A Case Study Of Cadbury Schweppes Marketing Essay

Cadbury Schweppes was formed by a merger in 1969 between Cadbury and Schweppes. Since then the business has expanded into a leading international confectionery and beverages company. Through an active programme of both acquisitions and disposals the company has created a strong portfolio of brands which are sold in almost every country in the world. Cadbury Schweppes has nearly 54,000 employees and produces Fast Moving Consumer Goods (FMCG).

Its products fall into two main categories:

Confectionery

Beverages.

Its portfolio of brands include leading regional and local brands such as Schweppes, Dr Pepper, Orangina, Halls, Trebor, Hollywood, Bournvita, and of course, the Cadbury masterbrand itself. These Products are sold in a range of countries depending on consumer preferences and tastes.

The core purpose of Cadbury Schweppes is “working together to create brands people love”. It aims to be judged as a company that is among the very best in the business world – successful, significant and admired. The company has set five goals to achieve this, one of which relates to Corporate Social Responsibility (CSR) – “To be admired as a great company to work for and one that is socially responsible to its communities and consumers across the globe”

Cadbury plc is a leading global confectionery company with an outstanding portfolio of chocolate, gum and candy brands. It has number one or number two positions in over 20 of the world’s 50 largest confectionery markets. Cadbury also has the largest and most broadly spread emerging markets business of any confectionery company. With origins stretching back nearly 200 years, Cadbury’s brands include many global, regional and local favourites including Cadbury, Creme Egg, Flake and Green & Black’s in chocolate; Trident, Clorets, Dentyne, Hollywood, Bubbaloo and Stimorol in gum; and Halls, Cadbury Eclairs and The Natural Confectionery Company in candy. (Cadbury, 2010).

Impact of social welfare and industrial policy initiatives on Cadbury’s and the wider community

In the UK social expenditure accounts for between 50% -60% of government spending and includes- pension, unemployment, sickness/disability, heath/medical care.

Investment involves business organisations recognising that they have a responsibility both to their local areas and society in general. For a company, being socially responsible means using its resources and its influence to shape the lives of fellow citizens for the better.

The Cadbury Schweppes group has a Corporate Community Investment strategy of ‘Creating Value in the Community’. This focuses on creating community partnerships that generate real, sustainable added value in:

* Education and enterprise

* Health and welfare

* The environment.

EIRIS (Ethical Investment Research Service) survey 2002 commended the company for its carefully structured community involvement programme. CTB is also a member of the Business in the Community Percent Club; CTB’s community contribution was around two of its UK pre-tax profits.

In 2001 CTB launched its Community – “You Can Make a Difference” programmes to maximise the impact of the business, its employees and community partners. Over 1,500 of the company’s 7,000 workforce have been involved so far. Stakeholder expectations Cadbury Schweppes’ core purpose is ‘Working together to create brands people love’.

The success of the organisation in meeting this purpose can be measured in terms of the value created for shareholders. However, this success is achievable only if the company respects its commitment to every one of its stakeholders.

CTB believes in creating prosperous, educated and socially inclusive communities, not only because this is part of the company’s heritage but because it is the right thing to do and makes good business sense.

Corporate Community Investment has always been a core part of CTB’s business philosophy. It is also something that its stakeholders expect. Stakeholders are the groups and individuals that play a part in an organisation.

Stakeholders

Enlightened companies see their stakeholder groupings as partners who help to shape and inform company plans and policies.

The external environment

Successful businesses seek to create a fit between their line of business, way of operating and external environment. In recent years, there have been attempts to make UK society more inclusive. Groups that used to be treated as ‘outsiders’ (e.g. disabled people, single parent families, people living in areas of poverty and educational disadvantage) are being brought into the mainstream of social and economic activity.

The current UK government is promoting social inclusion and the part that businesses can play in bringing it about. For example, the government has encouraged businesses to work in partnership with government agencies and the local community to:

* Improve education and training opportunities

* Support small local businesses

* Promote housing projects

* Create employment opportunities through Welfare to Work programme.

Active citizenship

In the modern world the obligations of business to society have broadened and companies like CTB are building on a heritage of good citizenship in a more strategic way.

CTB’s community contributions take many forms e.g. cash grants, sponsorship, donations in kind, as well as the time, effort and skills that CTB people put into the communities in which they live and work.

Impact of macro-economic policy and the influence of global economy on Cadbury’s.

Here is a terrific example of how a long established business sees an emerging economy not just opportunity for growing sales and profits but also as a centre for production.

Spurred on by rising incomes and consumer demand, Cadburys is hoping to consolidate its dominant position in the Indian chocolate market by encouraging coconut plantations to switch production and establish a much bigger cocoa production capacity in India. The incentives to expand cocoa supply in India are strengthened by the 30% tariff imposed on imports of cocoa into India from countries such as Ghana and the Ivory Coast. The FT reports that Cadburys is hoping to source all of its cocoa beans domestically by 2015 and coconut farmers may hold the key as cocoa seedlings grow alongside coconut palms in southern India and therefore do not require fresh clearing of forests for plantations.

The FT article claims that Cadbury controls more than 70 per cent of the chocolate market in India with a presence in 1.2m stores while Nestlé controls about 25 per cent. It enjoys a dominant position in a market where sales are rising by more than 20 per cent per year.

Reinforcing that market dominance is key for Cadburys – it has spent heavily on marketing revamped chocolate brands in the Indian market including heavy cricket-related sponsorship – but having a domestic supply chain will do more that pure marketing plays to keep their profits rising.

Strengths

Cadbury is the largest global confectionery supplier, with 9.9% of global market share.

High financial strength (Sales turnover 1997, £7971.4 million and 9.4%)[1]

Strong manufacturing competence, established brand name and leader in innovation.

Advantage that it is totally focused on chocolate, candy, chewing gum, unique understanding of consumer in these segments.

Successfully grown through its acquisition strategy. Recent acquisitions, including Adams, 2003, enabled it to expand into important markets like the US market.

Weaknesses The Company is dependent on the confectionery and beverage market, whereas other competitors e.g. Nestle [2] have a more diverse product portfolio, where profits can be used to invest in other areas of the business and R&D.

Other competitors have greater international experience – Cadbury has traditionally been strong in Europe. New to the US, possible lack of understanding of the new emerging markets compared to competitors [3]

.

Threats

Worldwide – there is an increasingly demanding cost environment, particularly for energy, transport, packaging and sugar. Global supply chain in low cost locations [4].

Competitive pressures from other branded suppliers (national and global). Aggressive price and promotion activity by competitors – possible price wars in developed markets.

Social changes – Rising obesity and consumers obsession with calories counting. Nutrition and healthier lifestyles affecting demand for core Cadbury products.[5]

Opportunities

New markets. Significant opportunities exist to expand into the emerging markets of China, Russia, India, where populations are growing, consumer wealth is increasing and demand for confectionery products is increasing.

The confectionery market is characterized by a high degree of merger and acquisition activity in recent years. Opportunities exist to increase share through targeted acquisitions [6].

Key to survival within the FMCG market is increasing efficiency and reducing costs. Cadbury Fuel for Growth[7] and cost efficiency programmes seek to bring cost savings by: 1) Moving production to low cost countries, where raw materials and labour is cheaper ii) reduce internal costs – supply chain efficiency, global sourcing and procurement, and wise investment in R&D.

Innovation is key driver. To respond to changes in consumer tastes and preferences – healthier snacks with lower calories need to be developed. R&D and product launches have led to sugar-free & centres filled chewing gum varieties and Cadbury premium indulgence treat. Low-fat, organic and natural confectionery demand appears strong.

The mission and values statement for Cadbury’s

Cadbury’s means quality: this is our promise. Our reputation is built upon quality: Our commitment to continuous improvement will ensure that our promise is delivered’. (Wikianswers, 2010).

Aims and objectives:

To improve the quality of their chocolate gets the word out about the business going fairtrade. The important aims are:

To survive in the market.

Have loads of stores worldwide

To be an ongoing company.

The future mission of Cadbury. The company’s business strategy hinges on following for driving its future growth:

Increase the width of chocolate consumption, through low price point packs and distribution focus.

Increase depth of consumption, targeting regular chocolate consumers through generating impulse and a dominant presence at Point of Sale.

Maintain image leadership through a superior marketing mix.

Be a significant player in the gifting segment, through occasion linked gift packs.

Build critical mass in the sugar business by introducing value-added sugar confectionery products.

Future revenue growth will be through increasingly higher volumes rather than price increases. The management believes that price increase can only be a short term objective. It is volumes, which are very important to achieve the long-term goal of having a wide consumer base.

Cadbury Online Annual Report & Accounts 2008

Welcome to Cadbury. We create chocolate, gum and candy treats people love – brands such as Cadbury Dairy Milk, Trident and Halls.

Our vision is to be the biggest and the best confectionery company in the world.

2008 highlights

Revenue growth†

Operating margin*

EPS growth**

Dividend growth

Financial highlights

Base business revenues up 7%

Underlying operating margins up 150 bps

Performa EPS from continuing operations up 16%

Return on invested capital up 110 bps

Full-year dividend 16.4p, up 6%

Strategic highlights

Transformation of the business into a category-led pure-play confectionery company

Vision into Action business plan well underway

Simplified organisation from 2009

The company sees its growth in future in market expansion and new product launches. Increased reach, new launches, higher marketing spend and intensive promotions – the mix, Cadbury is looking at to fuel its future growth. The company is also looking for acquisition of brands, and its huge cash reserves might be utilized for the purpose.

The company manufactures and sells.

1Conduct our business in compliance with applicable environmental laws and regulations. Even where we are in full compliance, our objective will remain the control and reduction of the environmental impact of our operations reflecting industry best practice.

2 Implement programmes and reviews to evaluate our operations and check compliance against this policy. Management are required to have programmes in place to determine appropriate local targets and demonstrate continually improving

Performance.

3 Adopt programmes to ensure efficient use of energy, raw materials and natural resources across all segments of our business and to minimise the quantity of waste and pollutants associated with our activities.

4 Work with relevant organisations, government bodies and public groups to promote efficiency in solid waste management through recycling, reuse and energy recovery of material.

5 Provide employees with a healthy and safe environment together with effective information and training to encourage the individual’s contribution towards environmental responsibility.

6 Promote consideration of environmental concerns throughout

the supply chain and with our business partners. In addition, we promote awareness of our environmental policies more generally.

7 Assign management responsibility for the environment throughout the business and maintain the organisation and operational procedures to ensure successful implementation of these policies.

8 Review and update our Environmental .Policy on a regular basis.

Environmental Aspects Environmental Impacts. Group Environmental Management Reduction of environmental impacts and opportunity for better environmental performance Communication & Training Good environmental understanding at all levels and co-ordination of activities thus minimising the risk of potential environmental harm.

Water Integrity Protection of one of our primary raw materials

Water Consumption Depletion of natural resources

Wastewater Potential threat of pollution to water courses and damage to aquatic ecosystems

Energy Use Contribution to global warming through greenhouse gases and depletion of natural resources

Emissions to air Contribution to atmospheric pollution and global warming

Solid Waste Occupation of landfill space; air emissions from incineration and landfill gas; potential contamination of land, groundwater and surface water

Packaging & Material Conservation Use of materials, waste, resource conservation and disposal to landfill

Refrigerants Depletion of ozone layer by CFC’s, HCFC’s and

Other ODS’s (Ozone Depleting Substances) Source (Corporate register.com)

Stakeholders analysis by Mendelow’s Matrix for Cadburys

A Stakeholder Analysis is an approach that is frequently used to identify and investigate the Force Field formed by any group or individual who can affect or is affected by the achievement of the objectives of an organization. Stakeholder Analysis identifies the ways in which stakeholders may influence the organization or may be influenced by its activities, as well as their attitude towards the organization

Typical stakeholders

Owners and stockholders, investors

Banks and creditors

Partners and suppliers

Buyers, customers and prospects

Management

Employees, works councils and labour unions

Competitors

Government (local, state, national, international) and regulators

Professional associations, Industry trade groups

Media

Non-governmental organizations

Public, social, political, environmental, religious interest groups, communities

The power and influence of stakeholders:

The extent to which stakeholders affect the activities of an organisation depends on the relationship between the stakeholder and the organisation. Mendelow’s matrix provides a way of mapping stakeholders based on the power to affect the organisation and their interest in doing so. It identifies the responses which management needs to make to the stakeholders in the different quadrants.

Following categorisation of stakeholders in a manufacturing company:

Low + Low : Small customers, Small Shareholders

High + Low: Major Customers, Central Govt, Media

Low + High: Employees, Environmental Groups, Local Community

High + High: Institutional Investors, Local Planning Authority

Responsibilities of Cadbury’s to its stakeholders and the strategies

To stakeholders, key legal responsibilities eg consumer employment, disability discrimination and health and safety, diversity and equal

opportunities, stakeholder pensions; wider responsibilities including ethical, environmental and ethical practice. (HNC Business, 2010).

Cadbury Cocoa Partnership:

In 2008 Cadbury set up the Cadbury Cocoa Partnership to secure the economic, social and environmental sustainability of around a million cocoa farmers and their communities in Ghana, India, Indonesia and the Caribbean, through:

Improving cocoa farmer incomes: by helping farmers increase their yields and produce top quality beans

Introducing new sources of rural income: through microfinance and business support and introducing additional income streams

Investing in community led development: to improve life in cocoa communities

Working in partnership: Farmers, governments, NGOs, international agencies and local organisations will work together to decide how the funding is spent and turn plans into action

This ground-breaking initiative, which is carried out in partnership with the United Nations Development Programme (UNDP) and other partners, marked 100 years since the Cadbury brothers first began trading in Ghana and aims to holistically support the development of sustainable cocoa growing communities. Cadbury is investing £45 million over 10 years.

In June, 2009 Cadbury awarded Gold today for sustainable business practice by Business in the Community in their Corporate Responsibility Index, launches its Geography online educational resource this month. Skills Space supports the work of the Cadbury Cocoa Partnership and the Cadbury Dairy Milk Fairtrade certification.

Skills Space enables students to learn about Ghana, how cocoa is grown, the lives of cocoa farmers, the interdependence between Ghana and chocolate manufacturers, and discover more about sustainable farming.

Alex Cole, Global Director of Corporate Affairs at Cadbury said: “As a global company, we have access to a huge amount of information and resources that can inspire and have real value to young people studying business and associated subjects.

“We have always received a large number of enquiries from teachers and pupils looking for real-life case studies to support learning in the classroom. Skills Space has been developed in specific response to this demand, and we hope that this new online resource will prove to be a useful tool in their studies.”

Through Skill Space, Cadbury reflects that it is more important than ever for businesses to acknowledge the impact they have on society and the environment, and commit to tackling the issues, not just because they should, but because it’s good for business, as acknowledged in the BiTC CR Index.

Main Aspects of Porter’s Five Forces Analysis

The original competitive forces model, as proposed by Porter, identified five forces which would impact on an organization’s behaviour in a competitive market. These include the following:

• The rivalry between existing sellers in the market.

• The power exerted by the customers in the market.

• The impact of the suppliers on the sellers.

• The potential threat of new sellers entering the market.

• The threat of substitute products becoming available in the market.

Understanding the nature of each of these forces gives organizations the necessary insights to enable them to formulate the appropriate strategies to be successful in their market. (Thurlby, 1998).

Force 1: The Degree of Rivalry:

The intensity of rivalry, which is the most obvious of the five forces in an industry, helps determine the extent to which the value created by an industry will be dissipated through head-to-head competition. The most valuable contribution of Porter’s “five forces” framework in this issue may be its suggestion that rivalry, while important, is only one of several forces that determine industry attractiveness.

• This force is located at the centre of the diagram;

• Is most likely to be high in those industries where there is a threat of substitute products; and existing power of suppliers and buyers in the market.

Force 2: The Threat of Entry:

Both potential and existing competitors influence average industry profitability. The threat of new entrants is usually based on the market entry barriers. They can take diverse forms and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not economically feasible for an outsider to replicate the incumbents’ position (Porter, 1980b; Sanderson, 1998). The most common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:

Economies of scale: for example, benefits associated with bulk purchasing;

Cost of entry: for example, investment into technology;

Distribution channels: for example, ease of access for competitors;

Cost advantages not related to the size of the company: for example, contacts and expertise;

Government legislations: for example, introduction of new laws might weaken company’s competitive position;

Differentiation: for example, certain brand that cannot be copied (The Champagne).

Force 3: The Threat of Substitutes:

The threat that substitute products pose to an industry’s profitability depends on the relative price-to-performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need. The threat of substitution is also affected by switching costs – that is, the costs in areas such as retraining, retooling and redesigning that are incurred when a customer switches to a different type of product or service. It also involves:

Product-for-product substitution (email for mail, fax); is based on the substitution of need;

Generic substitution (Video suppliers compete with travel companies);

Substitution that relates to something that people can do without (cigarettes, alcohol).

Force 4: Buyer Power:

Buyer power is one of the two horizontal forces that influence the appropriation of the value created by an industry (refer to the diagram). The most important determinants of buyer power are the size and the concentration of customers. Other factors are the extent to which the buyers are informed and the concentration or differentiation of the competitors. Kippenberger (1998) states that it is often useful to distinguish potential buyer power from the buyer’s willingness or incentive to use that power, willingness that derives mainly from the “risk of failure” associated with a product’s use.

This force is relatively high where there a few, large players in the market, as it is the case with retailers an grocery stores;

Present where there is a large number of undifferentiated, small suppliers, such as small farming businesses supplying large grocery companies;

Low cost of switching between suppliers, such as from one fleet supplier of trucks to another.

Force 5: Supplier Power:

Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier power typically focuses first on the relative size and concentration of suppliers relative to industry participants and second on the degree of differentiation in the inputs supplied. The ability to charge customers different prices in line with differences in the value created for each of those buyers usually indicates that the market is characterized by high supplier power and at the same time by low buyer power (Porter, 1998). Bargaining power of suppliers exists in the following situations:

Where the switching costs are high (switching from one Internet provider to another);

High power of brands (McDonalds, British Airways, Tesco);

Possibility of forward integration of suppliers (Brewers buying bars);

Fragmentation of customers (not in clusters) with a limited bargaining power (Gas/Petrol stations in remote places).

The nature of competition in an industry is strongly affected by suggested five forces. The stronger the power of buyers and suppliers, and the stronger the threats of entry and substitution, the more intense competition is likely to be within the industry. However, these five factors are not the only ones that determine how firms in an industry will compete – the structure of the industry itself may play an important role. Indeed, the whole five-forces framework is based on an economic theory know as the “Structure-Conduct-Performance” (SCP) model: the structure of an industry determines organizations’ competitive behaviour (conduct), which in turn determines their profitability (performance). In concentrated industries, according to this model, organizations would be expected to compete less fiercely, and make higher profits, than in fragmented ones. However, as Haberberg and Rieple (2001) state, the histories and cultures of the firms in the industry also play a very important role in shaping competitive behaviour, and the predictions of the SCP model need to be modified accordingly.

Cadbury’s objectives of three major stakeholders

There are many stakeholders in a business. Ideally all stakeholders will have common views at what the corporate should be. This is, in reality, most unlikely .The reason of groups having a stake in any business are so fundamentally different that their will be many occasion when their interests diverge or conflict. A business have to find a way of satisfying these different interest especially those of powerful and influential stakeholders – but there is no sure or safe route through this dilemma. Some of issue involved when considering the objectives of certain important stakeholders.

The objective of other stakeholders

The objectives of the business

Stakeholders

Investors clearly want to be rewarded for their stake in the business. This reward must be at least equal to that which would be available elsewhere and should also reflect the measure of risk associated with investing in a particular business, e.g.

Investors in Bio Tech businesses expecting highly rewards because of the risk associated with this type of research, it may not be commercially successful.

Shareholders reward comes from annual dividend and increased the prices for share they owned. The extent of reward to shareholders is dependent on number of factors.

the size of after tax profits determined by companies performance but also by the gearing ratio of the business as interest on lone is always paid before tax, and therefore before dividend s

the plans of the directors to retain profits to development for future of the business

the prospect for the company and the economy in general will be the main driving forces behind the share price charges.

Shareholders are protected by law because their positions thought to be weak compare to the business itself, the main right they have are:

to receive annual accounts

Stakeholders

Main objectives

Work force

* To receive fair wages

* To ensure good working condition.

* To ensure their jobs through the survival and expansion of the business.

Customers

* To obtain ‘good value for money’ from the goods and services purchased.

* To receive high level of customer services

* To receive after sale-service and supply of spare from a business which survives in the future.

Suppliers

* To continue to sell profitably to the business

* To be paid promptly and fully for goods supplied

Schweppes plc