the fishing industry, selling Orange Roughy frozen fish fillets, we were one of several players in a market place for a variety of fish that was not a household name but was distinctive. We needed to differentiate ourselves asthe product to be sought after ahead of other fish brands, and competitor products. Our objective was to be the fish fillet provider of choice in the Great Lakes region of the United States of America. We launched our Fletcher Quality Orange Roughy brand at a 10% premium price over our competitors. We launched as thetop quality product, a USA hygienic clean white fish meat (some would say tasteless), in a special display pack. And in a market where everyone delivers late, delivery on time. So our differentiators were top quality, special display pack anddelivery on time. Orange Roughy was a distinctive name. People were amazed thatsuch a good-looking fish fillet could have such a horrid name, yet if we couldget them to try the fish, they would love it and would tell all their neighboursand friends. The name Orange Roughywas a memorable name and by making the fish look in a class of its own in the shop window display pack, we captured a strongmarket. Within a year, Fletcher brand Orange Roughy was commanding a 30% marginand was selling ahead of any other brands.

So knowing your business, your unique customer advantage, who you are, and whatyou are pitching is vital to your success.

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WHAT IS ALSO IMPORTANT IS THE DETAIL OF HOW YOU APPLY YOUR PRICING

In software, the key pricing ingredients we can unbundled are: - Product licence- Support - Training - Documentation - Consultancy

And we are not the only industry that unbundled our investment. The best known unbundled today is the motor vehicle industry where a simple $7995 on the windscreen represents $10,000 plus when you add registration, bullbars, CDStacker, leather trim, electric aerial, insurance, 3 year warranty etc.

In our software industry the best unbundlers I have come across are Oracle. I have never really met anyone who could understand easily what the Oracle purchasecomponents would add up to for a particular configuration. Just as well Oracle ASAP arrived as a fixed price deal to reduce the confusion.

But back to the components, each of these ingredients has its own equation, which sends a message to a prospective purchaser:

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PRODUCT LICENCE could be purchase, lease, and rental, bundled with another element. You will all no doubt remember when OS2 was it and Windows was the small player with a lower level of capability. Microsoft`s master stroke was to almost givetheir Office suite of products away to Windows users to get them to use their Windows operating system and ensure that it became the international leader. SUPPORT in some cases, the cost of a product in insignificant beside the level of support cost, which shows the ability to have an ongoing relationship with a supplier when using a product. In a development, a high level of support content maydenote a low quality initial development. TRAINING in the case of a developmentenvironment such as Jade, VB or C++, people need to be trained to make effectiveuse of your product. It is the concept of a fool with a tool still being a foolunless he/she has effective training in the skills to use the tool. The first introduction course is always justifiable by a company so you can price this well.What businesses struggle with is justifying an Advanced Course. They feel that ifthey are training a developer in a new product, then the developer should be able to pick the balance of the product up by themselves. People such as Microsoftand Cisco have got around this by putting together an Academy programmed including a tiered hierarchy of courses clearly differentiated in content and adding tobecome a package of knowledge. A clever move. DOCUMENTATION nobody reads it butwithout it, no prospective purchaser will purchase your product. So what is itworth to a purchaser? Certainly not what it costs. And if you priced it based upon hours of use by a purchaser, it would be a highly variable commodity. Most treat it as a nominal cost and unbundled it, or pay third party providers

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to build documentation for them. One of the better books I have seen recently isthe Python Cookbook, which is a very easy how tofor their development environment and published by a third party. CONSULTANCY you don`t need it, but if you have it you may make progress much quicker than you would without it. So consultancy should be priced to cover costs and allow a margin. If you do not charge enough,it is likely not to be valued by the client enough.

OTHER ISSUES WITH PRICING THE INTERNATIONAL PRICE In Jade, we decided to get tooclever. We believed the market could bear a higher price in some countries thanin others. So we established NZ, Australian, UK and US pricing. Now, how do youput all this on the website and appear international and professional? The answer is that you can`t. So we didn`t publish a price at all. We have had thousands ofqueries for the price of Jade, but we have no idea how many thousands of hits have just turned away, believing the price was outside their price range. This isnot the case for all products let`s look at the Bentley luxury car. The Bentley Motors website does not list prices. But it is a superb site and if you are looking for the extravagance of a Bentley, then price is not an issue. The site lookslike you pay a fortune and it would be crass to publish a price if you have to ask, then you are unlikely to be a likely purchaser. Jade have learned their lessonand from June 15 this year, Jade comes out at an international price where a development licence is at no charge and different, clearly defined levels of support can be obtained. From June 15, the international price for a Jade developmentlicence is zero dollars.

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OTHER ISSUES WITH PRICING DISTRIBUTOR MARGINS Many product and service sellers leave insufficient money in the pot for the distributor to do what they have to do to be effective. If they don`t have enough margin for market spend, sales activity, and support, then they will not be effective. Too many pricing strategies donot consider the way the product is going to be distributed internationally andwhat the financial position will be of those distributors and resellers doing that task. They are an extension of your sales force so they need to be considered as being a part of your company with appropriate cost structures.

OTHER PRICING OPTIONS PARTNERING For Independent Solutions Vendors developing their own applications, Jade offers clients the option of no end user charges butinstead the option of a royalty on revenue earned from the sale of the application to an end client? MESSY - Another option is a charge for a server product butno charge for client use? This means that changing the configuration will result in changes to end user charges. FIXED - A fixed monthly rental for use of an application? USAGE BASED - Sale of a library package for schools based upon the usage calculated on a multiplier on the number of kids in the school? FIXED FEE PLUS - A support fee for services with a cap over which a premium is paid? SUCCESS BASED - A dollar for every successful car rental processed through an application? Truly sharing in the success of the company

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SERVICE LEVEL OPTIONS Platinum, Gold, Silver, Bronze, pay as you go. It is probably better to sell a service contract up front than to hit clients credit cardswith charges when they are having a tough time with bugs in your product. Makinga change to your price /market position Sometimes the strategies to go from where you are now to where you want to be are very simple. We suggested to the client in Case 1 the successful one that he add a zero on the right hand end of hisprice, rename the product to sound grand, and take it out to market as the enterprise release. He told us it would never work. We struck a deal and he now has anew product, selling extremely well, providing him with good margin which has enabled him to set up a team of international distributors. He is starting his slide to retirement by travelling around the world assisting his distributors to install the application and getting some holidays in nice places on the side. Heis 50 years old. He describes it as a holiday with business, rather than a business holiday.

The second case. With the company who has built a product to help students learnEnglish more quickly and better has changed their market, target distribution,and widened his market. They are now not selling their product to a limited number of NZ English language colleges. They are now promoting their product to students using the English language colleges as their distributors. The deal they now take out is a distribution offer to colleges to make money selling their product. And not just through NZ colleges but as an international offering. They havehad 70


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what is being delivered, and has a vastly better understanding of the elements which make up a successful application implementation. The fourth case is work inprogressat present. This was the company that had set its price based on the report from a Big 5 consultant. Nothing wrong with the report or its accuracy. Butlots wrong with the brief proposed to the consultants as regards the business goals and market positioning the pricing strategy was to assist with. As I mentioned earlier, the pricing strategy for Jade has changed dramatically. Large numbers of pre-alerted international clients were set to download Jade from the Jade website from15 June. Price is only one of the factors that are changing to take Jade from being an internationally boutique product into the realm of being a pervasive and widely used development and deployment environment. Yes, some of thecosts are being unbundled but access to the development environment will be free. I look forward to reporting on the success of this strategy in a year or so. Pricing is an art where if you are challenged with Is your price right?, you can truthfully respond It depends. Pricing is an important key to your business success,but not the only key. Cadbury is going to need all the help it can get in the coming years. Last year the company initiated its major foray into one of the toughest consumer markets in this country: the Rs 1,600-crore sugar confectionery industry. Sugar confectionery contributed 13% to its 1998 turnover, of which 9% came in from the leading brand in the clair market, Cadbury

s clair. So far the confectionery foray has been watchful and conservative. All of that is set to change this year. A spanking new plant in Pune

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(Maharashtra) was set up at a cost of Rs 8 crore to bring in some of its int

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