Cadbury

Introduction

Cadbury Limited is the confectionery division of Cadbury Schweppes(Schweppes is a

beverage brand that is sold around the world. It includes a variety of carbonated

water and ginger ales. Its marketing campaign made heavy use of an onomatopoeia in

their commercials: "Schhhhh.... Schweppes," after the sound of the gas escaping as one

opens the bottle.) a major force in the confectionery and soft drinks international

market.Cadbury plc (product life cycle) is a confectionery and beverage company with its

headquarters in Berkeley Square, London. The firm was formerly known as Cadbury

Schweppes plc before demerging in May 2008, separating its global confectionery

business from its North American beverage unit, which has been renamed Dr Pepper

Snapple Group Inc. Today Cadbury Schweppes employs around 54,000 people and its

brands are enjoyed in almost every country around the world. Cadbury is the world’s

fourth biggest supplier of chocolate and sugar confectionery. The group markets a mix of

global, regional and local brands and has manufacturing plants in 25 countries and sales

in a further 165.

The group’s strategy is to increase profitability, strength and volume on a global basis in its two business streams: beverages and confectionery through a combination of internal growth and ensure the continuing strength and earning potential of the group’s brand. Chocolate confectionery is sold internationally under Cadbury name and includes power brands such as Cadbury’s Dairy Milk, Cadbury’s Time Out, Picnic and Roses.

Cadbury Pakistan, a subsidiary of Cadbury Schweppes is the world’s largest confectionery company. Cadbury has grown consistently since its inception in 1993 and the company has tripled its size in the last two years. The company employs 151 people and currently has a manufacturing plant in Hub. It enjoys strong presence in the confectionery business with brands like Cadbury Dairy Milk, Chocki, Perk, Éclairs and Soft mints. In 2006, Cadbury was declared the top confectionery brand in Pakistan according to Top Brands survey conducted by the FPCCI.

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Success story of Cadbury

The Cadbury story is a fascinating study of industrial and social development, covering well over a century and a half. It shows how a small family business developed into an international company combining the most sophisticated technology with the highest standards of quality, technical skills and innovation.

A one-man business, opened in 1824 by a young Quaker, John Cadbury, in Bull Street Birmingham, was to be the foundation of Cadbury Limited, now one of the world's largest chocolate producers. By 1831 the business had changed from a grocery shop and John Cadbury had become a manufacturer of drinking chocolate and cocoa, the start of the Cadbury manufacturing business as it is known today.

Cocoa and drinking chocolate had been introduced into England in the 1650s but remained a luxury enjoyed by the elite of English society.. Cocoa beans were imported from South and Central America and the West Indies. Experimenting with his mortar and pestle, John Cadbury produced a range of cocoa and chocolate drinks, the latter with added sugar.

John Cadbury had a considerable flair for advertising and promotion. "John Cadbury is desirous of introducing to particular notice 'Cocoa Nibs', prepared by himself, an article affording a most nutritious beverage for breakfast," announced his first advertisement in the Birmingham Gazette in March 1824.

He soon established himself as one of the leading cocoa and drinking chocolate traders in Birmingham. The popularity and growing sales of John Cadbury's cocoa and drinking chocolate of 'superior quality' determined the future direction of the business.In 1831, John Cadbury rented a small factory in Crooked Lane not far from his shop. He became a manufacturer of drinking chocolate and cocoa, laying the foundation for the Cadbury chocolate business.These early cocoa and drinking chocolates were balanced with potato starch and sago flour to counter the high cocoa butter content, while other ingredients were added to give healthy properties.By 1842, John Cadbury was selling sixteen lines of drinking chocolate and cocoa in cake and powder forms.

The Quaker Influence

The Cadbury family were prominent members of the Society of Friends or Quakers, one of the many nonconformist religious groups formed in the 17th century. Their strong beliefs carried into campaigns aimed at ending poverty and deprivation and many prominent Quaker-run businesses were part of reforms of social and industrial society in Victorian Britain. By providing tea, coffee, cocoa and chocolate as an alternative to alcohol he felt he was helping to alleviate some of the alcolohol-related causes of poverty and deprivation amongst working people. He also incorporated some of these principles in his industrial relations philosophy.

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A major turning point for the cocoa and chocolate industry came in the mid-1850s, when taxes on imported cocoa beans were reduced by Prime Minister William Gladstone. The previously prohibitive chocolate products were now within the reach of the wider population.

Cadbury Brothers received their first Royal Warrant on February 4, 1854 as 'manufacturers of cocoa and chocolate to Queen Victoria.' The company continues to hold royal warrants of appointment.

During the 1850s business began to decline. The partnership between the first Cadbury brothers was dissolved in 1860, a difficult time in the company's history.After the death of founder, the first five years were a period of unremitting toil with few customers, long hours and very frugal living. Business was going to dissolve. But then company management worked with a strategy. Manufacturing department started working in collaboration with sales and marketing department, went on promoted their goods. Due to their dedication, sheer hard work and improvements in the quality of Cadbury cocoa products, the business survived and prospered.

Technological Advancements:

Dissatisfied with the quality of cocoa products, including their own, the Cadbury brothers took a momentous step in 1866 that not only had a bearing on their business but revolutionized the whole of the British cocoa business. The brothers introduced this new process to their Bridge Street factory. The press removed some of the cocoa butter from the beans, producing a less rich and more palatable cocoa essence - the forerunner of the cocoa we know today was advertised as 'Absolutely pure...therefore Best'

At that time there was much concern in Parliament about the adulteration of food, including cocoa. The new unadulterated Cadbury's cocoa essence was heralded as a major breakthrough and resulted in the passing of the Adulteration of Food Acts in 1872 and 1875. Cadbury received a remarkable amount of free publicity during this period and sales increased dramatically.The marketing of this cocoa essence helped turn a small business into a vast worldwide company leading to the development of the smooth creamy chocolate produced today.The quality of the chocolates made by the company following the introduction of the cocoa press was such that in the 1870s, Cadbury broke the monopoly which French producers had previously enjoyed in the British Market.

The leader in the UK confectionery market, Cadbury Limited is the confectionery division of Cadbury Schweppes plc, a major force in the confectionery and soft drinks international market. Quality has been the focus of the Cadbury business from the very beginning, as generations have worked to produce chocolate with the taste, smoothness and snap characteristic of Cadbury chocolate.

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3) Corporate Objective of Cadbury Pakistan Limited

Vision Statement

Cadbury’s vision statement is 'Working together to create brands people love'. For Cadbury, it captures the positive, collaborative aspects of doing business and recognizes the emotion, attachment and values associated with their brands. we envision to:

Meet the nutrition needs of consumers of all age groups from infancy to old age, from nutrition to pleasure, through an innovative portfolio of branded food and beverages products of the highest quality.

Deliver shareholders value through profitable long term growth, while continuing to play a significant and responsible role in the social, economic, and environment sectors of the country.

Mission Statement Cadbury is committed to the long-term development of the chocolate industry in Pakistan through substantial foreign capital infusion, category management and local infrastructure and talent development.

Strategic Goal

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Our strategic goals are to deliver superior shareowner performance, profitably and significantly global confectionery share; profitably secure and grow regional shares; ensure our capabilities are the best in class and nurture the trust of colleagues and communities.

Corporate Social Responsibility ObjectiveCadbury Schweppes is committed to growing responsibly. We believe responsible business comes from listening and learning, and having in place a clear CSR vision and strategy. It also comes from having the processes and systems to follow through and an embedded commitment to living our values.

Product Line of Cadbury in Pakistan

Cadbury is the world’s largest confectionary company. With origin stretching back over 200 years, their products which include many globally popular brands are enjoyed in almost every country around the world. Currently operating in two categories out of the four prevalent worldwide:-

Sugar and Chocolate

Cadbury Pakistan boasts five power brands that are:- Cadbury Dairy Milk Soft mints Éclairs Cadbury Perk Five Star Cadbury Roast Almond Chocki

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Market Overview

Cadbury is market leader in the confectionary products. They have big market in all around the world. They are focusing on developing both customers’ understanding and consumer awareness which has led to introduction of number of highly successful new product developments particularly in the block chocolate segment.

MARKET SIZE

Cadbury globally compete in the world. Their share is relatively low then competitors. But they are using aggressive strategy leading in the world market. The Pakistani market remains dominated by Cadbury, Mars and Nestlé, and new product development (NPD) is firmly centered on brand extension rather than bringing new names to the consumer. This strategy has worked with some success.

Although there are some in the industry who complain about the lack of innovation, given the cost in terms of investment of bringing new products to the market, it is hardly surprising that this cautious approach has been adopted.Consumption of chocolate products amounted to about 387,234 tons in 1995, worth around Frequency of 11,836.95 million at manufacturers’ and importers selling prices (excluding tax).

Consumption of chocolate products, which had been growing until 1991, remained fairly static in 1992, reflecting the fall in demand due to the gloomy economic situation. From 1991 to 1995 the market grew by only 9.1 per cent, an indication of a mature market.The chocolate bar market is highly segmented. Dark chocolate bars, milk bars and milk bars with nuts accounted for over two-thirds of the total volume of sales in large and medium size grocery outlets (which dominate the market), while specialties for children, light sugar-free chocolate bars and other miscellaneous special lines accounted for one-third of sales. Sales of milk chocolate bars, which account for 24 per cent by volume of total sales of chocolate bars, decreased by 3.7 per cent. As part of its efforts to remain independent, Cadbury raised its forecast for how the business would perform between now and 2013. The company said that organic revenues would grow by 5 per cent to 7 per cent per year, up from a previous forecast of 4 per cent to 6 per cent, and margins would improve to 16 per cent to 18 per cent by 2013, up from the “mid-teens

Leading manufacturers of chocolate bars have been stimulating the growth of the market by improving their recipes, modernizing their packaging and making great use of promotions. The dynamism of this sector owes a lot to greater added value in products during the last three years. Thus, chocolate bars are now marketed to two groups: children and adults. The children’s market represents 8 per cent by value of total chocolate bar sales and is growing by 6 per cent a year. Chocolate bars for adults lay stress on their rich and refined image. Manufacturers have succeeded in creating new

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consumption habits, for example, the French are now eating small chocolates with their coffee.

MARKET TRENDS

Market Trends is the latest product line from Packaged Facts. These timely, compact reports offer insight and analysis into new product trends, demographic shifts, and consumer behaviors that affect the food and consumer goods industries. The acquisition of Adams Confectionery for $4.2 billion from Pfizer on March 30, 2003 was a major strategic move. The purchase significantly expanded Cadbury's geographic reach and catapulted the company into the number one position in the worldwide confectionery market. Cadbury Schweppes is leveraging the combined operations and routes-to-market in order to drive down costs.

Brand Stretching Cadbury stretch their brand with innovate the new ideas. Those companies only survive in the market that follows the new trends and new approaches and also making good strategies for competing in the market.

Inexpensive As the recent market segment has been hit by price wars. So the market trends give opportunity to Cadbury to launch less expensive products in the market. According to trade estimates, sales of low price products increased by 23 per cent and gained significant ground in the chocolate market in recent years. Low prices are mainly visible in basic products such as milk chocolate bars.

Healthy Impact Cadbury want to bring a diet factor in the chocolate bars. They want consumer’s high involvement in the buying decision. Confectionery consumption in Pakistan has come under pressure from the healthy eating lobby. There has been some progress, particularly in the sugar market, with sugar-free and reduced-sugar products, fruit juice and vitamin-supplemented options, among others. Therefore Cadbury is careful about health conscious customers so they have developed a more functional role in the oral health market.

MARKET SHARES

Cadbury's controlling more than 60% of the market share worldwide. Although Nestlé is the market leader globally, but Cadbury's is posing significant threats to the dominance of Nestlé with the recent launch of its powerful brand kit Kat in the Pakistani market. The market is divided into two broad sectors: chocolate confectionery (including count lines, blocks, boxed chocolates and bite-size products) and sugar confectionery (including fruit sweets, mints and chewing gum). Chocolate confectionery accounts for nearly three-quarters of sales by value. Count lines continue to account for the largest share of the sector but boxed varieties are showing the fastest growth. This is being driven by the development of more brands targeting everyday sharing occasions, such as Cadbury Dairy Milk share boxes, which were introduced in 2005. This in turn has stimulated

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innovation in a slightly more premium level for more special occasions, which is also helping to add value to the market.

5) SWOT ANALYSIS

Strengths:- Cadbury’s success is based on three factors: quality, value for money and good

advertising. Maintains a stable growth of the company by maximizing the use of its

production capacity and thus increase its economies of scale and scope. Cadbury Schweppes is the world’s largest confectionery company with a product

portfolio including chocolate, candy and gum. Cadbury has a long history up to 200 years and exercises good advertising. It is a global chocolate brand built upon a reputation for fine products and services Cadbury market and sells unique brands which give pleasure to millions of people

around the world everyday. Cadbury Schweppes employs around 54,000 people and its brands are enjoyed in

almost every country around the world Profits are increasing year by year Cadbury enjoys a good reputation worldwide and its profits are increasing year by

year. The organization has strong ethical values and an ethical mission statement Cadbury posses strong leadership position in confectionary markets Cadbury is recognized as highly respected company and an employer of choice.

Weaknesses There is a lack of launch of new brands in Chocolates segment and Very few new

products are created by Cadbury’s own group. The company has no apprehensions of cannibalization of its chocolate brands Cadbury offers a Small range of products to its customers. Sales of milk chocolate bars, which account for 24 percent by volume of total

sales of chocolate bars, decreased by 3.7 per cent.

Opportunities The Pakistani market and more specifically the urban areas where the penetration

of Chocolates is low can be developed as a future market through affordability and availability.

Cadbury can use information and technology to bring efficiency in logistics and distribution.

Cadbury can offer Sponsorship for sporting events as a source of promotional advertising*

Cadbury can diversify or expand into a different market by producing new products and using large marketing strategies.

Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.

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Threats Cadbury takes into account the growing health concerns of consumers worldwide

as a serious threat to their product. Cadbury considers Nestle one of the competitive threats to its market shares. Supermarket own brands serve as a threat to growth of Cadbury. The company has large exposure to foreign currency exchange rate risk, mainly

on account of imported cocoa beans and cocoa butter in US Dollar and Pound Sterling.

The company should take note of the changes in the consumer’s buying trend. It is perceived that consumers might shift from chocolates to “Healthy” snacks

The emerging retailer pressure is yet another fear to Cadbury. Stiff competition exists in Confectionery segment.

PEST ANALYSIS

PoliticalThere are many political developments Cadburys will have to look at when producing the final marketing strategy, both regionally, and nationally and also internationally. Pakistan is a developing parliamentary democracy and politically is highly unstable. The political power is centralized with the president, prime minister and parliament. The country specific risk is not negligible. As a result

Political decisions can affect Cadbury’s, these can be either advantages or disadvantages, if taxes increase, therefore consumers decrease and sales of stock decrease. However if taxes decrease the likelihood is consumers will buy more.

Laws can also change Cadbury’s income because if a law was brought out, that you could only work from 9am till 5pm, factory hours would be cut short resulting in less chocolates being produced.

The Government is concerned about obesity as heart problems are costing lives every year.

EconomicThe marketing strategy will have to involve economic factors and their effect on the business. Consumer activity can change throughout seasons in the year, their spending patterns and willingness to spend can all depend on interest rates, and this will affect the strategy by having prices rising and falling and income monthly being vary.

Pakistan is a third world developing market based economy. Due to a recent recession its economy is weak and deregulated with European Union policies. Pakistan represents a large potential market with middle class standard of living and purchasing power. As a result

The interest rates can have an affect on Cadbury’s. If the interest rates were high then Cadbury would not want to borrow as much money for expansion. Also if consumers themselves were under pressure due to their loans they would again have less disposable income to buy luxury items.

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If the minimum wage was brought down, this would mean more money for Cadbury’s but would also result in low sales from the consumers.

SocialIf there is a social change taking place outside Cadburys then it might affect the way a strategy may be run or even designed. Due to fashion and taste people change their minds every month to want the rich and the famous eat and wear. Although chocolate is not directly involved, it will still affect the choice people make on which brand consumers will buy. Pakistan has a broad eastern culture which has no similarities with the United Kingdom. Therefore these existing cultural differences must be considered when planning for the market. Marketers must consider

As the trends are changing – increase in people eating on the ‘go’ (Vending machines).

Local residents with small businesses near Cadbury’s World would benefit from the money that is being brought in by visitors.

More people are health conscious so they will prefer to read ingredients content.

TechnologicalFrom the early days of Cadburys, technology has changed dramatically. It has become quicker and more efficient to this day. Communication has improved as well as marketing the product through word of mouth has now changed to advertising in magazines, newspapers, bill boards, television and even the internet. This will help with the strategy as it will be easier to promote the product to the consumers. Pakistan has an average technology level and very few industries are based in the technological sector. Improving the following technological bases can constitute one of Pakistan’s competitive advantages.

Better equipment Cost of machinery New machinery Maintenancenvesting in the Future

Investing in Future:

In January 2008, Cadbury announced that the firm would invest money in coca farming areas in Africa and Asia. These areas, which are among the largest producers of cocoa in the world, and thus the biggest suppliers, are currently experiencing a decline in the amount of farming. The cocoa supply may be diminishing in the future without intervention which Cadbury is currently proposing. Cadbury will give money to help farmers and their families to sustain their cocoa cultivation in areas where they are currently experiencing a decline. This will help produce goodwill and sustained supply when no other competitor is following a similar path. Input costs will be lower for Cadbury than its competitors in the future and this will result in better earnings potential for the firm.

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Customers Audit

Cadbury operate in different markets and cultures around the world and have very many different consumers. People love the taste, the quality and the value of Cadbury’s products. They expect Cadbury’s brands to have been produced with integrity, where decent labor standards exist, with straight dealing in business transactions and a fair price for goods, services and labor has been paid. Consumers look at Cadbury to make and sell safe, great tasting, and good value products of the highest quality.

Increasingly, customers expect Cadbury products to come from sustainable sources and be produced without significant environmental impact. Increasingly, consumers expect companies to source ethically and in a sustainable manner, and these are firm Cadbury Schweppes commitments. Nowadays consumers are also more concerned about issues of health, diet and lifestyle. Cadbury is working with others, including government, research groups, NGOs and with multi-stakeholders on solutions to help address issues in these areas.Perceptual Map: High quality

Nestle Cadbury

Low Price High Price

Low Quality

This perceptual Map shows that people want high quality product in low price. Perceptual map shows that what people have perception about Cadbury’s products.

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The figure shows that the frequency of customers want to buy delicious Cadbury products.

The figure shows that the frequency of customers wants to give more prices in order to get quality products.

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Company Life Cycle

Company Life Cycle

Cadbury’s origin stretch backs to over 200 years. The Cadbury Company has been in the Pakistani market for several years. In 2005, Cadbury Pakistan received the Global Award for highest Net Sales Value in emerging markets. 2006 proved to be a yet another landmark year for Cadbury Pakistan. Now the Cadbury Company has significantly matured in Pakistani market, as most of its products have stable sales.

Market Life Cycle

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Market Development Market Maturity Market Decline

Market Maturity

The taste and liking for chocolates is more than ever before, but with that customer buying power has not increased. Now there are a numerous companies in the market that are producing mouth watering chocolates that are causing market saturation. Therefore as the Market Life Cycle shows, the market for the Cadbury chocolates has matured. So this would be the ideal time for Cadbury to introduce the appetizing Cadbury Snaps.

Boston Consulting Group Matrix

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In the confectionery market, Cadbury’s global market share has grown through acquisition and organic growth. Cadbury focus on generating free cash flow and making efficient use of capital is also allowing it to make investments in new businesses and assets. Therefore Cadbury is lying at Star phase in Boston Consulting Group Matrix with high business growth rate and high relative market shares.

Conclusion

Cadbury is world leading chocolate manufacturing company. They also deeply involved with research into foods that target the health and wellness trends, and are keen to involve chocolate, traditionally seen as fattening, in this category.

Cadbury Schweppes is a company that produces not only chocolates but also drinks globally; it should market a new product and maybe get into the product development or get into a total diversification. However, need to bear in mind that it is not as easy as marketing Cadbury’s current products. It took Cadbury almost 165 years to reach to its successful peak today.

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For Cadbury innovation remains one of the key elements to the company’s success with new brands catering for changing tastes and life styles. Identifying these changes in taste and lifestyle and matching these with quality product with strong brand values will mean that new product development will continue to be an integral part of the Cadbury’s business strategy.

References

www.cadbury.com

www.marketsearchworld.net

www.scriptovia.com

www.cadburyschweppes.com

www.britishdelights.com/cadbury

Appendices:

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2003–2006 Confectionery Revenue of Cadbury Companyfrom Innovation

Cadbury Confectionery Revenue Growth 1999-2007

Cadbury Schweppes TSR against Peer Group2003–2007

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2002–06 Key Category Retail Sales Growth

Global Confectionery Market Category Share

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Market share in the global confectionery market

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