Cadbury Gems Repositioning

Porter’s 5 force model—

Porter’s Five Force Analysis of Cadbury provides a deep insight into the various

aspects which influence the company’s structure and growth.

Threat of new entrants—

The constant change in the market structure, shares and prices, due to the

emergence of new chocolate manufacturers, demonstrates a threat for the

existing chocolate and confectionery companies like the Perfetti, Parle,

Ravalgaon, Nutrine & Parry’s, etc. But for a giant like Cadbury such threats are of

no substantial value since it is such a big and reputed company. In fact Cadbury

itself becomes an exceedingly bigger threat for the upcoming companies. Thus

there is no question of rising competition and dispersion of the customers across

all these new manufacturers. Therefore this factor does not significantly affect the

total turnover of Cadbury. Recent reports of US chocolate major Hershey

entering the Indian market is not worrying the company because a lot of home

work in terms of knowing the Indian consumers’, brand building and wide

distribution network needs to be done by it. At the same time, the rivals should

never be taken for granted as this is an evergreen sector with ample profit

margins and with potential initial investments and appropriate market analysis

any emerging company can spread its wings to become a huge success.

Another threat which could possibly affect sales of the Cadbury is the threat of

substitute products or services. Now, if the general eating habits of the

consumers are taken into consideration, substitutes would definitely point out at

the sweets dominantly omnipresent in the Indian market. Festive seasons

witness a big sale in both sweets and chocolates. Advertising and a strong

market analysis during such peak periods helps a company in making profits. It

should be noticed that even cookies, carob confections, ice creams and the other

bakery products like cakes and pastries present themselves as a good substitute

for chocolates. In today’s health conscious world fruits and other natural products

are rising up to become a substitute for chocolates. (Good housekeeping)

Another important force is the - Bargaining power of supplier. It is the pressure

that the suppliers can impose on sources for inputs that are needed in order to

provide goods or services. Supplier bargaining power is likely to be high when,

the market is dominated by a few large suppliers, the switching costs from one

supplier to another are high, threat of forward integration by suppliers and the

buying industry has low barriers to entry. Cadbury seeks high quality, great value

and excellent service from all of its suppliers. Hence, it has formed an Ethical

Sourcing Program which is a fundamental element in ensuring that the standards

are met at every step in the supply chain. Also, Cadbury is developing a Supplier

Diversity Program to enhance its supplier base and ensure that it reflects the

markets they serve. Cadbury itself selects such suppliers who deliver the best

overall value; value that consists of competitive pricing, technological foresight,

customer service excellence and the ongoing achievement of its supply chain

and material standards. (C.S-supplier)

Some what similar to the above would be another force which is – Bargaining

power of the buyers. Customer’s bargaining powers are likely to be high when

they buy in large volumes, when they have knowledge about the production cost

and most importantly when there are other potentially competitive companies

selling the same type of product at reasonable costs. Cadbury faces tough

challenge in this aspect as the customers are very well aware of all the above

factors. Cadbury has thus designed the overall strategy to maintain its market

dominance along with targeting the impulse buyers. (Hinduonnet)

The most important force amongst all the Porter’s 5 forces is the - Rivalry

among existing firms. Cadbury currently faces tough competition from the

international giants like the Nestle and Hershey's and national giants like the

Amul and Campco. The company profit is inversely proportional to the intensity of

rivalry. But it is observed that Cadbury has always welcomed strong competition

(like that from Nestle from past 7-8 years). Cadbury believes that strong

competition increases the market pie. This confidence is very well reflected from

that fact that, despite Nestle launching its famous "Kit Kat" brand, Cadbury India

has maintained its market share.

Brief history & Company profile

Cadbury India Ltd. is a part of the Mondelēz International group of companies

and is in the business of creating a delicious world - producing delectable

chocolate confectionaries, gum and candy products, and popular beverages and

foods, that include many of India's most popular and trusted food brands.

Cadbury in India began its operations in the year 1948. After 60 years of

existence, it has got five company-owned manufacturing facilities at Thane,

Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh)

and 4 sales offices (New Delhi, Mumbai, Kolkata and Chennai). The corporate

office is in Mumbai.

There are 4 major segments under which the Cadbury operates Chocolate

Confectionery, Milk Food Drinks, and Candy and Gum category. Cadbury has

maintained its undisputed leadership in the chocolate confectionery segment

enjoying over 70% of the total market share. Cadbury’s Dairy Milk is considered

as the ‘Gold Standard’ for chocolates in India. Cadbury India Ltd. is a subsidiary

of the Cadbury Schweppes and employs over 2000 people across the country.

Current position, Growth rates and the future outlook for the Industry

The chocolate market in precedent years has been witnessing tremendous

growth in terms of value as well as volume. The governance of market is

maintained by large international giants through franchisee and expansion into

new markets which is leading to the growth of the chocolates market in India.

Indian chocolate industry has registered a growth of 15% per annum from 2008

to 2012 and is projected to grow even at a higher rate in future. The industry has

a positive outlook due to phenomenal growth in the confectionery industry, rising

per capita income and gifting culture in the country.

the per capita consumption of chocolates is increasing in the country which will

continue to flourish the market revenues. It is expected that India chocolate

industry will be growing at the CAGR 23% by volume between the years 2013-

2018 and reach at 3,41,609 Tons. The dark chocolates are expected to account

for the larger market share when compared to milk and white chocolates in the

coming years. The introduction of medicinal and organic ingredients in the

manufacturing of chocolates had lead to a new trend and development in the

country, which will be adapted by major manufacturers to remain active in the

market.

Competition levels, competitors in the Industry and their product offerings

The Indian chocolate market is getting bigger and better. On one hand there are

imported varieties and on the other companies like Cadbury launch their own

products of international standards. In India in early 90’s market share of

Cadbury was 80% but after the Nestle enters to Indian Chocolate industry the

Cadbury’s share reduce to 70%, 15% share is hold by Nestle, 15% by Amul and

other companies. The higher competition is between Cadbury and Nestle as

Nestle is trying to have tough fight with Cadbury.

Major competitors & Their product offerings

· Nestle

o Milky Bar

o Bar One

o Crunch

o Kit Kat

o Munch

o Nutties

· Amul

o Milk Chocolate

o Fruit ‘n’ Nut

o Fundoo

o Bindaaz

o Almond Bar

Campco

o Campco Bar

o Cream Krust

o Turbo Treat

Marketing Mix Of Cadbury

After segmenting the market and positioning itself to outdo their competitors, it needs to come up with different strategies. The 4 P’s used by Cadbury are:

Product: The Company should design and manufacture its products so as to

improve the customer experience.

Product Success

The meaning of Product is anything tangible or intangible that can be offered to

the customers for the proposed market segments either in the domestic or

international market. It includes packaging, guarantee, quality etc.

Every company will compete for customers by satisfying their expectation

constantly. But the best company will go beyond the expectations by delivering

additional benefits, which they would have never imagined. Cadbury offers a

wide variety of products which include:

I. Chocolates: Fruit & Nut, Dairy Milk, Perk, 5 Star, Eclairs, Gems, Temptation,

Nutties, Milk Treat.

II. Beverages: Drinking Chocolate, Bournvita and Cocoa.

III. Snacks: Bytes

IV. Candy: Halls

V. Gums: Bubbaloo

Place: The place means to identify the physical distribution of the product where

the product should be available for the customer at the right place, time and

quantity. It also consists of roles of channel for distribution.

For the success of any product in the Indian market, the product should be

introduced to the retail shelves. Buyers play an important role for its success

rather than brand and market shares. With the increase in technology and

competitive pressure, it is difficult to retain a unique product for a long period.

The brand that gets the greatest number of customers, sells the most products.

Proper channels of distribution also play an important role. If the product reaches

the market at the right time, only than will the consumer will have access to the

products. Increases in distribution and channel cost go together. Marketing cost

of Cadbury is 18% of its total cost which is higher as compared to Nestle and

Parry.

Price:

Pricing is the most important part of a marketing mix as it is the only area by

which revenue is generated for the company. Price includes the catalog prices,

discounts available and different options available for financing etc. Before

deciding the price strategy the feasible reactions of the competitors are also have

to be taken into consideration. The pricing of the product must consider the

appropriate demand-supply equation.

The strategy used by Cadbury for satisfying the value that all the customers buy

the product is using the expectation they have about how much the production is

worth to them.

Cadbury has introduced various products for different customer segments so that

every customer segment has different expectations of price from the product.

Therefore maximizing the returns includes maintaining right price level for each

segment and then increasing moving through them.

Promotion:

Where and when can you get across your marketing message to your target

market?

Effective advertising attracts and generates supporting feelings for any business.

To reach out to the consumers, communication plays an important. For the

marketing of any product, advertisement and promotions are the best means of

communication about the product to the end user. Cadbury does its promotions

through Televisions, consumer contact activity, etc.

Some of the most famous marketing campaigns of Cadbury are:

“Khane Walon Ko Khane Ka Bahana Chahiye” for Cadbury Dairy Milk

“Thodi Si Pet Pooja – Kabhi Bhi Kahin Bhi” for Perk

Cadbury gives special promotional offers during festivals like Diwali, Holi, etc.

and special occasions like Valentines Day. It continuously introduces new

products to maintain its brand and to expand its market share.

Marketing Strategy of Cadbury

To encourage the consumers Cadbury uses many strategies. Some of them are

as follows:

On Every Hand Everywhere: The customers demand flawless services from the

salesmen and they have to deliver that to the customers. Cadbury is the market

leader in confectionery and chocolates. Their sales team plays an important role

in the success. They regularly conduct surveys of consumer’s choice and

requirements. They deliver the products not only in the super markets but also in

the small shops, so that every segment of the customers can easily get their

products. They also provide selling techniques.

Growing with Emerging Markets: Revenue of the company grows with the

emerging markets. They continuously modify the products to fulfill the

requirement of all segments of consumers. This strategy leads them to a growth

of above 20% annually for the past three years.

A strong foundation: Since 1948, Cadbury is serving their products in India and

they have created a very strong tradition and leadership position. They are the

number one chocolate brand with a share of about 70%. Today only one third of

the population buys the chocolate so Cadbury is challenged to introduce the

pleasure of Cadbury to many peoples.

Growing with the market: To attract the broader range of consumers is the

main target the Cadbury. They created a base range of their acceptable

chocolate brands at more reasonable and affordable price. They also introduced

the gift range products for the customers segments with high-income group.

Functional advantage: Cadbury Bournvita was launched in India in 1948 and it

always required providing nutrition that helps in the development and growth.

Today the natural goodness of milk, chocolate and malt is prepared with vitamins

A, B1, B3, B6, B12 and C, plus protein, iron, calcium, manganese, zinc, and folic

acid. It is also known as “a cup of confidence”.

Affordable luxury: Cadbury has increased their presence in the candy in the

form of halls and Cadbury dairy milk Eclairs. Eclairs became more popular in the

markets with a hotter climate. The consumers find the delicious taste of

chocolate in the middle that easily melts in the mouth and not in the hot climate.

It is also an affordable chocolate for everyone. The new Eclairs Crunch is with

more crispy caramel shell for hot climatic conditions.

Volume led growth strategy

Cadbury has followed a well-planned strategy of fuelling volume growth by

introducing smaller unit packs at lower price points. Simultaneously, the company

seems to have astutely juggled with the larger pack sizes and raised prices to a

degree higher than what appears at face. The strategy has driven volumes in the

last two years and we expect the volume growth to continue in the next two

years.

Market Segments

Break segment – some products are consumed during short breaks with coffee

and tea, for example snack range and Perk.

Desire segment – under this segment products are purchase on desire, for

example Cadbury’s Dairy Milk, temptation etc.

Take home segment – this segment express the products that are purchased

from supermarkets and taken home for consumption, for example Bournvita.

Product failure-

Cadbury And The Worm Controversy

The discovery of worms in some samples of Cadbury’s Chocolate in early

October 2003 created one of the biggest controversies in India against a

Multi National reputed for being a benchmark of QUALITY.

The controversy created a deep adverse impact on the company with their

sales not only drastically dipping down, but at the same time allowing the

competitors to establish their foothold and taking maximum advantage of

Cadbury’s misfortune.

The controversy, and the adverse publicity received in several countries,

set back its plan of outsourcing model which would have resulted in

significant revenue generation, several months back.

The "worms’ controversy" came at the worst time….the next few months

were the peak season of Diwali, Eid & Christmas. Cadbury sells almost 1,000

tones of chocolates during Diwali. In that year, the sales during festival

season dropped by 30 per cent. The company saw its value share melt from

73 per cent in October 2003 to 69.4 per cent in January 2004. In May,

however, it inched up to 71 per cent. CDM sales volumes declined from 68

per cent in October ’03 to 64 per cent in January 2004

Clearly, the worm controversy took a toll on Cadbury's bottom-line. For the year

ended December 2003, its net profit fell 37 per cent to Rs 45.6 crore (Rs 456

million) as compared with a 21 per cent increase in the previous year.

However, Cadbury’s reiterated that all through the 55 years of leadership in

India, that it has remained synonymous with chocolates and have remained

committed to high quality and consumer satisfaction."

CABDBURY’S FIGHT-BACK

'Project Vishwas'

“Steps to ensure quality & regain the confidence”

Following the controversy over infestation in its chocolates, Cadbury India Ltd

unveiled 'Project Vishwas', a plan involving distribution and retail channels to

ensure the quality of its products.

The company's team of quality control managers, along with around 300 sales

staff, checked over 50,000 retail outlets in Maharashtra and replaced all

questionable stocks with immediate effect.

The Vishwas programme was intended to build awareness among retailers on

storage requirements for chocolates, provide assistance in improving storage

conditions and strengthen packaging of the company's range of products.

Cadbury reduced the number of chocolates in its bulk packets to 22 bars from

the present 60 bars. These helped stockists display and sell the products "safely

and hygienically" 190,000 retailers in key states were covered under this

awareness programme.

Initially positioning of Cadbury gems

Cadbury gems was originally positioned as a brand catering only to young kids as it had

lot of success with that positioning. Gems used to be children chocalate and appealed

kids so far

Repositioning of Cadbury gems

Cadbury has successfully re – position its other product in past example being Cadbury

dairy milk it had different positioning at different times as CDM( Cadbury Dairy milk)

is for the kid in you, CDM is a substitute for Indian sweets `Kuch Meetha Ho Jaaye’

all these campaign has been very successful.

Cadbury after their successful up gradation of chocolate brands to adults, tried to do the

same with their Gems brand. Whatever be the reason, increasing sales or market

expansion, the move is indeed brave.

The brand has the tagline “Raho Umarless”, can be translated into “Be Ageless”. The

concept of the brand may be to encourage even adults to enjoy the life irrespective of

age

Though the concept is good, but ad could not reflect its intended position. The reason

for targeting adults, sales might have attained maturity level which forced the company

to target new segment to boost its sales. Another view could be the market expansion.

Repositioning as a failure

The repositioning of Cadbury gems has failed to create any impact.

One of the reasons for the failure of the re-positioning can be attributed to the concept

of the campaign itself. The “Raho Umarless” ads unlike the other Cadbury ads failed to

connect with the target consumers. This is because the ads for

Cadbury chocolates showed adults behaving like adults which earned their empathy,

while, Gems ads had shown adults behaving like kids which apparently did not register

well with target consumers.  It might probably have made only the children laugh.

However, it failed to win over the hearts of its target consumers.

Another reason to the failure is that the campaign could not provide any convincing

reason as to why adults should buy Gems.  Elements like why should and when to buy

as in Cadbury chocolate campaigns is missing in Gems campaign.

Conclusion

It looks like Cadbury’s has to go back to the basics and work out a re-positioning

strategy for Gems from scratch. However, it would be really good for the company to

ask themselves this fundamental question ‘do we need to re-position Gems brand?’

Well Cadbury is a great company and made an effort to attract new segment. But time

will decide and we are going to witness whether it is a great effort or poor and

ineffective effort. Let us wish and hope cadbury gems will drive adults into its way.

The right approach would have been that while repositioning, the brand should have

concentrated on building salience and should have concentrated on finer details as to

why to buy and when to? These elements are simply missing in the campaign.