Dairy milk in France:

Background: Cadbury Schweppes was founded in 1831 by John Cadbury. Cadbury Schweppes is the worlds fourth biggest supplier of chocolate and sugar confectionery with manufacturing plants in 25 countries and sales units in further 165 countries. The strategy of Cadbury Schweppes is to increase profitability, brand strength and volume on a global basis in its two business streams: beverages and confectionery. Dairy Milk, one of the brands of Cadbury Schweppes was introduced in 1905, and is one of the worlds most famous brand names and the companys leading chocolate bar by revenue. Cadbury manufactures over 250 million Dairy Milk bars every year and alone generates revenue of 135 million in 1995. Cadbury believes the success factors to be quality, value for money and good advertising. Problem: Cadbury Schweppes is trying to enter into France with its Dairy Milk brand. Market Analysis: Cadburys Dairy milk is the best selling chocolate in the world. Cadbury manufactures over 250 million Dairy Milk bars every year and British people alone spend nearly GBP 100 million a year on this product. The French market for chocolate confectionery divides into three main categories: chocolate bars, countlines and standard and seasonal lines. And there are five main types of chocolate bars: solid plain dark chocolate bars, solid plain milk chocolate bars, solid white chocolate bars, special lines of solid chocolate bars with various additions and filled chocolate bars. French production of chocolate bars and confectionery in 1995: Production of chocolate bars of all types in 1995: Production of solid milk chocolate bars in 1995: Consumption of chocolate products in 1995: 275000 ton 126236 ton 70692 ton (56% of total Produn of chocolate bars) 387234 ton

From the figures of 1995 we can see that there is huge demand of chocolate products in France which is being fulfilled by imports. But the establishment of manufacturing facilities in France by foreign companies has led to a reduction in imports and a development of exports. The industry growth has declined dramatically. Total production of chocolate confectionery had increased by 24.5% between 1988 and 1991 but remained static in 1992 partly due to economic depression. From 1991 to 1995 the market grew by only 9.1% which indicate a mature market. The sale of milk chocolate bars which account for 24% of total sales of chocolate bars, decreased by 3.7% (category of Dairy milk). Leading manufacturers of chocolate bars have been stimulating the growth of the market by improving their recipes, modernizing their packaging
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Dairy milk in France:

and making great use of promotions. The manufacturers have resorted to price wars to maintain their market share. Consumption pattern: Consumption of chocolate products is lower in France, 5.1kg per person per year compared to 6.1 kg in several other European countries. But the change in eating habit and an increase in demand for products with a high cocoa content has increased the consumption considerably which was 3.4kg per person per year in 1995. Manufacturers have succeeded in creating new consumption habits, for example, the French are now eating small chocolates with their coffee. Chocolate bars are also a common shopping basket item and almost 88% of households with children regularly buy chocolates. Elderly people consume a smaller volume of chocolate bars than average. The under 35s are the largest consumers of milk chocolate and households with children under 15 are the largest buyers of milk chocolate. Manufacturers and brands: The French chocolate industry comprises of some 107 enterprises and dominated by multinational, mainly foreign owned groups like Nestle, Kraft General Foods etc. Cacao Barry SA and Chocolate Cantalou are the only two French companies among top 8 enterprises. Distribution and price: Distribution is dominated by large grocery outlets accounting for 87% of the value of sales while the market share of small grocers shop is 13%. The consumers of chocolate bars and confectionery are very price conscious and market is highly competitive and price-cutting is widespread. Breakdown of retail sales of chocolate bars in 1995 Light sugar-free chocolate bars Special lines for children Dark chocolate bars used for cooking Dark chocolate eating bars Milk chocolate bars with nuts Milk chocolate bars Other bars 1% 7% 12% 17% 14% 25% 24%

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Dairy milk in France:

SWOT analysis Strengths: Dairy milk is the one of the worlds most famous brand and best selling bar chocolate in the world. Cadbury Schweppes already has a subsidiary, Chocolate Poulain, in France which it can use to produce and market Dairy Milk chocolate in France. It will also help to mitigate the cultural differences. Dairy milk is known for quality, value for money and is well advertised. UK production is well established and can easily produce sufficient chocolate to export for a short term market entry and is also already exporting Cadbury Fingers brand to France.

Weakness: Chocolate Poulain is already operating at near full capacity and any change in production would be costly not only through reducing production of other brands but also through recalibrating machines and experience curve difficulties. So manufacturing and distributing through the subsidiary is an expensive alternative.

Opportunities: Cadbury can increase the use of its production capacity and thus increase economies of scale and scope; Counterattack the competitors by attacking their domestic market; Increase its sales and profit. Seize higher profit opportunities of foreign market. Diversify its market specific risk by expanding to foreign market. Country specific risk is negligible in France because of high political stability and excellent relations with the UK. France has a very strong economy and represents a very large potential market with a high standard of living and purchasing power. Many cultural similarities with UK. Since France is located near to UK the cost of export will be minimal. The free trade between EU countries will also minimize the cost and facilitate trade.

Threats: Total French production of chocolate bars and confectionary, which has increased by 24.5 per cent between 1988 and 1991, has slowed down in more recent years, partly due to the economic slump. Consumption of chocolate product, which has been growing until 1991, remained fairly static in 1992, reflecting a falling demand due to the gloomy economic situation. The market for chocolate confectionery has saturated.
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The establishment of manufacturing facilities in France by foreign multinational has led to increase in competition and market is characterized by price wars. Sales of milk chocolate bars (category of Dairy milk) which account for 24% by volume of total sales of chocolate bars, decreased by 3.7%. Not understanding foreign customer preferences and fail to offer a competitively attractive product. Underestimate foreign regulations and incur unexpected costs.

Recommendation: I would recommend Cadbury Schweppes to utilize its untapped production capacity at UK facility to produce and export Dairy Milk to France and adopt a wait and watch policy for the time being and then act on the basis of product performance in French market. This will help to avoid cost for re-calibrating machines or increasing capacity by installing new plants at its subsidiary, Chocolate Poulain, and also cutting production of other brands. It would be beneficial to produce Dairy Milk in UK and exporting them to France as the French market is very close and the extra cost involved in expoeting would be small because Cadbury already exports Cadbury Fingers to France. If the products picks up in French market Cadbury can increase capacity at Chocolate Poulain and start manufacturing and distributing through its subsidiary.

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