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Cadbury India Limited – An insight to its strategy

1. INTRODUCTION1.1 Strategy

Strategy is the art of creating value. It provides the intellectual frameworks, conceptual

models, and governing ideas that allow a company’s managers to identify opportunities

for bringing value to customers and for delivering that value at a profit. In this respect,

strategy is the way a company defines its business and links together the only resources

that really matter in today’s economy: knowledge and relationships or an organization’s

competencies and customers.

Strategic thinking is driven by the match between current capabilities and existing

opportunities, searching for sustainable advantages and finding protected niches. It is all

about finding ways to leverage resources, outpacing competitors in building new

advantages and making new industry rules.

The four questions that guide strategic choices are :

1. What can we do?

This question helps to analyse our strengths and weaknesses.

2. What might we do?

This question tells us about the external opportunities and threats.

3. What do we want to do?

This question gives the organizational and individual values.

4. What do others expect us to do?

This question helps to analyse the stakeholder expectancies.

NMMIMS – Deemed University 1


1.2 History Of Strategy

Strategy is rooted in military conflicts. It originated in business with the emergence of the

business schools like, Wharton and Harvard.

It was first known as Business Policy, which was used as a capstone course to bring

business functions together and had little grounding in its own theory. Real research in

the area of “strategic management” only really began to take shape in the 1970’s.

Technically, economics is the grounding for strategic management theory. The rigid

structure of neoclassical economics did not serve empirical evidence of firm performance

well which lead to other disciplines such as sociology, Psychology, political science, and

institutional theory as “alternative” explanations for strategy. The relaxation of the

rigidities in economics in the 1980’s has put economics back in the forefront as a solid

theoretical foundation for strategy. This led to a very young field of research with little in

the way of “accepted” principles and theories. Thus, resulted the evolution of business

strategy.

1.3 Purpose Of Strategy

The ultimate purpose of strategy for a firm are to maximise shareholder value, to become

a monopoly in its sphere of operation, that it should be earning profits above average and

that it is successful. But success is a very subjective word and its explicit definition is

required as success may mean staying in business and also may mean survival for a firm.

1.4 Strategic Planning

The first stage of strategic planning involve Futures Planning, which is thinking about

what the business might need to do 10–20 years ahead, and, Strategic Intents, which

involves thinking about key strategic themes that will inform decision making.

The thicker or rather the more voluminous, the planning document the more useless it

becomes.



The vision should be communicating to all staff where the organisation is going and

where it intends to be in the future and allows the firm to set goals. The aim of the firm

should be long term target, while the objective is the way in which the firm is going to

achieve the aim.

When the framework of the planning is laid down and the direction is identified, the firm

should analyse its position, develop and introduce strategy according to its position and

then evaluate the same. The evaluation should be on a regular basis and the results of the

evaluation should be fed back into the vision.

1.5 Types Of Strategy

Market Dominance, which is achieved through internal growth and

acquisitions – mergers and takeovers.

New product development to keep ahead of rivals and set the pace.

Contraction/Expansion to focus on what are the firm’s core competencies or

seek to expand into a range of markets?

Price Leadership – through dominating the industry so that other competitors

follow the price lead.

Global – seeking to expand global operations.

Reengineering – thinking outside the box – looking at news ways of doing things

to leverage the organisation’s performance.

The internal business level strategies are :

• Downsizing – selling off unwanted parts of the business – similar to contraction

• Delayering – flattening the management structure, removing bureaucracy, speed

up decision making

• Restructuring – complete re-think of the way the business is organised.



2. CADBURY INIDA LIMITED

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.

2.1 Corporate Vision

Cadbury in every pocket Superior shareholder value

2.2 Cadbury is mainly into three segments

Chocolates- out of total market size (volume) of 22500 tpa, Cadbury’s share has been

69.2 %.

Sugar Confectionery – out of the total market size (volume) of 163000 tpa, Cadbury

enjoys 4 % market share in this category.

Food drinks – out of total market size (volume) of 73500 tpa, 14.2 % share has been

rewarded to Cadbury in this segment.

Changing product mix

Contribution to turnover

1994

Contribution to turnover

2001

Chocolate 59% 65%

Sugar Confectionery 9% 10%

Food Drinks 32% 24%



2.2.1 Chocolates (65% 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).

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 relaunched during the year

to stem their degrowth. Perk registered a degrowth 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.

Retail outlet for FMCG goods in India, over two thirds out of these stock branded

impulse products, but fewer than 25% sell chocolates. The current chocolate value share

of the total impulse category is 6.1 %. Out of which Cadbury enjoys the share of 4.4%.

The scenario is going to change as

Attitude & disposable income changes are favourable to impulse product.

The main target segment, youth population, 47 % of urban India is growing.

Child & gifting segments are expected to grow at a faster rate.

Thus, the growth might be seen as saturating in the short run but certainly not in the

medium to long run.

Cadbury’s future plans for chocolate category is:

Broadening the consumer appeal & extending its reach to newer markets. Cadbury is

broadening its customer appeal via 450,000 outlets. More than 2100 distributors.

With addition of 8 million. New consumers added in 2000, Cadbury has the loyalty of

60 million total consumers now. However, the customer addition is lower than

expectation of more than 15 million a year. Cadbury is focusing on new channels &



institutional sale as a means to growth. Child connectivity & gifting segment also

being attempted as a new growth segment by the company.

Sustained growth of market through aggressive product development. Cadbury plans

to launch one new product every year.

Striving for international quality in the products as well as processes.

Focusing on cost competitiveness, productivity & innovative utilization of assets.

Benchmarking the manufacturing costs within the Cadbury Group's 40 production

facilities across the globe will do this. Thus, every year, this will definitely contribute

to the value creation.

2.2.2 Sugar Confectionery segment (10% turnover)

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

Eclairs. 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. Eclairs was relaunched with unique packaging in

cartons during 2001.

Sugar confectionery contributes around 10 % to the company’s revenue. Cadbury’s future

plans for this category is:

Optimum utilization of distribution network & reach

Introducing technologically differentiated value added sugar products

Focus on quality & packaging

Regular introduction of variants

However, this is a commodity segment and the premium market here may not emerge

very fast. Thus, any major success for the company is not expected in the short run. Also,

the company could look for acquiring some good brands here, which would enable them

to position themselves strongly.



2.2.3 Food drinks (25% of turnover)

Cadbury’s Bournvita 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 relaunched Bournvita with a new formulation and advertising

campaign positioning it on the health benefit platform to compete with white drinks. The

brand was relaunched in the South – the largest food drink market in the country, during

2001. Bournvita 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.

Cadbury is at No. 2 position in food drinks market. It has positioned itself on the platform

of ‘taste & energy’. To win a continuous brand loyalty from the child segment, it has

associated with children through programs such as ‘Bournvita Quiz Contest’. Cadbury’s

future plans for this category is:

To extend its positioning of ‘taste & energy’ to adults

To continue program with kids

Increase association with kids through website ‘bournvita.com’

Here, too the company is positioned more in the Brown segment. The White segment is

represented by HORLICKS as a dominant brand. Thus, to that extent, Cadbury India’s

growth may remain limited in this category. Here, too the company would look for

acquisitions.

2.3 Earnings sensitivity factors

Cocoa bean prices: Domestic as well as international prices of key raw material -

cocoa has 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.

2.4 Chronology of Success of Cadbury

1750 - Mayans discover cocoa.

1831 - Manufacture of drinking chocolate and cocoa began in a small rented

factory in Crooked Lane, Birmingham.

1865 - The Cadbury Brothers launch of Cocoa Essence, a new unadulterated

product. "Absolutely pure and therefore Best".

1886 - Cadbury became one of the first firms to open dining rooms with kitchens

and with food on sale.

1899 - The business became a private limited company, Cadbury Brothers Ltd,

and the Bournville factory had trebled in size and employed over 2,600 workers.

1905 - Cadbury Dairy Milk was launched. It was going to be called Cadbury's

Dairy Maid but the name was changed 6 weeks prior to launch.

1915 - Milk Tray was launched. Chocolates were put onto trays in special 5.5lb

boxes and sold loose to customers, at 3.5d per lb.

1932 - Bournvita made with malt extracted from barley, full-cream milk, the

finest cocoa and eggs, was launched.

1947 - Cadbury set up a factory in India and its India operations started.

1969 - Cadbury merged with Schweppes.

1993 - Cadbury opened the world's largest and most advanced chilled warehouse

in Minworth, Birmingham.



3. Strategy of Cadbury

The challenge that Cadbury faced in India, when it started its operations in 1947

in India was that chocolates were primarily seen as a western taste and getting people

accustomed to chocolates was a difficult task. The mindsets and the preferences of

Indians are so diverse as the country itself and reaching out to them and communicating a

new ideology was the main challenge that Cadbury was facing.

The advertising is aimed at changing consumer perception and eating habits. It supports a

lot of human welfare activities in all the regions and countries of its operations. It shows

its commitment to stakeholders in line with Corporate Governance policy.

Cadbury India Limited is always on the lookout of attractive and growing markets. It

believes in creating high barriers for any new entrant to enter the market. The objective is

to earn attractive and resilient returns so that it recovers its investment faster and create

its monopoly in the market.

The strategy at the organisational level is followed by comprehensive structural and leadership change, consolidated operational structure, increased scale of each regional operating unit and separated supply chain management from commercial management.

Apart, from the above-mentioned steps, Cadbury has planned to follow the following

strategies, which shows its commitment towards its stakeholders in line with its

Corporate Governance policy – shareholders, customers, employees, suppliers &

distributors.

Providing high focus on Economic profit & a constant review of company & brand

performance



To drive low cost manufacturing

Reducing manufacturing cost by enhancing supply chain efficiencies & further

reduction in material costs

To seek better trading margins

Efficient utilization of scarce resources via brands & production capabilities

Keep Capex close to depreciation

Further improvements in working capital norms

Effective use of properties

Use of Information Technology for business improvement & cost reduction

Enhancing organization capabilities through people – by training & development,

sharpening of culture work shops, performance linked incentives for managers &

through people care index measurement

Form business improvement projects making in-house project teams of senior

managers work closely with CS Group & some well known consultants to identify

new growth opportunities, improve manufacturing costs & supply chain processes &

effective use of IT.

The goals and priorities are well defined by the organisation. They are :

Deliver superior shareowner performance. Profitably and significantly increase global confectionery share.

Profitably secure and grow regional beverages share.

Ensure our capabilities are best in class.

Reinforce reputation with employees and society.

Up to a third of benefits reinvested in top line growth.

Operating margin growth of 50 – 75 basis points pa.

Net sales value growth of 3% - 5% pa.



Targeting a 10% reduction in direct and indirect costs

o 20% reduction in factory base

o 10% reduction in headcount

Savings across: supply chain; commercial; back office

Operational gearing from volume growth.

4. DISTRIBUTIONS AND SALES MANAGEMENT

Cadbury's distribution network encompasses 2100 distributors and 450,000 retailers. The company has a total consumer base of over 65mn.

As a part of the project, a few retailers like “TULIKA, Vile Parle”, “xxxx”, “xxxx”, were interviewed. A small team of sales people from the distributor gave valuable inputs on their distribution channel and sales management.

Cadbury India Limited has a “Carrying and Forwarding (CNF) Agent” in all the districts of India, where the company has a presence. The product is passed on from the company to the CNF agent. Every district is divided in various zones and there are distributors to handle the sales of one or more zones (maximum three). The CNF agents bear the responsibility of selling the goods to the various distributors in his district. The distributors, in turn, interact with the retailers and are directly involved with them in collecting orders and payments. The CNF agent interacts with the distributors on every 10 days, to take fresh



orders and also ask for the payment due. This procedure is again followed by the distributors while interacting with their retailers.

A schematic representation of the entire distribution channel is given here :

EACH IN A DISTRICT

DISTRIBUTORS

RETAILERS


DISDISDIS

CADBURYS INDIA LIMITED

CNFCNFCNFCNF

RETRETRET


Cadbury India does not interact only with the CNF agents and completely rely on them.

The company interacts with its distributors and retailers once every month to get a first

hand knowledge of the performance of its product compared to other competitive

products present in the market and also takes a note of the effectiveness of the

distribution network. This helps the company to evaluate their strategies and help them

gain an insight on the new developments of the market.

And since any discussion today would be incomplete without mention of the 'e' word, the management is eager to tap this new channel of marketing.

E.COM INITIATIVES

1. Direct Websites (B2C)

2. Push B2B through

I. Distributors.com

II. SCM Issue (+) Information Management issues (+) Better

Working Capital Management

B2B will unlock lot of cash from Banking system & plough back to grow business.

Cadbury was successful in penetrating deeper in Metros. In Bombay & Kolkata, it

recorded 15% growth in volume terms. In case of small towns, a lot is still to be done. It

will address this issue thru new channels with highly focussed servicing areas. It has



started selling through unconventional channels (Rs. 1 crore sales p.m.). It is a good

beginning.

The company has entered into various marketing relationships on the net, a move towards e-commerce sites are being renovated. At BQC (Bournvita Quiz Contest), there were 18,000 hits per month.

5. BCG MATRIX



The BCG Growth-Share Matrix is a portfolio-planning model developed by Bruce

Henderson of the Boston Consulting Group in the early 1970's. It is based on the

observation that a company's business units can be classified into four categories based

on combinations of market growth and market share relative to the largest competitor,

hence the name "growth-share". Market growth serves as a proxy for industry

attractiveness, and relative market share serves as a proxy for competitive advantage. The

growth-share matrix thus maps the business unit positions within these two important

determinants of profitability.

This framework assumes that an increase in relative market share will result in an increase in the generation of cash. The increased relative market share implies that the firm is moving forward on the experience curve relative to its competitors, thus developing a cost advantage.


Perk

Dairy MilkBournville Candy

Gum

DelightEclairsGems

???High Low

High

Low

Market

Grow

th

Relative Market Share

Circle Size = proportion of total revenue business contributes to corp.

5 Star

Bournvita


The position of a business on the growth-share matrix provides an indication of its cash generation and its cash consumption.

The four categories are:

Dogs - Dogs have low market share and a low growth rate and thus neither generate nor consume a large amount of cash. However, dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture.

The dogs, in case of Cadbury India Ltd., are Gems, Eclairs and 5 Star. Eclairs is being duplicated by a lot many regional players while Gems has decreased its presence steadily. Although Cadbury Re-invented 5 Star but it has not regained its popularity.

Question marks - Question marks are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash consumption. A question mark (also known as a "problem child") has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines.

The question marks are Bournville and small candies. The candies are the rage of the day and have a great chance of success, while Bournville, as a brand is very successful but needs to be re-invented.

Stars - Stars generate large amounts of cash because of their strong relative market share, but also consume large amounts of



cash because of their high growth rate; therefore the cash in each direction approximately nets out. If a star can maintain its large market share, it will become a cash cow when the market growth rate declines. The portfolio of a diversified company always should have stars that will become the next cash cows and ensure future cash generation.

The revenue generator of Cadbury are Bournvita, which is responsible for one-third revenue of Cadbury, and Dairy Milk.

Cash cows - As leaders in a mature market, cash cows exhibit a return on assets that is greater than the market growth rate, and thus generate more cash than they consume. Such business units should be "milked", extracting the profits and investing as little cash as possible.

The cash cows of Cadbury are Perk and Delight.

Under the growth-share matrix model, as an industry matures and its growth rate declines, a business unit will become either a cash cow or a dog, determined solely by whether it had become the market leader during the period of high growth.



6. ANSOFF MODEL

The Ansoff Growth matrix is a tool that helps businesses to decide their product and market growth strategy. It suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets.


Marke

t

ProductEXISTING NEW

EX

ISTIN

GN

EW

Market penetration(Dairy Milk,

Perk,Bournvita)

Product development(Bournville,Chockis)

Market development

(Candy)

Diversification(Gems,Eclairs)


The output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy. They are :

Market penetration - Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. It seeks to maintain or increase the market share of current products, secure dominance of growth markets, restructure a mature market by driving out competitors, and, increase usage by existing customers.

These objectives are met by Dairy Milk, Bournvita and Perk.

Market development - Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. The possible ways of approaching this strategy are new geographical markets, new product dimensions or packaging, new distribution channels, and, different pricing policies to attract different customers or create new market segments.

This strategy is needed by Cadbury in the candy market as it has limited presence in the market.

Product development - Product development is the growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products, which can appeal to existing markets.

Bourville and Chockis need this strategy t be followed as they are very new to the market and they are needed to be developed.



Diversification - Diversification strategy should be followed where business markets new products in new markets.

This should be followed in the case of Gems and Eclairs.

7. GE Mckinsey Matrix

The business portfolio is the collection of businesses and products that make up the

company. The best business portfolio is one that fits the company's strengths and

helps exploit the most attractive opportunities.

The company must analyse its current business portfolio and decide which businesses

should receive more or less investment, and, develop growth strategies for adding

new products and businesses to the portfolio, whilst at the same time deciding when

products and businesses should no longer be retained.

The McKinsey/GE Matrix overcomes a number of the disadvantages of the BCG

Box. Firstly, market attractiveness replaces market growth as the dimension of

industry attractiveness, and includes a broader range of factors other than just the

market growth rate. Secondly, competitive strength replaces market share as the

dimension by which the competitive position of each SBU is assessed.



The factors that Affect Market Attractiveness :

Market Size

Market growth

Market profitability

Pricing trends

Competitive intensity / rivalry

Overall risk of returns in the industry

Opportunity to differentiate products and services

Segmentation

Distribution structure (e.g. retail, direct, wholesale)

The factors that Affect Competitive Strength are :

Strength of assets and competencies

Relative brand strength

Market share

Customer loyalty

Relative cost position (cost structure compared with competitors)

Distribution strength

Record of technological or other innovation



Access to financial and other investment resources

8. PORTER’S FIVE FORCES MODEL



Michael Porter’s Five Forces Model analysis involves scanning and evaluating various

sectors outside the organization to identify positive and negative trends that may affect its

performance. The positive trends are opportunities that may improve performance. These

usually lead to market opportunities the organization has not yet tried. The negative

trends are threats that may hinder the organization's performance. The organization is an

open system that interacts with and responds to its external environment.

Rivalry Among Existing Firms is intensified by several factors:

Balance Among Firms: No matter how many firms are in the industry, if they are

about the same size, rivalry is likely to be more intense as they try to gain an

advantage over one another. This intense rivalry is easiest to see at the local level,

such as the competition among supermarkets or fast-food outlets in one city.


INDUSTRY COMPETITORS

Rivalry AmongExisting Firms(Nestle,Amul)

POTENTIAL ENTRANTS(Regional Players)

SUPPLIERS(Cocoa farmers

&others)

BUYERS(Consumers &

Customers)

SUBSTITUTES(Working in all

Substitute areas)

Threat of new entrants

Bargaining power of buyers

Threat of substitute products or services

Bargaining power of suppliers


Slow-Growth Markets: These make for intense rivalry because the only way to grow

is to take market share away from competitors.

High Fixed Costs: High fixed costs may result in price cutting to get the turnover to

cover these costs.

Cadbury India Limited is facing tough competition from Nestle India and Amul as both

command substantial market share in the chocolate category alongwith new innovations,

like, Kit Kat, and, also goodwill and respect, in the industry.

New Entrants or Competitors can be repelled by several means:

Brand Loyalty is established by continually advertising the brand and company name,

patent protection, high product quality, after-sales service, and other means. Strong

brand loyalty makes it hard for customers to change to a new, competing product.

Cadbury commands a high degree of brand loyalty with its customer, and, especially,

Cadbury dairy Milk ranks high in brand loyalty among its consumers.

Absolute Cost Advantages: It is hard to compete against a firm with lower costs if

their product is of appropriate quality. Low-cost advantage can be achieved in any of

a company's operations: better management, lower transportation costs, better

purchasing, etc. Cadbury is trying to cut costs at its production and management

level.

Economies of Scale: Is the market big enough for the company in question to serve it

profitably? Small businesses thrive by serving market niches that are too small for

larger firms to serve profitably. Cadbury has the advantage of economies of scale

because of its high degree of production.

The Capital Requirement For Entry: The capital requirements to compete in today's

world market would be enormous. Smaller businesses, however, have no such

protection against new competitors. Their protection must come from special service,

high quality, or a focus on serving a market segment extremely well.



Legislation Or Other Government Action: This can lower entry barriers quickly and

significantly. Deregulation of airlines, trucking, and long-distance telephone service

are good examples during the past two decades.

Differentiation: This is the ultimate barrier to entry. Like lower, differentiation can be

achieved in virtually any phase of a company's operations.

Expected Retaliation: The company must try to understand the motivations of its key

competitors. These motivations can change over time. The more the firm know about

possible competitor reactions, the more able it is able to choose a strategy that will

not result in an unexpected or unwanted reaction.

Threat of Substitutes

Cadbury need to consider both direct and indirect substitutes. Some products

are direct substitutes for one another: for example, chocolates are a substitutes for sugar

candy. It is harder to see indirect substitutes for a product.

When analysing, Cadbury need to ask questions like, is there a way you can lessen these

threats, perhaps by some form of differentiation or by lowering costs? Is there a way that

the firm can find new markets by making its products or services a substitute for those of

a competitor?

Close substitutes are a very potent competitive threat. Newly created substitutes can even

cancel advantages a firm may have gained by speeding down the learning curve. But the

absence of close substitutes may give a firm the chance to raise prices and profit margins.

The firm should always find some way to take advantage of a lack of close substitutes,

but should always be on the lookout for ways competitors may gain such advantages, and

plan the firm's countermoves.



Supplier Power:

It is likely to be high when there is a concentration of suppliers rather than a

fragmented source of supply. The switching costs of changing from one supplier to

another are high. It is possible for a supplier to integrate forward if they do not obtain the

prices and margins they want in their present business.

The supplier's customers are not very important to the supplier. Such a supplier may not

be willing to offer very favourable terms and service to customers. Many small

businesses face this problem as they buy from their suppliers.

Buyer Power

The firm should always remember that the buyer is the next person downstream

in the channel of distribution. The buyer for the firm in the case of Cadbury is the final

consumer and the customer. The factors that increase a buyer's power are the mirror

image of those that increase a supplier's power. Thus buyers have enhanced power.

When there are alternative sources of supply for a buyer and it costs little to switch

among them, then the buyers play suppliers among each other to get the lowest price or

best service.



9. PEST FORCES

A PEST analysis is an analysis of the external macro-environment that affects

all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological

factors of the external macro-environment. Such external factors usually are beyond the

firm's control and sometimes present themselves as threats. For this reason, some say that

"pest" is an appropriate term for these factors. However, changes in the external

environment also create new opportunities and the letters sometimes are rearranged to

construct the more optimistic term of STEP analysis.

Many macro-environmental factors are country-specific and a PEST analysis will need to

be performed for all countries of interest.

The following are examples of some of the factors that might be considered in a PEST

analysis.


Macro Forces

Micro Forces

Political(Stability)

Social(Muh Meetha)

Technological(intro. of double pack)double pack)

Economic(Affordable

small Packs)Packs)

Supply(Local)

Demand(Created)

Competition(Regional)


Political Analysis

Political stability

Risk of military invasion

Legal framework for contract enforcement

Intellectual property protection

Trade regulations & tariffs

Favoured trading partners

Anti-trust laws

Pricing regulations

Taxation - tax rates and incentives

Wage legislation - minimum wage and overtime

Work week

Mandatory employee benefits

Industrial safety regulations

Product labelling requirements

Economic Analysis

Type of economic system in countries of operation

Government intervention in the free market

Comparative advantages of host country

Exchange rates & stability of host country currency

Efficiency of financial markets

Infrastructure quality

Skill level of workforce

Labour costs

Business cycle stage (e.g. prosperity, recession, recovery)

Economic growth rate

Discretionary income

Unemployment rate

Inflation rate



Interest rates

Social Analysis

Demographics

Class structure

Education

Culture (gender roles, etc.)

Entrepreneurial spirit

Attitudes (health, environmental consciousness, etc.)

Leisure interests

Technological Analysis

Recent technological developments

Technology's impact on product offering

Impact on cost structure

Impact on value chain structure

Rate of technological diffusion

The number of macro-environmental factors is virtually unlimited. In practice, the firm

must prioritise and monitor those factors that influence its industry. Even so, it may be

difficult to forecast future trends with an acceptable level of accuracy. In this regard, the

firm may turn to scenario planning techniques to deal with high levels of uncertainty in

important macro-environmental variables.

Cadbury has made it resent in most of the countries by doing a PEST analysis. In the

recent times, when it was surrounded by controversies of worm in Dairy Milk, the firm

showed its technological superiority by importing technologies of double packing.

In regards to social activities, it has always attached itself with activities that benefits its

employees and people near its vicinity of workplace, all over the world, wherever it is

present. The company has always followed a policy of having good relation with the



government at power so that it does not face any problem in its smooth functioning. It

cooperated with the government in all the investigations that was undertaken against the

company in the worm case. It was basically followed a neutral position while dealing

with political parties.

10. DAIRY MILK



Cadbury Dairy Milk is considered as the most delicious, best tasting chocolate. It is

perceived synonymously with chocolate, world over.

”CDM is Chocolate” - A moment of pure magic. It stands for goodness.

The branding of Cadbury Dairy Milk encapsulates an enormous breath of emotions, from

shared values such as family togetherness (fun, wholesome, reliable), to the personal

values of individual enjoyment. The personal bonding so created with the consumers has

helped to increase the Emotional Value of the brand alongwith the Functional Value that

it delivers. The brand character is given in such a way that the customer feels proud to be

associated with the brand and the product. The ambition is to “work better together” to

drive World Class performance.

The projection has been done in such a way that it is a personal treat, stimulating mouth

as well as mind and is a part of fun and pleasure. The category has been advertised in

such a way that it conveys that there is no reason for Dairy Milk and there is no time to

do so. It is a unique portfolio of a winning masterbrand that own the benefits in its own

category, keeping in line with the strategy of Cadbury India Limited.

10.1 Positioning with time

80s - The branding of CDM was done with children as target audience. It was

considered as a surrogate of parental affection for their children. The strategy was to

harness the appetite appeal of the goodness of the chocolate. It was positioned as ‘The

perfect expression of parental love’ and also as the love shown towards the children

by their elders. CDM became a common gift that was presented to a child by its

relatives. The tag line that was used during this period was ‘Sometimes a Cadbury

can say it better than words’.



90s –The target audience remained the same in he 90s with the focus oriented towards

children. It was seen as an indulgence product where the consumers and the

customers were too much associated with the product. There were negative

associations as well with the product. It said that too much of chocolate was bad for

health, especially for teeth. The communication was consciously addressing kids, and

hence the consumption also got restricted within the same segment resulting in brand

stagnation. The size of the pie of the market share or the pie as a whole needed to be

increased so as to increase the consumption. The challenge was to expand the

consumer base by making CDM aspirational and desirable

to the adult segment, as well.

94 – Cadbury went on to increase the category relevance, give consumers a taste of

life. It was projected that Cadbury Dairy Milk way is the way of - real, fun and free. It

targeted to integrate Cadbury Dairy Milk with the emotions of the consumers, and the

customers, the linking of "real" chocolate of to "real" feelings. The brand audits that

were done on the consumer pulse revealed that Cadbury Dairy Milk moments were

spontaneous, carefree, special and real moments.

The idea was to target the adults, alongwith the children, as target audience. The

atmosphere at that time was :

The new resurgent India.

The era of globalization had sowed the seeds of ‘I wanna break free’

syndrome.

Avenues for freedom for expression were more than welcome were more than

welcome.

The Cadbury Dairy Milk was targeted ‘The chocolate for the kid in all of us’. The

Communication that was used during this time was “The Real Taste of Life”. The

message that was conveyed was that CDM is the perfect expression of

spontaneous, happy, joyous feelings. The result was that the volume of the



category grew from 12 to 43 from 1993-’94 to 1994-’95, while the volume of

Moulded Segment grew from 22 to 52in the same period and the brand jumped

from 31 to 54.

1998 – The hurdles in 1997 at a competitive level were the launch of Kit Kat by

Nestle – the closest rival of Cadbury in India, which was considered as young,

trendy, future, exciting, smart, and, the threat from imported premium moulded

brands like Lindt, Ritter, Van Houten, etc. The hurdles at the communication level

was that the “Real Taste of Life Campaign” was able to cut ice with the metro

audience, but the rural audience remained untapped, and, the barriers of Middle

and Bottom end consumers still remained to be addressed. As a result, brand

growth rate was slower than the chocolate market growth.

This resulted in the “Indianisation” of the brand. The strategy was to increase

width of consumption by entering the Indian mind-space, and hence, the idea to

make CDM part of Indian customs and mores took shape and was implemented

by making CDM to be the Real Taste of Everyone's Life.

The strategy that took shape was that CDM was positioned as the gold standard in

taste amongst chocolates for Regular users, and the message was “I will do

anything to eat my CDM”, while, it was positioned as the chocolate meant for

everyone and Chocolate = CDM, for Infrequent users. The message used was

“You don’t need any special reason to eat CDM”. The strategy helped increase

brand penetration (specially in smaller towns) leading to a brand growth of around

40%. The volumes grew by 34% post ad exposure (i.e Jul-Dec ‘00) vis-à-vis pre

ad period (i.e. Jan-Jun ‘00). Overall CDM volumes of 2000 grew by more than

30% over 1999.

The parallel initiatives that were taken along with the above mentioned strategies

was beefing up the distribution system (grown by over 60% over past 5 years),

and, increasing points of contact, that is, bringing CDM closer to the consumer.



2002 – There was an influx of several brands at various price points offering

greater perceived value. While attitudes towards chocolates softened, consumers

flirted with options. This led other players to come in the foray. The sales of

Nestle, the nearest competitor of Cadbury India Limited picked up too. The

challenge before Cadbury India Limited was to reinforce the pre-eminence of the

brand. It introduced a range of new, international pack formats – a CDM for every

need. It said that for chocoholics, there was CDM Chunky, while for Connoisseur,

there was Bournville and Fruit & Nut. Cadbury made itself synonymous to sweets

and tried to occupy the space of sweets in Indian homes with the tag of – ‘Muh

Meetha Karna’. It reinforced its relationship of brand in the consumer’s life.

10.2 Cadbury Dairy Milk – A Global Benchmark

Today, India is the second largest market for CDM in the world. The Indian case-

study has been designated as the "blueprint for success" for all international markets to

emulate. It is followed in letter and spirit.

The challenges are to strike a balance between the CDM enlistment (in non-metros) and

the increasing usage in Metros. The focus is to drive CDM ‘Ultimate Chocolate

Experience’ values across the Mega Brand Range. The idea is to make CDM a part

of the Indian shopping basket.

The opportunity is worth a whopping Rs. 11,000 crore(3.5 times Australian chocolate

market), which is the traditional sweet market in India.

The current task of CDM is to maintain the growth trend of the brand by enlisting new

users and upgrading marginal users. There is a need to expand the market, especially in

the lower and middle and upper Strata and to increase Per Capita Consumption among

regular users. The communication needed is to soften attitudes and drive width of

consumption in small towns and casualise chocolate consumption in an attempt to

increase average intake among regular users.



11. BOURNVITA

11.1 INTRODUCTION

Way back in the 60s malted foods drink (MFDs) especially the white beverages

came into existence because of the shortage of milk in southern and eastern regions of

India. Therefore as a tradition, whites were used as milk substitutes and were perceived to

be far ‘more nutritious’. Whereas browns were used as milk additives and were

basically perceived to be ‘ taste enhancers’ .

Cadbury’s Bournvita, a brand that most of us have grown up with, existed even before

this evolution. Positioned as a milk fortifier that makes ‘ the good better’, Bournvita has

always been positioned as the best form of nutrition for children that aided in their all

round development. Due to the market complexities and the dynamic nature of this

category, re- launches have been synonymous with this category. Throughout its history,

Cadbury Bournvita has continuously re-invented itself in terms of product , packaging ,

promotion and distribution. Cadbury lineage, a rich brand heritage coupled with a precise

combination of all elements of the marketing mix has helped the brand maintain its

leadership position and image over the last 50 years.

Cadbury’s Bournvita is the leading Brown Milk Food Drink (MFD) brand in the country

and the 2nd largest MFD brand (both browns and whites put together).It also features

among the lead power brands in the Cadbury India stable and contributes to one third of

its total business in volume and value.

The health food drink segment in India dates back to pre independence. The major

players in the earlier days were Horlicks, Bournvita and Maltova. At present the entire

malted food drink market can be divided into two very distinct segments

· White beverages

· Brown beverages

White beverages account for 65% of the total health beverage segment whereas the share

of brown beverages is 35%.



The main products in this particular sector are

White beverages:

· Horlicks (Glaxo Smithkline)

· Viva (Glaxo Smithkline)

· Complan (Heinz)

Brown beverages:

· Bournvita (Cadbury)

· Boost (Glaxo Smithkline)

· Horlicks Chocolate (Glaxo Smithkline)

· Milo (Nestle)

· Maltova (Glaxo Smithkline)

· Nutramul (Amul)

· Complan Chocolate (Heinz)

The Heydays:

In earlier times the malted drinks were used as milk substitutes and were highly

popular in the milk deficient regions of Southern and Northern India. As a result of the

Operation Flood undertaken by National Dairy Development Board, milk was now being

provided to all parts of the country. Hence there was a decline in the demand for white

drinks. This prompted a change in the way the health food drinks were promoted. The

concept of “taste” along with “nutritive value” was the new style in which these products

were presented to the user.

At Present:

Most health drinks earlier focused on children as the target segment, but gradually

the positioning has been extended to health drinks for the entire family. Big players such

as Glaxo Smithkline, Cadbury and Heinz have targeted different consumer segments.



Separate brands for infants, different compositions for expecting mothers, extra protein

enriched variants positioned on health benefit, etc. have been the latest trend. For e.g.

Complan has constantly been playing on the phrase “23 vital vitamins” and that it is a

complete planned food. Horlicks on the other hand has been harping on extra calcium in

it. For Bournvita it is the Balanced RDA (Recommendatory Dietary Allowance) that is

the major selling point. Most advertisements try to strike an emotional chord in mothers

(who is the main decision taker) regarding her concern for her child’s health.

Horlicks is the largest brand in the segment, followed by Bournvita at No 2 and Complan

at No 3. Glaxo Smithkline also leads the health beverage market with a 62% volume

share and a 64% value share. The two brands Maltova and Viva together had annual sales

6500 tons before they were taken over by Glaxo Smithkline. The brands have been

acquired for a princely Rs 860mn ie.(1.23 times sales of Rs700mn).

Brown MFDs are milk additives and are added to milk to add to its nutritious value.

White MFDs are milk substitutes and can be made in water as well as milk. So,

penetration of white MFDs is very high among lower income groups. But this is the trend

only in South and East India where white MFDs are the major players with Horlicks as

the mother brand. In comparison, Brown MFDs are the major players in the West with

Bournvita as the major player. But the overall penetration of MFDs in North and West

India is very less as compared South India.



11.1.2 Market Size And Growth

The malted food drink segment has grown at an average annual compounded

growth rate of 10-12% pa over the last decade.

Year 000 tonnes1994 441995 491996 631997 691998 781999 822000 832001 852002 862003 90

In 2003, the malted food drink segment grew by about 6-7%. Annual sales of major

players in the organized segment were about 90000 tons in 2003. In value terms, the

market is estimated at Rs12bn (16bn on MRP basis)

11.2 Consumption Trends

The total number of households consuming malted food drinks has risen from 46

mn in 1985-86 to 137 mn in 2002-03. The southern region is the largest market. The

malted food drinking habit that was inculcated into the consumer in an era of milk

shortage has persisted even though availability of milk has improved significantly. White

drinks are more popular than browns.

The south today accounts for over 45% of total malted food drink consumption. This was

an even higher 53% about a decade ago. The market share of the west has been

increasing over the years. Twenty-three percent of malted food is sold in the western

region. The popularity of malted drinks has been on the decline in the east, which

accounts for about 18% of the market.



White drinks account for a major chunk of the market. About 65% of total volumes sales

are from the white segment v/s 35% of browns. There are periodic switches between

white and brown drink consumption as both products act as substitutes.

For example, between 1996 and 1998, white drinks recorded higher growth as

manufacturers leveraged on the health benefit aspect to improve consumption. Brown

drink volumes stagnated during that period. In 1999, most brown drink manufacturers

repositioned browns with repackaging and positioning of health nutrient ingredients.

11.3 Segmentation, Targeting & Positioning

A product is the result of the want created by the marketer. It is not possible to

make each and every person like the product. As a result, the marketer identifies a section

of the population as his target market based on demographic, psychographic and

behavioral differences among the population. By population, it is implied buyers in the

market. This process of dividing the market on the basis of the above mentioned factors is

termed as Segmentation of the market. The market is divided into various segments by

the marketer. Based on his/her analysis, the marketer identifies that segment which is

suited to the product. That segment(s) is then termed as its target market. The marketer

then, develops his product according to the target market.

Bournvita has been one of the market leaders in the malted food drinks segment. During

the earlier days the malted drinks were used as milk substitutes and were highly popular

in the milk deficient regions of Southern and Northern India As the days went by the

demand for white drinks declined mainly due to Operation Flood undertaken by National

Dairy Development Board, which provided milk to all parts of the country. This

prompted a change in the way the health food drinks were promoted. The concept of

“taste” along with “nutritive value” was the new style in which these products were

presented to the user.

Most health drinks earlier focused on children as the target segment, but gradually the

positioning has been extended to health drinks for the entire family. Big players such as

Glaxo Smithkline, Cadbury and Heinz have targeted different consumer segments.



Separate brands for infants, different compositions for expecting mothers, extra protein

enriched variants positioned on health benefit, etc. have been the latest trend. For e.g.

Complan has constantly been playing on the phrase “ 23 vital vitamins”, Horlicks on the

other hand has been emphasizing on extra calcium in it. Most advertisements try to strike

an emotional chord in mothers (who is the main decision taker) regarding her concern for

a child’s health.

In 1999, Cadbury India Ltd (CIL) re-launched the Bournvita brand in southern markets

with an eye on stealing at least two per cent of the market share of the white-drinks

segment. Bournvita had then, diverted its focus towards nutrition. This shift may enable

the newly positioned brand to improve its market share not only from the browns group

but also convert the whites consumer group. After considering the positive response in

northern and western markets, CIL expected that about two per cent growth could be

garnered from the whites business. At present, Bournvita commands over 45 per cent

market share in the brown drinks business. It is also contributing to the sales of the

company to the tune of around 20% of the total sales. Its total share in the brown and

white drinks market combined is tipped to be around 14-15%.

Out of the estimated market size of hot beverages of 60,000 tonnes per annum white

business constitute 60 per cent while the remaining share goes to browns. The new

Bournvita had been developed after using the newly developed formula `Recommended

Dietary Allowance' (RDA) to meet the specific nutritional requirements of children, who

are the target consumers of the brand.

The market research conducted by the company has highlighted the point that parents

shows concern about their children's nutritional and dietary needs. Accordingly, the

nutrition level of Bournvita has been significantly enhanced without changing the

original taste.

According to Vidyut Arte, General Manager (Marketing), Bournvita contributes to 23 per

cent of the total turnover of CIL. It has reported a total turnover of Rs. 435 crore in the



year, 2001. To strengthen the nutrition equity of the product, CIL plans to set up a

`Bournvita Nutrition Centre', solely managed by a professional nutritionist, Arte said.

The nutritionist is expected to provide free counseling service to the consumers on their

daily nutritional needs.

In an effort to trigger consumption for its popular brands Bournvita and Drinking

Chocolate, Cadbury India is now extending the initiative of Bournvita and Chocolait

vending machines to Chennai and Delhi. The initiative was recently piloted in Mumbai

and Pune. This move is being viewed by FMCG analysts as an attempt to create a new

format of consumption in the beverages segment of the market.

The initiative is also directed at addressing a certain lifestyle perception of the consumer.

For, according to the company spokesperson, the Indian consumer is looking for options

beyond tea and coffee, which can significantly add-on to the existing lifestyle. Therefore,

malted food drinks like Bourn- vita arrive with the alternative that the consumer is

looking for. The company has identified corporate offices, eateries and congregation

points to set-up such vending machines.

Commenting on the significant value that the brands will leverage, the company

spokesperson explains: “Cadbury India is pioneering the evolved vended beverages

market and plans to tap this channel to its fullest potential”. The initiative aims at

expanding the avenues for indulgence with the brand. According to the spokesperson, this

initiative extends the franchise of Bournvita and Chocolait by taking them beyond

housewives and children. It also redefines brand communication as something that goes

beyond a breakfast drink and is available only at the retail shelves.

According to the spokesperson: “Fifty machines being set up in Mumbai, Delhi and

Chennai have shown consumption ranging from 50 to 200 cups a day. Consumers

interpret it as a much welcome change from tea and coffee, which is available through

vending machines”.



On Cadbury’s new marketing initiative, comments a leading FMCG analyst based in

Mumbai: “Food drinks are still a choice that Indian households make with a very

calculated preference. With health as a positioning all the food drink brands are still a

consumption choice that will be restricted within the family. It will, therefore, be a tough

task to replicate it in social circles, as is being attempted by the initiative”.

Industry sources also inform that initiatives similar to vending machines will be explored

by the companies in future as the mobility of malted food drinks has considerably slowed

down in the retail end.

BQC is a property that was initiated, developed and built up to its present avatar by

Cadbury, which is more than any other brand has done in this country. Cadbury's

association with BQC is not a mere association." The quiz is all about mental energy, in

keeping with the Bournvita brand's promise of physical and mental energy.

And in keeping with this `energy' association, the format of the Bournvita Quiz has been

altered several times to "evolve with the tastes of the consumer while retaining the focus

on blending information and entertainment.

“Cadbury’s brand, Bournvita has always been positioned as a milk fortifier that makes

the “good better”. The brand has always been positioned as the best form of nutrition for

children that aided in their all round development.” This statement, published in the

Bournvita brand history, on the Cadbury website clearly implies that Bournvita has

always been positioned as a health drink for children. However, target market being

children, the positioning has changed from a tasty breakfast drink to a health and energy

drink required to keep the child energetic throughout the day. Bournvita’s marketing

position was mainly driven by the logic, that purchasing decision in the family is

primarily decided by the mother in the family who wants the most nutritious and tasty

food and food drinks for her family and especially her growing kid(s).



11.3.1 CONSUMER BEHAVIOR

Brands, in fact, influence consumer behavior in a number of ways:

1. Reassurance: A brand is a stamp of authenticity. It adds value by promising

‘replicability’ and helps to establish repeat purchase patterns. In a foreign country, people

seek the reassurance of familiar brands, even though they are presumably traveling to

find new experiences! This is why tourists and travelers around the world feel

comfortable on eating at McDonald’s.

2. Value Expression: We choose brands that reflect the individual values that we possess

as individuals. We do this to communicate the desired signals in the highly social

environment we inhabit.

Brand Value to the Company

1. Usage: A strong brand increases a consumer’s usage and ‘spend’ over time,

either within a category, or as a bridge into other categories. Virgin started as a record

label and expanded into airlines, vodka and financial services. It has been successful in

every category, because the perception has been the same - “consistent value delivery to

the consumer”.

2. Brand Switch: In FMCG markets, 'experimenting less with competition' means

that the brand achieves a larger proportion of the category spend by that consumer. For

example, Maggi soup is always bought by the consumer, and is not being substituted by

other soup brands. However, in the durables market, the brand has to become a lifetime

companion, repeatedly being purchased each time a replacement is necessary, and being

referred to others as “value assured”.



11.4 Price Strategies

Normally, price is the most important element in deciding the fate of any product.

However, Energy drinks or milk drinks are perceived as a luxury. This explains the slow

off-take. While white beverages are hailed for their therapeutic offerings, consumers look

at browns as mere taste additives. Brand loyalties are not very strong as the key target,

children, are always looking for new products. Promotion campaigns such as freebies and

contests also play an important role in influencing brand choice. These campaigns are

mainly targeted at children who force their parents to buy these products. Free gifts like

crystal jars, pet jars and sippers also attract consumers.

While purchasing any health drinks however, a housewife or a mother who is the ultimate

buyer gives price secondary importance. She will carefully study the taste & nutritive

values in the health drinks. Bournvita is the most expensive health drink in the market

(Rs.95 for 500gms) but still due to its good taste & great nutritive values it has captured

the majority of the market. Presently its available in packs ranging from 100gm to

500gms

The malted food beverage industry is popularly known as the health beverages sector. It

is estimated to be a Rs 9.40 million market and is growing at the rate of 12-14 per cent

per annum. Historically, malted beverages has had a strong association with milk, which

also explains its strong presence in the southern and eastern regions of the country. These

regions suffered from milk deficit and malted beverages positioned themselves as

substitutes for milk.

Operation Flood, launched in the 1980s, changed the scenario. Undertaken by National

Dairy Development Board, Operation Flood made milk available in all parts of the

country and the demand for white drinks was hit. With a view to revive demand for the

brands, malted foods were repositioned as strength and energy drinks with a nutritional

thrust. And this positioning stands valid till date.



Apart from the availability of milk, another significant reason for medium growth rates of

malted food industry lies in its limited acceptability and/or reach in Indian society.

Malted foods have primarily been used in upper and upper middle-class families, which

constitute a small proportion of the Indian population. However, over the last few years,

there have been clear indications of a recovery.

Several factors are responsible for this. Chief among these is the demand for better

products and an increased acceptability of malted products. This demand has contributed

to the growth in consumer options in terms of variety of taste and products. Other factors

include improved standard of living, increased awareness and health consciousness

amongst people, and product availability at reasonable prices. This trend is in keeping

with the patterns observed across international economies where the growth of middle-

class has driven the uptrend in food industry in general and health beverages in particular.

The international price of a standard 400 grams packing of Bounvita costs $ 4.88. When

compared to the corresponding prices of Horlicks and Milo it ahs been seen that it is in

the middle priced category. Horlicks ( with $6.19 for 400 gms) is on the higher side and

Milo ( $ 3.99/ 400 gms) is on the lower end.

Bournvita has been introduced in the market at a price comparable to other brands. The

price of 500gm of brown (chocolate) malted drink ranges from Rs.108 to Rs. 115. This

price range product extends to brands such as Chocolate Horlicks of Smithkline

Beecham, Milo and Boost.


BRAND International price ( 400 gms )

Bournvita $ 4.88Milo $ 3.99Horlicks $ 6.19


Bournvita was introduced by Cadbury India Limited when there was no compettion to it

in the chocolate malted drink sector. Horlicks was catering to the white malted segment,

hence Bournvita was introduced to create a new segment of chocolate health drinks as

apart from the nutrition there was also the taste element of chocolate in it. This led

Bournvita to grow at an exceptional rate within a short span of time. But Horlicks was a

trusted brand, and when they came with the chocolate version of the white malted drink,

the consumer switched loyalty to Horlicks. The advertisement for Horlicks basically

concentrated on highlighting the constituents of the drink, while Bournvita highlighted

the taste of the drink along with only some of its constituents such as balanced nutrition.

The other challenge that Horlicks gave to Bournvita was the 2kg bottle pack. Horlicks

had substantial figures in sales from its 2kg bottle pack, which inspired Bournvita to

come with the 2kg bottle pack, but the price was quite high because of the cost of

production, hence, the 2kg bottle pack did not send a good signal to the management of

the company. This led the management to slowly and invisibly phase out the 2kg bottle.

Bournvita went for repositioning and reintroduction of the product in 2000 to improve its

sales and face the competition which was basically from Horlicks and also due to

introduction of new brands like Milo and Boost. Bournvita was given a completely new

look and re-launched initially only in South India. This led to the increase of the sales and

the management then went on to re-introduce it in North and West India. The sales of

Bournvita have again picked up.

The Warana Sahakari Dudh Utpadak Prakriya Sangh case is an infamous case, involving Bournvita, which appeared before the Mumbai CEGAT. Warana manufactured Bournvita at its factory in Amritnagar using the raw material and recipe supplied by Cadbury. Warana supplied the entire production of Bournvita to, and collected processing charges from Cadbury, paying duty at cost, which worked out to Rs 16 per tin of 500 gm.

The CE officials wanted to treat Cadbury as the manufacturer of the product and work out duty on the basis of Cadbury's dealer price,that



is Rs. 28 per half-kilo. But Warana's contention was that it was the manufacturer. The Department's stand was that the employees of Cadbury were posted at Warana's factory to supervise the receipt and handing over of raw materials and also to test samples of Bournvita.

However, the Tribunal did not find the Department's view acceptable since the allegation of supervisory control over production activities was not supported by evidence.

Cadbury's Web site informs us how the Aztecs used cocoa seeds as currency -- eight to

buy a rabbit and a hundred to get a slave. This leads one to wonder whether the company

would give us a break-up of the build-up of Rs. 16 to the MRP, which is about six times

over the selling price.

Malted beverage consists of about 50% milk solids and the remaining 50% is barley malt,

wheat flour etc. Proteins and vitamins are added in small quantities as per the desired

specifications of the product. In brown beverages, cocoa powder is a significant

ingredient. Contribution margins in the product category are high at around 30%.

Ingredients such as proteins and vitamins (if imported) cost higher, thus pulling down the

margins. The excise Duty is 16% (levied on MRP basis). Average sales tax levied stands

at approx. 13%. The average wholesaler margins in this sector hovers around the 4 –5%

mark and the average retailer margin is 9%. Most of the companies also give cash

discounts on the invoice amount based on the stock that is lifted by the retailer and the

wholesaler. As a result, the product MRP comes to around Rs. 108, inclusive of profit

margins.

11.5 PRODUCT STRATEGY

The penetration of malted food in India is a low 6.1 per cent. Over the last few

years, there have been a number of attempts to expand the health-beverages business. In

view of the tremendous growth potential, many multi-national corporations (MNCs) as



well as domestic players have made aggressive investments in this sector, but there are

very few players left in this sector in India, today.

11.5.1. Product information

Bournvita is the relaxing bedtime malted chocolate drink made with wholesome

ingredients. For today’s kids who detest milk in its pure state unless flavored, this is an

ideal drink. It has its own unique flavor, and the taste is rich and full-bodied. Its so easy

to prepare, just instant mix it into milk. Even a child can manage this for himself when he

is in a hurry to run off to play.

11.5.2. Ingredients

Malt extract, sugar, cocoa powder, milk solids, liquid glucose, vitamins, permitted

emulsifiers, sodium bicarbonate, mineral & salt.

Bournvita’s nutritional facts:

1)Gives protein.

2)Provides Vitamin A, Vitamin C & Vitamin B12.

3)Contains Calcium, Iron & Folic Acid.

4)It also provides our body with Niacin, pyridoxine, Riboflavin, & Thaimin which is very

essential for the proper working of our nervous system.

Cadbury India Ltd launched Cadbury Bournvita, a chocolate health drink in 1947 in

India. But even before launching its new health product in the Indian market, Bournvita

was one of the most loved chocolate drink around the world. Bournvita is a combination



of 2 words, “Brown” & “Vita”. Brown, because its brown in colour & Vita because it has

lots of vitamins. It’s a nutritional drink which acts as a dietary supplement providing

nourishment along with good taste & flavor. Bournvita is used by a variety of people like

growing children, old age persons, pregnant ladies etc. Its liked for its nourishment value

& great taste.

Throughout it’s history, Cadbury Bournvita has always continuously re-invented itself in

terms of product, packaging, promotion and distribution. Cadbury lineage, a rich brand

heritage coupled with a precise combination of all elements of the market mix have

helped the brand maintain its leadership position and image over the last 50 years.

Milk/ malted food drinks category is segmented into brown drinks positioned as energy

boosters and white drinks positioned as milk substitutes. White drinks account for almost

two-thirds of the 90,000 ton market. Demand keeps shifting between the brown and white

drink categories, driven by advertising and promotional efforts of major players In the

white drink segment, Smithkline’s Horlicks is the market leader. Cadbury’s Bournvita is

the leader in the brown drink (cocoa based) segment. Other significant players are Heinz

(Complan), Nestle (Milo) and GCMMF (Nutramul). Complan and Milo enjoy a market

share of 12.9 per cent and 3.4 per cent respectively. Besides Glaxo SmithKline Consumer

Healthcare (GSK) which owns the brands Horlicks, Boost has acquired Viva and Maltova

from Jagajit industries in early 2000.South and East are large markets for food drinks,

accounting for the largest proportion of all India sales.

SmithKline Beecham(Horlicks, Boost, Maltova, Viva) 69%

Cadbury (Bournvita) 13.80%

Heinz (Complan) 12.90%

Nestle (Milo) 3.40%



At present, Bournvita commands over 15 per cent market share in the brown drinks

business and with it, it is the leading Brown Milk Food Drink (MFD) brand in the

country and the 2nd largest MFD brand ( both whites and browns put together). It also

features among the lead power brands in the Cadbury India Stable and contributes to over

one third of its total business in volume and value.

During the mid and late 1990’s the Milk Food Market had become very challenging and

growths were slowing down. All brands spoke of benefits that were very physical in

nature i.e. Boost – energy , Complan – growth etc. Hence Cadbury decided to change its

offering to both physical and mental and rolled out the famous “ Tan ki Shakti, Man ki

Shakti” campaign that became the anthem for the brand. This helped the brand in a big

way, but was later discarded since the category dynamism was so high that it required

refreshment.

While the category driver for a Brown MFD was taste, it was not a good enough reason for purchase. Horlicks was offering family nourishment, Complan; growth and Boost; energy. Hence Cadbury decided to peg Bournvita on the nutrition platform, as it was more encompassing and was ratified through extensive consumer research. The market research conducted by the company highlighted the point that parents shows concern about their children's nutritional and dietary needs. Accordingly, the nutrition level of Bournvita has been significantly enhanced without changing the original taste

Bournvita relaunched in March 99 with RDA balanced formula as a support to the

platform – New Campaign: Bournvita Nutrition, Balanced Nutrition to meet the specific

nutritional requirements of children, who are the target consumers of the brand. The

campaign resulted in pushing all India shares from 12.2 to 14.5.

More recently, Cadbury's India has revamped its entire health drink marketing strategy.

The company recently relaunched Bournvita as a chocolate drink. The relaunch involved

a complete overhaul of the Bournvita's packaging with the addition of some ingredients



to the beverage, accompanied by an audio-visual media campaign.

The nutritional drink or the health drink industry has been marked by competition from

various companies in the past few years. The health drink manufacturers in India have

tried to retain their brand image by improving their product quality & by meeting

consumer’s expectation. Bournvita sales had been adversely affected following the entry

of Nestle's Milo and the growing popularity of SmithKline Beecham's Horlicks and

Boost. Horlicks, Boost and Milo have upset the Cadbury's drinks-cart. Bournvita's

volume grew by just one per cent in 2000, while sales value grew five per cent. While

that was good news for the company in terms of profitability, the slow growth in volumes

is not. Bournvita contributes 22 per cent to the total sales of Cadbury, and its volume

growth is important. It seemed imperative for the company to revitalize this brand.

The company has realised the need to increase market penetration, and is expanding its

distribution network from the current 4 lakh outlets to 5 lakh over the next two years.

Bournvita always comes up with consumer promotion activities from time to time eg

giving free gifts like plastic mugs, kitchen appliance, chess game or ludo etc. Recently

they decided to target school children by offering attractive mugs with cartoon characters

design on it. They also come up with the scheme of extra Bournvita for the same price.

The company has already successfully revamped its chocolates division by following a

strategy of regular product launches and marketing its existing chocolates in smaller

packs.

However, while Bournvita is perceived it to be a sleep inducing drink in the UK, it is

positioned as a nutritional drink in India and Nigeria." the Bournvita pack in UK had

stars and other night time aspects associated with sleep on it, while the same product was

sold as an energy drink for growing children in India. This is an important vital difference

in the product and marketing strategy of the same brand India and abroad.

11.6 FUTURE STRATEGY



Currently the company proposes to tell the consumers “ Cadbury Bournvita

contains specific ingredients that augments stamina & concentration in children, arming

them with confidence to achieve their dreams and aspirations. This strategy has evolved

as the result of an extensive usage and attitude study as well as direct consumer contacts

done among consumers.

Meanwhile, the company is in the process of setting up a new plant at Baddi in

Himachal Pradesh which will initially manufacture 1,000 tonnes/day of its malt-based

drink, Bournvita. Cadbury already has three existing manufacturing facilities at Thane,

Indur and Malanpur (Gwalior) in additional to third party operations.

11.7 Promotion and Communication Strategies

Communication process is an interactive dialogue between the company/brand

(here Cadbury’s Bournvita) and its customers that takes place during the preselling ,

selling , consuming and post consuming stages. Thanks to new technologies, companies

have been encouraged to move from mass – communication to more targeted

communication and one – to – one dialogue. Every products styling and price , the shape

and colour of the package all communicate something to the buyers. Every brand

contact delivers an impression that can strengthen or weaken a customer’s view of the

brand and hence the company. The communication process plays a very important role in

delivering the core strengths of the brand. Cadbury’s Bournvita is one brand that has

changed its campaign idea over the years and has enabled it be a market leader in the

brown Malted Food Drink (MFD) segment.

11.7.1. COMMUNICATION OVER THE YEARS

70s

Advertising really began with the advent of television and the first campaign rolled

out during this time. Positioning was centered around ‘GOOD UPBRINGING’ and ‘

Bournvita became as essential building block of childhood. The ‘goodness that grows

with you’ was the campaign idea that communicated this thought.



80s

A need was felt to change the focus of the brand message. So in the 80s, the

offering shifted from upbringing to intelligence and we had the famous ‘Brought up

right Bournvita bright’ which ran very successfully during this time.

90s

The Malted Food Drink (MFD) market was very challenging during this time and

growth rates were slowing down. All brands spoke of benefits that were very physical

in nature i.e. Boost – energy, Complan – growth etc. Hence Bournvita decided to

change their offering to both physical and mental. It was during this time that

Bournvita rolled out the famous ‘ tan ki shakti man ki shakti’ campaign that became

an anthem for the brand. This helped the brand in a big way but was later discarded

since the category dynamism was so high that it required refreshment.

THE 99 BRAND MILESTONE

While the category driver for a brown MFD was taste, it was not a good enough

reason to purchase - Horlicks was offering family nourishment, Complan growth and

Boost energy. Hence it was decided to peg Bournvita on the nourishment platform as it

was more encompassing and was ratified through extensive market research. Bournvita

relaunched in March 99 with Recommended Dietary Allowance (RDA) balanced

formula as a support to the platform – new campaign Bournvita nutrition balanced

nutrition. The campaign resulted in all India shares rising from 12.2 to 14.5 per cent.

THE 01 BRAND MILESTONE

South India, which constituted 60% of the brown MFD market, responded very poorly to the RDA campaign because of the following :



Bournvita was shouting nutrition while Horlicks (which was the market leader)

epitomized nutrition.

Lacks of kid connect as the kid by far are the end user and key influencers.

Bournvita’s response was an all new product, packaging and communication and the

placement of the brand in the context of the mother- child balanced relationship.

The consumer insight was, parenting is about drawing balances, and hence Bournvita is

also drawing about similar balances i.e. great taste and great nutrition. Bournvita was

very successful in this campaign and had all India shares shooting from 14.5 to 17%.

2003

Category advertising hinged on a singular benefit. Twin propositions (balance) with

emotional layering load the consumers mind. In the recent past Bournvita has been

focusing on nutrition – opportunity to showcase higher order benefit of the same. So

Bournvita tried to communicate success stories of kids armed with Bournvita nutrition.

Bournvita carried two ads ‘karate and dancer’ the proposition being Cadbury

Bournvita’s unique Recommended Dietary Allowance (RDA) balance formula fortifies

your milk and ensures you get the right amount of nutrition everyday. The end payoff as

a result was’ you have the confidence to do anything in life.’

11.8 SALES PROMOTION

Sales promotion, a key ingredient in marketing campaigns consists of a diverse

collection of incentive tools, mostly short term, designed to stimulate quicker or greater

purchase of particular products or services by consumers or the trade.

Whereas advertising offers a reason to buy, sales promotion offers an incentive to buy.

There are various sales promotion tools, which Cadbury has resorted to increase the sales

of Bournvita. These tools are as follows: -



Consumer promotion – A number of times there has been an offer where discounts were

given or prices off on Bournvita so as to increase its sales.

Trade promotion – Bournvita has given gifts such as bats, balls, cups etc. On a number

of occasions to target the child and increase his incentive to buy Bournvita - bat or a ball

along with the taste of Bournvita. Bournvita always comes up with consumer promotion

activities from time to time eg giving free gifts like plastic mugs, kitchen appliance, chess

game or ludo etc. Recently they decided to target school children by offering attractive

mugs with cartoon characters design on it. They also come up with the scheme of extra

Bournvita for the same price.

The Bournvita quiz book is another step towards pushing the Bournvita brand Bournvita

represents energy and nutrition. The book increases the general knowledge of the target

audience – the child. This book provides essential nutrients to the brain in the form of

knowledge packs just as Bournivita provides nutrients to the body. This also propagates

the brand name of Bournvita and links it towards its main idea – energy and nutrition.

Business and Sales force promotion - The Company used strategic marketing and strategic sponsorships on TV to build Bournvita’s brand. This was very effective as proved by the Bournvita Quiz Competition in which a number of schools in India participate and this helps in attracting the target market – children. Bournvita and Cartoon Network formed a tie up and due to this Bournvita sales zoomed 20%. The basic logic for the tie up was to attract its main segment- children and hence use their interest in cartoons to build and hence increase the sales of its brand

Bournvita also used a strategy along with Cartoon Network where by both parties are offering kids a chance to collect limited edition school bags and pencil boxes. Featuring some of Cartoon Network’s favourite



toon stars including The Powerpuff Girls, The Flintstones and Dexter, these colourful bags and pencils boxes were available with the purchase of one kilogram and 200 gram Bournvita packs, respectively. The exclusive school bags come in four colours and featured the Powerpuff Girls, Dexter and Tom & Jerry. Also, up for the grabs were the Flintstones and Tom & Jerry branded pencil boxes with an inbuilt game. All these measures had a positive impact on sales and brand recall of Bournvita.

11.9 PUBLIC RELATIONS

Not only must the company relate constructively to customers, suppliers, and dealers, but

it must also relate to a large number of interested publics. A public is any group that has

an actual impact or potential interest in or impact on a company’s ability to achieve its

objectives. Public relations (PR) involve a variety of programs designed to promote or

protect a company’s image or its individual products. Just like most companies, Cadbury

too has a public relations department that monitors the attitudes of the organization’s

publics and distributes information and communication to build goodwill.

The company does a lot of social activity as well to build upon its image and its product

and hence enhance its public relation process. Some of the programmes implemented by

Bournvita to enhance its public image are as follows: -

Cadbury India has a large factory in Malanpur, one of the most under developed

districts in Central India. In 1999, they launched the Cadbury Community Initiative

Programme under the banner: Nutrition, Education, Security and Love.



In setting up the programme Cadbury officials initiated a long-term dialogue with local

stakeholders to engage them in helping identify what community support they should be

providing. As a result, they focused on healthcare and education in the nearby village of

Gurikha. A nursery school was started and key improvements were made to the primary

School. The consultation and a bit of lateral thinking led to some real social

improvements: fresh drinking water from a new village pump, a doctor’s clinic, vet

services for milk-producing animals and fruit trees for each

Household to plant during the rainy season. They also helped to increase school

attendance levels.

Last year, the education programme supported the Indian Government’s Year of

Women Empowerment. Special focus was given to the rights and contribution of

girls and to the counteraction of female infanticide through a variety of initiatives,

including awareness generation and gender sensitisation programmes leading to the

formation of women self-help groups.

Since 1972, millions of school children across Asia have tested and improved their

knowledge by tuning in to The Bournvita Quiz Contest sponsored by Cadbury

India; it is the longest running and possibly the biggest on air quiz show in the world.

Cadbury India has setup the Bournvita Nutrition Centre to advise on healthy eating

for children.

All these measures have helped consolidate the basic idea that brand Bournvita focuses on, that is, balanced nutrition coupled with good health among the general public as well as built an image that the brand was socially conscious.

All the above measure point out to three critical facts about the marketing strategy of Bournvita, which are as follows: -



Cadbury India has been keeping pace with the changing times for marketing its

products.( here Bournvita)

The above is basically achieved through altering the theme and the functionality

of the product as the time demands.

This has also to a larger extent helped in creating high brand awareness.

12. CONCLUSION

Bournvita has been one of the leading brands in the MFD brown drink segment.

Through its intelligent positioning of its brand signifying balanced nutrition and energy,

it has slowly changed its target segment from children to the entire family. Through the

concept of establishing vending machines it is also trying to position itself as a substitute

to tea and coffee. The concept o small packs of CDM and other products is very

successful while the concept of sachets, as successfully used in the case of shampoos, is

not prevalent in the sector. Taking cue from coffee sachets, the introduction of a low

priced Bournvita sachet will be able to penetrate the market as in the case of small packs

of CDM and Perk.This would help customers to try out Bournvita for the first time

without incurring a high cost, thereby increasing the chances of converting a prospective

client into a customer. This would also enable Cadbury to penetrate the rural market

through and increae the size of the pie alongwith increasing theshare of the pie. The

feedback given by most of the retailers was that Bournvita did not dissolve well in milk

and that granules left floating on top of the milk did not please the consumers and that it

irritated them. Thus, it is recommended that a slight change in the product mix will help

in overcoming this drawback. The inferences of the consumer research clearly show that

the Bournvita advertising clearly does not have a recall, while the recall is highest in case



of CDM, among all other product of Cadbury, because of the emotional influence

attached to its advertisements. The last Advertisement which people recall was the “Tan

ki Shakti Man ki Shakti Bournvita”. The recent ads showing the Bharatnatyam girl

simply don’t have a recall in the minds of the consumers. Hence there is a need to revamp

their advertising strategy. Many of the retailers also felt that consumers could not

associate Bournvita with Cadburys. The Brand Cadburys for them is restricted to

Chocolates. Emphasizing Cadbury brand name will make people think that Bournvita

might have taste of Cadbury Dairy Milk and also garner for Bournvita the trust and Brand

Equity which Cadburys commands. Hence, it is recommended that giving away Cadbury

Dairy Milk with Bournvita Refill SKU will solve this issue.

Bibliography

www.cadbury.com

www.cadburyindia.com

www.cadburyworld.com

www.agencyfaqs.com

www.quickmba.com

Tulika Stores, Vile Parle

Sales team, Cadbury.


http://www.quickmba.com/

http://www.agencyfaqs.com/

http://www.cadburyworld.com/

http://www.cadburyindia.com/

http://www.cadbury.com/

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