JAIPURIA INSTITUTE OF MANAGEMENT,LUCKNOW

MARKETING ASSIGNMENT

INDUSTRY: CHOCOLATE

COMPANY:

SUBMITTED TO: SUBMITTED BY: Yash jain (jiml-10-172) Dr. Reeti AgarwalUrvashi Sharma (jiml-10-165)Tulika Narayan (jiml-10-164) Agrita Khanna(jiml-10-172)Shikha Asthana(jiml-fs-040)

INTRODUCTION

Cadbury is the leading global company with a great portfolio of chocolates, gums, candy brands. It is the world’s largest confectionery manufacturer, having its headquarters in London, United Kingdom. It employs around 50,000 people and have direct operations in over 60 countries. Cadbury sells its product in almost every part of the world.

Cadbury India is a fully owned subsidy of Kraft Foods Inc. The combination of Kraft Foods and Cadbury creates a global powerhouse in snacks, confectionery and quick meals.

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

In India, Cadbury began its operations in 1948 by importing chocolates. After 60 years of existence, it today has five company-owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and 4 sales offices (New Delhi, Mumbai, Kolkota and Chennai). The corporate office is in Mumbai.Cadbury enjoys a value market share of over 70% - the highest Cadbury brand share in the world! Our billion-dollar 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, we have worked with the Kerala Agriculture University to undertake cocoa research and released clones, hybrids that improve the cocoa yield. Our Cocoa team visits farmers and advise them on the cultivation aspects from planting to harvesting. We also conduct farmers meetings & seminars to educate them on Cocoa cultivation aspects. Our efforts have increased cocoa productivity and touched the lives of thousands of farmers. Hardly surprising then that the Cocoa tree is called the Cadbury tree!

HISTORY

Cadbury is a very old trusted name. It all started in Birmingham in England when John Cadbury started his family grocery shop with side business of cocoa and chocolateproducts in around 1824. His two sons, Richard and George, expanded their familybusiness of cocoa and chocolate. Bournville, a town near Birmingham, was build by themas a part of expansion of their business

Cadbury began its operations in 1948 by importing chocolates. After 60 years of existence, it today has five company-owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and 4 sales offices (New Delhi, Mumbai, Kolkota and Chennai). The corporate office is in Mumbai.

MARKET SEGMENTATION

Market segmentation is the process in marketing of grouping market i.e. customers into smaller sub-groups. These markets are often termed as Niche markets or specialty markets.

The purpose of market segmentation is to identify and target prime customers groups so that we get the maximum return from a limited marketing budget.

GEOGRAPHIC SEGMENTATION :-

The market presently has come close to 60 MN consumers and they are mainly located in the urban areas.Growth will mainly come through an increase in penetration as income levels improves.In India the consumption of chocolates is more in urban areas than in rural areas.The reason behind the low consumption of chocolates in rural areas is because of the fact that the average summer time temperature reaches to 43 degree Celsius in India and the chocolates melts at body temperature of 36 degrees.

DEMOGRAPHIC SEGMENTATION :-

AGE:- Children -55%Adults – 12%Young Adults -33%

Income levels- In the middle and higher level income groups.

MARKETING MIX

Marketing mix also known as the 4 P’s of marketing. Marketing decision generally fall into the following four controllable categories:-

ProductPricePlace ( distribution)Promotion

These 4 P’s are the parameters which will help in controlling the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P’s on the customers in the target market in order to create perceived value of Cadbury.

PRODUCT

Cadbury India operates in four categories Viz. chocolates confectionery, milk food products, candy and gum category.

PRODUCT VARIANTSCadbury dairy milk, 5 star, perk, Eclairs, Celebrations, Candy category halls –Bubble gum brands bubbalooBournvita – the leading malted food drink (MFD)

PRODUCT INNOVATION

5 STAR: For the product 5 star, consumer feedback helped in making an all new 5 star. Customers suggested that the old 5 star was too chewy, and people complained of it sticking to their teeth. Cadbury accepted the suggestion and they made 5 star more softer and melted easily in the mouth and introduced as 5 star crunchy.

PERK:

As we know the chocolate industry is the most competitive industry. So in the case of perk, it was made much lighter and the size of the bar increased to match Nestle’s munch. Perk had been under fire from Nestle’s deadly duo of KITKAT and Munch. After the re launch, its market share is 2 percent more then KitKat’s market share and the five year old brand is now almost as big as the decades old 5 star in size, both in the region of Rs 50-55 crore.

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

PRICE

The Rs 5 price point accounts for more than half of all chocolate sales. Today, Cadbury has four products at this price point: CDM, Perk, 5 Star and gems and the five rupee CDM bar is its single largest selling product. This is a potent price point in India because the average purchasing power is very low.

VOLUME LED GROWTH STRATEGY

Cadbury has followed a well-planned strategy of fuelling volume growth by introducing smaller unit packs at lower price points. Simultaneously, the company seems to have astutely juggled with the larger pack sizes and raised prices to a degree higher than what appears at face.

HIRES AT KEARNEY TO CLUB COSTS

Cadbury India appointed management consultancy firm at Kearney to draw up a strategy to control costs in several areas, including sourcing of raw materials and packaging. The consultancy firm will also look at the sourcing of direct and indirect materials like renegotiating with suppliers for longer term contracts and vendor management. Other costs ( indirect expenses) like travel costs and hotels were also being studied.

EARNING SENSITIVE FACTOR

Cocoa bean prices: domestic as well as international.Prices of key raw material: cocoa have significant impact on margins.Excise Duties: Changes in excise levied on malt and chocolate influence and product prices and thereby volume growth as well as margins.Changes in Custom duties and foreign exchange fluctuation: As 20% of raw material is imported changes in custom duties and foreign exchange fluctuations have significant impact on the final cost of the product.Competition from MNCs like Nestle as well as imported brands is increasing. Competition puts pressure on advertisement budget and margins. However on the positive side it helps in expanding the market.

PLACE (DISTRIBUTION)

Chocolate needs to be distributed directly, unlike other FMCG products like soaps and detergent, which can be sold through a wholesale network. 90% of chocolate products are sold directly to retailers. Cadbury’s distribution network used to encompasses 2100 distributors and 45,000 retailers to avoid cannibalization of its higher priced products from lower priced ones, Cadbury is setting up two separate distribution channel=one for core business and other for mass markets.

NATURE RETAIL OUTLETS

Chocolates are primarily sold through kirana stores, gift stores, medical stores, canteens, bakeries, sweet shops etc. This is true for chocolates also. The space allocated for the

chocolates was less when compared to the total area of the shop and of the spaces allocated for chocolates, Cadbury brands occupied more than nestle brands.

PROMOTION

Advertisements: The advertisements aimed at conveying the idea that no specific occasion is required for consuming chocolates.

Celebrities Endorsements: Cadbury made Preity Zinta for its Perk brand and Rani Mukherjee for much. The big factor that pushed the sales of Cadbury sales was Amitabh Bachchan campaign. Cadbury appointed Amitabh Bachchan as its brand ambassador.

Chocolate ads have shifted from kids to youth. As there was a myth that Indian chocolate market is dependent on the purchase of kids.

ENVIRONMENTAL SCAN

The environmental scanning of chocolate industry is based on the following components:-

The Macro EnvironmentThe Micro Environment

THE MACRO ENVIRONMENT

The factors under macro environment are those factors which are not under the direct control of the industry.

The chocolate industry in India is a fragmented industry with a diverse range of macro environment factors influencing it. The factors under macro environment are as follows:-

POLITICAL FACTORS

Legal factorsLegal factors

Environmental factors

Environmental factors

Technological factors

Technological factors

Social factorsSocial factors

Economic factorsEconomic factors

Political factorsPolitical factors

The industryThe industry

Cadbury India has thoroughly scanned the various political factors influencing the Indian chocolate industry.Cadbury has never supported child labor. All its products and raw materials that are procured from all over the world are from workshops free from child labor and devoted themselves to all guidelines so put up by the Indian laws and government. The food industry guidelines by the Indian government are followed by the chocolate industry.With the supporting political and legal politics of the government of India, chocolate industry are confident about the smooth and successful penetration of the industry. In order to support the same major steps and clearances have been undertaken

A majority of them being1. Clearance from food authorities such as FDA of India for all the food products2. Clearance from chocolate manufacturing association of India3. Clearance of labor and ESI laws/guidelines.

TECHNOLOGICAL FACTORS

Safe, efficient and sustainable manufacturing of chocolates and other related products in the focal point of the production department. Cadbury India follows the Indian industrial norms and confer to the outlined standards. Milking and Milk processing, which forms the majority and important part of production is undertaken with the help of latest and the state of art technology conferring to the EURO III norms.For efficient distribution and inventory management, latest radio frequency identification technology is being utilized. Various other technologies for efficient and minimal waste production are being utilized for instance six Sigma, LEAN MANUFACTURING and 5s.

ENVIRONMENTAL FACTORS

The environmental conditions of India favor the production of cocoa beans however due to recent pollution levels and deforestation ; major concerns for sustainable chocolate manufacturing processes have been raised. Chocolate industry have decided to import a majority of raw materials in order to put minimal stress on Indian agriculture. Other guidelines for minimal waste production are going to be completely followed and devoted to.

SOCIO-DEMOGRAPHIC FACTORS

Consumers constantly change their perception and needs for products. Especially in chocolate industry, the customer needs are changing periodically from richer products leading to emergence of commercial bakeries to large varieties and forms of chocolates and its forms.Hence the chocolate industry in India provide us with a huge opportunity to tap this huge segment of customers by providing them with new verities and tastes. Recently the health benefits of dark chocolates so found are taking this extremely opportunistic industry on a complete new path.Available of skilled labor and growth in daily wages all indicate towards the growth and development areas of this industry.

ECONOMIC FACTORS

According to the FDA survey market size of chocolates was estimated to be around 41.6 billion in 1998.Chocolate and sugar confectionaries are characterized by low penetration levels. Market growth in the chocolate segment has been between 10 to 20%.A majority of consumers are located in the urban areas. Rural areas/ rural markets in India are to a great extent untouched with chocolates with extremely low penetration levels hence providing an extremely untapped market representing a quarter of India’s population.

MICRO ENVIRONMENT FACTORS

Micro environment factors are those that directly influence the chocolate industry.

Indian Market Overview for chocolates

Chocolate industry belongs to the Food Processing industry which has an estimated size of US$ 70 billion (ministry of food processing, government of India) and contributes to around 6.3% of India’s GDP. (ministry of food processing, government of India)

The chocolate industry in India is estimated to be of Rs. 650 crore with as high as 15% market penetration and as low as 4 % market penetration and as low as 4% market penetration in rural areas. (Ministry of food processing, government of India).

The confederation of Indian Industry (CII) has estimated that the food processing sector a potential of attracting US$ 33 billion of investment in 10 years thus generating employment to 9 million people.Thus the chocolate industry is being estimated to have a potential growth rate of around 7-9% every year ( ministry of food processing, government of India).Thus the chocolate industry in itself has a huge opportunity especially in the untapped rural segment where there is a huge customer need for affordable yet high quality chocolate products.

Global Market overview for chocolates

The chocolate industry is an extremely labor intensive industry which apart from the agricultural activities needs labor input from all aspects. Hence for a country like India, chocolate manufacturing provides great opportunities to skilled labor resources which are available in developing nations such as China and India. Hence new opportunities and new markets are being created for all industries. With new distribution channels being developed there is an advent of great opportunity for developing nations with regard to this industry. Developing countries such as China and India, have many rural areas where chocolate products are not offered yet. Hence expansion and market penetration into developed nations such as India is being considered extremely favourable.

SWOT Analysis

STRENGTHS:

Cadbury would realize several possible advantages in going abroad. By penetrating a foreign market the company could:• Maintain a stable growth of a company by maximizing the use of its production capacity and thus increase economies of scale and scope.• With its brand name, Cadbury could counterattack the competitors it faces in the domestic market by attacking their domestic market.• Keep up with the financial strength by increasing its sales and profit, indeed the foreign market could present higher profit opportunities than the domestic products.• Acquisition rules in UK, reduce its dependence on the UK market and therefore diversify its market specific risks.• Overall, Cadbury has been successful through the new products (development) it has to offer.

WEAKNESSES:

Generally, as Cadbury has a weak position in the US market, thus, need to change its target

to a different location. Besides its lack of distribution network, it also has a small total of market share altogether. Therefore in order to market the product in France successfully, Cadbury would have to find out on how it can improve in order to have great performance. It is also good to find out what are the situations that they could avoid in order to be successful. In order to market products the following issues should be considered:• Total French production of chocolate bars and confectionary, which has increased by 24.5 per cent between 1988 and 1991, has slowed down in more recent years, partly due to the economic slump.• Consumption of chocolate products, which has been growing until 1991, remained fairly static in 1992, reflecting a fall in demand due to the gloomy economic situation.• Sales of milk chocolate bars, which account for 24 per cent by volume of total sales of chocolate bars, decreased by 3.7 per cent.

OPPORTUNITIES:

Through its confectionary product line, least to mention is to build viable positions in prioritized markets through organic growth and acquisition. Besides what is mention

above, Cadbury has other opportunities to have market development in Russia and China. The Timeout Candy Bar market is growing worldwide. This company is also at the same time distributing its products via the internet – Develop Gourmet Line. Besides developing the “Low Calorie” line of chocolates and sweets, they also offer the “Sugar Free” sweets line. This has thus opened a completely Cadbury world in US.Therefore in order to get the product into a new foreign market, France, Cadbury would have good opportunities in store for them. Opportunities are as follows:• In terms of political issues, France is an advanced parliamentary democracy and politically is highly stable. The political power is centralized in the parliament, the Prime Minister and the President. The country specific risk is negligible. France is a member of the European Community and has excellent relations with the UK.• Economically, France has the fourth largest Gross Domestic Product in the world. It is a first-world advanced market based economy. Despite a recent recession, its economy is very strong and also highly deregulated in line with European Union policies. France represents a very large potential market with a high standard of living and purchasing power. The economy is highly open internationally and conducts a high percentage of trade within its European partners.• With regards to its social situation, France has a broadly central/southern European culture which has many similarities with the UK. However cultural differences do exist and these must be considered when planning for the market.• France has a high technological level and a lot of industries are based in the technological sector. This technological base constitutes one of France’s competitive advantages.

THREATS:

Due to its confectionary products, it is very important for Cadbury to be aware of any present or upcoming threats. The company should take note of the changes in the consumer’s buying trend. It is perceived that consumers might shift from chocolates to “Healthy” snacks. If this were to happen, there might be a poor product development which would tarnish the Cadbury’s name. Needless to say price wars would occur between its competitors like Mars, Hershey and Nestle. Due to the abovementioned, there would be seasonal sales slumps all year round which will reflect to an increase in cost of the raw materials needed. Cadbury would then have to be prepared for growth of small local gourmet chocolates and regional candy manufacturers

.However if Cadbury were to market its products in France, the company has to be aware of the risks it could encounter. It might:

• Not understand foreign customer preferences and fail to offer a competitively attractive product;• Not understand the foreign country’s business culture or know how to deal effectively with foreign nationals;• Underestimate foreign regulations and incur unexpected costs.• Threat of entry due to the competition growing through acquisition

CONCLUSION

In order for Cadbury to reach the peak of achievement, the company would have to stress on the global growth of the product. It can be a risk to market it in the region France, but with careful study of the target market segments and its economic position, it can be an attainment. Cadbury should also look into other countries like the Asia Pacific in order to market its products popular globally. But then again, careful considerations to look at its major competitors and to obtain the rules and regulations of a certain country are equally important.

Another strategic plan would be a joint venture. Since Cadbury Schweppes is a company that produces not only chocolates but also drinks, it should market a new product and maybe get into the product development or get into a total diversification. However, need to bear in mind that it is not as easy as marketing Cadbury’s current products. It took Cadbury almost 165 years to reach to its successful peak today.

Needless to say that in order for the company to market its products globally, it is understood that heavy capital and marketing expenditures have to be sacrificed. Cadbury has somehow gone through this process therefore throughout the past decade; it shouldn’t be an issue that would raise a problem.

Last but not least not to forget that Cadbury should need to strengthen the brand name of its products. This is important due to the fact that since it is popular in the UK and US, the profile of the product should be maintained and not deteriorates.