Cadbury India Limited – An insight to its strategy
1. INTRODUCTION1.1 Strategy
Strategy is the art of creating value. It provides the intellectual frameworks, conceptual
models, and governing ideas that allow a company’s managers to identify opportunities
for bringing value to customers and for delivering that value at a profit. In this respect,
strategy is the way a company defines its business and links together the only resources
that really matter in today’s economy: knowledge and relationships or an organization’s
competencies and customers.
Strategic thinking is driven by the match between current capabilities and existing
opportunities, searching for sustainable advantages and finding protected niches. It is all
about finding ways to leverage resources, outpacing competitors in building new
advantages and making new industry rules.
The four questions that guide strategic choices are :
1. What can we do?
This question helps to analyse our strengths and weaknesses.
2. What might we do?
This question tells us about the external opportunities and threats.
3. What do we want to do?
This question gives the organizational and individual values.
4. What do others expect us to do?
This question helps to analyse the stakeholder expectancies.
NMMIMS – Deemed University 1
Cadbury India Limited – An insight to its strategy
1.2 History Of Strategy
Strategy is rooted in military conflicts. It originated in business with the emergence of the
business schools like, Wharton and Harvard.
It was first known as Business Policy, which was used as a capstone course to bring
business functions together and had little grounding in its own theory. Real research in
the area of “strategic management” only really began to take shape in the 1970’s.
Technically, economics is the grounding for strategic management theory. The rigid
structure of neoclassical economics did not serve empirical evidence of firm performance
well which lead to other disciplines such as sociology, Psychology, political science, and
institutional theory as “alternative” explanations for strategy. The relaxation of the
rigidities in economics in the 1980’s has put economics back in the forefront as a solid
theoretical foundation for strategy. This led to a very young field of research with little in
the way of “accepted” principles and theories. Thus, resulted the evolution of business
strategy.
1.3 Purpose Of Strategy
The ultimate purpose of strategy for a firm are to maximise shareholder value, to become
a monopoly in its sphere of operation, that it should be earning profits above average and
that it is successful. But success is a very subjective word and its explicit definition is
required as success may mean staying in business and also may mean survival for a firm.
1.4 Strategic Planning
The first stage of strategic planning involve Futures Planning, which is thinking about
what the business might need to do 10–20 years ahead, and, Strategic Intents, which
involves thinking about key strategic themes that will inform decision making.
The thicker or rather the more voluminous, the planning document the more useless it
becomes.
NMMIMS – Deemed University 2
Cadbury India Limited – An insight to its strategy
The vision should be communicating to all staff where the organisation is going and
where it intends to be in the future and allows the firm to set goals. The aim of the firm
should be long term target, while the objective is the way in which the firm is going to
achieve the aim.
When the framework of the planning is laid down and the direction is identified, the firm
should analyse its position, develop and introduce strategy according to its position and
then evaluate the same. The evaluation should be on a regular basis and the results of the
evaluation should be fed back into the vision.
1.5 Types Of Strategy
Market Dominance, which is achieved through internal growth and
acquisitions – mergers and takeovers.
New product development to keep ahead of rivals and set the pace.
Contraction/Expansion to focus on what are the firm’s core competencies or
seek to expand into a range of markets?
Price Leadership – through dominating the industry so that other competitors
follow the price lead.
Global – seeking to expand global operations.
Reengineering – thinking outside the box – looking at news ways of doing things
to leverage the organisation’s performance.
The internal business level strategies are :
• Downsizing – selling off unwanted parts of the business – similar to contraction
• Delayering – flattening the management structure, removing bureaucracy, speed
up decision making
• Restructuring – complete re-think of the way the business is organised.
NMMIMS – Deemed University 3
Cadbury India Limited – An insight to its strategy
2. CADBURY INIDA LIMITED
Cadbury dominates the Indian chocolate market with a 65% market share.
Besides, it has a 4% market share in the organized sugar confectionery market and a 15%
market share in milk/ malted foods segment.
2.1 Corporate Vision
Cadbury in every pocket Superior shareholder value
2.2 Cadbury is mainly into three segments
Chocolates- out of total market size (volume) of 22500 tpa, Cadbury’s share has been
69.2 %.
Sugar Confectionery – out of the total market size (volume) of 163000 tpa, Cadbury
enjoys 4 % market share in this category.
Food drinks – out of total market size (volume) of 73500 tpa, 14.2 % share has been
rewarded to Cadbury in this segment.
Changing product mix
Contribution to turnover
1994
Contribution to turnover
2001
Chocolate 59% 65%
Sugar Confectionery 9% 10%
Food Drinks 32% 24%
NMMIMS – Deemed University 4
Cadbury India Limited – An insight to its strategy
2.2.1 Chocolates (65% of turnover)
For more than five decades now, Cadbury has enjoyed leadership position in the Indian
chocolate market to the extent that 'Cadbury’ has become a generic name for chocolate
products. Cadbury has leading brands in all the segments viz bars (Dairy Milk, Crackle,
Temptations), count lines (5 star, Milk Treat).
During 2001, Cadbury’s chocolate sales (65% turnover) registered a 9% value growth,
aided primarily by growth in the flagship brand Dairy Milk. Dairy Milk contributes an
estimated 30% to Cadbury’s sales. Gems and Five Star were relaunched during the year
to stem their degrowth. Perk registered a degrowth during 2001 despite launch of new
variants. New brand initiatives included the launch of Temptations in the premium
segment and Chocki a low priced chocolate confectionery targeted at children.
Retail outlet for FMCG goods in India, over two thirds out of these stock branded
impulse products, but fewer than 25% sell chocolates. The current chocolate value share
of the total impulse category is 6.1 %. Out of which Cadbury enjoys the share of 4.4%.
The scenario is going to change as
Attitude & disposable income changes are favourable to impulse product.
The main target segment, youth population, 47 % of urban India is growing.
Child & gifting segments are expected to grow at a faster rate.
Thus, the growth might be seen as saturating in the short run but certainly not in the
medium to long run.
Cadbury’s future plans for chocolate category is:
Broadening the consumer appeal & extending its reach to newer markets. Cadbury is
broadening its customer appeal via 450,000 outlets. More than 2100 distributors.
With addition of 8 million. New consumers added in 2000, Cadbury has the loyalty of
60 million total consumers now. However, the customer addition is lower than
expectation of more than 15 million a year. Cadbury is focusing on new channels &
NMMIMS – Deemed University 5
Cadbury India Limited – An insight to its strategy
institutional sale as a means to growth. Child connectivity & gifting segment also
being attempted as a new growth segment by the company.
Sustained growth of market through aggressive product development. Cadbury plans
to launch one new product every year.
Striving for international quality in the products as well as processes.
Focusing on cost competitiveness, productivity & innovative utilization of assets.
Benchmarking the manufacturing costs within the Cadbury Group's 40 production
facilities across the globe will do this. Thus, every year, this will definitely contribute
to the value creation.
2.2.2 Sugar Confectionery segment (10% turnover)
Cadbury entered the hard-boiled sugar confectionery market with the launch of Googly in
1996. In 1997, the company launched a coffee based sugar confectionery product Mocka.
Cadbury has a 4% market share in the confectionery segment, largely contributed by
Eclairs. Other confectionery brands such as Gollum, Frutus, Nice Cream, etc launched in
the last two years did not receive a good market response and the company has decided to
minimize focus on those brands. Eclairs was relaunched with unique packaging in
cartons during 2001.
Sugar confectionery contributes around 10 % to the company’s revenue. Cadbury’s future
plans for this category is:
Optimum utilization of distribution network & reach
Introducing technologically differentiated value added sugar products
Focus on quality & packaging
Regular introduction of variants
However, this is a commodity segment and the premium market here may not emerge
very fast. Thus, any major success for the company is not expected in the short run. Also,
the company could look for acquiring some good brands here, which would enable them
to position themselves strongly.
NMMIMS – Deemed University 6
Cadbury India Limited – An insight to its strategy
2.2.3 Food drinks (25% of turnover)
Cadbury’s Bournvita is the leading brand in the brown drinks segment of milk/ malted
food products. Overall share in the malted food drinks market is estimated at 15%. Brown
drinks earlier positioned as taste enhancers were losing market to white drinks during the
last few years. Cadbury relaunched Bournvita with a new formulation and advertising
campaign positioning it on the health benefit platform to compete with white drinks. The
brand was relaunched in the South – the largest food drink market in the country, during
2001. Bournvita sales registered a 12% growth in value terms in 2001 to Rs , contributing
24% to total turnover.
Cadbury’s other products include Cadbury’s Drinking Chocolate and Cadbury’s Cocoa
powder. These account for only 1% of Cadbury’s turnover.
Cadbury is at No. 2 position in food drinks market. It has positioned itself on the platform
of ‘taste & energy’. To win a continuous brand loyalty from the child segment, it has
associated with children through programs such as ‘Bournvita Quiz Contest’. Cadbury’s
future plans for this category is:
To extend its positioning of ‘taste & energy’ to adults
To continue program with kids
Increase association with kids through website ‘bournvita.com’
Here, too the company is positioned more in the Brown segment. The White segment is
represented by HORLICKS as a dominant brand. Thus, to that extent, Cadbury India’s
growth may remain limited in this category. Here, too the company would look for
acquisitions.
2.3 Earnings sensitivity factors
Cocoa bean prices: Domestic as well as international prices of key raw material -
cocoa has significant impact on margins.
NMMIMS – Deemed University 7
Cadbury India Limited – An insight to its strategy
Excise duties: Changes in excise levied on malt and chocolate influences end product
prices and thereby volume growth as well as margins.
Changes in custom duties and foreign exchange fluctuations, as 20% of raw material
is imported.
Competition from MNCs like Nestle as well as imported brands. Increasing
competition puts pressure on advertisement budget and margins. However on the
positive side, it helps in expanding the market.
2.4 Chronology of Success of Cadbury
1750 - Mayans discover cocoa.
1831 - Manufacture of drinking chocolate and cocoa began in a small rented
factory in Crooked Lane, Birmingham.
1865 - The Cadbury Brothers launch of Cocoa Essence, a new unadulterated
product. "Absolutely pure and therefore Best".
1886 - Cadbury became one of the first firms to open dining rooms with kitchens
and with food on sale.
1899 - The business became a private limited company, Cadbury Brothers Ltd,
and the Bournville factory had trebled in size and employed over 2,600 workers.
1905 - Cadbury Dairy Milk was launched. It was going to be called Cadbury's
Dairy Maid but the name was changed 6 weeks prior to launch.
1915 - Milk Tray was launched. Chocolates were put onto trays in special 5.5lb
boxes and sold loose to customers, at 3.5d per lb.
1932 - Bournvita made with malt extracted from barley, full-cream milk, the
finest cocoa and eggs, was launched.
1947 - Cadbury set up a factory in India and its India operations started.
1969 - Cadbury merged with Schweppes.
1993 - Cadbury opened the world's largest and most advanced chilled warehouse
in Minworth, Birmingham.
NMMIMS – Deemed University 8
Cadbury India Limited – An insight to its strategy
3. Strategy of Cadbury
The challenge that Cadbury faced in India, when it started its operations in 1947
in India was that chocolates were primarily seen as a western taste and getting people
accustomed to chocolates was a difficult task. The mindsets and the preferences of
Indians are so diverse as the country itself and reaching out to them and communicating a
new ideology was the main challenge that Cadbury was facing.
The advertising is aimed at changing consumer perception and eating habits. It supports a
lot of human welfare activities in all the regions and countries of its operations. It shows
its commitment to stakeholders in line with Corporate Governance policy.
Cadbury India Limited is always on the lookout of attractive and growing markets. It
believes in creating high barriers for any new entrant to enter the market. The objective is
to earn attractive and resilient returns so that it recovers its investment faster and create
its monopoly in the market.
The strategy at the organisational level is followed by comprehensive structural and leadership change, consolidated operational structure, increased scale of each regional operating unit and separated supply chain management from commercial management.
Apart, from the above-mentioned steps, Cadbury has planned to follow the following
strategies, which shows its commitment towards its stakeholders in line with its
Corporate Governance policy – shareholders, customers, employees, suppliers &
distributors.
Providing high focus on Economic profit & a constant review of company & brand
performance
NMMIMS – Deemed University 9
Cadbury India Limited – An insight to its strategy
To drive low cost manufacturing
Reducing manufacturing cost by enhancing supply chain efficiencies & further
reduction in material costs
To seek better trading margins
Efficient utilization of scarce resources via brands & production capabilities
Keep Capex close to depreciation
Further improvements in working capital norms
Effective use of properties
Use of Information Technology for business improvement & cost reduction
Enhancing organization capabilities through people – by training & development,
sharpening of culture work shops, performance linked incentives for managers &
through people care index measurement
Form business improvement projects making in-house project teams of senior
managers work closely with CS Group & some well known consultants to identify
new growth opportunities, improve manufacturing costs & supply chain processes &
effective use of IT.
The goals and priorities are well defined by the organisation. They are :
Deliver superior shareowner performance. Profitably and significantly increase global confectionery share.
Profitably secure and grow regional beverages share.
Ensure our capabilities are best in class.
Reinforce reputation with employees and society.
Up to a third of benefits reinvested in top line growth.
Operating margin growth of 50 – 75 basis points pa.
Net sales value growth of 3% - 5% pa.
NMMIMS – Deemed University 10
Cadbury India Limited – An insight to its strategy
Targeting a 10% reduction in direct and indirect costs
o 20% reduction in factory base
o 10% reduction in headcount
Savings across: supply chain; commercial; back office
Operational gearing from volume growth.
4. DISTRIBUTIONS AND SALES MANAGEMENT
Cadbury's distribution network encompasses 2100 distributors and 450,000 retailers. The company has a total consumer base of over 65mn.
As a part of the project, a few retailers like “TULIKA, Vile Parle”, “xxxx”, “xxxx”, were interviewed. A small team of sales people from the distributor gave valuable inputs on their distribution channel and sales management.
Cadbury India Limited has a “Carrying and Forwarding (CNF) Agent” in all the districts of India, where the company has a presence. The product is passed on from the company to the CNF agent. Every district is divided in various zones and there are distributors to handle the sales of one or more zones (maximum three). The CNF agents bear the responsibility of selling the goods to the various distributors in his district. The distributors, in turn, interact with the retailers and are directly involved with them in collecting orders and payments. The CNF agent interacts with the distributors on every 10 days, to take fresh
NMMIMS – Deemed University 11
Cadbury India Limited – An insight to its strategy
orders and also ask for the payment due. This procedure is again followed by the distributors while interacting with their retailers.
A schematic representation of the entire distribution channel is given here :
EACH IN A DISTRICT
DISTRIBUTORS
RETAILERS
NMMIMS – Deemed University 12
DISDISDIS
CADBURYS INDIA LIMITED
CNFCNFCNFCNF
RETRETRET
Cadbury India Limited – An insight to its strategy
Cadbury India does not interact only with the CNF agents and completely rely on them.
The company interacts with its distributors and retailers once every month to get a first
hand knowledge of the performance of its product compared to other competitive
products present in the market and also takes a note of the effectiveness of the
distribution network. This helps the company to evaluate their strategies and help them
gain an insight on the new developments of the market.
And since any discussion today would be incomplete without mention of the 'e' word, the management is eager to tap this new channel of marketing.
E.COM INITIATIVES
1. Direct Websites (B2C)
2. Push B2B through
I. Distributors.com
II. SCM Issue (+) Information Management issues (+) Better
Working Capital Management
B2B will unlock lot of cash from Banking system & plough back to grow business.
Cadbury was successful in penetrating deeper in Metros. In Bombay & Kolkata, it
recorded 15% growth in volume terms. In case of small towns, a lot is still to be done. It
will address this issue thru new channels with highly focussed servicing areas. It has
NMMIMS – Deemed University 13
Cadbury India Limited – An insight to its strategy
started selling through unconventional channels (Rs. 1 crore sales p.m.). It is a good
beginning.
The company has entered into various marketing relationships on the net, a move towards e-commerce sites are being renovated. At BQC (Bournvita Quiz Contest), there were 18,000 hits per month.
5. BCG MATRIX
NMMIMS – Deemed University 14
Cadbury India Limited – An insight to its strategy
The BCG Growth-Share Matrix is a portfolio-planning model developed by Bruce
Henderson of the Boston Consulting Group in the early 1970's. It is based on the
observation that a company's business units can be classified into four categories based
on combinations of market growth and market share relative to the largest competitor,
hence the name "growth-share". Market growth serves as a proxy for industry
attractiveness, and relative market share serves as a proxy for competitive advantage. The
growth-share matrix thus maps the business unit positions within these two important
determinants of profitability.
This framework assumes that an increase in relative market share will result in an increase in the generation of cash. The increased relative market share implies that the firm is moving forward on the experience curve relative to its competitors, thus developing a cost advantage.
NMMIMS – Deemed University 15
Perk
Dairy MilkBournville Candy
Gum
DelightEclairsGems
???High Low
High
Low
Market
Grow
th
Relative Market Share
Circle Size = proportion of total revenue business contributes to corp.
5 Star
Bournvita
Cadbury India Limited – An insight to its strategy
The position of a business on the growth-share matrix provides an indication of its cash generation and its cash consumption.
The four categories are:
Dogs - Dogs have low market share and a low growth rate and thus neither generate nor consume a large amount of cash. However, dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture.
The dogs, in case of Cadbury India Ltd., are Gems, Eclairs and 5 Star. Eclairs is being duplicated by a lot many regional players while Gems has decreased its presence steadily. Although Cadbury Re-invented 5 Star but it has not regained its popularity.
Question marks - Question marks are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash consumption. A question mark (also known as a "problem child") has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines.
The question marks are Bournville and small candies. The candies are the rage of the day and have a great chance of success, while Bournville, as a brand is very successful but needs to be re-invented.
Stars - Stars generate large amounts of cash because of their strong relative market share, but also consume large amounts of
NMMIMS – Deemed University 16
Cadbury India Limited – An insight to its strategy
cash because of their high growth rate; therefore the cash in each direction approximately nets out. If a star can maintain its large market share, it will become a cash cow when the market growth rate declines. The portfolio of a diversified company always should have stars that will become the next cash cows and ensure future cash generation.
The revenue generator of Cadbury are Bournvita, which is responsible for one-third revenue of Cadbury, and Dairy Milk.
Cash cows - As leaders in a mature market, cash cows exhibit a return on assets that is greater than the market growth rate, and thus generate more cash than they consume. Such business units should be "milked", extracting the profits and investing as little cash as possible.
The cash cows of Cadbury are Perk and Delight.
Under the growth-share matrix model, as an industry matures and its growth rate declines, a business unit will become either a cash cow or a dog, determined solely by whether it had become the market leader during the period of high growth.
NMMIMS – Deemed University 17
Cadbury India Limited – An insight to its strategy
6. ANSOFF MODEL
The Ansoff Growth matrix is a tool that helps businesses to decide their product and market growth strategy. It suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets.
NMMIMS – Deemed University 18
Marke
t
ProductEXISTING NEW
EX
ISTIN
GN
EW
Market penetration(Dairy Milk,
Perk,Bournvita)
Product development(Bournville,Chockis)
Market development
(Candy)
Diversification(Gems,Eclairs)
Cadbury India Limited – An insight to its strategy
The output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy. They are :
Market penetration - Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. It seeks to maintain or increase the market share of current products, secure dominance of growth markets, restructure a mature market by driving out competitors, and, increase usage by existing customers.
These objectives are met by Dairy Milk, Bournvita and Perk.
Market development - Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. The possible ways of approaching this strategy are new geographical markets, new product dimensions or packaging, new distribution channels, and, different pricing policies to attract different customers or create new market segments.
This strategy is needed by Cadbury in the candy market as it has limited presence in the market.
Product development - Product development is the growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products, which can appeal to existing markets.
Bourville and Chockis need this strategy t be followed as they are very new to the market and they are needed to be developed.
NMMIMS – Deemed University 19
Cadbury India Limited – An insight to its strategy
Diversification - Diversification strategy should be followed where business markets new products in new markets.
This should be followed in the case of Gems and Eclairs.
7. GE Mckinsey Matrix
The business portfolio is the collection of businesses and products that make up the
company. The best business portfolio is one that fits the company's strengths and
helps exploit the most attractive opportunities.
The company must analyse its current business portfolio and decide which businesses
should receive more or less investment, and, develop growth strategies for adding
new products and businesses to the portfolio, whilst at the same time deciding when
products and businesses should no longer be retained.
The McKinsey/GE Matrix overcomes a number of the disadvantages of the BCG
Box. Firstly, market attractiveness replaces market growth as the dimension of
industry attractiveness, and includes a broader range of factors other than just the
market growth rate. Secondly, competitive strength replaces market share as the
dimension by which the competitive position of each SBU is assessed.
NMMIMS – Deemed University 20
Cadbury India Limited – An insight to its strategy
The factors that Affect Market Attractiveness :
Market Size
Market growth
Market profitability
Pricing trends
Competitive intensity / rivalry
Overall risk of returns in the industry
Opportunity to differentiate products and services
Segmentation
Distribution structure (e.g. retail, direct, wholesale)
The factors that Affect Competitive Strength are :
Strength of assets and competencies
Relative brand strength
Market share
Customer loyalty
Relative cost position (cost structure compared with competitors)
Distribution strength
Record of technological or other innovation
NMMIMS – Deemed University 21
Cadbury India Limited – An insight to its strategy
Access to financial and other investment resources
8. PORTER’S FIVE FORCES MODEL
NMMIMS – Deemed University 22
Cadbury India Limited – An insight to its strategy
Michael Porter’s Five Forces Model analysis involves scanning and evaluating various
sectors outside the organization to identify positive and negative trends that may affect its
performance. The positive trends are opportunities that may improve performance. These
usually lead to market opportunities the organization has not yet tried. The negative
trends are threats that may hinder the organization's performance. The organization is an
open system that interacts with and responds to its external environment.
Rivalry Among Existing Firms is intensified by several factors:
Balance Among Firms: No matter how many firms are in the industry, if they are
about the same size, rivalry is likely to be more intense as they try to gain an
advantage over one another. This intense rivalry is easiest to see at the local level,
such as the competition among supermarkets or fast-food outlets in one city.
NMMIMS – Deemed University 23
INDUSTRY COMPETITORS
Rivalry AmongExisting Firms(Nestle,Amul)
POTENTIAL ENTRANTS(Regional Players)
SUPPLIERS(Cocoa farmers
&others)
BUYERS(Consumers &
Customers)
SUBSTITUTES(Working in all
Substitute areas)
Threat of new entrants
Bargaining power of buyers
Threat of substitute products or services
Bargaining power of suppliers
Cadbury India Limited – An insight to its strategy
Slow-Growth Markets: These make for intense rivalry because the only way to grow
is to take market share away from competitors.
High Fixed Costs: High fixed costs may result in price cutting to get the turnover to
cover these costs.
Cadbury India Limited is facing tough competition from Nestle India and Amul as both
command substantial market share in the chocolate category alongwith new innovations,
like, Kit Kat, and, also goodwill and respect, in the industry.
New Entrants or Competitors can be repelled by several means:
Brand Loyalty is established by continually advertising the brand and company name,
patent protection, high product quality, after-sales service, and other means. Strong
brand loyalty makes it hard for customers to change to a new, competing product.
Cadbury commands a high degree of brand loyalty with its customer, and, especially,
Cadbury dairy Milk ranks high in brand loyalty among its consumers.
Absolute Cost Advantages: It is hard to compete against a firm with lower costs if
their product is of appropriate quality. Low-cost advantage can be achieved in any of
a company's operations: better management, lower transportation costs, better
purchasing, etc. Cadbury is trying to cut costs at its production and management
level.
Economies of Scale: Is the market big enough for the company in question to serve it
profitably? Small businesses thrive by serving market niches that are too small for
larger firms to serve profitably. Cadbury has the advantage of economies of scale
because of its high degree of production.
The Capital Requirement For Entry: The capital requirements to compete in today's
world market would be enormous. Smaller businesses, however, have no such
protection against new competitors. Their protection must come from special service,
high quality, or a focus on serving a market segment extremely well.
NMMIMS – Deemed University 24
Cadbury India Limited – An insight to its strategy
Legislation Or Other Government Action: This can lower entry barriers quickly and
significantly. Deregulation of airlines, trucking, and long-distance telephone service
are good examples during the past two decades.
Differentiation: This is the ultimate barrier to entry. Like lower, differentiation can be
achieved in virtually any phase of a company's operations.
Expected Retaliation: The company must try to understand the motivations of its key
competitors. These motivations can change over time. The more the firm know about
possible competitor reactions, the more able it is able to choose a strategy that will
not result in an unexpected or unwanted reaction.
Threat of Substitutes
Cadbury need to consider both direct and indirect substitutes. Some products
are direct substitutes for one another: for example, chocolates are a substitutes for sugar
candy. It is harder to see indirect substitutes for a product.
When analysing, Cadbury need to ask questions like, is there a way you can lessen these
threats, perhaps by some form of differentiation or by lowering costs? Is there a way that
the firm can find new markets by making its products or services a substitute for those of
a competitor?
Close substitutes are a very potent competitive threat. Newly created substitutes can even
cancel advantages a firm may have gained by speeding down the learning curve. But the
absence of close substitutes may give a firm the chance to raise prices and profit margins.
The firm should always find some way to take advantage of a lack of close substitutes,
but should always be on the lookout for ways competitors may gain such advantages, and
plan the firm's countermoves.
NMMIMS – Deemed University 25
Cadbury India Limited – An insight to its strategy
Supplier Power:
It is likely to be high when there is a concentration of suppliers rather than a
fragmented source of supply. The switching costs of changing from one supplier to
another are high. It is possible for a supplier to integrate forward if they do not obtain the
prices and margins they want in their present business.
The supplier's customers are not very important to the supplier. Such a supplier may not
be willing to offer very favourable terms and service to customers. Many small
businesses face this problem as they buy from their suppliers.
Buyer Power
The firm should always remember that the buyer is the next person downstream
in the channel of distribution. The buyer for the firm in the case of Cadbury is the final
consumer and the customer. The factors that increase a buyer's power are the mirror
image of those that increase a supplier's power. Thus buyers have enhanced power.
When there are alternative sources of supply for a buyer and it costs little to switch
among them, then the buyers play suppliers among each other to get the lowest price or
best service.
NMMIMS – Deemed University 26
Cadbury India Limited – An insight to its strategy
9. PEST FORCES
A PEST analysis is an analysis of the external macro-environment that affects
all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological
factors of the external macro-environment. Such external factors usually are beyond the
firm's control and sometimes present themselves as threats. For this reason, some say that
"pest" is an appropriate term for these factors. However, changes in the external
environment also create new opportunities and the letters sometimes are rearranged to
construct the more optimistic term of STEP analysis.
Many macro-environmental factors are country-specific and a PEST analysis will need to
be performed for all countries of interest.
The following are examples of some of the factors that might be considered in a PEST
analysis.
NMMIMS – Deemed University 27
Macro Forces
Micro Forces
Political(Stability)
Social(Muh Meetha)
Technological(intro. of double pack)double pack)
Economic(Affordable
small Packs)Packs)
Supply(Local)
Demand(Created)
Competition(Regional)
Cadbury India Limited – An insight to its strategy
Political Analysis
Political stability
Risk of military invasion
Legal framework for contract enforcement
Intellectual property protection
Trade regulations & tariffs
Favoured trading partners
Anti-trust laws
Pricing regulations
Taxation - tax rates and incentives
Wage legislation - minimum wage and overtime
Work week
Mandatory employee benefits
Industrial safety regulations
Product labelling requirements
Economic Analysis
Type of economic system in countries of operation
Government intervention in the free market
Comparative advantages of host country
Exchange rates & stability of host country currency
Efficiency of financial markets
Infrastructure quality
Skill level of workforce
Labour costs
Business cycle stage (e.g. prosperity, recession, recovery)
Economic growth rate
Discretionary income
Unemployment rate
Inflation rate
NMMIMS – Deemed University 28
Cadbury India Limited – An insight to its strategy
Interest rates
Social Analysis
Demographics
Class structure
Education
Culture (gender roles, etc.)
Entrepreneurial spirit
Attitudes (health, environmental consciousness, etc.)
Leisure interests
Technological Analysis
Recent technological developments
Technology's impact on product offering
Impact on cost structure
Impact on value chain structure
Rate of technological diffusion
The number of macro-environmental factors is virtually unlimited. In practice, the firm
must prioritise and monitor those factors that influence its industry. Even so, it may be
difficult to forecast future trends with an acceptable level of accuracy. In this regard, the
firm may turn to scenario planning techniques to deal with high levels of uncertainty in
important macro-environmental variables.
Cadbury has made it resent in most of the countries by doing a PEST analysis. In the
recent times, when it was surrounded by controversies of worm in Dairy Milk, the firm
showed its technological superiority by importing technologies of double packing.
In regards to social activities, it has always attached itself with activities that benefits its
employees and people near its vicinity of workplace, all over the world, wherever it is
present. The company has always followed a policy of having good relation with the
NMMIMS – Deemed University 29
Cadbury India Limited – An insight to its strategy
government at power so that it does not face any problem in its smooth functioning. It
cooperated with the government in all the investigations that was undertaken against the
company in the worm case. It was basically followed a neutral position while dealing
with political parties.
10. DAIRY MILK
NMMIMS – Deemed University 30
Cadbury India Limited – An insight to its strategy
Cadbury Dairy Milk is considered as the most delicious, best tasting chocolate. It is
perceived synonymously with chocolate, world over.
”CDM is Chocolate” - A moment of pure magic. It stands for goodness.
The branding of Cadbury Dairy Milk encapsulates an enormous breath of emotions, from
shared values such as family togetherness (fun, wholesome, reliable), to the personal
values of individual enjoyment. The personal bonding so created with the consumers has
helped to increase the Emotional Value of the brand alongwith the Functional Value that
it delivers. The brand character is given in such a way that the customer feels proud to be
associated with the brand and the product. The ambition is to “work better together” to
drive World Class performance.
The projection has been done in such a way that it is a personal treat, stimulating mouth
as well as mind and is a part of fun and pleasure. The category has been advertised in
such a way that it conveys that there is no reason for Dairy Milk and there is no time to
do so. It is a unique portfolio of a winning masterbrand that own the benefits in its own
category, keeping in line with the strategy of Cadbury India Limited.
10.1 Positioning with time
80s - The branding of CDM was done with children as target audience. It was
considered as a surrogate of parental affection for their children. The strategy was to
harness the appetite appeal of the goodness of the chocolate. It was positioned as ‘The
perfect expression of parental love’ and also as the love shown towards the children
by their elders. CDM became a common gift that was presented to a child by its
relatives. The tag line that was used during this period was ‘Sometimes a Cadbury
can say it better than words’.
NMMIMS – Deemed University 31
Cadbury India Limited – An insight to its strategy
90s –The target audience remained the same in he 90s with the focus oriented towards
children. It was seen as an indulgence product where the consumers and the
customers were too much associated with the product. There were negative
associations as well with the product. It said that too much of chocolate was bad for
health, especially for teeth. The communication was consciously addressing kids, and
hence the consumption also got restricted within the same segment resulting in brand
stagnation. The size of the pie of the market share or the pie as a whole needed to be
increased so as to increase the consumption. The challenge was to expand the
consumer base by making CDM aspirational and desirable
to the adult segment, as well.
94 – Cadbury went on to increase the category relevance, give consumers a taste of
life. It was projected that Cadbury Dairy Milk way is the way of - real, fun and free. It
targeted to integrate Cadbury Dairy Milk with the emotions of the consumers, and the
customers, the linking of "real" chocolate of to "real" feelings. The brand audits that
were done on the consumer pulse revealed that Cadbury Dairy Milk moments were
spontaneous, carefree, special and real moments.
The idea was to target the adults, alongwith the children, as target audience. The
atmosphere at that time was :
The new resurgent India.
The era of globalization had sowed the seeds of ‘I wanna break free’
syndrome.
Avenues for freedom for expression were more than welcome were more than
welcome.
The Cadbury Dairy Milk was targeted ‘The chocolate for the kid in all of us’. The
Communication that was used during this time was “The Real Taste of Life”. The
message that was conveyed was that CDM is the perfect expression of
spontaneous, happy, joyous feelings. The result was that the volume of the
NMMIMS – Deemed University 32
Cadbury India Limited – An insight to its strategy
category grew from 12 to 43 from 1993-’94 to 1994-’95, while the volume of
Moulded Segment grew from 22 to 52in the same period and the brand jumped
from 31 to 54.
1998 – The hurdles in 1997 at a competitive level were the launch of Kit Kat by
Nestle – the closest rival of Cadbury in India, which was considered as young,
trendy, future, exciting, smart, and, the threat from imported premium moulded
brands like Lindt, Ritter, Van Houten, etc. The hurdles at the communication level
was that the “Real Taste of Life Campaign” was able to cut ice with the metro
audience, but the rural audience remained untapped, and, the barriers of Middle
and Bottom end consumers still remained to be addressed. As a result, brand
growth rate was slower than the chocolate market growth.
This resulted in the “Indianisation” of the brand. The strategy was to increase
width of consumption by entering the Indian mind-space, and hence, the idea to
make CDM part of Indian customs and mores took shape and was implemented
by making CDM to be the Real Taste of Everyone's Life.
The strategy that took shape was that CDM was positioned as the gold standard in
taste amongst chocolates for Regular users, and the message was “I will do
anything to eat my CDM”, while, it was positioned as the chocolate meant for
everyone and Chocolate = CDM, for Infrequent users. The message used was
“You don’t need any special reason to eat CDM”. The strategy helped increase
brand penetration (specially in smaller towns) leading to a brand growth of around
40%. The volumes grew by 34% post ad exposure (i.e Jul-Dec ‘00) vis-à-vis pre
ad period (i.e. Jan-Jun ‘00). Overall CDM volumes of 2000 grew by more than
30% over 1999.
The parallel initiatives that were taken along with the above mentioned strategies
was beefing up the distribution system (grown by over 60% over past 5 years),
and, increasing points of contact, that is, bringing CDM closer to the consumer.
NMMIMS – Deemed University 33
Cadbury India Limited – An insight to its strategy
2002 – There was an influx of several brands at various price points offering
greater perceived value. While attitudes towards chocolates softened, consumers
flirted with options. This led other players to come in the foray. The sales of
Nestle, the nearest competitor of Cadbury India Limited picked up too. The
challenge before Cadbury India Limited was to reinforce the pre-eminence of the
brand. It introduced a range of new, international pack formats – a CDM for every
need. It said that for chocoholics, there was CDM Chunky, while for Connoisseur,
there was Bournville and Fruit & Nut. Cadbury made itself synonymous to sweets
and tried to occupy the space of sweets in Indian homes with the tag of – ‘Muh
Meetha Karna’. It reinforced its relationship of brand in the consumer’s life.
10.2 Cadbury Dairy Milk – A Global Benchmark
Today, India is the second largest market for CDM in the world. The Indian case-
study has been designated as the "blueprint for success" for all international markets to
emulate. It is followed in letter and spirit.
The challenges are to strike a balance between the CDM enlistment (in non-metros) and
the increasing usage in Metros. The focus is to drive CDM ‘Ultimate Chocolate
Experience’ values across the Mega Brand Range. The idea is to make CDM a part
of the Indian shopping basket.
The opportunity is worth a whopping Rs. 11,000 crore(3.5 times Australian chocolate
market), which is the traditional sweet market in India.
The current task of CDM is to maintain the growth trend of the brand by enlisting new
users and upgrading marginal users. There is a need to expand the market, especially in
the lower and middle and upper Strata and to increase Per Capita Consumption among
regular users. The communication needed is to soften attitudes and drive width of
consumption in small towns and casualise chocolate consumption in an attempt to
increase average intake among regular users.
NMMIMS – Deemed University 34
Cadbury India Limited – An insight to its strategy
11. BOURNVITA
11.1 INTRODUCTION
Way back in the 60s malted foods drink (MFDs) especially the white beverages
came into existence because of the shortage of milk in southern and eastern regions of
India. Therefore as a tradition, whites were used as milk substitutes and were perceived to
be far ‘more nutritious’. Whereas browns were used as milk additives and were
basically perceived to be ‘ taste enhancers’ .
Cadbury’s Bournvita, a brand that most of us have grown up with, existed even before
this evolution. Positioned as a milk fortifier that makes ‘ the good better’, Bournvita has
always been positioned as the best form of nutrition for children that aided in their all
round development. Due to the market complexities and the dynamic nature of this
category, re- launches have been synonymous with this category. Throughout its history,
Cadbury Bournvita has continuously re-invented itself in terms of product , packaging ,
promotion and distribution. Cadbury lineage, a rich brand heritage coupled with a precise
combination of all elements of the marketing mix has helped the brand maintain its
leadership position and image over the last 50 years.
Cadbury’s Bournvita is the leading Brown Milk Food Drink (MFD) brand in the country
and the 2nd largest MFD brand (both browns and whites put together).It also features
among the lead power brands in the Cadbury India stable and contributes to one third of
its total business in volume and value.
The health food drink segment in India dates back to pre independence. The major
players in the earlier days were Horlicks, Bournvita and Maltova. At present the entire
malted food drink market can be divided into two very distinct segments
· White beverages
· Brown beverages
White beverages account for 65% of the total health beverage segment whereas the share
of brown beverages is 35%.
NMMIMS – Deemed University 35
Cadbury India Limited – An insight to its strategy
The main products in this particular sector are
White beverages:
· Horlicks (Glaxo Smithkline)
· Viva (Glaxo Smithkline)
· Complan (Heinz)
Brown beverages:
· Bournvita (Cadbury)
· Boost (Glaxo Smithkline)
· Horlicks Chocolate (Glaxo Smithkline)
· Milo (Nestle)
· Maltova (Glaxo Smithkline)
· Nutramul (Amul)
· Complan Chocolate (Heinz)
The Heydays:
In earlier times the malted drinks were used as milk substitutes and were highly
popular in the milk deficient regions of Southern and Northern India. As a result of the
Operation Flood undertaken by National Dairy Development Board, milk was now being
provided to all parts of the country. Hence there was a decline in the demand for white
drinks. This prompted a change in the way the health food drinks were promoted. The
concept of “taste” along with “nutritive value” was the new style in which these products
were presented to the user.
At Present:
Most health drinks earlier focused on children as the target segment, but gradually
the positioning has been extended to health drinks for the entire family. Big players such
as Glaxo Smithkline, Cadbury and Heinz have targeted different consumer segments.
NMMIMS – Deemed University 36
Cadbury India Limited – An insight to its strategy
Separate brands for infants, different compositions for expecting mothers, extra protein
enriched variants positioned on health benefit, etc. have been the latest trend. For e.g.
Complan has constantly been playing on the phrase “23 vital vitamins” and that it is a
complete planned food. Horlicks on the other hand has been harping on extra calcium in
it. For Bournvita it is the Balanced RDA (Recommendatory Dietary Allowance) that is
the major selling point. Most advertisements try to strike an emotional chord in mothers
(who is the main decision taker) regarding her concern for her child’s health.
Horlicks is the largest brand in the segment, followed by Bournvita at No 2 and Complan
at No 3. Glaxo Smithkline also leads the health beverage market with a 62% volume
share and a 64% value share. The two brands Maltova and Viva together had annual sales
6500 tons before they were taken over by Glaxo Smithkline. The brands have been
acquired for a princely Rs 860mn ie.(1.23 times sales of Rs700mn).
Brown MFDs are milk additives and are added to milk to add to its nutritious value.
White MFDs are milk substitutes and can be made in water as well as milk. So,
penetration of white MFDs is very high among lower income groups. But this is the trend
only in South and East India where white MFDs are the major players with Horlicks as
the mother brand. In comparison, Brown MFDs are the major players in the West with
Bournvita as the major player. But the overall penetration of MFDs in North and West
India is very less as compared South India.
NMMIMS – Deemed University 37
Cadbury India Limited – An insight to its strategy
11.1.2 Market Size And Growth
The malted food drink segment has grown at an average annual compounded
growth rate of 10-12% pa over the last decade.
Year 000 tonnes1994 441995 491996 631997 691998 781999 822000 832001 852002 862003 90
In 2003, the malted food drink segment grew by about 6-7%. Annual sales of major
players in the organized segment were about 90000 tons in 2003. In value terms, the
market is estimated at Rs12bn (16bn on MRP basis)
11.2 Consumption Trends
The total number of households consuming malted food drinks has risen from 46
mn in 1985-86 to 137 mn in 2002-03. The southern region is the largest market. The
malted food drinking habit that was inculcated into the consumer in an era of milk
shortage has persisted even though availability of milk has improved significantly. White
drinks are more popular than browns.
The south today accounts for over 45% of total malted food drink consumption. This was
an even higher 53% about a decade ago. The market share of the west has been
increasing over the years. Twenty-three percent of malted food is sold in the western
region. The popularity of malted drinks has been on the decline in the east, which
accounts for about 18% of the market.
NMMIMS – Deemed University 38
Cadbury India Limited – An insight to its strategy
White drinks account for a major chunk of the market. About 65% of total volumes sales
are from the white segment v/s 35% of browns. There are periodic switches between
white and brown drink consumption as both products act as substitutes.
For example, between 1996 and 1998, white drinks recorded higher growth as
manufacturers leveraged on the health benefit aspect to improve consumption. Brown
drink volumes stagnated during that period. In 1999, most brown drink manufacturers
repositioned browns with repackaging and positioning of health nutrient ingredients.
11.3 Segmentation, Targeting & Positioning
A product is the result of the want created by the marketer. It is not possible to
make each and every person like the product. As a result, the marketer identifies a section
of the population as his target market based on demographic, psychographic and
behavioral differences among the population. By population, it is implied buyers in the
market. This process of dividing the market on the basis of the above mentioned factors is
termed as Segmentation of the market. The market is divided into various segments by
the marketer. Based on his/her analysis, the marketer identifies that segment which is
suited to the product. That segment(s) is then termed as its target market. The marketer
then, develops his product according to the target market.
Bournvita has been one of the market leaders in the malted food drinks segment. During
the earlier days the malted drinks were used as milk substitutes and were highly popular
in the milk deficient regions of Southern and Northern India As the days went by the
demand for white drinks declined mainly due to Operation Flood undertaken by National
Dairy Development Board, which provided milk to all parts of the country. This
prompted a change in the way the health food drinks were promoted. The concept of
“taste” along with “nutritive value” was the new style in which these products were
presented to the user.
Most health drinks earlier focused on children as the target segment, but gradually the
positioning has been extended to health drinks for the entire family. Big players such as
Glaxo Smithkline, Cadbury and Heinz have targeted different consumer segments.
NMMIMS – Deemed University 39
Cadbury India Limited – An insight to its strategy
Separate brands for infants, different compositions for expecting mothers, extra protein
enriched variants positioned on health benefit, etc. have been the latest trend. For e.g.
Complan has constantly been playing on the phrase “ 23 vital vitamins”, Horlicks on the
other hand has been emphasizing on extra calcium in it. Most advertisements try to strike
an emotional chord in mothers (who is the main decision taker) regarding her concern for
a child’s health.
In 1999, Cadbury India Ltd (CIL) re-launched the Bournvita brand in southern markets
with an eye on stealing at least two per cent of the market share of the white-drinks
segment. Bournvita had then, diverted its focus towards nutrition. This shift may enable
the newly positioned brand to improve its market share not only from the browns group
but also convert the whites consumer group. After considering the positive response in
northern and western markets, CIL expected that about two per cent growth could be
garnered from the whites business. At present, Bournvita commands over 45 per cent
market share in the brown drinks business. It is also contributing to the sales of the
company to the tune of around 20% of the total sales. Its total share in the brown and
white drinks market combined is tipped to be around 14-15%.
Out of the estimated market size of hot beverages of 60,000 tonnes per annum white
business constitute 60 per cent while the remaining share goes to browns. The new
Bournvita had been developed after using the newly developed formula `Recommended
Dietary Allowance' (RDA) to meet the specific nutritional requirements of children, who
are the target consumers of the brand.
The market research conducted by the company has highlighted the point that parents
shows concern about their children's nutritional and dietary needs. Accordingly, the
nutrition level of Bournvita has been significantly enhanced without changing the
original taste.
According to Vidyut Arte, General Manager (Marketing), Bournvita contributes to 23 per
cent of the total turnover of CIL. It has reported a total turnover of Rs. 435 crore in the
NMMIMS – Deemed University 40
Cadbury India Limited – An insight to its strategy
year, 2001. To strengthen the nutrition equity of the product, CIL plans to set up a
`Bournvita Nutrition Centre', solely managed by a professional nutritionist, Arte said.
The nutritionist is expected to provide free counseling service to the consumers on their
daily nutritional needs.
In an effort to trigger consumption for its popular brands Bournvita and Drinking
Chocolate, Cadbury India is now extending the initiative of Bournvita and Chocolait
vending machines to Chennai and Delhi. The initiative was recently piloted in Mumbai
and Pune. This move is being viewed by FMCG analysts as an attempt to create a new
format of consumption in the beverages segment of the market.
The initiative is also directed at addressing a certain lifestyle perception of the consumer.
For, according to the company spokesperson, the Indian consumer is looking for options
beyond tea and coffee, which can significantly add-on to the existing lifestyle. Therefore,
malted food drinks like Bourn- vita arrive with the alternative that the consumer is
looking for. The company has identified corporate offices, eateries and congregation
points to set-up such vending machines.
Commenting on the significant value that the brands will leverage, the company
spokesperson explains: “Cadbury India is pioneering the evolved vended beverages
market and plans to tap this channel to its fullest potential”. The initiative aims at
expanding the avenues for indulgence with the brand. According to the spokesperson, this
initiative extends the franchise of Bournvita and Chocolait by taking them beyond
housewives and children. It also redefines brand communication as something that goes
beyond a breakfast drink and is available only at the retail shelves.
According to the spokesperson: “Fifty machines being set up in Mumbai, Delhi and
Chennai have shown consumption ranging from 50 to 200 cups a day. Consumers
interpret it as a much welcome change from tea and coffee, which is available through
vending machines”.
NMMIMS – Deemed University 41
Cadbury India Limited – An insight to its strategy
On Cadbury’s new marketing initiative, comments a leading FMCG analyst based in
Mumbai: “Food drinks are still a choice that Indian households make with a very
calculated preference. With health as a positioning all the food drink brands are still a
consumption choice that will be restricted within the family. It will, therefore, be a tough
task to replicate it in social circles, as is being attempted by the initiative”.
Industry sources also inform that initiatives similar to vending machines will be explored
by the companies in future as the mobility of malted food drinks has considerably slowed
down in the retail end.
BQC is a property that was initiated, developed and built up to its present avatar by
Cadbury, which is more than any other brand has done in this country. Cadbury's
association with BQC is not a mere association." The quiz is all about mental energy, in
keeping with the Bournvita brand's promise of physical and mental energy.
And in keeping with this `energy' association, the format of the Bournvita Quiz has been
altered several times to "evolve with the tastes of the consumer while retaining the focus
on blending information and entertainment.
“Cadbury’s brand, Bournvita has always been positioned as a milk fortifier that makes
the “good better”. The brand has always been positioned as the best form of nutrition for
children that aided in their all round development.” This statement, published in the
Bournvita brand history, on the Cadbury website clearly implies that Bournvita has
always been positioned as a health drink for children. However, target market being
children, the positioning has changed from a tasty breakfast drink to a health and energy
drink required to keep the child energetic throughout the day. Bournvita’s marketing
position was mainly driven by the logic, that purchasing decision in the family is
primarily decided by the mother in the family who wants the most nutritious and tasty
food and food drinks for her family and especially her growing kid(s).
NMMIMS – Deemed University 42
Cadbury India Limited – An insight to its strategy
11.3.1 CONSUMER BEHAVIOR
Brands, in fact, influence consumer behavior in a number of ways:
1. Reassurance: A brand is a stamp of authenticity. It adds value by promising
‘replicability’ and helps to establish repeat purchase patterns. In a foreign country, people
seek the reassurance of familiar brands, even though they are presumably traveling to
find new experiences! This is why tourists and travelers around the world feel
comfortable on eating at McDonald’s.
2. Value Expression: We choose brands that reflect the individual values that we possess
as individuals. We do this to communicate the desired signals in the highly social
environment we inhabit.
Brand Value to the Company
1. Usage: A strong brand increases a consumer’s usage and ‘spend’ over time,
either within a category, or as a bridge into other categories. Virgin started as a record
label and expanded into airlines, vodka and financial services. It has been successful in
every category, because the perception has been the same - “consistent value delivery to
the consumer”.
2. Brand Switch: In FMCG markets, 'experimenting less with competition' means
that the brand achieves a larger proportion of the category spend by that consumer. For
example, Maggi soup is always bought by the consumer, and is not being substituted by
other soup brands. However, in the durables market, the brand has to become a lifetime
companion, repeatedly being purchased each time a replacement is necessary, and being
referred to others as “value assured”.
NMMIMS – Deemed University 43
Cadbury India Limited – An insight to its strategy
11.4 Price Strategies
Normally, price is the most important element in deciding the fate of any product.
However, Energy drinks or milk drinks are perceived as a luxury. This explains the slow
off-take. While white beverages are hailed for their therapeutic offerings, consumers look
at browns as mere taste additives. Brand loyalties are not very strong as the key target,
children, are always looking for new products. Promotion campaigns such as freebies and
contests also play an important role in influencing brand choice. These campaigns are
mainly targeted at children who force their parents to buy these products. Free gifts like
crystal jars, pet jars and sippers also attract consumers.
While purchasing any health drinks however, a housewife or a mother who is the ultimate
buyer gives price secondary importance. She will carefully study the taste & nutritive
values in the health drinks. Bournvita is the most expensive health drink in the market
(Rs.95 for 500gms) but still due to its good taste & great nutritive values it has captured
the majority of the market. Presently its available in packs ranging from 100gm to
500gms
The malted food beverage industry is popularly known as the health beverages sector. It
is estimated to be a Rs 9.40 million market and is growing at the rate of 12-14 per cent
per annum. Historically, malted beverages has had a strong association with milk, which
also explains its strong presence in the southern and eastern regions of the country. These
regions suffered from milk deficit and malted beverages positioned themselves as
substitutes for milk.
Operation Flood, launched in the 1980s, changed the scenario. Undertaken by National
Dairy Development Board, Operation Flood made milk available in all parts of the
country and the demand for white drinks was hit. With a view to revive demand for the
brands, malted foods were repositioned as strength and energy drinks with a nutritional
thrust. And this positioning stands valid till date.
NMMIMS – Deemed University 44
Cadbury India Limited – An insight to its strategy
Apart from the availability of milk, another significant reason for medium growth rates of
malted food industry lies in its limited acceptability and/or reach in Indian society.
Malted foods have primarily been used in upper and upper middle-class families, which
constitute a small proportion of the Indian population. However, over the last few years,
there have been clear indications of a recovery.
Several factors are responsible for this. Chief among these is the demand for better
products and an increased acceptability of malted products. This demand has contributed
to the growth in consumer options in terms of variety of taste and products. Other factors
include improved standard of living, increased awareness and health consciousness
amongst people, and product availability at reasonable prices. This trend is in keeping
with the patterns observed across international economies where the growth of middle-
class has driven the uptrend in food industry in general and health beverages in particular.
The international price of a standard 400 grams packing of Bounvita costs $ 4.88. When
compared to the corresponding prices of Horlicks and Milo it ahs been seen that it is in
the middle priced category. Horlicks ( with $6.19 for 400 gms) is on the higher side and
Milo ( $ 3.99/ 400 gms) is on the lower end.
Bournvita has been introduced in the market at a price comparable to other brands. The
price of 500gm of brown (chocolate) malted drink ranges from Rs.108 to Rs. 115. This
price range product extends to brands such as Chocolate Horlicks of Smithkline
Beecham, Milo and Boost.
NMMIMS – Deemed University 45
BRAND International price ( 400 gms )
Bournvita $ 4.88Milo $ 3.99Horlicks $ 6.19
Cadbury India Limited – An insight to its strategy
Bournvita was introduced by Cadbury India Limited when there was no compettion to it
in the chocolate malted drink sector. Horlicks was catering to the white malted segment,
hence Bournvita was introduced to create a new segment of chocolate health drinks as
apart from the nutrition there was also the taste element of chocolate in it. This led
Bournvita to grow at an exceptional rate within a short span of time. But Horlicks was a
trusted brand, and when they came with the chocolate version of the white malted drink,
the consumer switched loyalty to Horlicks. The advertisement for Horlicks basically
concentrated on highlighting the constituents of the drink, while Bournvita highlighted
the taste of the drink along with only some of its constituents such as balanced nutrition.
The other challenge that Horlicks gave to Bournvita was the 2kg bottle pack. Horlicks
had substantial figures in sales from its 2kg bottle pack, which inspired Bournvita to
come with the 2kg bottle pack, but the price was quite high because of the cost of
production, hence, the 2kg bottle pack did not send a good signal to the management of
the company. This led the management to slowly and invisibly phase out the 2kg bottle.
Bournvita went for repositioning and reintroduction of the product in 2000 to improve its
sales and face the competition which was basically from Horlicks and also due to
introduction of new brands like Milo and Boost. Bournvita was given a completely new
look and re-launched initially only in South India. This led to the increase of the sales and
the management then went on to re-introduce it in North and West India. The sales of
Bournvita have again picked up.
The Warana Sahakari Dudh Utpadak Prakriya Sangh case is an infamous case, involving Bournvita, which appeared before the Mumbai CEGAT. Warana manufactured Bournvita at its factory in Amritnagar using the raw material and recipe supplied by Cadbury. Warana supplied the entire production of Bournvita to, and collected processing charges from Cadbury, paying duty at cost, which worked out to Rs 16 per tin of 500 gm.
The CE officials wanted to treat Cadbury as the manufacturer of the product and work out duty on the basis of Cadbury's dealer price,that
NMMIMS – Deemed University 46
Cadbury India Limited – An insight to its strategy
is Rs. 28 per half-kilo. But Warana's contention was that it was the manufacturer. The Department's stand was that the employees of Cadbury were posted at Warana's factory to supervise the receipt and handing over of raw materials and also to test samples of Bournvita.
However, the Tribunal did not find the Department's view acceptable since the allegation of supervisory control over production activities was not supported by evidence.
Cadbury's Web site informs us how the Aztecs used cocoa seeds as currency -- eight to
buy a rabbit and a hundred to get a slave. This leads one to wonder whether the company
would give us a break-up of the build-up of Rs. 16 to the MRP, which is about six times
over the selling price.
Malted beverage consists of about 50% milk solids and the remaining 50% is barley malt,
wheat flour etc. Proteins and vitamins are added in small quantities as per the desired
specifications of the product. In brown beverages, cocoa powder is a significant
ingredient. Contribution margins in the product category are high at around 30%.
Ingredients such as proteins and vitamins (if imported) cost higher, thus pulling down the
margins. The excise Duty is 16% (levied on MRP basis). Average sales tax levied stands
at approx. 13%. The average wholesaler margins in this sector hovers around the 4 –5%
mark and the average retailer margin is 9%. Most of the companies also give cash
discounts on the invoice amount based on the stock that is lifted by the retailer and the
wholesaler. As a result, the product MRP comes to around Rs. 108, inclusive of profit
margins.
11.5 PRODUCT STRATEGY
The penetration of malted food in India is a low 6.1 per cent. Over the last few
years, there have been a number of attempts to expand the health-beverages business. In
view of the tremendous growth potential, many multi-national corporations (MNCs) as
NMMIMS – Deemed University 47
Cadbury India Limited – An insight to its strategy
well as domestic players have made aggressive investments in this sector, but there are
very few players left in this sector in India, today.
11.5.1. Product information
Bournvita is the relaxing bedtime malted chocolate drink made with wholesome
ingredients. For today’s kids who detest milk in its pure state unless flavored, this is an
ideal drink. It has its own unique flavor, and the taste is rich and full-bodied. Its so easy
to prepare, just instant mix it into milk. Even a child can manage this for himself when he
is in a hurry to run off to play.
11.5.2. Ingredients
Malt extract, sugar, cocoa powder, milk solids, liquid glucose, vitamins, permitted
emulsifiers, sodium bicarbonate, mineral & salt.
Bournvita’s nutritional facts:
1)Gives protein.
2)Provides Vitamin A, Vitamin C & Vitamin B12.
3)Contains Calcium, Iron & Folic Acid.
4)It also provides our body with Niacin, pyridoxine, Riboflavin, & Thaimin which is very
essential for the proper working of our nervous system.
Cadbury India Ltd launched Cadbury Bournvita, a chocolate health drink in 1947 in
India. But even before launching its new health product in the Indian market, Bournvita
was one of the most loved chocolate drink around the world. Bournvita is a combination
NMMIMS – Deemed University 48
Cadbury India Limited – An insight to its strategy
of 2 words, “Brown” & “Vita”. Brown, because its brown in colour & Vita because it has
lots of vitamins. It’s a nutritional drink which acts as a dietary supplement providing
nourishment along with good taste & flavor. Bournvita is used by a variety of people like
growing children, old age persons, pregnant ladies etc. Its liked for its nourishment value
& great taste.
Throughout it’s history, Cadbury Bournvita has always continuously re-invented itself in
terms of product, packaging, promotion and distribution. Cadbury lineage, a rich brand
heritage coupled with a precise combination of all elements of the market mix have
helped the brand maintain its leadership position and image over the last 50 years.
Milk/ malted food drinks category is segmented into brown drinks positioned as energy
boosters and white drinks positioned as milk substitutes. White drinks account for almost
two-thirds of the 90,000 ton market. Demand keeps shifting between the brown and white
drink categories, driven by advertising and promotional efforts of major players In the
white drink segment, Smithkline’s Horlicks is the market leader. Cadbury’s Bournvita is
the leader in the brown drink (cocoa based) segment. Other significant players are Heinz
(Complan), Nestle (Milo) and GCMMF (Nutramul). Complan and Milo enjoy a market
share of 12.9 per cent and 3.4 per cent respectively. Besides Glaxo SmithKline Consumer
Healthcare (GSK) which owns the brands Horlicks, Boost has acquired Viva and Maltova
from Jagajit industries in early 2000.South and East are large markets for food drinks,
accounting for the largest proportion of all India sales.
SmithKline Beecham(Horlicks, Boost, Maltova, Viva) 69%
Cadbury (Bournvita) 13.80%
Heinz (Complan) 12.90%
Nestle (Milo) 3.40%
NMMIMS – Deemed University 49
Cadbury India Limited – An insight to its strategy
At present, Bournvita commands over 15 per cent market share in the brown drinks
business and with it, it is the leading Brown Milk Food Drink (MFD) brand in the
country and the 2nd largest MFD brand ( both whites and browns put together). It also
features among the lead power brands in the Cadbury India Stable and contributes to over
one third of its total business in volume and value.
During the mid and late 1990’s the Milk Food Market had become very challenging and
growths were slowing down. All brands spoke of benefits that were very physical in
nature i.e. Boost – energy , Complan – growth etc. Hence Cadbury decided to change its
offering to both physical and mental and rolled out the famous “ Tan ki Shakti, Man ki
Shakti” campaign that became the anthem for the brand. This helped the brand in a big
way, but was later discarded since the category dynamism was so high that it required
refreshment.
While the category driver for a Brown MFD was taste, it was not a good enough reason for purchase. Horlicks was offering family nourishment, Complan; growth and Boost; energy. Hence Cadbury decided to peg Bournvita on the nutrition platform, as it was more encompassing and was ratified through extensive consumer research. The market research conducted by the company highlighted the point that parents shows concern about their children's nutritional and dietary needs. Accordingly, the nutrition level of Bournvita has been significantly enhanced without changing the original taste
Bournvita relaunched in March 99 with RDA balanced formula as a support to the
platform – New Campaign: Bournvita Nutrition, Balanced Nutrition to meet the specific
nutritional requirements of children, who are the target consumers of the brand. The
campaign resulted in pushing all India shares from 12.2 to 14.5.
More recently, Cadbury's India has revamped its entire health drink marketing strategy.
The company recently relaunched Bournvita as a chocolate drink. The relaunch involved
a complete overhaul of the Bournvita's packaging with the addition of some ingredients
NMMIMS – Deemed University 50
Cadbury India Limited – An insight to its strategy
to the beverage, accompanied by an audio-visual media campaign.
The nutritional drink or the health drink industry has been marked by competition from
various companies in the past few years. The health drink manufacturers in India have
tried to retain their brand image by improving their product quality & by meeting
consumer’s expectation. Bournvita sales had been adversely affected following the entry
of Nestle's Milo and the growing popularity of SmithKline Beecham's Horlicks and
Boost. Horlicks, Boost and Milo have upset the Cadbury's drinks-cart. Bournvita's
volume grew by just one per cent in 2000, while sales value grew five per cent. While
that was good news for the company in terms of profitability, the slow growth in volumes
is not. Bournvita contributes 22 per cent to the total sales of Cadbury, and its volume
growth is important. It seemed imperative for the company to revitalize this brand.
The company has realised the need to increase market penetration, and is expanding its
distribution network from the current 4 lakh outlets to 5 lakh over the next two years.
Bournvita always comes up with consumer promotion activities from time to time eg
giving free gifts like plastic mugs, kitchen appliance, chess game or ludo etc. Recently
they decided to target school children by offering attractive mugs with cartoon characters
design on it. They also come up with the scheme of extra Bournvita for the same price.
The company has already successfully revamped its chocolates division by following a
strategy of regular product launches and marketing its existing chocolates in smaller
packs.
However, while Bournvita is perceived it to be a sleep inducing drink in the UK, it is
positioned as a nutritional drink in India and Nigeria." the Bournvita pack in UK had
stars and other night time aspects associated with sleep on it, while the same product was
sold as an energy drink for growing children in India. This is an important vital difference
in the product and marketing strategy of the same brand India and abroad.
11.6 FUTURE STRATEGY
NMMIMS – Deemed University 51
Cadbury India Limited – An insight to its strategy
Currently the company proposes to tell the consumers “ Cadbury Bournvita
contains specific ingredients that augments stamina & concentration in children, arming
them with confidence to achieve their dreams and aspirations. This strategy has evolved
as the result of an extensive usage and attitude study as well as direct consumer contacts
done among consumers.
Meanwhile, the company is in the process of setting up a new plant at Baddi in
Himachal Pradesh which will initially manufacture 1,000 tonnes/day of its malt-based
drink, Bournvita. Cadbury already has three existing manufacturing facilities at Thane,
Indur and Malanpur (Gwalior) in additional to third party operations.
11.7 Promotion and Communication Strategies
Communication process is an interactive dialogue between the company/brand
(here Cadbury’s Bournvita) and its customers that takes place during the preselling ,
selling , consuming and post consuming stages. Thanks to new technologies, companies
have been encouraged to move from mass – communication to more targeted
communication and one – to – one dialogue. Every products styling and price , the shape
and colour of the package all communicate something to the buyers. Every brand
contact delivers an impression that can strengthen or weaken a customer’s view of the
brand and hence the company. The communication process plays a very important role in
delivering the core strengths of the brand. Cadbury’s Bournvita is one brand that has
changed its campaign idea over the years and has enabled it be a market leader in the
brown Malted Food Drink (MFD) segment.
11.7.1. COMMUNICATION OVER THE YEARS
70s
Advertising really began with the advent of television and the first campaign rolled
out during this time. Positioning was centered around ‘GOOD UPBRINGING’ and ‘
Bournvita became as essential building block of childhood. The ‘goodness that grows
with you’ was the campaign idea that communicated this thought.
NMMIMS – Deemed University 52
Cadbury India Limited – An insight to its strategy
80s
A need was felt to change the focus of the brand message. So in the 80s, the
offering shifted from upbringing to intelligence and we had the famous ‘Brought up
right Bournvita bright’ which ran very successfully during this time.
90s
The Malted Food Drink (MFD) market was very challenging during this time and
growth rates were slowing down. All brands spoke of benefits that were very physical
in nature i.e. Boost – energy, Complan – growth etc. Hence Bournvita decided to
change their offering to both physical and mental. It was during this time that
Bournvita rolled out the famous ‘ tan ki shakti man ki shakti’ campaign that became
an anthem for the brand. This helped the brand in a big way but was later discarded
since the category dynamism was so high that it required refreshment.
THE 99 BRAND MILESTONE
While the category driver for a brown MFD was taste, it was not a good enough
reason to purchase - Horlicks was offering family nourishment, Complan growth and
Boost energy. Hence it was decided to peg Bournvita on the nourishment platform as it
was more encompassing and was ratified through extensive market research. Bournvita
relaunched in March 99 with Recommended Dietary Allowance (RDA) balanced
formula as a support to the platform – new campaign Bournvita nutrition balanced
nutrition. The campaign resulted in all India shares rising from 12.2 to 14.5 per cent.
THE 01 BRAND MILESTONE
South India, which constituted 60% of the brown MFD market, responded very poorly to the RDA campaign because of the following :
NMMIMS – Deemed University 53
Cadbury India Limited – An insight to its strategy
Bournvita was shouting nutrition while Horlicks (which was the market leader)
epitomized nutrition.
Lacks of kid connect as the kid by far are the end user and key influencers.
Bournvita’s response was an all new product, packaging and communication and the
placement of the brand in the context of the mother- child balanced relationship.
The consumer insight was, parenting is about drawing balances, and hence Bournvita is
also drawing about similar balances i.e. great taste and great nutrition. Bournvita was
very successful in this campaign and had all India shares shooting from 14.5 to 17%.
2003
Category advertising hinged on a singular benefit. Twin propositions (balance) with
emotional layering load the consumers mind. In the recent past Bournvita has been
focusing on nutrition – opportunity to showcase higher order benefit of the same. So
Bournvita tried to communicate success stories of kids armed with Bournvita nutrition.
Bournvita carried two ads ‘karate and dancer’ the proposition being Cadbury
Bournvita’s unique Recommended Dietary Allowance (RDA) balance formula fortifies
your milk and ensures you get the right amount of nutrition everyday. The end payoff as
a result was’ you have the confidence to do anything in life.’
11.8 SALES PROMOTION
Sales promotion, a key ingredient in marketing campaigns consists of a diverse
collection of incentive tools, mostly short term, designed to stimulate quicker or greater
purchase of particular products or services by consumers or the trade.
Whereas advertising offers a reason to buy, sales promotion offers an incentive to buy.
There are various sales promotion tools, which Cadbury has resorted to increase the sales
of Bournvita. These tools are as follows: -
NMMIMS – Deemed University 54
Cadbury India Limited – An insight to its strategy
Consumer promotion – A number of times there has been an offer where discounts were
given or prices off on Bournvita so as to increase its sales.
Trade promotion – Bournvita has given gifts such as bats, balls, cups etc. On a number
of occasions to target the child and increase his incentive to buy Bournvita - bat or a ball
along with the taste of Bournvita. Bournvita always comes up with consumer promotion
activities from time to time eg giving free gifts like plastic mugs, kitchen appliance, chess
game or ludo etc. Recently they decided to target school children by offering attractive
mugs with cartoon characters design on it. They also come up with the scheme of extra
Bournvita for the same price.
The Bournvita quiz book is another step towards pushing the Bournvita brand Bournvita
represents energy and nutrition. The book increases the general knowledge of the target
audience – the child. This book provides essential nutrients to the brain in the form of
knowledge packs just as Bournivita provides nutrients to the body. This also propagates
the brand name of Bournvita and links it towards its main idea – energy and nutrition.
Business and Sales force promotion - The Company used strategic marketing and strategic sponsorships on TV to build Bournvita’s brand. This was very effective as proved by the Bournvita Quiz Competition in which a number of schools in India participate and this helps in attracting the target market – children. Bournvita and Cartoon Network formed a tie up and due to this Bournvita sales zoomed 20%. The basic logic for the tie up was to attract its main segment- children and hence use their interest in cartoons to build and hence increase the sales of its brand
Bournvita also used a strategy along with Cartoon Network where by both parties are offering kids a chance to collect limited edition school bags and pencil boxes. Featuring some of Cartoon Network’s favourite
NMMIMS – Deemed University 55
Cadbury India Limited – An insight to its strategy
toon stars including The Powerpuff Girls, The Flintstones and Dexter, these colourful bags and pencils boxes were available with the purchase of one kilogram and 200 gram Bournvita packs, respectively. The exclusive school bags come in four colours and featured the Powerpuff Girls, Dexter and Tom & Jerry. Also, up for the grabs were the Flintstones and Tom & Jerry branded pencil boxes with an inbuilt game. All these measures had a positive impact on sales and brand recall of Bournvita.
11.9 PUBLIC RELATIONS
Not only must the company relate constructively to customers, suppliers, and dealers, but
it must also relate to a large number of interested publics. A public is any group that has
an actual impact or potential interest in or impact on a company’s ability to achieve its
objectives. Public relations (PR) involve a variety of programs designed to promote or
protect a company’s image or its individual products. Just like most companies, Cadbury
too has a public relations department that monitors the attitudes of the organization’s
publics and distributes information and communication to build goodwill.
The company does a lot of social activity as well to build upon its image and its product
and hence enhance its public relation process. Some of the programmes implemented by
Bournvita to enhance its public image are as follows: -
Cadbury India has a large factory in Malanpur, one of the most under developed
districts in Central India. In 1999, they launched the Cadbury Community Initiative
Programme under the banner: Nutrition, Education, Security and Love.
NMMIMS – Deemed University 56
Cadbury India Limited – An insight to its strategy
In setting up the programme Cadbury officials initiated a long-term dialogue with local
stakeholders to engage them in helping identify what community support they should be
providing. As a result, they focused on healthcare and education in the nearby village of
Gurikha. A nursery school was started and key improvements were made to the primary
School. The consultation and a bit of lateral thinking led to some real social
improvements: fresh drinking water from a new village pump, a doctor’s clinic, vet
services for milk-producing animals and fruit trees for each
Household to plant during the rainy season. They also helped to increase school
attendance levels.
Last year, the education programme supported the Indian Government’s Year of
Women Empowerment. Special focus was given to the rights and contribution of
girls and to the counteraction of female infanticide through a variety of initiatives,
including awareness generation and gender sensitisation programmes leading to the
formation of women self-help groups.
Since 1972, millions of school children across Asia have tested and improved their
knowledge by tuning in to The Bournvita Quiz Contest sponsored by Cadbury
India; it is the longest running and possibly the biggest on air quiz show in the world.
Cadbury India has setup the Bournvita Nutrition Centre to advise on healthy eating
for children.
All these measures have helped consolidate the basic idea that brand Bournvita focuses on, that is, balanced nutrition coupled with good health among the general public as well as built an image that the brand was socially conscious.
All the above measure point out to three critical facts about the marketing strategy of Bournvita, which are as follows: -
NMMIMS – Deemed University 57
Cadbury India Limited – An insight to its strategy
Cadbury India has been keeping pace with the changing times for marketing its
products.( here Bournvita)
The above is basically achieved through altering the theme and the functionality
of the product as the time demands.
This has also to a larger extent helped in creating high brand awareness.
12. CONCLUSION
Bournvita has been one of the leading brands in the MFD brown drink segment.
Through its intelligent positioning of its brand signifying balanced nutrition and energy,
it has slowly changed its target segment from children to the entire family. Through the
concept of establishing vending machines it is also trying to position itself as a substitute
to tea and coffee. The concept o small packs of CDM and other products is very
successful while the concept of sachets, as successfully used in the case of shampoos, is
not prevalent in the sector. Taking cue from coffee sachets, the introduction of a low
priced Bournvita sachet will be able to penetrate the market as in the case of small packs
of CDM and Perk.This would help customers to try out Bournvita for the first time
without incurring a high cost, thereby increasing the chances of converting a prospective
client into a customer. This would also enable Cadbury to penetrate the rural market
through and increae the size of the pie alongwith increasing theshare of the pie. The
feedback given by most of the retailers was that Bournvita did not dissolve well in milk
and that granules left floating on top of the milk did not please the consumers and that it
irritated them. Thus, it is recommended that a slight change in the product mix will help
in overcoming this drawback. The inferences of the consumer research clearly show that
the Bournvita advertising clearly does not have a recall, while the recall is highest in case
NMMIMS – Deemed University 58
Cadbury India Limited – An insight to its strategy
of CDM, among all other product of Cadbury, because of the emotional influence
attached to its advertisements. The last Advertisement which people recall was the “Tan
ki Shakti Man ki Shakti Bournvita”. The recent ads showing the Bharatnatyam girl
simply don’t have a recall in the minds of the consumers. Hence there is a need to revamp
their advertising strategy. Many of the retailers also felt that consumers could not
associate Bournvita with Cadburys. The Brand Cadburys for them is restricted to
Chocolates. Emphasizing Cadbury brand name will make people think that Bournvita
might have taste of Cadbury Dairy Milk and also garner for Bournvita the trust and Brand
Equity which Cadburys commands. Hence, it is recommended that giving away Cadbury
Dairy Milk with Bournvita Refill SKU will solve this issue.
Bibliography
www.cadbury.com
www.cadburyindia.com
www.cadburyworld.com
www.agencyfaqs.com
www.quickmba.com
Tulika Stores, Vile Parle
Sales team, Cadbury.
NMMIMS – Deemed University 59