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Economic Analysis
The FMCG Industry
▪FMCG goods are popularly known as consumer packaged
goods. Items in this category include all consumables people buy
at regular intervals.
▪The FMCG sector has grown at an annual average of about 11
per cent over the last decade. Food products is the leading
segment, accounting for 43 per cent of the overall market.
▪The market size of FMCG in India is estimated to grow from US$
30 billion in 2011 to US$ 74 billion in 2018.
The top ten India FMCG brands are:
1.Hindustan Unilever Ltd. 2. ITC (Indian Tobacco Company)
3. Nestlé India 4. GCMMF (AMUL) 5. Dabur India 6. Asian Paints
(India) 7. Cadbury India 8. Britannia Industries 9. Procter & Gamble
Hygiene and Health Care 10. Marico Industries
Company Profile
Cadbury
Cadbury is a British
multinational confectionery
company owned by
Mondelēz International.
It is the second largest confectionery
brand in the world after Wrigley's.
It is H.Q in Uxbridge, Greater
London and operates in more
than fifty countries worldwide.
Chocolate became the
company’s best-selling
product by 1948.
Cadbury India
In 1948, Cadbury India
began its operations in India
by importing chocolates.
The corporate head office is in
Mumbai.
It is the market leader in the
chocolate confectionery
business with a market share of
over 70%
On 21 April 2014, Cadbury
India changed its name to
Mondelez India Foods
Limited.
PRODUCTS
Cadbury India
operates in five
categories –
• Chocolate
confectionery
• Beverages
• Biscuits
• Gum and
• Candy
Some of the key
brands are Cadbury
Dairy Milk, Bournvita,
5 Star, Perk, Bournville,
Celebrations, Gems,
Halls, Éclairs, Bubbaloo,
Tang and Oreo.
Market Structure
Cadbury operates in a
monopolistic competitive
market structure in which they
have been able to maintain a
control over their inflated
prices.
Cadbury understands the
concepts of brand identity
and product differentiation
which is a reason why
Cadbury has become the
second largest confectionery
company all over the world.
The company’s strategy is to
focus on their main
competencies to differentiate
themselves
Cadbury understands how to
benefit their customer in
which they conduct an
observation on consumer
feedback; leverage the
company widely to many
products and markets, and
create innovative ideas that
are hard for competitors to
imitate.
Cadbury attracts their
customers over their
competitors by their creative
designed advertisement
campaigns
The company is maintaining a steady gross margin of approx 20%
around its years of production. This is despite the fact that they
having 35% share of this market which gives them an almost
monopolistic status
Pricing Strategy
Weight Prices
20gm pack Rs 10
50 gm Pack Rs 30
150 gm Pack Rs 90
350 gm Tin Rs 175
500 gm Tin Rs 350
And it is concluded from the survey that customers by looking this
price chart have accepted the prices and called it as an
economical.
Pricing Technique
Skimming
The prices are set very high to take advantage of some people’s
desire for a new product or design at any price.
Cost Plus Pricing
In this simple mark-up procedure is used. Cost plus pricing tends to
ignore the demand for the product and the competition.
There are 4 different pricing techniques that are
available to Cadbury.
Positioning pricing
Cadbury uses this method to position prices that are set which
reflect the consumers view of the chocolate bean.
Demand based pricing
Cadbury set their prices based on what they think the consumer is
prepared to pay.
Cost
Structure
Years 2013 2014
Per
pack
Per
carton
Per
pack
Per
carton
Materi
al
260 1300 320 1600
Process
ing
Cost
40 200 65 325
Financi
al Cost
64 320 83 415
Sales
team
expens
es
103 515 132 660
Other
expens
es
45 225 60 300
TOTAL
COST
512 2560 660 3300
Graphical representation of cost structure for the years 2013 and 2014
The expenses that a firm must take into account when
manufacturing a product or providing a service is considered
as company’s cost structure. 
2013 2014
Total no. of bags
sold
3,40,000 5,00,000
Revenue per
bag
3,200 4,125
TOTAL REVENUE 1,088,000,000 2,062,500,000
Revenue structure
A revenue model is a framework for generating revenues. The co’s
revenue reflects significant increase because of two main
reasons :
▪Control in production cost
▪Great appreciation and value of product leads to increase in
demand
Graphical representation of revenue structure for the years 2013 and 2014
Porter’s
Five
Force
ModelBargaining
power of
buyers
Entry of
competitors
Threat of
substitutes
Bargaining
power of
suppliers
Rivalry among
the existing
players
Entry of competitors
Entry will be difficult because there are already well established
companies within this market like Mars, Nestle, Ferrero, Kraft,
Hershey’s and Lindt. The barrier for entry is very hard for new
company.
Threat of substitutes
The main threat of is the supermarket own brands because they
tend to copy popular chocolates and sell at a cheaper price.
Bargaining power of suppliers
 Cadbury has higher bargaining power as it is a big company
and has high purchasing power. Although there is an existing
competition, but Cadbury’s can use economies of scale and buy
raw materials at a cheaper price.
 
Bargaining power of buyers
Cadbury’s has a large buying power scattered all around the
world in billions. The price subjectivity of the products is not a
question for the people but the increasing number of
competitors that offers the same type of products at a lower
cost might be the cause of customer loyalty alteration.
Rivalry among the existing players
Companies such as Nestle, Hershey’s, Ferrero etc. are
Cadbury’s main rivals because they are also long established
confectionary brands and like Cadbury are developing new
ranges of products new promotions. Rivalry will always be
strong among these companies because they sell from the
same types of stores and their products are similar in some
respects.
S W
0 T
•World leader 
•Powerhouse brands and
Products 
•Brand name, brand equity
and Brand loyalty
•Positioning as gift 
•Promotions
•Indian connect 
•Placement and distribution 
•Rural distribution
•Quality control needs
to be strengthened.
• Rural markets
• New tastes
•Cost and price
increase
•Health consciousness
on the rise
•Decreasing importance
of festivals
•Rising demand of
people, growing
purchasing power
Determinants of Demand
•Income
•Population
and Age Group
•Brand Image
•Consumer Preference
and Taste
•Expected
Future Price
•Competition
•Price of
Complementary
Goods
•Cooling Weather
and Recession
Demand Curve
Determinants of Supply
Supply Curve
PriceRs.
400
525
650
775
900
Quantity
1.1 Million kg (2010) 1.7 Million kg (2011) 2.5 Million kg (2012)
520
640
825
Sales prices per year
2012 2013 2014
•Number of
suppliers
•Expected price
•Price of input
costs
Elasticity
•Price Elasticity of Demand
Price Elasticity is a measure of the
relationship between a change in the quantity
demanded of a particular good and a change
in its price.
•Cross Price Elasticity
Cross price elasticity measures the responsiveness in the
quantity demand of one good when a change in price takes
place in another good .
Band Wagon Effect:
The band wagon effect is totally
depended on the mentality of the
human beings. The advertisement
campaign with Amitabh Bachchan
has made an increase in the demand of
the dairy milk. It indicates that if the one
person is going to buy dairy milk
chocolate than the other also want to
buy the same chocolate.
Snob Effect:
This is a kind of totally contra effect of the band wagon
effect. If a person bought one particular product then the
other person wants superior product than the person had
already bought. But in our product the demand does not
affect by the snob effect.
Demand forecasting
Table: Sales for the year 2005-14
YEAR SALES (In Rs Cr)
2005 571.14
2006 626.32
2007 795.61
2008 842.85
2009 885.28
2010 1006.02
2011 1149.97
2012 1441.92
2013 1751.24
2014 2045.08
1. Trend Projection Method
Time series has four types of
components namely, Secular
Trend (T), Secular Variation (S),
Cyclical Element (C), and an
Irregular or Random Variation
(I).
In our study we estimate the
trend using The Graphical
Method
Fig: Trend Line of actual sales from 2005-2014
Sales (in Rs Cr)
0
550
1100
1650
2200
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sales (in Rs Cr)
According to the graph, there is an upward trend in the
actual yearly sales of Cadbury. It rises by 250 Crores every
year from 2011 to 2014. Going by the trend, it is forecasted
that the sales for the year of 2015 will be Rs 2,295 Crores.
2. Regression analysis
It attempts to assess the relationship between at least two
variables (one or more independent and one dependent), the
purpose being, to predict the value of the dependent variable
from the specific value of the independent variable
Relationship of Sales
with Price
Relationship of Sales
with Advertising
Price
Sales(Cr.)
0
550
1100
1650
2200
Price
0 4 8 11 15
R² = 0.6266 Series1
Adv (Cr)
Sales(Cr.)
0
550
1100
1650
2200
Adv (Cr.)
0 50 100 150 200
R² = 0.995 A
This graph shows that the impact of price on
sales of Cadbury’s can be explained only by
62.66%. R squared value of 0.6266 shows a
not so strong correlation between price and
the sales of Cadbury’s.
Direct correlation between advertisement
spending and the Sales of Cadbury’s from the
period 2005-2014. Rreflected in strong R
squared value of 0.995 which implies that 99.5%
of the impact of advertising spends can be seen
on the Sales of Cadbury’s chocolates.
Relationship of Sales
with Competitors price
Relationship of Sales
with PDI
Competitor Price
Sales(Cr.)
0
550
1100
1650
2200
Competitor Price
0 5 9 14 18
R² = 0.6266 Series1
Personal Disposable
Income (PDI)
Sales(Cr.)
0
550
1100
1650
2200
PDI
0 20000 40000 60000 80000
R² = 0.8332
Ser
The PDI of Indian consumers has direct impact on
the sales of Cadbury’s chocolate. Though this
impact is not as high as that of advertisement
spending but still high enough (83% correlation)
to not be ignored.
As with the pricing of the Cadbury’s chocolates,
the pricing of its competitor products doesn’t have
much impact on its Sales. This can be seen from a
weak R squared value of 0.6266
Recommendations
•Maintain dominance in chocolate segments and bring in more
flavours of Dairy Milk.
•Use medias such as Facebook, twitter, radio, etc. to enable large
amount of cheap advertisement.
•Formulate new strategies to give tough competition to new
entrants.
•New channels such as gifting, child connectivity and value for
money offering to be the key growth drives.
•One new major product from International Portfolio should be
launched in India every year.
•Maintain their strong market distribution channel so as not to lose
market share.
•Customer’s complaint should be welcomed and handled
effectively
Marketing Strategies
Marketing strategies can be implemented by dividing the
target audience in three age groups and formulate strategies
accordingly.
1. Marketing Plan for Age group 0 to 18
•Child connectivity & gifting is a new growth segment for the
company. Target this age group by gifting the chocolates in
schools.
•We propose, Cadbury to tie up with bigger chain of school for
distribution. Chocolates have become a premium gifting
option. The chocolates have health
•benefits compared to Indian traditional sweets. CDM has more
nutritional value for children's than any other sweet.
2. Marketing Plan for Age group to 19 to 35
•The best way is to catch this population on internet (on Facebook). India
has 78 million active users who access Facebook. We propose Cadbury
to tie up with Facebook & launch the online chocolate gifting
programme on facebook. Customers can choose the best Chocolate
gift they want to send it across India. Cadbury will take great care in
delivering the Chocolate gifts across India (Through distribution network.
•In future this can be extended to gifting chocolates on Valentine's Day,
International Women, Day Mother's Day, Father's Day & Friendship Day.
3. Marketing Plan for Age group 36 to 60
•The total population in this age group is 0.381 billion.This is majorly
working population of India. This segment can be targeted by using
corporate gifting Chocolates have become a premium gifting option.
•Hospitality is another segment that is growing at a consistent rate.
•This population can be targeted on marriages (with wedding invitation
card & after marriage gift), on festivals, special occasions & many more
occasions.
Conclusion
Cadbury has had much market power in the confectionery
industry all over the world. Cadbury realizes their success
depends significantly on the value of the Cadbury brand while
relying on its excellent reputation for their product quality and
flavour, accessible, and affordable price. In the current
economic state, they are still facing and need to sort out the
issue of the deficit of cocoa and the price increases in cocoa.
Besides, they need to compete with other chocolate brands
as many firms have entered freely in the market. To remain a
major player in the confectionery industry, they need to be
effective in the current market by introducing more new
products and react to the alternatives within the market. Also,
their advertisement spending has a huge impact on the
revenue that they earn and so they should be very careful
while making the decision.
Presented by:
Prateek Kathuria: 157002
Chhavi Rahul: 157009
Aishwarya Raj Khanna:157016
Kshitiz Singhal: 157024
Shubham Thukral: 157033
Ritika Puria: 157040
Simranmeet Singh: 157045

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Demand Forecasting - Cadbury

  • 2. The FMCG Industry ▪FMCG goods are popularly known as consumer packaged goods. Items in this category include all consumables people buy at regular intervals. ▪The FMCG sector has grown at an annual average of about 11 per cent over the last decade. Food products is the leading segment, accounting for 43 per cent of the overall market. ▪The market size of FMCG in India is estimated to grow from US$ 30 billion in 2011 to US$ 74 billion in 2018. The top ten India FMCG brands are: 1.Hindustan Unilever Ltd. 2. ITC (Indian Tobacco Company) 3. Nestlé India 4. GCMMF (AMUL) 5. Dabur India 6. Asian Paints (India) 7. Cadbury India 8. Britannia Industries 9. Procter & Gamble Hygiene and Health Care 10. Marico Industries
  • 3. Company Profile Cadbury Cadbury is a British multinational confectionery company owned by Mondelēz International. It is the second largest confectionery brand in the world after Wrigley's. It is H.Q in Uxbridge, Greater London and operates in more than fifty countries worldwide. Chocolate became the company’s best-selling product by 1948. Cadbury India In 1948, Cadbury India began its operations in India by importing chocolates. The corporate head office is in Mumbai. It is the market leader in the chocolate confectionery business with a market share of over 70% On 21 April 2014, Cadbury India changed its name to Mondelez India Foods Limited.
  • 4. PRODUCTS Cadbury India operates in five categories – • Chocolate confectionery • Beverages • Biscuits • Gum and • Candy Some of the key brands are Cadbury Dairy Milk, Bournvita, 5 Star, Perk, Bournville, Celebrations, Gems, Halls, Éclairs, Bubbaloo, Tang and Oreo.
  • 5. Market Structure Cadbury operates in a monopolistic competitive market structure in which they have been able to maintain a control over their inflated prices. Cadbury understands the concepts of brand identity and product differentiation which is a reason why Cadbury has become the second largest confectionery company all over the world. The company’s strategy is to focus on their main competencies to differentiate themselves Cadbury understands how to benefit their customer in which they conduct an observation on consumer feedback; leverage the company widely to many products and markets, and create innovative ideas that are hard for competitors to imitate. Cadbury attracts their customers over their competitors by their creative designed advertisement campaigns
  • 6. The company is maintaining a steady gross margin of approx 20% around its years of production. This is despite the fact that they having 35% share of this market which gives them an almost monopolistic status Pricing Strategy Weight Prices 20gm pack Rs 10 50 gm Pack Rs 30 150 gm Pack Rs 90 350 gm Tin Rs 175 500 gm Tin Rs 350 And it is concluded from the survey that customers by looking this price chart have accepted the prices and called it as an economical.
  • 7. Pricing Technique Skimming The prices are set very high to take advantage of some people’s desire for a new product or design at any price. Cost Plus Pricing In this simple mark-up procedure is used. Cost plus pricing tends to ignore the demand for the product and the competition. There are 4 different pricing techniques that are available to Cadbury.
  • 8. Positioning pricing Cadbury uses this method to position prices that are set which reflect the consumers view of the chocolate bean. Demand based pricing Cadbury set their prices based on what they think the consumer is prepared to pay.
  • 9. Cost Structure Years 2013 2014 Per pack Per carton Per pack Per carton Materi al 260 1300 320 1600 Process ing Cost 40 200 65 325 Financi al Cost 64 320 83 415 Sales team expens es 103 515 132 660 Other expens es 45 225 60 300 TOTAL COST 512 2560 660 3300
  • 10. Graphical representation of cost structure for the years 2013 and 2014 The expenses that a firm must take into account when manufacturing a product or providing a service is considered as company’s cost structure. 
  • 11. 2013 2014 Total no. of bags sold 3,40,000 5,00,000 Revenue per bag 3,200 4,125 TOTAL REVENUE 1,088,000,000 2,062,500,000 Revenue structure A revenue model is a framework for generating revenues. The co’s revenue reflects significant increase because of two main reasons : ▪Control in production cost ▪Great appreciation and value of product leads to increase in demand
  • 12. Graphical representation of revenue structure for the years 2013 and 2014
  • 13. Porter’s Five Force ModelBargaining power of buyers Entry of competitors Threat of substitutes Bargaining power of suppliers Rivalry among the existing players
  • 14. Entry of competitors Entry will be difficult because there are already well established companies within this market like Mars, Nestle, Ferrero, Kraft, Hershey’s and Lindt. The barrier for entry is very hard for new company. Threat of substitutes The main threat of is the supermarket own brands because they tend to copy popular chocolates and sell at a cheaper price. Bargaining power of suppliers  Cadbury has higher bargaining power as it is a big company and has high purchasing power. Although there is an existing competition, but Cadbury’s can use economies of scale and buy raw materials at a cheaper price.  
  • 15. Bargaining power of buyers Cadbury’s has a large buying power scattered all around the world in billions. The price subjectivity of the products is not a question for the people but the increasing number of competitors that offers the same type of products at a lower cost might be the cause of customer loyalty alteration. Rivalry among the existing players Companies such as Nestle, Hershey’s, Ferrero etc. are Cadbury’s main rivals because they are also long established confectionary brands and like Cadbury are developing new ranges of products new promotions. Rivalry will always be strong among these companies because they sell from the same types of stores and their products are similar in some respects.
  • 16. S W 0 T •World leader  •Powerhouse brands and Products  •Brand name, brand equity and Brand loyalty •Positioning as gift  •Promotions •Indian connect  •Placement and distribution  •Rural distribution •Quality control needs to be strengthened. • Rural markets • New tastes •Cost and price increase •Health consciousness on the rise •Decreasing importance of festivals •Rising demand of people, growing purchasing power
  • 17. Determinants of Demand •Income •Population and Age Group •Brand Image •Consumer Preference and Taste •Expected Future Price •Competition •Price of Complementary Goods •Cooling Weather and Recession
  • 19. Determinants of Supply Supply Curve PriceRs. 400 525 650 775 900 Quantity 1.1 Million kg (2010) 1.7 Million kg (2011) 2.5 Million kg (2012) 520 640 825 Sales prices per year 2012 2013 2014 •Number of suppliers •Expected price •Price of input costs
  • 20. Elasticity •Price Elasticity of Demand Price Elasticity is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. •Cross Price Elasticity Cross price elasticity measures the responsiveness in the quantity demand of one good when a change in price takes place in another good .
  • 21. Band Wagon Effect: The band wagon effect is totally depended on the mentality of the human beings. The advertisement campaign with Amitabh Bachchan has made an increase in the demand of the dairy milk. It indicates that if the one person is going to buy dairy milk chocolate than the other also want to buy the same chocolate. Snob Effect: This is a kind of totally contra effect of the band wagon effect. If a person bought one particular product then the other person wants superior product than the person had already bought. But in our product the demand does not affect by the snob effect.
  • 22. Demand forecasting Table: Sales for the year 2005-14 YEAR SALES (In Rs Cr) 2005 571.14 2006 626.32 2007 795.61 2008 842.85 2009 885.28 2010 1006.02 2011 1149.97 2012 1441.92 2013 1751.24 2014 2045.08 1. Trend Projection Method Time series has four types of components namely, Secular Trend (T), Secular Variation (S), Cyclical Element (C), and an Irregular or Random Variation (I). In our study we estimate the trend using The Graphical Method
  • 23. Fig: Trend Line of actual sales from 2005-2014 Sales (in Rs Cr) 0 550 1100 1650 2200 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sales (in Rs Cr) According to the graph, there is an upward trend in the actual yearly sales of Cadbury. It rises by 250 Crores every year from 2011 to 2014. Going by the trend, it is forecasted that the sales for the year of 2015 will be Rs 2,295 Crores.
  • 24. 2. Regression analysis It attempts to assess the relationship between at least two variables (one or more independent and one dependent), the purpose being, to predict the value of the dependent variable from the specific value of the independent variable
  • 25. Relationship of Sales with Price Relationship of Sales with Advertising Price Sales(Cr.) 0 550 1100 1650 2200 Price 0 4 8 11 15 R² = 0.6266 Series1 Adv (Cr) Sales(Cr.) 0 550 1100 1650 2200 Adv (Cr.) 0 50 100 150 200 R² = 0.995 A This graph shows that the impact of price on sales of Cadbury’s can be explained only by 62.66%. R squared value of 0.6266 shows a not so strong correlation between price and the sales of Cadbury’s. Direct correlation between advertisement spending and the Sales of Cadbury’s from the period 2005-2014. Rreflected in strong R squared value of 0.995 which implies that 99.5% of the impact of advertising spends can be seen on the Sales of Cadbury’s chocolates.
  • 26. Relationship of Sales with Competitors price Relationship of Sales with PDI Competitor Price Sales(Cr.) 0 550 1100 1650 2200 Competitor Price 0 5 9 14 18 R² = 0.6266 Series1 Personal Disposable Income (PDI) Sales(Cr.) 0 550 1100 1650 2200 PDI 0 20000 40000 60000 80000 R² = 0.8332 Ser The PDI of Indian consumers has direct impact on the sales of Cadbury’s chocolate. Though this impact is not as high as that of advertisement spending but still high enough (83% correlation) to not be ignored. As with the pricing of the Cadbury’s chocolates, the pricing of its competitor products doesn’t have much impact on its Sales. This can be seen from a weak R squared value of 0.6266
  • 27. Recommendations •Maintain dominance in chocolate segments and bring in more flavours of Dairy Milk. •Use medias such as Facebook, twitter, radio, etc. to enable large amount of cheap advertisement. •Formulate new strategies to give tough competition to new entrants. •New channels such as gifting, child connectivity and value for money offering to be the key growth drives. •One new major product from International Portfolio should be launched in India every year. •Maintain their strong market distribution channel so as not to lose market share. •Customer’s complaint should be welcomed and handled effectively
  • 28. Marketing Strategies Marketing strategies can be implemented by dividing the target audience in three age groups and formulate strategies accordingly. 1. Marketing Plan for Age group 0 to 18 •Child connectivity & gifting is a new growth segment for the company. Target this age group by gifting the chocolates in schools. •We propose, Cadbury to tie up with bigger chain of school for distribution. Chocolates have become a premium gifting option. The chocolates have health •benefits compared to Indian traditional sweets. CDM has more nutritional value for children's than any other sweet.
  • 29. 2. Marketing Plan for Age group to 19 to 35 •The best way is to catch this population on internet (on Facebook). India has 78 million active users who access Facebook. We propose Cadbury to tie up with Facebook & launch the online chocolate gifting programme on facebook. Customers can choose the best Chocolate gift they want to send it across India. Cadbury will take great care in delivering the Chocolate gifts across India (Through distribution network. •In future this can be extended to gifting chocolates on Valentine's Day, International Women, Day Mother's Day, Father's Day & Friendship Day. 3. Marketing Plan for Age group 36 to 60 •The total population in this age group is 0.381 billion.This is majorly working population of India. This segment can be targeted by using corporate gifting Chocolates have become a premium gifting option. •Hospitality is another segment that is growing at a consistent rate. •This population can be targeted on marriages (with wedding invitation card & after marriage gift), on festivals, special occasions & many more occasions.
  • 30. Conclusion Cadbury has had much market power in the confectionery industry all over the world. Cadbury realizes their success depends significantly on the value of the Cadbury brand while relying on its excellent reputation for their product quality and flavour, accessible, and affordable price. In the current economic state, they are still facing and need to sort out the issue of the deficit of cocoa and the price increases in cocoa. Besides, they need to compete with other chocolate brands as many firms have entered freely in the market. To remain a major player in the confectionery industry, they need to be effective in the current market by introducing more new products and react to the alternatives within the market. Also, their advertisement spending has a huge impact on the revenue that they earn and so they should be very careful while making the decision.
  • 31. Presented by: Prateek Kathuria: 157002 Chhavi Rahul: 157009 Aishwarya Raj Khanna:157016 Kshitiz Singhal: 157024 Shubham Thukral: 157033 Ritika Puria: 157040 Simranmeet Singh: 157045