PROJECT REPORT ON CADBURYS MARKETING STRATEGIES

SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION 2009-10 UNDER THE GUIDANCE OF Mrs. MINISHA FACULTY, MAIMS SUBMITTED BY: ANKUSH GUPTA
Roll no8460 Batch No.(BBA SEM 3rd B Section)

MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIES Affiliated to Guru Gobind Singh Indraprastha University, Delhi PSP Area, Plot No. 1, Sector 22, Rohini Delhi 110086

Table of contents

S.N.O 1. 2. 3. 4. 5.

CONTENTS Student declaration Certificate from guide Acknowledgement Executive Summary Chapter 1 1.1 Introduction 1.2 Relevence of studies 1.3Objectives of the project

PAGE NO.

6. 7. 8. 9 10

1.4 Research Methodology Chapter 2 Company Profile Chapter 3 Results and Analysis Chapter 4 Suggestions Chapter 5 Conclusions and Limitations Bibliography

STUDENT UNDERTAKING

This is to certify that I have completed the Project titledCadburys marketing stratergies in Maharaja agrasen institute of management studies under the guidance of Mrs. MINISHA in partial fulfillment of the requirement for the award of degree of Bachelor of Business Administration at Maharaja Agrasen Institute of Management Studies, Delhi. This is an original piece of work & I have not submitted it earlier elsewhere.

Name of the student ANKUSH GUPTA

CERTIFICATE

This is to certify that the project titled Cadburys marketing strategies is an academic work done by ANKUSH GUPTA submitted in the partial fulfillment of the requirement for the award of the degree of Bachelor Of Business Administration from Maharaja Agrasen Institute of Management Studies, Delhi, under my guidance & direction. To the best of my knowledge and belief the data & information presented by him/her in the project has not been submitted earlier.

Name of the Faculty Guide Mrs. MINISHA

ACKNOWLEDGEMENT

This project work, which is my first step in the field of professionalism, has been successfully accomplished only because of timely support of my well wishers. I would like to pay my sincere regards and thanks to those, who directed me at every step in my project work.

First of all, I would like to express my thanks to Dr. N.K Kakar (director, MAIMS) for giving me such a wonderful opportunity to widen the horizons of my knowledge.

I extend my thanks to my project guide Mrs. MINISHA for her scholarly guidance, constant supervision and encouragement. It is due to her personal interest and initiative that the project work is published in the present form . Last but not the least, I would also thank all the staff members of MAIMS, friends and parents who have directly or indirectly contributed in making this project a success. It is a tribute for there valuation.

Despite all efforts, I have no doubt that error and obscurities remain that seen to afflict all writing projects and for which I am culpable.

EXECUTIVE SUMMARY

Cadbury is a leading global confectionery company with an outstanding portfolio of chocolate, gum and candy brands. They employ around 50,000 people and have direct operations in over 60 countries, selling the products in almost every country around the world.

In India, Cadbury began its operations in 1948 by importing chocolates. After 60 years of existence, it today has five company-owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and 4 sales offices (New Delhi, Mumbai, Kolkota and Chennai). The corporate office is in Mumbai. Their core purpose "creating brands people love" captures the spirit of what They are trying to achieve as a business. They collaborate and work as teams to convert products into brands. Simply put, They spread happiness!

Currently Cadbury India operates in four categories viz. Chocolate Confectionery, Milk Food Drinks, Candy and Gum category. In the Chocolate Confectionery business, Cadbury has maintained its undisputed leadership over the years. Some of the key brands are Cadbury Dairy Milk, 5 Star, Perk, clairs and Celebrations. Cadbury enjoys a value market share of over 70% - the highest Cadbury brand share in the world! Their flagship 6

brand Cadbury Dairy Milk is considered the "gold standard" for chocolates in India. The pure taste of CDM defines the chocolate taste for the Indian consumer.

Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India. For over two decades, they have worked with the Kerala Agriculture University to undertake cocoa research and released clones, hybrids that improve the cocoa yield. Thier Cocoa team visits farmers and advises them on the cultivation aspects from planting to harvesting. They also conduct farmers meetings & seminars to educate them on Cocoa cultivation aspects. Their efforts have increased cocoa productivity and touched the lives of thousands of farmers. Hardly surprising then that the Cocoa tree is called the Cadbury tree!

Today, they are poised in thier leap towards quantum growth. They are a part of the Cadbury PLC, world's leading Confectionery Company , and their moto is to continue to spread happiness!

CHAPTER 1
INTRODUCTION

RELEVANCE OF STUDY Todays Indian chocolate market, an overview

Chocolate consumption in India is extremely low. Cadbury dominates the chocolate market with about 70% market share. Nestle has emerged as a significant competitor with about 20% market share. Key competition in the chocolate segment is from co-operative owned Amul and Campco, besides a host of unorganized sector players. There exists a large unorganized market in the confectionery segment too. Leading national players are Parry's, Ravalgaon, Candico and Nutrine. MNC's like Cadbury, Nestle, Perfetti, are recent entrants in the sugar confectionery market. Other competing brands such as GCMMF's Badam bar and Nestls Bar One have minor market shares.

Chocolate consumption in India is extremely low. Per capita consumption is around 160gms in the urban areas, compared to 8-10kg in the developed countries. In rural areas, it is even lower. Chocolates in India are consumed as indulgence and not as a snack food. Indian chocolate market grew at the rate of 10% pa in 70's and 80's, driven mainly by the children segment. In the late 80's, when the market started stagnating, Cadbury repositioned its Dairy Milk to any time product rather than an occasional luxury. Its advertisement focused on adults rather than children. Cadbury's Five Star, the first count 8

chocolate, was launched in 1968. Due to its resistance to temperature, the chocolate has become one of the most widely distributed chocolate in the country.

In the early 90's, high cocoa prices compelled manufacturers to raise product prices and reduce their advertisement budget affecting the volumes significantly. The launch of wafer chocolates Kit Kat and Perk spurred volume growth in the mid 90's. These chocolates positioned as snack food rather than on the indulgence platform compete with biscuits and wafers. A strong volume growth was witnessed in the early 90's when Cadbury repositioned chocolates from children to adult consumption. The mid 90's saw the entry of new players like Nestle, which created categories like wafer chocolate and spurred growth.

Chocolate Manufacturing

Cocoa, common name for a powder derived from the fruit seeds of the cacao tree and for the beverage prepared by mixing the powder with milk. When cocoa is prepared, most of the cocoa butter is removed in the manufacturing process. After the fat is separated and the residue is ground, small percentages of various substances may be added, such as starch to prevent caking, or potassium bicarbonate to neutralize the natural acids and astringents and make the cocoa easy to dissolve in liquids. Cocoa has a high food value, containing as much as 20 percent protein, 40 percent carbohydrate, and 40 percent fat. It is also mildly stimulating because of the presence of Theo bromine, an alkaloid that is closely related to caffeine.

The processing of the cacao seeds, better known as cocoa beans, is complex. The fruit harvest is cured or fermented in a pulpy state for three to nine days, during which the heat kills the seeds and turns them brown. The enzymes activated by fermentation impart the substances that will give the beans their characteristic chocolate flavor later during roasting. The beans are then dried in the sun and cleaned in special machines before they are roasted to bring out the chocolate flavor. They are then shelled in a crushing machine and ground into chocolate. During the grinding, the fat melts, producing a sticky liquid called chocolate liquor, which is used to make chocolate candy or is filtered to remove the fat and then cooled and ground to produce cocoa powder. The beans are sold in international markets. African countries harvest about two-thirds of the total world output; Ghana, Cte d'Ivoire, Nigeria, and Cameroon are the leading African cocoa producers. Most of the remainder comes from South American countries, chiefly Brazil and Ecuador. The crop is traded on international commodity futures markets. Attempts by producing countries to stabilize prices through international agreements have had little success.

Types of chocolate

Sweet chocolate, usually dark in colour is made with chocolate liquor, sugar, cocoa butter, and such flavourings as vanilla beans, vanillin, salt, spices and essential oils. Sweet chocolate usually contains at least 25-35% chocolate liquor content. The ingredients are blended, refined (ground to a smooth mass), and conched. Viscosity is

10

then adjusted by the addition of more cocoa butter, lecithin (an emulsifier), or a combination of both.

Milk chocolate is formulated by substituting whole milk solids for a portion of the chocolate liquor used in producing sweet chocolate. It usually contains at least 10% chocolate liquor and 12% whole milk solids. Manufacturers usually exceed these values, frequently going upto 12-15% chocolate liquor and 15-20% whole milk solids. Milk chocolates, usually lighter in colour than sweet chocolate, are milder in taste because of its lower content of bitter chocolate.

Products And Segmentation

Chocolate market can be segmented as follows:

Large units bars/ slabs,

Count lines, Panned varieties, Small value added units.

Confectionery products can be categorized as

Hard boiled sugar candies, lollipops, jellies Toffees Chewing candies Breath freshners, digestives, throat relievers

11

Gum based products are

Chewing gum Bubble gum

TABLE 1.01

Chocolates and Confectionery Industry Chocolates Sugar confectionery Gum based

Bars/ Slabs

Hard boiled

Chewing gum

Count lines

Toffees

Sugar coated chewing gum

Panned (Gems)

Soft chew

Bubble gum

Eclairs

Jelly candies

Assorted

Deposit candies

Lollipops

Mints, etc.

12

Chocolate Segmentation

Chocolate market can be segmented into moulded chocolates, count chocolates, panned chocolates, clairs and assorted chocolates.

SHARE OF CHOCLATES IN THE MARKET

TABLE 1.02

Type of chocolates Moulded Count Eclairs Panned Others

% Share in chocolate market 37% 30% 20% 10% 3%

13

SHARE OF COCLATE IN THE MARKET

CHART 1.01

Others Panned 3% 10% Eclairs 20% Moulded 37%

Count 30%

Moulded chocolates, like Dairy Milk, Truffle, Amul Milk Chocolate, Nestle Premium, Nestle Milky Bar, is the largest segment accounting for more than 1/3rd of the market.

Count lines (5 Star, Perk, Kit Kat, and Picnic) are the second largest segment accounting for 30% of the volumes. The Count Line segment has been growing at a faster pace during the last three years driven by growth in Perk and Kit Kat volumes. Panned products include Cadburys' Gems, Nutties, and Nestls Marbles. In panned segment, Cadbury dominates with over 95% market share.

clairs (droplets of hard caramels with soft chocolate fillings) are a low unit priced product. Cadbury clairs was launched in 1972. Parle Products launched Melody in 14

1991. Nestle is a recent entrant in the segment. Nutrine's clairs has done extremely well in the market.

Chocolates Market Share

Cadbury is the market leader in all categories with over 65% market share. Its main competitor is Nestle India. Nestle has identified chocolate and confectionery as one of the thrust areas for growth. It has launched some of its international brands like Quality Street, After Eight, and Lions in India. In 1998, Cadbury launched a new count bar Picnic. Nestle immediately followed it with the launch of Charge. Gujarat Co-operative Milk Marketing Federation (GCMMF), which is normally known as Amul and Central Arecanut and Cocoa Manufactures and Processors Co-operative (CAMPCO) are other two significant players. Both are local manufacturers.

MARKET SHARE

TABLE 1.02

Moulded segment Cadbury Nestle GCMMF 70% 23% 5%

Count segment Cadbury Nestle Campco 76% 20% 3%

clairs Cadbury Nutrine Nestle 49% 37% 12%

15

Others

2%

Others

1%

Parry's Others

1% 1%

Confectionery

Confectionery, processed food based on a sweetener, which may be sugar or honey, to which are added other ingredients such as flavorings and spices, nuts, fruits, fats and oils, gelatin, emulsifiers, colorings, eggs, milk products, and chocolate or cocoa. Confectionery, usually called candy in the United States, or sweets in Great Britain, can be divided into two kinds according to their preparation and based on the fact that sugar, when boiled, goes through different stages from soft to hard in the crystallization process. Typical of soft, or crystalline, candysmooth, creamy, and easily chewed are fondants (the basis of chocolate creams) and fudge; typical hard, noncrystalline candies are toffees and caramels. Other favorite confections include nougats, marshmallows, the various forms of chocolate (bars or molded pieces, sometimes filled), pastes and marzipan, cotton candy (spun sugar), popcorn, licorice, and chewing gum.

Records show that confectionery was used as an offering to the gods of ancient Egypt. Honey was used as the sweetener until the introduction of sugar in medieval Europe. Among the oldest types of candies are licorice and ginger from the Far East and marzipan from Europe. Candy-making did not begin on a large scale until the early 19th century, when with the development of special candy-making machinery it became a British specialty. In the U.S. the candy industry began to grow rapidly during the mid-19th century with the invention of improved machinery and a cheaper process for powdering 16

sugar. In 1911 the first candy bars were sold in baseball parks; by 1960 candy bars made up almost half of U.S. confectionery production. By the 1980s annual world production of confectionery totaled many millions of kilograms.

Confectionery Market Share

The confectionery market is highly fragmented with several players with strong regional presence. Leading national players are Nutrine, Parry's, Parle, Cadbury, Nestle, Ravalgon, Candico, Perfetti, Wrigleys and Joyco India. The entire market can be divided into 7 major categories, namely Hard Boiled Candies(HBC), Toffees, Eclairs, Chewing Gum, Bubble Gum, Mints and Lozenges. While HBCs form 51% of the entire market, 18% is formed by toffees and 18% by chewing gum & bubble gum collectively. Eclairs form just 5% of the entire market. Mints and Lozenges form 4% and 3% of the market respectively.

Nutrine with a strong base in southern India has emerged as the reigning number one player in the sugar confectionery market with 24% share. Over last one year or so it has launched various products in the sugar confectionery market. It is the market leader in hard-boiled confectionery as well as toffees. It has share of 37% in eclairs market and is reigning at second position behind Cadbury's. Nutrine gets around 50% of its turnover from southern India, 20% from Eastern region and rest equally from westerns and northern region. Its biggest brand is Mahalacto followed by Asay and Kokonaka respectively. Total tonnage sold by Nutrine in the confectionery market is around 36650 tonnes.

17

The second largest player, Parle has strong presence in orange candies (hard boiled) supported by its Melody toffees, Mango Bite and Kismi Toffee bar. Besides this the company also has brands like Rola Cola, Poppins, Peppermint etc. in its portfolio.It has market share of 16% in the total confectionery market with a tonnage of 16800 tonnes. It is number two in both HBC and Toffee market with 30% and 21% market share respectively.

Parry's has emerged as the third largest player in the market with 13% market share and a tonnage of 14500 tonnes.The company has brands like LactoKing, Coconut Punch, Madras Cafe, Coffy Bite etc. in its portfolio. Though in the over all confectionery market it is at number three, it is at par with Parle in toffees market with 21% share.

Cadbury has been one of the leaders with Cadbury eclairs with chocolate inside. It was the most successful in 1972 when it was launched because of its initial introductory price of 25 paise and was instant hit. It continues to be one of the biggest brands. Cadbury made a foray into the sugar confectionery segment with Googly, a hardboiled sweet in late 1996.Googly the tangy, fizzy candy, Cadbury took the market by surprise and marked the entry of Trebor into the fast growing Indian market. The product is sold under license from Trebor Bassett, UK. Googly was extended nationally in early 1997. Cadbury has also launched Mocka, a coffee based sugar confectionery.

18

SHARE IN SUGAR CONFECTIONERY MARKET

TABLE1.04

Company

Market share (%) Major brands Mahalacto, Kokonaka, HoneyFab, Aam Ras, Chuma- Chuma, Gulkand, Funda, Gum Yum,

Nutrine

24 Ole, Nutrine Eclairs,SuperStar, Caramella, Wild Coffy, Dishum, Aasay,Naturo, Fruit Bar Melody, Mango bite, Kismi, Poppins, Rola

Parle's

16 cola, LuxDairy, Peppermint, Rosemint Coffy Bite, Lacto king, Coconut punch,

Parry's

13

Caramilk, Madras Cafe, Soft-Spot, Flavoured Candy, Mango, Sunshine, Shakti, Pineapple Googly, Mocka, English toffee,

Cadbury's

11 Frutus, Gollum, Eclairs, Pops. Polo, Allen's Splash, Soothers, Toffo Butter,

Nestle

8 Fruit Rings, Fox's Pan pasand, Mango mood, Coffee break, Hi-

Ravalgaon

7 soft, Supreme, Cherries, Juicy

19

Company Dabur P&G Warner Lambert

Market Share 3% 2.5% 2.5% Hajmola Vicks

Major brands

Halls, Chiclets, Clorets

Anti-cold/OTC brands such as Halls, Vicks, Clorets, etc are increasingly being sold on the fun positioning rather than for their medicinal properties, competing directly with other confectionery brands. Halls and Vicks are available in various flavours.

SHARE IN SUGAR CONFECTIONERY MARKET CHART 1.02

Others 21% Ravalgaon 7% Nestle 8% Cadbury's 11%

Nutrine 24%

Parle's 16% Parry's 13%

Nutrine Nestle

Parle's Ravalgaon

Parry's Others

Cadbury's

20

Financial Analysis

Cadbury India net profit at Rs 190 million.

Mumbai:

Cadbury India Ltd has posted a net profit of Rs 190 million for the quarter ended 16 June 2008 as compared to Rs 93.60 million for the quarter ended 17 June 2007.

The total income has increased from Rs 1,206.80 million for JQ07 to Rs 1,363.40 million for JQ08. The other income for the current quarter is at Rs 127.70 million (corresponding quarter last fiscal: Rs 21.90 million) out of which Rs 107.70 million is on account of the profit on sale of excess immovable property at Thane, Maharashtra.

Cadbury had sold the land near its factory at Thane for Rs 11 crore early this year. The company says it has struck an agreement with Kalpataru Properties, Thane, for selling the land, which measured about 27,520 square metres. The deal helped Cadbury unlock the value of its investments and helped it to shore up its bottomline.

Recently Cadbury India also refurbished its old office block in Mumbai and is now planning to lease out the extra space available after the renovation, with a view of earning some funds.

21

Cadbury India has three factories, which it operates on its own, while three other facilities are run through arrangements with third parties.

To overcome the negative impact of sluggishness in the fast-moving consumer goods market on its performance, the company undertook cost-cutting exercises over the past one year, say analysts. As a future strategy, it plans to reduce manufacturing and supplychain costs. During the past few months, Cadbury India had offered a voluntary retirement scheme to 29 employees in order to bring down costs.

Cadbury recently hiked its stake in the Indian company to 90 per cent by buying out around 39 per cent of the public shareholding. Cadbury India has already made an application for delisting.

22

Cadbury India Ltd Brief Financials (in Rs. Mn.) Detailed Quarterly TABLE 1.05 31-Dec-2006 Period ending (months) 28-Dec-2008 (12) 29-Dec-2007 (12) (12) Net sales Other Income Total Income Cost of goods sold OPBDIT PAT Gross Block Equity capital EPS (Rs.) DPS (Rs.) BV (Rs.) P/E range (x) Debt / Equity (x) Operating margin (% of OI) Net margin (% of OI) 7298.11 93.32 7391.43 6293.08 1098.34 456.50 3267.69 357.10 12.78 2.00 99.78 0.0 - 0.0 0.03 14.9 6.2 6846.58 11.45 6858.03 5683.02 1175.01 727.21 2860.47 357.10 20.36 2.00 89.71 0.0 - 0.0 0.04 17.1 10.6 6258.34 13.98 6272.32 5163.55 1108.77 595.40 2690.13 357.10 16.67 6.00 70.73 0.0 - 0.0 0.03 17.7 9.5

23

OBJECTIVE OF THE PROJECT 1. The study of pricing of different products of Cadburys and techniques used to maximize the profit. 2. The study of strategy of Cadbury of increasing their profit by introducing new product. 3. The study of comparison of Cadbury and its competitors competitors. 4. The study of cadburys place in market. 5. The study of ongoing battle in the confinery market. 6. The difficulties, which Cadbury had faced, in past years

24

RESEARCH METHOLOGY

It refers to the method adopted to collect the relevant data and other information, which forms the basis of the thesis writing. So for the effective writing of the thesis report, the data must be quality oriented. My research is divided into two stages:

STAGE I: Data Source. Secondary Data- Secondary data represents information that already exists somewhere, having been collected for another purpose. The secondary data sources that came to be utilized by me in these were as followsI Internal Sources- In-house magazine - Annual Reports of the banks - Corporate magazines etc II. External Sources- British counsil library - college library - Internet services STAGE II: Analysis In this stage all the collected data had been analyzed and then a Report had been written.

25

LITERATURE REVIEW Cadbury's holds its price, despite its troubles Independent, The (London), Nov 17, 2006 by Andrew Dewson

Some traders are convinced that something is going on at Cadbury Schweppes. Despite a "sell" recommendation from the broker Goldman Sachs on Wednesday and yesterday's confirmation of an investigation into alleged accounting malpractice at its 50 per centowned Nigerian operations, the shares still managed to close in positive territory.

The Nigerian operation is a tiny part of Cadbury's business, but the market never likes to get wind of accounting problems. EMI Group shares lost more than 15 per cent when it discovered accounting fraud at its Brazilian operations three weeks ago - the shares have still not recovered.

Cadbury's closed 5p firmer at 532p, valuing the group at more than [pound]15bn, including debt. The word among traders is that Cadbury's is poised to face a take over, most likely from a private equity group, in what would be the largest ever UK buyout. Traders said a change of management might be the best way for it to move forward and that could mean an attempt to take it into private hands.

The insurance sector remained in focus following Legal& General's promise to return [pound]1bn to investors and a round of corporate activity speculation. The Swiss investment bank UBS raised its target for the shares to 165p as it reiterated its "buy" advice, sending the shares 3.25p better to 149.75p. Meanwhile, Royal& SunAlliance firmed another 1.5p to close at 153p as bid talk continued to do the rounds. 26

It has been five years since shares in Aggreko traded at 400p; the power supply group's stock collapsed to 100p in late 2001, but the turnaround looks to be complete. A bullish trading update yesterday surprised even the most upbeat analysts. ABN

Amro, Citigroup and Evolution Securities published upbeat notes as the shares climbed 19p to close at 404p. Shares in the London Stock Exchange had another bad day on the back of news that a consortium of investment banks is putting together a rival exchange. The shares fell through 1,200p for the first time since the beginning of September before a late afternoon rally saw the stock close 4p worse at 1,230p.

27

CHAPTER 2
COMPANY PROFILE

Throughout history chocolate has been associated with romance and sharing. Today the richness and smoothness of Cadbury chocolate is what makes it one of the world's favorite treats.

Discover everything here that you want to know about Cadbury and chocolate, from historical facts to delicious recipes. Youll also find facts about our exciting new product such as Cadbury snaps and Cadbury dairy milk wafer.

Think delicious chocolate, think Cadbury.

28

History of the company Cadbury has been synonymous with chocolate since 1824, when John Cadbury opened his first shop, establishing a flourishing dynasty that today provides the world with many of its favorite brands of chocolate.

Learn about the fascinating history of chocolate: How cacao is the Mayan word for God Food; when and how chocolate was first introduced to Europe; how xocolatl a bitter frothy drink, beloved by Montezumamade the transaction into food centuries later, how its reputation for heightening pleasure made it the stuff of myth and legend.

Discover the history of Cadbury, from its social pioneering to the perfection of the

29

recipe for Cadbury Dairy Milk; first launched in 1905, and still a market leader today. Find out all there is to know about making chocolate, and amaze yourself with the brand stories and brand timeline that show how many Cadbury brands have been favorites since the early 1900s

When chocolate finally reached England in the 1650s, the high import duties on cocoa beans meant it was a drink only for the wealthy. Chocolate cost the equivalent of 50-75 pence a pound (approximately 400g), when pound sterling was worth considerably more than it is today. Gradually chocolate became more freely available. In 1657, London's first Chocolate House was opened by a Frenchman, who produced the first advertisement for the chocolate drink to be seen in London:

The history of Cadbury as manufacturers of chocolate products in Birmingham dates back to the early part of the 19th century, when John Cadbury opened a shop in the centre of the city, trading as a coffee and tea dealer. Soon a new sideline was introduced - cocoa and drinking chocolate, which he prepared himself using a mortar and pestle. His lifelong involvement with the Temperance Society led him to provide tea, coffee and cocoa as an alternative to alcohol, believed to be one of the causes of so much misery and deprivation amongst working people in Britain at that time.

Fashionable chocolate houses were soon opened where the people could meet friends and enjoy various rich chocolate drinks, many of which were rather bitter to taste, while discussing the serious political, social and business affairs of the day or gossiping

30

The Cadbury family were closely involved in the evolution of drinking chocolate. From his grocery shop in Birmingham, where he sold mainly tea and coffee, John Cadbury started preparing cocoa and drinking chocolate, using cocoa beans imported from South and Central America and the West Indies. He experimented with a mortar and pestle to produce a range of cocoa and drinking chocolates with added sugar.

By 1831 the cocoa and drinking chocolate side of the business had expanded, so he rented a small factory in Crooked Lane not far from his shop and became a 'manufacturer of drinking chocolate and cocoa'. This was the real foundation of the Cadbury manufacturing business as it is today. The earliest preserved price list of 1842 shows that John Cadbury sold sixteen lines of drinking chocolate and cocoa in cake and powder forms. Customers would scrape a little off the block and mix it with hot milk or water. A solid chocolate for eating was introduced by John Cadbury in 1849, which by today's standards wouldn't be considered very palatable.

In 1866 George Cadbury (John 's son) brought to England a press developed in Holland by Van Houten. The press changed the face of cocoa and chocolate production, as it was designed to remove some of the cocoa butter, enabling a less rich and more palatable drink to be produced. There was no longer any need to add the various types of flour and Cadbury's new cocoa essence was advertised as 'Absolutely pure...therefore Best'.

31

Established by Richard and George Cadbury, two Victorian businessmen with great industrial and social vision, Bourneville Village is a story of industrial organization and community planning covering well over a century. It embraces the building of a factory in a pleasant 'green' environment (in stark contrast to the oppressive conditions of the Victorian industrial scene), the enhancement of employees' working conditions and overall quality of life and the creation of a village community with a balanced residential mix (both employees and non-employees).

George Cadbury was a housing reformer interested in improving the living conditions of working people in addition to advancing working practices. Having built some houses for key workers when the Bourneville factory was built, in 1895 he bought 120 acres near the works and began to build houses in line with the ideals of the embryonic Garden City movement. Motivation for building the Bournville Village was two-fold. George Cadbury wanted to provide affordable housing in pleasant surroundings for wage earners. But as the Bournville factory grew, local land increased in value and was ready to fall into the hands of developers. The last thing the brothers wanted was that their 'factory in a garden' would be hemmed in by monotonous streets.

Dame Elizabeth Cadbury was involved in the planning of Bourneville with her husband, George. Her memoirs tell us how these plans became reality:

32

"When I first came to Birmingham and we were living at Wood Brooke, morning after morning I would walk across the fields and farmland between our home and the Works planning how a village could be developed, where the roads should run and the type of cottages and buildings.

Gradually this dream became reality, houses arose and many of the first tenants being men in Mr Cadbury's Adult School Class - which met every Sunday morning at 8.00am in Bristol Street - who had previously lived in the centre of the city and had never had a garden. Also workers in the factory became tenants.

They too enjoyed their homes in the healthy surroundings, cultivating their gardens, rewarded in many instances by splendid crops of apples from the belt of apple trees which each tenant found at the bottom of his garden."

The consequent availability of cocoa butter led to the development of the smooth creamy chocolate we know today.

Manufacturing process

Cadbury makes a variety of chocolates for different purposes but the two main types are Cadbury Dairy Milk, milk chocolate and Cadbury Bourneville plain chocolate.

33

The taste and texture of Cadbury chocolate are based on long traditions of expertise in recipe and processing unique to Cadbury. Techniques are improving all the time and new technology enables the whole process to be finely tuned to match evolving tastes and preferences.

Production starts at the Chirk cocoa factory, where the highest quality cocoa beans are processed to produce cocoa mass containing 55% cocoa butter plus extracted cocoa butter, the basis for all chocolate products.

When plain chocolate is made the 'mass' goes straight to the Bourneville factory in Birmingham while the 'mass' for milk chocolate production is taken to the Cadbury milk factory at Marl brook, Herefordshire, in the heart of English dairy country.

At the milk processing factory fresh liquid full cream milk is cooked with sugar and condensed to a thick liquid. Cocoa mass is added, making a rich creamy chocolate liquid, which is then evaporated to make milk chocolate crumb. As these ingredients are cooked together the very special rich creamy taste of Cadbury chocolate is produced. 95,000 tonnes of crumb a year are produced at Marl brook to be made into chocolate at the Cadbury chocolate factories at Bourneville, Birmingham and Somerdale, Bristol.

On arrival at the chocolate factory the crumb is pulverized by heavy rollers and mixed with additional cocoa butter and special chocolate flavorings. The amount of cocoa butter

34

added depends on the consistency of the chocolate required: thick chocolate is needed for molded bars, while a thinner consistency is used for assortments and covered bars.

In the UK up to 5% vegetable fat is added to compensate for variations in cocoa butter, allowing the melting properties of the chocolate to be controlled to a precise standard, and preserving the full taste and texture of the chocolate. Cadbury use carefully selected vegetable oils similar in nature to cocoa butter: African Shea, Indian Sal and Malaysian Palm oils are all part of the recipe.

Both milk and plain chocolate, which has had sugar and cocoa butter added to the mass before pulverizing, undergo the same final special production stages, producing the famous smoothness, gloss and snap of Cadbury chocolate.

CADBURY PRODUCTS

Cadbury Perk

35

A pretty teenager; a long line, and hunger! Rings a bell? That was how Cadbury launched its new offering; Cadbury Perk in 1996. With its light chocolate and wafer construct, Cadbury Perk targeted the casual snacking space that was dominated primarily by chips & wafers. With a catchy jingle and tongue in cheek advertising, this 'anytime, anywhere' snack zoomed right into the hearts of teenagers.

Raageshwari started the trend of advertising that featured mischievous, bubbly teenagers getting out of their 'stuck and hungry' situations by having a Cadbury Perk. Cadbury Perk became the new mini snack in town and its proposition "Thodi si pet pooja" went on to define its role in the category.

As the years progressed, so did the messaging, which changed with changes in the consumers' way of life. To compliment Cadbury Perk's values, the bubbly and vivacious Preity Zinta became the new face of Perk with the 'hunger strike' commercial in the mid 90's.

36

In the new millennium, Cadbury Perk moved beyond just owning 'hunger' to a "Kabhi bhi kaise bhi" position, because the urge for Cadbury Perk could strike anytime and anywhere.

With the rise of more value-for-money brands in the wafer chocolate segment, Cadbury Perk unveiled two new offerings - Perk XL and XXL.

The temptation to have more of Cadbury Perk was made even greater with the launch of Cadbury Perk Minis in 2003 for just Rs. 2/-

In 2004, with an added dose of 'Real Cadbury Dairy Milk' and improved wafer', Perk became even more irresistible. The product was supported in the market with a new look and a new campaign. The advertisement spoke of the irresistible aspect of the brand, with 'Baaki sab Bhoola de' becoming the new mantra for Cadbury Perk.

Did you know: Cadbury Perk advertising has been a launch pad for Bollywood stars - Preity Zinta, Raageshwari, Gayatri Joshi and Amrita Rao, were all Perk models before they made it big on cinema screens.

Cadbury Five Star

Chocolate lovers for a quarter of a century have indulged their taste buds with a Cadbury 5 Star. A leading knight in the Cadbury portfolio and the second largest after Cadbury

37

Dairy Milk with a market share of 14%, Cadbury 5 Star moves from strength to strength every year by increasing its user base.

Launched in 1969 as a bar of chocolate that was hard outside with soft caramel nougat inside, Cadbury 5 Star has re-invented itself over the years to keep satisfying the consumers taste for a high quality & different chocolate eating experience.

One of the key properties that Cadbury 5 Star was associated with was its classic Gold colour. And through the passage of time, this was one property that both, the brand and the consumer stuck to as a valuable association.

Cadbury 5 Star was always unique because of its format and any communication highlighting this uniqueness, went down well with the audiences. From 'deliciously rich, you'd hate to share it' in the 70's, to the 'lingering taste of togetherness' & 'Soft and Chewy 5 Star' in the late 80's, the communication always paid homage to the product format.

More recently, to give consumers another reason to come into the Cadbury 5 Star fold, Cadbury 5 Star Crunchy was launched. The same delicious Cadbury 5 Star was now available with a dash of rice crispies.

Cadbury 5 Star & Cadbury 5 Star Crunchy now aim to continue the upward trend. This different and delightfully tasty chocolate is well poised to rule the market as an extremely successful brand.

Cadbury Dairy milk

38

The story of Cadbury Dairy Milk started way back in 1905 at Bournville, U.K., but the journey with chocolate lovers in India began in 1948.

The pure taste of Cadbury Dairy Milk is the taste most Indians crave for when they think of Cadbury Dairy Milk.

The variants Fruit & Nut, Crackle and Roast Almond, combine the classic taste of Cadbury Dairy Milk with a variety of ingredients and are very popular amongst teens & adults.

Recently, Cadbury Dairy Milk Desserts was launched, specifically to cater to the urge for 'something sweet' after meals.

Cadbury Dairy Milk has exciting products on offer - Cadbury Dairy Milk Wowie, chocolate with Disney characters embossed in it, and Cadbury Dairy Milk 2 in 1, a delightful combination of milk chocolate and white chocolate. Giving consumers an exciting reason to keep coming back into the fun filled world of Cadbury.

39

Our Journey:

Cadbury Dairy Milk has been the market leader in the chocolate category for years. And has participated and been a part of every Indian's moments of happiness, joy and celebration. Today, Cadbury Dairy Milk alone holds 30% value share of the Indian chocolate market.

In the early 90's, chocolates were seen as 'meant for kids', usually a reward or a bribe for children. In the Mid 90's the category was re-defined by the very popular `Real Taste of Life' campaign, shifting the focus from `just for kids' to the `kid in all of us'. It appealed to the child in every adult. And Cadbury Dairy Milk became the perfect expression of 'spontaneity' and 'shared good feelings'.

The 'Real Taste of Life' campaign had many memorable executions, which people still fondly remember. However, the one with the "girl dancing on the cricket field" has remained etched in everyone's memory, as the most spontaneous & un-inhibited expression of happiness.

This campaign went on to be awarded 'The Campaign of the Century', in India at the Abby (Ad Club, Mumbai) awards.

In the late 90's, to further expand the category, the focus shifted towards widening chocolate consumption amongst the masses, through the 'Khanewalon Ko Khane Ka Bahana Chahiye' campaign. This campaign built social acceptance for chocolate consumption amongst adults, by showcasing collective and shared moments.

40

More recently, the 'Kuch Meetha Ho Jaaye' campaign associated Cadbury Dairy Milk with celebratory occasions and the phrase "Pappu Pass Ho Gaya" became part of street language. It has been adopted by consumers and today is used extensively to express joy in a moment of achievement / success.

The interactive campaign for "Pappu Pass Ho Gaya" bagged a Bronze Lion at the prestigious Cannes Advertising Festival 2006 for 'Best use of internet and new media'. The idea involved a tie-up with Reliance India Mobile service and allowed students to check their exam results using their mobile service and encouraged those who passed their examinations to celebrate with Cadbury Dairy Milk.

The 'Pappu Pass Ho Gaya' campaign also went on to win Silver for The Best Integrated Marketing Campaign and Gold in the Consumer Products category at the EFFIES 2006 (global benchmark for effective advertising campaigns) awards.

During the 1st World War, Cadbury Dairy Milk supported the war effort. Over 2,000 male employees joined the armed forces and Cadbury sent books, warm clothes and chocolates to the front.

41

Cadbury's big Bytes

Kuch meetha ho jaye suggests Cadbury India, its brand ambassador Amitabh Bachchan smiling down the hoardings lined along Mumbai's Marine Drive right down to the company's corporate head office at Mahalakshmi. While the chocolate major is waiting for Diwali to see a turnaround in its business after the worms controversy, at the moment it's all about driving growth for the category, which has seen a decline since the first quarter of this year.

Being the market leader in chocolates with a 70 per cent share, the company has attempted to stretch the boundaries within chocolate confectionery. It has also been adventurous in unleashing a brand new category within chocolate early this year. Introducing the concept of sweet snacking, it launched Cadbury Bytes in the south with the positioning `Snacking ka meetha funda.' The product is a crunchy wafer pillow with a choco-cream centre and is being rolled out nationally.

42

Explaining the need to introduce this new category, Bharat Puri, Managing Director, Cadbury India, says, "While we were sure of our core competencies, there was need for innovation to deliver double-digit growth. What we found was that we were underrepresented in the area of snacking on the go and that there was a need for a light crunchy snack." While entry into salted snacks was ruled out, sweet snacks were the obvious choice, and Bytes is unique to the chocolate major's Indian portfolio.

Getting the right product and packaging was a challenge for the company. It has subcontracted the product to get the volumes and is poised for a national launch. Adds Puri, "After all this was the first category anywhere in the world that Cadbury was entering and we did not have the expertise. So the best way was to test-market the product and today we find that it has already bagged five per cent of the chocolate market."

The company has no apprehensions of cannibalization of its chocolate brands. It believes that while its chocolates are more of indulgence products, Bytes is about snacking when one is hungry and can be treated as a snack in between meals.

43

In the past when Cadbury tried out a biscuit brand, Chocobix, there was fear about some amount of cannibalization. After all, it was simply a biscuit coated in chocolate, and was perceived to be another chocolate brand in Cadbury's portfolio.

Stresses Puri, "Cadbury Bytes is adjacent to chocolates and in the markets that we have launched it, there has been no cannibalization. Chocolates is largely an indulgence product while Bytes is about between-meals snacking. A product which is consumed when one is feeling hungry or peckish."

Another thrust area Cadbury has been re-evaluating is confectionery. While growth rates in this segment are healthier compared to chocolates, it has always been a difficult market 44

to crack. Cadbury's own experiences have led it to withdraw certain brands but now with Warner's Lambert's international kitty under its fold, there are chances of reconsidering the segment once again.

"Through the acquisition of Warner Lambert, there is a great set of brands already available to us. We are still examining which are the right brands for the Indian market," says Puri. Cadbury has already identified Halls as the strongest brand in Warner Lambert's portfolio and re-launched the brand early this year. Adds Puri, "Halls was not doing well for a while so we re-launched it this year. When you have the existing assets, it is necessary to get them right first. Halls is the first brand that we have revived and it is now doing well."

In April 2003, Cadbury India's foreign parent acquired Pfizer's interests in the confectionery business for $4.2 billion. That included the Warner-Lambert product portfolio, known best for Halls, Clorets and Chiclets. The acquisition is now poised to become a growth area for Cadbury India, whose confectionery brands include clairs and Googly. But instead of selling confectionery through its existing chocolate network, Cadbury has set up an entirely new network.

While Halls has been revived with new packaging, there has been no change in the status of its other brands. Chiclets had been discontinued long before it belonged to Cadbury and Clorets continues to sell with a small franchise. But now Cadbury is looking closely at Warner Lambert's gums portfolio (it is one of the world's largest gum manufacturers) and is considering its viability for the Indian market. Sugarless gum brands such as

45

Dentyne Ice and Trident White have been known for their functional benefits worldwide but steep pricing may be a deterrent to their entry into the country.

"The gum market has not done well in India. But gum has functional properties and is not merely a breath freshener. We are now evaluating whether there is a market for them in India and whether it is going to be worth our while," says Puri.

The confectionery market may be huge in volumes but making money on it remains a tough task with its low margins. Governed by price points, one can sell at only at a Re 1 or 50 paise unit price. "The issue is not of garnering volumes but making money out of those volumes. The offer should be one which can get you both top and bottom lines," states Puri. Having shifted focus from Googly, Cadbury has tasted success with its ageold clairs which continue to bag almost 50 per cent of the market.

"There is scope in the market. Our clairs has been growing and this has been evident in our past numbers," claims Puri. At the same time the sugar confectionery market is highly competitive and it's all about finding the right consumer proposition and a business model that can deliver both top line and bottom line growth.

In spite of the new categories being explored by Cadbury, its star brand remains Cadbury Dairy Milk (CDM), which continues to corner almost 30 per cent of the chocolate market. It is followed by brands such as 5-star, perk and Gems. Each of these has been revamped over the years to generate excitement for the category. For instance, recently Perk was rejuvenated as a crunchier wafer while CDM came up as a white-and-brown variant in the market.

46

"The chocolates category thrives on excitement. It's all about giving the consumer a choice and taste which they enjoy," adds Puri. For instance, in beverages, in spite of its malted food brand Bournvita, Cadbury decided to introduce a milk additive brand such as Delite, just to give its consumers the real taste of chocolate. Delite has added flavors such as strawberry and mango and is not expected to encroach upon Bournvitas shares. According to Puri, "There is still a large section of people who do not add anything to milk. This will apply to children for whom milk is a problem and having an additive will make it a pleasurable experience."

Making changes in its distribution network, Cadbury split its sales and marketing team between its mass (confectionery) and core brands last year. "Chocolates needed to get retailed at larger and better outlets while all the products below Rs 3 needed a different distribution network," says Puri. Today Cadbury's distribution network reaches out to six lakh outlets each for its confectionery and chocolate brands. With the worms episode behind it, there are other issues bothering the company, especially that of the rising input costs of cocoa, sugar and milk. Although Cadbury has been able to maintain prices, it is still grappling with the upward trend in prices for its basic raw materials. But its challenge remains that of growing the chocolate market in spite of the odds. Posting a turnover of Rs 729 crore last year, Cadbury is waiting for Diwali to make a turnaround for both itself and the category which has been through troubled times.

47

Pricing battle

Cadbury's efforts to exploit untapped potential and reach every pocket have a lot to do with outwitting Nestle in the war of the wafers.

Its latest annual report states: `Cadbury is all set to satisfy untapped potential. With brand launches, re-launches and new products, the thrust is on reaching every individual, satisfying different palates and being within varying budgets. Basing its operations on this vision, Cadbury is charting a new course of action. With the product, place, price and promotion synergies working in tandem, it won't be long before we find a Cadbury in every pocket.'

This may sound like a reiteration of its earlier claims, but in its heart of hearts, Cadbury India, in spite of being the leader in the chocolate market, is still trying to settle scores with Nestle in the wafer-coated chocolate market, where it has yet to grab a dominant share.

48

Creating new launches and extensions may be an ongoing exercise for the Rs 511-crore chocolate multinational, but lately it has set its sights on the Swiss food giant, Nestle, which is going through a rough patch with its flagship brand, Kit Kat.

In fact, the wafer chocolate war started in 1995 when both Perk (from Cadbury) and Kit Kat (from Nestle) were launched. It had Cadbury running for cover to protect its largest brand, Cadbury's Dairy Milk, which it did by extending its positioning on the adult platform. The power-packed campaign from HTA (`Have a Break') did wonders for the Kit Kat brand at that point of time, but its premium pricing proved to be the main hitch, which has seen its volumes dipping from 15 per cent in 1997 to 9.5 per cent this June, as per ORG-Marg figures.

Despite its share of the volumes coming down, Kit Kat still has a dominant share in the market while Cadbury's Perk has seen steady shares between 2000 and 2006 with present volume shares at 8.8 per cent, as per ORG-Marg figures. Perk has also stretched itself to variants such as Mango, Strawberry and Mint to generate some excitement around the brand.

So, while Kit Kat has taken a battering with its premium pricing and image, Cadbury India is taking this chance to put its might behind its wafer category, with Perk and the newly-launched Milk Treat, to beat Nestle in this category.

But then, the price points in the wafer chocolate category were redefined by Nestle when it launched Munch at Rs 5 last year. Cadbury had to react to this lowering of price within the wafer chocolates category and had to stretch Perk-to-Perk Slims at Rs 5 to counter it.

49

Explains Rajat Sabharwal, an analyst with Kotak Securities, ``the growth rates have come to a standstill in wafer chocolates and the market is not buoyant in this category. With Nestle coming out with a lesser-priced brand, Cadbury is responding now.'' So, despite Nestls flagship brand suffering to a certain extent, a flanking brand such as Munch has taken care of the dipping shares.

Highlights Nirav Sheth, an analyst with SSKI Securities, ``In the first three years since the launch of Kit Kat, its price rise has been too fast and this has backfired. Today, its price cuts have been prompted by competitive pressures and the purpose is obviously to gather volumes.'' But then, the prices of cocoa have also been crashing, perhaps helping Nestle absorb the price cuts, which, possibly it would not have been in a position to do otherwise.

Today, Nestle seems content with its strategy and admits that though shares of Kit Kat have dipped, Munch has succeeded in doing what it was expected to do. Says Sanjay Sehgal, Executive Vice-President (Marketing), Nestle India, ``Cadbury has reacted to us. In fact, Munch could also be responsible for eating into the shares of Kit Kat along with Cadbury's own brand. There has been a redefinition of pricing strategy for KitKat and we are hoping it will show.''

KitKat continues to sell at a slight premium to Perk though it is now offering a price discount of nearly 20 per cent, which indicates that Nestle either had great margins on the brand earlier, or is in trouble.

50

For Cadbury, Perk is basically a fighter brand being used to flank the mother brand. In fact, the fight is almost similar to what HLL did with Wheel (though it was not making money on the brand) to counter Nirma in the detergent market while Surf sat pretty as the mother brand in Lever's portfolio.

However, in the case of wafer chocolates, it is not a very happening category since consumers have realized that they are not paying for pure chocolate, but for a chocolatecoated biscuit. For Cadbury, its cash cow will always remain its Cadbury's Dairy Milk. Both are players fighting with their higher reserves, trying to establish themselves with a dominant share in the wafer chocolate category.

The new Perk has four wafer layers covered with chocolate and is lighter and crisper. Its packaging has also undergone a change and has used Cadbury's trademark purple background with the dark brown wave of chocolate on the wrapper, indicating the presence of pure dairy milk chocolate, to set it apart from a common biscuit chocolate.

Cadbury is targeting a 12 per cent volume share for the Perk brand after this relaunch and expects to overhaul Kit Kat. As Bharat Puri, Director (Sales & Marketing), Cadbury India, declares: ``our objective is to be the largest wafer-coated brand in the country.''

A new campaign has been developed for the relaunch of the brand where through three commercials the differences in the new Perk are highlighted through dialogues alluding to match fixing -- Khule Aam Khayiye. Kabhi Bhi. Kahin Bhi.

Explains Piyush Pandey, National Creative Director, Ogilvy & Mather, ``Through the commercials we are trying to bring out various explanations about the changes in Perk.'' 51

The original campaign of Thodi Si Pet Pooja, Kabhi Bhi, Kahin Bhi will continue through another new commercial, of a lady secretly eating Perk on the occasion of Karwa Chauth.

Meanwhile, another wafer chocolate brand that has been targeting kids is Milk Treat, four wafers with butterscotch-flavored cream embedded in milky white chocolate. Though Cadbury did have a white bar, Creamy Bar, it was never treated as a major brand. Milk Treat is pitted against Nestls Milky Bar though it is in a moulded form unlike the former, which is in count form. There are expected to be more variants under the Milk Treat brand for children. Both Milk Treat and Perk are priced on par at Rs 10 for 27 gm.

Despite all the action in the chocolate wafer segment, growth for Cadbury has always come from its mother brand - the Rs 117-crore Cadbury's Dairy Milk which today straddles all possible price points.

Explains an analyst with Motilal Oswal Securities, ``For Cadbury, its growth has been coming from Cadbury's Dairy Milk and what it is doing to Perk is just to gather momentum in the chocolate market which thrives on innovation and excitement.''

In 2007, Cadbury recorded an eight per cent turnover growth in chocolate confectionery led by its flagship brand Cadbury's Dairy Milk, which registered a growth of over 40 per cent. The malted food drinks category reported a growth of 14 per cent while the sugar confectionery segment rose a mere three per cent. The clairs brand grew by a healthy 14 per cent.

52

In fact, Cadbury has consciously stayed away from meddling too much with its heritage chocolate brands -- Dairy Milk and 5 Star. Explains Puri, ``As a marketer, it is best not to do too much to these heritage brands which already have strong equity. Not that we will never relaunch them but right now they enjoy a strong equity.''

But, it did relaunch its heritage brand of malted drinks, Bournvita, last year when it lost share to the white drinks segment. There are plans to extend this strong brand in the future, about which Cadbury does not want to reveal its plans right now. Interestingly, there already exists a similar sounding dark chocolate brand for adults, Bourneville, in its kitty for many years, which has not seen much advertising.

While its chocolate brands are continuing to get broad based, its sugar confectionery brands will get upgraded to higher price points. For instance, its hard-boiled sweets such as Googly, Mocka and English Toffee are gradually being phased out, while the new brands such as Frutus, a chewy sweet (Re 1) and the jelly, Gollups (Rs 2), are expected to see some healthy growth. Adds Puri, ``It is not possible to build brands at such low price points. While there are volumes, the margins are thin in this category.''

Besides, the latest Budget has hiked the duties of sugar confectionery products from eight per cent to 16 per cent, which in any case has led to an increase in prices and thereby affected brands such as Googly.

But one thing that Cadbury has realized through all this is that it has got cheaper with more products in the Rs 3-5 category. Its premium brands such as Cadbury Gold, Truffle and even Picnic have never really been accepted in the chocolate market. Today, Cadbury

53

is constantly looking at pushing volumes at the lower end of the market and brands such as Relish, Break, 5 Star and Dairy Milk have Rs 5 variants catering to this lowest price point. Perk Slims is the latest Rs 5 brand to be added to this list.

As for taking the chocolate wafer war to the enemy camp, it might take a while because Nestle also has deep pockets and has established itself in the chocolate wafer category in spite of dipping shares. However, Cadbury will always be the leader with its heritage brands. As Rajat Sabharwal, an analyst with Kotak Securities states, ``Nestle may be a key player in the Indian chocolate market but there is no possibility of it emerging as a category leader.''

54

Cadbury faces prosecution

Bureaus in Mumbai Laboratory tests by the Maharashtra Food and Drug Administration of samples of Cadbury's products confirmed the presence of two dead and one live organisms. The unspecified product was manufactured by Cadbury's factory near Pune.

Cadbury India is now liable to be booked under the provisions of the food adulteration law. Confirming this, FDA Commissioner Uttam Khobargade told Business Standard: "As per FDA norms this is a clear case of adulteration. We will charge the manufacturer. We have not found any instance of this adulteration in the Thane unit of Cadbury India."

Khobargade added that while the company had offered the plea that faulty storage by a dealer was responsible for the incident, it was the manufacturer's responsibility to ensure that quality storage conditions were available with the dealers.

In a late night media release, Cadbury said: "We are not aware which samples have been tested by the Food and Drugs Administration. Neither have we received any official report from their office. We would therefore not like to comment until we have had a chance to see the formal report. However, we have checked the relevant factory control samples and have found them to be of good quality and free of any traces of infestation."

On October 3, acting on a consumer complaint, the Maharashtra FDA seized stocks of Dairy Milk chocolates in Maharashtra. A consumer found worms in a Dairy Milk chocolate bar, bought from a shop in Mumbai's western suburb of Andheri.

55

Cadbury Dairy Milk, the flagship brand, contributed 30 per cent to the company's Rs 687.30 crore (Rs 6.87 billion) turnover in 2002.

More infested Cadbury chocolates found

Ten Cadbury chocolate bars were on Monday sent to the Maharashtra Food and Drug Administration laboratory in Dadar, Mumbai, for testing whether they contained worms.

The move came three days after the state government expressed satisfaction at the 'hygienic condition' being maintained at the manufacturing unit of Cadbury.

FDA sources said the chocolates, from a shop in Kurla, central Mumbai, were handed over to police, who in turn deposited them with the FDA at around 1530 IST.

The chocolates were found to have holes in them, they said. On October 10, Minister of State for Food and Drug Administration Anil Deshmukh had said that the judiciary would decide whether to prohibit the sale of the seized stock.

Meanwhile, FDA Commissioner Uttam Khobragade alleged that Cadbury officials were trying to put political pressure on him.

But "I will not come under any political pressure", he said.

Khobragade said, "Instead of admitting their fault, Cadbury are saying that it's dealer's fault. Why are they forgetting that those are their dealer so it's their responsibility to make the product safe?"

56

He also said he would not visit the Cadbury factory. "I have no business to visit their factory. What I want is that the products coming into the market should be perfect."

Asked if it was lobbying the government, a Cadbury official told rediff.com: "We reiterate that we will continue to cooperate with the authorities."

She said the company was confident that "our products are of the highest standards".

Asked why Cadbury had not followed the FDA commissioner's suggestion to withdraw its products from the market and repack them, she said, "As a part of our standard procedure we regularly take back any damaged or date expired stocks back from our retailers."

She said the company had not received any intimation about a case being registered against it. "However, we will continue to extend all cooperation to the authorities because like the FDA, Cadbury is also conscious of its commitment to society in general and consumers in particular."

Regarding Deshmukh's visit to the Cadbury plant, she said the minister "inspected the hygiene standards and manufacturing practices adhered to" by the company.

She admitted the controversy would affect the sales during the festival season. "However, we would like to reiterate that all through the 55 years of leadership in India, Cadbury has remained synonymous with chocolates and we have remained committed to high quality and consumer satisfaction.

57

Cadbury's loss is Amul's gain

As Cadbury India finds itself mired in the worms controversy, Gujarat Co-operative Milk Marketing Federation, which makes Amul chocolates, has witnessed a surge in sales.

After selling 60 tonnes of chocolate in September, the company was on course to report sales of 150 tonnes in October and had projected sales of 250 tonnes in November, a GCMMF executive told Business Standard.

In Mumbai, which accounts for almost 10 per cent of the 4,000 tonne, Rs 650 crore (Rs 6.50 billion) a year chocolate market in India, the company plans to raise its market share from 2 per cent in the beginning of October to 15 per cent by the end of the month.

"We will sell 20 tonnes this month in Mumbai, against only 2 tonnes in October last year," the GCMMF executive said.

According to the executive, while 20 per cent of the growth in Amul's sales in recent days has been because of the Cadbury factor, the recent brand launches by the company and the increased focus of GCMMF on chocolates have contributed 40 per cent each to the rise in the numbers.

In an attempt to boost sales, the company has launched three new chocolates in Mumbai under the brands Fundoo, Bindaas and Almond Bar. While the first two have been priced at Rs 10 for a 30 gm stick, Almond Bar carries a price tag of Rs 10 for a 35 gm chocolate.

58

As a result, the company's festival season pack "Rejoice" now comes with six chocolates in the city, up from three during the festive season last year.

"A national launch of the three brands is likely to happen in a month's time," the official added.

Encouraged by the rising numbers, GCMMF has drawn up plans to make its chocolate business a separate division of the company.

"We think that the business requires a special focus and this is the best way to do it," the official added. Cadbury India is the largest player in the Indian chocolate market, followed by Nestle India and Amul.

Cadbury bids to worm way into public good books with Big B endorsement

The Big B is going to promote the Big C in the chocolate business - Cadbury in India. Indian cine superstar Amitabh Bachchan has signed on to become the brand ambassador of the chocolate major for two years.

AB will play a pivotal role in all communication relating to Cadbury's products and brands, be it in print, on television or the great outdoors, the company's managing director Bharat Puri has been quoted as saying in media reports

Cadbury India Ltd has announced that mega star Amitabh Bachchan will be the company's new brand ambassador.

59

He will endorse and promote Cadbury chocolates for a period of two years. As brand ambassador, he will play a key role in brand and product communication on television, in print and outdoor media.

Cadbury has launched a strengthened, new 'purity sealed' packaging for Cadbury Dairy Milk. The new packaging for 13g (Rs 5) is double wrapped for maximum protection. The chocolate is wrapped in aluminum foil and enclosed in a poly flow pack, which is completely sealed on all sides. In the second phase, the larger Cadbury Dairy Milk packs will come in poly-coated aluminium foil, which will be heat-sealed and then wrapped in the branded outer package. Both these steps are a 'first ever' in chocolate packaging in India. Amitabh Bachchan is Cadbury brand ambassador.

Cadbury India Ltd has announced that mega star Amitabh Bachchan will be the company's new brand ambassador.

He will endorse and promote Cadbury chocolates for a period of two years. As brand ambassador

"Over the last few months, we have had some cases of infestation due to improper storage conditions. As a company committed to ensuring that our consumers enjoy a pristine bar of chocolate each time, we decided to take steps to reduce dependency on storage conditions to the extent possible," said Bharat Puri, managing director, Cadbury India Ltd. "Cadbury will do everything it can to ensure that every bar of chocolate that a consumer buys comes full of goodness and rich taste."

60

Commenting on Amitabh Bachchan as brand ambassador for Cadbury chocolates, Puri said, "There is a perfect fit between Amitabh Bachchan and Cadbury chocolates - their timelessness, and the love and trust they both share with the people across India, makes this an ideal partnership.

Moreover, Mr Bachchan has a universal appeal that extends to everyone from 6 to 60, just as our chocolates do. We believe his endorsement of Cadbury Dairy Milk will go a long way towards our objective of increasing chocolate consumption among all ages of consumers."

Amitabh Bachchan said, "Most of you may not know this, but I have been a brand ambassador for Cadbury for the last 55 years. Only, now it is official. Bringing smiles, spreading happiness and joy amongst millions of people in India is what Cadbury and I shall be continuously working towards."

The new 13g (Rs 5) Cadbury Dairy Milk packaging is currently available only in Maharashtra and the national rollout will take place over the next three weeks. New packaging for the larger bars of Cadbury Dairy Milk, Fruit & Nut, Crackle, Bournville, Caramello, and Double Deck will be completed in six weeks.

61

CADBURYS PRICING

Organizational structure of Cadbury

Hierarchical structure is based on distinct chain of commands from Managing director to Clerical Support assistants (according to Cadbury). Decisions are made at the top and pass down. Such organizational are usually based on clearly defined procedures and roles.

Cadbury organization is based on more democratic. Decisions are made as a result of a consultation process involving various members of the organization (Cadbury). Ideas would be discussed and thought through collectively. Within Cadbury organization we can find a Democratic structure, Because Cadbury tends to be found in situation were it is felt to be important for all members of the organization to understand what they are doing, were decisions require individual initiative, and where member of staff need to work as a team.

How management style, Culture and Organizational structure interrelate Management style, culture and organizational structure interrelate together in Cadbury because they all work together to help the business to achieve its objectives; in order to lead a successful business.

62

Cadbury has strategies for the organization, continually to motivate members of staff to support this process, and market change within the organization.

Management style, culture and organizational structure interrelate together in Cadbury because they all work together to:

UNDERSTANDING COSTS AND PRICING FOR SUCCESS We have many ways of pricing our products or services. The first thing to understand is the cost elements that make up our offering. This unbundling of cost must be known prior to setting prices, however it may have only limited influence in the price finally set. You may deliberately price an element at a loss, and another at a huge profit because the market with bear this. The loss leading offering maybe the carrot required to differentiate you from your competition, make your offering seem fresh and market leading, and your competitions offering, old hat. But if you havent done your forecasts and understood your cost models properly before going to market, then the end result of your sales success could be a huge loss.

And in pricing, you need to look clearly at your business goals. Do you want to: - Sell your products or services? - Dominate the market? - Force the market to purchase your product? - Have fun? You may try different strategies at different times depending on what result you are after. If you a new to a market, then you may employ an early adopter strategy to achieve 63

some presence and reference. Later in the lifecycle, you may use a strategy that achieves greater returns in a more traditional manner.

With our LINC product in 1980, we identified we had only four potential clients IBM, Burroughs, NCR, and Digital. So we had to prepare strategies, which would achieve the business goals we wanted to establish our company as a developer of good development and deployment environments, and to earn and excellent stream of profitable revenue for several years. We sold LINC to Burroughs for US$1 plus the rights to continue manufacturing new feature content for on a predefined costed basis and to provide product support. Thus profitability was guaranteed so long as product quality levels were maintained. So knowing your costs is important if you wish to position your prices for profitability.

But knowing your costs is not enough. You also need to know all about yourselves as a company and position your business. You need to: - Know what exactly is your business solution? - Who exactly are your potential clients? - What is your unique customer advantage? - What is your business identity? - What is your elevator statement?

Without this business knowledge, you do not have a hope of pricing your product to meet your business goals and to effectively compete in the market place.

64

In my days in the fishing industry, selling Orange Roughy frozen fish fillets, we were one of several players in a market place for a variety of fish that was not a household name but was distinctive. We needed to differentiate ourselves as the product to be sought after ahead of other fish brands, and competitor products. Our objective was to be the fish fillet provider of choice in the Great Lakes region of the United States of America. We launched our Fletcher Quality Orange Roughy brand at a 10% premium price over our competitors. We launched as the top quality product, a USA hygienic clean white fish meat (some would say tasteless), in a special display pack. And in a market where everyone delivers late, delivery on time. So our differentiators were top quality, special display pack and delivery on time. Orange Roughy was a distinctive name. People were amazed that such a good-looking fish fillet could have such a horrid name, yet if we could get them to try the fish, they would love it and would tell all their neighbours and friends. The name Orange Roughy was a memorable name and by making the fish look in a class of its own in the shop window display pack, we captured a strong market. Within a year, Fletcher brand Orange Roughy was commanding a 30% margin and was selling ahead of any other brands.

So knowing your business, your unique customer advantage, who you are, and what you are pitching is vital to your success.

65

WHAT IS ALSO IMPORTANT IS THE DETAIL OF HOW YOU APPLY YOUR PRICING

In software, the key pricing ingredients we can unbundled are: - Product licence - Support - Training - Documentation - Consultancy

And we are not the only industry that unbundled our investment. The best known unbundled today is the motor vehicle industry where a simple $7995 on the windscreen represents $10,000 plus when you add registration, bullbars, CDStacker, leather trim, electric aerial, insurance, 3 year warranty etc.

In our software industry the best unbundlers I have come across are Oracle. I have never really met anyone who could understand easily what the Oracle purchase components would add up to for a particular configuration. Just as well Oracle ASAP arrived as a fixed price deal to reduce the confusion.

But back to the components, each of these ingredients has its own equation, which sends a message to a prospective purchaser:

66

PRODUCT LICENCE could be purchase, lease, and rental, bundled with another element. You will all no doubt remember when OS2 was it and Windows was the small player with a lower level of capability. Microsofts master stroke was to almost give their Office suite of products away to Windows users to get them to use their Windows operating system and ensure that it became the international leader. SUPPORT in some cases, the cost of a product in insignificant beside the level of support cost, which shows the ability to have an ongoing relationship with a supplier when using a product. In a development, a high level of support content may denote a low quality initial development. TRAINING in the case of a development environment such as Jade, VB or C++, people need to be trained to make effective use of your product. It is the concept of a fool with a tool still being a fool unless he/she has effective training in the skills to use the tool. The first introduction course is always justifiable by a company so you can price this well. What businesses struggle with is justifying an Advanced Course. They feel that if they are training a developer in a new product, then the developer should be able to pick the balance of the product up by themselves. People such as Microsoft and Cisco have got around this by putting together an Academy programmed including a tiered hierarchy of courses clearly differentiated in content and adding to become a package of knowledge. A clever move. DOCUMENTATION nobody reads it but without it, no prospective purchaser will purchase your product. So what is it worth to a purchaser? Certainly not what it costs. And if you priced it based upon hours of use by a purchaser, it would be a highly variable commodity. Most treat it as a nominal cost and unbundled it, or pay third party providers

67

to build documentation for them. One of the better books I have seen recently is the Python Cookbook, which is a very easy how to for their development environment and published by a third party. CONSULTANCY you dont need it, but if you have it you may make progress much quicker than you would without it. So consultancy should be priced to cover costs and allow a margin. If you do not charge enough, it is likely not to be valued by the client enough.

OTHER ISSUES WITH PRICING THE INTERNATIONAL PRICE In Jade, we decided to get too clever. We believed the market could bear a higher price in some countries than in others. So we established NZ, Australian, UK and US pricing. Now, how do you put all this on the website and appear international and professional? The answer is that you cant. So we didnt publish a price at all. We have had thousands of queries for the price of Jade, but we have no idea how many thousands of hits have just turned away, believing the price was outside their price range. This is not the case for all products lets look at the Bentley luxury car. The Bentley Motors website does not list prices. But it is a superb site and if you are looking for the extravagance of a Bentley, then price is not an issue. The site looks like you pay a fortune and it would be crass to publish a price if you have to ask, then you are unlikely to be a likely purchaser. Jade have learned their lesson and from June 15 this year, Jade comes out at an international price where a development licence is at no charge and different, clearly defined levels of support can be obtained. From June 15, the international price for a Jade development licence is zero dollars.

68

OTHER ISSUES WITH PRICING DISTRIBUTOR MARGINS Many product and service sellers leave insufficient money in the pot for the distributor to do what they have to do to be effective. If they dont have enough margin for market spend, sales activity, and support, then they will not be effective. Too many pricing strategies do not consider the way the product is going to be distributed internationally and what the financial position will be of those distributors and resellers doing that task. They are an extension of your sales force so they need to be considered as being a part of your company with appropriate cost structures.

OTHER PRICING OPTIONS PARTNERING For Independent Solutions Vendors developing their own applications, Jade offers clients the option of no end user charges but instead the option of a royalty on revenue earned from the sale of the application to an end client? MESSY - Another option is a charge for a server product but no charge for client use? This means that changing the configuration will result in changes to end user charges. FIXED - A fixed monthly rental for use of an application? USAGE BASED - Sale of a library package for schools based upon the usage calculated on a multiplier on the number of kids in the school? FIXED FEE PLUS - A support fee for services with a cap over which a premium is paid? SUCCESS BASED - A dollar for every successful car rental processed through an application? Truly sharing in the success of the company

69

SERVICE LEVEL OPTIONS Platinum, Gold, Silver, Bronze, pay as you go. It is probably better to sell a service contract up front than to hit clients credit cards with charges when they are having a tough time with bugs in your product. Making a change to your price /market position Sometimes the strategies to go from where you are now to where you want to be are very simple. We suggested to the client in Case 1 the successful one that he add a zero on the right hand end of his price, rename the product to sound grand, and take it out to market as the enterprise release. He told us it would never work. We struck a deal and he now has a new product, selling extremely well, providing him with good margin which has enabled him to set up a team of international distributors. He is starting his slide to retirement by travelling around the world assisting his distributors to install the application and getting some holidays in nice places on the side. He is 50 years old. He describes it as a holiday with business, rather than a business holiday.

The second case. With the company who has built a product to help students learn English more quickly and better has changed their market, target distribution, and widened his market. They are now not selling their product to a limited number of NZ English language colleges. They are now promoting their product to students using the English language colleges as their distributors. The deal they now take out is a distribution offer to colleges to make money selling their product. And not just through NZ colleges but as an international offering. They have had 70

to readjust their expectations on price to allow for single student use, change their security structure to give the required control, and have had to forgo some of their distribution margin. But they have more multipliers in place, more feet on the ground, and their product is being offered to millions of people in more countries than they had ever hoped to holiday in. The jury is out on the charges but the opportunity looks solid and the distribution network is enthusiastic.

The third case was the developer who was barely covering costs. He proposed the development of a new application for an existing client where he budgeted to make a 40% profit. He planned the project properly, outlined the phases and costs for each and the timeline for these, and, was accused by the client of holding the client to ransom. He offered to take some phases out of the equation and asked which phases the client wished him to remove. The client did not know how to respond to this. Acceptance testing was discussed as a possible option, but the caveat on this was that support cost increases and likely application instability were then discussed. The developer had decided to forgo the client rather than to do the job on any other basis than that he has proposed. Hard ball. The client finally agreed but then wanted the system installed earlier. The developer asked the client which phases of the project he would agree could be done without. The development finished on the original time, the client is happy and is now a reference site, the application is delivering sound business results, and another two applications are under development on the same new basis. The client is learning to respect the value of

71

what is being delivered, and has a vastly better understanding of the elements which make up a successful application implementation. The fourth case is work in progress at present. This was the company that had set its price based on the report from a Big 5 consultant. Nothing wrong with the report or its accuracy. But lots wrong with the brief proposed to the consultants as regards the business goals and market positioning the pricing strategy was to assist with. As I mentioned earlier, the pricing strategy for Jade has changed dramatically. Large numbers of pre-alerted international clients were set to download Jade from the Jade website from15 June. Price is only one of the factors that are changing to take Jade from being an internationally boutique product into the realm of being a pervasive and widely used development and deployment environment. Yes, some of the costs are being unbundled but access to the development environment will be free. I look forward to reporting on the success of this strategy in a year or so. Pricing is an art where if you are challenged with Is your price right?, you can truthfully respond It depends. Pricing is an important key to your business success, but not the only key. Cadbury is going to need all the help it can get in the coming years. Last year the company initiated its major foray into one of the toughest consumer markets in this country: the Rs 1,600-crore sugar confectionery industry. Sugar confectionery contributed 13% to its 1998 turnover, of which 9% came in from the leading brand in the clair market, Cadbury's clair. So far the confectionery foray has been watchful and conservative. All of that is set to change this year. A spanking new plant in Pune

72

(Maharashtra) was set up at a cost of Rs 8 crore to bring in some of its international confectionery brands. In December 1999, the company introduced two new products in the confectionery segment, a chewy sweet called Frutus (Rs 1) and a jelly called Googly (Rs 2). Says Puri: "Our focus is going to be on launching value-added products during the year." A value-added product is not merely a nice marketing term to bandy about. In this industry it is often a case of survival. Since most of the industry functions around the 50paise price point (Rs 1 is premium pricing), margins are painfully low. But there are other attributes that go into making it a complicated market.

It functions on a 'you-eye-it-you-buy-it' syndrome which means that retail penetration is very important. Most purchases, such as chocolate, are impulse-driven so retail displays and dispensers are very important. Brand loyalty is non-existent, the market is notoriously price-sensitive and different products among confectionery -- hard-boiled sweets, ice creams and bubble gums -- often compete with each other. Since it caters to the most fickle of consumer categories -- children -- the category needs a constant frisson of excitement to keep interest alive. Last but not least is the fact that about 25-30% of the Rs 1,600-crore market is catered to by the unorganized sector. Couple this with the fact that it has strong competition in this market through Parry's Confectionery, Ravalgaon Sugar Farm and multinationals like Perfetti, and it's easy to see that Cadbury has got its work cut out. What perhaps makes things worse is that the latest budget has hiked excise duties of sugar confectionery products from 8% to 16% and this may result in an upward movement of prices, which in turn may affect volumes adversely. For Bakshi, it's been a momentous two years at the helm of Cadbury's affairs. He has all along felt that the best

73

way to drive up volumes in this business is to expand the consumer base. One way of doing it is to take the company's products down the price line. That exercise is well underway. The other is to make chocolates appeal to a wider audience (read adults). This is a tactic that's close to Bakshi's heart and now that the company is in fine trim, will perhaps be his next big challenge. Cocoa surplus helps sustain chocolate prices

PRICES of branded chocolates have displayed divergent trends over the past year. On one hand, there has been an increase in the maximum retail prices (MRPs) of the larger pack sizes of established brands. On the other hand, the MRP of the popular pack sizes and brands appear to be heading southwards.

For instance, between September 1999 and September 2000, the MRP of Cadbury's Dairy Milk (80 g) was hiked from Rs 26 to Rs 30. Cadbury's clairs and Cadbury's Fruit and Nut also saw price increases. But, Cadbury's Perk, Picnic and Nestls Kit Kat have all seen their price lines revised downward.

The past couple of years have seen the availability of a large number of imported brands, and intensifying competition in the domestic chocolate market. Pricing strategies have largely responded to this situation. The two major domestic players -- Cadbury India and Nestle India -- have adopted a major strategy to pep up their flagging volume growth. They have focused on lower price points.

In the recent times, both players have tried to expand the number of products available in the popular price points of Rs 5 and Rs 10. 74

Over the past year, Cadbury India has introduced smaller pack weights of its Perk and Picnic range in order to reduce the MRPs of these brands to the Rs 5 and Rs 10 range.

Similarly, Nestle India has retaliated with the launch of Rs 10 versions of its brands, Munch and Charge.

Meanwhile, declining prices of the key input for chocolate -- cocoa, have probably helped the players a great deal in sustaining this pricing strategy. A global cocoa surplus for the year, coupled with the forecast of high cocoa output for the 2006-2007 (October to September) season, has helped bring about a steady decline in cocoa prices over the past one-and-a-half years.

International prices have declined from around $1,200 per tonne in March last to levels of around $800 per tonne at present.

Since both Cadbury and Nestle outsource a substantial portion of their cocoa requirements, the decline in cocoa prices has probably given both players a larger leeway when it comes to reducing their price levels

75

CHAPTER 3
RESULT AND ANALYSIS 1. Taste of the same product often differ from country to country

The composition of export lines is always as near as possible to that of the UK product. However, They have to comply with the food laws in the country in which the product is being sold. This does affect the end result where food laws differ significantly from the UK.

2.

Taste

of

the

same

product

often

differ

from

brand

to

brand.

The way chocolate is stored can affect the taste. For instance chocolate stored in a warm environment will become stale more quickly than chocolate stored in a refrigerator.

Although the recipe and ingredients for our chocolates are always controlled to tight recipe standards, on occasions ingredients are sourced from different areas, and milk particularly can taste differently when bought from different areas of the country.

Chocolate recipes and textures are different. For instance a bar of Cadbury Dairy Milk tastes quite different to a Flake or a Wispa because they have different recipes.

3. Purpose of the Cadbury website.

The Cadbury website provides a variety of information about the world of chocolate and Cadbury's vital role in that ever popular market. It has attracted millions of visitors since its launch in March 1996. 76

Although the Cadbury site is a popular stop for Internet surfers, it was not designed as a promotional tool for its brands but rather as an educational and informative source for interested surfers from educational establishments to chocolate-loving members of the public.

4 Cadbury makes low fat or diabetic chocolate bars

DIABETIC CHOCOLATE

Unfortunately they do not manufacture chocolates suitable for Diabetics under the Cadbury label. Trebor Bassett confectionery however, which is an associate company of Cadbury Ltd sells Diabetic chocolate under the Ernest Jackson "Special Recipe" label.

There are a variety of flavours and products within the range, and these bars are generally available in larger chemists throughout the country. Chemists are also able to order these bars from their suppliers given a little notice.

LOW FAT CHOCOLATE

They don't specialize currently in the manufacture of low fat bars. You may be interested to learn however that our Fry's Turkish delight bars are 92% fat free! They also produce a range of treat size and snack size bars, which are smaller than their standard bars. Although they have no immediate plans to launch a low fat bar there is always a possibility that they may do so in the future.

77

5.

sponsor

other

sites

or

take

advertising

on

other

sites

In general it is not our policy to sponsor other sites or take advertising space.

6. Where do product names come from

MILK TRAY

The name "Tray" came from the special pack in which the milk chocolate assortment was delivered to the shops. Originally Milk Tray was packed in 5.5lb boxes and arranged on trays from which it was sold loose to customers.

DOUBLE DECKER

The Double Decker name was inspired by the British obsession with double Decker buses in the 1970's

FLAKE 99

The real reason for "99" Flake being so called has been lost in the mists of time, but this is an extract from an article which appeared in a Cadbury works paper many years ago.

At a recent Sales conference Mr Berry, a sales manager, told a story of how Flake became associated with ice cream and how "99" Flake came by its name.

"When I first came north in 1928 I found that some of the Italian soft ice cream makers in County Durham were trying ways of introducing other lines to increase their sales, which

78

in those days were largely in the form of sandwich wafers. The possibilities were obvious if we could get a suitable line, both in shape and size and texture - and the most promising was Flake, which at that time only sold as a 2d line, and therefore had to be cut with a knife to reduce its size. It proved very successful and its popularity quickly spread. After successive introductions of half penny and 1d Flake, both of which were sold with ice cream, the Sales Committee finally agreed to produce a special size to fit the sandwich and Mr Berry visited a number of Italian customers in the area. After this of course the cornet with the Flake placed temptingly in the top of the ice cream became very popular.

In the days of the monarchy in Italy the King has a specially chosen guard consisting of 99 men, and subsequently anything really special or first class was known as "99" - and that his how "99" Flake came by its name.

7. An idea for a new product

Here at Cadbury they have a Research and Development Team who, in partnership with the Marketing Department continually investigate new product ideas.

Development of a new chocolate product requires tremendous investment, both in time and financial resources.

For every new product that reaches the market place, fifty or more will have failed to meet expectations somewhere during development. New products have to be carefully

79

researched to ensure they have mass appeal, and the decision to introduce a new Cadbury chocolate product is always based on the results of extensive market research.

Unfortunately for these reasons they are not able to use any ideas from members of the public.

PRODUCTS REFFERED BY PEPOLE

CHART 3.01

Which product you prefer?

Cadbury Nestle Amul Others

80

CHART 3.02

factor consider while purchasing a product

price quality brand andorsement taste

GRAPH 3.01

Which product of cadbury yuo like the most?

81

Ratio analysis

Financial statements can be analyzed by shareholders, the financial press, and others to check how well a company is performing. Ratios are determined from a company's financial information and used for comparison purposes, e.g. operating profit to sales. This can be set out in the form:

Operating Profit : Revenue

Alternatively, it can be set out as a percentage.

Operating Profit Margin=Operating profit x 100 Revenue This is very helpful because it shows how much profit is made for each 1 of sales made. An improvement in Operating Profit margin would see this figure rising over time showing that Cadbury ' customers are prepared to pay more for their purchases and/or that the company has made savings by improving the way it makes or ships its products. The operating profit margin of Cadbury Schweppes can be compared from year to year e.g. comparing 2006, 2007 etc, with 2008. Cadbury ' profit margin can also be compared with that of other companies.

If you refer back to the Profit and Loss Account, you can see that the operating profit margin was:

143x100=14.27% 1002 82

The figure above is crucial to Cadbury as it relates to the second performance goal.

Here is another ratio you will find in your current course. This ratio shows whether the company owes more money to its suppliers and bankers than the assets it holds in the form of stocks, debtors and cash. If this number is less than 1, then the company's shortterm or liquid assets are greater then its short-term liabilities.

Current asset CURRENT RATIO = Current liability If you refer back to the Balance sheet, you can see that the current ratio for Cadbury is:

2040/2313=0.88

This ratio is used in different ways for small and large companies. Businessmen and women considering whether to trade with a new small company would prefer to see this figure at 1.5 or above - as an indication that the company is solvent and will be able to pay its debts. For large established companies with good credit ratings, a lower ratio indicates an efficient use of capital.

In addition to the Balance Sheet and Income Statement, Cadbury values the information provided in its Cash Flow Statement. This statement simply sets out the incomings and outgoings of cash in a business during a particular period of time e.g. one year. It shows how the main categories of cash flow have changed the cash balance in particular periods.

83

In 2007, Cadbury achieved free cash flow generation of 265 million. Cash flow is very important to the company because cash enables the business to pay its bills, pay dividends to its shareholders and, in addition, to make acquisitions.

In recent times Cadbury has focused on acquiring new businesses, increasing sales and innovation, cutting costs, and integrating existing businesses to achieve its aims of:

Higher sales growth

Improved operating profit margins

Higher levels of free cash flow.

Through efficient financial management Cadbury is able to continually invest in making sure that customers are supplied with the brands that they enjoy.

84

Conclusion

Cadbury prepares financial statements because:

As a listed company, it is legally required to do so.

Cadbury wants to communicate a true and fair picture of the financial state of the company to its shareowners and external analysts.

The company values transparency and honesty and aims to reflect this is all its communications, both internally and externally.

Cadbury

won

the

Communication

of

Corporate

Strategy

Award

at

the

PricewaterhouseCoopers 'Building Public Trust' awards in 2005. This publicly recognized the high standards of the company's reporting: 'a highly accessible overview of its short-term strategy, major markets and measurable targets.'

85

CHAPTER 4
RECOMMANDATIONS

There should be difference in pricing strategy of Cadbury i.e. in term of rural and urban areas.

It should show more and more ad of the chocolates that it is offering. For Example, Cadbury only emphasis on Dairy milk chocolate the most and not the other products.

It should introduce different schemes like giving mask to the children with their product to attract children the most.

The packaging of the Cadbury product should be made more attractive so that more and more people gets attracted towards it. Every customer likes changes if not they get used to it but they should take risk.

86

CHAPTER 5

LIMITATIONS

This study provides the data for only Cadbury pricing. The following study does not represent overall idea of any company. Two months time is not sufficient for study of the topic. The data collected is from secondary source hence it is not 100% accurate. There can be a chance of biasness in the data selection.

87

CONCLUSION

Price plays an important role in the purchase of a product like dairy milk they have introduced dairy milk the most popular chocolate in Rs.5 also which is within the reach of every customer.

Consumer prefers quality goods at lower price like Cadbury people just introduced bytes, which is a snack, which is sweet.

Consumer is loyal to brand so its necessary to pay attention to the brand image. In todays world most of the people see the image of the product and then purchase it. So its necessary to make an image in market.

Consumer prefers those goods whose advertisements are shown on television. Price should be according to the competitors price .i.e the price of Cadbury should be less or same as the competitors price. .

88

BIBLIOGRAPHY

www.cadburyindia.com, 7th June 2009 , 6.15 PM

www.findarticles.com , 29th June 2009 , 9.10 PM

www.cadbury.co.uk , 18th July 2009 . 4.30 PM

www.economictimes .com , 30th July 2009 , 3.35 PM

www.wikipedia.org , 10th August 2009 , 8.10 PM www.indiatodaygroup.com ,11th August, 5.45 PM

89

90