Cadbury in Russia

An overview into the issues faced and

what strategies were adopted to
overcome them

Sonny Bagharis – Anastassiya Iordan – Caterina Lay – Alina Yatskevich

 Objectives
• Understand the context of Socialist Russia and the
market in the 1990’s
• The impact of socialist era on FDI
• A general overview of Cadbury in Russia
• The logic behind Cadbury investing in the Russian
market
• Issues that the company faced and the strategies to
overcome them
 Context
• Socialist Revolutionaries (formed in 1901) -wanted to give the
land to the peasants and to get rid of the aristocracy & the
Tsar.
• Small middle class, most people were peasants and; in the
cities, workers.  no history or culture of political
moderation.
• Harsh living standards due to industrialization
• Big gap between aristocracy and the
• 1917- Revolution, Nationalizations, 5 year planning
• Socialism = free education, free health-care and political
representation for all
 The Socialist Economy
Economic inefficiency:
• lack of private property,
• planned economy,
• state ownership of industrial enterprises,
• price distortions,
• lack of institutions,
However, high level security
• Full employment (but immobility)
 The Transformation
Socialist regime ended Dec 91 with the founding
of Commonwealth of Independent States and
Jan 92, beginning of transition to market
economy:
• Correct distortions and inefficiency
• Stabilisation of macro-economy
• Privatisation and de-regulation
• Creation of institutions
 Important Events
• People had accumulated money holding due
to the lack of ways to spend it, which lead to
monetary overhang
• Hyperinflation resulted from the removal of
price controls (agreed with IMF) and lead to
the 1998 financial crisis
• Around 2002 changes and unpredictability in
customs regulations lead to problems with
trade and FDI
The Company
 Cadbury Plc
• One of the leading global confectionery
companies with a portfolio of chocolate, gum
and candy brands.
• The company has global operations spread
across Europe, Americas, Asia Pacific and
Africa. It is headquartered in London, the UK
and employs about 46,517 people.
 Key Products

• Chocolates
• Candy
• Candy bars
• Chewing gum
 Local Portfolio
• Dirol chewing gum
• Stimorol
• Malabar,
• Halls
• Dirol Drops
• Cadbury
• Picnic.
• Cocolate Figures (traditional)
 History
• 1824, when John Cadbury opened his grocery
business in Birmingham. (drinking cocoa, chocolate)
• Cadbury Schweppes (which was split into: Cadbury
plc; and Dr pepper Snapple Group in May 2008) was
actually formed in 1969 by the merger of Schweppes
and Cadbury Group. (incorporated)
• 1969-2008 merges and acquisitions
• Enters Russian market in 1964 Known as “Cadbury
O.O.O.”
 Today
• The world's second largest producer of candy
and chocolate
• OOO Dirol Cadbury, Chudovo, Velikij
Novgorod,Russia- 2 plants, Head Office In
Moscow, 400 Russian cities
• November 2009. Kraft foods acquires OOO
Dirol Cadbury.
 Why did Cadbury enter Russia?
1. Market size – providing excellent growth
opportunities
2. Market development – offering an
opportunity for gaining market share
3. Good expansion opportunity – in line with
Cadbury’s strategy
4. Competitors
5. A changing country
 Issues Strategies
Heavily fractured confectionery Transform into opportunity to take chunk
market of market share

MA
Align consumers needs to the products
RKE Tidal shift in Russian spending
on offer and not the other way round
T
Higher concentration of cocoa and more
Consumer tastes
widespread use of nuts

Encourage sales “indulgence

Route-to-market
opportunities” in kiosks
COS
TS Acquisitions in related high-growth
Distribution
segments
 Issues Strategies
Switched to buying raw material in Russia
Inflation & cost of raw materials
in greater bulk

COS Lack of skilled workers

Farmed its own talent; high wages and
TS good benefits

Increased investment and gained market

Ruble crisis
share and awareness

Unfavourable tax structure and Less TV ads but more creative; spending
I N F R unequal tax enforcement on training but retaining the talent
ASTR
UCT
U R E Red tape – over bureaucratic Focus on developing existing brands
shelf-life approval procedure
 Issues Strategies
INF Lack of international accounting Consultations to acquire strong local
RAS standards brands
TRU
Accumulated experience in the field of
CTU Uncertainty with regards to
acquisitions in Russia gave advantage
RE which sectors were open to FDI over competitors
 Summary
• The transformation in Russia offered an
attractive market for FDI
• In line with their international strategy, Cadbury
entered the Russian market
• The constraints in terms of costs and
infrastructure were overcome by heavy
investment
• The market constraints were addressed…but
were Cadbury successful in doing so?
 Conclusion
How to measure success?

• Turnover?
• Returns?
• Market share?
• Brand value?

Cadbury achieved the financial gains they had forecasted.

However in Russia, they are still not a household name. Their
most known chocolate is the Picnic and their rivals, Mars, have
much higher brand value in the snack chocolate area.