12th March, 2011

Index

Sr. No.

Particulars Page no.

1 Introduction to project 3

2 Introduction to organisation 4

3 Strategic Profile (Swot- MC7’S’, BCG, BSC) Critical evaluation

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4 Observation & conclusion (Expand or Diversify) 16

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Chapter 1: Introduction to the project

About the Project:

As part of our course curriculum we were asked to undertake an integrated project by focusing on a company and taking it to the global level. As the title of the subject goes an “Integrated Project on Global business” we were asked to select an Indian company which is at its growing stage and do a detailed analysis on it considering the product ranges it is into and also the different countries it is present in. After considering all the aspects of the organisation we as management students were given a task to strategically design strategy for the organisation taking into consideration two options whether to diversify into new product or to expand into some new country or whether the company can diversify into a new product and launch it directly in some new country along with hosting the same new product in home country.

After reading newspaper articles and magazines we narrowed down into Cadbury India Pvt Ltd as a company for this project.

The project will identify the entire details of the company Cadbury India Pvt ltd which is a wholly owned subsidiary of Kraft Food Inc. In this report efforts are made to identify the following questions:

Question 1: What are the Products that Cadbury India offers?

Question 2: What is the Market Share and Growth rate of Cadbury India? We have used Boston Consulting Group (BCG) Matrix to identify this.

Question 3: How is performance of the company in the past few years? And how is it measured? We have used the Balanced Score card of the company Cadbury to identify the same.

Question 4: What are the visions of the organisation and how does it contribute to the shared values of the organisation? Mckinseys 7 ‘S’ was a valuable tool to identify the same.

Question 5: What are the strengths and weaknesses of the organisation and the external opportunities and strengths for the companies and how this information will be useful for strategically selecting a new product or a new country for Cadbury India?

Based on all the questions above, efforts were made to answer all the questions in such a way that it helps us identify the right strategy which matches the company’s core values and it would also help the company to successfully launch a new product in a new country (Diversification and Expansion)

Chapter 2: About Cadbury India Pvt. ltd

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History of the company:

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Cadbury limited was set up by one man in 1824 called John Cadbury from Birmingham. In 1824 Cadbury was set up to be a grocery shop. This changed in 1831 when John Cadbury went into manufacturing drinking chocolate and cocoa. In 1847a large factory was rented in Bridge Street Birmingham. Around the same time John Cadbury was joined by his brother Benjamin and the name of the business became Cadbury Brothers of Birmingham The turning point of the business was in 1866 when the brothers introduced the process of pressing the cocoa butter out of the cocoa beans. The benefits for the Cadbury brothers was that they could use the butter to make different types of eating chocolate the first of which was the Cadburys dairy milk. After this time the brothers moved to the now famous Bournville site where Cadbury world is situated today. The Cadbury brothers changed the employer to employee relations for the better by having the Bournville site as a 'factory in a garden'. Also the brothers introduced better employee welfare with joint consultation and other innovations in this area.

About Cadbury India

Cadbury India is a fully owned subsidiary of Kraft Foods Inc. The combination of Kraft Foods and Cadbury creates a global powerhouse in snacks, confectionery and quick meals.

With annual revenues of approximately $50 billion, the combined company is the world's second largest food company, making delicious products for billions of consumers in more than 160 countries. We employ approximately 140,000 people and have operations in more than 70 countries.

In India, Cadbury began its operations in 1948 by importing chocolates. After 60 years of existence, it today has five company-owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and four sales offices (New Delhi, Mumbai, Kolkota and Chennai). The corporate office is in Mumbai.

Their core purpose "make today delicious" captures the spirit of what they are trying to achieve as a business. Currently, Cadbury India operates in four categories viz. Chocolate Confectionery, Milk Food Drinks, Candy and Gum category. In the Chocolate Confectionery business, Cadbury has maintained its undisputed leadership over the years. Some of the key brands in India are Cadbury Dairy Milk, 5 Star, Perk, Éclairs and Celebrations.

Cadbury enjoys a value market share of over 70% - the highest Cadbury brand share in the world! The billion-dollar brand Cadbury Dairy Milk is considered the "gold standard" for chocolates in India. The pure taste of CDM defines the chocolate taste for the Indian consumer.

In the Milk Food drinks segment their main product is Bournvita - the leading Malted Food Drink (MFD) in the country. Similarly in the medicated candy category Halls is the undisputed leader. Cadbury also entered in to gums category with the launch of their worldwide dominant bubble gum brand Bubbaloo. Bubbaloo is sold in 25 countries worldwide.

Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India. For over two decades Cadbury has worked with the Kerala Agriculture University to undertake cocoa research and released clones, hybrids that improve the cocoa yield. The Cocoa team visits farmers and advise them on the cultivation aspects from planting to harvesting. They

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also conduct farmers meetings & seminars to educate them on Cocoa cultivation aspects. Their efforts have increased cocoa productivity and touched the lives of thousands of farmers. Hardly surprising then that the Cocoa tree is called the Cadbury tree!

Today, as a combined company with an unmatched portfolio in confectionery, snacking and quick meals, Cadbury is poised for a leap towards quantum growth. Cadbury is currently the world's No.1 Confectionery Company and they strive to “make every today delicious”

Corporate Vision: -

Cadbury in every pocket Superior shareholder value

Cadbury’s Market Segment

Market place for any product is comprised of many different segments of consumers, each with different needs and wants. Markets segmentation can be defined in a number of ways such as: Demographic variables (e.g. Consumers age groups, gender, material states income etc…) The lifestyle of consumers (i.e. their interests and activities) the benefits which consumers look for in a product or on the occasions when the product might be consumed.

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

Break segment – products which are normally consume as a snatched break and ften with tea and coffee, for example Cadbury’s Perk and snack range.

Impulse segment – these products are often purchase on impulse, eating these and then. They include product such as Cadbury’s Dairy Milk.

Take home segment – this describes product that are normally purchased in supermarkets, taken home consumed at a later stage.

Some other facts about the company:

Global Reach

Approximately $50 billion in revenues

25%+ of global revenue from emerging markets

Number 1 in global confectionery

Number 1 in global biscuits

More than 50% of global revenue from snacks and confectionery

Brand Portfolio

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11 brands with more than $1 billion in revenue

70+ brands with more than $100 million in revenue

40+ brands over 100 years old

80% revenue from #1 share positions

Factors for Success of Cadbury’s India Limited

Extensive distribution network

Cadbury’s brands are available in over a million outlets across the country. The distribution network directly covers almost the entire urban population. The company has invested significantly in building such an extensive network. The company uses Information Technology to improve its logistics and distribution competitiveness. Cadbury has improved the distribution quality of its products with the installation of refrigerators at several outlets. This helps in maintaining product quality in summer, when sales usually dip due to the fact that the heat affects product quality and thereby consumption.

Creation of strong brands

Cadbury owes its success to strong brand equity and resultant consumer preference that it enjoys in India. The company has built strong brand equity through consistently high product quality, relevant, insightful, and entertaining communication. Cadbury has developed new channels for marketing its brands such as Gifting and Snacking. The company places great emphasis in ensuring display dominance at the point of purchase

Customisation of products for India

Cadbury India has spent time in understanding the Indian consumers. Leveraging its 55 years of experience in India, the company has customised its products to the Indian markets. It also offers products at affordable price points so as to increase its market penetration.

Leveraging the India Advantages

Though, India contributes to less than 5 per cent of the global revenues today, India is critical to the global strategy of the company

Managerial Talent

Cadbury has begun recruiting management graduates in India to serve its global operations. Huge market potential India offers huge market potential and is a priority market for Cadbury. The company also leverages India as a manufacturing base for producing products for the overseas market. Cadbury India has 4 company owned factories and as many third party manufacturing contractors. It also has a wide Sales & Distribution infrastructure consisting of 33 depots managed by 4 regional sales branches across India.

Global management processes

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India occupies a high profile position in the global organization, with advocates in regional and global headquarters. Global management has allowed the local operation a high degree of flexibility in growing the business, understanding that asset utilization may be lower and returns slower to arrive, but expecting volume share to compensate for lower margins in the long run.

Local management processes

The Cadbury India team is all-Indian and has a deep understanding of local market dynamics.

The business is set in a way that highlights localization across all facets – driving the belief that the only way to succeed in India is by developing localized business models. For example, the company tailored the chocolate formula in India to prevent melting in the country’s open-air high frequency store environment.

Customized business models

Local management has set up systems to test and develop products from the ground up with specialized interlinked cells that execute innovation and market testing hand-in-hand. Cadbury India is known as a key product innovator. Besides Dairy Milk, the entire Cadbury product portfolio in India has been developed locally to suit Indian consumer tastes. Packaging, marketing and distribution have all been tailored to local market conditions.

Royalty Structure

Royalty to Cadbury Schweppes Plc. is around 1 per cent of the turnover. But with that, the company gets unlimited access to latest technology, new products and so on. They can also introduce new products from the parent, if it is suitable for Indian market.

Subtle reengineering of raw material mix led to cost savings

Cadbury has reduced its dependence on cocoa, thus lowering its exposure to volatile raw material prices as well as cutting costs. It appears that they have subtly altered its recipe by using less of costlier cocoa and more of milk and sugar. Cadbury's launch of Perk has also contributed significantly in reducing the proportion of cocoa in the overall raw material mix.

Future Plans

Cadbury India expects strong growth in India in future. The company plans to increase the franchise of its existing brands and continue to explore new product opportunities including adjacent market opportunities. Cadbury India is also looking for more opportunities in the SAARC region.

Chapter 3: Strategic Profile (Swot- MC7’S’, BCG, BSC) Critical evaluation

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Situation Analysis

Demand scenario

Year Demand (MT)2004-05 35.52005-06 38.42006-07 41.32007-08 44.22008-09 47.22009-10 50.2

Value chain Analysis

The last few years have seen the company invest heavily in the entire value chain to successfully combat competition and continually move the market to the next stage of evolution. At Cadbury India they believe that effective communication and availability of information 'at the right time and the right place' is critical for an edge in business. In order to achieve this they realized the importance of and have in place, an effective IT infrastructure. Through IT investment, they aim to remain competitive in the fast changing environment. Incorporate best practices in the business processes. Arrive at uniform software and business practices globally within Cadbury Schweppes. Achieve flexibility of systems to keep pace with changing environments. Increase speed of response to business processes. Minimize working capital. Cadbury continued to make significant investments in the information Services/ Technology area to cope with the growing needs necessary to manage operations more effectively in complex supply chain management. Technical expertise in various forms of information technology enabled the business of company to grow and sustain.

SWOT ANALYSIS

Strengths

1. Very strong brand equity in India.2. Due to its 54 years presence in India – has deep penetration – 2100 distributors;

450,000 retailers, 60 mid urban (22%) customers. 3. Three sectors: Chocolates (70% share), confectionaries (4%), food drinks (14% -

leader in brown segment).4. Low cost of production due to economic of scale. That means higher profits. Better

market penetration.5. Second best manufacturing location throughout Cadbury Schweppes. 6. Large teeming population of kids and teenagers7. Well established market and Vast variety of products8. Priced according to Indian mind set9. Easy availability of cocoa in India

Weakness  

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1. Poor technology in India compared to current international technologies (Godiva, Mozart, Fazer, Dint, Naushans, etc.)

2. Limited key products, only one central brand (Cadbury DairyMilk). Pralines range totally wising in India. 

3. “Make in India” tag once the economy opens up wore and imports rush in.4. Large portion of population suffers from 5. diabetes, cholesterol disorders etc6. Dental problems associated with 7. consumption of chocolates

Opportunities

1. Increase in per capita national income resulting in higher disposable income.2. Growing middle class and growing urban population.3. Increasing gifts cultures.4. Substitute to “Sweets” with higher calories/cholesterol.5. Increasing departmental stores concept – impulse @ at cash counters.6. Globalization: optimal use of global Cadbury Schweppes.7. Innovative un-captured chocolate market in India – ( such as sugar free chocolate

sector)8. Large number of occasion celebrations and festivals in which chocolates are used as

a medium to convey happiness9. Increasing acceptance of Globalisation and better relationship with foreign

companies.

Threats  

1. Due to low cost and highest brand equity, it is success in India.2. Globalization will bring in better brands for upper end of the market3. Competition- cut throat competition from nestle amul and international choc brands.4. Negative publicity and controversies. 5. New entrance and individual players (rise in sale of homemade chocolates).6. Preference and availability of other substitutes ( sweets and deserts)

BCG MATRIX

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Cadbury India’s position in BCG Matrix

Chocolate & Confectionery Segment

Cadbury India with Dairy Milk, Perk, Gems, 5 Star, Celebrations, Bytes, Dairy Milk Eclairs, Eclairs Crunch, Mr. Pops and Halls brands is a key player in the chocolate, eclairs, lollipops, and mints segments. With High growth and High market share, it is the leader in chocolate and confectionary market.

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Perk

Bubbalo chewing gum

Cadbury India Pvt Ltd

Halls

Celebrations

Dairy Milk

Gems

Eclairs

5Star

Beverages & Snacks Segment

Cadbury is a key player in the segment with Cadbury Bournvita and Cadbury Bournvita 5 Star Magic. However Cadbury bytes has low market share still. Growth is feasible but hence efforts can be made to increase its market share.

PERFORMANCE ANALYSIS (SCORE CARD)

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Bournvita

Bytes

McKINSEY 7S ANALYSIS

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Strategy

Cadbury’s strategy to attract consumers is unique in a sense. Instead of focusing on the product, it seeks to tap into emotions normally associated with chocolates. They have also adapted their strategies to the unique demands of the Indian retail sector. The strategy has clearly proved successful, as they have been able to build and maintain a leadership position in the market with many loyal customers. Marketing Strategy: In the Chocolate Confectionery business, Cadbury has maintained its undisputed leadership over the years. Some of the key brands are Cadbury Dairy Milk, 5 Star, Perk, Éclairs and Celebrations. Cadbury enjoys a value market share of over 70% - the highest Cadbury brand share in the world. The flagship brand Cadbury Dairy Milk is considered the "gold standard" for chocolates in India. The Cadbury India Brand Strategy has received consistent support through simple but imaginative extensions to product categories and distribution. The diversified product categories enable them to reach out to different customer segments thus broadening their reach. While the usual brands in the lite category are stocked at most of the mom and pop stores, and groceries, the premium brands are sold at premium food stores and modern trade formats to achieve ‘differential visibility. Supplier Strategy: Since 1965 Cadbury has also pioneered the development of cocoa cultivation in India. For over two decades, they have worked with the Kerala Agriculture University to undertake cocoa research and released clones, hybrids that improve the cocoa yield. Their Cocoa team visits farmers and advises them on the cultivation aspects from planting to harvesting. They also conduct farmers meetings & seminars to educate them on Cocoa cultivation aspects. Their efforts have increased cocoa productivity and touched the lives of thousands of farmers.

Structure

Cadbury follows functional structure of organization and has been very succesful in engaging its employess. C Y Pal is the chairman while Anand Kripalu Managing Director for South Asia region and other non-executive directors. The Middle level department is divided into funtional areas like Finance, Operations, Human Resource and Sales. It has built up a strong structure with its experience and beliefs .

Systems

Cadburry makes every effort to adhere to the most stringent control norms, ensuring that their

customers get the most deliciously consistent chocolate each and every time. As part of their global quality control procedure, Cadbury has installed Metal Detection Systems on each line, to ensure that every product being packed was safe, and free from stainless steel, copper, or any other kind of metal.

Style

Over th e last thre e years , th e best par t of m strategy ha s bee n mainly people . Of my top 50 leaders , two-thirds are new to th e job. Man y came from within Kraft, some from Danon e biscuits an d man y from outside an now man y mor e from Cadbury. Wha t is hugely exciting is tha t thes e leader s wil l bring a whol e lot of competitive advantag e to the table. The Cadbury team in India just seem to wor k very wel l together . Ther e is a feelin of winnin g an d opportunities . Stay of th e way and give them ambitious target s bu t ensure tha t you provide them the resources , scale and expertise of a global company to achieve that . Our turnaround emergin g markets has bee n due to total empowermen t of th e right leaders . By unleashin g talent , yo u can transform business .

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Staff

Standout HR Policy: “Have fun. Cadbury has an annual celebration .”

Work and fun can co-exist. At Cadbury India, they take this philosophy very seriously. “We celebrate at the drop of a hat,” says Radhakrishnan B. Menon, director (HR). It perhaps helps that the brand is also about celebrating life’s little moments. Beyond the happy coexistence between work and play, the other thinking Cadbury nurtures is the importance of teamwork. A good team player is more valuable than an individual, with rewards and recognition for a job well done. For every new recruit, a ‘buddy’ is nominated who guides the fresher for a month and helps adjust to the job. “There is a strong sense of kinship, and the feeling that they, too, own the brand. So, there is greater involvement and loyalty,” says managing director Bharat Puri. Cadbury believes its work culture is also conducive to innovations. In 2005, it launched Bilkul, a saunf-flavoured chewing gum-cum-mouth freshener. Bilkul was entirely a Cadbury India innovation and the company’s first entry into the chewing gum market.

Skills

At Cadbury, people are highly committed to their work and because Cadbury always looks for the same level of commitment in their people. People who do well at Cadbury  tend to share the qualities and spirit of good entrepreneurs: lots of drive to make things happen, ability to influence people, a habit of making sound decisions, a knack for turning ideas into action.Cadbury’s commitment to training and development is a core value. As they grow, so their people grow with them, developing new capabilities to take their business forward. Helping people reach their potential means that they in turn help them succeed as a business.They offer support not only in the way of training for career skills and capabilities but in the opportunity to study. Their strong belief in community involvement encourages their people to take part in local projects as a way of developing valuable skills. They also offer a continual programme of encouragement and development to advance employees career.

Shared Values

Cadbury encapsultes an enormous breath of emotions,from shared values such as family togetherness (fun, wholesome, reliable), to the personal values of individual enjoyment. It stands for Goodness among all its stake holders whether employees or customers.

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Chapter 4: Observation & conclusion (Expand or Diversify)

Cadbury India expects strong growth in India in future. The company plans to increase the franchise of its existing brands and continue to explore new product opportunities including adjacent market opportunities.

Expansion

Cadbury India is looking for more opportunities in the SAARC region. So entering into markets like Bangladesh, Sri Lanka, Nepal or Bhutan will be a great opportunity as the conditions will be more or less similar to that of a country like India.

Diversification

Cadbury can foray into chocolate biscuits that are of its kind. It can go for “Related Diversification”. As Cadbury has become a synonym for chocolates for most of us. Diversifying into Biscuits will help Cadbury increase its portfolio and Market share.

India’s biscuit market is estimated to be around Rs. 12,000crores. The global portfolio of its parent Kraft Foods includes the product Oreo which is globally famous in the biscuit segment. Thus Cadbury can introduce the same product Oreo in India or in SAARC regions with portflio of their products. This will be a completely new category for Cadbury if they enter into the biscuit market. Oreo is the world's favourite biscuit. Thus if introduced in India Cadbury can make Oreo as one of India's favourite biscuits," Cadbury India said in a statement.

Conclusion

With globalization Cadbury is being affected but taking its advantage it can increase its share and growth by entering into promising countries and diversifying into related segment. The industry analysis and country analysis will be proceeded in the next reports where in report two we will be doing a detailed analysis of the chocolate industry and the prospective industry of biscuits. And in report three, analysis of different SAARC nations will be done which will help us identify which products can be launched in which countries and how successful Cadbury will be in the endeavor.

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