POORNIMA SCHOOL OF BUSSINESS MANAGEMENT

A PROJECT REPORT ON

Cadbury India Ltd.

Submitted To:
DR. VINITA MATHUR

Submitted By:

A Study on the Chocolate Industry

Market Study of Cadbury India Ltd.

Contents
Executive Summary Background Objective Methodology Market Segmentation Product Positioning Product Category Product Market Boundary Competitor Analysis Product Life Cycle Industry Structure and its dynamics

 Corporate Strategy Glance into the Future Bibliography Appendix

ACKNOWLEDGEMENT

We would like to take this opportunity to express our deep gratitude to the person who made this project possible. We are grateful to our project guide DR. VINITA MATHUR, Faculty for CONSUMER BEHAVIOUR, MBA (M&S), Class of 2010, who showed us the right path to reach the final destination with minimum hiccups and was always there with a helping hand in times of need throughout our project.

EXECUTIVE SUMMARY

Chocolates had its beginnings in the times of the Mayas and the Aztecs when they beat cocoa into a pulp and made a bitter frothy chocolate out of them. They first became popular in Europe in a highly unrefined form. Then the Hershey Food Company was the first to bring out chocolates in the currently popular solid form. The main ingredient of chocolates is cocoa, grown mainly on the equatorial zones of South America. The other ingredients that go into the making of chocolates are: sugar, milk solids, and permitted emulsifiers. Cocoa constitutes nearly 40% of the total raw material cost. The following report attempts to make a study on the chocolate industry and the position of the chocolate brand, Cadbury. The brand name chosen is the umbrella brand as we feel that the corporate name is recognised as a brand, not so much its individual products. The study will focus on the consumer behavior of the consumers in the Indian maket. The consumer behavior strategy will be studied with respect to Cadbury's business and marketing objectives. The strategies adopted will be analyzed for each product

offering. The same is followed to a minimal extent for its major competitor, Nestle India Limited, to get an understanding of where Cadbury stands. The report initially focuses on an examination of the industry environment and the product class. The report then goes on to analyse the consumers behavior, marketing and advertising strategies adopted by the selected company and its main competitor. It concludes by looking at the future challenges and recommendations for the industry and the company.

BACKGROUND
Confectionery Industry
The confectionery industry in India is approximately divided into:

Chocolates Hard-boiled candies Eclairs & toffees Chewing gums Lollipops Bubble gum Mints and lozenges

The total confectionery market is valued at Rupees 41 billion with a volume turnover of about 223500 tonnes per annum. The category is largely consumed in urban areas with a 73% skew to urban markets and a 27% to rural markets.

Hard boiled candy accounts for 18%, Eclairs and Toffees accounts for 18%, Gums and Mints and lozenges are at par and account for 13%. Digestive Candies and Lollipops account for 2.0% share respectively. Overall industry growth is estimated at 23% in the chocolates segment and sugar confectionery segment has declined by 19%.

Cadbury India limited was set up as a wholly owned subsidiary of the UK-based Cadbury Schweppes Overseas Limited. The parent company is the fourth largest in the world chocolate market, after Mars, Nestle, and Philip Morris. They set up operations here as far back as 1948, and will thus be completing 50 years of its existence here. Cadburys milk chocolate was first introduced in the Indian market in 1956. It made an immediate impact, quickly becoming the market leader a success story, even to this day.

The Major Players

The major national players in the chocolate market in India are: Cadbury India Limited Nestle India Limited Gujarat Cooperative Milk Marketing Federation Limited (Amul) Lotus Chocolate Company

Cadbury India Limited

Cadbury began its operations in 1948 by importing chocolates and then repacking them before distribution in the Indian market. After 59 years of existence, it today has five company-owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesssh) and 4 sales offices (New Delhi, Mumbai, Kolkota and Chennai). The corporate office is in Mumbai. Cadbury India limited was set up as a wholly owned subsidiary of the UKbased Cadbury Schweppes Overseas Limited in July 1948. They started off by setting up production facilities at Thane to manufacture chocolates, malted foods, cocoa powder and drinking chocolate using the technical know how of the parent company. Currently Cadbury India operates in three sectors viz. Chocolate Confectionery, Milk Food Drinks and in the Candy 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! Our flagship 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. In the Milk Food drinks segment our main product is Bournvita - the leading Malted Food Drink (MFD) in the country. Similarly in the medicated candy category Halls is the undisputed leader. It recently entered the gums category with the launch of our worldwide dominant bubble gum brand Bubbaloo. Bubbaloo is sold in 25 countries worldwide. The Cadbury India Brand Strategy has received consistent support through simple but imaginative extensions to product categories and distribution. A

good example of this is the development of Bytes. Crispy wafers filled with coca cream in the form of a bagged snack, Bytes is positioned as "The new concept of sweet snacking". It delivers the taste of chocolate in the form of a light snack, and thus heralds the entry of Cadbury India into the growing bagged Snack Market, which has been dominated until now by Salted Bagged Snack Brands. Bytes was first launched in South India in 2003. The key business objective of the company today is to 'continuously provide products that are value for money'. On analysing the market, the phenomenal success of the company can be attributed to:

The pioneer advantage - The company was the first to enter the Indian market, as early as 1956. For a long time, it was practically the only dominant player in the market. It, therefore, enjoyed a large share of both customers heart and mind. So much so that for an entire generation, chocolate was synonymous with Cadbury. It is only recently that the company has started facing some threat from Nestle.

A strong endorser brand - Cadbury realised early that volumes would not be enough to support all its brands with heavy advertisements. Hence what they was to take CDM as the flagship brand and advertised it heavily to popularise the brand name to help the flanker brands around CDM. But in the last two years the company has spent extensively on the chocolate wafer segment(without treating it as a flanker brand of CDM), seeing as how the segment has been growing phenomenally.

Right product formulation - the climatic conditions and the Indian taste are very different from the western markets where the company first started its operations. Cadbury was able to successfully reformulate its product as per the Indian conditions, while entrants like Nestle could not do so.

Presence in all segments Cadbury has a presence in the entire range, starting from low priced hard boiled sweets and sugar confectionery to the premium range of chocolates. The company also claims success in all these segments in which it is operating.

The following is the list of the major brands of the company :

Cadburys Dairy Milk Cadburys Gems Cadburys Nutties Cadburys Crackle Cadburys Star Cadburys Relish 5

Cadburys Mr. Pops Cadburys Eclairs Cadbury's Picnic Cadbury's Truffle Cadbury's Gold Cadbury's Bournville

Cadburys Temptatio n Cadburys Fruit Nut Cadbury's Tiffins Cadbury's Butterscotch Googly Mocka N

The following is the list of the major brands of the company:

CHOCOLATES
Cadburys Dairy Milk

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'. 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. 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.

Cadburys Gems

The brand Gems came into India in 1968 and from that time till now it is still going strong. The saying "Good things come in small packets" has been proven right many a times and it couldn't have been truer for the pretty chocolate buttons called Gems. Who can forget the unique, brightly colored chocolate buttons with crispy shells, encased in a pack that's as colorful as the product itself? Unrivalled in all these years, Cadbury Gems has captured every consumer's fantasy for almost 4 decades. The sheer taste and the fun associated with eating Cadbury Gems and the joy of sharing it with friends has made the brand a dear companion and a source of nostalgia for consumers. Early 2006 gave consumers one more reason to celebrate with Cadbury Gems; the launch of Cadbury Fruity Gems, a fruit flavoured variant with a crispy shell outside and white chocolate inside. Now consumers had not one, but two reasons to enter the 'Masti' world of Cadbury Gems.

Today, Cadbury Gems has established itself as one of the leading brands in its segment. With the single-minded purpose to delight every consumer and help them discover the fun, exciting and adventurous side of life, Cadbury Gems will continue to be the leading brand in Cadbury India's portfolio.

Cadburys Perk

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. 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. 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 an '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.

Cadburys Celebrations

Cadbury Celebrations was aimed at replacing traditional gifting options like Mithai and dry- fruits during festive seasons. Cadbury Celebrations is available in several assortments: An assortment of chocolates like 5 Star, Perk, Gems, Dairy Milk and Nutties and rich dry fruits enrobed in Cadbury dairy milk chocolate in 5 variants, Almond magic, raisin magic, cashew magic, nut butterscotch and caramels.

The super premium Celebrations Rich Dry Fruit Collection which is a festive offering is an exotic range of chocolate covered dry fruits and nuts in various flavours and the premium dark chocolate range which is exotic dark chocolate in luscious flavours.

Cadbury Celebrations has become a popular brand on occasions such as Diwali, Rakhi, Dussera puja. It is also a major success as a corporate gifting brand. The communication is based on the emotional route and the tag line says "rishte pakne do" which fits with the brand purpose of strengthening your relationships with something sweet

Cadburys Temptations

Cadbury Temptations is a range of delicious premium chocolate in five flavours. Research revealed a niche segment of chocoholics - those exposed to international chocolates and those who love a variety of chocolates but possibly find the price of international chocolates too high. Cadbury Temptations is a range targeted at this segment of discerning chocolate lovers.

Ever see people hide away their chocolate since they dont want to share it! If you have, then its likely to be a bar of Cadbury Temptations.The Cadbury Temptations range is available in 5 delicious flavour variants- Roast Almond Coffee, Honey Apricot, Mint Crunch, Black

Forest and Old Jamaica. With its international quality chocolate Temptations soon became a popular brand for "chocoholics".

The advertising positioned Cadbury Temptations as a chocolate range so delicious that it was "too good to share".

Cadburys 5 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 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. 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.

Cadburys Eclairs

Eclairs was first discovered by a local confectionery firm in London, England in the 1960s. The firm then became part of Cadbury in 1971 making Cadbury Eclairs the second largest brand in the company. The experience of eating a Cadbury Dairy Milk Eclair is truly unique because of its creamy caramel exterior and rich Cadbury Dairy Milk chocolate at the center. In 2006 Cadbury Dairy Milk Eclairs launched a crunchy Eclair with a hard caramel outside and delicious Cadbury Dairy Milk chocolate inside called Cadbury Dairy Milk Eclairs Crunch.

In India, Cadbury Dairy Milk Eclairs has been the most preferred brand in the Eclairs category for years and has always been a favourite with consumers. Eclairs advertising over the years has talked about the mesmerizing taste of Eclairs because of the Cadbury Dairy Milk chocolate it contains at its center. The 'Kar De Dil Pe Jadoo' campaign illustrated this in a youthful college context. The Eclairs Crunch variant has also had an encouraging response from both teens and preteens. Currently, the chewy and the crunchy variants are both enjoyed by the Eclair consumer

SNACKS
Cadburys Bytes

Cadbury Bytes was launched in 2004-05 as Cadbury's foray into the rapidly growing packaged snack market. Cadbury Bytes is a one of a kind snack, in that it is sweet and not salty, as compared to most of the other snacks. It's a bite sized snack with a crunchy wafer and rich Choco cream filling. There are three variants of Bytes available in the market - Regular, Coffee and Strawberry, at two price points- Rs 5 and Rs 10. Cadbury Bytes is targeted at teens as they are the largest consuming segment of packaged snack category. They are also the gateway to the family, especially for a new sweet snack. With Bytes, Cadbury has entered into a new category with well entrenched and established

brands. It is an exciting challenge for us to take the brand forward and make it a stupendous success. Cadbury Bytes is positioned as the 'only sweet snack' in the world of salty snacks. The proposition we have arrived at is "Snacking ka meetha funda", where we take a pot-shot at other snacks, by saying `Har snack namkeen nahi hota'. The product is all about breaking a clich and teenagers identify with breaking stereotypes. The new commercials'Tommy' and 'Villain', talk about breaking the stereotype.

BEVERAGES
Cadburys Bournvita

It is among the oldest brands in the Malt Based Food / Malt Food category with a rich heritage and has always been known to provide the best nutrition to aid growth and all round development. Throughout it's history, Cadbury Bournvita has continuously re-invented itself in terms of product, packaging, promotion & distribution. The Cadbury lineage and rich brand heritage has helped the

brand maintain its leadership position and image over the last 50 years. The Journey: The brand has been an enduring symbol of mental and physical health ever since it was launched in 1948. It is hardly surprising then, that Bournvita enjoys a major presence in the Malt Food market. Given its market share of 17%, Cadbury Bournvita reaches across hundreds of cities, towns and villages through 3,50,000 outlets in India. It is a universal truth that mothers attach a lot of emotional importance to nourishment while bringing up their children. However, children always look out for the tastiest option to make their daily dose of milk more enjoyable. Cadbury now offers two options to capture this appeal: Cadbury Bournvita, with its popular chocolate taste, and its latest offering, Cadbury Bournvita 5 Star Magic, leveraging the rich chocolate and caramel flavour of Cadbury 5 Star.

CANDY
Cadburys Halls

Halls accounts for 50% of international cough drop sales and is the leading sugar confectionery brand in the world. In 1930s, the Hall brothers invented its Mentho-Lyptus formula, using a combination of menthol and eucalyptus, and began producing cough drops. The cough drops were introduced into the US during the mid-1950s. Warner-Lambert recognised the potential of the product and acquired Halls in 1964. In 1971, Warner Lambert began selling Halls under the Adams family, and the first national television campaign was aired in the US & the results were a resounding success. Halls has been sold in India as part of the Pfizer & Warner Lambert networks before it came into the Cadbury fold in 2003 as part of a global merger with Adams Confectionery. Halls has had a colourful advertising history in India & was infact, one of the earliest brands to advertise on television in India. In the 1980s, Ads featuring Meenakshi Sheshadri and later, Vijeta Pandit on its unique vapour action formula with a classic Halls Jingle were aired which established the brand firmly in the market. In the 90s, Halls advertising adopted a different take with its Traffic Jam Ad where Halls restores order to a situation of chaos & the early 2000s saw Halls advertising on the refreshment platform. Over the years Halls has been strongly positioned on the` soothes sore throat benefit in the consumers mind. Halls is marketed in 24 different countries around the world & is offered in over 26 flavours. Halls continues to be one of the leading mint brands in India even in the changed competitive context.

GUMS
Cadburys Bubbaloo

Cadbury India has expanded its confectionary portfolio in 2007 by foraying into the Bubble gum category with the launch of Bubbaloo Bubbleguma successful bubblegum brand from its international portfolio.

Bubbaloo is an innovative soft bubblegum with a centre filled liquid. It is filled with a high level of a great tasting fruit flavoured liquid that floods your mouth instantly. Bubaloo is currently available in two yummy flavors- Strawberry and Mixed Fruit. The communication focuses on the "fun filled liquid centre " of Bubbaloo and is anchored by Bubbathe cat, the international mascot for the brand Bubbaloo.

Chocolate Chronology
The following is the analysis of how the chocolate industry evolved in India. 1956 - Cadbury's milk chocolate launched 1957 - Cadbury's 5-Star launched 1970 - Cadbury's Eclairs launched. 1974 - Amul chocolate launched 1986 - Cadbury's Milk Chocolate relaunched as Cadbury's Dairy Milk (CDM). 1990 - Cadbury launches premium chocolate brand Overtures 1991 - Nestle chocolates launched. Cadbury counters Nestle's entry with All Silk, and unfurls huge consumer promotion campaign. CDM revamped. Nestle launches Milkybar; Cadbury counters Creamy Bar. 1994 - Cadbury's 'Real Taste of Life' and 5Star's 'Reach for the Stars' campaign launched.

Eclairs revamped and renamed Dairy Milk Eclairs. 1995 - Cadbury launches Perk, preempting Nestle's KitKat. Overtures is withdrawn. 1997 Cadbury launches Truffle 1998 Cadbury launches Gold, Picnic. (All these launches actually took place in the month of December, i.e. Dec96 and Dec97 to be more precise, in keeping with the company policy of launching the new brands at the new year eve,. However they hit the market in the month of January only) 2000 Cadbury launched Temptation, this was yet another brand introduced by Cadbury to cater the High Segment.

OBJECTIVE OF THE PROJECT

The basic objective of this project is to perform a thorough market analysis of the Chocolate Industry and the company Cadbury India Ltd. along with a detailed analysis of its major

product Cadbury dairy milk. The analysis incorporates market segmentation, company analysis, consumers behavior analysis, market analysis, corporate strategies and our recommendations.

METHODOLOGY

Type

of

Research:

Exploratory

and

Descriptive.

Sample Units: Two of the Number One brands

in India namely Cadburys and Nestle, respectively, were chosen on the basis of their market shares. These two industries were chosen on the basis of the usage of the products, as the usage of FMCGs and is high and noticeable.

Sample Design: Non-probability sampling was

resorted to and the methods used is Convenience sampling and Judgment sampling.

Samples size: The total sample size is 109,

which includes consumers of all the two brands, retailers of Cadburys and Nestle.

Data Collection: Data was collected both from

secondary sources as well as primary data was also collected. A structured questionnaire method was used to collect primary data. Secondary data was soured from various published sources that include magazine like A&M, Business India and Business world. Newspaper like Brand Equality, Brand wagon and The Times of India were also used. Annual Report of Cadburys and Nestle were also referred.

Data was analyzed manually and with the help of computer software EXCEL, to make graphs and pie charts.

Limitation of the project:

1. For generalization of the results a study needs to be undertaken based in a larger sample across different industries. 2. Since the study is confined to Delhi only, the findings cannot be applied to other parts of the country.

Market Segmentation
This can be done in two ways: product forms, and customer based.

With Respect To Product Forms

There are four major segments in the Indian Chocolate Industry:

Moulded Chocolate Segment

This segment constitutes 50% of the total market. Cadburys Dairy Milk (CDM) Cadburys flagship brand has 50% of this segment market. To position CDM in this segment Cadbury used the traditional demographic variables of age, socioeconomic groups and usage intensity. CDM was positioned as a product that elders (parents) bought for children. Cadbury has actually associated itself to enduring and emotional values of love, sharing, parental affection, and reward. Considering that CDM practically acts as a trend setter for all the brands in this segment, this limited the positioning of the entire category towards children only. Amul attempted to expand the category by bringing in teenagers, but it was not successful. The Cadbury brands in this segment are CDM, Temptation, Fruit & Nut. CDM is basically the leading brand here, and the others act as an endorser basket for the company.

Nestle forms 25% of this segment and the companys major brands are Nestle Classic, Nestle Milk Chocolate. Today, this segment grows at 40% per annum, and is likely to remain an important segment for further growth.

Countline Bars Segment

This segment forms 33% of the chocolates market. This segment is mostly targeted at teenagers. Major Cadbury brands are 5-Star and some other also. 5-Star is doing well here (about 50% of the segment) while the rest of the brands act as endorser brands. Nestle has a minor presence in this category with its product Bar-One.

Growth Of A Sub Segment: Chocolate Wafers

Chocolate wafers are the new products being offered by chocolate companies today in order to expand the market. In 1995, Cadbury and Nestle launched Perk and KitKat respectively. These were waferenrobed chocolates in a new context and a different benefit offering. Both chocolates had a snack positioning. Perk offered the anytime anywhere snack proposition Thodi si Pet

Puja, whereas KitKat tried to promote snacking through Have a break, Have a KitKat. The growth rate of this segment is 15-20% annually, and is estimated to be worth over Rs. 100 cr., making it a very lucrative segment. Internationally, confectionery products like wafer chocolates have a very high tonnage and have a much bigger future than plain chocolates. Market research and success of these two brands suggest that Indian consumers are ready for accepting the wafer chocolate proposition. The conviction of both Cadbury and Nestle towards this segment can be gauged from the fact that both brands are seeing unprecedented allocation of funds, to the tune of 60% to 70% of the total advertisement budget of both companies on chocolates. A new entrant in this category was Cadbury's Picnic it was a three layered chocolate coated wafer bar with dry fruit, caramel, and crispies, priced at Rs. 14 for a 40 gm. Bar. Picnic was used not only to expand the functional segment of the market, but also to counter KitKat and other imported bars (Snickers, Mars, Lion). As against Perk, which is positioned as a light snack, Picnic was positioned as a heavy near meal substitute. In keeping with the company's new strategy of expanding the market, this product has been launched to develop the snacking area in the

chocolate market. Cadbury was able to grab a 10% market share with Picnic.

Choco Panned Segments

This segment forms 4% of the total market and Cadbury has 100% of the market in this segment. The major brands are Nutties, Caramels, Butterscotch and Tiffins. All of these brands have been used by Cadbury to drive variety, induce gifting practices and serve to some specific taste preferences. Cadbury does not advertise these brands. They have been used as flanker products. The opportunity for growth in this segment is high what with the imminent entry of multinationals like Mars and Hersheys. This is also likely to pose a threat to Cadbury, what with its complacency.

Sugar Panned Segment

This segment forms 15% of the total market and Cadbury has about 98% of this segment, its major brands being Gems and Eclairs. Eclairs has been used strategically to foster chocolate consumption among children as well as adults by offering a tiny guilt free, eat no more than a biteful at a convenient price point. (65% of

Eclairs eaters are from the households earning less than Rs. 4000/- per month.) Gems is still Cadburys primary tool to protect its franchise in the child segment. It was previously associated in its commercials with the international spy character, James Bond. Around 1995, Gems was repositioned to broadbase its appeal from 3-6 years olds to teenagers as well. However this failed due to the product form which has become deeply rooted with kids and hence the company has reverted back to the target segment of kids with a new offering of 'Chocogems'.

With Respect To The Consumer Buying Power

These are:
1.

High income customers (price greater than Rs. 25 for 40 gm.) who will go in for premium chocolate brands.

2.

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

3.

Children, who are mostly price driven and will consume more of toffees in the price range of Rs. 0.50 1.

Psychographics And Demographics

This is attempted in terms of the consumers.
1.

High income customers

It is estimated the

age group buying the chocolates will be 22 onwards. The income level is estimated to be Rs. 25,000 per month. The customers are mostly urban, and are mostly professionals(engineers, doctors, executives, etc.)

The psychographic profile:

They can either be individuals indulging themselves, or they could be indulging their children. They are inner directed people who form their own values and norms and believe in not adhering blindly to social norms. They are somewhat occasion behaviour. driven in their buying

2.

Middle income customers

It is

estimated that the age group in this segment will be 15 plus. The income level is estimated to be around Rs. 5000 per month. The consumers can be urban,

semi urban, and is currently spreading to rural areas.

The psychographic profile:

They are likely to be variety seeking in their behaviour. They are self expressing by nature and inner directed to an extent. They like to indulge themselves.

3.

Children
The upper age limit is estimated to

be 12 years. They mostly purchase their chocolates with their pocket money. The consumers can be urban, semi urban, and rural, though, there is a somewhat greater emphasis on urban.

The psychographic profile:

They are novelty seeking in behaviour. They are also fun loving.

Product Positioning

The differentiation planks used in the Indian chocolate market are: Product quality (levels of fat/cocoa): e.g., KitKat, though priced higher, sells more than Perk, presumably due to quality. Chocolates with additives like fruits and nuts. Packaging: this being predominantly an impulse driven purchase category, packaging is an important mode of attracting attention at the display counter. International heritage of the product: e.g., KitKat is selling somewhat due to its international fame.

- 38 -Functional attributes (e.g., as an energy bar).

As a gift item (Celebrations). As a snack (Crunch etc.) (Note: The importance of positioning

chocolates as a gift item has been receding in recent times. Now, a greater emphasis is placed on positioning chocolates as a snacking item or as a near meal substitute)

Size (e.g., small sizes to increase trial rate): this is gaining tremendous importance today since the companies, in a bid to offer chocolates at affordable prices, are reducing their pack sizes.

Shape (e.g., chocolates in shape of toys targeted at children).: e.g., chocolates for Christmas season, by Cadbury's, which were shaped as Mickey Mouse; this was successful for the season. Also the shape has to be such that the product is sharable. This has been attributed as a major reason for success of third re-launch of KitKat.

THE PRODUCT CATEGORY

Needs satisfied by product category
In its present form chocolate fulfills many needs by satisfying a state of felt deprivation of some basic satisfactions. They satisfy basic physiological needs like need for food and also some socio-psychological needs like belonging, affection, social and aspirational needs. However, not all the chocolate variants may satisfy all the needs and there may be certain variants taking care of some specific needs.

Food
Hunger Sweet tooth gratification Taste Chocolates may be used to satisfy the basic need of hunger. In India they are neither typically seen as having wholesome and nutritional food value nor are they perceived as stomach filling. Some of them were positioned as an instant energy provider but they also were given some emotional overtones along with the rational appeal of food. The snacking concept has just caught up in India with the introduction of wafer chocolates and there also they are used to satisfy only small pangs of hunger and are used as a between meal snacks. This concept has gained more importance and with the launch of Picnic in the past, chocolates are now intended to be used as near meal substitute. It is also used by many users as dessert, however it has still not substituted the traditional dessert of sweets. Nestle, to

counter this has brought out 'MithaiMagic'. Also, Nestle has already come up with its chocolate 'After Eight', positioned as a desserts, and we foresee that with the changing taste if the consumers, this might be a lucrative market in the future.

Belonging:
The consumption of chocolates in India is now days seen as contemporary and trendy. The chocolate consumption is identified with the feeling of self-expression and spontaneity. Many young people nowadays therefore eat chocolates to have a feeling of belonging to a group which is trendier, free from inhibitions imposed by society. Not only the youth, in the current scenario, chocolates are also targeted at the child ego state of the adults.

Affection:
Human being by nature wants to get affection and return it. In India many parents have traditionally purchased chocolates for their children to show their love and affection. There was a time when the chocolate industry was primarily thriving on the satisfaction of this emotional need. This emotional platform is now being modified to incorporate the rational platform.

Social:
There were many people who want to become a part of the strata of society which is westernized and upwardly mobile, exchange chocolates as gifts (on festivals). For example, Cadbury was a pioneer in starting the concept of 'Chocolate Days' and 'Eclair Days' in colleges and

schools, which led to substantial increase in the sales, which enabled the company to give discounts upto 20%.

Aspiration :
A segment of consumers who cannot afford chocolates and generally consume sugar confectionery, sometimes eat chocolate eclairs (a product which gives taste of chocolate at far less price) as they aspire to eat better things in life like chocolates. This satisfies his aspirational needs.

Consumer Buying Behaviour In Product Category

The product category comes under Fast Moving Consumer Foods (FMCG) and the product is generally purchased as a convenience good. The general characteristics of this product are: It is a low involvement product, but there are significant differences in various brands in market.

The following matrix may help in studying the behavior of consumer for this particular product category.

High

Involvement

Low involvement Significant differences Variety seeking behaviour Between brands * chocolates Complex buying behavior

Few differences

Dissonance Habitual

reducing buying behavior

Between brands

buying behaviour

In this category, consumers are often found to do a lot of brand switching. Although the consumer expects some benefits from chocolates, but he chooses a brand without much evaluation, and evaluate it during consumption only. But next time, quite often he may reach for another brand out of boredom or a wish for a different taste. Brand switching occurs for the sake of variety rather than dissatisfaction.

Since Cadbury has 70 % of market share, this variety-seeking behavior had not affected its sales negatively. This had been possible due to various factors like lack of strong competition. However, with the new entrants in the market, there has been stiff competition. There are few segments like wafer chocolates segment where company faces strong competition from Nestle, the second major player in the market. In these segments company should try to increase brand loyalty for its brands. This increased consumer loyalty will also act as deterrent towards development of strong competitors in other segments. Further to increase the overall size of market, company should try to increase consumers involvement with chocolates. (Company can use consumer involvement achieved by soft drink marketers in USA as a benchmark. In USA, consumer involvement in soft drinks is much higher than other beverages like coffee).

How To Build Consumer Interest In The Product Category?

Following are the possible strategies for increasing consumer interest in the product category. Frequent reminder advertising and maintain a top of mind awareness for the product. Emphasize functional benefits like nutritious

value of chocolates. In India chocolate is considered as a junk food. Creating consumer awareness about functional benefits can help in weakening this negative image. Here, the industry can follow the example of Max ice creams, wherein they are using the nutritional/health (more milk protein) plank to sell the ice creams to the buying unit mothers who can feel less guilty of buying 'junk food'. Company can try to satisfy higher level needs of consumers like social needs, belongingness, and aspirational needs.

Our Recommendations:
Out of these possible strategies, we recommend that company should try to focus on building high top-of-mind functional awareness, benefits of increasing product. reminder Educating advertisements and educate consumers about consumers about nutritious, calorific value of chocolates may be significant as per capita expenditure on food in India is significantly high and chocolates get very little of it. Also there is a need to educate the customers of the various need satisfactions that can be fulfilled by the use of chocolates apart from treating it like a light snack, in between kind of food item. Company has already taken a positive step in this direction with the launch of its Picnic ads wherein it has educated the

customers about the heavy snacking aspect of chocolates.

How To Increase Brand Loyalty For Cadbury's Brands?

Build strong relationship for different

Cadbury's brands with consumers in various segments. By dominating the shelf space and avoid getting out of the shelf space. The company can also maintain the consumer loyalty by offering a variety brands from its own stable so that even if the consumer looks for variety, he goes in for some of that company's own stable. By increasing the range of its products so as to increase the evoked set in the minds if the consumers.

Our Recommendations:
Company already has a very strong relationship with consumers in traditional segments like molded chocolates. Parents were using Cadbury to express their love towards their children. In fact various market researches carried out revealed that consumers see Cadbury as a synonym for chocolates. This relationship building strategy

should be extended to emerging high growth segments like wafer chocolates. Apart from advertising, company can form kids clubs and sponsor various competitions like quizzes, games and music events to build a continuous relationship with target segment. Food MNC Nestle successfully utilized this strategy by forming children clubs for its noodles brand Maggi. Company's flagship brand CDM is already available in many variants and thus consumer opting for competitor's brands in moulded chocolate segment is very less. In other segments like wafer chocolates, company should offer more variety to retain customers. The company is already working on this strategy and has decided to launch around three to four new brands every year to offer customers more variety and at the same time displace the strong competitor brands from the shelf and increase its own shelf space.

Company already has highest shelf space among chocolate companies and its distribution is strong enough to keep continuous availability. So there is not much scope of strengthening this network without going for increasing geographical coverage. Keeping this in mind the company has increased its retailer network by over 60% and is targeting the semi-urban areas. Chocolates are a perishable item, which means that the shelf life of the product

is not very long and it is important that the product moves fast. Also, it is an impulse purchase item. Most of the time the consumers decide to consume the product at the spur of the moment. The companies can actually use this as an advantage and increase their sales since it does not involve any rational evaluation and then reaching a decision to consume.

How

To

Exploit

Impulse

Purchase

Behaviour?

By improving the point of purchase promotion and providing the cues to instigate the customers to consume the product.

Improving the visibility of the product so as to enhance the consumption

Installing an extensive distribution system and ensuring that the product is available at all possible places most of the times.

Extend the gift proposition so as to position it as a gift not only for the festivals but also as a casual gift that can be given to anyone anytime.

Our Recommendations:

Cadbury's is already using the above mentioned tactics to exploit impulse behavior and increase the product consumption. However there is

further scope to increase coverage and visibility. For this reason we recommend that the company not only focus on the urban and semiurban areas but also expand its coverage to the rural areas. There are some elements of seasonality present in the consumption of chocolates. The sales in summer drop almost to 2/3rd of the normal sales. This is largely due to the fact that chocolates melt when kept in open during summers and hence there is a need to store them in the refrigerators, which in turn restricts the number of outlets where the product can be sold. This factor also affects the visibility of the product which is a very important criteria being an impulse purchase item.

Company

has

succeeded

in

positioning

chocolates as an all time product (the 'Slice of Life' campaigns) that can be consumed anytime and anywhere, to treat others and also one. It is the spirit of enjoying life at every step of the way and with this theme they have succeeded in overcoming the barrier of using chocolates as a gift only for the festival season.

Celebration treat has been a success for the company. Also, the campaign of Kuch Mithha Ho Jaye, which was positioned to trigger the sales of the chocolate and to associate it with the good time was a success.

COMPETITOR ANALYSIS
THREAT AND OPPORTUNITIES PROVIDED BY THE COMPETITORS First let us examine the threats and opportunities as posed by the form competitors:

Snack Foods
Organized snack foods market stands at around 35,000 tonnes of the total market of 300,000 tonnes. The major competition to chocolates comes from traditional Indian snacks and desserts, which are available in the unorganised sector. These are available at every nook and corner at very low prices, which lead to increased usage. A large part of consumer in this segment has an attitude that chocolate is some junk food from the west. Organized snack food market can be considered as substitute for chocolates. According to a recent research on heavy consumer of snack foods in the

organized sector, results suggest that these are the people who are also becoming heavy consumers of chocolates due to their high per capita consumption on snack foods and related products. Rather heavy advertisements and promotions done by International majors like KFC, Pizza Hut etc. is helping improving the attitude of the consumers towards snack food in general. After years of effort and a few hundred crore gone into advertising and promotions, the category remains pitifully small. One countermanding factor is guilt. The mother still feels that her children are being fed junk food, and this guilt factor needs careful handling by the marketers. Contributions to this change in attitudes are well known. More women are working, disposable incomes are rising, more Indians are travelling abroad, the attitudes of retailers and distributors are changing, more people are trying to keep up more with the Joneses, children are becoming stronger influencers of purchase decisions and growing exposure to -dare one say the s-word? -Satellite TV. A rise in the number of double income families and a change in attitudes will certainly cause a shift towards convenience goods.

Nestle India Limited

Nestle ended 2007 with a 41% increase in their net profit with Rs. 274.3 crores. The net sales of the

company amounted to Rs. 1725 crores, which is an 18% increase over last year. Out of this, chocolates had a 31% increase in the sales turnover. Nestle is a strong player in chocolates world wide but it entered the Indian market much later (in 1991) than one of its global competitor Cadbury. Nestles initial foray into the Indian market was not very successful. The problem was in the formulation of the product. They were soft chocolates with high fat content which were unsuitable to the Indian climate. Also, the distribution focus had been on the larger cities and urban areas, which limited their customer base. It was with the launch of KitKat that the companys strategy changed with respect to both product and distribution. It increased its distribution network to cover small towns and interiors as well, so as to increase their customer base. It also modified the formulation of the moulded chocolates to suit the Indian conditions. The company used three layers of foil packaging so that KitKat could survive the summer heat. Today Nestle poses a formidable threat to

Cadbury. KitKat has captured a sizable chunk of the market within a short span of launch. Nestle, as of 2006-07, commands 20% of the market share, with KitKat alone accounting for 11.5% market share points. Nestle Bar One is another brand with

a market share of 5.5%. Nestle recently withdrew its Nestle Bitter chocolate brand. The other brands of Nestle are Nestle Milkybar and Nestle Crunch. Nestle have also entered the sugar confectionery market, in direct competition with Cadbury by offering Allen's Splash, and Allen's Koffees, and Allen's Butterscotch. With eroding margins and increasing competition, Nestle has also started to look at exports to boost its turnover. The advertising for the company in India is being handled by Ammirati Puris Lintas. Nestle has been increasing its advertising budget, with the 2006 figure being Rs. 116 crores.

Gujarat Cooperative Milk Marketing Federation Limited (Amul)

Amul is the third player in the chocolate market in India. This brand does not have any international lineage and is miniscule in terms of market share in chocolates, as compared to the other two players Cadbury and Nestle. Amul had an extremely focused positioning of A gift for Someone you Love, albeit not targeted at a single age group. However, Amul failed to

capitalize on it, seemingly due to the following reasons:

1.

Chocolates have never been one of Amuls main products, and hence there was a lack of organisational commitment. The company has never really supported or pushed its chocolates. This reflects in the drastic cutback on ad expenditure for its chocolates, which has negatively affected its top of the mind awareness level.

2.

The company has enjoyed a high customer equity and pull in butter and so it offered very low retailer margins of 3.1% as against the industry average of around 78%. Amul tried the same technique in chocolates too. However, since it was neither a leader nor enjoyed a customer pull like in butter. Hence the company get very little support for its chocolates.

3.

Amul chocolates have shown a very limited product differentiation and have not really given any important additional benefit to the consumer. The product line also suffered in comparison to the portfolios of the competitors Cadbury and Nestle.

Its only strength was low price. Its brands are Amul Premiu m Milk Amul Fruit & Nut Amul Orange Amul Badam Bar Amul Crisp

Of these, Fruit & Nut is the most successful. Ulka is handling the advertising for Amul.

PRODUCT LIFE CYCLE

In 2003-04, it looked that chocolates had completed the mature of PLC and was passing through its decline stage. In 2002-03, volumes had fallen by 15.6% and in 2003-04 volumes fell by 17%. As a result, in the period the total tonnage decreased from 15,000 tones to 13,000 tonnes. Everybody was sure that this industry was on the way to demise, but industry leader Cadbury (with around 70% --market share) bounced back in 2004 when cocoa prices again fell to their normal level. The company also changed its positioning which had been safely nurtured over many years, this lead to a dramatic growth in tonnage from 13,000 tonnes to 17,000 tonnes in period 2004-06. However, there was another increase in the prices of cocoa, which led to the decline in the sales till early mid 2007. Since then the cocoa prices had stabilised leading to a reversal in the declining trend. Thus, PLC for the category can be described as scalloped PLC as industry moved back from mature stage to growth stage. The PLC graph as revealed by the industry is shown in the figure.

PRICE SENSITIVITY
At the outset, the chocolate market appears to be price-sensitive. This is starkly brought out in the following cases:

1) When the excise-duty on chocolates was raised from 16.5% to 27.5% and cocoa prices rose by 25%in 2002-03, the retail prices went up by 30%. As a result, the sales and consumption fell by more than 30% in the next two years. 2) The major players have successfully launched small-size packs of chocolates. Keeping in mind the price sensitive nature of the market, the companies are reducing the pack sizes to be able to offer chocolates at affordable prices, and fit them to a Rs. 6-10 bracket. Due to the broad basing of the chocolate market there is a drive towards smaller, convenient packs for a larger audience and it also increases trial.

INDUSTRY STRUCTURE AND ITS DYNAMICS

With Cadbury cornering almost 70% market share and Nestle getting another 20%, industry has all the characteristics of duopoly. This industry is characterized by near-total absence of unorganized sector as compared to its substitutes like ice creams, chips etc. Various internationally famous brands such as Mars, Hershey etc are either imported in very small quantity or are smuggled to avoid high import duty. Mars is due to enter the market and so could Hersheys. Other chocolates like Toblerone, Twix, Snickers are being imported through California Foods in India. These help in

expanding the premium / imported segment of the chocolate market. As these brands have minuscule volumes and high price they are not giving any serious competition to Indian brands. The market has been stable over a long period of time with the two major companies Cadbury and Nestle occupying the major share of the market. However, with the threat of entry of new competitors and also the broadbasing of the market, the repositioning of the entire chocolate eating concept, we foresee a lot of action in the market. This is already seen in the chocolate war of Perk and KitKat, which had very nearly taken on the intensity of the cola wars. Nestle has started threatening the long enjoyed lead of Cadbury, and Cadbury is all set to defend its territory.

Entry Barriers
Brand Image Requirement of specialised machinery Lack of raw materials (cocoa) in sufficient quantity in the domestic market Government regulations in the form of excise duties, etc. Need of heterogeneous and wide distribution (being an impulse purchase category)

Exit Barriers
Government regulations Specialised assets like machinery, cold chains, etc.

New Entrants
The frequency of new entrants in this industry has been low in the past. However, this is expected to change with the imminent entry of MNCs like Mars and Hersheys.

Key Success Factors

R & D: With increasing competition in the industry, R & D may become a critical factor for success in newly emerging segments of the market. Indian players like Amul are not able to launch chocolates in fast growing countline bars wafer segment of the market, as they don't have appropriate technology. But still moulded chocolates which constitute 62% of market do not require any specialized R & D.

Price: Price can be used as basis for competition in this industry. In 1995, Perk was launched at a price Rs 4 less than KitKat was. This brand was specially produced for Indian market and successfully competed with internationally famous KitKat, although it did not

overtake KitKat. But low price without brand equity may not really help as Amul and various regional brands are priced lower than category leaders without having much success. International lineage: the international

image associated with the chocolates acts as a propeller for the sales considering the significance of user imagery and the aspirational aspect of this product category. The lead of KitKat can be attributed to the international lineage despite the higher price compared to the price of Perk. However this has to be taken in consonance with the price factor, considering that the Indian customer is price sensitive. Product quality: Product quality per se may not be critical success factor. But many instances prove that poor product supported with high decibel advertising is likely to be a failure. Nestle milk chocolate was not successful as its formulation was not suitable for the Indian market. Cadbury had constantly improved the product quality along with rest of the marketing mix as a tool to create growth in category.

Distribution: Chocolate being an impulse

purchase, wide and heterogeneous distribution channels are important so that the consumer have it within arm's length of desire. In India distribution for chocolates gain special

significance due to the very hot weather conditions during summer months. Availability and clear of lack the of capital: Chocolate sector capital

manufacturing is a capital intensive business unorganized of underlines availability. Quickness of response: With the increasing competition, fast response is assuming significance. For example, Perk was launched before 15 days of the launch of KitKat to counter its threat. Advertising and promotion: The importance of brand symbolism in this category is very high, as the rationality of buying decision is very low. Since this category does not satisfy any immediate functional need, the consumers look to products for some rewards which may be social, emotional etc. By attaching unique emotional values to its brands CIL is consistently able to maintain around 70-80% of market share. Recently, by changing the image of CDM chocolate CIL was able to provide a brand, which is consistent with self-image of the new target segment, and even successfully enhance its self-image. Visibility - for an impulse purchase: Chocolates are largely an impulse purchase where the consumer makes the decision most often than importance

not when he sees the products displayed at the retail point. A recent in-depth survey carried out by Cadbury showed that more than 35% of the total sales of chocolates are on impulse. Thus visibility will surely spur the purchase of chocolates. Unfortunately, storing in refrigerators defeats this very purpose. Cadbury and Nestle tackled this issue by 1. buying shelf space in the retail outlets 2. having display containers analogous to the Pepsi concept of 'visicoolers'. 4. attractive packaging in order to grab

consumer attention

Ability to bear negative effect of regulatory factors:

Various government policies and regulatory factors have affected this industry from time to time. High excise duty (increased to 27.5% in 1992-93) is a major impeding factor in breaking price barrier. Many times cocoa (basic raw material) has to be imported at high rates of import duty. This also affects the price structure of these companies negatively. In summer months, government usually bans selling of milk for purposes other than drinking. It also affects availability of the product. Although various entry barriers like government licenses etc.

have been relaxed, exit barriers in terms of lack of any exit policy still exist.

CORPORATE STRATEGY

CADBURY'S BUSINESS STRATEGY

Cadbury realizes that being market leader in the chocolate market it will have to bear the onus of expanding the size of the market; there was not much scope of increasing the market share at the expense of existing players. Thus resulting business strategy consists of having a presence in all the segments with a clear differentiation among offerings in different segment and a different proposition for each of them. Further, the company follows a multi branding strategy i.e. having more than one brand cater to a particular segment that may even lead to the cannibalization of sales of one brand. The game plan for the company is to increase the consumption of chocolate and confectionery among adults by offering products in convenient packs at affordable price. To achieve this it has chosen the local manufacturing route. This also makes business sense it sources almost every raw material locally (except cocoa, one third of which is imported from south east Asia and Africa since the domestic production is falling short).

Short Term Objective And Future Plans

The short-term objective of the company is to develop brands with mass franchise and widen out its distribution network further into the rural sector. This is in keeping with the awareness that new product development provides the key to growth in this market. The company plans to launch one new product every year and extend its sugar confectionery range. The overall strategy is to launch three or four products every year, but only one of the brands will be a big launch, the rest being soft launches. Few years back the company chose Picnic as its big launch. The company is also focusing on exports. The current exports constitute 4.5% of the total turnover of Rs. 754.14 crores. The company has clear intentions of improving margins which will be achieved by controlling indirect costs, reduced wastage, freeze manpower, and cut non profit expenditure. The company expects healthy cash flows in the future due to decline in the capital expenditure depreciation, which will further bring down the interest costs. The future strategy of the company is to maintain is dominance. The company has started to associate the umbrella name of Cadbury's with events like the Filmfare awards, and Zee Cine Awards, and movie screenings like Air Force One to promote the brand name further and also to simulate recall.

The company is aiming at overall growth rate of 18%. In keeping with this objective the company has 1997. increased its advertising spending and marketplace investments by 40% over the year

The Cadbury account in India which is handled by O&M, is worth Rs. 169.62 crores. Currently if we see, the company has its products focussed around three basic propositions. Drives attitudes and behaviour: This is led by

the company's flagship brand Cadbury Dairy Milk (CDM). CDM is currently positioned on the emotional consumer. plank of spontaneity and selfexpression and is targeted mainly on the adult

Drives Snacking Consumption: It has three main brands in this category - 5 Star, Perk and Picnic. However the three brands are positioned in a slightly different manner. Perk is positioned as a any time snack anywhere, whereas 5 star is positioned as a Energy Bar. Picnic is positioned as a heavy snack bar which can be had as a near meal substitute

Drives variety, gifting and taste preference: The two brands in this category are Gems and Eclairs. However, there is a lot of difference between these two brands. While Gems is targeted primarily at children, Eclairs is a chocolate simulator, which simulated the taste and the feel of the chocolate but has to popped in the mouth like a toffee. Drives variety, Drives attitude Drives snacking and gifting and taste and behavior consumption preference 5-Star Endorsers Dairy Milk Perk Picnic Celebrations Tempetations

Bournville Crackle Flankers Nut Milk Fruit & Nut Creamy Bar Roast Almond Break

Butterscotch Caramels Nutties Tiffins Relish Truffle Mocka Overtures withdrawn) All Silk (now

Prodigals

Besides

these

endorsing

brands,

Cadbury

traditionally has maintained a whole battery of flank and satellites in its brand portfolio. It has always focused on preempting any moves by a competitor by launching a brand of its own. The threat of Nestle's entry led to the launch of tactical brands like All Silk, Crackle and Break. Therefore, in the Cadbury's brand system, the flanker brands are used for the tactical purpose of plugging a gap in the segment where the threat of entry by a rival brand was imminent. Cadbury has also entered the sugar confectionery range of Googly and Mocka with the intention of expanding its range further. However, Nestle's successful entry through KitKat in the wafer segment proved that unless you support your flank brands actively, they are not going to be of any use in blocking competition. And hence Cadbury is showing some active interest in

the area.

The Essential Advertising Strategy

It has been noticed that the basic advertising strategy of Cadbury India Limited regarding its chocolate and confectionery products is that of main media vehicle being television, and to a lesser extent, outdoor advertising. There is not that extreme emphasis on print media advertising. There is also some amount of radio advertising but only on the FM stations in the metro towns.

CADBURY'S DAIRY MILK (CDM)

Cadbury Dairy Milk (CDM) is the flagship brand of Cadbury's. This is the endorser brand in the Cadbury's stable. Its success can be attributed to a variety of factors. This was the first chocolate to hit the Indian market. Therefore, in the minds of the consumer - chocolates became synonymous with Cadbury's Dairy Milk Chocolate. CDM is at the center of an array of support brands that complete the product line. These brands, though unadvertised, lend support to CDM by attracting customer attraction through increased retailer shelf space. In late 90s, the chocolate market in India was a virtual monopoly of Cadbury's India Ltd., with the company commanding almost 80% of the market share. However, the market leader was not in a very comfortable position due to the various problems in the chocolate market: rising prices of cocoa, rising excise duty small consumer base consisting primarily of children The perception that chocolates as a product is nothing but a junk food and an occasional indulgence. The outcome of the above problems was that per capita chocolate consumption in India was very low as compared to the International standards. The

problem was further accentuated when the sales volume for chocolate industry fell drastically in period 2001-02 to 2003-04 largely due to the increasing prices of cocoa, and the decline of the volumes for the market reflected in the decline of sales for the market leader Cadburys as well. Added to this was the increasing threat posed by Nestle which made Cadbury's squirm in their seats, especially after the success of KitKat.

Marketing Strategy
The company's marketing strategy was mainly based on remarketing the product category. lts objective was to revitalize the faltering demand and to search for new marketing propositions to start a new life cycle for the declining product. The onus of this marketing task was more on Cadbury than on any other player in the market. Being a market leader, it was the both the responsibility and necessity for the company to revive and increase the market. This was very true in the context of the theory that the market leaders stand to gain the maximum with an increase in the market size. With the entry of Perk and KitKat in 1995, CDM's performance was affected because consumers attention was diverted by the variety and

excitement now available in the market place. In addition to this, primarily in metros the CDM consumers were graduating to functional offerings like KitKat or Picnic. So in the future, CDM's primary focus would be to widen franchise in smaller tows where penetration is currently low, and also to stress on the platform of mood upliftment rather than hunger satisfaction.

Possible

Marketing

Strategies

For

Achieving Above-Mentioned Objectives

There were three basic strategies Cadbury could have taken to capture the downfall in its sales.

1. Market Modification
To look for new markets and market segments and thus find new buyers for the product. To stimulate the increased usage of the product among present customers. To repositioning the brand to achieve larger brand sales.

2.

Product Modification

To bring about improvement in the product and increase in the functional values and thus generating new users.

To come out with the new variants of the product, with clear differentiation from the existing product and try to tap a different set of users for the product.

3.

Marketing Mix Modification

To cut prices to draw new segments To push the product through trade promotions. To search for a new and brilliant advertising appeal that wins the customers attention and favor.

Brand Prism
Picture of sender (company)

Taste, wholesome Friendly, Indulgent Physique Personality

Liberation Individualism,

Relationship

Culture

Self Indulgence

Casual, Independent Free child

Reflection

Self Image

Picture of recipient (Customer)

The next process - to create a favourable brand image and make the chocolates acceptable to adults was achieved primarily with the help of

communication and the onus of tapping the customer then fell on the advertising strategy of the company.

Possible Strategies That Cadbury should adopt:

The increasing competition in the chocolate market would have prompted companies not only to go for line extensions of the existing products but to also diversify into other related areas. Some of the possibilities that existed at that point of time for market leader, Cadbury are briefly stated below Expand into sugar confectionery market. (the volume of chocolates is around 16000 tons whereas sugar confectionery is approximately 2 lakh tons). Set-up a manufacturing base in India for Exports. Cultivate cocoa beans, (which accounts for 50% of the total raw material costs) domestically which is 50% cheaper than imported ones. Expansion in the rural/semi-urban markets, class IV and V towns (here Nestle have an upper hand compared to Cadbury's at present). Position the products for corporate gifts,

although this market exists the potential is still

unknown and none of the players have seriously eyed this market. Convert light users to heavy users, by

introducing new large packages at lower prices compared to the existing prices. Introduce small packs (1 piece of chocolate per pack), to induce trial rate, this is more important in light of the decision taken by the companies to enter the rural market.

New Product Forms

Other recommendations should are to look launch for new taking products linked to their core offerings. The company seriously chocolates in other product forms: Chocolate sauces, particularly used as toppings for ice creams are getting popular in India. No organised sector market exist for this product category. Cadbury can continue its pioneering tradition by entering this sector. Considering that ice cream market is a high growth category ,this may turn in to significant volumes for Cadbury. Chocolate cakes. Like CDM-cake/Nestle Milk Cake in line with Britannia's Merricake. Liquid chocolate, different variants can be launched. Liquid chocolate such that it can be

used with Cold Water (like Rooh Afza), Chocolate biscuits by CDM and Nestle with their different chocolate.

brands,

e.g.

with

white/brown

The company can also consider rejuvenating its dormant chocolate drink by marketing it as a cold, ready to drink milk and using dispensers to distribute it.

Further, if the company has ambitions to tap the huge market for snacks in India, it should consider launching variants of chocolates which can directly compete with traditional Indian snack in terms of tastes as well as price. Nestle tried to do so in the area of sweets, by launching MithaiMagic, although it bombed at the marketplace at the initial launch.

Position the brand as an alternative to other meals during breakfast, and thus can be taken with hot/cold milk in breakfast. This alternative will have an implication on package sizes, the company will have will have to introduce large family packs say 400/500/1000 grams.

Chocolates from vending machines at places like Railway stations/offices/schools, and make it as an attractive new concept.

Advertising Strategy

Around 2004, when the need for repositioning was felt, the advertising strategy of the company was to bring about a change in adult's attitude towards chocolate eating which could further compel a behavioral purchase. conducting change a resulting in high team, found repeat after that Cadbury's research study,

semantics

chocolates were linked to love, emotion, magic and romance, whereas CDM stood for core rational values lie wholesomeness, purity, taste, and goodness of milk. Hence, it was realized that in order to re-establish the category and grow volumes, there was a need to choose a path between rational and emotional benefits. Cadbury did accomplish this by dropping the sharing and parental affection or reward concepts and retaining the family context. They reasoned that sharing made the product special and hence was not considered an everyday product which was not in sync with the company's proposed strategy of stepping by up consumption agency in within the family. deeply Following advertisement shows the challenge faced advertising changing entrenched positioning of chocolates as a reward for children. To operationalise these objectives advertising agency sources say they took in to consideration following issues. 1. The target audience - The target

audience of the Cadbury's campaign was the adult. 2. The ultimate behaviour the advertising is attempting to change or influence - The ultimate behaviour looked by the company was to induce more and impulse usage of the brand amongst the target audience and to build a long-term relationship by creation of a more positive use experience. 3. The process that will lead to the desired behaviour and the role of advertising in it In this case it was not necessary to create awareness or communicate information about the brand. It was more important to associate feelings and create a image of self-expression with the brand. It was also necessary to enrich this feeling of self-expression with positive values: universal truths, enduring human values universal moments of joy, and sense of freedom. To describe the advertisements, the first ad was a montage which brought out this free child - old man kicking the ball, pregnant woman craving, young girls breaking into a run, boy throwing a chocolate to a girl in a bus. This was followed by the cricket ad where the girl breaks into a dance. The company did market research to discover that consumer's value system was undergoing change collectivism was giving way to individualism, self expression was rapidly overshadowing the pre-90s

values of filial love or family being sacrosanct. Company sources say while developing the

advertising strategies they took into view the major institutions involved in the field of advertisement management. For Cadbury's, which has been most successful in the chocolate market, these institutions are: Control Institutions Facilitating Institutions
Government

O&M

Nestle / Foreign Brands Management Media

MRTP

MR Agencies Cadbury's U.K.

The implications of these was that Cadbury's decided to universalise the chocolate eating category by segmenting the market using the various ego states (rather than age, heaviness of usage, or socio-economic classifications) to unshackle consumption that had been narrowly compartmentalized by age. The key was to extend

this value proposition into the realm of selfexpression.

Our

Evaluation

Of

The

Advertising

Strategy
The Company's advertising strategy has been consistent with the marketing strategy. This can be seen in the following matrix, which shows the different combinations possible in adopting marketing and advertising strategies
Marketing Strategy Right
CDM

Wrong

Advertising Strategy

Right

Five Star Perk Celebation

Amul Chocolates

Wrong

Cadbury's All Silk Tempetations

Bar - One.

This chart also shows the importance of advertising strategy as brands whose advertising strategy was not in consonance with marketing strategy simply vanished from market. These brands has been discussed in detail at appropriate place. Bringing this radical shift in consumer attitude may have created some confusion as the current consumers of CDM at that time were children and

all the advertisements till then typically involved children. This strategy is inherently risky as on one hand the company's strategy of tapping the adults may not have worked and on the other side by -taking the campaigns away from the children, the company may have lost some of its existing consumers. The company tried to reduce this risk by taking in to consideration various institutions, which may affect success or failure of this strategy. Moreover, the association of children with chocolates is so deep rooted that even after taking the campaigns away from them, the children can be expected to remain loyal consumers of chocolates. However, now after an elapse of substantial time the sales of CDM have dropped down, making us question whether this strategy was really successful at widening the market.

Message Strategy
If we look chocolates on the 'thinking-feeling' platform, the product is high on the feeling plank but low on the thinking. it is not possible to bring attitude change among consumers by increasing the functional attributes like in case of durables. Since chocolate is a low involvement product, it is more appropriate for the ads to first appeal to target

audience, leading to trial and then through continuous reinforcement gradual attitudinal change. Further for ads in this category, it is more appropriate to raise awareness and change brand attitudes through executional liking and credibility rather than any information based message. This is typically true for the Cadbury ads, which bought out the situations in the ads which are likeable and more importantly, highly believable and realistic. Their Real taste of life campaign tried to portray occasions of childlike-but not childishbehaviour from adults, which typically every person possess within him or her. The adults could easily relate to situations like - the old man kicking the football, the pregnant woman craving a chocolate, young girl breaking into a sprint and the young man tossing a bar of chocolate at his sweetheart departing in a bus. All these ads had one common theme - spontaneity and self-expression. The ads were such designed that they first make a person smile at first and then unconsciously realise the importance of the message. The feeling of likeability for the ad also comes from the feeling of identification and warmth. The message given through these ads may not be consistent with closely held values of the target audience, as the idea is to change the attitude of the consumer and not to use his present belief system to sell the product. The success of these

ads can be gauged from the fact that the adult consumption of chocolates after this campaign was increased by 20%. At the same time, these ads gave the Cadbury's range a new lease of life by facilitating repositioning of Cadbury's sub-brands. Some of these were a success while others failed.

Creative Strategy
O&M advertising agency on CDM account revealed that the CDM Real Taste of Life campaign is based on the emotional creative approach that rely on emotions or feelings for its effectiveness. These advertisements evocate the feeling of warmth and self-expression. The CDM ads are typical examples of the slice of life ads where the occasions depicted in the ads seem to come out of a typical consumer's life. Agency believe that this type of creative approach worked beautifully in this case as it is more appropriate for the product categories like chocolates which the consumer buys because of sensory appeal rather than tangible benefits. Further company used above shown teaser ads to catch attention of consumers. These advertisements show two different sides of consumer's personality simultaneously.

Our Evaluation Of The Creative Strategy

While evaluating this advertisement strategy we should consider that company's marketing objective was not to position it on functional benefits, but to save the brand from strong holds of positioning which restricted its usage mainly for children. These ads helped the consumers to relate to the product and brand better and thus there was

increased chance of change in consumer attitude. The characteristics that make the CDM campaign highly memorable and likeable are: The entire campaign is built around a great idea, the idea of Real taste of life.

The advertising was contemporary. The ads were interesting and did not try to bore people into buying. The people liked the ads which increased the chance of buying. It gave them a chance to break free form the everyday mundane life and express themselves by exploring the child ego state.

Media Strategy
As per O&M, the agency on account the media strategy behind this campaign was to use different media for the teaser advertisement and the slice of life advertisement. So, the media planning included using Sunday editions of the newspapers, magazines like India Today (having mass circulation), out door hoardings to show teaser ads and prime time television slots to show slice of life advertisements.

Our Evaluation of The Media Strategy

Media used is definitely consistent with the

selected target market as people from different age groups (teenagers and adults) read Sunday colored editions of newspapers and general reading magazines like India Today. Further people are relatively relaxed while reading these periodicals, so more willing to accept the message. Prime TV slots are also viewed by the family together and the aim of the ads was also to show that all family members slowly eating chocolates. Simultaneous use of these three different media i.e. print, electronic and outdoor was particularly effective as they were used in a complimentary manner. They acted as vehicles for successfully implementing different stages of consumer buying process i.e. creating awareness, bringing interest, stimulating desire and inducing action.

LOOKING AT THE FUTURE

The consumption of chocolates in India is among the lowest in the world. , a comparison with the world wide industry average is an eye opener. In India the average per capita consumption is a mere 20 gm compared to the world average per capita consumption of 2.24 kgs. Moreover, data on worldwide chocolate consumption indicates that - in the mature markets this figure is as high as 9.36 kgs, while even the -emerging markets total upto 1.16 kgs. While looking at the consolidated averages -would be misleading, even the consumption among the potential consumers of chocolates is extremely low as compared to world average Potential Consumers Incom e Group s (Rs. '000 pa) 62 Rural (Millions) 86 >86 Total Urban (millions) 62 86 2.2 13.5 15.7 7.0 0.8 4.8 5.6 2.5 0.7 4.3 5.0 2.2 1.2 7 8.2 3.7 4.9 29.6 34.5 15.4 5 14 15 19 20 24 25 - 34 Total Age-groups Chocolate

>86 Total Total

18.8 20.8 36.5

4.9 7.4 13.0

4.4 6.6 11.7

7.2 10.8 19.0

30.2 45.7 80.2

Using the figures as mentioned in the table above, we can arrive at a rough estimate of the potential consumers of chocolate in the country. For this purpose, we have considered the population in the age groups of 5yrs to 35yrs falling in the income -groups having an annual household income of Rs 62000 and above. The total population in this group is about 80 million split into 45.7 million urban consumers and 35 million rural consumers.

As the consumption of chocolates is skewed towards the urban consumers, we estimate that 80% of the chocolate consumed is in urban areas. Using this figures, the per capita consumption for the relevant target populations is as given in the table below.

Chocolate Consumption Share of Market Tonnage Relevant target population in millions Gms per consumer

Urban sales Rural sales Total

80% 20% 100%

12800 3200 16000

45.7 34.5 80.2

280 40 200

Comparing these figures to the world average, we feel that there is a very high potential for the chocolate market. As eating habits of large part of Indian society (at least 200 million) are becoming consistent with rest of the world; the category is poised for a significant growth. With global majors like Mars, Hershey likely to enter the Indian market, excitement in this category is already high. The Wafer war between Perk and KitKat in an interesting indication of the times to come and it reached almost the same intensity as that of the cola wars!! As these new players and existing companies introduce new type of chocolates, distinction between chocolates, biscuits, ice cream will become less and many hybrid products will grow. Along with this the potential to expand the consumer base by incorporating a wider array of tastes and needs of the consumers. Segmentation of market based on consumer age is increasingly becoming irrelevant. There are expected to be many products target at specific new segments (e.g. segments on basis of attitude, level of health consciousness etc.). This is

very obvious with the emerging segmentation policy of using the ego states. We also estimate a shift in media strategy of various companies. Instead of present use of mass media, specialized media targeted at different segment (e.g. health magazine for health for health conscious) will catch fancy of media planners. At the same time we see an increasing association between the brands and various highly publicised events in order to increase the brand equity in the minds of all the stakeholders. Further there will lot of improvement in packaging and modification of -products as per Indian conditions. We foresee a trend in the future wherein this innovative packing can be used as a differentiating factor in order to increase the usage of the product. We believe that chocolate consumption will percolate down to the majority of rural India, with the increase in the rural incomes, and lowering prices and also increasing marketing. Along with this the need to innovately package ones chocolates in such a way so as to enhance consumption, by making the need to stock it in refrigerators, will be a key driving force to success. We also see the focus of the chocolate giants slowly shifting to the large untapped interiors, with the increasingly saturating market in the urban Aries and also increasing clutter. We feel that the first mover advantage by monopolising the distribution network will work in great favour of the company, and hence recommend Cadburys to

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

BIBLIOGRAPHY
Kapferer, Jean-Noel. "Strategic Brand Management". The Free Press. A division of Macmillan, Inc. 1992 Edition Kotler, Philip. "Marketing Management" Analysis, Planning, Implementation, and Control PrenticeHall, Inc. Eighth Edition Aaker, David, et al, "Advertising Management" Prentice-Hall, Inc. Fourth Edition Business Line 'Catalyst' Thu. Feb 19,1998. Financial express 'Brand Wagon' Fri, Oct. 27, 1995 Internet Sources: w.business-standard.com w.financialexpress.com w.economictimes.com w.hinduonline.com w.indiaserver.com w.expressindia.com ww ww ww ww ww ww

 w.indiainformer.com w.cadbury.co.uk w.india-today.com/btoday

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Back issues of A&Ms

Porter's 5 Forces Model

Substitutes Substitutes like IceCreams, potato chips, biscuits, soft drinks, chewing gum, are a source of threat as well as opportunity for market expansion.

Suppliers - Major raw material suppliers are cocoa producers in Latin American countries. - Due to negligible domestic production in India, suppliers enjoy high bargaining power. - Milk supply also fluctuates, therefore, in summer months, milk suppliers gain sufficient bargaining power.

Competitors Duopoly Both the major players have financial muscle to sustain their brands All players following a pull strategy.

Buyers - Since chocolates do not satisfy any immediate needs, it is not a necessary item. - Consumer power is very high and consumers need to be persuaded through various positioning planks to consume chocolates.

New Entrants Imminent entry of global majors like Hershey's, Mars etc. is bound to change the power equation in the Indian chocolate market.

OBJECTIVES OF THE SURVEY: The objective of the survey was to Gauge the chocolate consumption habit of the consumers,To find out the important attributes of the product that affects the buying decision of the consumer,Effect of the Worm controversy on the perception of the consumer.

Questionnaire
Q. Do the respondents like having chocolates ? A) Yes B) N0

Q.What is your Reasons for not liking chocolates ? A) High Fat B) Prefer Sweet B) Diabetic D) Do Not Like The Taste

Q. Which chocolate do the consumers prefer? A) Dairy Milk C) Perk E) Amul B) Five Star D) Kitkat F) Other

Q. Do consumers purchase chocolate for self-consumption? A) Yes B) No

Q. What is the frequency with which the consumer buys chocolates every week? A) Every day C) Twice E) Occasionally B) Thrive a week D) Once

Q. How much does the consumer spend during his each purchase? A) Rs 1 5 C) Rs 11 15 B) 6 10 C) 16+

Q. The key attributes that affect the buying behaviour of consumers? A) Price C) Packaging B) Taste D) Brand

Q. The primary reason why the consumer buys a Cadburys Dairy Milk? A) Self Consumption C) Both B) Gift

Q. Do the respondents like having chocolates ?

Q.What is your Reasons for not liking chocolates ?

Q. Which chocolate do the consumers prefer?

Q. What is the frequency with which the consumer buys chocolates every week?

Q. How much does the consumer spend during his each purchase?

Q. The key attributes that affect the buying behaviour of consumers?

Q. The primary reason why the consumer buys a Cadburys Dairy Milk ?