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in
DESSERTATION
REPORT
 ON
INDIAN CHOCOLATE INDUSTRY

Submitted in the partial fulfillment of the

award of the degree of

Submitted by:

(MBA IV SEM)
ENROLLMENT NO.
AMITY INTERNATIONAL BUSINESS SCHOOL
(AMITY UNIVERSITY,NOIDA, Sec-44.)

ACKNOWLEDGEMENT
I would like to pay my gratitude to .., and also wish thanks
to . AMITY BUSINNESS SCHOOL International Business programme.
Again, I greatly appreciate the diligent support provided by all my colleagues, both academic
and professional and the faculty members if AMITY for their wholehearted support and co-
operation.
Last but not the least, I would like to thank ., my project guide for his
valuable insight and unending guidance.
Above all, I thank God for giving me courage and wisdom to complete this piece of work
successfully in time.

Contents
Titles

1. Introduction

2. Objective
3. Research Methodology

4. Chocolate Industry

5. Chocolate in a Bloom

6. Chocolate Industry in India

7. Major Players

8. Amul

9. Nestle

10. Cadbury

11. SWOT analysis of Cadbury

12. Market Segmentation

13. Psychographics and Demographics

14. Product Positioning

15. Product Market Boundary

16. Price Sensitivity

17. Consumer Buying Behavior

14. Industry Structure and Dynamics

15. The Rural Conundrum

16. Key Success Factors

17. Product Life Cycle

18. Positioning

19. Procter's 5 Force Model

18. Rural Market Initiatives

20. Suggestions
21. Conclusion

22. Bibliography

EXECUTIVE SUMMARY

The Cadburys Indias number one chocolate is able to share with their market insights based

upon unparalled breath of chocolate experience.

The merge in 1969 with Schweppes and the subsequent development of the business have led to

Cadbury Schweppes taking the led in both, the confectionery and soft drink market intech UK

and becoming a major force in the international market. Cadbury Schweppes today manufactures

product in 60 countries and a trade in staggering 120.

This project is a sincere effort to look for the market potential in chocolate and confectionery

industry. A descriptive research procedure had been applied to come to the conclusions of the

project. The project later concluded in recommending the market potential of the chocolate and

confectioneries.

INTRODUCTION
Chocolates had its beginning in the times of the Mayas and the Aztecs when they beat cocoa into
a pulp and made bitter frothy chocolate out of them. They first became popular in Europe in a
highly unrefined form. Then the Hershey Food Company was the first to bring out chocolates in
the currently popular solid form. The main ingredients of chocolate is cocoa grown mainly on
equatorial zones and of the consumers looks for variety he goes in for some of that companys
own sugar milk solids and permitted emulsifiers. Cocoa constitutes nearly 40% of the total raw
material cost.
The following report studies the chocolate industry in India and in particular the position of the
chocolate brand - Cadbury. The brand name chosen is the umbrella brand as it was felt that the
corporate name is recognized as brand not so much its individual products. The study focuses on
the marketing and the advertising, employed by Cadbury in the context of the Indian macro
environment and industry structure. The advertising strategy is studied with respect to Cadburys
business and marketing objectives. The strategies adopted are then analyzed for each product
offering. Considering the strategies of Cadburys major competitor follows the analysis, nestle
India ltd. to get an understanding as to where Cadburys stands.
The report initially focuses on an examination of the industry environment and the product class.
The product then goes on to analyze the corporate, marketing and advertising strategies adopted
by the selected company and its main competitor. It concludes by looking at the future challenges
for the industry and the company
It is also to be noted that the data used for analysis is of 2001-2003. This was the most recent
data available under whose purview the companies marketing and the advertising strategies are
studied.
OBJECTIVE OF THE PROJECT
The major objective is to study the Marketing Segmentation of Chocolate and:

To understand the Consumer Buying Behavior of Chocolate.

And also to study the Industry Structure and Dynamics.

RESEARCH METHODOLOGY
Sample Units: Three of the Number One brands in India namely Cadbury, Nestle and Amul
respectively, were chosen on the basis of their market shares. These three industries were chosen
on the basis of the usage of the products, as the usage of FMCGs and is high and noticeable.
Sample Design: Non-probability sampling was resorted to and the methods used is Convenience
sampling and Judgment sampling.
Data Collection: Data was collected from Secondary data. Secondary data was soured from
various published sources which include magazines like Business India and Business World.
Newspapers like Brand Equity, Brand Wagon and The Times of India were also used. Annual
Report of Cadburys and Nestle were also referred
Data was analyzed manually .

Emerging markets drive growth for malt and chocolate drinks

Malt- and chocolate-based drinks are often seen as relatively unsophisticated in developed
markets in the west, but in many countries, in particular in Latin America, they are big business
indeed, marketed mostly as an excellent source of nutrition in countries where food quality is
often poor. But improving sales in other countries will depend on finding premium positioning.
Global retail volume sales of both malted and chocolate-based hot drinks reached 956,702 tones
in 2003, according to a recent report from market analysts Euro monitor, with Latin America
alone accounting for over one third of total sales.
Indeed, Latin America accounts for two of the top three markets for chocolate-based drinks
(Brazil and Mexico, the third being Spain), and manufacturers are increasingly focusing their
marketing efforts on young people in these countries, according to the report.
This goes hand-in-hand with the widespread introduction of value-added products in these
markets. In recent years, for example, the Mexican market saw the launch of a number of
chocolate-based powders in new packaging, formats and formulas - often with new flavors.
These products generally targeted consumers prepared to pay a premium, though some were
aimed at low-income segments of the population, according to Euro monitor.
Brazilian manufacturers also met consumer demand by offering premium chocolate-based
products, helped by the fact that Brazilian consumers are more aware of health issues than many
of their Latin American counterparts. Brazilian consumers often upgrade by purchasing healthier
chocolate-based products such as low-calorie and diabetic-friendly alternatives, Euro monitor
said, highlighting the 2003 launch of Toddy Light by PepsiCo as an example of this trend.
Malt drinks, meanwhile, are most popular in India, which accounts for 22 per cent of the worlds
retail volume sales. They are traditionally consumed as milk substitutes there and marketed as a
nutritious drink, mainly consumed by the old, the young and the sick. Sales have also been aided
by improved retail and distribution in recent years, combined with a large child and youth
consumer base, the report said.
India also recorded the highest growth (53 per cent in US$ terms) during 1998-2003, again
spurred by consumers trading up to value-added products. In 2003, for example, Glaxo Smith
Kline re-launched Horlicks for Kids, specifically targeted at young children, as well as launching
Horlicks in three new flavors.
With its Horlicks brand (often seen as an old-fashioned drink in its home market in the UK)
Glaxo Smith Kline in fact accounts for 70 per cent of malt-based hot drinks, with India alone
contributing nearly 60 per cent of the companys global sales of the product. Other major players
include Cadbury Schweppes and Nestl.
But if developing nations have a growing taste for malt- and chocolate-based drinks, other more
sophisticated markets have yet to catch on. Indeed, the report shows that the performance of
malt- and chocolate-based drinks in mature western markets was characterized by of stagnation
and decline during 1998-2003.
The US, for example, has seen a sharp decline in value sales of both malt- and chocolate-based
drinks over the past few years, mainly as these products largely remained outside the overarching
consumer trend for premium and healthy products. In fact, malt-based drinks have an almost
negligible presence in the US, with manufacturers largely failing to attract the important child
and youth consumer groups a category more interested in soft drinks.
The performance of malt- and chocolate-based drinks in Western Europe was more positive than
that of the US, but nonetheless there was little in the way of growth during 1998-2003. A relative
lack of innovation and marketing activities, allied to demographic factors such as falling birth
rates, saw important western European markets such as Germany record modest growth,
according to Euro monitor.
The warmer winters experienced in Western Europe in recent years also contributed to the lower
demand for chocolate- and malt based drinks. The UK experienced sharp decline of 13 per cent
in retail volume terms in malt-based drinks and only moderate growth in chocolate drinks during
1998-2003.
Looking forward, the emerging markets will, not surprisingly, continue to provide the best
opportunities for growth in this category, Euro monitor suggests. Market such as Indonesia and
Mexico are expected to see strong growth in both malt- and chocolate-based drinks by 2008,
with large youth populations and a rising number of middle class consumers as the key driving
factors.
Among major markets, China is forecast to be the fastest growing market in both chocolate-
based (up 35 per cent by value) and malt-based (up 29 per cent by value) up to 2008. Chinas
booming economy along with rising levels of disposable income and increased availability of
quality products will encourage further consumption, the analysts predict. Following Chinas
accession to WTO, multinationals are also expected to penetrate the country further, driving up
demand and in turn prompting more local manufacturers to get involved in production.
Chocolate in a Bloom
Is a white bloom enough to put you off your chocolate? Scientists are hard at work to find out
exactly how this bloom forms and how to stop it, as Emma Davies finds out

Next time you reach out for your favorite chocolate bar you will probably pay little attention to
its fat crystals. However, should you be unfortunate enough to peel back the wrapping to reveal a
chocolate covered in a mouldy-looking white 'bloom', and then perhaps you might spare a
thought for its crystal structure? The chocolate industry ploughs a lot of money into investigating
chocolate crystals and bloom.
The industry takes bloom seriously - not only because it is unsightly, but also because it can
change the texture and the flavor release properties of the chocolate. Manufacturers are keen to
invest in research, using expensive techniques such as X-ray scattering and atomic force
microscopy (AFM), to help understand exactly how bloom forms and how to stop it forming.
With the average person in the UK eating 10kg chocolate each year (according to Cadbury's
confectionery review of 1999), it is easy to see why the industry wants to create a perfect
chocolate bar that stays temptingly glossy with a good 'snap'.

Temper, temper
Tempering is a crucial stage of chocolate
manufacture, which ensures that the fat in the
chocolate crystallizes in a thermodynamically
stable crystal form.

The process generally involves cooling the

molten chocolate (held at about 45C) to a
temperature (about 27C) that induces
crystallization in both stable and unstable
crystal forms (polymorphs). Raising the
temperature slightly (to about 30C) then melts
out the unstable crystal forms leaving only the
stable crystals to seed the crystallization of the
bulk chocolate in a stable polymorphic form.

To help crystals to grow, the chocolate is

usually stirred as it is cooled using scraping
and mixing blades.

The temperatures needed to temper a chocolate

depend on the composition of its fat phase.
Manufacturers need to find the right
combination of stirring forces and temperatures
for their ingredients.

Chocolate bloom develops naturally with time, but it can be brought on prematurely. How many
of us have left a chocolate bar on the car dashboard in the sun and been disappointed to find that
it has been spoilt by a bloom? In this case, the bloom develops because the crystals melt and then
re-crystallise in a different form when the temperature drops again. Chocolate bloom can also
form if the manufacturing process doesn't include a tempering step (see Box 1), when the
temperature is carefully raised and lowered to ensure that fat crystals grow in the correct form,
size, shape and number.

Chocolate crystals

Cocoa butter, perhaps the most important ingredient of chocolate, is composed of a mixture of
saturated and unsaturated fats (triglycerides), the relative proportions of which depend on the
country of origin. Some of the unsaturated triglycerides in cocoa butter have low melting points,
making it partly liquid at room temperature. Adding milk fat to chocolate raises the level of
unsaturated triglycerides and increases the proportion of liquid fat, which explains why milk
chocolate is so much softer than its dark counterpart.
The fat crystals in cocoa butter pack together in six different formats (polymorphs). The
chocolate industry labels these polymorphs forms I to VI (form I being the least stable) and aims
to get the cocoa butter to crystallize in a stable form V to give the chocolate a glossy appearance
and a good snap.
Table 1. What goes into a typical milk chocolate?

Ingredient Per cent

Cocoa mass 11.78
Milk powder 19.08
Sugar 48.73
Added cocoa butter 19.98
Lecithin 0.35
Vanillin 0.08

Surface science

The surface of a good quality chocolate contains lots of tiny fat crystals that can reflect light,
giving it a glossy appearance. Any cracks or crevices (or even fingerprints) on the surface of the
chocolate can encourage small, spiky fat crystals to grow. When the crystals reach a size that can
diffuse the reflection of light from the surface they give it a dull appearance.
Although the exact mechanism of bloom formation remains disputed, most scientists agree that it
involves fat crystals transforming from form V to form VI. Because form VI crystals are more
stable than form V, chocolate should inevitably form a bloom at some stage, unless preventive
measures are taken.
Richard Hartel at the department of food science in the University of Wisconsin, US, believes
that although the form V to form VI transformation always accompanies bloom formation, it
does not necessarily cause it. With John Bricknell at Mars in New Jersey, US, he has analyzed a
'model' chocolate using X-ray spectroscopy, to identify the types of fat crystals that develop.
Their model chocolate contains amorphous sugar particles - created by spray drying a mixture of
corn syrup and sucrose and sieving the mixture to ensure that all the particles are the same size.
The chocolate is made by blending and tempering a mixture of cocoa butter, lecithin (an
emulsifier), sieved cocoa powder, milk fat and the amorphous sugar.
Because the model chocolate contains no crystalline sucrose, the researchers were able to see
clearly the changing polymorphic forms of the cocoa butter. They also used a colorimeter to
measure the amount of white bloom that developed on the chocolate samples, enabling them to
link changes in polymorphic form to the onset of visual bloom.
They discovered that the form V to form VI crystal transformation took place not only in all of
the samples that developed a visual bloom but also in some of the samples that remained bloom-
free. Hartel says that 'most people thought they understood bloom formation in chocolate to be
the polymorphic transition of cocoa butter. What our results show is that the polymorphic
transition indeed occurs, but that something else is needed to create visual bloom'.
Hartel's research team has come up with a theory to explain how visual fat bloom develops in
well-tempered chocolates. They suggest that, first of all, liquid fat must be able to get to the
surface of the chocolate. The 'pumping action' required to do this could be induced by
temperature fluctuations, which cause the fat crystals to melt and then to re-crystallise. Fat
crystals with high melting points 'dissolve' in this liquid fat and are taken along to the surface
where they can re-crystallise as spiky crystals. Any cracks and crevices can help the liquid fat get
to the surface. The way that the spikes grow from the surface of the chocolate, says Hartel, is
'open for debate' although the 'nature of the sites available for growth undoubtedly plays a role in
their formation'.
An interesting and unexpected result emerged from Hartel's study: the amorphous sugar used to
make the 'model' chocolate seemed to be able to prevent a visual bloom developing. When the
researchers looked at the samples through a microscope, they saw that the fat crystals on the
surface of the model chocolate were smooth, rounded and flat, causing little more than a slight
dulling of the surface. These crystals were markedly different to the spiky, needle-like crystals of
'real' chocolate that can take away its gloss.
Hartel thinks that, because the smooth, spherical sugar particles pack together more tightly than
the irregular-shaped sugar crystals in commercial chocolate, this reduces both the rate of liquid
fat migration and hence the rate of bloom formation.
Despite the success of the amorphous sugar at inhibiting fat bloom, Hartel says that it could not
be used in commercial chocolate because the sugar 'picks up moisture easily and gives a gummy
texture in the mouth'.
By adding high melting point milk fat fractions to their chocolate mix, Hartel and his team have
been able to delay substantially the transition from form V to form VI. Indeed, milk fat is
commonly used to inhibit fat bloom, and skimmed milk powder is better than whole milk at
preventing bloom formation.
How milk fat reduces bloom formation remains a mystery, but minor lipids in the milk fat
(e.g. mono- and diglycerides) are generally thought to influence the kinetics of cocoa butter
crystallization. The denser crystal structures that form could potentially stop liquid fat from
moving to the surface and re-crystallising. The minor lipids could also affect the amount and
type of high-melting lipids that dissolve in the liquid fat and could even slow down the
transformation of crystals from form V to form VI. Another theory is that because milk fat can
decrease the rate of fat crystallization, the chocolate contracts less on cooling. Fewer
microscopic cracks appear, reducing the likelihood of liquid fat reaching the surface.
Hartel predicts that 'understanding how the chocolate microstructure influences the rate of bloom
formation will ultimately allow the chocolate manufacturer to produce high quality chocolates
with enhanced resistance to bloom'.

An even temper

Making chocolate

Researchers at the University of Leeds have been working with Cadbury to help make its
tempering process more efficient and reduce the amount of money it spends on heating and
cooling vast quantities of chocolate during tempering.
Industrial tempering usually involves applying shear forces (stirring) while changing the
temperature. The shear rate has to be chosen carefully because if it is too low then not enough
crystals will be generated, and if it's too high the crystals could melt.
Scott Macmillan and Kevin Roberts, from Leeds' chemical engineering department, have
developed a method that enables them to look at crystal changes during tempering, with the aim
of optimizing the process in order to guarantee the growth of form V fat crystals. They have
designed a temperature-controlled shear 'cell', similar to the cone and plate system commonly
used in rheometers, placing the fat sample on the bottom plate and rotating the top 'cone'. This
set-up allows the researchers to heat and cool fat mixtures while at the same time varying the
shear rate. Using the small angle X-ray scattering (SAXS) facility at dares bury, they have been
able to monitor changes in crystal structure in the shear cell during tempering.
When no shear stress was applied to cocoa butter samples, the fat crystals transformed slowly
from form III to form IV. However, on shearing the samples, the crystals transformed from form
III to form V. Macmillan believes that because the results 'give a strong indication of the inherent
mechanisms taking place', they should be able to help Cadbury determine the optimum shear rate
and temperature to ensure that the chocolate crystallizes in form V.

Soft in the middle

Those of you with sufficient self-restraint to put aside a half-eaten selection box of chocolates
may have noticed, on reopening the box, that the pralines are generally the first to develop a
bloom. The nut-based filling contains fat that is liquid at room temperature and, as this fat
migrates from the filling to the chocolate exterior, some of the cocoa butter in the chocolate
moves in the opposite direction. The appealing texture contrast between the inside and the
outside of the praline can then be lost as the liquid fat softens the chocolate exterior and the
cocoa butter hardens the soft centre. The liquid fat that moves to the surface of the chocolate can
also drag some of the cocoa butter with it, which can re-crystallise at the surface and form a
bloom.
These problems can be solved to a certain extent by adding a layer of a harder fat (more saturated
triglycerides) in between the outer chocolate layer and the soft interior, or alternatively to the
centre where it can act as a sponge for the liquid fat.
Paul Smith and researchers at the Institute for Surface Technology in Stockholm, Sweden, are
working on the problem of fat bloom in soft-centered chocolates and have developed a technique
using radiolabel led (14C) triglycerides to study the fat exchange process. They use differential
scanning calorimetry (DSC) to determine the polymorphic form of the triglyceride crystals and
a 14C radio detector to follow the movement of the radiolabelled compounds. So far, they have
worked mainly on model fat systems, adding unlabelled fat crystals to an oil saturated with a 14C
labelled triglyceride and gently stirring the mixture. At regular intervals they remove samples
and measure how many of the 14C triglycerides in the liquid oil phase crystallize out. Preliminary
results suggest that the exchange rate between fat crystals and dissolved fat is relatively fast
when the crystals are small but slow when the crystals are large.
Smith is currently using atomic force microscopy (AFM) to study the changes in the structure of
the surface of the chocolate that occur when bloom forms. The diamond tip of the AFM probe
moves over the surface of the chocolate and deflects as it passes over any undulations. Smith has
chosen the technique over the standard methods of scanning electron microscopy or optical
microscopy which can generate artifacts, he says. Optical microscopy, explains Smith, is difficult
to use with chocolate because of its dark Colour. In addition, the limit of resolution means that
only the large crystals can be picked up. Smith has yet to release the results of the study but
hopes to use them to help understand the methods of bloom formation and to observe the early
onset of bloom.
There is clearly more work to be done on bloom but new techniques and R & D investment
should lead the chocolate industry to its holy grail: a long-lasting chocolate that doesn't lose its
gloss with storage.
THE CHOCOLATE INDUSTRY IN INDIA
The chocolate industry in India has a size of 20000 tones and is worth about Rs 400 crores. The
chocolate market has been growing by nearly 35 %. However there has been some slowdown in
the last two years.
The chocolate market is predominantly urban with coverage of 95 %. The sales volume has
decreased by 5% in the last year and the chocolate market had declined with the average
consumption coming down by 25% from 16000 tones to the current level of 125000 tones
Chocolate consumption in India is extremely low. Per capita consumption is around 160gms in
the urban areas, compared to 8-10kg in the developed countries. In rural areas, it is even lower.
Chocolates in India are consumed as indulgence and not as a snack food. A strong volume
growth was witnessed in the early 90's when Cadbury repositioned chocolates from children to
adult consumption. The biggest opportunity is likely to stem from increasing the consumer base.
Leading players like Cadbury and Nestle have been attempting to do this by value for money
offerings, which are affordable to the masses.
Cadbury, a subsidiary of Cadbury Schweppes is a dominating player in the Indian chocolate
market with strong brands like Dairy Milk, Five Star, Perk, and Gems etc. Dairy milk is the
largest chocolate brand in India. Chocolates & Confectionery contribute to 75% of Cadburys
turnover. Cadbury also has a strong brand Bourn vita in the malted health drink category, which
accounts for 24% of turnover. The parent Cadbury Schweppes during 2001 made an open offer
for acquiring the 49% non-promoter holding in the company. It has already acquired over 90% of
the equity and proposes to buy back the balance equity and delist the stock from Indian bourses.
THE MAJOR PLAYERS
The major national players in the chocolate market in India are:
Cadbury India Ltd.
Nestle India Ltd.
Gujarat Cooperative milk marketing federation limited (Amul)
The combined chocolate and clair market is dominated by two giants Cadbury and nestle
together they have 90 % share of the entire market. Amul holds a 5% share and is present only in
the molded chocolate segment of the market
The CHOCLATE CHRONOLOGY
1956 - Cadbury milk chocolate launched
1957 - Cadbury 5 star launched
1970 - Cadbury clairs launched
1974 - Amul chocolate launched
1986 - Cadbury milk chocolate re-launched as Cadburys dairy milk
1990 - Cadbury launches premium chocolate brand overtures
1991 - Nestle chocolates launched. Cadbury counters nestles entry with all silk and unfurls huge
consumer promotion campaign. Cadbury diary milk revamped. Nestle launches Milky bar:
Cadbury counters creamy bar
1994 - Cadburys real taste of life and 5 star reach for the stars campaign launched clairs
revamped and renamed diary milk clairs
1995 - Cadbury launches perk, preempting nestles Kitkat Overtures is withdrawn
1997 - Cadbury launches truffle
1998 - Cadbury launches Gold, Picnic (all these launches took place in the month of December
i.e. Dec 96 and dec-97 to be more precise in keeping with the company policy of launching new
brands at the new year eve. However the hit the market at the month of January only
AMUL: THE FLIGHT WHICH FAILED TO TAKE OFF
Gujarat cooperative milk marketing federation limited (Amul)
Amul is the third player in the chocolate market in India. The brand doesnt have any
international lineage and is miniscule in terms of market share in chocolates and compared to the

two other players Cadburys and nestle.

Amul had an extremely focused positioning of a gift for someone you love albeit not target to a
single group however Amul failed to capitalize on it seemingly due to the following reasons.

1. Chocolates have never been Amuls main products and hence there was lack of
organizational commitment. The company has never really supported or pushed its
chocolates. This reflects on the drastic cutback on advertisement expenditure for its
chocolates which has negatively affected its top of the mind awareness

level

2. The company has enjoyed a high customer equity and pulls in butter and so it offered a
very low retailer margin of 3.1 % as against the industry average of around 7-8 % Amul tried
the same technique in chocolates too. However since it was neither leader nor enjoyed a
customer pull like in butter the company got very little support for its chocolates

3. Amul chocolates have shown a very limited product differentiation and have not really
given any important additional benefit to the consumers. The product line also suffered in
comparison to the portfolios of the competitor Cadbury and nestles. Its only strength was its
low price
Following are the major brands of Amul

Amul premium Milk

Amul badam bar

Amul orange

Amul fruit and nut

Amul crisp

NESTLE: A BRIEF INTRODUCTION

Nestle India limited
Nestle is a strong player in the chocolates world wide but it entered the Indian market much later
in (1991) than one of its global competitor Cadbury. Nestle initial foray into the Indian market
was not very successful. The problem was in the formulation of the product. They were soft
chocolates with high fat content which were unsuitable to the Indian climate. Also the
distribution focus has been on the larger cities and urban areas which limited their customer base.
It was with the launch of Chitchat that the companys strategy changed with respect to both
product and distribution. It increased its distribution network to cover small towns and interiors
as well so as to increase the customer base .It also modified the formulation of Moulded
chocolate to suit the Indian condition. The company used three layers of foil packaging so that
Kitkat could survive the summer heat.
Today nestle poses a formidable threat to Cadbury. Kitkat has captured a sizeable chunk of the
market within a short span of launch. Nestle, as in 2002-2003 has around 24 % market share with
Kitkat alone accounting for 12% market share points. Nestle Bar One is another brand with a
market share of 6%. Nestle recently withdrew its Nestle bitter chocolate brand. The other brands
of nestle are nestle milky bar and nestle crunch.
Nestle have also entered the sugar confectionery market in direct Compton with Cadbury by
offering Allens splash and Allens coffees and Allens Butterscotch. Amul has also entered into
another foray of the confectionery team that being ice creams. The distribution of this has been
pretty good with Amul ice-cream being available all around India.
The advertising for the company in India is being handled by love lints. Nestle has been
increasing its adverting figure the latest being in 2002 RS 25 crores.
Major Chocolate Products
Crunch: Crunch Chocolate is one of the best-loved foods everywhere in the world. It is one of
life's little pleasures. The attractive tastes and textures of chocolate and chocolate products
delight the senses of all

ages.
Introduced in 1938, today Crunch is Nestls third largest confectionary brand sold in about 40
countries worldwide. Nestl Crunch is available in the following varieties: Nestl Crunch, Nestl
White Crunch, Nestl Crunch Pieces, Nestl Bunch Crunch and new products Nestl Crunch
with caramel and Nestl Crunch assorted minis.
Launched in 1938 in the USA, Crunch was the first chocolate bar to combine milk chocolate and
crunchy crisps. Crunch is a unique combination of smooth Nestl chocolate and crisped rice,
which delivers an exciting eating sensory experience of distinctive taste, texture and sound.
Kitkat: Kitkat Chocolate is one of the best-loved foods everywhere in the world. It is one of
life's little pleasures. The attractive tastes and textures of chocolate and chocolate products
delight the senses of all

ages.
The product, developed as Wafer Crisp, was initially launched in London, UK in September
1935 as Rowntree's Chocolate Crisp. It became 'Kitkat' in 1937, two years before the Second
World War.
Within two years of launch Kitkat was established as Rowntree's leading product, a position that
it has maintained ever since. During the Second World War Rowntree Kitkat was seen as a
valuable wartime food and advertising described the brand as 'What active people need'.
For most of its life Rowntree Kitkat has appeared in the well-known red and white wrapper. It
did, however, change to a blue wrapper in 1945, when it was produced with a plain chocolate
covering due to a shortage of milk following the war. This blue packaging was withdrawn in
1947 when the standard milk chocolate Kitkat was reintroduced.
No one can be absolutely sure where the name Kitkat came from but it is believed to be from the
famous 1920's Kitkat Club in South East London which had some influence. As the building had
very low ceilings, it could only accommodate paintings which were wide and not very high. In
the art world, these paintings were known as 'Kats'. It's believed that Kitkat derived its name
from paintings, which had to be snapped off to fit into the rooms with the low ceilings.
Reinventing Nestle
A detail analysis by the companies management to turnaround nestle
Top line growth, bottom-line contribution, difficult market situations. Nestle India's trademark
`renovate and innovate' strategy is churning with action. Catalyst finds out more.
JUST how much can a housewife influence a Rs 1,688-crore company? She's someone whose
needs we anticipate
Take, for example, the exhaustive experimental kitchen and sensory laboratory at the plush
corporate headquarters of Nestle India at Gurgaon. It's obviously a first-of-its-kind facility and
research centre for any food company in India.
The objective? Consistent product development. Also, achieving a preference ratio of 60:40 for
every Nestle product as opposed to competition. The kitchen comprises a panel of application
groups and 15 professional tasters checking out new products for consistency in quality and
product evolution on a regular basis.
The exercise, has resulted in the creation of two different flavors of Maggi noodles (curry and
tomato), Fruitips candy, besides new formulations of Nescafe and Bar One chocolate in recent
months. "And this research model isn't a substitute for consumer research, or regular test-
marketing with the real consumer.
Based on an international research and development model proprietary to Nestle SA, the kitchen
is just one component of the Rs 3,000 crore allocated for a centralized research and development
cell for the foods conglomerate worldwide, against Rs 2,500 crore spent on the same earlier.
Another component is the third in a series of multi-cuisine recipe collections cutting across all
Nestle products, in place of the two earlier ones which centered on Milkmaid and Maggi.
The Nestle `renovate and innovate' mantra, meanwhile, is on in full swing.
Four existing brands - Nescafe, Milo, Bar One chocolates and Maggi super seasonings - have
been re-launched in new tastes, packaging and pack sizes. And another variant of Kitkat - white
chocolate - has just been rolled out.
On the launch block a month from now are 10 new product variants spread across the culinary
and confectionery segments. The restructuring exercise of Excelcia Foods Ltd - the joint venture
company in which Nestle acquired management control following Dabur India's decision to exit
non-core areas - has neared completion. Following that, Nestle proposes to enter fresh product
categories such as biscuits in the forthcoming months.
Beverage Partners Worldwide (BPW), the joint venture between Nestle SA and the Coca Cola
Company too is looking to tap the Indian market for possible coffee and tea variants.
But it's the food major's most keenly awaited venture - ice-cream - that's got the FMCG industry
abuzz. They are very much interested in the domestic ice-creams market. Of course, that requires
putting in place a cold chain, besides stabilizing its milk and UHT businesses first. Meanwhile,
though there's no confirmation from Nestle, the industry grapevine suggests that Nestle has
begun negotiations with Vadilal for manufacturing and marketing ice-cream.
Another category where Nestle could give Hindustan Lever a run for its money is candy. The
company has recently rolled out a candy brand by the name of Fruitips.
On the beverage front, following the introduction of chocolate-and-coffee formulation Choc Cafe
and Frappe under the Nescafe umbrella, Nestle has been setting up slosh-type vending machines
for iced tea in two flavors - peach and lemon. In an economy that's in a downturn, Nestls
performance has been impressive. Net sales for third quarter this year were Rs 533 crore against
Rs 469 crore in the same period last year, recording a growth of 13.5 per cent. While domestic
sales grew at 11.4 per cent in value terms, export sales for the quarter increased by 24.6 per cent.
Sales during the first nine months of the year improved by 17.4 per cent, with a net profit
increase of 28.6 per cent over the same period last year.
Despite excellent top line and impressive bottom-line contribution, the uncertain and difficult
domestic and international market environment, coupled with seasonality factors, will affect their
performance in the fourth quarter. Market analysts warn that incremental selling and advertising
expenditure on new launches would dampen margins and that it would take time before the new
products begin contributions to turnover or profitability.
While the success of the new variants is yet to be gauged, Nestls star performers remain
Nescafe, baby food Cerelac, Maggi and Everyday. Nestls biggest strength lies in creating
brands with distinct positioning. Hence, Nescafe is generic to coffee, just the way Maggi has
become generic to instant noodles. Maggi noodles face no direct competition, with Top Ramen
barely managing to hold ground in the instant noodles category. Another winner has been Maggi
ketchup, which, FMCG analysts say, has been built from scratch to market leadership position,
outperforming Kissan.
While Nestle has done exceptionally well in Western food categories such as ketchup, condensed
milk, noodles, coffee and weaning foods, the company hasn't been able to handle Indian product
categories such as pickles and tea too well. No one is really making money in pickles. Not only
is the unorganized and made-at-home sector too well-entrenched, even the consumer shows no
brand loyalty towards pickles. What drives her purchase pattern is new taste and not brand
preference.
The market for ready-to-cook mixes and soups too has been largely fragmented with a distinct
skew towards the unorganized sector.
In chocolates, while Cadbury India continues its stranglehold of the market, Nestls Kitkat, Bar
One, Munch and Classic have been performing reasonably. Two recent entrants to this category
have been ChocoStick and Milky bar Chocolate, the latter soft chewy fudge in stick format
priced at Rs 5.
In the chilled dairy segment, Nestle dahi has recently been extended to Mumbai and Pune. While
the market for this continues to be very small with only Mother Dairy and Amul giving Nestle
competition in the organized sector, milk in cartons is a concept that's yet to go down well with
the Indian consumer. Apart from being expensive, the Indian consumer is still not ready to
consume milk without boiling it. And research has proved that three-fourths of Indians prefer hot
milk. On the pricing front, Nestle continues to target the premium segment. They make inroads
into markets which represent not only potential for consumption, but also potential for bottom-
line. Nestls premium pricing strategy is a strength that's worked in most categories it operates
in.
Fruitips, therefore, occupies price points of 50 paisa and Re 1 per unit against HLL's Max which
attacks the unorganized sector with an extremely aggressive 25 paisa per unit price.
It's the association with quality that works in Nestls favour in most product categories. That
this hasn't really worked in case of Nestls bottled water brand, Pure Life, is more distribution-
related, feel industry watchers. Pure Life, launched earlier this year at a price point of Rs 12, has
been a lukewarm performer compared to Coca-Cola's Kinley and Pepsi Aquafina besides, of
course, market leader Bisleri. Discounting at the trade level has been a problem area with bottled
water.
And while spends on advertising have been raised at a macro level, brand-wise spends have been
re-allocated accordingly.
According to the A&M Annual survey on India's top 200 ad and marketing spenders, Nestle was
the country's sixth largest advertising spender in 2000-01, recording an ad spend of Rs 128.46
crore which amounts to a 13.6 per cent growth over the previous year.
Nestle Business
Nestle has a presence in the following categories - Baby Food, Milk products, Beverages
(Coffee, malted beverage), Chocolates & confectionery and other processed food
products. Category wise turnover breakup and growth
% contribution 2001 2000 % yoy
to turnover Rs mn. Rs mn.
Milk Products 43 8159 7375 10.6%
Beverages 29 5627 4903 14.8%
Culinary Products 14 2764 2310 19.7%
Chocolate & Confectionery 14 2646 2179 21.5%
Total 19197 16768 14.5%
Beverages
Beverages like coffee, tea and health drinks contribute to about 30% of Nestls turnover.
Beverage sales registered a 15% yoy growth during 2001. While about 14% of sales come from
domestic market, exports contribute to about 16% of sales.
Nestls Nescafe dominates the premium instant coffee segment. Nestls other coffee
brand Sunrise has also been re-launched under the Nescafe franchise to leverage on the existing
equity of the brand. Nestle has focused on expanding the domestic market through price cuts and
product repositioning. However it has been losing share in the domestic market, where it has a
37% market share. Milo, a brown-malted beverage was launched in 1996. It has an estimated
volume share of about 3% in the malted food drink segment. Nestle has launched non-carbonated
cold beverages such as Nestea Iced Tea and Nescafe Frappe during 2001.
Nestle is one of the largest coffee exporter in the country. Key export market is Russia, besides
Hungary, Poland and Taiwan. Nestle has received an award for highest export of instant coffee
and highest export of coffee to Russia and CIS for FY00 and FY01. Turnover contribution from
exports registered a 17.5% volume growth in F12/01. Nescafe sales to Russia accounts for 80%
(Rs2.5bn) of Nestls Rs3bn export turnover.
Infant food/ milk products
Milk based products and baby food contributes to 43% of Nestls turnover. For ensuring regular
procurement of good quality milk, Nestle has developed a network around its Moga factory for
collection of fresh milk everyday from the farmers. Nestle has a dominating 87% market share in
the baby weaning foods with its Cerelac and Nestum brands. Infant milk powder is sold under
the Lactogen and Nestogen brands. Brand loyalties are very high in categories such as infant
food and weaning cereals, enabling the company to command a price premium
Other milk products include dairy whiteners (21% market share) sold under
the EveryDay and Tea Mate brands, sweetened condensed milk and ready to cook mixes for
traditional Indian sweets sold under the Milkmaid brand. The company also markets ghee (6%
market share) under the EveryDay brand. Nestle has expanded its milk product portfolio with the
launch of new dairy products such as UHT milk, Curd and Butter. Huge investments are being
made in building a diversified dairy business and the distribution infrastructure for the same.
Milk products sales registered a 10.6% yoy growth during 2001.
Chocolates & Confectionery
Nestle forayed into chocolates & confectionery in 1990 and has cornered a fourth share of the
chocolate market in the country. The category contributes 14% to Nestles turnover. It has
expanded its products range to all segments of the market The Kitkat brand is the largest selling
chocolate brand in the world. Other brands include Milky Bar, Marbles, Crunch, Nestle Rich
Dark, Bar-One, Munch etc. The sugar confectionery portfolio consists of Polo, Soothers,
Frootos and Milkybar clairs. All sugar confectionery products are sold under the umbrella
brand Allen's. Nestle has also markets some of its imported brands like Quality Street,
Lions and After Eight. New launches such as Nestle Choco Stick and Milky Bar Choo at
attractive price points to woo new consumers. Chocolate confectionery sales registered a strong
21.5% yoy growth in 2001 aided by good volume growth in Munch, Kitkat and Classic sales.
Nestle re-launched Bar-One during the year
Culinary products
Ready to cook food/ cooking aides are sold under the umbrella brand name Maggie. Culinary
product account for about 14% of Nestls turnover. Maggie is the market leader in the noodles
(45% market share) and the ketchup (43% market share) categories. Other products, sold under
the umbrella brand Maggie, are ready-to -cook gravy/sauces, soups, seasonings, as well as
traditional Indian foods such as pickles and instant snack mixes. New taste variants are
continuously launched to add variety to the product offerings. Culinary product sales registered a
20% yoy growth during 2001.
Future prospects
Nestle is focused on product expansion and improvement of distribution efficiency. The Dairy
business is being expanded and is expected to drive growth in the long run, although short-term
profitability may be impacted in the investment stage. The companys entry into the mineral
water segment is a concern, as the segment is already overcrowded and the company faces stiff
competition especially from the Cola manufacturers. Acquisition of an established brand could
catapult Nestls position in the segment. In categories like beverages, culinary products and
chocolate confectionery, the company is looking at driving growth through launch of smaller
SKUs, thus enabling affordability to a wide section of the population.
Earnings sensitivity factors

Success
of new category launches (Milk and Mineral Water) which involve considerable
investment for promotional schemes and ad-spend and yield returns only after a few
years.

Continued exports to Russia, Nestls main market for coffee exports.

Good monsoon ensures adequate availability of raw materials, which are mainly
agricultural in nature. Raw material prices have significant influence on margins.

Government policies in terms of licensing, duties, movement of agricultural commodities

etc.

Market growth driven by overall economic growth and urbanization.

Rupee depreciation improves export realizations

DIRECTORS' REPORT (7th March, 2001)
1. Operations:
Domestic Sales grew by 7% in value and 15% in volume terms, during the year. Export Sales
grew by 16% in value and 32% in volume. Profit after Tax grew by 20% from Rs985mn to
Rs1186mn.
The market and economic growth continued to be sluggish during 2000. Concerted efforts of the
management to maintain the price of products (in some cases even reduction of prices), better
working capital management, continuous improvement of supply chain and a focus on flagship
brands, contributed significantly towards the above profitability. The favourable impact of the
commodity prices during parts of the year and the product mix, also contributed significantly
towards improvement in profitability.
During the year, the Company retired certain fixed assets from active use at various locations and
the impairment loss on such fixed assets has been charged to the Profit and Loss Account.
Out of business prudence, the Company supplemented the Contingency Provision with further
amount in 2000 of Rs295mn (net) to provide for various contingencies resulting from matters
mainly relating to issues under litigation, dispute and management discretion.
Your Company's overall sales and profit progression during 2000 can be considered satisfactory
and in line with the expectations.
The current year has commenced as per plan in the domestic market and your Directors are
hopeful of continued good results. However, with the current level of inflation and economic
indicators pointing towards a sluggish market, it would be difficult for the Company to maintain
the level of earnings unless the Company takes price increase on finished products which would
depend on market conditions and competitor activities.
2. Exports:
Export Sales for the year at Rs2655mn have grown by 32% in volume terms, over the last year.
This has been mainly due to the higher exports of NESCAFE to Russia, buoyant sales of Instant
Tea and good performance of the culinary products. However, depressed green coffee prices in
domestic and international markets kept the export realizations low. Measures taken for tapping
new market and product opportunities have also contributed to this growth. The export
competitiveness of value added instant coffee manufactured in India continues to be adversely
affected by the purchase tax levied on green coffee. Efforts continue to tap new market and
product opportunities.
3. Dividends:
Interim dividend of Rs. 8.00 per equity share, including Rs4.50 per equity share out of
undistributed profits of the previous financial years, was paid during 2000.
Your Directors are pleased to recommend to the Annual General Meeting a final dividend of
Rs6.00 per equity share. The dividend, if approved, shall be payable to the shareholders
registered in the books of the Company and beneficial owners furnished by the Depositories,
determined with reference to the book closure from 16th June, 2001.
4. Business Development:
In line with the Company's objective to provide superior value in every product category and
market sector, efforts were focused to provide quality products to customers at attractive price
points. While the Company continued to generally maintain price points across all the product
categories, the pricing of some products were also reduced to meet consumer expectations.
MAGGI Noodles re launched in 1999 in response to popular consumer taste preference,
continued to boost sales during 2000 in the culinary segment. New flavour profiles were
introduced in the bouillon business.
The market continued to react positively to the initiatives taken in the recent past to grow the
consumption of instant coffee in the domestic market. The new NESCAFE pricing and bringing
the popular SUNRISE brand under NESCAFE umbrella to benefit from its association continued
to strengthen the category. NESCAFE Frappe a blend of coffee, mocha and vanilla, which makes
a delicious frothy cold coffee, was launched in select metropolitan cities in the third quarter. This
was another strategic launch and seeks to address consumer with preference for cold drinks.
NESCAFE Frappe has received encouraging response.
In the area of Chocolate and Confectionery NESTLE MUNCH Crisp wafer biscuit with
chocolayer, which was launched in select markets in1999, was rolled out nationally during 2000
and had good growth. Continuing with the efforts to meet consumer expectation on price points,
the pricing of KITKAT was also reduced during the later half of the year. Moulded Chocolates
and clairs also showed satisfactory growths. This has also helped in improving the
infrastructure and distribution reach of the Company in the Chocolate and Confectionery
segment.
In the milk and cereal categories, EVERYDAY Dairy Whitener and cereals had satisfactory
growth. NESTLE Growing up Milk; a new product offering superior nutrition, launched in 1999
was rolled out nationally during the year.
Your Company has also entered the Chilled Dairy business with the recent launch of NESTLE
Dahi in select cities of the North. The initial response has been very encouraging and your
Company is working on plans to further leverage the international expertise of Nestle Group,
Switzerland in the area of Chilled Dairy.
The performances of other products were generally in line with expectations. A few products
whose performance was not considered satisfactory are under constant review for corrective
action.
Your directors are pleased to report the implementation of the two new projects undertaken by
the Company during 2000 packaged milk and packaged drinking water. Both the projects seek to
leverage the worldwide experience and knowledge of Nestle Group, Switzerland who are the
leaders in these product categories.
In line with its objective of long term growth and entry in significant value added food segments,
the Company forayed into the Ultra Heat Treated (UHT) liquid milk business in April 2000 by
launch in Mumbai. Packaged UHT milk seeks to address growing consumer concerns on
adulteration and product safety and brings with it reliability, complete hygiene and safety. It
offers convenience to the consumer, in terms of a shelf life without any deterioration in the
product quality and easy usage without refrigeration or boiling. UHT Milk has received
encouraging response and has been rolled out in select cities of the West, South and North.
The project for bottled water was implemented at the Samalkha factory and water launched in
February, 2001 under the brand NESTLE PURE LIFE and is available in select cities. NESTLE
PURE LIFE contains a balance of essential minerals and a light pleasant taste and is
manufactured under stringent quality control. The packaging has been specially designed to
maximize safety for the consumer and protect from possible tampering.
The new categories like bottled water and liquid milk are lower margin categories and will
require considerable investments. Your Company sees them as strategic and as requiring support
on a sustained basis.
The two new Sales Branches at Bangalore and Chandigarh set up in 1999 to further strengthen
the flexibility of the Sales organization and for speedier response to the market conditions, have
started showing positive results during the year. With a view to expand distribution and increase
penetration in smaller towns, a concerted drive was undertaken to make products affordable and
accessible to consumers. An initiative taken includes more penetrative pricing and smaller packs
covering brands such as EVERYDAY Dairy Whitener, MAGGI Noodles, MILO Chocolate
Energy Drink and NESCAFE Instant Coffee. The response has been encouraging.
The Alternative Trade Channel unit created in 1999 undertook initiatives to tap the opportunities
for out of home consumption, particularly for instant coffee and chocolate and confectionery and
to extend availability of product to nontraditional outlets. The outcome of these initiatives has
been encouraging and is being consolidated.
Availability of NESCAFE has been enhanced through an expansion of the vending machine
network and new consumption opportunities for Chocolates and Confectionery were identified
and developed in areas like railway platforms, college canteens and major events.
On the manpower development front, programmes during the year continued to be focused on
the operational front more particularly sales and production.
To support the growth plans and distribution strategy, and simultaneously improve the
operational efficiency, the thrust on strengthening supply chain continued to receive attention
during the year. In addition to consolidating the improvements made over the last two years,
significant progress was recorded in following areas:
a) Reduction in finished goods inventory pipeline to improve freshness of stocks and reduce
working capital.
b) Control of distribution costs through innovative measures, despite steep increases in cost of
fuel.
c) Sustained improvement in customer service level to improve product availability across all
geographies and channels.
d) Reduction in obsolescence of materials.
5. New Head Office:
The Company moved into its new Head Office at Gurgaon. The new Head Office has been
designed to provide the employees with work environment that enhances white collar
productivity. The new Office design seeks to stimulate improved internal communication and
enhance transparency in working. State of the art facilities for training, tasting, and a fully
equipped test kitchen, have been made available that will facilitate the efforts for innovation and
renovation.
6. Technology from Nestle:
The Company being a part of Nestle Group, Switzerland benefits from its access to proprietary
technology, technical and non technical expertise and the fruits of the extensive centralized
Research and Development. The diversified knowledge and expertise have contributed
significantly to the operations of your Company over the years. Some of the key areas, which
have benefited are:
a) Manufacture of products of truly international quality. Product quality, which encompasses
taste, appearance, convenience and overall value for money, is a critical factor in consumer
choice and in a competitive market like India could determine the very survival of the products.
The high quality of products of your Company is borne out by the position and image the
products enjoy in the market and your Company continuing to be a leading exporter of value
added Instant Coffee in the country.
b) Benchmarking of products against competition to achieve an advantage in product quality, for
increasing competitiveness.
c) Access to latest technological developments, such as Spear point Technology for Cocoa based
products implemented during 2000 which would improve product quality and competitiveness
and the MUCH technology for instant coffee manufacture implemented during 1999, which
would enhance the productivity by increased extraction of coffee solids from coffee beans.
d) Implementation of project for bottled drinking water.
e) Product innovation and renovation some illustrations are MUNCH Crisp wafer biscuit with
chocolayer; Nestle Dahi; Nestle Milk (UHT); Junior Foods; NESCAFE Frappe; KITKAT Milky;
new and improved flavours profiles of bouillons; and re-launch of MAGGI Noodles.
f) Enhancement of skill and competence of Company personnel due to the training received.
g) Implementation of environmentally sound business practices.
h) Technical expertise in various forms including Information Technology, which has enabled the
business of your Company to grow and sustain.
I) Providing assistance by way of improved technical and quality standards to local
manufacturers, who have contract manufacturing arrangements with your Company.
Your Directors are pleased to report the signing of the General License Agreement with the
collaborator providing license of all intellectual property rights for the products manufactured
and sold by the Company using such intellectual property. The General License Agreement
which is effective 1st January, 2001 aligns the Company with the global practice of Nestle Group
and would be beneficial to the Company. Undoubtedly, without the know-how provided and
ongoing technical assistance, your Company would have found it difficult to achieve the
progress that has been attained. Your Directors note with satisfaction that being a part of Nestle
Group, the ongoing technology transfer and access to the fruits of extensive Research and
Development and authorization to use internationally famous brands, would help the Company
significantly in its efforts to remain competitive in the market.
7. Moga Milk District:
Your Company which started milk collection in Moga in 1961 with a daily collection of 510 kg
of milk from 180 farmers has expanded its operations to an average daily collection of 540,000
kg of milk with total yearly collection of around 200 million. Kg of milk from nearly 81,000
farmers in its milk district. The Company owns no farms or cattle but through its Agricultural
Services world wide initiative of Nestle Group, works closely with the farmers to obtain the
highest quality raw material. Recognized as "Partners in Progress", Nestle Agricultural Services
at Moga factory has contributed its mite to the up-liftment of the milk district. Some significant
steps taken by the Company in the recent past are:
a) Installation of farm coolers.
b) Milk Collection Centers provided with new and improved equipment to enable on the spot
testing of quality.
c) Initiation of mechanization of large dairy farms.
d) Farmer development programmes.
The Company has over the past decades been providing facilities and support to the dairy
farmers in areas such as veterinary services, breed improvement; balanced cattle feed mixture,
feeding for dairy herds, fodder seeds and training for improved farm management practices.
The milk district is a reflection of your Company's commitment to nurturing quality, technology
and improved systems in the community and the company's initiatives to improve living in the
region.
9. Information Technology:
Your Company continued to make significant investments in the Information Services of
Technology area to cope with the growing information needs necessary to manage operations
more effectively in a complex supply chain environment.
10. Community Health:
Recognizing its responsibility to the community in which it operates, the Company over the
years has been taking initiatives in the area of community health at locations around its factories.
Some of the initiates taken in the recent past are:
a) Provide Government and village schools with facilities for toilets and hygiene drinking water
including deep bore wells, where necessary.
b) Support to health officials in Pulse Polio programmes.
C) Sponsorship of treatment of TB patients at clinic runs by NGO.
d) Healthcare Programmes with focus being on well being of employees and their families
covering vaccination, awareness programmes and health check up.
CADBURY: THE LEADER
Cadbury, a subsidiary of Cadbury Schweppes is a dominating player in the Indian chocolate
market with strong brands like Dairy Milk, Five Star, Perk, etc. Dairy milk is in fact the largest
chocolate brand in India. Cadbury India now stands only second to Cadbury UK in sales of Dairy
Milk. The company is pushing the gifting segment, through occasion linked gifts. Chocolates
contribute to 64%of Cadburys turnover. Confectionery sales, accounting for 12% of turnover, is
contributed largely by clairs. The company attempted expanding its confectionery product
portfolio, with launch of sugar based confectionery Googly and Frutus, without much success.
Cadbury also has a strong brand Bourn vita in the malted health drink category, which accounts

for 24% of turnover.

Chocolate consumption: in India is extremely low. Per capita consumption is around 160gms in
the urban areas, compared to 8-10kg in the developed countries. In rural areas, it is even lower.
Chocolates in India are consumed as indulgence and not as a snack food. A strong volume
growth was witnessed in the early 90's when Cadbury repositioned chocolates from children to
adult consumption. The biggest opportunity is likely to stem from increasing the consumer base.
Competition: Cadbury continues to dominate the chocolate market with about 69% market
share. Nestle has emerged as a significant competitor with about 20% market share. Key
competition in the chocolate segment is from co-operative owned Amul and Campco, besides a
host of unorganized sector players. There exists an even larger unorganized market in the
confectionery segment. Cadbury holds 4% of the market share in this segment. Leading national
players are Nutrine, Parry's, Ravalgaon, Candico, Parles, Joyco India and Perfetti. The MNCs
such as Joyco and Perfetti have aggressively expanded their presence in the country in the last
few years.
Malted food drinks: Category consists of white drinks and brown drinks. White drinks account
for almost two-thirds of the 82,000 ton market. South and East are large markets for food drinks,
accounting for the largest proportion of all India sales. Cadburys Bourn vita is the leader in the
brown drink (cocoa based) segment. In the white drink segment, SmithKlines Horlicks is the
leader. Other significant players are Heinz (Complan), Nestle (Milo), GCMMF (Nutramul) and
other SmithKline brands (Boost, Maltova, Viva). Cadbury holds 14% market share in food drinks

segment.
Performance: Despite tough market conditions & increased competition Cadbury managed to
record a double digit (11%) top line growth in 2000. The company achieved a volume growth of
5.2%. This was achieved through innovative marketing strategies and focused advertising
campaigns for flagship brand Dairy Milk... Net profit rose sharply by 41.8% to Rs520mn.
Reduced material and energy costs and tighter control over working capital and capital
expenditure enabled the company to improve profitability. Company added 8mn new consumers
and saw its outlets grow to 4.5 lakhs and consumers to 60mn.
Outlook: The Cadbury management has cut down on its growth target by setting a 10% average
volume growth target for the next three years (as against previous growth target of 12% volume
growth and 20% value growth). Coupled with inflationary price increases, this could translate
into a top line growth of 14-15%. This target also appears difficult to achieve given the consumer
slowdown and the fact that the company is dependent on a single category Chocolates to drive
growth. In the malted food drinks category the company faces stiff competition from SmithKline
Beecham, and market share has been stagnant at around 14% despite the companys efforts and
investments in repositioning the brand. Efforts at expanding confectionery portfolio have also not
yielded desired results. The management has declared its intention to focus only on clairs
(which form a major portion of its 4% share in the confectionery segment) for the time being in
this category. In chocolates too, the onus remains on the 2-3 key brands such as CDM, Perk and
clairs, which have supported growth in the past.
Cadburys Ad Campaign
Kuch meetha ho jaye suggests Cadbury India, its brand ambassador Amitabh Bachchan smiling
down the hoardings lined along Mumbai's Marine Drive right down to the company's corporate
head office at Mahalakshmi. While the chocolate major is waiting for Diwali to see a turnaround
in its business after the worms controversy, at the moment it's all about driving growth for the

category which has seen a decline since the first quarter of this year.
Being the market leader in chocolates with a 70 per cent share, the company has attempted to
stretch the boundaries within chocolate confectionery. It has also been adventurous in unleashing
a brand new category within chocolate early this year. Introducing the concept of sweet snacking,
it launched Cadbury Bytes in the south with the positioning `Snacking ka meetha funda.' The
product is a crunchy wafer pillow with a choco-cream centre and is being rolled out nationally.
Explaining the need to introduce this new category, Bharat Puri, Managing Director, Cadbury
India, says, "While we were sure of our core competencies, there was need for innovation to
deliver double-digit growth. What we found was that we were under-represented in the area of
snacking on the go and that there was a need for a light crunchy snack." While entry into salted
snacks was ruled out, sweet snacks were the obvious choice, and Bytes is unique to the chocolate
major's Indian portfolio.
Getting the right product and packaging was a challenge for the company. It has sub-contracted
the product to get the volumes and is poised for a national launch. Adds Puri, "After all this was
the first category anywhere in the world that Cadbury was entering and we did not have the
expertise. So the best way was to test-market the product and today we find that it has already
bagged five per cent of the chocolate market."
The company has no apprehensions of cannibalization of its chocolate brands. It believes that
while its chocolates are more of indulgence products, Bytes is about snacking when one is
hungry and can be treated as a snack in between meals.
In the past when Cadbury tried out a biscuit brand, Chocobix, there was fear about some amount
of cannibalization. After all, it was simply a biscuit coated in chocolate, and was perceived to be
another chocolate brand in Cadbury's portfolio.
Stresses Puri, "Cadbury Bytes is adjacent to chocolates and in the markets that we have launched
it, there has been no cannibalization. Chocolates are largely an indulgence product while Bytes is
about between-meals snacking. A product which is consumed when one is feeling hungry or
peckish."
Another thrust area Cadbury has been re-evaluating is confectionery. While growth rates in this
segment are healthier compared to chocolates, it has always been a difficult market to crack.
Cadbury's own experiences have led it to withdraw certain brands but now with Warner's
Lambert's international kitty under its fold, there are chances of reconsidering the segment once
again.
"Through the acquisition of Warner Lambert, there is a great set of brands already available to
us. We are still examining which are the right brands for the Indian market," says Puri. Cadbury
has already identified Halls as the strongest brand in Warner Lambert's portfolio and re-launched
the brand early this year. Adds Puri, "Halls was not doing well for a while so we re-launched it
this year. When you have the existing assets, it is necessary to get them right first. Halls is the
first brand that we have revived and it is now doing well."
In April 2003, Cadbury India's foreign parent acquired Pfizer's interests in the confectionery
business for $4.2 billion. That included the Warner-Lambert product portfolio, known best for
Halls, Clorets and Chiclets. The acquisition is now poised to become a growth area for Cadbury
India, whose confectionery brands include clairs and Googly. But instead of selling
confectionery through its existing chocolate network, Cadbury has set up an entirely new
network.
While Halls has been revived with new packaging, there has been no change in the status of its
other brands. Chiclets had been discontinued long before it belonged to Cadbury and Clorets
continues to sell with a small franchise. But now Cadbury is looking closely at Warner Lambert's
gums portfolio (it is one of the world's largest gum manufacturers) and is considering its viability
for the Indian market. Sugarless gum brands such as Dentyne Ice and Trident White have been
known for their functional benefits worldwide but steep pricing may be a deterrent to their entry
into the country.
"The gum market has not done well in India. But gum has functional properties and is not merely
a breath freshener. We are now evaluating whether there is a market for them in India and
whether it is going to be worth our while," says Puri.
The confectionery market may be huge in volumes but making money on it remains a tough task
with its low margins. Governed by price points, one can sell at only at a Re 1 or 50 paisa unit
price. "The issue is not of garnering volumes but making money out of those volumes. The offer
should be one which can get you both top and bottom lines," states Puri. Having shifted focus
from Googly, Cadbury had been tasting success with its age-old clairs which continue to bag
almost 50 per cent of the market.
"There is scope in the market. Our clairs has been growing and this has been evident in our past
numbers," claims Puri. At the same time the sugar confectionery market is highly competitive
and it's all about finding the right consumer proposition and a business model that can deliver
both top line and bottom-line growth.
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. It is followed
by brands such as 5-star, Perk and Gems. Each of these has been revamped over the years to
generate excitement for the category. For instance, recently Perk was rejuvenated as a crunchier
wafer while CDM came up as a white-and-brown variant in the market.
"The chocolates category thrives on excitement. It's all about giving the consumer a choice and
taste which they enjoy," adds Puri. For instance, in beverages, in spite of its malted food brand
Bourn vita, Cadbury decided to introduce a milk additive brand such as Delite, just to give its
consumers the real taste of chocolate. Delite has added flavours such as strawberry and mango
and is not expected to encroach upon Bourn vitas shares. According to Puri, "There is still a
large section of people who do not add anything to milk. This will apply to children for whom
milk is a problem and having an additive will make it a pleasurable experience."
Making changes in its distribution network, Cadbury split its sales and marketing team between
its mass (confectionery) and core brands last year. "Chocolates needed to get retailed at larger
and better outlets while all the products below Rs 3 needed a different distribution network," says
Puri. Today Cadbury's distribution network reaches out to six lakhs outlets each for its
confectionery and chocolate brands.
With the worms episode behind it, there are other issues bothering the company, especially
which of the rising input costs of cocoa sugar and milk. Although Cadbury has been able to
maintain prices, it is still grappling with the upward trend in prices for its basic raw materials.
But its challenge remains that of growing the chocolate market in spite of the odds. Posting a
turnover of Rs 729 crore last year, Cadbury is waiting for Diwali to make a turnaround for both
itself and the category which has been through troubled times.
Getting growth should not be an issue, according to analysts tracking the company. As
Nikhil Vora, Senior Vice-President (Research), SSKI Securities, observes, "Considering the
company was getting growth before the infestation episode occurred, it should not be a tall
order to get back to those levels. The company should be able to record a 15 per cent
compounded rate of growth over the next few years." That would be a sweet recovery
indeed for Cadbury.
Cadbury follows small packs strategy
Small has indeed proved to be beautiful for Cadbury. The company, after finding exceptional
success in the launch of small packs of Perk chocolate, has now launched Picnic in small packs
of 26 Gms. priced at Rs 10. The 43-gm packs are still available and are priced at Rs 15.

Cadbury has embarked on a strategy which involves increased consumption of its products
through enhanced reach, affordability and visibility, which it feels can be attained by creating
new markets, widening the depth of its distribution network and working towards a
comprehensive portfolio with brands across all price segments.
On the distribution front, the company aims to increase the number of its distribution outlets
from the present 4 lakhs to 5 lakhs by the year 2000.
To attain the objectives of affordability, over the past two years Cadbury has been changing its
product portfolio from pure chocolate items to confectionery which includes caramel, nuts,
raisins and wafers. The aim is to bring down the price line and enter other markets than the
purely urban ones.
In line with this, it launched Googly in early 1997, and followed it up with products like Mocka
and English Toffee.
The strategy of the company has been to launch one major product and follow it up with smaller
products, for instance, the launch of Picnic was followed by Cadbury Gold and a couple of sugar
confectionery launches.
Intense competition from Nestle is one of the reasons Cadbury has reworked its product range
and made efforts to enter the mass product segment. In 1998, the company moved into smaller
sized versions of Diary Milk and Perk and found to its delight that the introduction of economy
priced models led to more people eating chocolate. In the same year, small packs increased
chocolate volumes of Cadbury by 19 per cent and market share to 70 per cent from 69 per cent in
the previous year.
Cadbury now has a market share of 70 per cent of the chocolates market. It manufactures
chocolates, sugar confectionery and malted drinks. Chocolates constitute 71 per cent of the total
turnover, malted drinks 22 per cent, and sugar confectionery 7 per cent.
Nestle, with a 20 per cent share in the chocolates market, is expected to respond with Munch, a
chocolate brand meant to counter Picnic.
Cadburys Business
Cadbury dominates the Indian chocolate market with a 65% 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.
Changing product mix
Contribution to turnover Contribution to turnover
1994 2001
Chocolate 59% 65%
Sugar Confectionery 9% 10%
Food Drinks 32% 24%
Current market shares
Chocolate 69.2%
Sugar Confectionery 4.0%
Food Drinks 14.2%
Expanding distribution reach
2100+ distributors
450000 retail outlets
60mn Consumers
Future strategy

Maintain dominance in chocolate confectionery and market leadership in brown drinks.

New channels such as Gifting, child connectivity and Value for Money offerings to be the
ley growth drivers

Grow volume sales at 10% pa over the next three years.

Achieve
the goal of best manufacturing location in Cadbury Schweppes world for Dairy
Milk and clairs

One new major product launch every year

Chocolates and confectionery products (75% of turnover)

For more than five decades now, Cadbury has enjoyed leadership position in the Indian chocolate
market to the extent that 'Cadbury has become a generic name for chocolate products. Cadbury
has leading brands in all the segments viz bars (Dairy Milk, Crackle, Temptations), count lines (5
star, Milk Treat), panned confectionery (Gems) and wafer chocolates (Perk), clairs (Cadburys'
clairs), toffees (English Toffee).
During 2001, Cadburys chocolate sales (65% turnover) registered a 9% value growth, aided
primarily by growth in the flagship brand Dairy Milk. Dairy Milk contributes an estimated 30%
to Cadburys sales. Gems and Five Star were re-launched during the year to stem their de-
growth. Perk registered a de-growth during 2001 despite launch of new variants. New brand
initiatives included the launch of Temptations in the premium segment and Chocki a low priced
chocolate confectionery targeted at children.
Cadbury entered the hard-boiled sugar confectionery market with the launch of Googly in 1996.
In 1997, the company launched a coffee based sugar confectionery product Mocka. Cadbury has
a 4% market share in the confectionery segment, largely contributed by clairs. Other
confectionery brands such as Gollum, Frutus, Nice Cream, etc launched in the last two years did
not receive a good market response and the company has decided to minimize focus on those
brands. clairs was re-launched with unique packaging in cartons during 2001.
Food drinks (25% of turnover)
Cadburys Bourn vita is the leading brand in the brown drinks segment of milk/ malted food
products. Overall share in the malted food drinks market is estimated at 15%. Brown drinks
earlier positioned as taste enhancers were losing market to white drinks during the last few years.
Cadbury re-launched Bourn vita with a new formulation and advertising campaign positioning it
on the health benefit platform to compete with white drinks. The brand was re-launched in the
South the largest food drink market in the country, during 2001. Bourn vita sales registered a
12% growth in value terms in 2001 to Rs, contributing 24% to total turnover.
Cadburys other products include Cadburys Drinking Chocolate and Cadburys Cocoa powder.
These account for only 1% of Cadburys turnover.
Distribution
Cadbury's distribution network encompasses 2100 distributors and 450,000 retailers. The
company has a total consumer base of over 65mn. 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 off take.
Strategy
Increasing the consumer base by focusing on the twin proposition of affordability and
availability is being followed to drive future growth. Small affordable priced packs have been
launched, which have helped improve penetration. Also advertising for chocolates is aimed at
changing consumer perception and eating habits by creating new reasons for consumption.
Cadbury's Market Segments
The marketplace for any product is comprised of many different segments of consumers, each
with different needs and wants. Market segmentation can be defined in a number of ways, such
as:

demographic variables (e.g. consumers' age groups, gender, marital status, income etc)

the lifestyle of consumers (i.e. their interests and activities)

The
benefits which consumers look for in a product or n the occasions when the product
might be consumed.

Cadbury takes into account all of these factors when producing a range of products. It targets
different segments within the market, such as the:

breaksegment - products which are normally consumed as a snatched break and often
with tea or coffee, for example Cadbury's Timeout and Snack range

Impulse
segment - these products are most often purchased on impulse, eating there and
then. They include products such as Cadbury's Twirl, Moro, Star bar, Crunchie, Fuse and
Dairy milk

take-home
segment - this describes products that are normally purchased in supermarkets,
taken home and consumed at a later stage

Gift segment - boxes of chocolates and other products purchased for gift occasions
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 custom duties and foreign exchange fluctuations, as 20% of raw material is
imported.
Competition from MNCs like Nestle as well as imported brands. Increasing competition puts
pressure on advertisement budget and margins. However on the positive side, it helps in
expanding the market.
CADBURYS FAILURES:

How Cadburys positioning went haywire with `gems`

Gems present an unusual case of how a textbook-perfect, ultra-sharp positioning can actually

become a disadvantage
At 34, Gems is one brand in the Cadburys portfolio that refuses to grow up. Of course, that is
not such a liability now that children play a key role as consumers.
What it does mean, however, is that Cadbury has to constantly work at keeping its ageing brand
forever young. How has it managed so far? Gems was a sluggish performer in the late nineties
and its market share slid dramatically. Now, the brand appears to be regaining some of its toddler
energy and a campaign that is scheduled to break in 2003 is expected to help further.
Gems presents an unusual case of how a textbook-perfect ultra-sharp positioning can actually
become a disadvantage. Of course, Cadbury doesnt consider this a problem yet. Cadbury
actually consider Gems one of our power or advantage brands simply because it was specifically
developed for the kids segment. And it has no competition at all in India.
Cadburys problem is that Gems which is technically called a sugar-panned confectionery
item that comes in colourful little buttons has traditionally been so sharply targeted at children
below ten years that it did not lend itself readily to brand stretch as its target audience grew older.
Even as Cadbury successfully extended its appeal from children to adults from 1996 onwards for
its regular chocolates, the company learnt a bitter lesson when it tried doing the same with Gems.

Through the seventies and eighties, Gems was one of the few options available to the Indian
consumer, and more specifically the child, in terms of chocolate brands, the others being CDM,
Cadburys Five Star and Amul chocolates.
The other major advantage that Gems enjoyed probably created problems for Cadburys later
the fact that it never faced competition. Nestle and Mars never brought their global brands
Smarties and M&M respectively.
This was because, both the international brands are not developed keeping the climatic rigours of
India in mind. So as against Gems, which is a product formulated specifically for India, the sugar
shells of Smarties and M&M cracked easily in a tropical climate.
The result was that Cadburys never had the chance to benchmark its performance as far as Gems
was concerned. Other than ads in storybooks and comics like Champak, Tinkle and Amar Chitra
Katha, there was little focus on advertising till the late eighties.
The first significant commercial for Gems broke in 1989. This Gems Bond campaign was an
animated commercial based on the character of James Bond, which was used in promotional
stickers. However, the campaign was taken off in the early nineties.
It was actually the storyline and the animation that was working. The character was not for the
child.
The early nineties saw the emergence of pester power. Strangely, Cadbury did not capitalize on
this trend. What made Cadbury sit up was the entry of brands in the early nineties, like
Wrigleys, Freshmint, Boomers, Big Babool and candies from Perfetti, Candico and Parle
Products, all of which were priced at Re 1 or Rs 2 compared with Rs 5 for a 20 gm pack of
Gems.
So it was no longer just chocolates vying for the childs attention but chips, candy, and sugar
boiled sweets, bubblegum, all of which were upping their noise levels. This was worrying for
Cadburys, as almost half Gems sales came from impulse purchase.
Meanwhile, international players like Nestle were expected to enter the scene with brands like
Kit-Kat and Milkybar. In 1994, Cadbury re-launched Dairy Milk with the theme line The real
taste of Life, positioning it as chocolate with universal appeal.
Just as Cadbury flanked Perk to target young adults and reworked Cadbury Dairy Milks appeal
to include adults, in 1996 it attempted to extend Gems appeal to teenagers. The new campaign
was pegged on the baseline Smart, very smart derived from Mad magazine. The trouble
was that this campaign was not backed by product changes, so teenagers, who were always edgy
about being associated with a childrens brand, were unimpressed.
By 1997, the overall slowdown in the fast moving consumer durables market had affected the
chocolate segment. In spite of the re-launch, Cadburys net profit dropped by 5 per cent to Rs
18.6 crore. Perk had not overtaken Kit-Kat as expected. The only Cadbury brand doing
reasonably well was the low-priced sugar boiled confectionery Googly which went on to
become a Rs 15-crore brand in its first year.
Gems had staggered down to a growth rate of 3 to 5 per cent and its market share slipped to 6 or
7 per cent from 10 to 12 per cent in the early nineties.
In 1998, the company went back to Gems imagery of a childrens brand. A new campaign was
launched to target the urban child. It now included a whole range of Chocogem characters, who
were supposed to symbolize a childs partners in fun (Masti ka partner). Also, for the first time,
the communication emphasized the chocolate content.
However, this re-launch did not really contribute to the brands revival simply because the brand
still lacked excitement. This was when the company decided to look at market trends abroad.
Internationally, brands targeted at younger children sold because they offered value-ads like toys.
Also consumer research revealed that the chocolate flavour and CDMs equity was not being
utilized fully.
So the company decided to constantly change the packaging and include add-ons like play value
around Gems core proposition. The problem was that in the Indian market, promotions like toys
on smaller stock keeping units (SKUs) at low cost can be very difficult. So the company had to
opt for innovations on pack sizes and formats first.
In early 2001, the company introduced Re 1 packs, with four buttons, solely to increase
penetration. Later, tube packs priced at Rs 15 with flip tops and a maze-ball game on the top
were also introduced. Then in early 2002, new cricket ball packs were introduced. This combined
play value along with low costs.
The innovation seems to be paying off: This is equal to that of Rs 5 pouches, which were the
highest contributors to the total sales. The Re 1 packs now contribute to about 20 per cent of
sales. The company claims that these SKUs have now enabled Gems to stabilize its market share.
But this does not mean Gems problems are over. For one, the competition to Gems has extended
to a further range of low-priced impulse purchases, which are crowding retail stores.
For another, CDM, with a wider network of SKUs, and Perk are having the biggest bite of the
consumer mindshare. So Cadbury seems to be lying low on Gems, especially on the advertising
front. The brand has been losing out to its portfolio siblings when it comes to retail visibility and
booking order size as the number of SKUs of other Cadbury brands have increased. External
face of the brand has been far less glamorous than other Cadbury brands.
But all this is being compensated for by promos and innovations in packaging for instance;
Cadbury has introduced new stand-up trays for the tube packs to ensure counter visibility.
However, as Gems picks up lost growth rates, there is a new movement that could create
problems one that is partly Cadburys creation. The newly-launched popsicle Chocki
launched to counter Nestls ChocoStick priced at Rs 2, has started eating into Gems equity.
In fact, this segment has grown to 11 to 12 per cent of the chocolate market at the cost of
Gems.
Unless Cadburys is able to come up with more gems of innovation it may find one of its oldest
young brands succumb to old age.
TEMPTATION CHOCOLATE GIANT LIVED TO REGRET
It is a problem faced by multinational companies: how do they tap into the concerns of local
consumers to make their advertising more relevant?
The marketing people at Cadbury's India thought they would try to sell more chocolate by
playing on the biggest issue facing the world's largest democracy. That is Kashmir, which
continues to threaten to plunge India and its neighbour, Pakistan, into nuclear war.
Newspaper advertisements for the Temptations range of chocolate showed a map of Kashmir
alongside the riddle: "I'm good. I'm tempting. I'm too good to share. What am I? Cadbury's
Temptations or Kashmir?"
To make matters worse, the ad was timed to coincide with Indian Independence Day, when
nationalist feelings were running at their highest.
Cadbury's India is a wholly owned subsidiary of Cadbury Schweppes which has operated in the
country for more than 50 years. It apologized after protests against the advertisement whipped up
by the ruling Bharatiya Janata Party (BJP), which plays on Hindi nationalism
SWOT ANALYSIS OF CADBURY INDIA
Strengths

Strong Brand names like Cadbury dairy milk, Five Star and clairs

Rich Product Mix

Support from the parent Cadbury Schweppes

Weakness
 Ltd. Key products, only one central brand (CDM). Pralines range totally wising in India.

Lack of launching products in rural India

Opportunity

The
Indian 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

Threat

Stiff competition in confectionary segment

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

MARKET SEGMENTATION
This can be done in two ways, product forms and customer based
With respect to product forms
There are four major segments in the chocolate industry

1. Moulded chocolate segment

This segment constitutes 50 % of the total market Cadbury diary milk Cadbury s flagship brand
has 50 % of this segment market .To position CDM in this segment Cadbury used the traditional
demographic variables of age, socio economic groups and usage intensity. CDM was positioned
as a product that elders brought for their children and recently it has shifted this positioning and
has not only included parental love but has said that it is gift for someone you love and that can
be anybody not only parents and children Cadbury has associated itself to enduring and
emotional values of love sharing and affection and reward considering that CDM acts as a
trendsetter for all the brands in this segment.
Amul tried to be different and at its initial product launch as Cadbury had targeted children they
had targeted teenagers but unfortunately they were unsuccessful.
The Cadbury brands in this segment are Cadbury diary milk, Cadbury fruit and nut and Cadbury
temptation CDM is the leading brand here and others act as an endorser of the brand here.
From around 1993 this segment began showing signs of maturity. This was hurting CDM. This
led to Cadbury attempting to rejuvenate the segment. They changed their core customer from
children to that of the universe, which means from children to adults this attempts to redesign the
market to enticing all age groups, helped bring about changes in this segment. Today the notion
associated with the consumption of chocolates is that of casual ness instead of just product
consumption. Today this segment grows at 40 % per annum and is likely to remain an important
segment for further growth.

2. Count line Bars Segment

This segment forms 33 % of the chocolate market. This segment is mostly targeted to the
teenagers. Major Cadbury brands are 5 star, break, crisp, and double decker, perk. 5 star in doing
well here about 50 % of the segment while the rest of the brands acts as endorser nestle has a
minor presence in this product category with bar one.
Growth of a sub segment chocolate wafers: Chocolate wafers are the new products being
offered by the chocolate companies today in order to expand the market. In 1995 Cadbury and
nestle launched perk and Kit Kat respectively. These were wafer-enrobed chocolates in a new
context and a different benefit offering. Both chocolates had a snack positioning. Perk offered the
anytime anywhere snack proposition thodi se pet puja whereas Kitkat tried to promote snacking
through have a break have a Kitkat the growth rate of this segment is 15 %- 20 % annually and is
estimated to be worth over Rs 100 crores making it a very lucrative segment.
Internationally confectionery products like wafer chocolates have a very high tonnage and have a
much bigger future than plain chocolates. Market research and succeeds of these two brands
suggest that Indian consumers and ready to accept wafer chocolate proposition. This conviction
of both Cadbury and nestle towards this segment can be gauged from the fact that both brands
are seeking unprecedented allocation of funds to the tune of 60 to 70 % of the total advertisement
budget of both companies and chocolates.
A new entrant in this category is Cadburys Picnic it is three layered chocolate coated wafer bar
with dry fruits and caramel and crispies priced at Rs 14 for 40gm bar. Picnic will be used not
only to expand the functional segment of the market but also to counter kit Kat and other
important bars (Snickers, Mars, and Lion) as against perk which is positioned as a light snack
picnic is positioned as a heavy near meal substitute. In keeping with the company new strategy
of expanding the market this product has been launched to develop the snacking area in the
chocolate market.
C. Choco-panned segments
This segment forms 4 % of the total market and Cadbury has 100 % of the market in this
segment. The major brands are nutties caramels butterscotch band tiffins. All of these brands
have been used by Cadbury to drive variety induce gifting practices and serve to some specific
taste preferences. Cadbury doesnt advertise these brands they have been used as flanker
products.
The opportunity for growth in this segment is high with the imminent entry of multinationals like
mars and Hersheys. This is also likely to pose a threat to Cadbury what with its complacency.

4. Sugar panned segment

This segment forms 15 % of the total and Cadbury has about 98% of this .Its major brands being
gems and clairs. clairs has been used strategically to foster chocolate consumption among
children as well as adults by offering ` guilt free eat no more than a bite full at a convenient price
point (65% of clairs eaters are from the household earnings less than RS 4000 per month)

5. A gem is still Cadburys primary tool to protect its franchise in the child segment. Its
been previously associated in its commercial with the international spy character James bond.
Around 1995 gems were repositioned to broad base its appeal from 3 to 6 yr. olds to
teenagers as well. However this failed due the product form which has become deep-rooted
with kids and hence the company has reverted back to its target segment of kids with a new
offering of choco gems
Market Segmentation with respect to the consumer buying power
These are

High-income customers (price greater than Rs 25 for 40gm) who will go in for premium
chocolate brands.

Middle income customers (Price between Rs 10-25) who are price sensitive

Children
who are mostly price driven and will consume more of toffees in the price range
of Re 0.50 Re 1

PSYCHOGRAPHICS AND DEMOGRAPHICS

This is attempted in terms of the consumers

1. High income customers

It is estimated the age group buying the chocolates would be 232 on wards the income level is
estimated to be Rs 8000 per month. The customer are mostly urban and are mostly professional
(engineers doctors executives)
The psychographic profile: They can either be individuals indulging themselves or they could
be indulging their children. They are inner-directed people who form their own values and norms
and believe in not adhering to the social norms. They are some what occasion driven in their
buying behavior

2. Middle income customers

The age group of this segment will be 15 plus. The income level is estimated to be around Rs
5000 a month. The consumers can be urban semi urban and is currently spreading to rural areas
The Psychographic profile: They are likely to be variety seeking in their behavior. They are self
expressing by nature and inner directed to the extent. They like to indulge themselves but with a
little bit of cushion support.

3. Children

The upper age limit is estimated to be 12 yrs. They mostly purchase their chocolates with their
pocket money or get as gifts from elders. The consumers can be urban, semi urban and rural
though there is somewhat greater emphasis on urban
The psychographic profile: There is novelty seeking in their behavior. They are also fun loving.
PRODUCT POSITIONING
The differentiation planks used in the Indian chocolate market are
Product quality (levels of fat /cocoa) e.g. Kit Kat though priced higher then perk sells more due
to better quality.
Chocolate with additives likes fruit and nut.
Packaging: A chocolate being predominantly an impulse driven purchase category, packaging is
an important mode of attracting attention at the display counter
 International heritage of its product

Functional attributes like the energy bar

As a gift item

As
a snack the positioning of a chocolate as a gift item is receding now it more itself
being positioned as a snack or a quick meal substitute

Size small sizes to increase trial rates this is gaining tremendous today since the companies in a
bid to offer chocolates at affordable prices are reducing their packing size.
Shape (e.g. chocolates in the shape of toys targeted at children) for Christmas season chocolates
were shaped as Mickey mouse and this proved very successful for the season also the shape has
to be such the product is worth sharing this has been attributed as a major season for the success
of third launch of kit Kat.
.Evaluation of the Advertising strategy

Marketing strategy

Right Wrong

CDM
Five Star
Right Amul Chocolates
Perk
Advertising Picnic
Strategy
Cadburys Temptation
Wrong Cadburys All Silk Bar-One
Gems

Product market boundary

For deciding the product market boundary the [product market will be defined as the set of those
products which at as substitutes to satisfy the specific needs that are already identified of the
customer. Further for defining the product market the consumer judgment of similarity
And substitution will be used which are going to be more reliable then the categories defined by
the industry classification. To refine the categories further only those products that fall in the
processed food category are considered the following

Ice
cream - Ice cream is eaten as a desert or milk based snack. People also consume it to
feel themselves as a part of a upper strata of society (this is the attitudinal aspect associated
with eating out in famous parlors like Basin Robbins). It satisfies the need for food social
belonging and hence competes with chocolates for money spend by the consumers to satisfy
the needs.
 Biscuits
with mew variant of biscuits like chocolate cream elaichi cream puffed biscuits
launched in India biscuits are increasingly becoming snack budget of the consumers further
glucose biscuit are positioned as a source for energy same as some chocolates like 5 star
which are positioned as energy bars, hence they compete with each other directly.

Wafer
chips and packaged nankeens: with their high visibly easy availability and
aggressive advertising by multinationals like Pepsi chips are competing with snacks like
wafer chocolate which are purchased by consumer on impulse basis.

Fast
food: fast food consists of western food like pizzas burgers and traditional Indian
food like samosa and pakoras. Many chocolate marketing companies realized that if they
want to position chocolates as snacks they would have to compete with these fat foods
directly through their advertisement.

Sweet
/ Pans: sweets and sweet pan consumed after dinner as a desert directly competed
with chocolates which is also eaten many times after eight.

Sugar
based confectionery chocolate clairs directly compete with many sugar based
confectioneries particularly toffees in Indian market many of these toffees like pan pasand
coffee bite melody have become popular and eroded the market share of chocolate clairs
from time to time.

Soft
drinks with the advent of fountain machines soft drinks have become easily
accessible and convenient for consumption. This has therefore resulted in soft drinks being
increasingly perceived as a n impulse purchase item with this occurrence chocolate have
come in direct competition with cold drinks.

Chewing
gum this segment is also experiencing a rapid growth with its worth about Rs
150 crore. There is a virtual explosion of the chewing gum in the re1 segment and it
cannibalizes the chocolates in the lower price segment.

The product market boundary can be illustrated as follows:

 PRICE SENSITIVITY

At the outset the chocolate market appears to be price sensitive. This is starkly brought out in the
following cases
When the excise duty on chocolates was raised from 16.5 % to 27.5 % and cocoa prices raised by
25 % in 1992-93 the retail prices went up by 30 %. As a result the sales and consumption fell by
more than 30% in the next two years
The major players have successfully launched small size packs of chocolates. Keeping in minds
the price sensitive nature of the market the companies are reducing the pack sizes to be able to
offer chocolates at affordable prices and fit them to a RS 6-8 bracket. Due to the broad basing of
the chocolate market there is a drive towards smaller convenient packs for a larger audience and
it also increases trial. However the upper segments of the consumer base are not price sensitive.
For example chocolate like Kit Kat which is priced 30 % above its rival perk has a similar
market share of 8%.
Consumer Buying Behavior
The product comes under Fast Moving consumer Foods (FMCG) and the product is generally
purchased as a convenience good. The general characteristics of this product are:
It is a low involvement product, but there are significant differences in various brands in market.
The following matrix may help in studying the behavior of consumer for this particular product.
In this product, consumers are often found to do a lot of brand switching. Although
The consumer expects some benefits from chocolates, but he chooses a brand without much
evaluation, and evaluates it during consumption only. But next time, quite often he may reach for
another brand out of boredom or a wish for a different taste. Brand switching occurs for the sake
of variety rather than dissatisfaction.
Consumer Buying Behavior
High Involvement Low Involvement
Significance Difference in Complex buying behavior Variety seeking behavior
Brands
Few Difference in Brands Dissonance reducing Habitual buying behavior
buying behavior
Cadbury has 70% of market share, and hence this variety-seeking behavior had not affected its
sales negatively. This had been possible due to various factors like lack of strong competition.
However, with the new entrants in the market, there has been stiff competition. There are few
segments like water chocolates segment where company faces strong competition from Nestle,
the second major player in the market. In these segments company should try to increase brand
loyalty for its brands. This increased consumer loyalty will also act as deterrent towards
development of strong competitions in other segments. Further to increase the overall size of
market, company should try to increase consumers involvement with chocolates. (Company can
use consumer involvement achieved by soft drink marketers in USA as a benchmark. In USA,
consumer involvement in soft drinks is much higher than other beverages like coffee).
INDUSTRY STRUCTURE AND DYNAMICS
With Cadbury cornering almost 65 % market share and nestle getting another 24 % industry has
all the characteristics of a duple. This industry is characterized by a near total absence of
unorganized sector as compared to its substitutes like ice creams chips etc. Various
internationally famous brands such as mars Hershey etc are either imported in a very small
quantity or are smuggled to avoid high import duty. Other chocolates like Toblerone Twix
snickers are being imported through California foods in India. These help in expanding the
premium imported segment of the chocolate market. As these brands have miniscule volumes
and high price they are not giving any serious competition to Indian brands.
The market has been stable over a long period of time with two major companies Cadbury and
nestle occupying the major share in the market. . However with the threat of entry of new
competitors and also the broad basing of the market the repositioning of the entire chocolate
eating concept we foresee a lot of action in the market. This is already seen in the war of perk
and Kitkat, which had very nearly taken on the intensity of cola wars. Nestle has started
threatening the long enjoyed lead of Cadbury and Cadbury is all set to defend its territory.
There have not been many changes in the competitive strategies, Marketing practices product
modification of different brands till 1994. All major brands have been repositioned once or twice
only. But with the maturing market the new marketing strategy is to target a new breeds of
consumer the consenting adult rather then the indulged child. In keeping with this market
redefinition a lot of brands have been repositioned onto a new plank the most successful plank
being Cadbury diary milk which led to an increase in 20 % of consumption.
Till now frequency of the new product development was also very low but after the launch of
Kitkat this industry is experiencing a lot of action. Cadbury came with perk in response to Kitkat
in a very share time frame. Cadbury had also launched relish a brand in count line bar segment
there has not been significant technological development in India in chocolate. But to create
excitement and growth in the category Cadbury has launched many new products, which led to
change in consumer taste and preferences. These products are based on strong international R
&D capability of the chocolate majors.
Kit Kat is manufactured in a newly commissioned plant in go and due to cumulative production
volume nestle is not likely to enjoy the benefits of learning curve. But apart from relative cost
advantage Cadbury has pursued vigorously product differentiation strategy. Apart from
manufacturing products suitable for Indian taste and distribution Cadbury has established strong
brand equity and brand loyalty among Indian consumers.
Seasonal factors like weather festival etc do affect the demand for chocolates. In summers due to
lack of cold chain at all places chocolate are not able to bear the heat and humid condition. Thus
retailer do not stock them this shows high bargaining power of the retailers.
Chocolates have emerged as a gift item to be used during traditional Indian festivals like
deepawali and New Year. Companies like Cadbury come with special gift packs thus demands
shoot up during festival season Demand is also sensitive to economic factors like recession in
economy or substantial increase in price of chocolates. However in the year 1997, chocolate
manufacturers were spending only 80 % of the festival budget as compared to the previous year.
Advertisements spent across corporate India were pruned in the last festival seasons which led to
a fall in demand. Companies are hopeful of being able to reverse the trend for the current year.

Entry barriers

Brand image

Requirement of specialized machinery

Lack of raw materials (cocoa) in sufficient quantities

Government regulation in the form of excise duties

Need of heterogeneous and wide distribution (being an impulse purchase category)

Exit barriers

Government regulation

Specialized assets like machinery cold chains etc

The rural conundrum
Ratna Bhushan
Big opportunity, large masses to be tapped. Yet success in rural India has eluded several
corporates. Can India Inc really make it big in rural markets? CII's recent Summit had
experts introspect on the subject.
IT is not a one-time act, not a marketing gimmick or a sound byte. It has been the Waterloo of
many companies. It involves addressing some 700 million potential consumers, over 40 per cent
of the Indian middle-class, and about half the country's disposable income. Rural marketing, a
much-talked about and hotly debated subject, was once again the focus of attention of FMCG
majors such as Nestle India and Coca-

Cola.
Last week's Marketing Summit in New Delhi hosted by the Confederation of Indian Industry saw
heads of these companies express diverse points of view on the issue.

Carlo Donati, Chairman & Managing Director

Carlo Donati, Chairman and Managing Director, Nestle India, observed that `generalizing the
rural market can be dangerous'. "It is true that in today's congested and difficult markets, both
local and global, all FMCG as well as other companies or corporations look and search for new
opportunities, consumers and markets. Going rural is a question any marketing person must have
reflected on many times," he said.
Drawing attention to the 700 million potential consumers in rural India, Donati pointed out that
the rural market presented both an opportunity and a problem, given that this market has been
characterized by unbalanced growth and infrastructural problems.
So is Nestle going rural? "Our product portfolio is essentially designed for urban consumers; but
all the same we are closely monitoring the rural consumer," Donati said.
Nestls rural initiatives have largely been based on price-led initiatives. Brands such as Maggi
noodles and Kitkat chocolates have been priced at Rs 5, and few other candy and chocolate
brands are priced at Rs 2 per unit. These price points not only help Nestle reach more retail
formats in urban markets, but also help in making inroads into rural markets. Currently, rural
markets account for below 10 per cent of the food major's revenues.
Key Success Factors:

Research and Development:

With increasing competition in the industry R&D may become an important and critical factor
for success in newly emerging segments of the market. Indian players like Amul are not able to
launch chocolates in fast growing count line wafers segment of the market, as they dont have
 appropriate technology. But still moulded chocolates which constitute 62 % of the market do not
require any special R&D.

Price

Price can be used as a basis for competition in the industry. In 1995 perk was launched at a price
Rs 4 less than Kitkat was. This brand was specially produced for Indian markets and successfully
competed with internationally famous Kitkat. But low on price without brand equity may not
really help as Amul and various regional brands are priced lower then category leaders without
having much success.

International Lineage

The international image associated with chocolates acts as a propeller for the sales considering
the significance of user imagery and aspirational aspect of this product category. The lead can be
attributed to the international lineage despite the higher price compared to the price of perk
However this has to be taken into consonance with the price factor considering that the Indian
consumer is price sensitive.

Product Quality

Product quality per se may not be critical success factor. But many instances prove that poor
product supported with high decibel advertising is; likely to be a failure Cadbury has constantly
improved the product quality along with rest of the marketing mix as a tool to create growth in
the category.

Distribution

Chocolate being an impulse purchase wide and heterogeneous distribution channels are
important so that the consumers have it within arms length of desire. In India distribution of
chocolates gain special significance due to very hot weather condition during summer months

Availability of capital

Chocolate manufacturing is a capital intensive business and clear lack of unorganized sector
underlines the importance of capital availability.

Quickness of response

With the increasing competition fast response is assuming significance. For example perk was
launched 15 days of the launch of Kitkat to counter the threat.
Product Life Cycle
Market research is a process designed to link managers to consumers through information. It is
used to identify opportunities and make better-informed decisions about products, which have
future market potential.
Market research has revealed that Chocolate play more of a functional role than one of pure
indulgence: they are often a meal substitute. Research also shows that successful snack brands in
the confectionery category tend to have more 'foody' values and often contain ingredients such as
cereal, wafer, biscuits, peanuts and fruit to break up the chocolate delivery.
Cadbury's philosophy is to continue as a driving force in the confectionery market, and thus
constantly analyze its offerings for consumers. The core objective of Cadbury's innovation
programme is to generate incremental volume for the company and achieve the vision of market
leadership in every segment in which it operates. The role of innovation is critical as it allows
Cadbury to develop ahead of its competitors in those areas of the market which are new or
growing.
1. Product Development
Cadbury set out two objectives for the development of Fuse:

1. to grow the market for chocolate confectionery;

2. To increase Cadbury's share of the snacking sector.

The concept was developed after market research identified the growth of snacking and a definite
gap in the market for a chocolatier snack. A number of ingredients were devised and tested
following a survey which questioned consumers about their snacking habits and preferences. A
research and development team was then asked to develop a number of product recipes which
addressed the needs expressed by consumers.
Not all products successfully emerge from the product development phase. Research and
development involves combining various ingredients to develop potential new products.
Considerable development time is spent on all brands of Cadburys, carefully engineering the
ingredients in order to deliver the right balance of chocolate, food elements and texture. More
than 250 ingredients were tried and tested in various combinations before the recipe was
finalized.
Any new product in the snacking sector must establish points of difference from existing
products within the market - thus creating a unique selling proposition (USP) i.e. a product with
unique appeal which is not shared by any of its competitors. Whereas other confectionery
snacking products focus primarily upon ingredients, with chocolate used only to coat the bar, the
product developers decided to use Cadbury's chocolate to ''fuse'' together a number of popular
snacking ingredients such as raisins, peanuts, crisp cereal and fudge pieces.
2. Early Consumer Testing
As products are developed, they must be tested to ensure that consumers would be willing to buy
them. As approximately 85% of all new products launched into the grocery and allied trade
sectors fail in their first year, extensive research helps to reduce the risk of launching a new
product into an already competitive market. The brands go through two extensive 'in home
placement' tests. The results of these tests were multiplied into repeat purchase and purchase
frequency figures to allow. Cadbury to anticipate the volume of bars required for the launch of
any new brands.
A key element of any new product launch is the development of a strong brand name
The design brief for the brands require two objectives:
1. To communicate the dynamic and slightly wacky personality of the new product and
create interest at the point of purchase (i.e. in store)

2. To bring the brand name to life by communicating the fusion of Cadburys chocolate with
the snacking ingredients.

3. Pack Design
Packaging enables a manufacturer to convey both the tangible and intangible attributes of a
product. The packaging for Cadbury's new product sought to position it as a unique, exciting and
delicious chocolate snack which would stand out from its competitors. It was important to
emphasize the qualities and appeal whilst at the same time reinforcing that it was a Cadbury
brand.
The packaging achieved impact by using bright, fiery colours for the product name and
contrasting them against the deep and instantly recognizable 'Cadbury purple', which
communicated the manufacturer's heritage. The colours were also used in a gun powder style to
suggest an explosive taste. The vibrancy of the design aimed to differentiate it from other
products in the sector so that it would have an immediate point-of-sale impact both on-shelf and
in store display units.
Three different packaging formats are developed in order to maximize the various multi-
purchase opportunities available. The key pack size was the single bar, designed to entice trial
and to encourage repeat purchase. The 'treat size' and the multi-packs were aimed at families.

Brand name: Like packaging, brand names play a critical role in the success of a product, by
helping to create a product's 'personality'. The new product aimed to have broad appeal to 16-34
year olds, although it was primarily targeted at 16-24 year olds. The name of the new brand is
chosen to communicate the idea. The logo is also in association with the brands name.
4. Further Consumer Testing
Testing is vital throughout the entire product development process. It helps to provide valuable
information that can be used to fine-tune the product and minimize many of the launch risks.
In research, brands are tested for texture, 'interesting eat' and combination of ingredients, than its
competitors and each carries a rating.
5. The launch strategy
The launch strategy of any new product is critical. Cadbury has two targets for its products -
trade customers who stock the product and consumers who buy it. In recent years, product
launching has become an art which can make or break a product. A successful launch makes
potential customers aware of the new product and keen to try it.
Before consumers could try the product, however, it was important for Cadbury to gain the
support of its trade customers. Retailers had to view it as helpful in encouraging customers to
visit their shops. If the product had failed to interest retailers and distributors, the costs of
investment would not have been met and they would not have stocked the product.
Cadbury conducts one-to-one briefings with over 70 key trade customers. This helped Cadbury
build awareness and commitment to the launch and obtain significant orders for in-store displays
and merchandising ahead of the launch date. The trade commitment was reflected in high levels
of display support in store during the launch.
Traditionally, new confectionery products are initially launched in one region of the country, in
order to gauge the product's success, before moving on to other regions over a period of time.
Time Out and Wispa Gold, for example, were launched in this way.
There were certain key requirements to the co-ordination of the launch:
Secrecy had to be paramount!
Marketers who had identified the gap in the market had to work closely with individuals from
research and development as well as other external agencies.
Manufacturing operations, in conjunction with marketing and finance, had to evaluate a new
factory investment for Board approval.
Having a catchy 'hook' for a new launch helps to make consumers notice the product. Cadbury
selects a date and then christens that day as that brands day. This involved tight management of
stock distribution, with more than 40 million bars being moved from Cadbury depots into the
trade only a few days prior to the launch date.
Press releases were tailored to specific audiences. In each case, a strict embargo was imposed to
ensure that the impact of the day was not diluted. The only exceptions were briefings with The
Grocer, and Marketing (trade publications) and the media, which reviewed the product in its
business pages.
Public relations (PR) support was substantial. It told the story of the brand being launched
explained that it had taken so many years to develop, the investment incurred, the plant in which
it is being manufactured and the advertising cost involved. The results of the TV campaign and
PR campaign were so successful that Cadbury was under pressure to meet repeat orders post-
launch!
6. Post-launch results
After a new product launch, it is important to analyze whether the product has managed to meet
its launch objectives. Cadbury tries to find out as to how much increase has their been in the
percentage of its market share with the launch of the new product.
One way of evaluating the effectiveness of advertising and promotional campaigns is to ask
market research volunteers to identify advertisements using prompts in a recall test. The Fuse
launch had created massive awareness of the new brand; achieving greater prompted awareness
Cadbury's competitors reacted to the success of Fuse by increasing their own new product
activity.
Control Institutions Facilitating Institution
 Positioning With Respect To the Price Segments

Drives attitude Drives snacking Drives variety, gifting and taste

Positioning and and preferences
behaviour Consumption
Price

Kitkat
High Cadburys Temptation

(above Rs. Cadburys fruit & Nut

25
For 40 Cadburys Roast Almond
gms.) Cadburys Bounville
Cadburys Nut Milk
Tangro Almond

Cadburys crackle
Medium Cadburys diary Cadburys Perk Tango Fruit & Nut
Milk
(Rs. 10-25 Cadburys Creamy Bar
for Tango Cashew
40 gms.) Tango Crispy
Amul Fruit & Nut
Nestle Crunch

Low Nestle Premium Amul Milk Chocolate

Milk
(Below Rs. Amul Bitter
10 Nestle Classic Amul Orange
For 40 gms.) Tango Milk Amul Crisp
Cadburys Relish
Nestle Rich Dark
Mystique

Price, Positioning and Ad Descriptions of All the Brands

Compan Advertisement
Brand Weight Price Positioning
y campaign
Cadbury Dairy Milk 48 gm. Rs. 15 Product for people who are The real taste of
Chocolate Natural and spontaneous Life
Fruit & Nut 50 gm. Rs. 19 Piggybacking on Cadburys
Roast 80 gm. Rs. 38 dairy Milk
Almond 35 gm. Rs. 11
Creamy bar 40 gm. Rs. 13
 Bourmville
Crackle 40 gm. Rs. 12 Product for teenagers, fun Crack, Crack,
Alternative to Diary Milk Crackle
5Star 40 gm. Rs. 10 Source of energy for body & Energy bar
mind
Perk 35 gm. Rs. 12 Anytime, anywhere snack Thodi si pet puja
Break 25 gm. Rs. 6 Light chocolate bar to fulfill a I want a break
snack need rather than just taste
Diary Milk 1.00 Close to chocolate with a twin clairs teenagers
clairs taste tough from outside and jo bhi khaye duniya
soft creamy bhool jaye
Filing within.
Relish 17gm Rs 3
Nutties 40gm Rs 13
Tiffins Rs 12
Nestle Kit Kat 36gm Rs 15 Snack for routine usage Have a break
Have a Kit Kat
Have a Kit Kat
Play it Cool
Milky Bar 40gm Rs 13 Milkybar , give me the power Nutrition for
children and sugary
taste
Crunch 40gm Rs 13 Fun Product Chicken or Egg
Have a Crunch
Bar One 50 gm Rs 10 Snack For those in between
times
Classic 40gm Rs 10
clairs 7gm Rs0.5
0
Amul Premium 40gm Rs 10 Gift for all ages expression of Gift for someone
Milk 40gm Rs 10 love you love
Orange 40gm Rs8.5
Crisp 40gm 0
Fruit & nut 40gm Rs 12
Bitter Rs10

Procters 5 Forces Model

 Rural Market Initiatives
Contrary to most FMCG players, Cadbury is not looking at the rural markets for growth. Most of
the sale comes from urban areas. Chocolate consumption in urban India itself is low. There is a
large untapped demand in urban market alone. Only 60mn people out of the urban middle class
population of about 280mn consume chocolates. Why should they go to rural areas? The target of
adding 10mn consumers annually can be achieved from the urban areas. Besides storage and
logistics is also a problem. Chocolate needs to be distributed directly, unlike other FMCG
products like soaps and detergents, which can be sold through a wholesale network. 90% of the
products are sold directly to retailers. Building such a direct network in rural areas is a daunting
task. Currently, Cadbury is looking at growth through expansion of the target size, which will
grow as more people move upwards in the income pyramid.
SUGGESTIONS
Looking at the Future
The consumption of chocolates in India is among the lowest in the world. A comparison with the
world wide industry average is an eye opener. In India the average per capita consumption is a
mere 20 gm compared to the world average per capita consumption of 2.24kg. Moreover data on
world wide chocolate consumption indicates that in the mature markets this figure is as high as
9.36kg, while even the emerging markets total up to 1.16 kg. While looking at the consolidated
averages would be misleading, even the consumption among the potential consumers of
chocolates is extremely low as compared to the world average.
Potential Chocolate Consumers
Income
Groups Age Groups Total
(Rs`000 p.a.)

5-14 15-19 20-24 25-34

Rural 62-86 2.2 0.8 0.7 1.2 4.9

(Millions) >86 13.5 4.8 4.3 7 29.6
Total 15.7 5.6 5 8.2 34.5
62-86 7.0 2.5 2.2 3.7 15.4
>86 18.8 4.9 4.4 7.2 30.2
Total 20.8 7.4 6.6 10.8 45.7
Total 36.5 13.0 11.7 19.0 80.2
Using the figures as mentioned in the table above one can arrive at a rough estimate of the
potential consumers of chocolate in the country. For this purpose the populations in the age
groups of 5 yrs to 35 yrs falling in the income groups having an annual household income of Rs
62000and above have been reconsidered. The total population in this group is about 80 million
split into 45 million urban consumers and 35 million rural consumers.
As the consumption of chocolates is skewed towards the urban consumers, it can be estimated
that 80 % of the chocolate consumed is in urban areas. Using these figures the per capita
consumption for the relevant target population is as given in the table below
Chocolate Consumption
Share of Tonnage Relevant target Gms. per
market population consumer
(millions)
Urban 80 % 12800 45.7 280
Sales
Rural 20 % 3200 34.5 40
Sales
Total 100 % 16000 80.2 200
Comparing these figures to the world average, it can be concluded that there is a very high
potential for the chocolate market.
As eating habits of large parts of Indian society are becoming consistent with the rest of the
world; the category is poised for a significant growth. The wafer wars between Perk and Kit Kat
is an interesting indication of the times to come and it has reached almost the same intensity as
 the cola wars!! As these new players and existing companies introduce new type of chocolates,
distinction between chocolates, biscuits, ice-cream will become less and many hybrids product
will grow. Along with this the potential to expand the consumer base by incorporating a wider
array of taste and needs of the consumers. Segmentation of market based on consumer age is
increasingly becoming irrelevant. There are expected to be many products target at specific new
segments. This is very obvious with the emerging segmentation policy of using the ego states. A
shift in media strategy of various companies can also be estimated. Instead of present use of
mass media, specialized media targeted at different segment will catch the fancy of media
planners. At the same time one can see an increasing association between the brands and various
highly published events in order to increase the brand equity in the minds of all the stake
holders .Further there will be lot of improvement in packaging and modification of products as
per Indian conditions. A trend in the future wherein the innovative packaging can be used as a
differentiating factor in order to increase the usage of the product can be foreseen. It is seen that
the chocolate giants is slowly shifting to the large untapped interiors, with the increasingly
saturating market in the urban areas and also increasing clutter. The first mover advantage by
monopolizing the distribution network will work in great favor of the company; hence it can be
recommended that Cadburys should move in before any of the other companies can realize what
hit them.
CONCLUSION
The objective of the study was to study the Marketing Segmentation of Amul, Nestle, and
Cadbury, Consumer Buying Behavior of Chocolate Industry and also to study the Industry
Structure and Dynamics.

1. Advertising plays an important role in creating brand awareness, brand recall and brand
recognition which are important in helping a customer make purchase decision of that brand.

1. Brand should adopt itself to the local culture.

1. Brand should be kept alive.

1. The styles and code to the brand should change as clientele advance and grow.

11176. Brand should continuously evolve with the culture and the product should innovate.

Thus, we can say that companies which want to make their brands No. 1 should adopt the above
findings in their brand building exercise. However for generalization of the results, a study needs
to be undertaken based on a larger sample across different industries.
BIBLIOGRAPHY
1. Kotler, Philip. Marketing management
2. Aaker, David et al, Advertising Management
3. Business Line Catalyst

4. Financial Express Brand Wagon

5. Times Of India Brand Equity

6. Strategic Brand Management

7. Internet Sources

www.cadbury.co.in

www.business-standard.com

www.financialexpress.com

www.economictimes.com

www.hinduonline.com

www.indiaserver.com

www.indiainformer.com

www.india-today.com

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