Business description and market analysis for cadbury

Business description and market analysis for cadbury Cadbury is a global manufacturer, marketer and distributor of branded confectionery. The companys confectionery business operates chocolate, gum and sugar categories. The company along with its subsidiaries primarily operates in the Eurozone, the US, Central and Southern America, Australia and other parts of Asia Pacific. Chocolate business represents the biggest business segment of the company with around 46% of the overall revenues FY2008. The companys chocolate business is carried out on a regional basis according the tastes of the consumers in each market. The company operates its business through four business segments namely: Britain, Ireland, Middle East and Africa (BIMA), Americas, Europe, and Asia Pacific. Britain and Ireland (BI) is the largest business unit in the Group. The company has strong market position in the UK (30% market share in FY2008), and Ireland (42%). The companys main markets in Middle East and Africa include South Africa, Botswana, Swaziland, Namibia, Kenya, Egypt, Lebanon, Morocco, Nigeria, and Ghana. The company American business comprises the US, Canada and Mexico, three of the largest confectionery markets in the world, and extends through Central America and the Caribbean. The company also has its operations in South American countries including Brazil, Argentina, Venezuela, Colombia and Peru. The company is the leading player in South America with a market share of nearly 20%, with core strengths in gum and candy. In Europe, the company has significant gum and candy businesses, with strong gum market shares in the majority of Western Europe, Scandinavia, Turkey and Russia. The companys chocolate business is concentrated in Poland, Russia and France.The companys biggest European operating unit is in France. The companys Asian businesses are concentrated in India, Malaysia, Thailand and China. The companys key brands in these regions include Cadbury Dairy Milk, Bournvita, Halls, Eclairs/Choclairs, Clorets, and Dentyne. In the Pacific regions the companys operations are primarily located in Australia, New Zealand and Japan. Cadbury has a leading position in Australia with an overall 30% market share. While in New Zealand, the company holds a market share of around 41% in FY2008. 3.2 HISTORY Cadbury Schweppes (which was split into: Cadbury plc; and Dr pepper Snapple Group in May 2008) was actually formed in 1969 by the merger of Schweppes and Cadbury Group. Over the years, Cadbury Schweppes expanded its business through organic growth and acquisitions. In 1982, it acquired Motts, which was engaged in the production of apple juice and sauce. The company further strengthened its portfolio of key brands through the purchase of Canada Dry (1986), Trebor (1989), and Bassett (1989). In the 1990s, Cadbury Schweppes acquired 14 more companies, including the US soda giant Dr Pepper/7 UP (1995). Cadbury acquired Snapple Beverage Group in 2000. In the same year, the company also made acquisitions of Hollywood, and Kraft Foods in France, and Wuxi Leaf Confectionery in China to strengthen its chewing gum portfolio. Other acquisitions in the year included Spring Valley Juice and Wave flavored milk in Australia; and Mauna LaI tropical juice drink in the US. In the following year, Cadbury Schweppes acquired Pernod Ricards soft drinks brands and businesses in Europe, North America and Australia. Also in 2001, Cadbury Schweppes acquired the Slush Puppie, a frozen, non-carbonated beverages firm; and Carteret, a contract packer mainly of Snapple. The company also purchased La Casera, Spains third largest soft drinks manufacturer. In 2002, Snapple Beverages, a subsidiary of Cadbury Schweppes, purchased Nantucket Nectars, a producer of premium high juice content drinks. In the same year, the company acquired Brau und Brunnens 72% interest in the Apollinaris Schweppes joint venture in Germany. In 2003, Cadbury completed the acquisition of Adams Confectionery from Pfizer with its brands included Halls, Trident, Dentyne and the Bubbas bubblegum range. In the same year, Cadbury Schweppes main UK operating arm, the Cadbury Trebor Bassett division, announced the closure of two of its factories located in Greater Manchester and Chesterfield. In 2005, the company invested  £40 million (approximately $74.2 million) at its Bournville factory in Birmingham, UK to meet the growing demand for Cadbury Dairy Milk. In the following year, Cadbury sold its business division of Europe Beverages. The company fully acquired the Dr Pepper/Seven Up Bottling Group in the same year. In 2007, Cadbury Schweppes acquired the Southeast-Atlantic Beverage, the second largest independent bottler in the US, by Americas Beverages. In the same year, Cadbury Schweppes acquired Intergum, the leading Turkish gum business. In the same year, Cadbury Schweppes announced its plan to split itself into two separate businesses focusing on chocolate and confectionery on the one hand and the US soft drinks on the other. In February 2008, Cadbury Schweppes sold its Monkhill business, a manufacturer of sugar confectionery and popcorn for the UK market. In May 2008, Cadbury Schweppes completed its demerger and was split into: Cadbury plc, the new holding company of the worldwide confectionery operations and the Australian beverages business; and Dr Pepper Snapple Group (DPS), the new holding company of the Americas beverages business. Further in December 2008, Cadbury plc sold its Schweppes Beverages business in Australia to Asahi Breweries for a total consideration of approximately  £550 million ($1,020 million). In May 2009, Cadbury Schweppes Overseas, a wholly-owned subsidiary of Cadbury purchased 4% of the share capital of Kent Gida Maddeleri, a Turkey base supplier of confectionary products, from Tahincioglu Holding. In September 2009, Cadbury rejected a  £10,200 billion (approximately $18,922 million) offer from Kraft Foods to combine the two businesses and create a global manufacturer of snacks, confectionery and quick meals. 3.3 MAJOR PRODUCTS AND SERVICES Cadbury is an international manufacturing and marketing company of branded confectionery products. The companys key products and brands include the following: Products: Chocolates Candy Candy bars Chewing gum The key chocolate brands of the company include Caramilk, Cherry Ripe, Crunchie, Five Star, Freddo, Mieszanka Wedlowska, Milk Tray, Moro, Mr. Big, Old Gold, and Perk. The company also offers a cocoa based food drink beverage under Bournvita brand name. Gum business offers chewing gum with a number of flavors including strawberry splash, strong mint, peppermint and watermelon wave. The business contributed around 33% of the companys overall sales in FY2008. The key gum brands of the company include Bubblicious, Falim, First, Stride, and V6. The company offers a number of functional candies including cough drops, indulgent candy such as premium toffees. The company offers its candy products in a number of flavors including American hard gums, mints, sherbet lemons, pear drops, everton mints, imperials, mint creams, and fruit, lemon, and strawberry. The key brands of the company under this category include Bassetts, Kent, Maynards, Pascall, Sour Patch, and Swedish Fish. 3.4 CADBURY, INDIA 3.4.1 COMPANY BACKGROUND à ¢Ã¢â€š ¬Ã‚ ¢ Cadbury India is a subsidiary of Cadbury Plc, with Cadbury Schweppes holding a 97.61% stake in its local subsidiary. à ¢Ã¢â€š ¬Ã‚ ¢ The company operates in the hot drinks and packaged food industries. In packaged food it is present in confectionery, biscuits and dairy products. à ¢Ã¢â€š ¬Ã‚ ¢ The companys strategy is to cater to all price segments and consumer groups have a strong presence across the major impulse and indulgence categories in India. à ¢Ã¢â€š ¬Ã‚ ¢ It has national coverage with manufacturing and distribution facilities in all four regions. à ¢Ã¢â€š ¬Ã‚ ¢ In March 2009 the company re-launched Cadburys Perk with a new image, and employed up and coming bollywood actress as its new brand ambassador. The Perk brand portfolio was also extended with the launch of Cadburys Perk Poppers a selfline positioned as direct competition to Nestlà ©s Munch Pop Chocs. à ¢Ã¢â€š ¬Ã‚ ¢ The company launched Cadbury Bournville Fine Dark Chocolate from its parent companys international brand portfolio in India in October 2008. The company also launched Cadburys Dairy Milk Shots in late à ¢Ã¢â€š ¬Ã‚ ¢ In a bid to cater to all consumer groups, the company launched Cadbury Lite in February 2008. This is a smooth milk chocolate with no added sugar, which is suitable for diabetics. 3.4.2 PRODUCTION à ¢Ã¢â€š ¬Ã‚ ¢ The company supplies the local market through its local production units. Cadbury India has five factories, located in Thane, Pune, Induri and Malanpur in West India, and Baddi in North India. Cocoa is one of the major raw materials used by the company, and is procured mainly from plantations in South India, in the states of Kerala, Tamil Nadu, Karnataka and Andhra Pradesh. à ¢Ã¢â€š ¬Ã‚ ¢ The company exports its products to Sri Lanka, Dubai, the US and the Maldives. à ¢Ã¢â€š ¬Ã‚ ¢ Cadbury India is not known to be involved in third party manufacturing. 3.4.3 COMPETITIVE POSITIONING à ¢Ã¢â€š ¬Ã‚ ¢ The company ranked seventh in packaged food in India in 2008 with a 3% value share. The company is the leading player in confectionery, with its Cadburys Dairy Milk brand accounting for over 13% of total confectionery value at the end of the review period. The companys other brands, such as 5 Star and Cadburys Gems, have been favourites across several generations, and the company is highly visible in the mass media channels with its tagline of kuch meetha ho jaye (lets have something sweet). à ¢Ã¢â€š ¬Ã‚ ¢ The company is also very active with media and consumer promotions, as well as flavour innovations for its malt-based hot drinks brand Bournvita. While its presence in biscuits is very low it has represented the sole driver of sales in filled biscuits with Bytes. à ¢Ã¢â€š ¬Ã‚ ¢ The company is a key innovator in packaged food in India as it has pioneered several new product concepts, including Chocki and Bytes, and has been active in flavour innovation with products such as Fruity Gems and Bournvita 5 Star Magic. à ¢Ã¢â€š ¬Ã‚ ¢ The company strives to maintain its leadership in confectionery in India and expanded its presence in Confectionery in 2007 with the launch of Bubbaloo its first gum product in India. à ¢Ã¢â€š ¬Ã‚ ¢ The companys presence in packaged food in India is mainly concentrated in confectionery, where it is present across almost all categories. Its product portfolio outside confectionery is limited to flavoured powder milk drinks and filled biscuits. à ¢Ã¢â€š ¬Ã‚ ¢ The company is mainly present in well-established and mature categories in India. However, several of the categories in which it is present, including malt-based drinks, filled biscuits and chocolate confectionery, are fast growing with double digit constant value forecast CAGRs. Moreover, the company heavily leverages new product launches and brand re-launches to boost growth rates in the categories in which it is already well established. à ¢Ã¢â€š ¬Ã‚ ¢ The company has a very large product portfolio within confectionery. However, its brand portfolio is very limited in biscuits and flavoured powder milk drinks. à ¢Ã¢â€š ¬Ã‚ ¢ The company is positioned in the standard and premium price segments in confectionery and in the premium price segment in biscuits and flavoured powder milk drinks. 3.4.4 SWOT ANALYSIS Cadbury is a global manufacturer, marketer and distributor of branded confectionery products. The company has a strong market presence across all its operating regions. It is the market leader in the global confectionery sector with a market share of 10.5%. Strong global market position would boost the revenues and profitability of the company. However, the rising raw material prices and intense competition would affect the companys market share in certain geographies. A very peculiar characteristic of the chocolate consumers is that there is an overwhelming awareness among the users about different brands that exist in the market. There is however very little brand loyalty in users. People always are ready to try out new brands and keep on switching from one brand to another. This behaviour poses lot of challenge, as the job of designing of marketing strategies becomes two fold. Firstly non-users need to be converted to users and more importantly the existing customers should be retained. Organisational analysis of Cadburys Organizational analysis identifies the knowledge, skills, and abilities that employees will need in the future as the organization and their jobs change. Organizational analysis is a holistic approach which involves looking at the entire organization; the overall structure, the departments, functions, processes, jobs, the interplay between groups, system dynamics, human energy alignment, and other issues. It explores what is as compared to what should be and the gaps between the two. Strength Cadbury is a company, which is reputed internationally as the topmost chocolate provider in the world. The brand is well known to people they can easily identify it from others. Users have a positive perception about the qualities of the brand. Cadbury main strength is Dairy milk. Dairy milk is the most consumed chocolate in India. By using popular models like Cyrus Brocha, Preety Zinta and others Cadburys has managed to portray a young and sporty image, which has resulted in converting buyers of other brands to become its staunch loyalists. By roping in Amitabh Bachchan as its brand ambassador, Cadbury has succeeded in portraying itself as an evergreen, credible, trustworthy and eternal product. Cadbury has well adjusted itself to Indian custom. With the brilliant marketing campaign of Kuch Meetha Ho Jaye on every small or big family or social occasion, Cadbury has been able to create the notion that any occasion has to go along with a Cadbury. It has also catered to all the age groups across various demographics. It has properly repositioned itself in India whenever required i.e. from children to adults, togetherness bar to energizing bar for young ones etc. Weaknesses There is lack of penetration in the rural market where people tend to dismiss it as a high end product. It is mainly found in urban and semi-urban areas. It has been relatively high priced brand, which is turning the price conscious customer away. People avoid having their chocolate thinking about the egg ingredients. Cadbury offers a limited variety of products as opposed to other leading competitive brands, e.g. Amul and Nestle that offer an array of products like biscuits, dairy products, etc. One of the major raw materials i.e. cocoa has to be imported, leading to bunched imports and higher inventory. Majority of the markets in India are not air conditioned, hence cannot store chocolates, at least during hot summers, which limits market access. Environmental Analysis of Cadburys Opportunities The chocolate market has seen one of the greatest increases in the recent times (almost @ 30%). There is a lot of potential for growth and a huge population who do not eat chocolates even today that can be converted as new users. Infrastructure and potential to expand (other countries and markets) Narrowing down on their most popular and highest selling items (dairy milk) to increase sales (including brand ambassadors) Venture into new segments individually or jointly (food and beverages) Introduce their foreign products in India Targeting urban areas and developing sectors- by working on availability and affordability Using information and technology to bring efficiency in logistics and distribution. Though small now, fast growing modern trade with A/c and good ambience suitable for Cadbury products offers huge growth opportunity. Increase related category offerings like snacks (Cadbury bytes) Introduce Schweppes non carbonic drinks in India. Increase the chewing gum market. Threat There exists no brand loyalty in the chocolate market and consumers frequently shift their brands. New brands are coming and existing brands are introducing new variants to add up to an already overcrowded market. Competitors could use scandals in the past and company problems against the company (worm scandal). This could put the reputation of the company at stake. Stiff competition in the confectionery segment. (Amul, Nestle, etc.) New competition including global majors like mars Hersheys expected to enter the fray due to opening up of the Indian economy. The company has large exposure to foreign currency exchange rate risk, mainly on account of imported cocoa beans and cocoa butter in US dollars and Pound Sterling. Significant increase in the food snacks segment offerings which means high indirect competition with low cost local players as well as high brand recognition global players. As Cadbury produces chocolates and a few related products, effective management of all the areas proves to be difficult at times. Trends of purchase may change with the ever-changing taste preference of consumers. Changing restrictions and rules from Government quality control boards may result in pressure on the production of the company cost increase Cadbury is exposed to rise in the cost of cocoa beans, dairy products and other vital ingredients. Increase in modern trade will increase competition especially from global players will also increase cost pressure thru malls negotiating higher discounts from suppliers. 3.4.5 PEST ANALYSIS Demographic factor 1. Population growth:-chocolates have wide impact on population growth. 2. Educational groups:-target population is all age groups but the education group will have more influence on it. As this is used as 2 celebrate events such as birthday, days. 3. Population age mix:-both men and women would like 2 prefer dairy milk. 4. Household patterns:-consumption and need is according to the household patterns. 5. Population age group: Preschools:-5% School-age: 15% Teens:-40% 25-65:-38% 65+:- 2% Political factor Increase in the tax rate by the government on chocolates will force a customer to pay more for it An increase/decrease in inflation rate can affect the FMCG sector and thereby also increase/decrease the price of Cadbury products Economic In festival seasons the demand of chocolates increases. Willingness to buy Demand of chocolates depends on the persons willingness to buy, which in turn is affected by the persons needs and requirements. Taste and preference Cadbury has wide variety of products and a particular product like lets say Dairy milk is also differentiated in many ways such as fruit and nut, raisins, almond. So the demand will be according to the taste and preferences of the variety. Income Variation in income will affect positively or negatively on Cadbury products. Sale is directly proportional to the income of an individual keeping other factors constant. Social Social factors includes such as norms, beliefs, values of the company. Cadbury has created a positive impact on customers in terms of belief and values. Advertisement Dairy milk, a brand of Cadbury renews its advertisement in every 6 months. The advertisements convey that it can be consumed by people of all ages. The type of advertisement also affects the buying interest on customers. They get known about new products and variety. Technological Milk quality can be improved much by technology. Refrigeration power can be improved by new technology so that cold storage product such as dairy milk and other milk products can be stored well and for a longer duration. 3.4.6 COMPANY FACTFILE Corporate Summary Cadbury India Ltd is a subsidiary of Cadbury Schweppes Plc, with Cadbury Schweppes holding a stake in excess of 90% in its local subsidiary. The company was incorporated in 1948 and formerly called Hindustan Cocoa Products. It has four factories located in Thane, Induri and Malanpur in West India and Baddi in North India. The production facilities in India are not only used for domestic production but also for the export of finished products to Bangladesh, Sri Lanka, Dubai, Ghana and the Maldives. 3.5 CADBURY AFTER KRAFT Wider geographic reach but still developed markets bias à ¢Ã¢â€š ¬Ã‚ ¢The acquisition of Cadbury provided Krafts confectionery operations with a better balanced geographic mix between developed and developing markets, although the share of combined North American and Western European retail value sales remained at 55%. However, its exposure has increased in North America and decreased in Western Europe. Competition in both developed regions is fierce from well-established, domestic confectionery conglomerates, such as Mars/Wrigley and Hershey in North America, and Nestlà © and Ferrero in Western Europe. Market gaps to fill in emerging regions à ¢Ã¢â€š ¬Ã‚ ¢Krafts Asia-Pacific confectionery revenues in 2008 were just above US$100 million, and with the integration of Cadbury it is expected to exceed US$1.4 billion. However, over 50% of this retail value is generated in just two national markets: Japan and India. China, the regions most attractive confectionery market accounts, for around 8% of the joint entitys confectionery revenues. Although China is forecast to grow by a more modest rate than India, at a CAGR of 4% over 2009-2014, in absolute value terms it makes up over 50% of the Asia-Pacific confectionery market growth over the period. The next step in Krafts strategy should be to focus on strengthening its position in the Chinese market, potentially with further acquisitions/partnerships to gain a larger slice of this dynamic market.