2. INTRODUCTION
―A comparative analysis of buying behavior of different brands of chocolate user in
lucknow market‖ is about the customer perception & satisfaction level toward various
brands of chocolate. Product category comes under Fast Moving Consumer Foods
(FMCG). Purchased as a convenience good. Chocolates had its beginnings in the
times of the Mayas and the Aztecs. Chocolate market is predominantly urban with
coverage of 95%. General characteristics of this product are:
Low involvement product.
Lot of brand switching.
The chocolate market in India is estimated to be around 30800 tonnes. It is dominated
by 2 major players, Cadbury India Ltd and Nestle India Ltd, which together account
for about 90% of the total chocolate market. Some commodities in one segment are
used as inputs in another segment of the food processing industry, e.g., skimmed milk
powder (SMP) used as raw-material for chocolate, ice cream etc sugar, edible oil used
as raw materials for a number of items, molasses for alcohol etc.
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3. There has been a rise in the prices of all such commodities which have impacted the
overall cost of production in the food processing industry sectors. There is a need for
review of all such cases involving the users and the producers.
Chocolate is a preparation made from the fruit of the cacao tree and used as a
flavoring and as an ingredient of beverages and various kinds of confectionery. The
recipe for chocolate will vary from country to country – according to different tastes
and from brand to brand. The typical bar is made up of:
10% cocoa mass
14% cocoa Butter
25% milk
45% sugar
5% vegetable fat.
The best plain chocolate can contain up to 70% cocoa solids. This is the favorite type
of chocolate in Continental Europe. It is made by mixing the cocoa paste with cocoa
butter and sugar.
Without sugar the chocolate would be quite bitter.
Milk gives the chocolate a creamy taste and texture.
Cocoa beans are roasted and ground to produce three main products:
Cocoa Liquor - gives flavor to the chocolate.
Cocoa Mass - used for cocoa powder or hot chocolate.
Cocoa butter - melts at just below body temperature so it melts in the mouth.
The entire market can be divided into 7 major categories, namely Hard Boiled
Candies (HBC), Toffees, Eclairs, Chewing gums, Bubble gum, mints and Lozenges.
The confectionary market is highly fragmented with several players with strong
regional presence. Leading players are Cadbury India, Nestle, Nutrine, Parry's
Confectionary, Parle, Ravalgon, Candico etc.
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4. 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 a 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 world‘s 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.
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5. 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 company‘s global sales of the
product. Other major players include Cadbury Schweppes and Nestlé.
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.
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. China‘s booming economy along with rising levels of disposable income and
increased availability of quality products will encourage further consumption, the
analysts predict. Following China‘s accession to WTO, multinationals are also
expected to penetrate the country further, driving up.
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6. 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 Cadbury‘s turnover. Cadbury also has a strong brand Bourn vita
in the malted health drink category, which accounts for 24% of turnover.
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7. 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 doesn‘t 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.
a. Chocolates have never been Amul‘s 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
b. The company has enjoyed 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.
Following are the major brands of Amul
Amul premium Milk
Amul badam bar
Amul orange
Amul fruit and nut
Amul crisp
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8. NESTLE:
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 company‘s 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 Allen‘s splash and Allen‘s coffees and Allen‘s 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 lint‘s. Nestle has
been increasing its adverting figure the latest being in 2002 RS 25 crores.
Major Products
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9. 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 Nestlé‘s third largest confectionary brand sold in
about 40 countries worldwide. Nestlé Crunch is available in the following varieties:
Nestlé Crunch, Nestlé White Crunch, Nestlé Crunch Pieces, Nestlé Bunch Crunch and
new products Nestlé Crunch with caramel and Nestlé 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 Nestlé
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.
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10. 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?
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.
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11. 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.
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 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. Nestlé‘s premium pricing strategy is a strength that's worked in most
categories it operates in.
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12. 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 Nestlé‘s favour in most product
categories. That this hasn't really worked in case of Nestlé‘s 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.
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.
Sales growth in 2007 led by a robust 20% growth in volumes
Nestlé‘s domestic sales registered a 18.5% volume growth during the first 4 months of
2008. Exports registered a 31% year of year volume growth. In value terms, domestic
sales grew by 15.8% year of year to Rs12.1bn, while Exports grew by 26.4% year of
year to Rs2.4bn.
Segment wise realization decline has been the highest in Beverages. Milk product and
culinary product prices have been more or less maintained at previous year‘s level,
while the company has been able to improve realizations on its chocolate &
confectionery portfolio.
Realizations (Rs/kg)
Category % yoy
2007 2006
Milk & Nutrition Products 113 112 +1.4
Beverages 202 238 -15.1
Culinary Products 70 69 1.9
Chocolates & Confectionery 152 143 6.8
Beverages leading volume growth, value growth being led by culinary segment
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13. Beverage sales have grown at a fast pace of 42% in the first 9 months of 2001 driven
by rising exports and revised pricing strategy in domestic market. Growth in value
terms is however lower due to a sharp 15% decline in realizations. Culinary product
sales grew by 20% in volumes and 22% in value. Volume growth in chocolate &
confectionery segment was 12%, which was higher then market leader and average
industry growth, signifying that the company has been able to improve market share
in the category.
Turnover Growth
Contribution by
Volume Value Volume Value Realizations
Milk & Nutrition Products 47 43 15 13 -1.4
Beverages 18 29 42 21 -15.1
Culinary Products 24 14 20 22 1.9
Chocolates & Confectionery 11 14 12 20 6.8
Milk products, which account for a significant 43% of Nestlé‘s revenues, have grown
at steady 15% in volume terms. Turnover contribution of beverages is 29%, while
culinary products and chocolate & confectionery each contribute 14% to Nestle
Rs14.5bn turnover in the first 9 months of 2006.
Profit Margin
Operating margins have improved from 18.1% to 18.5% in 2006 driven by lower
material cost. Raw material cost declined from 44.4% of sales in F12/05 to 43.1% of
sales in F12/06.
Operating Margins 2006 2007
EBITDA 18.5 18.1
Adjusted EBITDA 18.5 17.7
Improved working capital and asset management The company has been able to
improve working capital management. Operating cash flow has registered a CAGR of
15% in the last 4 years.
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14. Fixed asset turnover has also gradually improved over the last 3 years. Net
indebtedness (total financial liabilities net of liquid assets) has declined from a high
2.5x in 1998 to 0.3z currently.
2003 2004 2006 2007(dec)
Operating Cash Flow 1743 2391 2420 1966
Rotation of Operating Net Working Capital 7.1 9.6 14.7 18.1
Rotation of Fixed Assets 4.0 3.9 4.2 4.7
Net Indebtedness 2.5 1.0 0.9 0.3
"India Infoline Ltd (IIL) and India Infoline Securities Ltd (IISL) do not have any
positions in any
DIRECTORS' REPORT (7th March, 2009)
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 2005. 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 2005 of Rs295mn (net) to provide for
various contingencies resulting from matters mainly relating to issues under litigation,
dispute and management discretion.
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15. Your Company's overall sales and profit progression during 2005 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 2005.
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,
2006.
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16. 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 Éclairs 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.
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17. 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.
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18. 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.
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19. 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.
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20. 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.
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21. 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.
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22. 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 Cadbury‘s turnover. Confectionery sales‘, accounting
for 12% of turnover, is contributed largely by Éclairs. The company attempted
expanding its confectionery product portfolio, with launch of sugar based
confectionery Googly and Fritos, 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, Parle‘s, Joyco India and Perfetti. The MNC‘s such as Joyco and Perfetti
have aggressively expanded their presence in the country in the last few years.
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23. 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.
Cadbury‘s Bourn vita is the leader in the brown drink (cocoa based) segment. In the
white drink segment, SmithKline‘s 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 2005.
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 company‘s
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 Éclairs (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 Éclairs, which have supported
growth in the past.
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24. Cadbury’s 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.
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25. 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
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26. 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.
Cadbury’s 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.
Current market shares
Chocolate 69.2%
Sugar Confectionery 4.0%
Food Drinks 14.2%
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 lay 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 Éclairs
One new major product launch every year
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27. 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), éclairs (Cadburys' Éclairs), toffees (English Toffee).
During 2001, Cadbury‘s 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 Cadbury‘s 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 Éclairs. 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. Éclairs was re-launched
with unique packaging in cartons during 2001.
Food drinks (25% of turnover) Cadbury‘s 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.
Cadbury‘s other products include Cadbury’s Drinking Chocolate and Cadbury’s
Cocoa powder. These account for only 1% of Cadbury‘s turnover.
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28. 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 he 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:
break segment - 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
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29. 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 Cadbury‘s
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.
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30. Gems presents an unusual case of how a textbook-perfect ultra-sharp positioning can
actually become a disadvantage. Of course, Cadbury doesn‘t 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.
Cadbury‘s 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, Cadbury‘s Five Star and Amul chocolates.
The other major advantage that Gems enjoyed probably created problems for
Cadbury‘s 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 Cadbury‘s 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.
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31. 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 Wrigley‘s, Freshmint, Boomer‘s, 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 child‘s attention but chips, candy,
and sugar boiled sweets, bubblegum, all of which were upping their noise levels. This
was worrying for Cadbury‘s, 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
Milk‘s 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
children‘s 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, Cadbury‘s 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 children‘s 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 child‘s 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 brand‘s revival simply
because the brand still lacked excitement. This was when the company decided to
look at market trends abroad.
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32. Internationally, brands targeted at younger children sold because they offered value-
ads like toys. Also consumer research revealed that the chocolate flavour and CDM‘s
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.
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.
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33. 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.
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34. POSITIONING WITH RESPECT TO THE PRICE SEGMENTS
Positioning Drives attitude and Drives snacking and Drives variety, gifting and
Price behaviour consumption taste preferences
Cadbury’s Fruit & Nut
High Cadbury’s Roast Almond
(above Rs.25 KitKat Cadbury’s Bournville
for 40 gms.) Cadbury’s Nut Milk
Tango Almond
Tango Fruit & Nut
Cadbury’s Creamy Bar
Medium
Cadbury’s Crackle Tango Cashew
(Rs. 10-25 for Cadbury’s Perk
Cadbury’s Dairy Milk Tango Crispy
40 gms.)
Amul Fruit & Nut
Nestle Crunch
Amul Milk Chocolate
Nestle Milkybar
Amul Bitter
Kandos
Low Nestle Premium Milk Amul Orange
Chuckles
(below Rs. 10 Nestle Classic Amul Crisp
Nestle Bar One
for 40 gms.) Tango Milk Cadbury’s Relish
Cadbury’s Break
Nestle Rich Dark
Cadbury’s Five Star
Mystique
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35. Price, Positioning and Ad descriptions of all the brands
Advertisement
Company Brand Price Positioning
Campaign
Product for people who
Dairy Milk The real taste of
Rs 15 are natural and
Chocolate life
spontaneous
Fruit & Nut
Rs. 19
Roast
Rs. 38 Piggybacking on
Almond
Rs. 11 Cadbury’s Dairy Milk
Creamy bar
Rs. 13
Bournville
Product for teenagers,
Crack, Crack,
Crackle Rs. 12 fun alternative to Dairy
Crackle.
Milk
Source of energy for
5Star Rs. 10 Energy bar
Cadbury’s body & mind
Anytime, anywhere Thodi si Pet
Perk Rs. 12
snack Puja.
Light chocolate bar to
Break Rs. 6 fulfil a snack need rather I want a Break
than just taste
Close to chocolate with Eclairs teenager
Dairy Milk a twin taste - tough from - jo bhi khaye
Rs. 0.75
Eclairs the outside and soft duniya bhool
creamy filling within jaye.
Relish Rs. 2.50
Nutties Rs. 13
Tiffins Rs. 12
Have a break,
Have a KitKat;
KitKat Rs. 15 Snack for routine usage
Have a KitKat,
Play it Cool.
Nutrition for children Milkybar, Give
Milkybar Rs. 13
and a sugary taste me the Power
Nestle
Chicken or Egg,
Crunch Rs. 13 Fun Product
have a Crunch
For those in
Bar One Rs. 9 Snack
between times
Classic Rs.10
Eclairs Rs. 0.50
Premium
Rs. 9
Milk
Amul Orange Gift for all ages - Gift for someone
Rs. 8.50
Crisp expression of love you love.
Rs. 11
Fruit & Nut
Bitter
Advertisement
Company Brand Price Positioning
Campaign
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36. Tango Milk
Tango
Rs. 10
Cashew Inexpensive chocolates
Rs. 14
Tango for young adults in the The bigger bar
Rs. 17
almond age group 18 - 25
Rs. 15
Tango Fruit
& Nut
Lotus
Affordable chocolate for
Chuckles Rs. 4
children and adults
Something the child can
Mystique Rs. 5 have alone without
sharing
Fun Chocolate for
Supercar
children
Love Birds Rs. 13 Romantic Milk Chocolate
Choco- Dolphin Rs. 24
Attractive novelty
Swiss Chocolate Rs. 60
shapes for children
–Animals
Melody Hai
Parle Melody Rs. 0.75 Rich in Chocolate
Chocolatey
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.
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37. 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.
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39. LITERATURE REVIEW
CHOCOLATE INDUSTRY SCHEREPPES: BEVERAGES ON
BLOCK
To concentrate on its core business of confectioneries chocolate schereppes, the U.K
major, in an ambitious are structuring drive is spinning. The main ingredient of
chocolates is cocoa grown mainly on the equatorial zone of South America. The other
ingredients that go into the permitted emulsifies cocoa constitutes nearly 40% of the
total raw material cost.
Chocolates had its beginnings in the times of the Mayas and the Aztecs when they
beat cocoa into a pulp and made a 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 ingredient of chocolates is cocoa, grown mainly on the equatorial zones of
South America. The other ingredients that go into the making of chocolates are: sugar,
milk solids, and permitted emulsifiers. Cocoa constitutes nearly 40% of the total raw
material cost.
The following report attempts to make a study on the chocolate industry and the
position of the chocolate brand, Cadbury. The brand name chosen is the umbrella
brand as we feel that the corporate name is recognized as a brand, not so much its
individual products. Chocolate most commonly comes in dark, milk, and white
varieties, with cocoa solids contributing to the brown coloration.
Chocolate has been used as a drink for nearly all of its history. The earliest record of
using chocolate pre-dates the Maya. In November, 2007, archeologists reported
finding evidence of the oldest known cultivation and use of cacao at a site in Puerto
Escondido, Honduras, dating from about 1100 to 1400 BC. The residues found and
the kind of vessel they were found in, indicate that the initial use of cacao was not
simply as a beverage, but the white pulp around the cacao beans was likely used as a
source of fermentable sugars for an alcoholic drink. The chocolate residue found in an
early classic ancient Maya pot in Río Azul, northern Guatemala, suggests that Mayans
were drinking chocolate around 400 A.D.
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40. In the New World, chocolate was consumed in a bitter, spicy drink called xocoatl,
and was often flavored with vanilla, chile pepper, and achiote (known today as
annatto). Xocoatl was believed to fight fatigue, a belief that is probably attributable to
the theobromine content. Other chocolate drinks combined it with such edibles as
maize starch paste (which acts as an emulsifier and thickener), various fruits, and
honey. In 1689 noted physician and collector Hans Sloane, developed a milk
chocolate drink in Jamaica which was initially used by apothecaries, but later sold by
the Cadbury brothers.
Chocolate was also an important luxury good throughout pre-Columbian
Mesoamerica, and cacao beans were often used as currency. For example, the Aztecs
used a system in which one turkey cost one hundred cacao beans and one fresh
avocado was worth three beans.
Chocolate is created from the cocoa bean. A cacao tree with fruit pods in various
stages of ripening. Roughly two-thirds of the entire world's cocoa is produced in
Western Africa, with 43% sourced from Côte d'Ivoire. Like many food industry
producers, individual cocoa farmers are at the mercy of volatile world markets. The
price can vary from £500 ($945) to £3,000 ($5,672) per ton, in the space of just a few
years. While investors trading in cacao can dump shares at will, individual cocoa
farmers cannot increase production or abandon trees very quickly. When cocoa prices
drop, farmers in West Africa sometimes cut costs by using slave labor. It has been
alleged that an estimated 90% of cocoa farms in Côte d'Ivoire have used some form of
slave labor in order to remain viable.[13] According to the World Cocoa Foundation
[WCF], some 50 million people around the world depend on cocoa as a source of
livelihood. The industry is dominated by three chocolate makers, Barry Callebaut,
Cargill and Archer Daniels Midland Company (ADM) and in the UK, 99.999% of
chocolatiers, whether they be large companies such as Cadbury Schweppes or small
independents, purchase their chocolate from them, to melt, mould and package to
their own design.
Despite some disagreement in the EU about the definition, chocolate is any product
made primarily of cocoa solids and cocoa fat. The different flavours of chocolate can
be obtained by varying the time and temperature when roasting the beans, by
adjusting the relative quantities of the cocoa solids and cocoa fat, and by adding non-
chocolate ingredients.
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41. Production costs can be decreased by reducing cocoa solid content or by substituting
cocoa butter with a non-cocoa fat. Cocoa growers oppose allowing the resulting food
to be called "chocolate", because that would lower demand for their crops.
There are two main jobs associated with creating chocolate candy, chocolate makers
and chocolatiers. Chocolate makers use harvested cacao beans and other ingredients
to produce couverture chocolate. Chocolatiers use the finished couverture to make
chocolate candies (bars, truffles, baked goods, etc.).
Cacao trees are small, understory trees that need rich, well-drained soils. They
naturally grow within 20 degrees of either side of the equator because they need about
2000 milimeters of rainfall a year, and temperatures in the range of 21 to 32 degrees
Celsius, and cannot tolerate a temperature lower than 15 degrees Celsius (59 degrees
Fahrenheit).
The three main varieties of cacao beans used in chocolate are criollo, forastero and
trinitario.
Representing only five percent of all cocoa beans grown, criollo is the rarest and most
expensive cocoa on the market and is native to Central America, the Caribbean
islands and the northern tier of South American states.[citation needed]
There is some
dispute about the genetic purity of cocoas sold today as Criollo, because most
populations have been exposed to the genetic influence of other varieties. Criollos are
particularly difficult to grow, as they are vulnerable to a variety of environmental
threats and produce low yields of cocoa per tree. The flavour of Criollo is unique. It is
described as delicate yet complex, low in classic chocolate flavour, but rich in
"secondary" notes of long duration.
The most commonly grown bean is forastero, a large group of wild and cultivated
cacaos, most likely native to the Amazon basin. The African cocoa crop is entirely of
the Forastero variety. They are significantly hardier and of higher yield than Criollo.
The source of most chocolate marketed, forastero cocoas are typically strong in
classic "chocolate" flavour, but have a short duration and are unsupported by
secondary flavours, producing "quite bland" chocolate. There are exceptional
forasteros, such as the "Nacional" or the "Arriba" varieties, which can be very
complex flavors.
"Chocolate" products should not be classified as covertures, or even as chocolate,
because of the low or virtually non-existent cocoa content.
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42. Vegetable oils and artificial vanilla flavor are often used in cheaper chocolate to mask
poorly fermented and/or roasted beans.
OBJECTIVE:
The basic objective of this project is to perform a thorough market analysis of the
Chocolate Industry. Along with a detailed analysis of its major product Chocolate
dairy milk. The analysis incorporates – market segmentation, company analysis,
competitor analysis, market analysis, corporate strategies and our recommendations.
CONCLUSION:
The study will focus on the marketing and advertising strategy employed by
Chocolate in the context of the Indian macro environment and industry structure. The
advertising strategy will be studied with respect to Chocolates business and marketing
objectives. The strategies adopted will be analyzed for each product offering. The
report initially focuses on an examination of the industry environment and the product
class. The report 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 and recommendations for the industry and the
company.
FAIZAN ALI
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44. RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem. It may
be understood as a science of studying how research is done scientifically. In it we
study the various steps that are generally adopted by a researcher in studying his
research problem along with the logic behind them. It is necessary for the researcher
to know not only the research methods/techniques but also the methodology.
Researchers not only need to know how to develop certain indices or tests, how to
calculate the mean, the mode, the median or the standard deviation or chi-square, how
to apply particular research techniques, but they also need to know which of these
methods or techniques, are relevant and which are not, and what would they mean and
indicate and why.
Thus when we talk of research methodology we not only talk of the research methods
but also consider the logic behind the methods we use in the context of our research
study and explains why we are using a particular method or technique and why we are
not using others so that research results are capable of being evaluated either by the
researcher himself or by others.
This section contains the methodological issues in research. It focuses primarily on
providing help with the tools and techniques used in the research. These tools and
techniques differ from discipline to discipline. Researchers also have specific blazes.
Some will prefer Qualitative over Quantitative approaches or vice-versa. Generally
speaking, an integrated approach is advisable. A study that contains only qualitative
data or solely quantitative data messes the rich texture of interpretation that an
integrated approach makes possible. While this section may be organized in a way
that suggests a defined process, this is not the intention.
"Marketing research is the systematic design, collection, analysis and reporting of
data and findings and relevant to specific marketing situations facing the
company."
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45. RESEARCH OBJECTIVE
Gauge the chocolate consumption habit of the consumers.
To find out the important attributes of the product that affects the buying
decision of the consumer.
To find out perception of customer‘s toward various chocolate brands.
To find out customer satisfaction level in different chocolate brands.
To find out market share in different chocolate brands.
RESEARCH DESIGN
A research project conducted scientifically has a specific framework of research from
the problems identification to the presentation of the reports. This framework of
conducting research is known as the RESEARCH DESIGN.
A research design is the arrangements of conditions and analysis of data in a manner
that aims to combine relevance to the research purpose with economy in procedure.
Research design provides the glue that holds the research project together. A design is
used to structure the research, to show how all of the major parts of the research
project-the samples or the groups, measures, treatments or programs, and methods of
assignment-work together to try to address the central research questions. There can
be following types of research design:
EXPLORATORY RESEARCH STUDIES:
Exploratory Research studies are also termed as formulate research studies. The main
purpose of such studies is that of such studies is that of formulating a problem for
more precise investigation or of developing the working hypothesis from an
operational point of view. The major emphasis in such studies is on discovery of idea
and insight. As such research designs appropriate for such studies must be flexible
enough to provide opportunity for considering different aspects of a problem under
study.
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46. Inbuilt flexibility in research design is needed because the research problem, broadly
defined initially is transformed into one with more precise meaning in exploratory
studies.
DESCRIPTIVE RESEARCH STUDIES:
Descriptive Research studies are those studies which are concerned with are
concerned with describing the characteristics of a particular individual, or of a group.
Studies concerned with narration of facts and characteristics concerning individual,
group or situation are all examples of descriptive research study most of the social
research comes under this categories.
SAMPLING PLAN
When field studies are undertaken in practical life, consideration of time and cost
almost invariably lead to a selection of respondents i.e., selection of only few items.
The respondents selected should be as representative of the total population as
possible in order to produce a miniature cross-section. The sampling design used in
this research is non-probability convenience sampling.
PROBABILITY SAMPLING:
Probability sampling is also known as ‗random sampling ‗or ‗chance‘ sampling.
Under this sampling design every item of inclusion in the sample. It is, so to say, a
lottery method in which individual units are picked up from the whole group not
deliberately but by some mechanical process.
NON-PROBABILITY SAMPLING:
Non-Probability sampling is that sampling is that sampling procedure which does not
afford any basis for estimating the probability that each item in the population has of
being included in the sample. On-Probability sampling is also known by different
names such as deliberate sampling, purposive sampling and judgment sampling. In
this type of sampling, items for the sample are selected deliberately by the research.
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