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Kraft Foods Inc.

in IndiaThe Cadbury Acquisition

Prepared By: Sunanda Gupta (1023) Vineet Sharma (1026)

What was Cadbury's standing in India prior to the KFI acquisition? Was it Spectacular? Was this a reason to go for the acquisition route? Justify.
Cadburys standing in India prior to the KFI acquisition: Enjoyed 70% market share- the highest Cadbury brand share in the world in the chocolate segment of the confectionery industry CDM had been the market leader in the chocolate category for years and in March 2011 enjoyed a market share of 30 percent Cadbury Bournvita launched in 1948 enjoyed a market share of 17 % in 2011 Launched Halls in 1968 and was the undisputed leader in the medicated candy market

Cont.
Launched brand Cadbury Bytes in snack market in 2004-05 In 2007, Cadbury launched bubble gum brand Bubbaloo in the gum category and within 3 months of launch captured 30% of the bubblegum market

Reasons to go for Acquisition Route


Cadburys leading position in confectionery market and strong presence in emerging markets Likelihood of Nestle and Hershey coming together Acquisition by Kraft puts it nearly 70% ahead of rival Mars in terms of confectionery sales in emerging markets Wanted to take advantage of the Cadbury distribution in developing markets of India, Brazil and Mexico Reduce its R&D costs and also speed up development of new products

Cont.
Cadbury presence in over 550,000 independent retail outlets throughout the country gave it extensive market reach To reduce competition from Nestle and Mars Acquisition would save $300 million in economies of scale in manufacturing, $200 million in administration, and $125 million in marketing and media Cadburys contribution whooping 90 % of the total revenues
Dec June Revenue 24% $540 m 30% $13.8 bn

Kraft Foods Pre-Cadbury

New Kraft Foods

Top 12 emerging markets account for 80% of emerging market retail sales Market share

Top 10 Global Packaged Food Players Performance Globally 2001-2008

Why does KFI appear hesitant to use Cadbury's to launch its own global brands in India? Asses the strategic importance of this.
Many acquired brands get reduced to ghosts of their illustrious past. Some are even exorcised. e.g. Air Deccan, Daewoo Mati but case of Coca-cola underestimating Thumps up Cadburys strong brand recognition in India, while Kraft brand presence in India is very little despite the fact it entered Indian market thrice To prevent cannibalization of Cadburys current brands Oreo biscuits (sandwich cookie) launched under the Cadburys brand name in India as Cadbury enjoys much greater brand equity as compared to Kraft. May follow this strategy in other emerging markets as well

Cont.
First product to be launched from Krafts portfolio in 2011 was Tang. Grow the existing market rather than introduce something new. Risk that the companys much-loved brands will not get the attention they deserve in a big food company that sells everything from instant coffee to hot dogs. ( for US markets ) Backing up well established brands like Halls was a no brainer. Instead of Trident gums of Kraft, investments were made in the bubblegum brand Bubbaloo

Cont.
Confident of Cadburys Indian operations with growth rate of 22-25 %

Kraft Foods 5-10-10 strategy for developing markets


CUSTOMISED STRATEGY 5 CATEGORIES Chocolates Coffee Biscuits Powdered drinks Candy and gum 10 POWER BRANDS MILKA chocolates LACTA chocolates CADBURY JACOBS coffee CLUB SOCIAL/TUC crackers OREO cookies BISKAUT/TIGER biscuits TANG beverages HALLS TRIDENT gums 10 PRIORITY MARKETS Brazil Russia India China Mexico South Africa Indonesia Ukraine Poland Australia/ New Zealand

RECENT DEVELOPMENTS & FUTURE STRATEGY


Kraft to split its global food business into two separately run companies to provide greater opportunities for its brands. Will spin off its Oreo, Cadbury, Milka, Trident and LU brands to create a global snacks business with annual revenue of about $32bn (19.6bn) Grocery brands including Philadelphia, Capri Sun, Maxwell House coffee and Jell-O, to be part of its North American grocery business; estimated annual revenue of $16bn(9.8bn)

Different strategic priorities, growth profiles and operational focus Kraft reports 13.3% increase in revenue to $13.8bn (8.6bn) for the three months to 30 June