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The foundation of the Cadbury empire lay in John Cadbury's Quaker beliefs. It was founded in 1824. Being a Quaker, John Cadbury did not have the opportunity to attend University. Therefore, he became an apprentice to a tea dealer at Leeds in 1818. Later, in 1824 he went on to establish his very own grocer's shop where he sold amongst other goods such as tea and coffee, cocoa and drinking chocolate as good alternatives to alcohol which he believed destroyed people's lives. He made these himself using a pestle and mortar. Cadburys very first advertisement appeared on 1st March 1824.
In 1831, John wanted to produce these on a commercial scale. Thus, he bought a warehouse near crooked lane, where he could manufacture his goods. A few years later, in 1847 the company Cadbury Brothers was born when, John took his brother Benjamin into partnership. After this partnership occurred the business was relocated to a new factory at Bridge Street. This new location was more convenient since it had its own canal spur which was connected to the Birmingham Navigation canal and from there to all the major ports in Britain.
John Cadbury fell ill in 1855 thus leading the business fortune to fall very rapidly. Following this decline, in 1856 John dissolved the partnership with Benjamin by and the business was handed over to John's 2 sons, Richard and George in 1861, the year that John retired.
The next product to be launched, in 1866, was Cocoa essence. The products add campaign was based on purity.
“Absolutely pure, therefore Best”
This ad campaign lasted 30 years.
Further expansion was carried out by the establishment of a new factory at Bourneville. This site was chosen because of its excellent transport system.
The year 1905 marked 2 important events in the history of Cadbury. The first being the launch of Dairy Milk chocolate in June 1905 and the second being the designing of the 1st proper logo of Cadbury. The logo was registered in 1911 and was then used for the presentation of boxes and was also imprinted on the aluminium foil that was used to cover the chocolate bars. This logo was used from 1911 to 1939.
The first Cadbury logo
In 1948 chocolate fudge was launched by Cadbury and 1950 saw the invention of Easter egg cartons. The first ever television commercial of Cadbury was launched in 1955. It was an advertisement for drinking chocolate. Aztec bars and pre-packaged cakes were introduced in 1962. 1983 saw the launch of Wispa, which was available during the 1980's and 90's but was discontinued in 2003. It was re-launched temporarily in 2007 and permanently in 2008.
The logo as we see it today was came into being in 1985. Until then, the old logo was small and came in many colours- whatever went with the product. Complete consistency of packaging design was achieved only recently, in 2003.
Target Market and marketing strategy
It is important to know what group of people the product is being targeted at. Knowing this information makes it a lot simpler to plan what method of marketing is the best to reach out to the brands target market.
Cadbury's does not market their chocolates to children. They make sure especially not to market to children under 8 years of age. Their marketing is directed mainly towards parents and guardians since they are the main and most important influence on children. They focus on encouraging responsible and moderate consumption of their products.
Many generations have grown up eating cadbury's chocolates. Their products have been a part of everyday life of those faithful to the brand.
Their focus is on the purity of their products. As cited very early on in the history of the company, one of their first products Cadbury cocoa essence was marketed using the slogan “absolutely pure, therefore Best”. This helped the company build the trust of people in their products and this made many of them brand faithful.
Cadbury has made it a point not to have their chocolates in vending machines at primary schools. The company has always met regulatory guidelines and many of their policies have gone way beyond the required guidelines i.e. they have made sure that they always follow the set regulatory guidelines.
Brand positioning in emerging markets it was noted that in the emerging markets Cadburys had the highest market share compared to its competitors .
- Mars-Wrigley's significant presence in all 3 categories drives its overall higher market share.
- Chocolate constitutes bulk of the volumes & hence has several players
- Most of them have a roughly equal share of the pie & Cadbury faces stiff competition from Nestle & Mars-Wrigley.
- Gum has relatively fewer players, the world market primarily belonging to Cadbury & Mars-Wrigley.
- Relative to other segments, the major players have a smaller presence in the candy segment where Cadbury is the single largest player.
The brands of Cadbury include several global, regional, and local favourites. The three largest brands in the 3 different confectionary segments i.e. chocolate, candy and gum are dairy milk chocolate, halls and trident gum respectively. Other important brands include: in chocolate, Creme Egg, Flake and Green & Black's; in gum, Hollywood, Stimorol, Dentyne, Clorets and Bubbaloo; and in candy, Eclairs and The Natural Confectionery Company.
The above graph represents the growth rate of Cadbury in emerging as well as developed markets from 2003 till 2008. It is quite evident that most growth in each sector i.e. chocolate, candy, gum and confectionary occurred in emerging markets. It can be noted also that growth in the developed markets was almost half of the growth observed in the emerging markets.
* Strong market position
* Wide geographic presence
* Strong presence in emerging markets
* Weak liquidity position
* Employee productivity
* Positive market outlook for US
* Growing market for premium chocolate products
* Rising raw material prices
* Intense competition
* Rising labour wages in the US
Strong market position
Cadbury has the leading market position in 20 confectionery markets around the world, thus making it one the world's largest confectionery companies. Its global market share is 10.5 % in the confectionery sector. It had been found that Cadbury had a 34% market share in the gum sector, thus making it the world's second largest gum seller. The market share of Cadbury in the candy and chocolate is 7.4% and 7.3% respectively. It is one of the leading players in Canada for chocolate and South America for gum and candy. In Argentina Cadbury holds a 55% of the gum market share and 24% of the candy market share. The company has a strong presence in the European region. In the UK it makes up 30% of the chocolate market share and 42% of the market in Ireland. In South Africa Cadbury is the largest player with a 27% market share. Also, in Thailand, Cadbury has a 59% and 22% market share in the gum and candy sectors respectively. Further, Cadbury hold the # 1 position in Australia in the confectionary market.
Wide geographic presence
Cadbury has a very widespread market and a diverse product base. The company produces chocolates, candy and gum. Each of these sectors contribute considerable amount to the sales of the company. In the financial year 2008 chocolate, gum and candy contributed 46%, 33% and 21% respectively to the sales of the company. In terms of the geographical revenue generation, in the year 2008, BIMA, the Americas, Europe and Asia Pacific accounted for 30.6%, 30.3% 20.4% and 18.6% of the revenue respectively. The company benefits from the business being geographically diverse in that the revenue generation is balanced evenly and the company is not adversely affected by an economic slowdown in any one particular area.
Strong presence in emerging markets
As compared to its peers, Cadbury is present to a much greater extent in the emerging markets of the world. In the year 2008 these emerging markets made up a third of the confectionary revenue and 60% of the company's overall revenue growth. It has been noted that in the last 5 years the confectionary market has been growing at a rate of 12% per annum in the emerging markets. Also, the range of “better for you” confectionary items saw a growth of 11% per annum between 2002 and 2007 as compared to the confectionery market as a whole. Thus, it is evident that the company's presence in these markets can result in higher revenue growth.
Weak liquidity position
The year ending 31st December 2008 saw Cadbury record a weak liquidity position. It was found that the company's assets were $2,635 million whereas, the liabilities stood at $3,388 million thereby resulting in a current ratio of 77.7%. Also, their short term borrowing was $1,189 million but, the cash and cash equivalents were found to be just $251 million. This shows that the company is facing major liquidity problems. The weak liquidity could result in poor operational efficiency, decreased growth initiatives and also improper capital management.
Weak employee productivity
Employee efficiency at Cadbury was found to be lower than that of its competitors, for example Hershey and Lindt. The year ended 31st December 2008 recorded the employee efficiency at Cadbury as being $214,724, which was considerably lower than that of Hershey and Lindt which were found to be $410,000 and $352,852 respectively. Low revenues per employee indicate relatively lower employee productivity of the company.
Positive market outlook for US
The confectionery market in the US has shown robust growth in the last few years. In the year 2008 the revenue generated by the confectionery market was found to be $32,900. Thus, indicating a CAGR, from the year 2004 till 2008, of 3.1% on average. The most profitable sector in the US for the confectionery market was chocolates generating revenue of $16,648 million in the year 2008. This figure represents 50.6% of the overall chocolate market. It is predicted that if the trends continue in the same manner then the estimated revenue value will reach $37,800 million by the end of 2013. The company's strong presence in the US confectionery market shows that it is well positioned to capture growing demands of the market.
Growing market for premium chocolate products
There is now an increased demand for premium chocolate. It is a very fast-growing market. The main reason for this being the increased awareness about the health benefits of dark chocolate. Also, ethical issues have increased the demand for organic and fair-trade chocolate both of which falls under the premium league in the market. Further, it has been estimated that the market for these premium products is likely to rise by 85% from 2008 till 2011 reaching $12,900 million. Cadbury makes a number of premium chocolates. If the company increases customer preferences for these premium products then it would positively impact their sales
Rising raw material prices
Products such as cocoa liquor, cocoa butter and cocoa powder are cadbury's primary raw materials. These are all processed from cocoa beans, most of which is produced by and bought from the equatorial regions of west Africa, the far east and south America.
In the year 2009 cocoa prices were highly volatile and hit a 30-year high in October 2009. The average annual price in September 2009 was$3,142.8 per ton as opposed to $2,626 per ton in January 2009.Further, the estimated production of cocoa came down from 3.47 to 3.46 million tons. Due to this reduction in the production and increase in demand it is expected that the prices will escalate further. Also, the prices of peanuts have risen from average $0.76 per pound in 2008 to $0.85 on an average in the middle of 2009. This increase in the prices of raw material will affect the production costs and thus have a sizable impact on the profit margins of the company.
Increasing cost of raw material:
There are a number of players in the global confectionery market of which, the 5 major players make up only 42% of the global market. The remaining 58% is made up by several regional and local companies. In an attempt to increase global market share and product portfolio several mergers and acquisitions have taken place. A good example of this was the acquisition of Wm Wrigley Jr. for $23,000 million, the largest chewing gum company in America, by Mars-the world's largest chocolate maker. This led to the formation of one of the world's top confectionary company's and also created fierce competition in the confectionary business. Further, it created pricing pressure thus reducing the profit margins of the competing companies.
Rising labour wages
Cadbury and all other companies must follow federal and state labour laws. This also includes the Fair Labour Standards Act which fixes minimum wages, tip credits and worker conditions. It was noted that the minimum wage in the US rose from $5.15 per hour in 1997 to $7.25 per hour in July 2009. Similarly the minimum wages in the UK also rose by 3.8% thus reaching £5.73 per hour in October 2008. This is a 60% rise since the introduction of the minimum wage policy in 1999. Thus, the increasing labour wages could result in a decrease in the company's profit margin
Proposed marketing strategy
It was observed that the cost of the raw materials used in the production of chocolate has been increasing for the last few years. For the present moment the increase in price of the finished product has off-set the possible loss. But, at the rate at which the rates of raw materials are increasing the prices of the finished product will also have to be revised quite frequently and eventually the price of the chocolate will be exorbitant and will cause the sales to drop. A possible alternative is to find a cheaper source of raw materials of equivalent quality.
Another possible option is to decrease the size of the chocolate bar marginally and keep the price the same of just increase it by a small un-noticeable amount.
Also, the current trends show that there is an increased demand for premium chocolate products. This is due to the increased knowledge about dark chocolate and its health benefits.
As we know that at the present moment Cadburys main focus and best selling chocolate is Cadburys dairy milk. But, since there is a fast growing market for dark chocolate Cadburys should venture into making innovative new dark chocolate bars. These could be either plain dark chocolate or flavoured dark chocolate bars. For example, mint flavoured dark chocolate bars. This could be possible competition for companies such as Lindt and Hershey's.
Another possible prospect for growth is by increasing their sales in the European markets where the sale of Cadbury is comparatively lower than its competitors. This can probably be done by creative marketing and product innovation. Creative marketing strategies could include options such as having attractive advertisements with special offers just for that particular day or week on the back of bus and train tickets. These modes of transport are used by the public at large since the public transport system in European countries is very well developed. Such an advertisement is sure to play on the minds of people and make even possible increase the number of first time buyers rather than just repeat customers.
- Referencing Electronic Sources [online] Available from Data monitor (accessed on 25th November 2009)
- Referencing Electronic Sources [online] Available from Euro monitor (accessed on 2nd December 2009)
- Referencing Electronic Sources [online] Available from http://www.cadbury.co.uk/cadburyandchocolate/ourstory/Pages/ourstoryFlash.aspx#/1981_present (accessed on 26th November 2009)
- Referencing Electronic Sources [online] Available from http://www.cadbury.com/Pages/Home.aspx (accessed on 27th November 2009)