Marketing Report on Cadbury India ltd

Marketing Report on Cadbury India ltd Cadbury India ltd. began its operations in India 1948 by importing chocolates. After 62 years of existence in India Cadbury enjoys a value market share of over 70 %- the highest Cadbury brand share in the world. The research looks after the various types of analysis such as PEST analysis and SWOT analysis and also contains the Marketing mix of various aspects of the organization. A strategic recommendation is also recommended to the company to increase its sales and to increase its profits and the conclusion it concludes the result of the analysis and its result as recommendation. Cadbury India Limited is a fully owned subsidy of Kraft Foods Inc. with approximately $50 billion, on 2nd February 2010 Kraft foods has sealed its takeover over Cadbury, the combined company is the worlds second largest food company making delicious food products for billions of its consumers in more than 160 countries and employ approximately 140,000 and have operations in more than 70 countries.(bbc,2010) In India, it began its operation in the year 1948 by importing chocolates initially. Today the company has five company owned manufacturing facilities at Thane, Induri(Pune) and Malanpur (Gwalior), Bangalore and Baddi(Himachal Pradesh) and four sales units spread across the country. Presently the company operates in four categories namely Chocolate confectionary, Milk Food Drinks, Candy and Gum category. In the chocolate confectionary business, Cadbury has been the undisputed leader over the years because of its popular key brands like Dairy milk, Perk, 5 star, etc. In the Milk fo od drinks business the companys main product is Bournvita. In the candy segment Halls is the companys product and in the gum segment the product is Bubbaloo. Today with an unmatched portfolio in confectionary, snacking and quick meals it is worlds no.1 Confectionary company (Cadbury India Limited n.d., 2010). The Indian Confectionary Market: The Indian Confectionary Market is estimated at around 223500 tons which is valued approximately at Rs. 41 billion. This market sees a steady growth of 11.5% annually. The market can be segmented into chocolates, sugar boiled confectionary, chewing gums and mints. Cadbury is the undisputed market leader and has a market share of 68% and Nestle being its immediate competition has a market share of 22%. Cadbury Indias market share in cocoa based products is 35% with Dairy milk solely accounting for 30% (Pandey 2006, p.212). The other competitors apart from Nestle are confectionary companies like Amul, Wrigleys, Lotte, etc; however these companies have a comparatively small market share. Industry Trends: Since Chocolate and Confectionary are mainly consumed in the urban areas, hence the industry witnesses a 73% skew towards the urban market, 27% towards the rural market. Overall industry growth is estimated at 23% in the chocolate segment and a decline of 19% in the sugar confectionary segment (Cadbury India Limited n.d.). With emerging trends and lifestyle changes, chocolate and confectionary nowadays arent only consumed by children. All confectionary companies have shifted their focuses to Adults as well; this shift explains the reason to the large variety of flavor variants, pack and size variants. According to a consumer research, 42% of adults stated they purchased confectionery to eat straightaway when on the move, 57% of those working full time eat chocolate bars while at work and 49% of people having nuclear families said that they prefer to munch on a chocolate bar when relaxing at home (Keynote 1999). Hence due to lifestyle changes the chocolate/ confectionary market has ex perienced a steady growth over the recent years.(confectionary, 2009) PEST Analysis: PEST analysis involves assessment of the Political, Economic, Social, and Technological. (Kitchen Proctor 2001). Political: According to the Safe Food Guide released by Greenpeace, the food products of Cadbury contained certain genetically modified crops which proved to be hazardous to health (Press Trust of India 2007). However, the company escaped out of these political implications when CRISIL gave an AAA rating to the company (Cadbury India Limited 2009), the company also got a clean chit from the FDA after the worm controversy. Economic: Many MNCs and Companies had to bear the wrath of the global recession. Surprisingly, at the time of global recession the sale of Cadbury chocolates had gone up by 7% in countries like India, Britain and South Africa. Cadburys CEO Todd Stitzer was confident that he would be able to achieve the 2009 sales target and he also quoted that since the recession has given rise to the stay-at-home culture, people prefer to buy chocolates and confectionary as these are affordable luxuries and act as a mood enhancers in bad times (Press Trust of India 2009) (Appendix 1). Social: Cadbury India set up non-formal schools for the children of migrant workers in Baddi, the company also tied up with Bharti and Walmart to support education needs of underprivileged children. The Sarvam programme catered to the victims of the Asian Tsunami in 2004 (Cadbury India Limited 2005b). These are just a few ways in which the company proves itself to be a socially ethical organization. Technological: The pappu pass ho gaya ad campaign proved to be an instant hit with the masses, however in 2005; the companys task was to increase Dairy Milks customer franchise. The main idea was that children should celebrate the joy of passing their exams with a Cadbury Dairy Milk, this eventually led to the tie -up with Reliance web world, wherein students across 66 examination boards in the country could access their results on R-world through Reliance mobiles. If they passed a message congratulating them on their moment of delight from Dairy Milk was displayed. This was an extremely innovative way of using technology and various marketing communications. This effort was awarded the Bronze Lion at the Cannes Media awards in 2005 (Cadbury India Limited 2006) Table: SWOT Analysis Strengths Weaknesses Strong market position Wide geographic presence Robust revenue growth Declining profitability Product recall Opportunities Threats Inorganic growth Demerger of Americas beverages business Increasing health consciousness Industry consolidation Increased competition from private labels Increasing distributor costs Source:( Datamonitor,2009) Strengths :- 1. Strong brand equity in India 2. due to 54 years of presence in India has deep penetration- 2100 distributors; 450,000 retailers, 60 mid urban (22%) customers . 3. low cost of production due to economic of scale. That means higher profits, better market penetration. 4. Second best manufacturing location throughout Cadbury Schweppes. 5. Strong global market position The companys Indian business has a leading presence in chocolate with 71% market share. The company acquires leading market share in Thailand in gum and candy, at 63% and 31% respectively. In Malaysia, it has a number one market share in chocolate at 29%, and in gum it has a number two position with a 19% market share. In Australia as well the company has a number one position in chocolate (53% market share) 6. Wide geographic presence The company operates along with its subsidiaries in the UK, the eurozone, the US, central and southern America, Australia and other parts of Asia pacific. Wide geographical presence enables the company to cater to diversified markets and thus reduce its business risk.(anonymous, 2010 ) Weakness :- 1. Poor technology in India compared to current international technologies (Godiva, Mozart, fazer,dint,naushans,etcà ¢Ã¢â€š ¬Ã‚ ¦..) 2. ltd. Key products, only one central brand (CDM). Pralines range totally wising in india 3.Make in India tag once the economy opens up wore and imports rush in 4. Declining Profitability The operating profit of the company declined at a rate of 13.3% compared with 2006 to reach 788 million pounds during FY2007. Declining profitability will adversely affect the operations of the company. (Anonymous, 2010) Opportunities :- 1. Tremendous scope for per capita consumption (160gms of 8-10kg) 2. Increasing per capita national income resulting in higher disposable income. 3. Growing middle class and growing urban population 4. Increasing gifts cultures 5. Increasing health consciousness Consumers are increasingly aware of the risks associated with obesity and poor dietary habits. The companys wellness (including products like sugar-free and fat-free products, and medicated candy) sub- category, accounted for around 30% of confectionary revenue in 2007. The company thus is well positioned to benefit from the rising demand for healthy foods worldwide. (Anonymous, 2010 ) Threats:- 1. Industry consolidation 2. Increasing distribution costs Higher fuel prices are likely to have a direct impact on the companys distribution cost and may directly affect its margins. 3. Increased competition from private labels Private-label goods generally lower priced products sold under a stores own name, are a constant threat to other brands goods, especially during times of economic weakness with increasing popularity of these private labels combined with the depth of their penetration in local markets, Cadbury may see the erosion of its market share in certain geographies and is likely to face a bigger challenge from these private labels in future. (Anonymous, 2010 ) Marketing Mix 4 PS of Marketing 1- PRODUCT The average company will compete for customer by conforming to his expectation consistently, but the winner will surpass them by constantly exceeding his expectation, delivering to his door step additional benefits which he would never have imagined. Cadburys offer such product. The wide variety products offered by the company include:- Chocolate Confectionary Dairy Milk Fruit Nut 5 Star Break Perk Gems Éclairs Nutties Temptation Milk Treat Food Drinks Bourn vita Drinking chocolate Cocoa 2. Price:- Second P of marketing is not another name for blindly lowering prices and relying on this strategy alone to increase sales dramatically. The strategy used by Cadbury is for matching the value that customer pays to buy the product with the expectation they have about what the production is worth to them . Cadburys has launched various products which cater to all customer segments. So every customer segment has different price expectation from the product. Therefore maximizing the returns involves identifying right price level for each segment and then progressively moving through them. Dairy milk Rs. 15 Perk Rs.10 5 Star Rs.10 Fruit and Nut Rs.22 Gems Rs.10 Break Rs.5 Nutties Rs.18 Bournvita(500gm) Rs.104 Drinking chocolate Rs.50 PLACE:- Distribution Equity: It takes much more time and effort to build, but once built, distribution equity is hard to erode. The fundamental axiom of Indian consumer market is this; You can set up a state-of-the-art manufacturing facility, hire the hottest strategies on the block, swamp prime television with best Ads, but the end of it all, you should know how to sell your products. The cardinal task before the Indian market in managing is to shoe-horn its product on retail shelves. Buyers are paying for distribution equity not brand equity and market shares. Why does the company need distribution equity more in India? In a product and price parity situation, the brand that sells more is the one that reaches the highest number of customers. India 1 billion people, 155 million household has over 4 million retail outlets in 5351 urban markets and 552725 villages, spread cross 3.28 million sq. km. television has already primed and population for consumption, and the marketer who can get to the consumer ahead of competition will give a hard-to-overtake lead. But getting their means managing wildly different terrains-climate, language, value system, life style, transport and communication network and your brand equity isnt going to help when it comes to tackling these issues. Own distribution network consist of clearing and forwarding (cf) agents distribution stockiest. This network of distribution can either contact to the retailers directly. Once the stock product reaches retailers, the prospective customers can have access to the product. Cadburys distributes the product in the manner stated above. Cadburys distribution network has expanded from 1990 distributors last year to 2100 distributors and 4,50,000 retailers. Beside use of TI to improve logistics, Cadbury is also attempting to improve the distribution quality. To address the issue of product stability, it has installed visi colors at several outlets. This helps in maintaining consumption in summer when sales usually drops due to the fact that the heat affects product quality and thereby off takes. The increase in distribution is going to be accompanied by reduction in channel costs. (Anonymous, 2010 ) Promotion:- Effective advertising is rarely hectoring or loudly explicit..,it often both attracts and generates arm feelings. More often than not, a successful campaign has a stronger element of the unexpected a quality that good advertising shares with much worthwhile literature. To penetrate into the inner recesses of customer memory, communication must first ensure exposure, grab his acceptance and then extract retension competing with thousands of other units of communication trying to do the same. Thereafter it was the job of the advertising to communicate customer the wonderful feeling that he could experience by re-discoursing the careful, unselfish conscious, pleasure- seeking child within him and graft these feeling into Ad campaign like Khane Walon Ko Khane Ka Bahana Chahiye for CMD and Thodi Si Pet Pooja Kabhi Bhi Kahin Bhi for perk have been sure shot winner with the audience. The next round of activity will include the wafer-chocolate Perk and the Picnic bar, which has faced problems with its taste, because of the peanut it contains. Milk treat has also been launched in a module bar form, just in time of Diwali gifting market. Éclairs has got potential for much wide distribution, in a small sweets that airlines, hostels, and up market retail outlet offer to guest and customers. Ad spend in 2000 was about 14% of sales and the management said that plans to maintain as spend at this level in the current year also. Its a combination of spiffing up its key brands, researching and improving the newer products that havent taken off, supported with high ad-spends that Cadbury hopes will see it emerges stronger after the current slowdown, as well as expand the market. (Anonymous, 2010 ) Critical analysis of Marketing mix:- Product is a output of the company, Being a market leader the level of expectation from the company is at a very high level and thus it is important for the company to maintain its Products quality, shelf life and freshness of the product are the most important factors for the company. Product is the life of the company and is the most important factor. In 2003 Cadbury India had to face the plight of the worms controversy. After receiving complaints from various states across the nation, the Food and Drug Administration of India took action against the firm, confirmed reports of worms being found in Dairy Milk chocolates. The FDA officials werent certain if the manufacturing was to be blamed for the infestation but they were sure that there was some problem in the packaging, meanwhile the company assured the FDA that it will change the packaging and come up with a tamper-proof seal packing (Kamdar 2003). Shortly after, the company came up with the purity sealed packaging and stored the chocolates in cool dispenser units to prevent melting of chocolates. The companys GM for marketing Mr. Sanjay Purohit in a press conference stated that We have regained 90 percent of the sales levels (Mathur 2004). Pricing is also an important factor, Factors like competition, internal costs, and the positioning and corporate objective of the company need to be taken into consideration by a company before pricing a product. Premium pricing(relative to the competing brands) with special emphasis on taste and quality is recommended. The premium pricing does not suggest that the offering is made unaffordable to the target consumer. A high price would accompany a promise for a better taste and quality. Therefore, the brands, taste quality needs to justify the high price. As seen in the table below nestle and Cadburys are pitted against each other and Amul is the cheapest brand in the market Considering the above, a premium pricing strategy, with the assurance of good quality and better taste, in a market that is not high on price sensitivity may prove to be a success. Cadbury dairy milk is priced at Rs.15/- for 40 gms Nestlà ©s Milk chocolate at Rs.13/- for 40 gms Amul is priced at Rs.10/- for 40 gms(Kevin jacob,2007) Place Positioning is simply concentrating on an idea or- even a word defines that company in the mind of the consumer. It is more efficient to market one successful concept to one large group of people than 50 product or service ideas to 50 separate groupà ¢Ã¢â€š ¬Ã‚ ¦ repositioning is a must when customer attitude have changed and product have strayed away from the consumers long standing perception of themà ¢Ã¢â€š ¬Ã‚ ¦ Cadburys is an anchor in sea of confectionary products. as a variety of competitive claims assails her senses, today customer uses complicated decision making process to assess the alternative before making a purchase. Since cadburys is more clearly associated with a particular set of attributes in terms of benefits and prices, the quicker becomes its search process. Promotional activities like Dil ko jab khushi choo jaaye, kuch meetha ho jaaye In the early 90s, chocolates were perceived as being meant for kids. However in the mid 90s, Cadbury repositioned itself, and shifted its focus, became a chocolate for the kid in all of us. This communication is aimed at all age groups from Children to the Youth and even Adults. The main objective behind this commercial was to make people realize that every little or big happy moment was to be celebrated with a Dairy milk. The communication also aimed at making chocolate consumption a habit (Pandey 2006, p.215). The audiences were expected to make Dairy milk a part of their lives. Every moment of happiness like passing the exams, meeting a celebrity, winning a game of cards, etc was meant to be cherished and celebrated by eating Dairy milk. This chocolate was meant to be a Celebration of Life and its happiness. The commercial was a simple, sweet and effective piece of communication. It had a very simple approach of celebrating joyous moments of life with Cadbury. The feelings, expressions, emotions portrayed by the actors in the commercial were enough to hit the emotional chord of the audiences. The ad was simple and direct in its content and visual presentation. The emotions displayed brought out the life and depth of the commercial. The brand also shifted its image from being only for kids to being a chocolate for all age groups. The punch line became extremely popular with the masses and people began to associate the chocolate to every happy moment. Strategic recommendation:- Cadbury India is a very experienced player in its field and is going well on its business in India but a bit of concern is its pricing of the confectionary products which is a bit high as compared to its competitors this is a place where the company is facing challenges from its competitors, The company also vouched this problem and in 2008 started a programme home grown supply where it started the production of cocoa in India. (Business India intelligence,2009) Cadbury is also hoping to change its dependence on imported cocoa. A 30% import duty on cocoa beans, which are mostly grown in Ghana and the Ivory coast markets that are also less politically stable than India- has led Cadbury seek to source more beans domestically. In a venture called the Cadbury cocoa partnership (which also operates in Ghana, Indonesia and the Caribbean), it hopes to persuade 20% of Indian coconut farmers to include cocoa trees in their plantations. It is pursuing this goal by giving farmers saplings and providing technical expertise. Last year 5m cocoa saplings were planted another 7.5m in 2009, ultimately making India self-sufficient in cocoa production by 2015. Thus, it is hoped, can be achieved with a little disruption as possible. One of the advantages of cocoa seedlings is that they can grow alongside coconut palms in southern India and do not require the clearing of forests for plantation. Although this programme is not being exposed as it could have been used.(Business india intelligence,2009) Recommendation:- The recommendation for the company is to work on the cocoa production in India as in India major group is farmers but they are not aware of the benefits of this cultivation, if the company promotes the cultivation and get good production from India then this can result in resuming the issue of high price of the products like chocolates, snacks etc. the company then can control its prices and could be competitive with its competitors which is its biggest problem in the market and also the company can Increase its profits by the use of this practice as the company has to pay 30% duty on imports of the cocoa from other countries like Ghana and Ivory coast and if they can get the same crop from the domestic region than they can get a good return on their Profit sharing ratio. (Business india intelligence,2009) To meet the increasing demand of cocoa seeds increasing number of farmers are taking cocoa cultivation as an inter crop along with the coconut to double their incomes .The industrys graph is slated to shoot up as the demand for cocoa seeds has sharply rised in India and in foreign markets as well for exports. Tamil nadu and the southern regions of India have the most favorable environment for the cultivation of cocoa. The present production of India is around 10,000 tons meeting only half of the total demand of around 20,000 tons. (jaya kumar,2008) Indias Cocoa Development board is also understood to have undertaken a similar initiative to increase the production to 16,000 tons in two years time. Indias annual consumption of the beans is about 20,000 tons and more than 40 percent of its total requirement is still met through imports .(jose roy,2009) According to Cadburys India forecast, cocoa demand is growing around 15 percent annually and will reach about 30,000 tons in the next 5 years. Industry observers said India through public- private partnership was attempting a cocoa revolution once again in the country to become a bellwether state of the beans in the region. (jose roy,2009) Conclusion:- This Report demonstrates Cadbury Indias hold in the Indian market and shows its position in the Indian market it also describes the various analysis like SWOT and PEST which describes various features about the company and the marketing mix which shows its marketing abilities and its strategies, the recommendations are also given to improve its position in the Indian market and to increase its profits. The Chocolate industry remained unaffected by the recent economic changes in the world and since Cadbury is the market leader its growth rate, marketing strategies are ever changing keeping the current industry trends in mind. All Cadbury commercials also have been extremely effective and popular with the masses. This report Clearly states the companys hold and experience in the target industry and gives suggestions though which it can indorse its strong potential to continue to do well.