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A STUDY ON THE CHOCOLATE

INDUSTRY

Market Study of Cadbury India Ltd.

SUBMITED BY:-

LUCKY SINGH

05524001809

BBA(B & I)

3rd

sem

SUBMITED TO:- DEEPTI



2

1. INTRODUCTION :-

Purpose of study

Research objectives

Research methodology

2. Companies profile

3. About the topic

4. Analysis of the study

5. Suggestions

6. Conclusion

7. Bibliography



3



4

Purpose of study



5

RESEARCH OBJECTIVES

The basic objective of this project is to perform a thorough market

analysis of the Chocolate Industry and the company Cadbury

India Ltd. along with a detailed analysis of its major product

Cadbury dairy milk. The analysis incorporates ± market

segmentation, company analysis, competitor analysis, market

analysis, corporate strategies and our recommendations.



6

RESEARCH METHODOLOGY

Type of Research: - Exploratory and Descriptive.

Sample Units:-Two of the Number One brands in India namely

Cadburys and Nestle, respectively, were chosen on the basis of their

market shares. These two industries were chosen on the basis of the

usage of the products, as the usage of FMCG¶s and is high and noticeable.

Sample Design:- Non-probability sampling was resorted to and the

methods used is Convenience sampling and Judgment sampling.

Samples size:- The total sample size is 109, which includes consumers

of all the two brands, retailers of Cadburys and Nestle.

Data Collection:- Data was collected both from secondary sources as

well as primary data was also collected. A structed questionnaire method

was used to collect primary data. Secondary data was soured from various

published sources which include magazine like A&M, Business India and

Business world. Newspaper like Brand Equality, Brand wagon and The

Times of India were also used. Annual Report of Cadburys and Nestle were

also referred.

Data was analyzed manually and with the help of computer software

EXCEL, to make graphs and pie charts.



7

Limitation of the project:-

1. For generalization of the results a study needs to be undertaken

based in a larger sample across different industries.

2. Since the study is confined to Delhi only, the findings cannot be

applied to other parts of the country.



8

COMPANIES PROFILE

Cadbury India is a fully owned

subsidy of Kraft Foods Inc. The

combination of Kraft Foods and

Cadbury creates a global powerhouse

in snacks, confectionery and quick meals.

With annual revenues of approximately $50 billion, the combined company

is the world's second largest food company, making delicious products for

billions of consumers in more than 160 countries. We employ approximately140,000 people and have operations in more than 70 countries.

In India, Cadbury began its operations in 1948 by importing chocolates.

After 60 years of existence, it today has five company-owned

manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior),

Bangalore and Baddi (Himachal Pradesh) and 4 sales offices (New Delhi,



9

Mumbai, Kolkota and Chennai). The corporate office is in Mumbai.

Our core purpose "make today delicious" captures the spirit of what we are

trying to achieve as a business. We make delicious foods you can feel

good about. Whether watching your weight or preparing to celebrate,

grabbing a quick bite or sitting down to family night, we pour our hearts into

creating foods that are wholesome and delicious.

Currently, Cadbury India operates in four categories viz. Chocolate

Confectionery, Milk Food Drinks, Candy and Gum category. In theChocolate Confectionery business, Cadbury has maintained its undisputed

leadership over the years. Some of the key brands in India are Cadbury

Dairy Milk, 5 Star, Perk, Éclairs and Celebrations.

Cadbury enjoys a value market share of over 70% - the highest Cadbury

brand share in the world! Our billion-dollar brand Cadbury Dairy Milk isconsidered the "gold standard" for chocolates in India. The pure taste of

CDM defines the chocolate taste for the Indian consumer.

In the Milk Food drinks segment our main product is Bournvita - the leading

Malted Food Drink (MFD) in the country. Similarly in the medicated candy

category Halls is the undisputed leader. We recently entered the gums

category with the launch of our worldwide dominant bubble gum brand

Bubbaloo. Bubbaloo is sold in 25 countries worldwide.

Since 1965 Cadbury has also pioneered the development of cocoa



10

cultivation in India. For over two decades, we have worked with the Kerala

Agriculture University to undertake cocoa research and released clones,

hybrids that improve the cocoa yield. Our Cocoa team visits farmers and

advise them on the cultivation aspects from planting to harvesting. We alsoconduct farmers meetings & seminars to educate them on Cocoa

cultivation aspects. Our efforts have increased cocoa productivity and

touched the lives of thousands of farmers. Hardly surprising then that the

Cocoa tree is called the Cadbury tree!

Today, as a combined company with an unmatched portfolio in

confectionery, snacking and quick meals, we are poised in our leap

towards quantum growth. We are the world's No.1 Confectionery

Company. And we will continue to ³make today delicious´!

THREAT AND OPPORTUNITIES PROVIDED BY THE COMPETITORS

First let us examine the threats and opportunities as posed by the form

competitors:

1. Snack Foods

2. Soft Drink

Snack Foods

Organized snack foods market stands at around 35,000 tonnes of the totalmarket of 300,000 tonnes. The major competition to chocolates comes

from traditional Indian snacks and desserts, which are available in the



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unorganised sector. These are available at every nook and corner at very

low prices, which lead to increased usage. A large part of consumer in this

segment has an attitude that chocolate is some junk food from the west.

Organized snack food market can be considered as substitute for

chocolates. According to a recent research on heavy consumer of snack

foods in the organized sector, results suggest that these are the people

who are also becoming heavy consumers of chocolates due to their high

per capita consumption on snack foods and related products. Rather heavy

advertisements and promotions done by International majors like KFC,

Pizza Hut etc. is helping improving the attitude of the consumers towardssnack food in general.

After years of effort and a few hundred crore gone into advertising and

promotions, the category remains pitifully small. One countermanding

factor is guilt. The mother still feels that her children are being fed junk

food, and this guilt factor needs careful handling by the marketers.

Contributions to this change in attitudes are well known. More women areworking, disposable incomes are rising, more Indians are travelling abroad,

the attitudes of retailers and distributors are changing, more people are

trying to keep up more with the Joneses, children are becoming stronger

influencers of purchase decisions and growing exposure to -dare one say

the s-word? -Satellite TV. A rise in the number of double income families

and a change in attitudes will certainly cause a shift towards conveniencegoods.

Soft drinks



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With the onslaught of the fountain soft drinks and the increasing availability

of soft drinks , this category has become increasingly a major threat to the

chocolate category as they vie for the share of the budget spend on

impulse purchases. The Indian soft drink market is estimated at aroundRs.3000 crore and the major players in this market along with their market

shares can be summarized as followed:

MARKET SHARE

Company Brand Market Share

Pepsi ± Cola PepsiMirinda

Others (7 Up, Mangola,Slice, Duke's Soda,Duke's Lemonade

27.1%7.3%

10.3%

Coca - Cola Thums Up

Coca ± Cola

Fanta

Limca

Gold Spot

Others (Bisleri ClubSoda, Rim Zim, Maaza)

16%

10.8%

5%

10%

1.5%

5%

CadburySchweppes

All brands

(Crush, Canada Dry,Campa ± cola, CampaOrange, Campa Lemon)

3.2%



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Cadbury Schweppes Beverages India Ltd (CSBIL), a 100 per cent

subsidiary of non-cola beverages major Cadbury Schweppes Plc, has

chalked out a multi-pronged strategy to increase market shares in this

highly competitive Indian soft drink market. The company will spend Rs. 70crores over the next five years to introduce and establish key international

brands in India and strengthen its distribution and bottling network. In

keeping with the trend in the market, the company has offered its major

brands including the orange drink Crush, and lemon and ginger drink

Canada Dry, to customers in 1.5 litres PET bottles and 330 ml cans in

addition to the conventional glass bottles. CSBIL is also gearing up to

launch the globally popular non-cola orange drink, Dr. Pepper, in India.

The reason that soft drinks are being viewed as a substitute for chocolates

is because

y Soft drinks are increasingly becoming an impulse purchase with

the increasing availability and also ease in the usage pattern

(fountain glasses).

y There is a relatively larger acceptance among adults as far as the

soft drink consumption goes as compared to chocolates.

y There is a widening perception that consuming the cola is the in

thing and leads to a feeling of peer acceptance and group

belonging.

Now we move on to the analysis of the industry competitors of Cadbury¶s

Dairy milk.



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Nestle India Limited

Nestle ended 1997 with a 41% increase in their net profit with Rs. 74.3

crores. The net sales of the company amounted to Rs. 1425 crores, which

is an 18% increase over last year. Out of this, chocolates had a 31%

increase in the sales turnover.

Nestle is a strong player in chocolates worldwide but it entered the Indian

market much later (in 1991) than one of its global competitor Cadbury.

Nestlé¶s initial foray into the Indian market was not very successful. The

problem was in the formulation of the product. They were soft chocolates

with high fat content which were unsuitable to the Indian climate. Also, the

distribution focus had been on the larger cities and urban areas, which

limited their customer base.

It was with the launch of KitKat that the company¶s strategy changed with

respect to both product and distribution. It increased its distribution network

to cover small towns and interiors as well, so as to increase their customer

base. It also modified the formulation of the moulded chocolates to suit the

Indian conditions. The company used three layers of foil packaging so that

KitKat could survive the summer heat.

Today Nestle poses a formidable threat to Cadbury. KitKat has captured a

sizable chunk of the market within a short span of launch. Nestle, as of

1996-97, commands 20% of the market share, with KitKat alone accounting

for 11.5% market share points. Nestle Bar One is another brand with a

market share of 5.5%. Nestle recently withdrew its Nestle Bitter chocolate

brand. The other brands of Nestle are Nestle Milky bar and Nestle Crunch.



15

Nestle have also entered the sugar confectionery market, in direct

competition with Cadbury by offering Allen's Splash, and Allen's Koffees,

and Allen's Butterscotch. With eroding margins and increasing competition,

Nestle has also started to look at exports to boost its turnover.

The advertising for the company in India is being handled by Ammirati

Puris Lintas. Nestle has been increasing its advertising budget, with the

1996 figure being Rs. 16 crores.



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ABOUT THE TOPIC

Market Segmentation

This can be done in two ways: Product Forms & Customer Based.

With Respect To Product Forms

There are four major segments in the Indian Chocolate Industry:

Moulded Chocolate Segment

This segment constitutes 50% of the total market.

Cadbury¶s Dairy Milk (CDM) ± Cadbury¶s flagship

brand ± has 50% of this segment market. To position

CDM in this segment Cadbury used the traditional

demographic variables of age, socio-economic

groups and usage intensity. CDM was positioned as

a product that elders (parents) bought for children.

Cadbury has actually associated itself to enduring and emotional values of

love, sharing, parental affection, and reward. Considering that CDM

practically acts as a trend setter for all the brands in this segment, this

limited the positioning of the entire category towards children only. Amul

attempted to expand the category by bringing in teenagers, but it was not

successful.



17

The Cadbury brands in this segment are CDM, Fruit & Nut, Crackle,

Bournville. CDM is basically the leading brand here, and the others act as

an endorser basket for the company.

Nestle forms 25% of this segment and the company¶s major brands are

Nestle Classic, Nestle Milk Chocolate and Nestle Crunch.

Today, this segment grows at 40% per annum, and is likely to remain an

important segment for further growth.

Countline Bars Segment

This segment forms 33% of the chocolates market. This segment is mostly

targeted at teenagers.

Major Cadbury brands are 5-Star, Break, Real, Krisp, and Double Decker.

5-Star is doing well here (about 50% of the segment) while the rest of the

brands act as endorser brands.

Nestle has a minor presence in this category with its product Bar-One.

Growth Of A Sub Segment: Chocolate Wafers

Chocolate wafers are the new products being offered by chocolate

companies today in order to expand the market. In 1995, Cadbury and

Nestle launched Perk and KitKat respectively. These were wafer±enrobed

chocolates in a new context and a different benefit offering. Both

chocolates had a snack positioning. Perk offered the anytime

anywhere snack proposition ± µThodi si Pet Puja¶, whereas KitKat

tried to promote snacking through µHave a break, Have a KitKat.



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All of these brands have been used by Cadbury to drive variety, induce

gifting practices and serve to some specific taste preferences. Cadbury

does not advertise these brands. They have been used as flanker products.

The opportunity for growth in this segment is high what with the imminent

entry of multinationals like Mars and Hersheys. This is also likely to pose a

threat to Cadbury, what with its complacency.

Sugar Panned Segment

This segment form 15% of the total market and Cadbury has about 98% of

this segment, its major brands being Gems and Eclairs.

Eclair has been used strategically to foster chocolate consumption among

children as well as adults by offering a tiny µguilt free, eat no more than a

biteful¶ at a convenient price point. (65% of Eclairs eaters are from the

households earning less than Rs. 4000/- per month.)

Gems are still Cadbury¶s primary tool to protect its franchise in the child

segment. It was previously associated in its commercials with theinternational spy character, James Bond. Around 1995, Gems was

repositioned to broadbase its appeal from 3-6 years old to teenagers as

well. However this failed due to the product form which has become deeply

rooted with kids and hence the company has reverted back to the target

segment of kids with a new offering of 'Chocogems'.



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With Respect To The Consumer Buying Power

These are:

1. High income customers (price greater than Rs. 25 for 40 gm.) who will

go in for premium chocolate brands.

2. Middle income customers (price between Rs. 10 ± 25) who are price

sensitive.

3. Children, who are mostly price driven and will consume more of toffees

in the price range of Rs. 0.50 ± 1.

Psychographics And Demographics

This is attempted in terms of the consumers.

1. High income customers ± it is estimated the age group buying the

chocolates will be 22 onwards. The income level is estimated to be

Rs. 8000 per month. The customers are mostly urban, and are mostly

professionals (engineers, doctors, executives, etc.)

The psychographic profile:

They can either be individuals indulging themselves, or they

could be indulging their children. They are inner directed people

who form their own values and norms and believe in not

adhering blindly to social norms. They are somewhat occasion

driven in their buying behaviour.

2. Middle income customers ± it is estimated that the age group in this

segment will be 15 plus. The income level is estimated to be around



21

Rs. 5000 per month. The consumers can be urban, semi urban, and

is currently spreading to rural areas.

The psychographic profile: they are likely to be variety seeking in their

behaviour. They are self expressing by nature and inner directed to an extent.

They like to indulge themselves.

3. Children ± the upper age limit is estimated to be 12 years. They

mostly purchase their chocolates with their pocket money. The

consumers can be urban, semi urban, and rural, though their is a

somewhat greater emphasis on urban.

The psychographic profile: they are novelty seeking in behaviour. They are alsofun loving.

THE PRODUCT CATEGORY

Needs satisfied by product category

In its present form chocolate fulfills many needs by satisfying a state of felt

deprivation of some basic satisfactions. They satisfy basic physiological

needs like need for food and also some socio-psychological needs like

belonging, affection, social and aspirational needs. However, not all the

chocolate variants may satisfy all the needs and there may be certain

variants taking care of some specific needs.



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y Food

Hunger

Sweet tooth gratification Taste

Chocolates may be used to satisfy the basic need of hunger. In India

they are neither typically seen as having wholesome and nutritional food

value nor are they perceived as stomach filling. Some of them were

positioned as an instant energy provider but they also were given some

emotional overtones along with the rational appeal of food. Thesnacking concept has just caught up in India with the introduction of

wafer chocolates and there also they are used to satisfy only small

pangs of hunger and are used as a between meal snacks. This concept

has gained more importance and with the launch of Picnic in the last

year, chocolates are now intended to be used as near meal substitute. It

is also used by many users as dessert; however it has still not

substituted the traditional dessert of sweets. Nestle, to counter this has

brought out 'MithaiMagic'. Also, Nestle has already come up with its

chocolate 'After Eight', positioned as a desserts, and we foresee that

with the changing taste if the consumers, this might be a lucrative

market in the future.

y

Belonging: The consumption of chocolates in India is now days seen as

contemporary and trendy. The chocolate consumption is identified with



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the feeling of self-expression and spontaneity. Many young people

nowadays therefore eat chocolates to have a feeling of belonging to a

group which is trendier, free from inhibitions imposed by society. Not

only are the younger people, in the current scenario, chocolates alsotargeted at the child ego state of the adults.

y Affection:

Human being by nature wants to get affection and return it. In India

many parents have traditionally purchased chocolates for their children

to show their love and affection. There was a time when the chocolate

industry was primarily thriving on the satisfaction of this emotional need.

This emotional platform is now being modified to incorporate the rational

platform.

y Social:

There were many people who want to become a part of the strata of

society which is westernized and upwardly mobile, exchange chocolatesas gifts (on festivals). For example, Cadbury was a pioneer in starting

the concept of 'Chocolate Days' and 'Éclair Days' in colleges and

schools, which led to substantial increase in the sales, which enabled

the company to give discounts upto 20%.

y Aspiration:

A segment of consumers who cannot afford chocolates and generallyconsume sugar confectionery, sometimes eat chocolate éclairs (a

product which gives taste of chocolate at far less price) as they aspire to



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eat better things in life like chocolates. This satisfies his aspirational

needs.

Consumer Buying Behaviour In Product Category

The product category comes under Fast Moving Consumer Foods (FMCG)

and the product is generally purchased as a convenience good. The

general characteristics of this product are:

It is a low involvement product, but there are significant differences in various

brands in market. The following matrix may help in studying the behavior of

consumer for this particular product category.

High Involvement Low involvement

Significant differences Complex buying behavior Variety seeking behaviour

Between brands * chocolates

Few differences Dissonance reducing Habitual buying

Between brands buying behavior behaviour

In this category, consumers are often found to do a lot of brand switching.

Although the consumer expects some benefits from chocolates, but he

chooses a brand without much evaluation, and evaluate it during

consumption only. But next time, quite often he may reach for another

brand out of boredom or a wish for a different taste. Brand switching occurs

for the sake of variety rather than dissatisfaction.

Since Cadbury has 70 % of market share, this variety-seeking behavior had

not affected its sales negatively. This had been possible due to various



25

factors like lack of strong competition. However, with the new entrants in

the market, there has been stiff competition. There are few segments like

wafer chocolates segment where company faces strong competition from

Nestle, the second major player in the market. In these segments companyshould try to increase brand loyalty for its brands. This increased consumer

loyalty will also act as deterrent towards development of strong competitors

in other segments. Further to increase the overall size of market, company

should try to increase consumers¶ involvement with chocolates. (Company

can use consumer involvement achieved by soft drink marketers in USA as

a benchmark. In USA, consumer involvement in soft drinks is much higher

than other beverages like coffee).

How To Build Consumer Interest In The Product Category?

Following are the possible strategies for increasing consumer interest in the

product category.

y Frequent reminder advertising and maintain a top of mind awareness for

the product.

y Emphasize functional benefits like nutritious value of chocolates. In

India chocolate is considered as a junk food. Creating consumer

awareness about functional benefits can help in weakening this negative

image. Here, the industry can follow the example of Max ice creams,

wherein they are using the nutritional/health (more milk protein) plank to

sell the ice creams to the buying unit ± mothers ± who can feel less

guilty of buying 'junk food'.



26

y Company can try to satisfy higher level needs of consumers like social

needs, belongingness, and aspirational needs.

Our Recommendations:

Out of these possible strategies, we recommend that company should try to

focus on building high top-of-mind awareness, increasing reminder

advertisements and educate consumers about functional benefits of

product. Educating consumers about nutritious, calorific value of chocolates

may be significant as per capita expenditure on food in India is significantly

high and chocolates get very little of it. Also there is a need to educate the

customer¶s of the various need satisfactions that can be fulfilled by the use

of chocolates apart from treating it like a light snack, in between kind of

food item. Company has already taken a positive step in this direction with

the launch of its Picnic ads wherein it has educated the customers about

the heavy snacking aspect of chocolates.

How To Increase Brand Loyalty For Cadbury's Brands?

y Build strong relationship for different Cadbury's brands with consumers

in various segments.

y By dominating the shelf space and avoid getting out of the shelf space.

y The company can also maintain the consumer loyalty by offering a

variety brands from its own stable so that even if the consumer looks for

variety, he goes in for some of that company's own stable.

y By increasing the range of its products so as to increase the evoked set



27

in the minds if the consumers.

Our Recommendations:

Company already has a very strong relationship with consumers in

traditional segments like moulded chocolates. Parents were using Cadbury

to express their love towards their children. In fact various market

researches carried out revealed that consumers see Cadbury as a

synonym for chocolates. This relationship building strategy should be

extended to emerging high growth segments like wafer chocolates. Apart

from advertising, company can form kids clubs and sponsor various

competitions like quizzes, games and music events to build a continuous

relationship with target segment. Food MNC Nestle successfully utilized

this strategy by forming children clubs for its noodles brand Maggi.

Company's flagship brand CDM is already available in many variants and

thus consumer opting for competitor's brands in moulded chocolate

segment is very less. In other segments like wafer chocolates, company

should offer more variety to retain customers. The company is already

working on this strategy and has decided to launch around three to four

new brands every year to offer customer¶s more variety and at the same

time displace the strong competitor brands from the shelf and increase its

own shelf space.

Company already has highest shelf space among chocolate companies

and its distribution is strong enough to keep continuous availability. So

there is not much scope of strengthening this network without going for

increasing geographical coverage. Keeping this in mind the company has



28

increased its retailer network by over 60% and is targeting the semi-urban

areas. Chocolates are a perishable item, which means that the shelf life of

the product is not very long and it is important that the product moves fast.

Also, it is an impulse purchase item. Most of the time the consumer decideto consume the product at the spur of the moment. The companies can

actually use this as an advantage and increase their sales since it does not

involve any rational evaluation and then reaching a decision to consume.

How to overcome this seasonality factor?

The seasonality factor in the sales can be eliminated by improving logistics

and packaging in order to make the product more durable and long lasting

in intense heat too. Therefore we feel that the company should pay

immediate attention towards increasing logistics. It can perhaps,

incorporate some strategies or experience of the ice-cream players in the

market. These companies have extensively used cold chains and tie up

with regional players to overcome problems created by the high

temperatures in the summers. In fact, KitKat had succeeded in counteringthe temperature problem with its packaging. Cadbury¶s had also to some

extent managed to counter this problem with its packaging for Perk ,

however it has to innovate and improve significantly to counter this heat

problem and be able to use this as a differentiating factor while selling its

chocolates.



29

PRODUCT LIFE CYCLE

In 1993-94, it looked that chocolates had completed the mature of PLC and

was passing through its decline stage. In 1992-93, volumes had fallen by

15.6% and in 1993-94 volumes fell by 17%. As a result, in the period the

total tonnage decreased from 12,000 tones to 8,000 tonnes.

Everybody was sure that this industry was on the way to demise, but

industry leader Cadbury (with around 70% --market share) bounced back in

1994 when cocoa prices again fell to their normal level. The company also

changed its positioning which had been safely nurtured over many years

that lead to a dramatic growth in tonnage from 10,000 tonnes to 16,000

tonnes in period 1994-96. However, there was another increase in the

prices of cocoa, which led to the decline in the sales till early mid 1997.

Since then the cocoa prices had stabilised leading to a reversal in the

declining trend. Thus, PLC for the category can be described as scalloped

PLC as industry moved back from mature stage to growth stage. The PLC

graph as revealed by the industry is shown in the figure.

PRICE SENSITIVITY

At the outset, the chocolate market appears to be price-sensitive. This is

starkly brought out in the following cases:

1) When the excise-duty on chocolates was raised from 16.5% to 27.5%

and cocoa prices rose by 25%in 1992-93, the retail prices went up by

30%. As a result, the sales and consumption fell by more than 30% in

the next two years.

2) The major players have successfully launched small-size packs of



30

chocolates. Keeping in mind the price sensitive nature of the market, the

companies are reducing the pack sizes to be able to offer chocolates at

affordable prices, and fit them to a Rs. 6-8 bracket. Due to the

broadbasing of the chocolate market there is a drive towards smaller,convenient packs for a larger audience and it also increases trial.

However, the upper segments of the consumer base are not price-

sensitive. For example, a chocolate like Kit-Kat, which is, priced 30% above

its rival Perk, has a similar market share of 8%.



31

ANALYSIS OF THE STUDY

CORPORATE STRATEGY

CADBURY'S BUSINESS STRATEGY

Cadbury realizes that being market leader in the chocolate market it will

have to bear the onus of expanding the size of the market; there was not

much scope of increasing the market share at the expense of existing

players. Thus resulting business strategy consists of having a presence in

all the segments with a clear differentiation among offerings in different

segment and a different proposition for each of them. Further, the companyfollows a multi branding strategy i.e. having more than one brand cater to a

particular segment that may even lead to the cannibalization of sales of one

brand. The gameplan for the company is to increase the consumption of

chocolate and confectionery among adults by offering products in

convenient packs at affordable price. To achieve this it has chosen the

local manufacturing route. This also makes business sense it sources

almost every raw material locally (except cocoa, one third of which is

imported from south east Asia and Africa since the domestic production is

falling short).

Short Term Objective And Future Plans

The short-term objective of the company is to develop brands with mass

franchise and widen out its distribution network further into the rural sector.

This is in keeping with the awareness that new product development

provides the key to growth in this market.

The company plans to launch one new product every year and extend its



32

sugar confectionery range. The overall strategy is to launch three or four

products every year, but only one of the brands will be a big launch, the

rest being soft launches. This year the company chose Picnic as its big

launch.

The company is also focusing on exports. The current exports constitute

2.5% of the total turnover of Rs. 354.14 crores. The company has clear

intentions of improving margins which will be achieved by controlling

indirect costs, reduced wastage, freeze manpower, and cut non profit

expenditure. The company expects healthy cash flows in the future due to

decline in the capital expenditure depreciation, which will further bring downthe interest costs. T he future strategy of the company is to maintain is

dominance.

The company has started to associate the umbrella name of Cadbury's with

events like the Filmfare awards, and Zee Cine Awards, and movie

screenings like Air Force One to promote the brand name further and also

to simulate recall.The company is aiming at overall growth rate of 18%. In keeping with this

objective the company has increased its advertising spending and

marketplace investments by 40% over the year 1997. The Cadbury account

in India which is handled by O&M, is worth Rs. 29.62 crores.

Currently if we see, the company has its products focussed around three

basic propositions.y Drives attitudes and behaviour: This is led by the company's flagship

brand Cadbury Dairy Milk (CDM). CDM is currently positioned on the



33

emotional plank of spontaneity and self-expression and is targeted

mainly on the adult consumer.

y Drives Snacking Consumption: It has three main brands in this

category - 5 Star, Perk and Picnic. However the three brands are

positioned in a slightly different manner. Perk is positioned as a any time

snack anywhere, whereas 5 star is positioned as a Energy Bar. Picnic is

positioned as a heavy snack bar which can be had as a near meal

substitute

y Drives variety, gifting and taste preference: The two brands in this

category are Gems and Eclairs. However, there is a lot of difference

between these two brands. While Gems is targeted primarily at children,

Eclairs is a chocolate simulator, which simulated the taste and the feel of

the chocolate but has to popped in the mouth like a toffee.

Drives attitudeand behaviour

Drives snackingand consumption

Drives variety,gifting and tastepreference

Endorsers Dairy Milk5-Star Perk

Picnic

Gems

Dairy Milk Eclairs

Flankers

Bournville

Crackle

Nut Milk

Fruit & Nut

Creamy Bar

Roast Almond

Break

Butterscotch

Caramels

Nutties

Tiffins

Relish

Truffle

Mocka

Prodigals

Overtures (nowwithdrawn)

All Silk



34

Besides these endorsing brands, Cadbury traditionally has maintained a

whole battery of flank and satellites in its brand portfolio. It has always

focused on preempting any moves by a competitor by launching a brand of

its own. The threat of Nestle's entry led to the launch of tactical brands likeAll Silk, Crackle and Break. Therefore, in the Cadbury's brand system, the

flanker brands are used for the tactical purpose of plugging a gap in the

segment where the threat of entry by a rival brand was imminent. Cadbury

has also entered the sugar confectionery range of Googly and Mocka with

the intention of expanding its range further.

However, Nestle's successful entry through KitKat in the wafer segmentproved that unless you support your flank brands actively, they are not

going to be of any use in blocking competition. And hence Cadbury is

showing some active interest in the area.

CADBURY'S DAIRY MILK (CDM)

Cadbury Dairy Milk (CDM) is the flagship brand of Cadbury's. This is the

endorser brand in the Cadbury's stable. Its success can be attributed to a

variety of factors. This was the first chocolate to hit the Indian market.

Therefore, in the minds of the consumer - chocolates became synonymous

with Cadbury's Dairy Milk Chocolate. CDM is at the center of an array of

support brands that complete the product line. These brands, though

unadvertised, lend support to CDM by attracting customer attractionthrough increased retailer shelf space. I n early 90s, the chocolate market in

India was a virtual monopoly of Cadbury's India Ltd., with the company



35

commanding almost 80% of the market share. However, the market leader

was not in a very comfortable position due to the various problems in the

chocolate market:

y rising prices of cocoa,

y rising excise duty

y small consumer base consisting primarily of children

y The perception that chocolates as a product is nothing but a junk food

and an occasional indulgence.

The outcome of the above problems was that per capita chocolate

consumption in India was very low as compared to the International

standards. The problem was further accentuated when the sales volume for

chocolate industry fell drastically in period 91-92 to 93-94 largely due to the

increasing prices of cocoa, and the decline of the volumes for the market

reflected in the decline of sales for the market leader Cadburys as well.

Added to this was the increasing threat posed by Nestle which madeCadbury's squirm in their seats, especially after the success of KitKat.

Marketing Strategy

The company's marketing strategy was mainly based on remarketing the

product category. lts objective was to revitalize the faltering demand and to

search for new marketing propositions to start a new life cycle for the

declining product. The onus of this marketing task was more on Cadbury

than on any other player in the market. Being a market leader, it was the



36

both the responsibility and necessity for the company to revive and

increase the market. This was very true in the context of the theory that the

market leaders stand to gain the maximum with an increase in the market

size. With the entry of Perk and KitKat in 1995, CDM's performance wasaffected because consumers attention was diverted by the variety and

excitement now available in the market place. In addition to this, primarily in

metros the CDM consumers were graduating to functional offerings like

KitKat or Picnic. So in the future, CDM's primary focus would be to widen

franchise in smaller tows where penetration is currently low, and also to

stress on the platform of mood upliftment rather than hunger satisfaction.

Possible Marketing Strategies For Achieving Above-Mentioned

Objectives

There were three basic strategies Cadbury could have taken to capture the

downfall in its sales, in 1994.

1. Market Modification

To look for new markets and market segments and thus find new

buyers for the product.

To stimulate the increased usage of the product among present

customers.

To repositioning the brand to achieve larger brand sales. 2. Product Modification

To bring about improvement in the product and increase in the functional



37

values and thus generating new users.

To come out with the new variants of the product, with clear

differentiation from the existing product and try to tap a different set of

users for the product.

3. Marketing Mix Modification

To cut prices to draw new segments

To push the product through trade promotions.

To search for a new and brilliant advertising appeal that wins the

customers attention and favour.

THE NESTLE PORTFOLIO

KITKAT

KitKat is a wafer-enrobed chocolate, which was introduced by Nestle just

two years ago, but has already made a big impact in the market. Success,

though, did not come easily for KitKat - the international version of the

chocolate had to undergo quite a few changes before it could be launched

in India. The chocolate was first tropicalised to suit Indian conditions. Its

packaging was changed to prevent melting of the chocolate in the hot

Indian summer.

The strategic reason of Nestle launching KitKat seem to be displacing CDM-something which it could not do with the help of Nestle Milky Bar. The

company's aim is to pull ahead of the country's largest selling brand by the



38

end of 1997. It was thought to be doubtful if this wafer-enrobed chocolate

could displace the dominance of milk chocolate, which is too deeply

embedded in the mind of Indian consumers. However, with KitKat now

proving to be a big success and Cadbury's Perk lagging behind, KitKat hasindeed proved to be a potent threat to CDM.

Marketing Strategy

The product was targeted at the casual consumers of chocolates - primarily

adults through a clear proposition of fulfilling a snacking need which

basically took advantage of the fact that the existing chocolates in the

market were too heavy to be had as a light snack. The company sees a

huge potential in the wafer covered with milk chocolate, not only in the

chocolate market but also in the premium biscuit market. The company is

trying to expand the market in this direction by portraying it as a product

taken during the breaks.

The distribution and packaging are in harmony with the broad marketing

plans of the company. Nestle followed a strategy of distributing its

chocolates in ice-lined Sintex tanks to protect them. KitKat currently has the

maximum reach in terms of the number of outlets it accesses. This has

helped the company to increase the consumer base and to sell the new

concept. KitKat packaging synergies with the total brand appeal. It has

been packaged to keep the product fresh, crisp and protected from theharsh climactic conditions in the country. Special packaging is also integral

to KitKat break ritual, which plays a part in the brand mystique.



39

The current perception is that before the entry of KitKat, the wafer market

was not ready in India. However, the main reason one could cite for KitKat

being the first wafer chocolate to succeed in India was that - its

international reputation was very strong and resulted in a high awarenesslevel even before launch. This meant that the consumers were already

favourably inclined towards the product. Also KitKat's product form helped

increase consumption since the finger product form allowed one to eat one

finger at a time and store the rest for later. At the same time it facilitated

sharing the chocolate among family and friends.

Recently KitKat came up with a 'four plus one' offer which is significant as itis meant to block out Picnic, so that the brand trials were slowed down.

Advertising Strategy

Advertising in this category is aggressive. It is funky, whacky, and

humorous. Nestle uses various situations to bring out the core value of

KitKat, the wafer, in its ads. For example, the karate master, the traffic

policeman, or the classical dancer all advertising the same concept. The

company sources came with following objectives behind their

advertisement campaign.

To highlight the use/benefit of the product

To clearly define KitKat's consumption process and occasion of use.

The latest television commercial for KitKat shows a typical rural Indian

endorsing the product (and the freebie offered) which is a subtle take off

on the Udham Singh commercial for Chekkers.



40

Our Evaluation Of The Advertising Strategy

The functional benefit was important to highlight as the chocolate was

targeted at the snacking segment and the consumption process was in line

with the international tradition of the brand and it helps the consumer to

identify himself with the KitKat fraternity and thus helps in building a long

term relationship with the brand.

KitKat campaign won the silver in the best TV advertising of 1996 category

at the sixth A&M awards in New Delhi.

Creative Strategy

The advertising agency operationalised this objective by showing

recognizable situations and characters speaking in colloquial language and

having crisp Kit-Kat fingers during any small break in daily hectic schedule.

The creative strategy was to appeal to consumer ethos. It focussed on

taking endorsement from people who are in love with brands. It resulted inshowing several -brand devotees (taking break from diverse activities)

instructing their followers on the right way to eat the chocolate - First, you

strip the chocolate of its red sleeve. Next, you press the shiny inner foil to

locate the lengthwise grower that separate the wafer-draped in chocolate

fingers. Then, you use your thumb to draw a neat laceration in the foil, split

it and pop it into your mouth; and yes, relish it.

O ur Evaluation O f The Creative Strategy



42

was the only chocolate that was promoted on the plank of snacking- the

"something in the middle and something in between". This brand mainly

suffered due to lack of commitment from company in opening snack

segment Perhaps company gained valuable experience through this brandwhich helped in launch of its international wafer chocolate brand KitKat.



43

1. How to Build Consumer Interest in the Product Category?

2. How to Increase Brand Loyalty for Cadbury's Brands?

3. How to overcome this seasonality factor?

4. How to Exploit Impulse Purchase Behaviour?



44

CONCLUSION

LOOKING AT THE FUTURE

The consumption of chocolates in India is among the lowest in the world. ,

a comparison with the world wide industry average is an eye opener. In

India the average per capita consumption is a mere 20 gm compared to the

world average per capita consumption of 2.24 kgs. Moreover, data on

worldwide chocolate consumption indicates that - in the mature markets

this figure is as high as 9.36 kgs, while even the -emerging markets total

upto 1.16 kgs. While looking at the consolidated averages -would be

misleading, even the consumption among the potential consumers of

chocolates is extremely low as compared to world average.



45

Potential Chocolate Consumers

Income Groups

(Rs. '000 pa)

Age-groups Total

5 ± 14 15 ± 19 20 ± 24 25 -3

4

Rural

(Millions)

62 ± 86 2.2 0.8 0.7 1.2 4.9

>86 13.5 4.8 4.3 7 29.6

Total 15.7 5.6 5.0 8.2 34.5

Urban

(millions)

62 ± 86 7.0 2.5 2.2 3.7 15.4

>86 18.8 4.9 4.4 7.2 30.2Total 20.8 7.4 6.6 10.8 45.7

Total 36.5 13.0 11.7 19.0 80.2

Using the figures as mentioned in the table above, we can arrive at a rough

estimate of the potential consumers of chocolate in the country. For this

purpose, we have considered the population in the age groups of 5yrs to

35yrs falling in the income -groups having an annual household income of

Rs 62000 and above. The total population in this group is about 80 million

split into 45.7 million urban consumers and 35 million rural consumers.

As the consumption of chocolates is skewed towards the urban consumers,we estimate that 80% of the chocolate consumed is in urban areas. Using

this figure, the per capita consumption for the relevant target populations is

as given in the table below.



46

Chocolate Consumption

Share of

Market

Tonnage Relevant

target

population in

millions

Gms per

consumer

Urban

sales

80% 12800 45.7 280

Rural

sales

20% 3200 34.5 40

Total 100% 16000 80.2 200

Comparing these figures to the world average, we feel that there is a very

high potential for the chocolate market.

As eating habits of large part of Indian society (at least 200 million) are

becoming consistent with rest of the world; the category is poised for a

significant growth. With global majors like Mars, Hershey likely to enter the

Indian market, excitement in this category is already high. The Wafer war

between Perk and KitKat in an interesting indication of the times to come

and it reached almost the same intensity as that of the cola wars!! As these

new players and existing companies introduce new type of chocolates,

distinction between chocolates, biscuits, ice cream will become less andmany hybrid products will grow. Along with this the potential to expand the

consumer base by incorporating a wider array of tastes and needs of the



47

consumers. Segmentation of market based on consumer age is

increasingly becoming irrelevant. There are expected to be many products

target at specific new segments (e.g. segments on basis of attitude, level of

health consciousness etc.). This is very obvious with the emergingsegmentation policy of using the ego states. We also estimate a shift in

media strategy of various companies. Instead of present use of mass

media, specialized media targeted at different segment (e.g. health

magazine for health for health conscious) will catch fancy of media

planners. At the same time we see an increasing association between the

brands and various highly publicised events in order to increase the brand

equity in the minds of all the stakeholders. Further there will lot of

improvement in packaging and modification of -products as per Indian

conditions. We foresee a trend in the future wherein this innovative packing

can be used as a differentiating factor in order to increase the usage of the

product. We believe that chocolate consumption will percolate down to the

majority of rural India, with the increase in the rural incomes, and lowering

prices and also increasing marketing. Along with this the need to innovately

package one¶s chocolates in such a way so as to enhance consumption, by

making the need to stock it in refrigerators, will be a key driving force to

success. We also see the focus of the chocolate giants slowly shifting to

the large untapped interiors, with the increasingly saturating market in the

urban Aries and also increasing clutter. We feel that the first mover

advantage by monopolising the distribution network will work in greatfavour of the company, and hence recommend Cadbury¶s to move in

before any of the other companies can realise what hit them.



BIBLIOGRAPHY

Kapferer, Jean-Noel. "S trategic Brand Management " . The Free Press. A

division of Macmillan, Inc. 1992 Edition

Kotler, Philip. " Marketing Management " Analysis, Planning,

Implementation, and Control Prentice-Hall, Inc. Eighth Edition

Aaker, David, et al, "Advertising Management "

Prentice-Hall, Inc. Fourth Edition

Business Line 'Catalyst' ± Thu. Feb 19,1998.

Financial express 'Brand Wagon' ± Fri, Oct. 27, 1995

Internet Sources:

y www.business-standard.com

y www.financialexpress.com

y www.economictimes.com

y www.hinduonline.com

y www.indiaserver.com

y www.expressindia.com

y www.indiainformer.com

y www.cadbury.co.uk

y www.india-today.com/btoday

lucky singh

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