Analysis of the Chocolate Industry in India

Project Objective

This project aims at understanding the overall Chocolate Industry in India, the product portfolios of different players in the market, various factors affecting the growth and success of chocolate industry in India, the challenges and opportunities which the market offers and the changing trends in the Indian Chocolate Industry. The project also covers a brief study of Cadbury’s India with reference to above points.

An Overview of Chocolate Industry in India

The chocolate industry in India as it stands today is dominated by two companies, both multinationals. The market leader is Cadbury with a lion’s share of 70 percent. The company’s brands (Five Star, Gems, Eclairs, Perk, Dairy Milk) are leaders their segments. Till the early 90s, Cadbury had a market share of over 80 percent, but its party was spoiled when Nestle appeared on the scene. The latter has introduced its international brands in the country (Kit Kat, Lions), and now commands approximately 15 percent market share. The Gujarat Co-operative Milk Marketing Federation (GCMMF) and Central Arecanut and Cocoa Manufactures and Processors Co-operative (CAMPCO) are the other companies operating in this segment. Competition in the segment will get keener as overseas chocolate giants Hershey’s and Mars consolidate to grab a bite of the Indian chocolate pie.

Per Capita Chocolate Consumption (in lb) of first 15 countries of the world Rank Countries Per Capita Consumption (in lb)

1. Switzerland 22.36
2. Austria 20.13
3. Ireland 19.47
4. Germany 18.04
5. Norway 17.93
6. Denmark 17.66
7. United Kingdom 17.49
8. Belgium 13.16
9. Australia 12.99
10. Sweden 12.90
11. United States 11.64
12. France 11.38
13. Netherlands 10.56
14. Finland 10.45
15. Italy 6.13

INDIA, stands nowhere even near to these countries when compared in terms of Per Capita Chocolate Consumption. The Indian chocolate industry is extremely fragmented with a range of products catering to a variety of consumers. We have the bars/slabs, jellies, lollipops, toffees and sugar candies.

Given India’s mammoth population, it comes as a surprise that per capita chocolate consumption in the country is dismally low – a mere 20 gms per Indian. Compare this to over 7 kgs in most developed nations.

However, Indians swallowed 22,000 tonnes of chocolate last year and consumption is growing at 10-12 percent annually.

The market size of chocolates was estimated to be around 16,000 tonnes, valued around Rs. 4.16 billion in 1998. Volume growth which was over 20% pa in the 3 years preceding 1998, slowed down thereafter.

Both chocolate and sugar confectioneries have abysmally low penetration levels, in fact, even lower than biscuits, which reach 56 per cent of the households. Market growth in the chocolate segment has hovered between 10 to 20%. In the last five years, the category has grown by 14-15% on an average and will expect it to continue growing at a similar rate in the next five years. The market presently has close to 60mn consumers and they are mainly located in the urban areas. Growth will mainly come through an increase in penetration as income levels improve. However, almost all of this consumption is in the cities, and rural India is nearly ‘chocolate-free’. But the fact is that three quarters of Indians live in Rural Areas. “Average summertime temperatures reach 43 degrees Celsius in India. Chocolate melts at body temperature of 36 degrees.”

Per capita consumption of chocolates in India is minuscule at 20gms in India as compared to around 5-8 kgs and 8-10 kgs respectively in most European countries. … Awareness about chocolates is very high in urban areas at over 95%. … Growth of other lifestyle foods such as malted beverages and milk food have actually declined by 3.7 per cent and 11.7 per cent, however the CHOCOLATES continue to grow at the rate of 12.6%.

Low priced unit packs, increased distribution reach and new product launches can be said to have fuelled this growth.

The launch of lower-priced, smaller bars of chocolate in the last two years and positioning of chocolate as a substitute to traditional sweets during festivals, have boosted consumption. This is also because chocolate, which was considered to be an elitist food, has caught the fancy of buyers looking for a lifestyle item at affordable cost.

Till recently, chocolate consumption had been restricted by low purchasing power in the market. Chocolates and other cocoa-based snack foods were looked upon as food suitable only for the well-off.

After economic liberalization in 1991, major changes have occurred in food habits, partly on account of rise in gross domestic product (GDP) growth and higher purchasing power in the hands of the middle-class representing a third of the total population. Availability of chocolate products has also exploded.

A study had projected that sales of the Indian chocolate industry would rise from $125/$130 million in 1998 to $175/$180 million by the year 2000 and to $450 million by the year 2005 which ACTUALLY happened irrespective of various negative factors.

Per capita chocolate consumption continues to be low at about 200g per person, being mainly consumed in urban areas. In the middle and higher income groups, 70 per cent of children, 43 per cent of young adults and 16 per cent of adults consume chocolate.

AC Nielsen ORG Marg report estimates the Indian Chocolate Industry’ worth at Rs 2,000-crore (Rs 20 billion)

Types of Chocolates

Depending on what is added to (or removed from) the chocolate liquor, different flavors and varieties of chocolate are produced. Each has a different chemical make-up, the differences are not solely in the taste.

1. Unsweetened or Baking chocolate is simply cooled, hardened chocolate liquor. It is used primarily as an ingredient in recipes, or as a garnish.

2. Semi-sweet chocolate is also used primarily in recipes. It has extra cocoa butter and sugar added. Sweet cooking chocolate is basically the same, with more sugar for taste.

3. Milk chocolate is chocolate liquor with extra cocoa butter, sugar, milk and vanilla added. This is the most popular form for chocolate. It is primarily an eating chocolate.

Cocoa is chocolate liquor with much of the cocoa butter removed, creating a fine powder. It can pick up moisture and odors from other products, so you should keep cocoa in a cool, dry place, tightly covered.

There are several kinds of cocoa

Low-fat cocoa has the most fat removed. It typically has less than ten percent cocoa butter remaining.

Medium-fat cocoa has anywhere from ten to twenty-two percent cocoa butter in it. Drinking or Breakfast cocoa has over twenty-two percent left in it. This is the cocoa used in chocolate milk powders like Nestle’s Quik.

Dutch process cocoa is cocoa which has been specially processed to neutralize the natural acids in the chocolate. It is slightly darker and has a much different taste than regular cocoa. Decorator’s chocolate or confectioner’s chocolate isn’t really chocolate at all, but a sort of chocolate flavored candy used for things such as covering strawberries. It was created to melt easily and harden quickly, but it isn’t chocolate.

Categories of Chocolates

Commercial Chocolates are available in the following forms:

1. Bars or Moulded Chocolates
2. Counts
3. Panned Chocolates (Gems)
4. Éclairs
5. Assorted Chocolates

Bars or moulded chocolates (like Dairy Milk, Truffle, Amul Milk Chocolate, Nestle Premium, and Nestle Milky Bar) comprise the largest segment, accounting for 37% of the total chocolate market in volume terms. … Wafer chocolates such as Kit-Kat and Perk also belong to this segment. Panned chocolates accounts for 10% of the total chocolate market. … Wafer chocolates such as Kit-Kat and Perk also belong to this segment. ..

Form of Consumption

1. Pure Chocolates
2. Toffees
3. Cakes & Pastries
4. Malted Beverages
5. Wafer Biscuits & Baked Biscuits
6. Chocolate Desserts

Chocolate Manufacturing Process

Workers cut the fruit of the cacao tree, or pods open and scoop out the beans. These beans are allowed to ferment and then dry. Then they are cleaned, roasted and hulled. Once the shells have been removed they are called nibs. Nibs are blended much like coffee beans, to produce different colors and flavors. Then they are ground up and the cocoa butter is released. The heat from the grinding process causes this mixture of cocoa butter and finely ground nibs to melt and form a freeflowing substance known as chocolate liquor. From there, different varieties of chocolate are produced.

What is conching?

Raw unprocessed chocolate is gritty, grainy and really not suitable for eating. Swiss chocolate manufacturer Rudolph Lindt discovered a process of rolling and kneading chocolate that gives it the smoother and richer quality that eating chocolate is known for today. The name ‘conching’ comes from the shell-like shape of the rollers used. The longer chocolate is conched, the more luxurious it will feel on your tongue.

Market Size (by value & by volume)

The Indian chocolate market is valued at Rs. 650 crores (i.e. Rs. 6.50 billion) a year. The Indian chocolate bazaar is estimated to be in the region of 22,000-24,000 tonnes per annum, and is valued in excess of US$ 80 million.

Chocolate penetration in the country is a little over 4 percent, with India’s metros proving to be the big draw clocking penetration in excess of 15 percent. Next, comes the relatively smaller cities/towns where consumption lags at about 8 percent. Chocolates are a luxury in the rural segment, which explains the mere 2 percent penetration in villages.

The market presently has close to 60mn consumers and they are mainly located in the urban areas.

Major Players & their Market Share

The major players in the Indian Chocolate Industry are:

1. Cadbury’s India Limited
2. Nestle India
3. The Gujarat Co-operative Milk Marketing Federation (GCMMF) – AMUL
4. Cocoa Manufactures and Processors Co-operative (CAMPCO)

Cadbury’s India Limited – A Study

CADBURY’S INTERNATIONAL

Cadbury is a very old trusted name. It all started in Birmingham in England when John Cadbury started his family grocery shop with side business of cocoa and chocolate products in around 1824. His two sons, Richard and George, expanded their family business of cocoa and chocolate. Bournville, a town near Birmingham, was build by them as a part of expansion of their business.

Cadbury family is also known for their contribution in social reforms and considered as liberals. This family was in the forefront of adult education movement in England.

CADBURY’S INDIA LIMITED

Cadbury was originally incorporated as a wholly owned subsidiary of Cadbury Schweppes Overseas Ltd (CSOL) in 1948. The company’s original name was Cadbury Fry (India) Ltd. In 1978, CSOL diluted its equity stake to 40% to comply with FERA guidelines. In 1982, the name was changed to Hindustan Cocoa Products. CSOL’s shareholding was increased to 51% in Jan ’83 through a preferential rights issue of Rs700mm. The current name was restored in Dec ’89. In 2001, Cadbury Schweppes made an open offer to acquire the 49% public holding in the company. The parent holds over 90% of the equity capital after the first open offer. A second open offer has been made to buyback the balance shareholding, after which the company would operate as a 100% subsidiary of Cadbury Schweppes Plc

Ever since the Cadbury is in India in 1947, Cadbury chocolates have ruled the hearts of Indians with their fabulous taste. The company today employs nearly 2000 people across India. Its one of the oldest and strongest players in the Indian confectionary industry with an estimated 68 per cent value share and 62 per cent volume share of the total chocolate market. It has exhibited continuously strong revenue growth of 34 per cent and net profit growth of 24 per cent throughout the 1990’s. Cadbury is known for its exceptional capabilities in product innovation, distribution and marketing.

With brands like Dairy Milk, Gems, 5 Star, Bournvita, Perk, Celebrations, Bytes, Chocki, Delite and Temptations, there is a Cadbury offering to suit all occasions and moods. Today, the company reaches millions of loyal customers through a distribution network of 5.5 lakhs outlets across the country and this number is increasing everyday.

OBJECTIVES AND VALUES

Our objective is to

Grow shareholder value…over the long term

Cadbury in every pocket
Our marketing strategy is aimed at achieving this vision by growing the market, by appropriate
pricing strategy that will create a mass market and to have offerings in every category to widen the
market

Our Managing For Value Process incorporates

Setting stretched financial objectives.

Adopting Value Based Management for major strategic and operational decisions and business systems.

Creating an outstanding leadership capability within our management.

Sharpening our company culture to reflect accountability, aggressiveness and adaptability.

Aligning our management rewards structure with the interests of our shareowners.

VISION

Life Full Of Cadbury

Cadbury is an organisation which impacts and interacts with the consumers.

Cadbury is present in most happy occasions in the life of our consumer.

Our brands excite our consumer.

Cadbury is an expression of a consumer’s life.

Cadbury Full Of Life

Cadbury as a company is vibrant.

Cadbury ia a fun and energising workplace.

Cadbury is robust and alive.

Business

Cadbury dominates the Indian chocolate market with above 65 – 70 % market share. Besides, it has a 4% market share in the organized sugar confectionery market and a 15% market share in milk/ malted foods segment.

Cadbury’s Indian operations are not just the largest in Asia but also the cheapest. In India, Cadbury has the largest market share anywhere in the world and has been the fastest growing FMCG Company in the last three years with a compound annual growth rate of 12.5 per cent.

Plant locations

Cadbury’s manufacturing operations started in Mumbai in 1946, which was subsequently transferred to Thane. In 1964, Induri Farm at Talegaon, near Pune was set up with a view to promote modern methods as well as improve milk yield. In 1981-82, a new chocolate manufacturing unit was set up at the same location in Talegaon. The company, way back in 1964, pioneered cocoa farming in India to reduce dependence on imported cocoa beans. The parent company provided cocoa seeds and clonal materials free of cost for the first 8 years of operations. Cocoa farming is done in Karnataka, Kerala and Tamil Nadu. In 1977, the company also took steps to promote higher production of milk by setting up a subsidiary Induri Farms Ltd near Pune. In 1989, the company set up a new plant at Malanpur, MP, to derive benefits available to the backward area. In 1995, Cadbury expanded Malanpur plant in a major way. The Malanpur plant has modernized facilities for Gems, Eclairs, Perk etc. Cadbury also operates third party operations at Phalton, Warana and Nashik in Maharashtra.

These factories churn out close to 8,000 tonnes of chocolate annually.

Cadbury’s Dairy Milk (CDM):

Cadbury’s Dairy Milk is the flagship brand of Cadbury’s not only in India but world wide. CDM is the single largest selling unit in India. It has annual sales to the tune of Rs 200 crore. CDM not only accounts for 30 per cent of the total chocolate market in value, but commands nearly 26 per cent in volume terms and close to 30 per cent of Cadbury’s annual turnover.

Moving from a predominantly adult positioning in the days of the legendary dancing girl ad, to the teens and the tweens, when the Cyrus Broacha ads hit the airwaves, CDM has made a long sweet journey. In spite of the new categories being explored by Cadbury, its star brand remains Cadbury Dairy Milk (CDM) which continues to corner almost 30 per cent of the chocolate market.

Cadbury’s Temptation:

Cadbury’s Temptation is premium chocolate brand aimed for high value consumption. Various variants available are Almond, Rum, Cashew & Orange. Cadbury’s temptation is priced at Rs. 40

Cadbury’s Celebration

Cadbury India launched its premium Celebrations range, which contains traditional Indian dry fruits wrapped in Dairy Milk chocolate. This gifting option combines the pleasure of giving away dry fruits – which Indians traditionally consider a premium, healthy gift – with chocolate. Cadbury now has 90 per cent market share in this profitable segment.

PRODUCT REVAMPING & INNOVATIONS

Cadbury’s chocolate brands registered double-digit growth in 2002, touching an astounding 19 per cent in the second half of that calendar year. Getting the power brands right was the first priority, so genuine re-launches of the products were made.

However, the growth rate was declining after that. The growth went down from 19 per cent in 1999 to 12 per cent in 2000 to single-digits, with seven per cent in 2001. If it staged a smart recovery to nearly 10 per cent in 2002, it was largely on the back of Chocki and the revamped power brands.

PRODUCT INNOVATIONS:

5 STAR:

Consumer feedback suggested that the old 5 Star was too chewy, and people complained of it sticking to their teeth. It was made softer and melted easily in the mouth & introduced as 5 Star Crunchy

PERK:

Perk was made much lighter and the size of the bar increased to match Nestle’s Munch. Perk had been under fire from Nestle’s deadly duo of KitKat and Munch, but after the relaunch, its marketshare is two per cent more than KitKat’s. And, the five-year-old brand is now almost as big as the decades-old 5 Star in size, both in the region of Rs 50-55 crore.

HEROES:

Packaging innovation has played a vital role in revamping of various Cadbury’s brands. Heroes brand is simply a multi-pack with miniatures of all its most popular brands in a single outer case.

NEW PRODUCT LAUNCHES

Rich Dry Fruit Collection

For Gifting Festive Season

Cadbury Celebrations’ Rich Dry Fruit

Collection – a range of premium chocolate gift boxes.

Available in attractive packs, the Collection caters to a premium gifting consumer and is an ideal festive gift. It is a unique combination of the best Cadbury chocolate and premium dry fruits and comes in four different formats each of which is a mix of select premium dry fruits enrobed in rich Cadbury Dairy Milk chocolate.

Cadbury’s Creative Launch

A new ‘after dinner’ segment

Cadbury Desserts

“for sweet moments after dinner”

“Khaane Ke baad Kuch Meetha Ho Jaye”.

Rs. 20/- per packet of 44 gms

Cadbury Dairy Milk (CDM) Desserts – with rich indulgent crème center, in exotic & traditional flavors of Tiramisu and Kalakand. CDM Desserts offer the perfect rounding off taste, after meal that adds special ‘Meetha’ moments to the family. The rich tastes of CDM combined with the unique crème center in exotic flavors provide a special chocolate experience. CDM Desserts add delight to the after-meal moments, especially with the consumers whose current choice of sweets range from home made delicacies to fruits to meethai.

PRICING

After the roaring success of Nestle’s Munch and Chocostick, Cadbury’s empire struck back hard. The Rs 5 price point accounts for more than half of all chocolate sales. Nestle had seized the initiative at this price point, with its launch of Munch, now a roaring success (and the largest selling product at that price point). Today, Cadbury has four products at this price point: CDM, Perk, 5 star and Gems – and the five-rupee CDM bar is its single largest-selling SKU. “This is a potent price point in India, because the average purchasing power is abysmally low,” is what industry analyst have to say.

Nestle kicked off one of the biggest success – the liquid chocolate category with its brand Chocostick priced at Rs.2 – three months ahead of competition. Cadbury did react with Chocki, priced at Rs 2, expanding the concept of sachetisation to new frontiers. Chocki has been the single biggest growth driver for Cadbury as well as the entire chocolate category. The novelty of the format endeared itself to the existing customer. In less than one year, it constituted nearly 10 per cent of the total chocolate market, split equally between Cadbury and Nestle.

Volume led growth strategy

Cadbury has followed a well-planned strategy of fuelling volume growth by introducing smaller unit packs at lower price points. Simultaneously, the company seems to have astutely juggled with the larger pack sizes and raised prices to a degree higher than what appears at face. The strategy has driven volumes in the last two years and we expect the volume growth to continue in the next two years.

PRICE WOES

Chocki, selling at a potent price point of Rs 2, was ideal for smaller towns, especially since it did not need refrigeration. But Chocki started to cannibalise other higher-priced chocolates in larger markets. The students of Bombay Scottish (an upmarket school in Mumbai) are not supposed to eat Chocki, they should not have even heard of the product.

Distribution

Chocolate needs to be distributed directly, unlike other FMCG products like soaps and detergents, which can be sold through a wholesale network. 90% of chocolate products are sold directly to retailers.

Distribution, in the case of chocolates, is a major deterrent to new entrants as the product has to be kept cool in summer and also has to be adapted to suit local tropical conditions. Cadbury’s distribution network used to encompasses 2100 distributors and 450,000 retailers. The company has a total consumer base of over 65 million. Besides use of IT to improve distribution logistics, Cadbury is also attempting to improve distribution quality. To address the issues of product stability, it has installed VISI coolers at several outlets. This helps in maintaining consumption in summer, when sales usually dip due to the fact that the heat affects product quality and thereby offtake.

To avoid cannibalization of its higher priced products from lower priced ones, Cadbury is setting up two separate distribution channels – one for CORE business & other for MASS markets, with different stockists, wholesalers and retailers. One set will be dedicated to Cadbury’s high-end products and traditional chocolates. The other will cater to the mass market brands namely Chocki, Halls, Eclairs et al – all products priced below Rs 3.

But today, Cadbury’s distribution network reaches out to six lakh outlets each for its chocolate & confectionery brands (i.e. total reaching12 lakh outlets).

Promotion

Typically it is said that chocolates are being eaten when everyone is happy. And this is something advertising has always portrayed. But it is found chocolates are eaten under diverse conditions and moods – when people are anxious, when they are sad, when happy – a whole range of emotions. Condensing these views & thoughts, it can be said chocolate is a true soul mate. Someone who is with you through the ups and downs of life, helping you bounce back. And that’s what Cadbury’s Dairy Milk (CDM) positioned itself as – a special friend.

% Share of various Brands Ad spending of Cadbury

Here, the 6 Cadbury brands shown in the graph comprise 85% of the advertising pie, whereas, rest of the 9 brands advertised by Cadbury comprise 15% of the advertising. Cadbury Dairy Milk Chocolate is the most advertised brand (with 22%).

RE-INVENTING CABDURY

“Kya Swad Hai Zindagi Mein” redefined the way Indians looked at Cadbury Chocolates. (The commercial showed a beautiful young lady overcoming all obstacles on the cricket ground, crossing boundary, watchman, securities and embracing her lover who won the game by hitting a six). This theme introduced in around mid 90’s bought instant growth to Cadbury’s Dairy Milk. The Ad campaign ran successful for about four years and immersed deeper inside hearts of Indians.

In March 2002, Cadbury launched its next advertisement campaign for its flagship chocolate brand, Cadbury’s Dairy Milk (CDM). The campaign featured a television (TV) commercial that was significantly different from the company’s earlier commercials for the brand. It featured Cyrus Broacha interviewing college students and asking why they liked to eat CDM. This was followed by college students ‘singing’ their excuses for eating CDM. Just as the commercial seems all set to end with the students and Cyrus singing the famous CDM theme, ‘Khane Walon Ko Khane Ka Bahaana Chaahiye’ (those who want to eat, will find excuses), a student comes up and questions Cyrus, The advertisement aimed at conveying the idea that no specific occasion is required for consuming CDM. This was a significant departure from CIL’s strategy of appealing to adults in India, who sought a rational justification for indulging in chocolate consumption. Cadbury roped in Preity Zinta for its PERK brand. Preity Zinta’s angelic dimples laid the foundation for what would become the Indian teenager’s favorite snack. After this campaign, PERK’S sale surged Cadbury’s advertising has, over the past few years, aptly reflected India’s passion for chocolates.

Cadbury And The Worm Controversy

The discovery of worms in some samples of Cadbury’s Chocolate in early October 2003 created one of the biggest controversies in India against a Multi National reputed for being a benchmark of QUALITY.

The controversy created an deep adverse impact on the company with their sales not only drastically dipping down, but at the same time allowing the competitors to establish their foothold and taking maximum advantage of Cadbury’s misfortune.

The controversy, and the adverse publicity received in several countries, set back its plan of outsourcing model which would have resulted in significant revenue generation, several months back.

The “worms’ controversy” came at the worst time….the next few months were the peak season of Diwali, Eid & Christmas. Cadbury sells almost 1,000 tonnes of chocolates during Diwali. In that year, the sales during festival season dropped by 30 per cent. The company saw its value share melt from 73 per cent in October 2003 to 69.4 per cent in January 2004. In May, however, it inched up to 71 per cent. CDM sales volumes declined from 68 per cent in October ’03 to 64 per cent in January 2004 Clearly, the worm controversy took a toll on Cadbury’s bottom-line. For the year ended December 2003, its net profit fell 37 per cent to Rs 45.6 crore (Rs 456 million) as compared with a 21 per cent increase in the previous year.

However, Cadbury’s reiterated that all through the 55 years of leadership in India, that it has remained synonymous with chocolates and have remained committed to high quality and consumer satisfaction.”

CABDBURY’S FIGHT-BACK

‘Project Vishwas’ “Steps to ensure quality & regain the confidence” Following the controversy over infestation in its chocolates, Cadbury India Ltd unveiled ‘Project Vishwas’, a plan involving distribution and retail channels to ensure the quality of its products.

The company’s team of quality control managers, along with around 300 sales staff, checked over 50,000 retail outlets in Maharashtra and replaced all questionable stocks with immediate effect. The Vishwas programme was intended to build awareness among retailers on storage requirements for chocolates, provide assistance in improving storage conditions and strengthen packaging of the company’s range of products.

Cadbury reduced the number of chocolates in its bulk packets to 22 bars from the present 60 bars. These helped stockists display and sell the products “safely and hygienically” 190,000 retailers in key states were covered under this awareness programme.

The Big ‘B’ FACTOR

The big factor that has pushed up CDM sales is the Amitabh Bachchan campaign. It helped restore consumers’ faith in the quality of the product. In early January, Cadbury appointed Amitabh Bachchan as its brand ambassador for a period of two years.

The company believed that the reputation he has built up over the last three decades complements their own, which was built over a period of 50 years. Yet, the entire credit of recovery could not be attributed to the brand mascot. Incisive action taken by the company also helped. Some of which were:

1. Responded to consumers concern over the issue rapidly. Also, the communication campaign worked effectively in giving out the central message.
2. The packaging was changed to include a sealed plastic wrapper inside the outside foil. Cadbury’s launched a new ‘purity-sealed’ packaging for its flagship product, Cadbury Dairy Milk. The packaging is in response to foreign bodies, notably worms, being found in its products. Over the next few weeks Cadbury will work towards introducing either a heatsealed or a flow-pack packaging that offers a high level of resistance to infestation from improper storage.
3. New advertising & promotion campaigns were in place which accounted for an Ad spend of nearly Rs 40 crore (Rs 400 million) Cadbury invested nearly Rs 25 crore (Rs 250 million) this year on new machinery for the improved packaging.

CADBURY’S SINGING SWEETLY AGAIN

All is well that ends well. And for Cadbury’s India, nothing can be sweeter than Regaining Back the Consumer Confidence.

Thanks to quick action taken to recover the damage done by the worm controversy like Operaion Vishwas, adopting new packaging & massive advertising with Mr. Amitabh Bachchan as their brand ambassador, Cadbury’s regained its market share.

The survey conducted by the company says that consumers have long forgotten the controversy and are back to their merry chocolate-chomping ways. Sales were back to the precontroversy levels. Consumer confidence in the product was back and there was a steady progression in sales .The company posted a high double digit sales growth in that year end. The recovery began in May 2004 when Cadbury’s value share went up to 71 per cent.

Hires AT Kearney to curb costs

Cadbury India appointed management consultancy firm AT Kearney to draw up a strategy to control costs in several areas, including sourcing of raw materials and packaging. This was partly an outcome of the worms’ controversy more than a year ago. Among other things, it changed the wrappers for its Cadbury Dairy Milk brand and introduced better coolers.

The consultancy firm will also look at the sourcing of direct and indirect materials like renegotiating with suppliers for longer term contracts and vendor management. Other costs (indirect expenses) like travel costs and hotels were also being studied.

In other words, Cadbury is trying to reduce the cost per stock keeping unit (SKUs, or packs).

The aim is to improve efficiencies.

Earnings sensitivity factors

Cocoa bean prices: Domestic as well as international prices of key raw material – cocoa have significant impact on margins.

Excise duties : Changes in excise levied on malt and chocolate influences end product prices and thereby volume growth as well as margins.

Changes in