Agenda

History
Introduction
Products
Competitors
Market shares
Cost Reduction and promotion strategies
Value chain
Case: Kraft and Cadbury deal

Introduction

Cadbury PLC (Cadbury), a British confectionery company, was known as Cadbury

Schwepps Plc from 1969 till 2008.

It was acquired by Kraft Foods in 2010 after which it became the largest confectionery
company in the world.

In India, Cadbury was incorporated in 1948 and it initially imported chocolates before
starting cocoa production in 1965.

It was present in different food categories like chocolate confectionery, biscuits,

beverages, gum, and candy.

Cadbury's main business was chocolate confectionery wherein it was the market leader
with a market share of around 70% in 2011, which is the highest Cadbury brand share
globally.

Markets: Australia, Canada, India, Ireland, New Zealand, United Kingdom, Malaysia,
Philippines

Introduction (contd)
The operations of Cadbury India initiated in 1948. It has five manufacturing units all
over India at Thane (Maharashtra), Induri (Maharashtra), Malanpur (Madhya Pradesh),
Bangalore (Karnataka) and Baddi (Himachal Pradesh). It has one cocoa operations
office at Dharapuram (Tamil Nadu)
Cadbury Indias one of the most popular brands, Cadbury Dairy Milk is a benchmark for
other chocolates in India and is regarded as the gold standard.
Some of its main chocolate products were Dairy Milk, 5 Star, Perk, Celebrations, Eclairs
and Gems. Dairy Milk alone held 30% of the share of the Indian chocolate market.
Cadbury Dairy Milk itself had many variants like Fruit and Nut, Crackle, Roast Almond,
Dessert, Silk, Shots, Eclairs.
In the medicated category, Halls is a favorite candy while Cadbury India has also
entered the biscuits category by launching Worlds no.1 biscuit brand Oreo.
Cadbury has also been the leaders in the development of cocoa cultivation in India since
1965. The research work has been carried out in collaboration with the Kerala
Agricultural University. The team from Cadbury also conducts training sessions for the
cocoa farmers on cultivation aspects to have an increased cocoa productivity.

Cadbury Products

The market major of Chocolates offers the following products in the market: Chocolates like Cadbury dairy milk, perk, celebrations, temptations, five star,
clairs, gems, fruit & nut, Cadbury crackle and many more..
Snacks like Cadbury bytes
Beverages like Bournvita,
Cadbury delight
Candy like Cadbury halls
Gums like Bubbaloo

Chocolate and coca based beverages

Gum
Candy
Other beverages

Cadbury Products (contd..)

The manufactures of Cadbury India in the chocolates brand are:

Cadbury Dairy Milk:
Other than the most popular Cadbury Dairy Milk, there were other variants in the brand as
Fruit & Nut, Crackle, Roast Almond, Cadbury Dairy Milk Wowie, and Cadbury Dairy Milk
2 in 1.
5 Star:
This chocolate bar was launched in 1969. It is the second largest chocolate brand after
Cadbury Dairy Milk with a market share of 14%. Cadbury 5 Star Crunchy and Cadbury 5
Star Fruit and Nut are the variants in this brand.
Perk:
Cadbury Perk was launched in 1996. The brands launched later are Perk XL and Perk XXL.
Celebrations:
Cadbury Celebrations brand was launched with a target of replacing the conventional gift
items as sweets etc on occasions like Diwali, Rakhi etc.
clairs:
The Cadbury Dairy Milk clairs is one of the most popular brands in the clairs category.
One more launched brand in this category is the Cadbury clairs Rich Brownie.

Cadbury Products (contd..)

Gems: This brand was launched in 1968 and is one of the most popular brands among
the kids.

Beverages
Cadbury Bournvita: It was launched in India in 1948. It is one of the oldest brands in
the category of Malt Based food. Bournvita Lil Champs: This is an ideal milk additive
product for the children launched in 2008 with key ingredients for proper growth as
DHA, whey protein etc.

Candy
Halls: Halls was included in the Cadbury Brand in the year 2003 as a part of the global
unification with Adams Confectionery.

Biscuits
Oreo: It was launched globally in the year 1912. It was launched in the Indian market in
2011

Gum
Bubbaloo: This gum with a bubbly taste was launched in India in the year 2007.

Competitors

Cadbury's main competitor in India was Nestl. Nestl's products included Kit Kat,
Munch, Bar-One, Milky Bar, and Milky Bar. There was an ongoing battle between
Cadbury and Nestl, with both of them engaging aggressively in their advertisement
campaigns.

Over the years, Cadbury focused on its advertising campaigns for Diary Milk to connect
with the people and gained popularity. Earlier, there was a perception that chocolates
were meant only for children. Cadbury wanted to change this perception and thus it
started various advertisement campaigns meant to influence adults and add them to its
consumer segment.

SWOT
STRENGTHS
Distribution network
Market Share
Aggressive Market
Very strong base
Better Market

WEAKNESS
Little Penetration in
rural sector
Poor tech. in India
Limited key products,
one central brand

OPPORTUNITIES
Increasing per capita
national income
Growing middle class
and urban population
Increasing gifts culture
Substitutes to Sweets

THREATS
Rise cost of diary
products
Changing consumers
trends
Entry if foreign
players

Cadbury Market Share

In 2013 Domestic Chocolate segment in India was Rs. 6,000/-

Cadbury at 67% followed by competitor Nestle at 21% and others 12%

Increasing Market Share is not easy for Cadbury

Pushing Pricier brand Silk and Lower price Cadbury Shots

Whereas Nestle pushing its Alpino and Munch

In health drinks Cadburys Bournvita facing stiff competition from Heinz Complan.

Future market expansion will be E commerce online selling.

Cadbury Market Share

Cadbury Prices

Cadbury Cost Reduction Strategy

Price reduction without affecting quality is the main concern it can be possible by new
offers, discounts and implementing new logistic and distribution centre

Use of automation process to reduce cost of production- high accuracy and more
perfection

Uses of innovative delivery that related with fast and time management as per demand

Cadbury uses following technology like PLC(programmable logic control),

SCADA(supervisory control and data acuisation) and DCS(distributed control system)

Bad days for Cadbury

Cadburys Position Before the Incident:

Thirty million bars of Cadbury Dairy Milk chocolate bars were bought every month.

In June of 2003, Cadbury was the only multinational to be identified as one of Indias
Best Managed Companies by Business Today and Business World ranked Cadbury
among the Best Workplaces in India.

Despite a slowdown in the fast-moving consumer goods (FMCG) sector in India,

Cadbury was among Indias fastest growing companies. In 2003, the companys
cumulative third quarter growth rate in value terms was 15.1%, and its underlying
operating profits were up by 15%.

Bad days (The Worm incident)

In 2003, Cadbury India faced a media onslaught and plummeting sales brought on by
reports of worms in some of its chocolate bars. In October 2003, just a month before
Diwali, customers in Mumbai complained about finding worms in Cadbury Dairy Milk
the Maharashtra Food and Drug Administration seized the chocolate stocks
manufactured at Cadbury's Pune plant.
In defense, Cadbury issued a statement that the infestation was not possible at the
manufacturing stage and poor storage at the retailers was the most likely cause of the
reported case of worms which was not taken by the FDA.- FDA commissioner, Uttam
Khobragade told CNBC-TV18, "It was presumed that worms got into it at the storage
level, but then what about the packing - packaging was not proper or airtight, either
ways it's a manufacturing defect with unhygienic conditions or improper packaging."
The heat of negative publicity melted Cadbury's sales by 30 per cent, at a time when it
sees a festive spike of 15 per cent.
For the first time, Cadbury's advertising went off air for a month and a half after Diwali,
following the controversy
Within a few weeks of the initial incident, the perfect storm of media, regulators, and
political parties had created an impression that each and every bar of Cadburys
chocolate was infested.

Steps taken for image Re-building

Cadburys response to the crisis was the implementation of the Project Vishwas
(Project Trust) campaign. The goal of Project Vishwas was to win back the confidence
of the consumer. Retailers and consumers were reached nationally through the press
advertisement, Facts about Cadbury, released in 55 publications in 11 languages. The
advertisement presented facts about Cadburys manufacturing and storage facilities and
highlighted corrective steps being taken by the company.
By investing up to Rs 15 crore (Rs 150 million) on imported machinery, Cadbury's
revamped the packaging of Dairy Milk. The metallic poly-flow, was costlier by 10-15
per cent, but Cadbury didn't hike the pack price. The new production process was
implemented in an unprecedented eight weeks (instead of the usual six months).
Cadbury also brought in a brand ambassador to reinforce the credibility that the
company had demonstrated through its repackaging efforts. Amitabh Bachchan, a
legendary Indian film star, was chosen (at a significant cost) because he embodied the
values of Cadbury as a brand and connected with all of India
Road shows were conducted across the states of Maharashtra and Kerala.
Cadbury also distributed more metal dispensers and coolers to its retailers
A response cell with a toll free number and e-mail was put in place to give shopkeepers
a means to directly contact the company with any issues they faced. On the response
cells first day, the unit received 158 calls and 60 emails.

Results

These actions helped reinforce the companys commitment to quality and reaffirm
retailers confidence and proper storage practices. Finally, even as Cadbury was in the
roes of the crisis, the company believed it was necessary to assure its consumers and
retailers that it was business as usual at Cadbury
As a result of the actions taken by Cadbury, there was significant upward movement in
ratings amongst consumers on parameters like company image, responsiveness of the
company, and intention to buy Cadbury chocolates
By June 2004, intention to consume and gift Cadbury had returned to pre-incident
levels.
Media perceptions about the company had changed. Cadbury had recovered its
reputation. Several enduring changes were made in Cadbury Indias internal and external
practices regarding food safety as well.
Cadbury learned (the hard way) that being prepared for similar events in the future
would be well worth the investment, and the company put in place a permanent media
relations and Corporate Affairs Cell.

Brand Value Chain of Dairy Milk

The brand value chain consists of four value stages and three multipliers:

Value Stages:
Marketing Program Investment
Investment in marketing program, targeting actual & potential customers
Product research & development, advertisement, promotion & sponsorships

Customer Mind-set
Brand awareness, Brand association, Brand attitude

Market Performance
Customer mindset & reaction

Shareholder Value

Multipliers:
Program Multiplier
Clarity Relevance, Distinctiveness & Consistency

Marketplace Multiplier
Customers reaction on premium price, market share & cost structure

Investor Multiplier
Market dynamics, Growth potential, Risk profile

Commitment to the environment

Migratory birds stop over at
Bangalore factory

Water is a precious resources. As part of

Cadbury India's effort to continuously

increase water conservation Bangalore
factory has constructed a check dam to
store the rainwater.
This dam not only acts as a major ground

water replenishing source for the bore

wells in the factories and surrounding
community, but is also a stopover
location for some of the migratory birds.

Commitment to the environment

The efforts of the Baddi factory team

over 50 children of migrant workers
living in and around Cadbury Baddi
factory will now have daily access to
non-formal education. Cadbury has set
up a non formal school as part of
Cadbury
commitment
to
create
prosperous, inclusive and healthy
communities.

This is the first phase of project

SAHYOG an 18 month project which
commenced in January this year in
partnership with an NGO RUCHI. the
project reaches out to over 400 poor &
marginalised families in sandholi village
near Cadbury Baddi factory and apart
from education .

Non-formal school set up by Cadbury for

children of migrant workers in Baddi

Commitment to the environment

Pioneering cocoa cultivation in India

Since 1974 Cadbury has pioneered the

development of cocoa cultivation in
India.

Cadbury India Ltd announced Cocoa

Research Project with Tamil Nadu
Agricultural university to undertake
cocoa research to help promote cocoa
cultivation in India.

Cadbury efforts have increased cocoa

productivity and touched the lives of
thousands of farmers.

 Kraft Foods INC. is a United State corporations established in 1923 by Thomas H.

Mclnnerney.
Ranking: Worlds second largest food company.
Brands available in 150 countries.
Headquarter: Chicago, Illinois.
Employees Approximately 100,000
2008 Revenues $42 Billion.
The firm has two main operating units-Kraft Foods North America and Kraft Foods
International.
A large proportion of Krafts worldwide revenues came from just 11, well-known,
well-established brands each brand drawing in over 1 billion US dollars in revenue
each year. coffee, cookies, crackers, cream cheese, dessert mixes, dry packaged
dinners, lunch combinations, powdered soft drinks, process cheese, salad dressings,
and snack nuts.

Kraft & Cadbury Merger in Jan2010

Initial Idea
Generation

No of Offers
to Cadbury

Price: 11.9
billion

Shareholders

Reasons for the Deal

Entering Emerging
market through cross
border Acquisitions

Overcoming Entry
Barriers in New
Markets

Valuation of Cadbury
by 50% more than
market value

Increased Market
Power

Breaking new grounds

by Cadbury

Major Problems

Inadequate Evaluation of Target: 500p in cash and 0.1874 Kraft shares for each Cadbury
share. According to Buffet which was a pretty full price i.e. much higher than actual &
Kraft shares undervalued.

Large Debt: Debt of $ 9.5 billion. Recoverable within 13 years at the then income level
(3.25, 6, 10, 30 year bonds through DB, HSBC, RBS, BNP Paribus)

Kraft's takeover of Cadbury was also criticized by British trade unions who felt that the
merger would destabilize the company and affect future returns to shareholders.

Cultural differences: Sir Dominic and Sir Adrian Cadbury said: considerably increased if
the bidder fails to win the loyalty and support of the employees on whom the continuing
fortunes of the enterprise depend."

Fears at Cadbury: Kraft's bureaucratic work structures, Working relationship: Irene

Rosenfeld's remote management style, etc.

Major Problems

Turnover of Key Personnel - Exodus of experienced Cadbury management

HR Integration - Job Redundancies and Changes to compensation package

Non-resolution of Uncertainty - Lack of clear communication with acquired employees

Cadbury failing to meet Krafts top line objectives.

Unreliable precedents:
Closed the Terry's factory in York after buying it in 1993, despite promising to keep
it open.
Habit of taking over great national institutions DANONE, Cadbury
Did not close biscuit manufacturing facilities in France for at least three years and
increased investments also

Implications of Cultural Change

Kraft

Cadbury

Strengthened Brand

Damaged Heritage

Drives higher performance leading to

better revenues

Lower Moral and Performance

Better Control of organization

Staff Burnout

Better Reputation

Risk of losing benefit schemes

Efficiencies through alignment of

processes

Trust Issues

Alignment of goals

Changed Brand Personality

Summary

The final offer marked a 14% increase from initial offer which is the worlds largest deal
for confectioner.

Recommended offer represents an attractive offer for Cadbury share holders

Combination of cash and upside as continuing share holders (i.e.500p in cash and
0.1874 Kraft stock for each share they own)
Transforms the portfolio and enhances the long term growth prospects

Kraft generates a strong near term economic return

9%-11% increase in long term;

Access to an iconic brand with a strong penetration in growth markets;

Access to a strong marketing and distribution channel in developing market

Summary

The initial results have been very pleasing to Kraft since they had been able to continue
moving forward with their long-term strategic goals.

Successfully been able to move into high growth emerging markets and at the same time
they have been able to promote Cadbury sales from within their established distribution
networks.

Over one third of the global Kraft Executive Management team is from Cadbury and
they have been critical in the attempts to move into new markets.

Improvements in Kraft business since the takeover. Great increases in both share price
and revenues, whilst at the same time reducing our long-term debt obligations by almost
50%.

30

Summary

Kraft commanded 14.8% of the global candy and gum market;

Kraft's net profit for the fourth quarter fells by 24%;

Kraft has to spend $1.3 billion for integration costs to achieve $675 million in recurring
annual synergy savings;

Kraft forced to raise price in North America and Europe to offset high commodity cost;

Overall 30% knocked off EPS after deal;

Had to sold Somerdale Factory based in UK plant for 50m

Labor outreach;

Keep Cadbury a British co. protest

Thank you