Cadburys - Market Size and Potential, the Category and Structure, the External Environment - Case Study Example

Executive Summary Cadburys has been performing in the international arena and is one of the most sought after chocolate. It is a leader in the industry and regular new products is enabling the company to keep pace with changes. The report tries to present the mission of Cadburys which is to ensure chocolate in everyone’s hand. The report presents the market overview in relation to the market size, the potential it has, the category and structure. It also analyses the external environment which shows the opportunity presents. The internal analysis helps to find the areas of competencies that can be worked upon. The target market and segmentation provides the direction Cadburys need to follow. The company also faces stiff competition which has been analyzed with. Finally, the SWOT analysis helps to find the strengths and weakness Cadburys has. It also throws light on the opportunities available. The report thus presents the area which will help Cadburys to perform better as a brand and working and designing a marketing structure based on it will ensure the success of the company. Contents Company Background 4 Mission 4 Objective of Cadburys 4 Brand Under Cadburys Umbrella 6 Market Overview 7 Market Category 7 Market Size 8 Market Potential 8 Market Structure 8 Trend analysis (PEST) 9 Buyer Behaviour 9 Competitors 11 Internal Analysis 12 Macro Environmental Analysis 13 SWOT Analysis 17 Segmentation and Buyer Behaviour 19 Positioning and Marketing Strategy 20 Promotion 21 Packaging 22 Monitors & Controls 22 Budget 23 Future Prospects 24 References 25 Appendix 27 Company Background Cadbury as a brand has been performing for decades. Cadbury “is a confectionery company ranking second among the world in that line of business”. (Cadbury Company Website, 2010) The company started in 1824 and since has increased its business by launching different products with different variant in different countries. The company has recently launched a new variant in the name Cadburys Dairy Milk Silk which is rich in chocolate and nuts. Mission Cadbury’s has been in business since 1824 and have continuously grown as a company by entering new countries and by launching different products. Cadbury’s vision is to ensure “a Cadbury in every pocket” (Singh, 1999) and the company has been working tirelessly to achieve it. This is fully backed and supported by their mission statement which says quality. To ensure this mission the company has been making continuous improvements so that they are able to deliver on the promises made. Objective of Cadburys Cadbury’s primary objective is to identify whether the new product Cadburys Dairy Milk Silk will go well with the customer. The company has been doing well in this arena and have seen people respond positively to this product. This has made it more important for Cadburys to identify the target market and marketing strategies. This is based on the backdrop that Cadburys Dairy Milk Silk is a costlier chocolate in comparison to the other brands the company has. This makes it important that the company identifies what influences customer purchasing and what plays an important part in the customer deciding a particular product. The company needs to identify these basic traits which will help them market their product effectively and help this brand to go well with the customer requirements. The company objective is also towards pursuing a method where they are able to use their experience and develop products which match the customer requirements. The company at the same time is looking towards using a match between the advertisement and their objectives so that they are able to divert their attention and gain maximum leverage from using a mechanism which helps the company to grow their brand and build themselves as a bigger brand. Brand under Cadburys Umbrella Cadburys has launched many variants and different brands looking into different aspect and attracting people of all age. The brand under Cadburys looks as follows The above chart It shows the brand Cadburys has and in addition to it a large number of variants are available for each. Even the company has ensured that it launches this product in different sizes and packs so that all segments can be eyed. Technology and experience has aided towards their product line. The company has been able to understand the wants of the customers and launch their products accordingly. The ability to understand the customers and use the changing technology in that direction has ensured that Cadburys is able to develop the brand. Technology has helped immensely to develop new products. This has enabled Cadbury to launch products like Temptation where it has ensured that the chocolate is different from their original brand and helps to satisfy customers. Thus, the growth in technology and experience has aided towards the growth of Cadbury as a brand. Market Overview Looking at the market overview from every angle will help to understand the opportunities the market presents to Cadburys and the scope their new brand Dairy Milk Silk will have. This will thereby help to find the opportunities the market has. Market Category Cadburys is aimed at everyone who loves chocolates. The product has been positioned for “the premium segment of customer who can have it”. (Chandran, 2007) For this product the prices are relatively high compared to its other brand. This has made it possible for the company to ensure that the premium segment of the consumer is eyed at. This is shown in appendix 2. Market Size Chocolates are very popular with every age group and the launches of different variant of chocolate are making the market more competitive. This is making more and more consumers look towards it. The chocolate industry stands at 75 billion dollar and is continuously growing by about 250 million dollar every year. (Fat, 2004) The only concern which is making the market grow at a slower rate then predicted is the health issue concerned like obesity. It is shown in appendix 3. Market Potential The chocolate industry provides a huge market to cater to. Forecast estimates “the industry to grow by 18%-20% per annum”. (Brown, 2007) Cadburys on this front has been very successful and have been able to strive as a market leader with more than 50% share. The huge potential this market possesses can be drawn on the backdrop that the market is growing by 250 million dollars every year. The growth is provided in appendix 1. Market Structure The chocolate market is very competitive with various players. Some of them are Nestle, Amul, Hershey, Lindor, Mars and many more. The market being very competitive makes the market a pure competition one. The company which launch a new product is soon replicated by others and is price takers i.e. a company prices its products similar to its competitors. This fierce competition is making the market appear as a pure competition market. This is shown in appendix 4. Trend Analysis Analyzing the external factors and its effect on the chocolate industry will help to understand the opportunities the market presents. The PEST analysis for the same has been provided in the following chart (PEST, 2010) Political Economic New legal restriction Decrease in national income reducing purchasing power Change in government policies Rise in interest rate affecting borrowing power Increase taxation rates Increasing inflation reducing purchasing power Changing future laws Reduction in wages   Increase in taxes Social Technological Decrease in population size Rise in capital expenditure due to changing technology Change in lifestyle Rapidly changing research and development growth Concerns about obesity Increase cost of machinery Rise of health conscious people Increase maintenance cost The trend analysis thus presents how the external factors will affect Cadbury’s and other chocolates brand and companies need to craft strategies to counter those. Buyer Behaviour The competition in the chocolate industry is putting pressure on each company to influence buyer. Their buying pattern is affected by “social factors, cultural factors, personal, environmental and others which determine their pattern”. (Kotler, 2001) The buying behaviour according to Kotler is influenced by the following Complex Buying Behaviour: Marketers need to provide more information to consumers so as to retain them (Kotler, 2001) which Cadburys has been able to do well by informing the customers about their different products and the taste and satisfaction they will get by consuming those. Dissonance-reducing Buying Behaviour: “Providing consumers with quality service and product so that they don’t feel like leaving the product”. (Kotler, 2001) Cadburys has been able to achieve this by providing chocolates which are acceptable for different occasions. The variety in the Cadburys likes the chewing gum, milk products and similar other product is ensuring that the customers have different options. Variety-seeking Buying Behaviour: “Provide services to ensure that customer don’t switch products”. (Kotler, 2001) Cadburys has done it by having different type of chocolates for different lovers. They at the same time offer special prices and incentives to those. Habitual Buying Behaviour: “Encourage more consumers to try the product so that they develop this habit of using it”. (Kotler, 2001) Cadburys is working on it by keeping the continuing with their base model in chocolates and at the same time coming with new ones so that the regular customers find a chocolate of their choice. Pursuing, this buyer behaviour is helping Cadburys to understand the customers and come up with products accordingly. Competitors Cadburys faces competition from many quarters. There are many companies who are in similar line of business thereby exerting extra pressure on the brand. Some of the competitors for Cadburys are Nestle, Amul, Hershey, Lindor and many more. The stiffest competition comes from Nestle Company Sales in US $ Million Mars inc 9,546 Cadbury Schweppes PLC 8,126 Nestlé SA 7,973 Ferrero SpA 5,580 Hershey Foods Corp. 4,881 Kraft Foods Inc. 2,250 Meiji Seika Kaisha Ltd. 1,693 Lindt & Sprüngli 1,673 Barry Callebaut AG 1,427 Ezaki Glico Co 1,239 Products Range: Nestle offers variety of products ranging from “coffee, bottled water, beverage, chocolate, ice-cream, confectionery, infant foods, seasoning, frozen and pet food”. (Nestle Company Website, 2010) The company is the chocolate and confectionery items have all products similar to Cadburys. This has intensified competition Performance: Nestle is a leader in “food and nutrition items and has its presence from 1905”. (Nestle Company Website, 2010) The company operates in 86 countries and has thousands of workers and suppliers working in tandem. This has ensured that the performance matches the industry standard which is seen by the growth rate shown. Positioning: Nestle and other competitors in the chocolate industry have positioned their products along side Cadburys. The company is the chocolate and confectionery items have all products similar to Cadburys. Their products are aimed at similar age groups and appeal to the same set of customers. A look at the other competitors show in the appendix the following results in terms of sales revenue especially when we consider the fact that products are similar to each other The findings show that there is fierce competition in the industry and to be successful every company have to ensure proper marketing strategies. (Candy Industry, 2006) Internal Analysis This will help to understand Cadburys performance and also give insight into the marketing strategies pursued by the company Product Cadburys Dairy Milk Silk is “a chocolate which has more cocoa and butter to make it smoother and make people get a feel it is as smooth as silk”. (Iyer, 2010) It is a “milk chocolate which is made from fresh milk being bought from diary”. (Iyer, 2010) Price The price being charged plays an important role in demand. Cadburys Dairy Milk Silk has been priced “keeping in mind the premium customers and has been priced as Rs 49 for 66 grams and Rs 99 for 160 grams”. (Iyer, 2010) The rate charged has been done after a market survey and customer preference for the product. Promotion Cadburys Dairy Milk Silk is being promoted by having television commercial and their packaging stands as a big force in marketing. (Iyer, 2010) Cadburys is also ensuring that in store promotions help to make consumer are about it. The company has also looked in marketing by endorsing it through a known face. Place Cadburys Dairy Milk Silk has been decided to “sell this product where the per capita income is high and the company looks to sell the product in 35 cities and in around 30,000 outlets”. (Iyer, 2010) This will ensure that the product is considered in the premium category. Macro Environment Analysis This analysis will help to identify the potential confectionery market has for Cadburys. Since, these are factors beyond control so it influences all other companies in similar business similarly. This will thus act as a tool to decide the strategy to enter the different market like Saudi Arabia. Political Political situation plays a very important role for any industry and more for a developing country. Saudi Arabia has a very high influence of “political factors and any changes in decision affect the overall bearing in the sector”. (OPpapers, 2010) The chocolate industry is “heavily influenced by the political scenario and the business get affected due to change in policies or unstable government”. (OPpapers, 2010) This calls for an understanding of the scenario. Recently, “the political situation was not sound due to rising prices of oil and falling of economies”. (OPpapers, 2010) This has affected the policy changes though still the government has reforms supporting growth. In spite, of such situation the stability of the government at the centre has ensured reforms to allow more investment in the confectionery sector. Economic The economic situation affects the number of commuters. The confectionery industry for a developing country like Saudi Arabia gets affected by “the growth rate and the business cycle as during recession people consider it a luxury but during boom a necessity”. (Justin, 2009) This is also affected by the price of raw materials. An increase in price reduces the people consuming chocolates. Saudi Arabia, is slowly coming out of recession provides an opportunity. The number of chocolate manufacturers has increased due to this. The income level and the growth rate also affect people spending on chocolate. (Justin, 2009) The economic situation has also improved for people as the living standards have risen. “The present GDP (per capita) is calculated at $3100 which is low compared to developed countries but the growth of IT and BPO is giving a push and with younger population on the side the per capita GDP is bound to grow”. (OPpapers, 2010) This is a boost and with the economy reviving has seen a rise in chocolate manufacturers. Social The Saudi Arabian culture is strongly influenced by culture prevalent is social environment. Saudi Arabia being a diverse country this plays a prominent role. “With different people from different backgrounds, religion, income level, and habits affect the way a person stays and brings a change in a social outlook”. (Justin, 2008) The social culture affects the way a client can be satisfied. This makes companies use a mix of different culture and ways to satisfy people especially while operating in service industry. For example, “A Muslim would like the environment to be such that he is served non-vegetarian food and his near ones are also of the same caste”. (Justin, 2008) Thus, the social factor is greatly influenced by religion. Service industry ensures that such an environment is created. This helps to ensure that customers are high on satisfaction and remain loyal. This is a common phenomenon seen in Saudi Arabia that “they remain loyal to the confectionery manufacturer which satisfy them and don’t switch easily even for a price”. (Justin, 2008) Thus, social factors have a huge role in Saudi Arabia. Technological Saudi Arabia has moved ahead in technological advancement. “The increased use of internet and the penetration level has acted as a boost for confectionery business to get even the far of customers”. (Justin, 2008) This is allowing people to purchase online themselves. This has increased as the literacy level has raised giving rise to more people using it as a medium to buy chocolates. This can also be supported by the fact that “US trade & development association conducted a feasibility which states that confectionery industry has been able to take huge advantage and this has been due to the modernization of communication, and increased use of computers”. (Justin, 2008) The use of technology in Saudi Arabia has also upgraded the process to manufacturer chocolate which has made business to capitalize on it. This is a great opportunity for the providers as they can use the advancement and capture the vast market. Environment The Saudi Arabian government has also framed laws for the environment. A cap has been put and steps taken to keep it within limits. The government has also taken steps for cleaning the rivers and companies are also helping in it. The chocolate industry has also contributed to it by domestic players taking steps to reduce emission. This is a step in the right direction and the chocolate industry can bank on it. The chocolate manufacturer can take steps which ensure that steps emission is low. Those companies are favoured and are a boom for the manufacturers as economies are reviving. Legal The Saudi Arabia government has rules in place regarding the entry and exit of players. “The government has put a cap on foreign investment in domestic players for the manufacturing sector”. (Justin, 2008) This is ensuring that industries which comply with those are allowed a stake. The government has also framed laws regarding “the permission to manufacture and sell chocolates on Arabian soil and manufacturers need to get approval from the government”. (Justin, 2009) Companies accompanying with the norms and ensuring that all the legal formalities are met has an edge. It ensures backing from the government and companies find it easy to comply with the regulations and perform. SWOT Analysis The SWOT analysis will help to identify areas where Cadburys can work on and also demonstrates the opportunities they have. Strengths Cadburys has a strong brand name due to the number of years the company has been operating. (Ferrell, 2002) Cadburys have many products aiming at different customers according to their wants Cadburys has a strong distribution network which has reduced its reliance on any way and ensured that the products are readily available. (Ferrell, 2002) Sound manufacturing owing to the innovation in new product which has helped to ensure that they keep up with the requirements. (Ferrell, 2002) Weakness Huge dependence on confectionery and beverages (Ferrell, 2002) has limited the scope for growth and ensuring stiff competition from Nestle Cadburys have a limited product portfolio compared to Nestle which has reduced the probability of diversifying (Ferrell, 2002) with new products and changing a variant is an option for them Limited storage time for milk chocolates (Ferrell, 2002) is making the company to ensure that it is sold within that interval Opportunities Merging and acquiring the small confectionery manufacturers so that they get access to already a created market. (Ferrell, 2002) Developing new products which improves there product range (Ferrell, 2002) and gives them a scope to grow Innovating and coming with new supplies techniques and moving into new markets Threats Increasing transportation cost, storage cost and increase in price of sugar (Ferrell, 2002) is a worry and steps needs to be taken to reduce those Threats from other brands like Nestle, Amul that has increased there market share and have products matching Cadburys. (Ferrell, 2002) Segmentation & Buyer Behaviour This will help to understand the different segment Cadburys is looking to eye and will also help to understand the behaviour of the buyer and their response towards the product. Buyer Behaviour The buyer behaviour of customer in the chocolate industry is influenced by various factors which defines their role and make them arrive at a decision. Role: The buyer role in the chocolate market is determined by the whims and desires. It is seen as a common fact that children determine the sell of chocolates. The defining role here is played by children who force their parents to purchase a particular chocolate and thereby playing a major role in the sale of chocolates. Decision stage: The decision to purchase is made at the time when parents along with their siblings enter a super market and displaying the production tempts them to be purchased. The decision here can be either at the beginning or at the end of the purchase cycle but when a glimpse of the chocolates being displayed catches attention is when a decision to purchase is made. Decision type: The decision to purchase is impulse and no prior planning is done to purchase it. There may be certain situations when planning is done but mostly the purchase of chocolates is impulse. Segmentation The company looks for people in the age group 5-60 years. The company has developed its target market based on two strategies. One the company looks at age demographics and the other is geographic segmentation. Targeted Segment Age Group Class of Customer Customer Needs Rural 5 - 60 years Premium Middle Class Lower Middle Class Providing quality product Superior taste fitting the pocket Semi-Urban 5 - 60 years Middle Class Lower Middle Class Quality product at a price suiting the pocket Urban 5 - 60 years Lower Middle Class Low priced product with good taste Based on the above segmentation Cadburys Dairy Milk Silk has been launched for the premium segment customers as the product has been priced accordingly and is mainly for rural regions where there is availability of refrigerators so that the chocolate doesn’t melt. (Iyer, 2010) Positioning & Marketing Strategies Cadburys have positioned their product for “all category of customers starting from the tender age of 5 to 60”. (Chandran, 2007) The product has been positioned to ensure that “every customer who wants the product can have it”. (Chandran, 2007) For this the company has kept the prices low and also have small packages so that it can eye all customers. Cadburys Dairy Milk has been positioned “for the premium and medium segment customers who want more cocoa and butter and different variants of the same has been launched so that it satisfies the entire customer”. (Iyer, 2010) Cadburys have marketed this product by using technology. Cadburys have ensured that “they come up with television commercial and have a brand ambassador”. (Chandran, 2007) The company to market has also ensured that the packaging is given priority. This has given them recognition and also longevity to their product. Cadburys have developed a strong network of suppliers and ensure that their marketing is backed by availability of stock. Measures are also taken to see that in store promotions are done. This has attributed to the success of Cadburys and following similar strategy will help Cadburys Dairy Milk Silk to succeed. Promotion Cadburys Dairy Milk Silk is being promoted by “having television commercial and their packaging stands as a big force in marketing”. (Iyer, 2010) Cadburys is also ensuring that in store promotions help to make consumer are about it. The company has also looked in marketing by endorsing it through a known face. Thus we see that the marketing strategy for Cadburys take care of the 4P’s for Cadburys Dairy Milk Silk. This will ensure that Cadburys is able to gather momentum and sell their product easily and make it a favoured product. Packaging The packaging for the product Cadburys Dairy Milk Silk has been done on similar lines as the Cadburys Dairy Milk brand. The company has done so because “Cadburys has been successful in the packaging variant it has and people find it easy to associate with the same brand as packaging which is similar is helping them to associate with the product easily”. (Iyer, 2010) The packaging for Cadburys Dairy Milk Silk is as follows Cadburys Dairy Milk Silk packaging has been such that people find it easy to recognise. The packaging has already been tested. This is ensuring longevity and easy association. It is also helping Cadburys to differentiate it from Nestle. Monitors and Controls The schedule we intend to follow for the Cadburys is as follows Following the above schedule will help to ensure that Cadburys adhere to the time limits and will also give the leverage to make the necessary changes in the development of product and advertising campaign if required. This will improve efficiency and help to achieve the desired result. To ensure that the process is as planned Cadburys will have a control mechanism where the process and development are evaluated continuously after regular intervals. This will help to find the deviations and take necessary steps as required so that the brand is able to grow and develop itself. Budget Cadburys to be able to develop itself and launch products need to take steps towards developing advertising. This will help Cadburys to develop and grow. The budget for such is as follows The cost for advertising in is as follows The client needs to decide which magazine and advertisement channel they want to use based on the budget of the product. This thus helps Cadburys to plan and take steps accordingly. Future Prospects The chocolate industry in Saudi Arabia has bright prospects for growth. With the already rising GDP the growth in the manufacturing industry is bound to increase. “It is estimated that the number sector will grow by 15%”. (Justin, 2008) The huge population will further act as a boost to grow. It is estimated that the CAGR will be 84%. Thus, the Saudi Arabian manufacturing sector has a bright prospect and with the opening of economy to foreign investor this sector is bound to move up. References Brown S, 2007, “Chocolate Market”, Destination for FMCG Marketing, Mark Out Cadbury Company Website, 2010, “Cadburys Worldwide”, retrieved on December 21, 2010 from http://www.cadbury.com/Pages/Home.aspx Cadburys, 2009, “Pie Chart Part-3”, retrieved on December 21, 2010 from http://www.alcibi.com/business_hieroglyphics/business-information-aesthetics/charts-graphs/the-problem-with-pie-charts-part-3/ Candy Industry, 2006, “The Chocolate Industry”, International Cocoa Organisation, New Oxford Street, London Ferrell G, 2002, “SWOT Analysis for Cadburys”, Orland, Dryden Press Fat, 2004, “Chocolate Tactics: Fat Profits”, One minute World News, BBC News Iyer B, 2010, “Cadburys Silk Route”, Business Standard, retrieved on December 21, 2010 from http://www.business-standard.com/india/news/cadbury%5Cs-silk-route/384906/ Justin A, 2008, “Chocolate Industry”, Service Sector Management, Business Week Kotler P, (2001), Marketing Management, page 201, 11th edition, Prentice Publication, Upper saddle River, New Jersey OPpapers, 2010, “PEST Analysis Saudi Arabia Manufacturing Sector”, Research paper, OPpapers.com PEST, 2010, “PEST Cadburys”, Research Paper, retrieved on December 21, 2010 from www.oppapers.com Nestle Company Website, 2010, “Nestle Website”, retrieved on April 10, 2010 from Singh N, 1999, “Cadbury’s chocolate coated vision”, News Article, Indian express Newspaper Ltd Target Market, 2010, “Cadburys Target Market”, Marketing Communications, Campaign India.com Appendix Appendix 1: Growth in Cadburys Revenue Appendix 2: Share of different brands in the market Appendix 3: Change in share of Cadburys Appendix 4: share of different varieties of chocolates Read More