Project Report On Project Appraisal

INDIAN INSTITUTE OF PLANNING & MANAGEMENT

Submitted to: - Prof. Samerendra Mitra

Submitted by: Munmun Das ISBE-A/PGP/10-12/SS

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About Cadbury
In 1930 R Hudson and Company finally joined with Cadbury. This gave the flourishing local firm a direct link with one of the greatest in international chocolate manufacturing and marketing. Over the years the company has been involved with many other long standing brands and entrepreneurs names such as Fry a chocolate brand dating back to 1756, and of course Schweppes which is still part of the Cadbury group internationally although not in New Zealand. In 1969 Cadbury Fry and Schweppes merged internationally with the New Zealand Company becoming known as Cadbury Schweppes Hudson Limited in 1973. In 1986 Cadbury Schweppes Hudson merged with Cadbury Schweppes Australia. The result was a truly international operation with both the New Zealand and Australian companies supplying each other. Cadbury Schweppes Australia is a fully owned subsidiary of Cadbury Schweppes plc, the United Kingdom based parent company. Most recently, in 1990 Cadbury required the Griffins confectionery business, and sold the Hudson biscuit operation in a reciprocal agreement. The Griffins business dates back to before the turn of the century. George Griffin established the company when he opened a small confectionery business at Nelson. Finally, in 1991 we became known as Cadbury Confectionery Ltd, and can now boast dominance in New Zealands chocolate and sugar confectionery markets. With manufacturing bases in both Dunedin and Auckland, as well as sales offices in Wellington and Christchurch, the Company employs nearly 1,000 in total. The Cadbury group has also flourished internationally. Cadbury Schweppes plc the parent company has manufacturing facilities in 20 countries and its famous brands are bought and enjoyed in more than 110 countries around the world. Cadbury is one of the worlds leading chocolate makers and is number one in England and Australia as well as in New Zealand.

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PRODUCTION
Cadbury Indias first manufacturing facility was set up at Thane (Mumbai) in 1966. Today, the factory has grown manifold and manufactures a range of products that include Cadbury Dairy Milk, 5 Star, Nutties, Gems and Bournvita. The factory employs about 750 people and houses the R&D and engineering development facilities of the company. In a move towards backward integration, Cadbury bought Induri Diary farm in Pune in 1964. Recently, a major investment program resulted in the installation of modern molding, crumb and chocolate making facilities. Today, the Induri Factory manufactures intermediate products like milk crumb and a range finished chocolates. In 1989, the company began operations in their newest and most modern plant at malanpur. Equipped with state-of-the-art technology and backed by constant investment, this unit manufactures clairs, Gems, Perk and Picnic.

Vision
The governing objective for Cadbury India is to deliver: Superior Shareholder Value Cadbury in every pocket

The company believes that this requires:

Broadening our consumer appeal and extending their reach to newer markets Sustained growth of their market share through aggressive product development Striving for international quality in their products and processes Focusing on cost competitiveness and productivity in their operations and innovative utilization of their assets Investing to develop people

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Environmental assessment

Environment for new venture

Within the industry Threat of new Entrants Power of suppliers Power of Buyer Product substitutes New business models

Outside the industry Social & cultural Economic Legal/ Regulatory Technology Global Political demographic

Within the Industry

Threat of new entrants
The industrys main barrier to entry is with respect to advertising. The incumbent firms have spent millions of rupees to create brand-loyalty with consumers. The cumulative effects of advertising create an absolute cost advantage for the incumbent firms, thus entrants must overcome not only current advertising efforts, but also the lingering impact of past marketing campaigns. High sunk costs also act as a barrier to entry.
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 Power of Buyer
End consumers have strong buyer power because of the availability of substitutes, both generic and brand names. It is easy for a consumer to purchase a nearly identical product for a lower price. This gives consumers a great deal of leverage and leads Cadbury to spend millions of rupees to create product differentiation via advertisements and new products to catch up with the evolving trends in the market.

Power of Suppliers:
Industry uses a wide range of raw materials in manufacturing chocolate products, the main ones being cocoa beans, sugar and other sweeteners (including polyols and artificial sweeteners such as aspartame), dairy products (including milk), gum base and fruit and nuts. Cadbury buys its raw materials from suppliers around the world. No single supplier accounts for more than 10% of their raw material purchases.

Threat of substitutes:
The current trends in the market suggest that traditional sweets are possible substitutes for chocolates. In order to strengthen the special relationship consumers share with chocolates, Cadbury India launched its all-year-round Cadbury Celebration gifting range with an array of newly designed Cadbury Celebration packs. Competition within industry: The chocolate industry is highly concentrated. Cadbury and Nestle together account for 90% of the retail sales with Cadbury being the market leader. Competition in this industry is fierce, especially between Cadbury and Nestle. Both Cadbury and Nestle have rival products in every segment
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(Cadburys Dairy Milk, 5 Star, Perk vs. Nestls Classic, bar-one, munch, etc.)

Outside the industry

Political & Economic A change in government will cause a change in polices. If the interest rates go up it will mean that there is no capital expenditure and no new jobs will be created which will therefore affect employment. If inflation went up/down it would affect the cost of materials and therefore their profit would increase/decrease accordingly. If pensions and national insurance went up then Cadburys costs would go up meaning that their profit would go down. If taxation went up then it would increase the production costs meaning that their profit would go down. If unemployment was high then people will have less money to spend on luxury goods like chocolate, again their profit would decrease. If exchange rates changed it would affect the cost of exporting, so a change to the euro would mean that it was better for exporting If the national income went down people would have less money to spend on luxury items such as chocolate. The prices of cocoa and milk, the chief ingredients used in chocolates, have gone up by 50 percent, if the prices of these commodities keep increasing, Cadbury will be forced to increase the prices. A low margin, high volumes, price sensitivity of the industry and competition from cheaper substitutes leaves little room for price maneuvering. Technological
An increase in capital expenditure e.g. more up to date equipment would

mean that the goods where produced quicker and cheaper but would also result in job lose.

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 Research and development- keep developing new products to keep up

with competition and customer needs. Adoption of JDA softwares space and category management solution resulted in 93.75% reduction in planning and processing time and increase in productivity. E-Commerce has not picked up that well - not much turnover through this route future growth prospects of this channel. Social
If the population size decreased then their would be less people to buy

their products therefore less profit. If peoples lifestyles changed e.g. more people wanting to get fit and lose weight, then they will stop eating chocolate and spend their money on gym memberships etc. This means that Cadburys profits will decrease. Legal
More legislation in place to make sure that the workplace is safe and the

worker is better protected. Expensive costs to Cadburys to implement. Socio-cultural

It includes life styles of people, health and fitness awareness and

perception, different cultures, spending patterns, aging populations. Demographic AGE: 5-60 GENDER: Male/Female FAMILY LIFE CYCLE: Young, Single, Married, Older INCOME: As concluded from the survey that our prices are economical so everyone can afford it. EDUCATION: Grade school or less, some high school, high school graduate, college graduate.
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 Geographic
REGION: Chocolates are everybodys favorite so there is no limit of

region, it is used all over the world. COUNTRIES: Perhaps categorized by size, development and membership of geographic region. CLIMATE: Northern n southern.

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Competitive Analysis

FUTURE GOALS

CURRENT STRATEGY

Future Goals of Cadbury Dairy milk For cocoa producers in Ghana this is exciting and life changing news as Fair-trade Certification of Cadbury Dairy Milk will dramatically increase sales of Fair-trade Certified cocoa providing them with the opportunity to grow their businesses and provide a better future for their families and communities. The move will also open up new opportunities for cocoa farmers in other parts of the world, giving even more producers the chance to change their lives and become part of the Fair-trade system. Cadburys commitment to Fair-trade is life-changing news for cocoa farmers who will be able to sell more of their cocoa as Fair-trade, helping to improve living standards and create a better future for their families and communities,

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 Current Strategy of Cadbury Dairy milk

Shubh Aarambh is a great idea for this great brand. It will be interesting to see how Dairy Milk milks this idea to the fullest. The brand has been trying to position itself as a symbol of enjoyment and celebrations. Indians have the tradition of sharing sweets on auspicious occasions and also when one initiates a venture/activity. Whether the activity is small like writing an exam or huge like starting a company, sharing of sweets is an integral part of the event. The belief is that good things happen when one starts a venture on a positive note (like sharing sweets). While the previous Payday campaign was a narrow interpretation of the occasion based positioning, Shubh Aarambh has given the brand a broad playing ground. Competitors Response Profile Cadbury is very much satisfied with their current strategy. There are many competitors like Cadbury 5-star, Nestle Kit-Kat, Amul, Parle chox, foreign chocolates (Chinese Chocolates), lotee etc. in the market so if the price of the competitors increases, the demand of the dairy milk also increases, but if the price of the competitors decrease, the demand of the dairy milks not much affected by it. Cadbury chocolates marketing strategy with its main competitors that has proved to be extensive through, and of great benefit to the company in furthering its competitive advantage. It also helps the company for building its future planning and targeting the customer for more satisfaction through its innovative products. Kit Kat, one of worlds most popular chocolate, was launched in India in 1995. Within months of its launch, it fulfilled every target Nestle had set. Its launch was accompanied by the launch of Cadburys Perk in order to counter Kit Kat and safeguard the flagship brand CDM. Kit Kat has been able to define a new segment in the industry in the form of the wafer enrobed any time snack. Kit Kat outsells Perk in the outlets where both are available. In the crucial markets of Bombay and Delhi both are running neck-and-neck. It has even said to have threatened the mother brand, Cadbury Dairy Milk.

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Gujarat Cooperative Milk Marketing Federation (GCMMF) launched the Amul Chocolate way back in 1974. With its milk chocolates, Badam Bar, Crunch and Fruit n Nut has a market share of about 5 %. Due to lack of focus and with multinationals spending huge amounts on advertisements its market share has been falling. GCMMF is involved in a large number of products, of which chocolates constitutes just 1-2 %. The company is not concentrating much on its chocolate business. As of now, Amul chocolates are not on companys focus. Interestingly, Kaira District Cooperative Milk Producers Ltd. (KDCMPL) - the manufacturer of Amul chocolate - is selling whatever it produces. Limited capacity is also a reason for the share it has. However, Amuls memorable advertising campaign positioning it as a A Gift for Someone You Love, saw the sales graph rising. Amuls sales grew by 39% then. Ever since, Amul has maintained a low profile. Although positioned internationally as energy bar, 5 Star was positioned on an emotional platform in India during the late 1980s. Symbolizing togetherness, 5 Star was originally targeted at teenagers. In June 1994, the company reworked the strategy for 5 Star to make it a source of energy. In fact, before the launch of Perk, 5 Star's energy bar positioning made it a snacking chocolate, with Nestle pitching Bar One (launched in 1993) against it with the punch line 'for those in between times'. Cadbury will be launching a new campaign for 5 Star shortly. They would like to further 5 Star's equity in the functional or snacking direction. It is very nebulous one though.

Assumption Kit Kat and Cadbury Dairy Milk had a high unaided awareness level and also, both these brands enjoyed a high consumer preference. Amul is perceived for giving value for money. Chocolates are no more a childrens item. Most of people buy chocolate by impulse decision. Chocolates are even considered as a good gift option. Consumers preference vis--vis place of purchase, size/form/taste of chocolates, etc
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 Most of the respondents had a high ad. Recall level for Cadburys Dairy Milk and Kit Kat. When it comes to gifting, usually the receivers are o A friend of opposite sex o Children The idea of making chocolates available at sweet shops, gift shops, ice cream parlors, fast food joints/restaurants was asked to be rated. The concept of exclusive chocolate parlors was rated favorably (around 63%). The product category does not enjoy high brand loyalty levels. People are not price sensitive and consider the prices of chocolates available in India, reasonably O.K.. They are ready to pay a premium for good quality. Suitable price for a 40gm chocolate was felt to be between Rs10/- to Rs15/-. Capabilities Strength o Maintain a stable growth of a company, o Keep up with the financial strength by increasing its sales and profit. o Acquisition rules in UK reduce its dependence on the UK market. o Cadbury is the largest global confectionery supplier, with 9.9% of global market share. o High financial strength (Sales turnover 1997, 7971.4 million and 9.4%) o Strong manufacturing competence, established brand name and leader in innovation and could counterattack the competitors o Advantage that it is totally focused on chocolate, candy, chewing gum o Overall, Cadbury has been successful through the new products (development) it has to offer. Weakness
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o Weak position in the US market. o Lack of distribution network. o Total French production of chocolate bars and confectionary has slowed down in more recent years, partly due to the economic slump. o Consumption of chocolate products, fall in demand due to the gloomy economic situation. o Sales of milk chocolate bars, which account for 24 per cent by volume of total sales of chocolate bars, decreased by 3.7 per cent. o The company is dependent on the confectionery and beverage market, whereas other competitors e.g. Nestle have a more diverse product portfolio, where profits can be used to invest in other areas of the business and R&D. o Other competitors have greater international experience - Cadbury has traditionally been strong in Europe. New to the US, possible lack of understanding of the new emerging markets compared to competitors

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Competitive Analysis

Competitive profile analysis

Competitive factor Product uniqueness Relative prod. Quality Price Service Availability Reputation Location Advtg. Effectiveness Design, variety, capacity Raw material cost Financial condition

Kit Kat Less Good More Avg Less Good Urban Good Good High Good

Nestle More Good Avg Less Few Good Urban Good Good Avg Medium

Cadbury More Good More More Huge Good Urban & Rural Good Good Avg Good

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