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Arup Sarkar (063010), Mansi Saxena (063024), Nitin Shivnani (063033), Ritu Agarwal (063041), Shivna Jain (063050), Sunny Kadian (063055) 3/10/2013 Confectionery for the Poles: Market Development by Cadbury in Poland

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Cadbury's Entry into Poland - An Analysis

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Page 1: Group6 Cadbury

Arup Sarkar (063010), Mansi Saxena (063024), NitinShivnani (063033), Ritu Agarwal (063041), Shivna Jain(063050), Sunny Kadian (063055)

3/10/2013

Confectionery for the Poles: MarketDevelopment byCadbury in Poland

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CERTIFICATE

This is to certify that Group 6 Members Mr./Ms. Arup Sarkar, Mansi Saxena, Nitin Shivnani,Ritu Agarwal, Shivna Jain, Sunny Kadian Roll Nos. 063010, 063024, 063033, 063041, 063050,063055 have completed their Term project report entitled towards part fulfillment of therequirements for the award of the Post Graduate Diploma in Management (IMG-6) 2012-2014.

This Term Report in International Marketing Management is the result of their own workand to the best of my knowledge no part of it has earlier comprised any other report,monograph, dissertation or book. This project was carried out under my overall supervision.

Date:Place:

-----------------------------------Dr Anupam NarulaInternal Faculty Guide

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TABLE OF CONTENTS

Acknowledgement ……………………………………………………………………………………… 5Executive Summary.......................................................................................... 6Introduction………………………………………………………………………………………………….7

PART 1Cultural Analysis …………………………………………………………………………………………. 8Economic Analysis ………………………………………………………………………………………. 10

Economic Landscape ………………………………………………………………………………………………. 10 SWOT Analysis ……………………………………………………………………………………………………. 11 Population Staistics …………………………………………………………………………………………….. 11 Macroeconomic Indicators …………………………………………………………………………………. 13 Economic Performance ………………………………………………………………………………………. 14

Political Analysis ………………………………………………………………………………………… 15 Political Risk Rating …………………………………………………………………………………………………………. 16 SWOT Analysis ………………………………………………………………………………………………………………… 18 Market Orientation …………………………………………………………………………………………………………. 19 Foreign Investment Policy ………………………………………………………………………………………………. 19 Tax Regime …………………………………………………………………………………………………………………….. 20 Exports and Imports ……………………………………………………………………………………………………….. 21 Business Etiquette ………………………………………………………………………………………………………….. 23

Entry Strategy ……………………………………………………………………………………………. 25

PART 2Market Audit and competitive analysis of confectionery industry in Poland

Market Overview ………………………………………………………………………………………. 27Market Data ……………………………………………………………………………………………… 28

Market Value …………………………………………………………………………………………………………………. 28 Market Volume ………………………………………………………………………………………………………………. 29 Market Forecast …………………………………………………………………………………………………………….. 30

Market Segmentation ……………………………………………………………………………….. 31Geography Segmentation ………………………………………………………………………….. 32Market Share …………………………………………………………………………………………….. 33Five Forces Analysis …………………………………………………………………………………….34Competitive Analysis …………………………………………………………………………………..35

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PART 3Marketing Operations of Cadbury in Poland

Marketing Strategy …………………………………………………………………………………… 38 Product Mix …………………………………………………………………………………………………………………… 39

Promotion Mix ………………………………………………………………………………………….. 41Sales Promotion ………………………………………………………………………………………… 43Market Distribution …………………………………………………………………………………… 46Future trend for Cadbury …………………………………………………………………………… 47

References ………………………………………………………………………………………………….49Appendix …………………………………………………………………………………………………….50

Appendix 1 (Cadbury Profile)……………………………………………………………………………………………..50 Appendix 2 (Poland Profile)………………………………………………………………………………………………..51

Conclusion ………………………………………………………………………………………………….52

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ACKNOWLEDGEMENT

We take this opportunity to express our profound gratitude and deep regards to our guide

Professor Anupam Narula for his exemplary guidance, monitoring and constant

encouragement throughout the course of this project. The blessing, help and guidance given

by him time to time shall carry us a long way in the journey of life on which we are about to

embark.

We also take this opportunity to express a deep sense of gratitude to everybody who helped

us through their valuable inputs or encouragement which has helped us to take this project

to its final conclusion.

We are obliged to staff members of the library of FORE School Of Management, for

their valuable assistance. We are grateful for their cooperation during the period of our

assignment.

Lastly, we thank our Institute for giving us an opportunity to make this project and have a

wonderful learning experience.

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Executive Summary

Poland officially the Republic of Poland , is a country in CentralEurope, bordered by Germany to the west; the Czech Republic and Slovakia to thesouth; Ukraine, Belarus to the east; and the Baltic Sea and Kaliningrad Oblast,a Russian exclave, and Lithuania to the north.

The four most advanced countries in East Europe which were not a part of the Soviet Unionwere Poland, Hungary, the Czech Republic and Slovakia, of which Poland had the largestpopulation and percentage of private sector business, as well as a strong consumer market.It also had good prospects for investment, offered a skilled labor force and faced neitherethnic strife nor border disputes.

Rapid changes in political, economic and social factors influenced Cadbury Schweppes'decision to enter Poland's developing market. Another strong factor was that, despitePoland having, at that time, one of the largest confectionery markets in Central and EasternEurope, none of Cadbury Schweppes' major international confectionery competitors hadestablished strong businesses there.

Market valueThe Polish confectionery market grew by 4.9% in 2011 to reach a value of $2,914.6 million.Market volumeThe Polish confectionery market grew by 3.1% in 2011 to reach a volume of 293.1 million kg.Category segmentationChocolate is the largest segment of the confectionery market in Poland, accounting for62.4% of the market's total value.Geography segmentationPoland accounts for 4.1% of the European confectionery market value.Market shareKraft Foods, Inc. the parent company of Cadbury is the leading player in the Polishconfectionery market, generating a 33% share of the market's value.Market rivalryThe Polish confectionery market is fairly concentrated, with the top four players holding71.6% of the total market value.

The first part of the report deals with analysis of the political, economic, social and culturalfactors of Poland relevant to the confectionary industry. In the second part we haveanalysed the whole confectionary market of Poland in terms of market size, growth,forecast, consumption habits of Polish people, available distributing and advertisingmediums and pricing strategy. In the last part we have discussed the marketing mix as wellas the product mix of Cadbury, we have also discussed about the target market of Cadbury,product adaptation, sales promotions in the Polish market. Finally, we have concluded bygiving the future trends for confectionary market in Poland.

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Introduction

Having established itself as a leading player in the English confectionery market Cadbury

Schweppes wanted to enter the high potential markets of Eastern and Central Europe.

There was a dilemma for the company as to which country to choose as the entry point to

these markets. It finally chose Poland as its entry point because of many significant

developments taking place there.

The Central and Eastern European countries can be divided into two groups: those which

were originally within the Soviet Union, and others. The key difference is that the countries

within the latter group only had communist regimes for 45 years and free enterprise still

existed to some degree. The four most advanced countries within this group were Poland,

Hungary, the Czech Republic and Slovakia, of which Poland had the largest population and

percentage of private sector business, as well as a strong consumer market. It also had good

prospects for investment, offered a skilled labor force and faced neither ethnic strife nor

border disputes.

Having developed a stable parliamentary democracy and signed an association agreement

with the European Union, Poland recognized that to shed its former communist image and

face market forces with a proactive, commercial approach would require major changes in

its culture and attitude.

One way in which it could do this was to encourage development in Poland by its European

partners, and Poland already had a good relationship with the UK, which has a Polish

community of some 150,000.

These rapidly changing political, economic and social factors were key influences in Cadbury

Schweppes’ decision to enter Poland’s developing market.

Another strong factor was that, despite Poland having, at that time, one of the largest

confectionery markets in Central and Eastern Europe, none of Cadbury Schweppes’ major

international confectionery competitors had established strong businesses there. Although

the Company could have taken a ‘wait and see’ approach (running the risk of missing a vital

opportunity to develop an early market lead), it decided that there were sufficient

indicators to justify an investment in Poland.

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PART 1

Cultural analysis of Poland

Figure: Flag of Poland

Hofstede’s Rankings for Poland

Power Distance

With a score of 68, Poland is a hierarchical society. This suggests that people accept a

hierarchical order in which everybody has a place and which needs no further justification.

Hierarchy in an organization is seen as reflecting inherent inequalities, centralization is

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popular, subordinates expect to be told what to do and the ideal boss is a benevolent

autocrat.

Individualism

Poland, with a score of 60 is quite an Individualistic society. This suggests that there is a high

preference for a loosely-knit social framework in which individuals are expected to take care

of themselves and their immediate families only. In individualistic societies offence causes

guilt and a loss of self-esteem, the employer/employee relationship is a contract based on

mutual advantage, hiring and promotion decisions are supposed to be based only on merit,

management is the management of individuals.

The Polish culture houses a “contradiction”: although highly individualistic, the Polish need a

hierarchy. This combination (high score on power distance and high score on Individualism)

creates a specific “tension” in this culture, which makes the relationship very delicate but

intense and fruitful once you can manage it.

Therefore, the manager is advised to establish a second “level” of communication,

maintaining a personal contact with everybody in the structure, allowing to give the

impression that “everybody is important” in the organization, regardless of their

designations.

Masculinity / Femininity

Poland scores 64 on this dimension and is thus quite a masculine society. In masculine

nations people “live in order to work”, managers are expected to be decisive and assertive,

the emphasis is on equity, being competitive and performance and conflicts are resolved by

fighting them out.

Uncertainty Avoidance

Poland scores 92 on this dimension and thus has a extremely high preference for avoiding

uncertainty. Nations exhibiting high uncertainty avoidance maintain rigid codes of belief and

behaviour and are intolerant of unorthodox behaviour and ideas. In these nations there is

an emotional need for rules (even if the rules never seem to work) time is money, people

have an inner urge to be busy and work hard, precision and punctuality are the norm,

innovation may be resisted, security is a very important element in individual motivation.

Long term orientation

Poland scores 32 on this parameter, making it a short term orientation culture. Societies

which are short-term oriented generally exhibit great respect for traditions, a relatively

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small propensity to save, strong social pressure to “keep up with the Joneses”, impatience

for achieving quick results, and a strong concern with establishing the Truth i.e. normative.

Western societies are typically found at the short-term end of this dimension, as are the

countries of the Middle East.

Economic analysis

Summary

Poland‘s economy is one of the strongest in Eastern Europe. European Union (EU)

membership has helped Poland in terms of providing employment and structural funds.

Poland was the only country in the EU that managed to avoid a recession in 2009, with the

economy posting growth of 1.7% due to strong economic policies, robust domestic demand,

low reliance on exports, and a flexible currency. The economy grew by 3.8% in 2010.

According to Datamonitor forecasts, the economy is expected to grow 4.1% in 2011.

However, the country still needs to implement economic changes before it adopts the euro

as its standard currency.

Economic Landscape

The financial system of Poland is dominated by a strong and stable banking sector.

Polish banking has been highly resilient and reported an increase in profits to the

tune of 37% year-on-year in 2011. According to the IMF, banks reported a healthy

capital adequacy ratio of 13% in 2011, with Tier 1 comprising around 90% of total

capital.

Poland was ranked 14th in transnational corporations' top prospective host

economies for 2012–14, published in the United Nations Conference on Trade and

Development World Investment Report 2012. FDI in Poland grew to $15.13bn in

2011, up from $8.85bn in 2010.

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SWOT Analysis

Strengths

The Strong demand in the Polish

market and integration into the

German export machine make

Poland less exposed to the unwinding

macroeconomic headwinds

originating from the Eurozone.

A credible and independent central

bank continues to bolster economic

stability and investor confidence.

Weaknesses

Investment, which has been the key

driver of Poland's domestic demand

story, is likely to slow in 2012 as

infrastructure spending ahead of the

European football championship tails

off. However, investment will recover

in mid-2013.

Opportunities

Polish manufacturing is moving up

the value-added chain as it integrates

into German supply chains, which is

its largest trading partner, while the

economy is also diversifying as

Warsaw emerges as a regional

financial hub.

Threats

On the downside the zloty which is

increasingly being used as a liquid

benchmark for the wider Central and

Eastern European region, will

overshoot the Czech Republic and

Hungary if another period of financial

distress occurs. This in turn will

continue to pose a risk to Poland’s

financial stability.

Population Statistics

Social Landscape

At 38.07 million in 2011, Poland's population is one of the largest in Europe. However,

population growth is stagnant and the country has been witnessing declining birth rates.

Poland enjoys high life expectancy and literacy rates. The ethnic and religious mix is quite

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uniform, with Roman Catholic Poles representing almost 90% of the population. As per the

United Nations Development Programme's Human Development Report published in 2011,

the country's Human Development Index (HDI) was 0.813, which placed it 39th out of 187

countries.

Demographic Composition

At 38.07 million, Poland's population is one of the biggest in Europe. In 2012, the infant

mortality rate is 6.42 deaths per 1,000 live births and the death rate is relatively high at

10.24 per 1,000 people, while life expectancy at birth for the whole population stands at

76.25 years

Composition by age and gender

In 2011, around 14.72% of Poland’s population was less than 15 years of age. Those aged

between 15 and 64 years constituted 71.62% of the population, and around 13.67% of the

total population was aged 65 and above.

Urban/rural composition and migration

In 2010, 61% of the population was urban; however, the country will experience negative

urbanization to the tune of 0.1% during 2010–15 according to the Central Intelligence

Agency's (CIA's) The World Factbook.

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Macroeconomic Indicators

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Source: World Bank

Performance

GDP and growth rate

The GDP growth in Poland averaged 4.5% during the six-year period 2002–07; this rate is

significantly higher than the negative growth rates prevailing during 1990–99. Real GDP

growth increased to 6.6% in 2007 compared to 1.4% in 2000. Real GDP grew due to an

increase in private consumption and strong growth in FDI and exports. Although the growth

rate plummeted to 5% in 2008, it remained higher than the growth rates of other European

nations. The sound monetary and fiscal policies along with the reform measures played an

important role in the resilience of the Polish economy

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Political Analysis

Summary

Poland has had a turbulent political history. The country became democratic after World

War I, but the Soviet Union installed a communist regime following World War II. After

many decades of communist association, Poland regained its democracy in 1989. The

country is a member of both the North Atlantic Treaty Organization (NATO) and the

European Union (EU). As one of Europe’s rapidly growing economies, and the proposed site

for NATO's missile defense system, Poland continues to be of political significance to Europe

and the world. Bronisław Komorowski won the presidential elections held in July 2010

following the death of President Lech Kaczynski in a plane crash on April 10, 2010. The Civic

Platform (Platforma Obywatelska [PO]), which now has a control of both the government

and the presidency, promises to dismantle more communist policies and focus on economic

reforms.

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BMI (Business Monitor International) Political Risk Ratings

Donald Tusk's re-election in late 2011 was the first time since the fall of communism that a

government won a second term, marking an important achievement for Poland's maturing

democracy. The country now enjoys broad political stability. Poland's long-term political risk

rating of 86.4 reflects analysts’ expectations that, as long-term economic and political

convergence with the West continues, political conditions will remain favourable.

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Table: Poland’s Risk Ratings

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SWOT Analysis

Strengths

EU membership and eventual

accession to Eurozone should

facilitate medium-term political

stability.

The next general election is

scheduled in 2015, giving the Civic

Platform-led coalition space to

implement politically painful

austerity measures.

Weaknesses

Sudden rise in popularity of a radical

reformist party, such as Palikot's

Movement, shows a growing level of

discontent with traditional parties

and the electorate's desire for

change. Threatened by this

development, the governing coalition

could be tempted to bow to populist

reforms in an effort to appease the

electorate and halt the party's rise.

Opportunities

There is scope for further integration

with key Euro-Atlantic institutions,

which will elevate Poland's

international profile making it an

attractive investment destination.

Election of Bronislaw Komorowski

(formerly of Civic Platform) as

president provides the ruling

coalition with a head of state

sympathetic to the government's

agenda, thereby removing the

potential roadblock of a presidential

veto.

Threats

The need to implement deep fiscal

reforms in an effort to bring the

country's fiscal accounts under

control could see support for Civic

Platform starting to wane. Indeed,

several of the PO deputies have

already defected.

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Market Orientation

Foreign Investment Policy

Since the collapse of communism and the country’s subsequent transition to a market

economy, Poland has embraced foreign investment. The principal investors in Poland

remain the US and Western European states. EU membership in March 2004 has further

consolidated Poland's reputation as a stable and open economy which is open to foreign

investment. Indeed, strengthening trade links as well as convergence towards Western

European levels of wealth and standards of corporate regulation have provided further

incentives for the foreign investor to invest in Poland.

Successive governments since 1990 have passed legislation which aim at cutting red tapism

surrounding foreign acquisitions. These include passing the Law on Economic Freedom in

2004, which has simplified the process of registering a company in Poland. Further reforms

include the improvement in regulation relating to bank loans and bankruptcy law, as well as

a reduction in the corporate income tax rate to 19% from 27%. The current Civic Platform-

led coalition government is widely seen as pro-reform and pro-business, which will likely

attract more foreign investment into the country. The government's commitment to

privatising state-owned industries will provide further opportunities for foreign investors to

gain exposure to key industries within Poland.

Foreign investors are permitted to operate in almost all Polish markets, with the exception

of some strategic industries (including air transport, broadcasting and gambling) as well as

real estate. Foreign firms are treated in the same way as domestic companies with regard to

property rights and are not restricted while remitting profits abroad. Foreign investors who

maintain a permanent residence in Poland are permitted to set up joint-stock companies,

limited liability companies, limited joint-stock partnerships, professional partnerships,

registered partnerships and limited partnerships.

In July 2004, the government amended the Economic Freedom Act, with updated rules and

compliance procedures regarding the operation of branches and representative offices in

Poland. Foreign investors wishing to establish a branch in Poland must first register with the

National Court Register. While a branch is permitted to conduct all of the activities of the

parent company, a representative office, on the other hand, is limited to only doing

promotional activities on behalf of the parent firm. Registration of either a branch or a

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representative office now no longer requires the acquisition of permits, which greatly

improves the efficiency and transparency of the whole process.

Foreign Trade Regime

Upon gaining membership of the EU in 2004, Poland agreed to adhere to the same trade

regulations, including the Community Customs Code and Community Tariff. There are now

no customs barriers to trade with other EU nations, while trade with non-EU nations is

dictated by EU regulations. EU tariffs are generally lower than previous Polish tariffs

resulting in cheaper imports.

Poland adheres to the EU's Generalised System of Preferences. Licensing regulations, which

are the same as elsewhere in the EU, restrict trade in few goods and with some non-EU

nations. Notably, EU import quotas apply to steel products and textiles as well as on some

Chinese products, for example.

Trade in few agricultural products may also be restricted or subject to preferential tariffs

under the EU's Common Agricultural Policy. Among goods which are subject to quota limits

are petrol, diesel fuel and heating oils, alcohol and cigarettes. Imports of strategic goods,

including weapons and some chemical and transport equipment require a licence or

concession. A licence is also needed for most alcoholic drinks, gas and some agricultural

products.

Tax Regime

The tax regime became more benign for investors in the years approaching the country's EU

membership, and legislation has also been streamlined. Revisions of corporate, individual

and VAT regulations are under discussion in parliament, but implementation has been

postponed.

Corporate Tax: The principal rate is 19%. Resident firms are taxed on cumulative global

income. Non-resident firms are taxed only on the total income earned in Poland. Dividends

paid to corporate and individual shareholders are subject to a 19% withholding tax.

Dividends paid by a Polish firm to a firm based in an EU member state are exempt under

certain circumstances. Dividends paid between elements comprising a corporate group are

also exempt. A tax credit regime is in effect, unless tax treaties state otherwise.

Individual Tax: Rates increase progressively to a maximum of 32%. Individuals may be

subject either to limited or unlimited tax liability. Resident individuals are taxed on

cumulative global income. Non-resident individuals are taxed only on the income earned in

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Poland. An 18% tax applies to some income, such as dividends and interest. An individual

may elect to be taxed at a flat rate of 18% on business income under some circumstances.

Indirect Tax: Polish VAT regulations were generally harmonised with EU directives on EU

accession in May 2004. The main rate is 23%. Poland permits VAT refunds based on rules in

EU directives.

Capital Gains: Gains of individuals and companies from disposal of business assets are taxed

as income. Gains by individuals from share sales are taxed separately from income at 19%.

Income of an individual on the sale of a residence, other building or non-business land is

taxed at 10%. This income may be tax-exempt if the proceeds are used to buy another

similar asset within the next two years, or the sale of the asset takes place five years after

purchase.

Exports and imports

Trade growth has been robust in the Polish economy. The country conducts almost two-

thirds of its merchandise trade with EU nations. In 2011, total exports amounted to

$224.35bn, whereas imports stood at $238.46bn. Since 1989, EU exports to Poland have

increased by 300% and EU imports from Poland have increased by more than 200%. Most of

the Polish imports from the EU consist of machinery and electrical goods, which make up

almost 27% of the country's total imports. In 2011, Germany received 27% of Polish exports,

followed by the UK (6.6%), the Czech Republic (6.4%), France (6.3%), Italy (5.6%), the

Netherlands (4.5%), and Russia (4.2%).

In 2011, Germany provided nearly 28.7% of Poland's imports, making it the country’s most

important single import trading partner. Germany was followed by Russia (10.3%) and the

Netherlands (5.9%). Other important partners were Italy, China, France, and the Czech

Republic. Total trade increased from $400.02bn in 2010 to $462.81bn in 2011.

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Source: WTO Country Profiles

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Major trade partners and major trade commodities

Figure: Poland’s Foreign Trade

Business Etiquettes

Shake hands, firmly but briefly, with everyone (including children) when introduced.

It is also customary to shake hands once again upon your departure. Men should

wait to see if women extend their hands in inter-gender meetings. In formal settings,

local men may kiss the hands of women in greeting, but the replication of this

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practice by foreigners may not be well received. Note that it is impolite to reach over

someone else's handshake. Also, avoid keeping your left hand in your pocket while

shaking hands with your right. Close friends or relatives may greet each other

effusively, with much hugging and kissing of cheeks.

The decision to address each other by first names may be decided by mutual

consent, although the best practice is to err on the side of formality and use titles

and surnames when first meeting someone. Note that there is a ceremony that

celebrates the decision to go to a first-name basis.

Politics and other complicated issues, such as religion and culture, are acceptable

topics of discussion in most European countries. The Poles, like other Europeans,

tend to be well informed about politics and to have their own opinions. While

conversation on such issues is not discouraged, visitors should not expect Eastern

Europeans to be entirely approving of Western concepts, ideas and political

viewpoints.

Food, sports, and sightseeing are good topics of conversation.

Note that despite the demands of work, Poles love to stay up late, talking and

sharing drinks. Leaving early may be taken as an insult by them, so be prepared for a

long night.

Drinking is often part of the social element, but note that Poles are experts at such

activities. Vodka-drinking contest are the norm but the Poles are the real experts and

foreigners should expect to lose. You should also expect your glass to be refilled

every time it is empty until the vodka runs out. It is also to be noted that when a Pole

flicks his finger against his neck, he is inviting you to join him for a drink (probably

vodka).

Littering, chewing gum while speaking to someone and any kind of loud behavior is

generally considered to be unacceptable in Poland.

If you are invited to a Polish home, be sure to bring a gift. Flowers for the hostess is a

good choice, but note that red roses are reserved for romantic situations in many

cultures, while lilies are often associated with funerals.

During meals, the host may invite you to eat additional portions. It is traditional in

many European cultures to turn down the first invitation.

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When eating at restaurants, always use utensils. Note that very few items are eaten

with the hands. Also, make sure to adhere to the European standard of the fork in

the left hand and the knife in the right hand. Avoid the Americanized "cross over"

where one uses the knife only to cut meat, while using the fork in the right hand

otherwise. Keep your utensils together on one side of the plate when you have

finished eating. The best practice is to always place your knife and fork together in

the 4 o'clock position on your plate. Meanwhile, if you wish to pause between

courses, cross your utensils on the plate.

Western business practices are quickly becoming the norm across Europe, including

such things as business lunches. One should not, however, enter into business

discussions without some light introductory conversation, politesse and other such

niceties. In this regard, it is acceptable to ask about your counterpart's family. If the

lunch or dinner meeting is your idea, you should insist on payment being your

responsibility.

Generally, Poles dress in a causal but conservative manner, except at dinners or

other more formal engagements. Conservative suits (dark in colour with ties and

white shirts) are usually worn by businessmen, while women's business attire

consists of dark skirts and dresses. Discretion is advised in the realm of business,

while trendy fashions may be more acceptable in other less formal domains of life.

Market strategy adopted by Cadbury Schweppes for entry into Poland

Entry Strategy

Cadbury Schweppes had three 'route to market' options to consider in order to tap Poland's

growing confectionary market. The options were:

Export from other Cadbury Schweppes companies

Acquire or form a joint venture with a local Polish confectionary company

Establish a fully owned factory locally.

When Poland first left the communist regime the government in power pursued a policy of

open trade which resulted in a flood of imports into the Polish market. To protect local

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industry the Polish government established import duties which were particularly high on

goods such as confectionery.

Under the prevailing conditions, exporting to Poland was not an economically viable option

available to Cadbury Schweppes. Cadbury Schweppes thoroughly evaluated the leading

Polish confectionery companies to assess their suitability for acquisition or joint ventures.

However, several problems, such as over-staffing or lack of investment, were found to be

common across all of the companies.

So, after having rejected the first two options, Cadbury Schweppes decided to explore local

manufacture as the most appropriate route into the Polish market.

Market Strategy

Although the total confectionery market in Poland was known to be quite large with all the

data and statistics available, market research was conducted to determine whether this

existing market would be suitable for Cadbury Schweppes' products.

Tastes in confectionery vary the world over and Cadbury Schweppes chose to manufacture

products from its existing confectionary range which would particularly suit the Polish taste.

The company also decided to manufacture a range of products which were budget-priced

under the name of Piasten, Cadbury Schweppes' brand in Germany, which was the biggest

trading partner of Poland.

Having identified the product range to be introduced and its acceptability to Polish

consumers it was then possible for Cadbury Schweppes to forecast the potential sales which

could be achieved in Poland.

This information, together with estimates of the costs involved in setting up and running the

manufacturing operation, helped the Company to determine that the project was financially

viable. Cadbury Schweppes finally took the decision to invest in building a factory and

developing a new confectionery business on a greenfield site in Poland.

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PART 2

Market Overview

Market Definition

The confectionery market consists of retail sales of chocolate, gum, cereal bars and sugar

confectionery. The market is valued according to retail selling price (RSP) and includes any

applicable taxes. Any currency conversions used in the creation of this report have been

calculated using 2011 annual average exchange rates. For the purposes of this report,

Europe consists of Western Europe and Eastern Europe. Western Europe comprises

Belgium, Denmark, France, Germany, Greece, Italy, the Netherlands, Norway, Spain,

Sweden, Switzerland, Turkey, and the United Kingdom. Eastern Europe comprises the Czech

Republic, Hungary, Poland, Romania, Russia, and Ukraine.

Market Analysis

The Polish confectionery market has experienced moderate growth over the past few years.

The market is predicted to continue growing moderately over the forecast period to 2016.

The Polish confectionery market had total revenues of $2,914.6 million in 2011,

representing a compound annual growth rate (CAGR) of 5% between 2007 and 2011. In

comparison, the Russian and Czech markets grew with CAGRs of 5.4% and 3.1% respectively,

over the same period, to reach respective values of $11,667.5 million and $861.9 million in

2011.

Market consumption volumes increased with a CAGR of 3% between 2007-2011, to reach a

total of 293.1 million kg in 2011. The market's volume is expected to rise to 334.3 million kg

by the end of 2016, representing a CAGR of 2.7% for the 2011-2016 period.

The chocolate segment was the market's most lucrative in 2011, with total revenues of

$1,819 million, equivalent to 62.4% of the market's overall value. The sugar confectionery

segment contributed revenues of $769.1 million in 2011, equating to 26.4% of the market's

aggregate value.

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The performance of the market is forecast to decelerate, with an anticipated CAGR of 4.1%

for the five-year period 2011 - 2016, which is expected to drive the market to a value of

$3,560.9 million by the end of 2016. Comparatively, the Russian and Czech markets will

grow with CAGRs of 4.2% and 2.7% respectively, over the same period, to reachrespective

values of $14,365.5 million and $982.6 million in 2016.

Market Data

Market Value

The Polish confectionery market grew by 4.9% in 2011 to reach a value of $2,914.6 million.

The compound annual growth rate of the market in the period 2007–11 was 5%.

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Market Volume

The Polish confectionery market grew by 3.1% in 2011 to reach a volume of 293.1 million kg.

The compound annual growth rate of the market in the period 2007–11 was 3%.

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Market Forecast

Looking specifically at value sales, Poland’s outperforming economy and the effect this is

having on disposable incomes will lend itself well to value sales growth in confectionery as

premiumisation continues to kick in. With incomes expected to continue growing

considerably over the next few years, premiumisation will be a very important driver of

growth as the industry adapts to the higher spending power of the Polish consumer.

Per capita consumption of confectionery in Poland is comparatively high, with sugar

confectionery products proving most popular. However, the 2009 financial crisis had a

negative effect on both volumes and values, with sales coming in lower than the preceding

few years. Nevertheless, forecasts remain optimistic about the performance of the sector,

which is viewed as one of the most promising regionally.

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f=BMI forecast. Source: Central Statistical Office, National Bank of Poland, BMI

Market Segmentation

Category segmentation

Chocolate is the largest segment of the confectionery market in Poland, accounting for

62.4% of the market's total value.

The Sugar confectionery segment accounts for a further 26.4% of the market.

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Geography segmentation

Poland accounts for 4.1% of the European confectionery market value.

Russia accounts for a further 16.4% of the European market.

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Market share

Kraft Foods, Inc. is the leading player in the Polish confectionery market, generating a 33%

share of the market's value.

Mars, Inc. accounts for a further 14.7% of the market.

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Five Forces Analysis

The confectionery market will be analyzed taking manufacturers of chocolates, gum and

sugar confectionery as players.

The key buyers will be taken as retailers, and cocoa farmers and other raw material

producers as the key suppliers.

Summary

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The Polish confectionery market is fairly concentrated, with the top four players holding

71.6% of the total market value.

The market has a wide range of products, differentiated both by their inherent

characteristics and by investment in branding. A variety of brands are available and products

can also be differentiated with respect to quality and price. Consequently, buyer power is

prevented from becoming disproportionately strong in this market.

The key ingredients, such as sugar and cocoa products, are bought in commodity markets,

and so manufacturers have little control over their prices; although maintaining inventories

and engaging in practices such as hedging, can reduce the effect of price volatility.

Entry into this market is highly dependent on growth prospects and also on the size of

existing players.

Confectionery products are vulnerable to the threat of substitutes, such as savory snacks

and fresh fruits, due to low switching costs and consumption patterns in different

geographies.

The competitive rivalry is deemed as moderate in this market, with branding contributing to

a high level of customer loyalty.

Price elasticity and product differentiation play a small part in terms of competitive rivalry in

the confectionery market.

Competitive Analysis

The Polish confectionery market is fairly concentrated, with the top four players holding

71.6% of the total market value.

Leading companies have diverse product lines, although food and drink products are central

to their business. Such factors protect their margins against local fluctuations.

Switching costs for consumers and retailers are low. The threat from private labels, offering

a cheaper alternative to branded products, increases during times of economic downturns

or slowdowns, as consumers become increasingly price-conscious.

However, product differentiation, both by inherent characteristics and by strong branding,

should allow players to maintain their hold on consumers, and thus weaken rivalry.

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In a business, where automated, high-volume manufacturing is the norm, capacity increases

are relatively easy to implement and fixed costs are high, rivalry is enhanced.

Overall, there is a moderate degree of rivalry in this market.

Leading Manufacturers in Poland

Colombina S.A.

Colombina is a Colombia-based company engaged in food processing. The company's

product mix includes: cookies, wafers, snacks, candies, lollipops, chocolates, pastries,

chewing gums, ice creams and preserves. It has production facilities in La Paila, Colombina

Delcauca, La Constancia, Procalidad, Inalac Lis and Robin Hood.

Its chocolate confectionary brands include; Nucita, Choco Break, Choco Ball, Choco Break,

and Kick; other nonchocolate confectionary brands include; Pirulito, Splot, Chupetas, Tiger

Pops, and Colombinetas. Moreover, its other brands under the cakes, sauces and snacks

market include Ponky, La Constancia and Snacky whilst its cookie brands include; Nucita,

Bridge, Capri, Splendid, Muuu, Maria, Moments and Brinky.

Mars, Incorporated

Mars primarily produces and distributes food products worldwide. The company offers

chocolates, candies, chewing gums, rice, entrees, sauces, and beverages. Additionally, it

provides dog and cat food.

The chocolate segment offers products under the following brand names: M&M's, Snickers,

Dove, Galaxy, Mars, Milky Way and Twix, among others. Mars Chocolate has 28

manufacturing facilities.

Nestlé SA

Nestle (or 'the company') is the largest food and beverage company in the world. The

company's products include beverages, milk based products, ice creams, prepared dishes,

and pharmaceutical products. Nestle operates in Europe, the Americas, Asia and Africa.

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The confectionery division primarily offers chocolates and chocolate based candies. The

segment's products are offered under Aero, Butterfinger, Cailler, Crunch, Kit Kat, Orion, and

Smarties brand names.

Kraft Foods Inc.

Kraft Foods the parent company of Cadbury is one of the leading food and beverage

companies in the world. The company offers snacks, beverages, cheese, convenient meals,

and various packaged grocery products. It markets its products in around 170 countries.

The Kraft Foods Europe segment's product offering includes biscuits, confectionery,

beverages, cheese, grocery, and convenient meals. The key brands offered by the segment

include Milka, Suchard, Jacobs, Gevalia, Carte Noire, Kraft, Dairylea, Sottilette, Miracel

Whip, and Simmenthal among others.

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PART 3

Marketing Strategy

Expansion:

Expanding the current product lines

Cadbury is expanding its current lines and adding more variants to its existing product

range.

Like in its chewing gums range:

Centre filled gum: Trident Splash, Hollywood Sweet Gum and Stimorol Fusion

Longer lasting flavor: Trident (mini sticks), Stimorol Ice and Dentyne Ice

Line filling by adding new tastes to existing bars and coming up with new packages smaller

and bigger, gift packs, etc.

Brand Image:

Improving the product image and repositioning the brand

High profile brands with strong consumer loyalty are fundamental to maintaining market

share as well as in generating sales growth in the confectionery industry. A highly successful

brand image also gives products a long life cycle. It also explains the dominance of

multinationals that bring with them well-known international brands into the market place.

Large companies with big promotion budgets are able to maintain strong brand images and

introduce new brands.

Cadbury was initially targeting the the youth but now its targets all alike. Cadbury’s mission

is about promising high quality to all its customers and hence, it is working on building a

stronger brand image. The Poland confectionary market is huge and Cadbury is a major

player in the market because of strong brand image and value to its customers. Cadbury is

focusing on retaining and further improving its image to the target customer.

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Innovation:

Cadbury also came out with a technology that makes the chocolate melting resistant, this

latest technology has added to the advantage of cadbury as the shelf life can be easily

maintained at different temperatures and selling the chocolate to other nations become

easier. Also with the new technology they can still maintain the smooth texture of the

chocolate that cadbury promises. the technology is very new and it is still to be patented by

cadbury. Also cadbury is coming up new flavours and combinations like Cadbury bubbly

which is an aerated chocolate and Cadbury Toffee popcorn.

Product Mix:

Cadbury has a huge product offering in Poland including chocolate bars, beverages that

mostly include drinking powders as it is a cold country and also special packs and chocolates

for special occasions like Easter, Christmas, Halloween and other gift packs.

Also Cadbury is the second largest player in the chewing gums market and came up with a

new factory in Poland in 2007.

Product offering:

● Chocolate bars

● Snacks

● Beverages

● Special gifts and Easter range

● Chewing gums

Product line width Product line length

● Chocolate bars Cadbury dairy milk, dairy milk bubbly, mint

bubbly, nutty caramel, fruit n nut, toffee

popcorn, Cadbury wispa, crispello, twirl,

crunchie, starbar, orange cream, pepermint

cream

● Beverages Bourneville, hot chocolate instant, drinking

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chocolate, milk chocolate, caramel, hazelnut,

fudge

● Special gifts and Easter, Halloween

and Christmas range.

Cadbury crème n egg, Cadbury egg n spoon

chocolate mousse, Cadbury egg n spoon

white mousse (crunchy spiders and dead

heads for Halloween), snow-bites, chocolate

snowman, etc.

● Chewing Gums Trident, Hollywood, Dirol and Stimorol

Line Stretching:

● Up market:

Better variants of the Cadbury bars with nuts and fruits and richer cocoa content

● Two way:

In case of Cadbury bubbly there were better variants with white chocolate fills, mint

fills, etc. and there was a variant that was Cadbury mini in a smaller size at a lower

price

Product Adaptation/Modification:

Cadbury is a transnational firm with a geocentric orientation. It uses a ‘glocal’ strategy for its

products which involves standardization as far as possible, but adaptation whenever

necessary. Tastes in confectionery vary the world over and Cadbury chose to manufacture

products from its existing range which would particularly suit the Polish taste.

It also decided to manufacture a range of budget-priced products under the name of

Piasten, Cadbury Schweppes' brand in Germany. This included the popular Wunderbar and

Curlywurly chocolate bars. Other Piasten products included chocolate tablets, candies and

‘panned’ – a range of chocolate-covered peanuts.

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Since Cadbury changed its product mix as well as slightly changed its communication

strategy for Poland, their overall strategy can be considered as Dual Adaptation.

Packaging:

The packaging has started including a sealed plastic wrapper inside the outside foil. Cadbury

has been using a new 'PURITY-SEALED' packaging for its flagship product – Cadbury Dairy

Milk. Cadbury’s is currently working towards a heat-sealed or a flow-pack packaging that

offers a high level of resistance to infestation from improper storage. Generally the shelf life

of a about 12 months.

Cadbury has patented the purple colour in chocolate packaging at least and it is globally

using the same colour globally. Purple is the significant of royalty.

Also the packaging is done in small packs, large packs, Gift Packs, and special packages for

occasions.

The package of Cadbury chocolates also creates the brand image to communicate the

Cadbury brand with consumers. Cadbury’s products are always packed with different colors

(along with purple) and pictures according to different tastes. More importantly, the

labeling of Cadbury’s products is such that responsible consumption messages are provided

along with nutritional information to help educate consumers about the role of treats in the

diet.

Promotion Mix:

Advertising:

Despite the generally held view that chocolates are meant only for children, Cadbury

realized that children would be attracted to any chocolate, irrespective of the brand.

Therefore, Cadbury has targeted adults with their advertising since the early 1990s. A

majority of Cadbury’s advertisements feature people over 18 years of age. Cadbury tries to

put across the message that: “In every adult, there is a child - let that child express itself,

give in to temptation, and satisfy his or her desire to sink teeth into a smooth, creamy,

delicious chocolate”.

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This approach appears to be unique to Cadbury. Its biggest competitor, Nestle, often

stresses the energy giving aspects of chocolate (for example, in advertising for Nestle

Charge), or on other attributes of the chocolate - taste in the case of Nestle Crunch, as a

light snack in the case of Nestle Bar One. Nestle specifically targets children in the

advertising for Milkybar (or Galak as it is called in Poland and the rest of continental

Europe), its white chocolate, again emphasizing its energy giving properties.

To counter Milkybar, CIL has the Dream or Dairy Treat - where it targets the mothers of

children by trying to convey the message that its product is full of the goodness of milk, and

so equivalent to consuming milk itself.

Television, print media and posters have been the main media of communication for

Cadbury’s advertisements. Cadbury’s TV campaigns in Poland were devised illustrating the

essential consumption occasions. In addition, according to the sources from Cadbury’s

website, there are other types of advertising form being used in Cadbury which is the trade

advertising, informative advertising and the consumer advertising. Cadbury has launched a

lot of periodic trade advertising to monitor quality checks and educate its retailers as well as

promoting sales. For the purpose of inform and remind customers, Cadbury published an

advertising regarding “the facts about Cadbury” in 55 trade publications.

More importantly, Cadbury has launched a response cell through toll free number and an

email-ID to encourage its customers to give feedback.

With continued fragmentation of the traditional commercial television audience base, the

industry has turned to other mediums for brand building promotions. ln particular, outdoor

and transit advertising is increasingly being utilised following the successful example in the

soft drinks industry. Sponsorships, both local and global also continue to enjoy popularity

among industry marketers.

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Figure: Ad spend by medium in Poland

For confectionary industry TV continues to remain the preferred mode of promotion as it

has the widest reach as is evident from the figure above.

Sales Promotions:

Cadbury uses innovative methods of sales promotion. They spearheaded the ‘Text N Win’

sales promotions by taking advantage of the popularity of mobile phones and they were one

of the first large companies to focus on internet marketing and social media for the purpose

of sales promotions.

An example is their ‘Get Active’ campaign throughout Europe, including Poland, which

consisted of a program of rewarding sports equipment in return for a collection of Cadbury's

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chocolate wrappers. This was an innovative way to address the weight problem in Poland as

the proportion of the Polish population aged 15 and over that is classified as obese reached

20.2% in 2010 and the overweight population reached 33.9%.

Standard sales promotion techniques like sampling, couponing, contests, bonus packs and

tie-in promotions are also regularly used by the company.

Examples:

Cadbury ran a three-month promotion in conjunction with airport retailers in Poland

– which involved a ‘three for two’ offer across the Cadbury Luxury Selection

portfolio, including the newer Dark and Milk Chocolate Multi-Packs. Supported by

in-store displays and point of sale materials, the promotion resulted in the Cadbury

Luxury portfolio claiming 10% of the airport retailers’ overall premium confectionery

category during the period.

Furthermore, every year Cadbury launches discount selling or price off sales

promotion activities during Christmas time in supermarkets and it does increase

sales dramatically every year.

Cadbury extensively used sampling while launching its products in Poland. A major

in-store sampling and couponing campaign was devised whereby three day sampling

events were carried out over major stores in Poland. This was repeated 8-10 weeks

later to coincide with the launch of product variants.

Cadbury also likes to go in for joint promotions. An example is its partnership with travel

retail channels, such as airlines that offer Cadbury Luxury Selection Praline Tower Pack

exclusively on-board their flights with the product consistently appearing in the airlines top

three confectionery products for sale on-board since then.

Personal Selling:

Personal selling is a two way communication between sellers and buyers. It can be done

through face to face communication, through the internet or telephone. The benefits of

personal selling are that firms can gain the feedback quickly from customers, demonstrate

the benefits of particular products and adjust their message immediately to capture

customers’ concern and desire needs.

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Personal selling had been used by Cadbury a long time ago. But it is not being used anymore

as the brand awareness and brand identity of Cadbury has increased substantially and they

do not require the use of personal selling.

Public Relations:

Public relations can be very beneficial for a company like Cadbury but it is also a risky way of

communication as firms cannot control the negative aspects. Cadbury has utilized a variety

of tactics for public relations in Poland such as:

Sponsorship of websites

Radio promotions

Media gifts to presenters of drive time radio shows and afternoon TV.

Product placement and point of sale

The most distinctive form of building public relation for Cadbury is its Trading Terms that

declare the Cadbury conditions of purchase for detailers to offer the best quality of

chocolate and service for consumers. The Cadbury Nutritional labeling global standard to

explain about consumer health and ingredient are also indicated on the company website

which includes the detailed product information and consumer health issues.

Cadbury also has a long tradition of sports sponsorship, both in its original country andand

of supporting major international events.

Direct Marketing:

For the purpose of boosting the awareness and stimulating sales, Cadbury had launched a

series of direct marketing campaigns such as the Dairy Milk’s door drop campaign through

the leaflet firms. Mailings and inserts to house were also frequently used in the Cadbury’s

direct marketing campaigns. Those campaigns have met the objectives of Cadbury such as

increasing the sales dramatically as well as acquitting a lot of valid customer information.

For example, in order to extend the reach of its popular gorilla campaign, which was used

throughout Europe including Poland to capitalize the target customers, who were 18-34

years old, Cadbury had used mobile marketing to deliver extra content and take the brand

awareness and brand identity to a new level amongst the target audience.

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Interactive/Internet Marketing:

Interactive media has taken many forms in the case of Cadbury, such as the company

website, mail box and virtual reality mall kiosks:

The frequently asked questions on Cadbury’s website are being used effectively to

gain an insight into the customer wants as well as complaints.

Cadbury likes its customers to engage in the operations so as to offer the desired

taste of chocolate for its target customers.

Customers can chat on Cadbury’s website to obtain more product information and

provide feedback to the Cadbury management team.

Market distribution

Cadbury dairy milk is produced at the chocolate factory. After the chocolate is produced and

goes through the process of all quality checks. It is transported to the staff rooms and then

Cadbury sells it product to shops.

The placement strategy of Cadbury dairy milk is to sell the chocolate at every corner shop,

super stores, bakers shop, petrol pumps and even medical stores also included in it. It is the

mission statement of Cadbury to provide chocolate to all type and class of customers.

Supermarkets / Hypermarkets form the leading distribution channel in the Polish

confectionery market, accounting for a 58.8% share of the total market's value.

Convenience Stores accounts for a further 14.9% of the market.

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Product Placement:

Cadbury’s chocolate products are placed in the confectionery section in stores, alongside

other confectionery products that are for in-home consumption.

Point of Sale: As Cadbury’s products are sold primarily in retail outlets, they insist on

developing in-store marketing support. This consists mainly of attractive floor units, shelf

headers and glorifiers to make the products stand out in the store.

Pricing

Demand for confectionery is highly price elastic. Value for money is a key part of the

purchase decision. Confectionery also faces strong competition from substitutes such as

com chips and biscuits, which increases the importance of competitively pricing and

positioning product lines.

Cadbury dairy milk applies the reasonable and affordable policy to charge the price from its

competitors. Because it is the vision of Cadbury that Cadbury is in every pocket. It charges

similar price like its competitors and provides better quality. It is using Competitive pricing

strategy because the products have similar or low prices as compared to its competitors and

have long life cycle of the product. Cadbury wants to survive in the market for long run.

However Cadbury has products in the premium range as well, Products like Bournville and

Temptations, here the pricing is again competitive but in the premium range.

But the pricing strategy stays in line with the Cadburys aim to target every one and hence

the pricing is affordable and competitive but still maintaining the quality of the product and

keeping the brand Cadbury strong in the mind of the customer so that it can sustain loyalty

Future Trend for Cadbury:

In terms of further strategic growth, Cadbury should apply Ansoff Growth Matrix while

focusing on new products and prospective markets. There is no need for Cadbury to

advance and promote the existing chocolate products since they are already widely

acknowledged in terms of quality and high reputation among the Cadbury's target markets.

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Cadbury is accomplishing its strong hold in Eastern Europe through Poland and it can go

deeper into the Eastern European market as there is a huge scope for confectionary market

and it is growing at a fast pace.

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REFERENCES

http://businesscasestudies.co.uk/cadbury-schweppes/poland-a-developing-market/poland-

a-developing-market.html#axzz2MJ6GwFNE

http://www.slideshare.net/liyanahassan/cadburys-marketing-strategy

http://www.cadbury.co.eu/products

http://www.piasten.com/site/piasten_en.phphttp://businesscasestudies.co.uk/cadbury-

schweppes/launching-a-new-product-into-a-developed-market/the-snack-

market.html#axzz2MJ6GwFNEhttp://www.managementparadise.com/forums/marketing-

management/209002-marketing-mix-

cadbury.htmlhttp://www.slideshare.net/kiranshaukat2/complete-ppt-of-cadbury

http://news.medill.northwestern.edu/chicago/news.aspx?id=212690

http://www.glenboden.com/show_article_page.php?article_id=296

http://www.ebscohost.com/

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Appendix 1- Cadbury Profile

Cadbury is a British confectionery company owned by Mondelēz International Inc which isthe corporate name for the global snacks company of Kraft Foods Inc. and is the industry'ssecond-largest globally after Mars, Incorporated. With its headquarters in Uxbridge, London,England, the company operates in more than 50 countries worldwide.

The company was known as Cadbury Schweppes plc from 1969–2008 until its demerger, inwhich its global confectionery business was separated from its US beverage unit (now called"Dr Pepper Snapple Group"). It was also a constant constituent of the FTSE 100 from theindex's 1984 inception until its 2010 Kraft Foods takeover.

The company’s Indian business has a leading presence in chocolate with a 71% marketshare. Also,the company also has leading market shares in Thailand in gum and candy at63% and 31%respectively. In Malaysia, it has a number one market share in chocolate at29%, and in gum, a number two position with a 19% market share. Further, in the Australianconfectionery market, the company has a number one position in chocolate (53% marketshare).

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Appendix 2- Poland Profile

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CONCLUSION

Chocolate confectionery market is expected to develop further in Poland, as the overalldemand for indulgence products is increasing. According to the leading manufacturers,there is still a great scope for growth, as per capita consumption of chocolate confectioneryin Poland is still lower as compared to Western European countries which augurs well forCadbury in the coming future. The future trend shows that this category is likely to beaffected by the overall health and wellness trend, as more Poles pay attention to what theyeat and how they feel. As a result, chocolate confectionery might see a growing number ofhealth positioned products, including sugar-free variants and fortified offerings.