A

MINI PROJECT ON

CHOCOLATE INDUSTRY

(Submitted in the partial fulfillment of the requirements for MBA)

2021-23

Submitted by- Submitted To-

Name of Student- Sachin Rajput Faculty Name-Ritika Khurana

Father’s Name-Ramchander Rajput

Batch of 2021-23

LLOYD INSTITUTE OF MANAGEMENT & TECHNOLOGYPLOT NO 11,

KNOWLEDGE PARK-2, GREATER NOIDA-201306 (UP)
 Certificate I
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This is to certify that the project report entitled CHOCOLATE INDUSTRY I

( benefiting organizations is a Bonafide work done by Sachin Rajput of 1st I
Year submitted in partial fulfilment of requirement for the award of degree of I
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Master of Business Administration of Dr. APJ Abdul Kalam Technical
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University, Lucknow during the session 2021-23. J
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External Examiner- Internal Examiner- 1.

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Co-ordinator L
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 STUDENT DECLARATION

I, hereby state that the project for the MBA degree, MINI PROJECT,
(Semester 2) on has CHOCLATE INDUSTRY been originally carried out by
me under the supervision of Mrs Ritika Khurana, Lloyd business school,
Greater Noida and this has not been submitted elsewhere for any other
degree and diploma previously .The information presented in this is correct
to the best of my knowledge and the analysis is as per the norms and
guideline provided for the report. I have utilized the requisite concept and
applied the required methodologies to analysis the primary data collected to
reach the conclusion in the report.

Place: Greater Noida

Date:
 ACKNOWLEDGEMENT

It is my pleasure to acknowledge and express my gratitude to all those who

helped me throughout in the successful completion of this project . I would
like to thank my Director, (Dr). Ashok Tiwari, for providing the necessary
facilities required for completion of the project . I am grateful to Ritika
Khurana, Professor, Lloyd Institute of Management and Technology,
Greater Noida for her continuous guidance to accomplish this project work,
successfully.

Sachin Rajput

MBA Semester II
 TABLE OF CONTENT
Chocolate Industry in India

1cc
Major Players
2
3 Market Segmentation

4 Product Positioning

5 Consumer Buying Behaviour

Product Life Cycle

6
7 Introduction to the topic

Objectives
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9 Research methodology

Data analysis
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Findings
11
Suggestions
12
13 Limitations
 CHOCOLATE INDUSTRY IN INDIA Emerging MU
markets drive growth for malt and M
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Malt- and chocolate-based drinks are often seen as relatively b
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unsophisticated in developed markets in the west, but in many countries, Q
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in particular in Latin America, they are big business indeed, marketed

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mostly as an excellent source of nutrition in countries where food quality is

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often poor. But improving sales in other countries will depend on finding a M
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premium positioning.
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Global retail volume sales of both malted and chocolate-based hot drinks M
reached 956,702 tones in 2005, according to a recent report from market
analysts Euro monitor, with Latin America alone accounting for over one
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third of total sales.
Malt drinks, meanwhile, are most popular in India, which accounts for 22 J*L
per cent of the world‘s retail volume sales. They are traditionally consumed L
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as milk substitutes there and marketed as a nutritious drink, mainly
consumed by the old, the young and the sick. Sales have also been aided If!
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by improved retail and distribution in recent years, combined with a large jijiyi
child and youth consumer base, the report said.
India also recorded the highest growth (53 per cent in US$ terms) during
20002005, again spurred by consumers trading up to value-added gv°aa%a°o

products. In 2005, for example, Glaxo Smith Kline re-launched Horlicks for JJM
Kids, specifically targeted at young children, as well as launching Horlicks
in three new flavors.
With its Horlicks brand (often seen as an old-fashioned drink in its home market in 1
the UK) Glaxo Smith Kline in fact accounts for 70 per cent of malt-based hot I
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drinks, with India alone contributing nearly 60 per cent of the company‘s global
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sales of the product. Other major players include Cadbury Schweppes and I
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Nestle. I
But if developing nations have a growing taste for malt- and chocolate-based J
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drinks, other more sophisticated markets have yet to catch on. Indeed, the report I
shows that the performance of malt- and chocolate-based drinks in mature I
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western markets was characterized by of stagnation and decline during I
20002005.The US, for example, has seen a sharp decline in value sales of both I
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maltand chocolate-based drinks over the past few years, mainly as these J
products largely remained outside the overarching consumer trend for premium L
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and healthy products. In fact, malt-based drinks have an almost negligible L
presence in the US, with manufacturers largely failing to attract the important child p
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and youth consumer groups - a category more interested in soft drinks. J
Looking forward, the emerging markets will, not surprisingly, continue to provide L
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the best opportunities for growth in this category, Euro monitor suggests. Market L
such as Indonesia and Mexico are expected to see strong growth in both maltand
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chocolate-based drinks by 2008, with large youth populations and a rising number J
of middle class consumers as the key driving factors.
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Among major markets, China is forecast to be the fastest growing market in both LJ
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chocolate-based (up 35 per cent by value) and malt-based (up 29 per cent by IP
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value) up to 2008. China‘s booming economy along with rising levels of
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disposable income and increased availability of quality products will encourage 0 ocP0
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further consumption, the analysts predict. Following China‘s accession to WTO,
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multinationals are also expected to penetrate the country further, driving up 1
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demand and in turn prompting more local manufacturers to get involved in
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production. I
Chocolate in a Bloom oWc

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Is a white bloom enough to put you off your chocolate? Scientists are hard I
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at work to find out exactly how this bloom forms and how to stop it, as I
Emma Davies finds out i
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Next time you reach out for your favorite chocolate bar you will probably pay little IP
attention to its fat crystals. However, should you be unfortunate enough to peel .*4
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back the wrapping to reveal a chocolate covered in a mouldy-looking white I
'bloom', and then perhaps you might spare a thought for its crystal structure? The I
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chocolate industry ploughs a lot of money into investigating chocolate crystals
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and bloom.
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The industry takes bloom seriously - not only because it is unsightly, but also
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because it can change the texture and the flavor release properties of the I
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chocolate. Manufacturers are keen to invest in research, using expensive I
techniques such as X-ray scattering and atomic force microscopy (AFM), to help I
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understand exactly how bloom forms and how to stop it forming. With the r'-i
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average person in the UK eating 10kg chocolate each year (according to

Cadbury's confectionery review of 1999), it is easy to see why the industry wants
to create a perfect chocolate bar that stays temptingly glossy with a good 'snap'.
is so much softer than its dark counterpart.
The fat crystals in cocoa butter pack together in six different formats
(polymorphs). The chocolate industry labels these polymorphs forms I to VI (form
I being the least stable) and aims to get the cocoa butter to crystallize in a stable
form V to give the chocolate a glossy appearance and a good snap.

Table 1. What goes into a typical milk chocolate?

Ingredient Per cent Cocoa mass 11.78

Milk powder 19.08

Surface science
The surface of a good quality chocolate contains lots of tiny fat crystals that can
reflect light, giving it a glossy appearance. Any cracks or crevices (or even
fingerprints) on the surface of the chocolate can encourage small, spiky fat
crystals to grow. When the crystals reach a size that can diffuse the reflection of
light from the surface they give it a dull appearance.
[P"A“

Although the exact mechanism of bloom formation remains disputed, most

scientists agree that it involves fat crystals transforming from form V to form VI.
Because form VI crystals are more stable than form V, chocolate should inevitably
form a bloom at some stage, unless preventive measures are taken. Richard
Hartel at the department of food science in the University of Wisconsin, US,
believes that although the form V to form VI transformation always accompanies
bloom formation, it does not necessarily cause it. With John Bricknell at Mars in
New Jersey, US, he has analyzed a 'model' chocolate using X-ray spectroscopy,
to identify the types of fat crystals that develop. Their model chocolate contains
amorphous sugar particles - created by spray drying a mixture of corn syrup and
sucrose and sieving the mixture to ensure that all the particles are the same size.
The chocolate is made by blending and tempering a mixture of cocoa butter,
lecithin (an emulsifier), sieved cocoa powder, milk fat and the amorphous sugar.
Because the model chocolate contains no crystalline sucrose, the researchers
were able to see clearly the changing polymorphic forms of the cocoa butter. They
also used a colorimeter to measure the amount of white bloom that developed on
the chocolate samples, enabling them to link changes in polymorphic form to the
onset of visual bloom.
They discovered that the form V to form VI crystal transformation took place not
only in all of the samples that developed a visual bloom but also in some of the
samples that remained bloom-free. Hartel says that 'most people thought they
understood bloom formation in chocolate to be the polymorphic transition of
cocoa butter. What our results show is that the polymorphic transition indeed
occurs, but that something else is needed to create visual bloom'.
[P"A“

Hartel's research team has come up with a theory to explain how visual fat bloom
develops in well-tempered chocolates. They suggest that, first of all, liquid fat
must be able to get to the surface of the chocolate. The 'pumping action' required
to do this could be induced by temperature fluctuations, which cause the fat
crystals to melt and then to re-crystallise. Fat crystals with high melting points
'dissolve' in this liquid fat and are taken along to the surface where they can
recrystallise as spiky crystals. Any cracks and crevices can help the liquid fat get
to the surface. The way that the spikes grow from the surface of the chocolate,
says Hartel, is 'open for debate' although the 'nature of the sites available for
growth undoubtedly plays a role in their formation'.
An interesting and unexpected result emerged from Hartel's study: the
amorphous sugar used to make the 'model' chocolate seemed to be able to
prevent a visual bloom developing. When the researchers looked at the samples
through a microscope, they saw that the fat crystals on the surface of the model
chocolate were smooth, rounded and flat, causing little more than a slight dulling
of the surface. These crystals were markedly different to the spiky, needle-like
crystals of 'real' chocolate that can take away its gloss.
Hartel thinks that, because the smooth, spherical sugar particles pack together
more tightly than the irregular-shaped sugar crystals in commercial chocolate, this
reduces both the rate of liquid fat migration and hence the rate of bloom
formation.
Despite the success of the amorphous sugar at inhibiting fat bloom, Hartel says
that it could not be used in commercial chocolate because the sugar 'picks up
moisture easily and gives a gummy texture in the mouth'.
By adding high melting point milk fat fractions to their chocolate mix, Hartel and
his team have been able to delay substantially the transition from form V to form
VI. Indeed, milk fat is commonly used to inhibit fat bloom, and skimmed milk
powder is better than whole milk at preventing bloom formation.

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[P"A“

How milk fat reduces bloom formation remains a mystery, but minor lipids in the
milk fat (e.g. mono- and diglycerides) are generally thought to influence the
kinetics of cocoa butter crystallization. The denser crystal structures that form
could potentially stop liquid fat from moving to the surface and re-crystallising.
The minor lipids could also affect the amount and type of high-melting lipids that
dissolve in the liquid fat and could even slow down the transformation of crystals
from form V to form VI. Another theory is that because milk fat can decrease the
rate of fat crystallization, the chocolate contracts less on cooling. Fewer
microscopic cracks appear, reducing the likelihood of liquid fat reaching the
Industrial tempering usually involves applying shear forces (stirring) while
changing the temperature. The shear rate has to be chosen carefully because if it
is too low then not enough crystals will be generated, and if it's too high the
crystals could melt.
Scott Macmillan and Kevin Roberts, from Leeds' chemical engineering
department, have developed a method that enables them to look at crystal
changes during tempering, with the aim of optimizing the process in order to
guarantee the growth of form V fat crystals. They have designed a temperature-
controlled shear 'cell', similar to the cone and plate system commonly used in
rheometers, placing the fat sample on the bottom plate and rotating the top 'cone'.
This set-up allows the researchers to heat and cool fat mixtures while at the same
time varying the shear rate. Using the small angle X-ray scattering (SAXS) facility
at dares bury, they have been able to monitor changes in crystal structure in the
shear cell during tempering.
When no shear stress was applied to cocoa butter samples, the fat crystals
transformed slowly from form III to form IV. However, on shearing the samples,
the crystals transformed from form III to form V. Macmillan believes that because
the results 'give a strong indication of the inherent mechanisms taking place', they
should be able to help Cadbury determine the optimum shear rate and
temperature to ensure that the chocolate crystallizes in form V.
Soft in the middle
Those of you with sufficient self-restraint to put aside a half-eaten selection box of
[P"A“

chocolates may have noticed, on reopening the box, that the pralines are
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generally the first to develop a bloom. The nut-based filling contains fat that is
liquid at room temperature and, as this fat migrates from the filling to the
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chocolate exterior, some of the cocoa butter in the chocolate moves in the
opposite direction. The appealing texture contrast between the inside and the
outside of the praline can then be lost as the liquid fat softens the chocolate
exterior and the cocoa butter hardens the soft centre. The liquid fat that moves to
the surface of the chocolate can also drag some of the cocoa butter with it, which
can re-crystallise at the surface and form a bloom.
These problems can be solved to a certain extent by adding a layer of a harder
fat (more saturated triglycerides) in between the outer chocolate layer and the
soft interior, or alternatively to the centre where it can act as a sponge for the
liquid fat.
Paul Smith and researchers at the Institute for Surface Technology in Stockholm,
Sweden, are working on the problem of fat bloom in soft-centered chocolates and
have developed a technique using radiolabel led ( 14C) triglycerides to study the
fat exchange process. They use differential scanning calorimetry (DSC) to
determine the polymorphic form of the triglyceride crystals and a 14
C radio
detector to follow the movement of the radiolabelled compounds. So far, they
have worked mainly on model fat systems, adding unlabelled fat crystals to an oil
saturated with a 14C labelled triglyceride and gently stirring the mixture. At regular
intervals they remove samples and measure how many of the 14
C triglycerides in
the liquid oil phase crystallize out. Preliminary results suggest that the exchange
rate between fat crystals and dissolved fat is relatively fast when the crystals are
small but slow when the crystals are large.
Smith is currently using atomic force microscopy (AFM) to study the changes in I
the structure of the surface of the chocolate that occur when bloom forms. The I
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diamond tip of the AFM probe moves over the surface of the chocolate and
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deflects as it passes over any undulations. Smith has chosen the technique over I
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the standard methods of scanning electron microscopy or optical microscopy
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which can generate artifacts, he says. Optical microscopy, explains Smith, is J
difficult to use with chocolate because of its dark Colour. In addition, the limit of
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resolution means that only the large crystals can be picked up. Smith has yet to
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release the results of the study but hopes to use them to help understand the I
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methods of bloom formation and to observe the early onset of bloom. There is
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clearly more work to be done on bloom but new techniques and R & D investment L
should lead the chocolate industry to its holy grail: a long-lasting chocolate that
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doesn't lose its gloss with storage. J
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 Emerging Technologies In Chocolate Industry

Intelligent Factories
Our first technology is the introduction of intelligent factories. Like many other sectors, the
commercial chocolate industry has not been left behind in artificial intelligence. Chocolate
companies fit new technologies in their systems to ensure their machinery is industry 4.0.
Industry 4.0 uses data from machines in the factory to exchange information over the internet.
This web communication and interconnection leads to precise decisions that are on time.
The system will upload data from the machinery to a secure server accessible for the
manufacturing process. Moreover, the process will assist in easier control and analysis of the
system as a whole and not individual sections

Belt Coating Technologies

There are emerging technologies in confectionary belt coating. These technologies provide
fast coating durations owing to an automatic recipe and controlled process. In addition,
modern technology offers even coating of chocolate surfaces and is also used to perfectly coat
uneven surfaces of other confectionaries.
The new belt coating systems also consume very little energy and are therefore ecological.
The air handling systems in the machine only circulate conditioned air. Also, they only add the
needed energy, thereby offering the minimum energy consumption.

Roller Refining and Conching

Roller refining and conching are major production methods being applied in Europe. The refiner
system employs a conch, 2-roll-refiner, 5-roll-refiner, and a mixer. First, the recipe is blended in
the mixer. Next, the 2-roll-refiner breaks crystals of sugar down. The use of the 2-roller-refiner is
a shift from using a sugar mill to grind the sugar. Third, the product is ground to the last size in
the 5-roller-refiner.
The conch is where most of the transformations take place. Here, the flakes coming from the
refiners are subjected to high amounts of energy, and they get treated
Ball milling
Ball milling involves milling and shearing the raw product at the same time. The process utilizes
steel balls that mix the chocolate cream homogeneously in the steel tanks. Ball milling is a
closed production that is hygienic and prevents unnecessary contamination. The challenge
posed by this system is the difficulty in removing moisture and unwanted vapors.
 THE CHOCOLATE INDUSTRY IN INDIA

The chocolate industry in India has a size of 20000 tones and is worth about Rs 400 crores. The
chocolate market has been growing by nearly 35 %. However there has been some slowdown in the
last two years.
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The chocolate market is predominantly urban with coverage of 95 %. The sales volume has L
decreased by 5% in the last year and the chocolate market had declined with the average I
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consumption coming down by 25% from 16000 tones to the current level of 125000 tones I
Chocolate consumption in India is extremely low. Per capita consumption is around 160gms in the I
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urban areas, compared to 8-10kg in the developed countries. In rural areas, it is even lower. J
Chocolates in India are consumed as indulgence and not as a snack food. A strong volume growth
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was witnessed in the early 90's when Cadbury repositioned chocolates from children to adult L
consumption. The biggest opportunity is likely to stem from increasing the consumer base. Leading
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players like Cadbury and Nestle have been attempting to do this by value for money offerings, which J
are affordable to the masses.
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Cadbury, a subsidiary of Cadbury Schweppes is a dominating player in the Indian chocolate L
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market with strong brands like Dairy Milk, Five Star, Perk, and Gems etc. Dairy milk is the . L
largest chocolate brand in India. Chocolates & Confectionery contribute to 75% of :j J¥
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Cadbury's turnover. Cadbury also has a strong brand Bourn vita in the malted health drink . J
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category, which accounts for 24% of turnover. The parent Cadbury Schweppes during 2003 ^ L
made an open offer for acquiring the 49% non-promoter holding in the company. It has . already
acquired over 90% of the equity and proposes to buy back the balance equity and v
delist the stock from Indian bourses.
Major Players 1
The major national players in the chocolate market in India are: I
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Cadbury India Ltd. 1
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Nestle India Ltd. I
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Gujarat Cooperative milk marketing federation limited (Amul)
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The combined chocolate and eclair market is dominated by two giants - Cadbury I
and nestle together they have 90 % share of the entire market. Amul holds a 5% I
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share and is present only in the molded chocolate segment of the market I
The CHOCLATE CHRONOLOGY I
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1956 - Cadbury milk chocolate launched L
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1957 - Cadbury 5 star L
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launched 1970 - Cadbury
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eclairs launched 1974 - Amul
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chocolate launched J
1986 - Cadbury milk chocolate L
re-launched as Cadburys J
dairy milk L
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1990 - Cadbury launches L
premium chocolate brand J
overtures LJ
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1991 - Nestle chocolates L
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launched. Cadbury
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counters nestles entry J
with all silk and unfurls
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huge consumer L
promotion campaign. ii
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Cadbury diary milk T'-'i

revamped. Nestle
 launched eclairs revamped and renamed diary milk eclairs 1995 - Cadbury 1
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launches perk, preempting nestles Kitkat Overtures is withdrawn I
1997 - Cadbury launches truffle 1
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1998 - Cadbury launches Gold, Picnic (all these launches took place in the I
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month of December i.e. Dec 96 and dec-97 to be more precise in keeping J
with the company policy of launching new brands at the new year eve.
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However the hit the market at the month of January only I
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AMUL: THE FLIGHT, WHICH FAILED TO TAKE OFF I
Gujarat cooperative milk marketing federation limited (Amul) I
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Amul is the third player in the chocolate market in India. The brand doesn‘t have L
any international lineage and is miniscule in terms of market share in chocolates J
and compared to the two other players Cadburys and nestle.
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Amul had an extremely focused positioning of a gift for someone you love albeit .*4
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not target to a single group however Amul failed to capitalize on it seemingly due L
to the following reasons. J
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a.Chocolates have never been Amul‘s main products and hence there was lack of J
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organizational commitment. The company has never really supported or pushed J
its chocolates. This reflects on the drastic cutback on advertisement expenditure L
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for its chocolates which has negatively affected its top of the mind awareness LJ
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level IP
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b.The company has enjoyed a high customer equity and pulls in butter and so it I
offered a very low retailer margin of 3.1 % as against the industry average of
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around 7-8 % Amul tried the same technique in chocolates too. However since it I
was neither leader nor enjoyed a customer pull like in butter the company got I
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very little support for its I
chocolates very J
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c.Amul chocolates have shown a have
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limited product differentiation and I
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not really given any important
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additional benefit to the J
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consumers. The product line also J
suffered in comparison to the L
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portfolios of the competitor L
Following are the major brands of I
Amul P
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□ Amul premium Milk L
□ Amul badam bar J
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□ Amul orange J
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□ Amul fruit and nut J
□ Amul crisp L
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 1
NESTLE: A BRIEF INTRODUCTION I
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Nestle India limited
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Nestle is a strong player in the I
chocolates world wide but it I
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entered the Indian market L
much later in (1991) than one I
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of its global competitor I
Cadbury. Nestle initial foray I
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into the Indian market was not I
very successful. The problem
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was in the formulation of the product. They were soft chocolates with high fat J
content, which were unsuitable to the Indian climate. Also the distribution focus
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has been on the larger cities and urban areas, which limited their customer base. .*4
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It was with the launch of kitkat that the company‘s strategy changed with respect L
to both product and distribution. It increased its distribution network to cover J
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small towns and interiors as well so as to increase the customer base .It also J
modified the formulation of Moulded chocolate to suit the Indian condition. The L
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company used three layers of foil packaging so that Kitkat could survive the L
summer heat. J
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Today nestle poses a formidable threat to Cadbury. Kitkat has captured a L
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sizeable chunk of the market within a short span of launch. Nestle, as in L
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20042005 has around 24 % market share with Kitkat alone accounting for 12% LL
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market share points. Nestle BarOne is another brand with a market share of 6%. 1
Nestle recently withdrew its Nestle bitter chocolate brand. The other brands of I
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nestle are nestle milky bar and nestle crunch.
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The advertising for the company in India is being handled by love lint‘s. Nestle I
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has been increasing its adverting figure the latest being in 2004 RS 25 crores. I
Nestle Business J
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Nestle has a presence in the following categories - Baby Food, Milk products, I
Beverages (Coffee, malted beverage), Chocolates & confectionery and other I
processed food products. Category wise turnover breakup and growth I
2005 Rs 2004 Rs I
% I
Contributi mn. mn.
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on to turnover % yoy J
Milk Products 43 8159 7375 10.6% L
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Beverages 29 5627 4903 14.8%
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Culinary Products 14 2764 2310 19.7% J
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Chocolate & Confectionery 14 2646 2179 21.5% J
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Total 19197 16768 14.5% L
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Beverages
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Beverages like coffee, tea and health drinks contribute to about 30% of Nestle‘s L
turnover. Beverage sales registered a 15% yoy growth during 2005. While about
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14% of sales come from domestic market, exports contribute to about 16% of
sales.
Nestle‘s Nescafe dominates the premium instant coffee segment. Nestle‘s other
coffee brand Sunrise has also been re-launched under the Nescafe franchise to
leverage on the existing equity of the brand. Nestle has focused on expanding the
domestic market through price cuts and product repositioning. However it has
been losing share in the domestic market, where it has a 37% market share. Milo,
a brown-malted beverage was launched in 2004. It has an estimated volume
share of about 3% in the malted food drink segment. Nestle has launched
noncarbonated cold beverages such as Nestea Iced Tea and Nescafe Frappe
during 2005.
Nestle is one of the largest coffee exporter in the country. Key export market is
Russia, besides Hungary, Poland and Taiwan. Nestle has received an award for
highest export of instant coffee and highest export of coffee to Russia and CIS
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The recent surge in the stock is partly driven by the announcement by the parent, L
Nestle SA, that it would use the creeping acquisition route to mop up another five
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per cent in Nestle India through open-market purchases. But improving the in
stock's valuation can also be traced to good financial performance in a market
starved of healthy earnings numbers. J
On a comeback trail L
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The resumption of its coffee exports to Russia and a favourable input price J
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environment pepped up Nestle India's net profit growth to 28 per cent in the first 1
nine months of 2004. Sales growth in this period was 10.4 per cent, with domestic I
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sales rising 9.8 per cent and export sales 13.8 per cent. In reality, the growth in
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sustainable net profits was higher than reported as the company took an I
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additional one-time charge of Rs 14.70 crore in the first nine months of 2004 for
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provisions against contingencies. J
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Unusually, low input prices may have contributed considerably to margin
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expansion. Continuing surpluses in global production have pushed both coffee I
Domestic 12107 10454 15.8 I
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Exports 2424 1918 26.4 I
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Total 14531 12372 17.5 J
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Pressure on prices J
Average realizations have dipped by 2.3% in case of domestic sales and by 3.7% L
in case of export sales p
Jan-Sep Jan-Sep % yoy .*4
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Average Realizations (Rs/kg) 2005 2004 L
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Domestic 115 117 -2.3 L
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Exports 181 188
-3.7 L
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Segment wise realization decline has been the highest in Beverages. Milk L
product and culinary product prices have been more or less maintained at J
previous year‘s level, while the company has been able to improve realizations on LJ
its chocolate & confectionery portfolio. L
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Category Realizations (Rs/kg) % yoy
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[P"A“

2005 2004

Milk & Nutrition Products 112 113 -1.4

Beverages 202 238 -15.1

Culinary Products 70 69 1.9

Chocolates & Confectionery 152 143 6.8

Beverages leading volume growth, value growth being led by culinary segment
Beverage sales have grown at a fast pace of 42% in the first 9 months of 2005
driven by rising exports and revised pricing strategy in domestic market. Growth
in value terms is however lower due to a sharp 15% decline in realizations.
Culinary product sales grew by 20% in volumes and 22% in value. Volume
growth in chocolate & confectionery segment was 12%, which was higher then
market leader and average industry growth, signifying that the company has
been able to improve market share in the category.
Growth
Turnover
Contribution by
Volume Value Volume Value Realization
s

47 43 15 13 -1.4
Milk & Nutrition
Products

Beverages 18 29 42 21 -15.1

Culinary Products 24 14 20 22 1.9

11 14 12 20 6.8
Chocolates &
Confectionery
Milk products, which account for a significant 43% of Nestle‘s revenues, have
grown at steady 15% in volume terms. Turnover contribution of beverages is
29%, while culinary products and chocolate & confectionery each contribute 14%
to Nestle Rs14.5bn turnover in the first 9 months of 2005...

Profit Margin
Operating margins have improved from 18.1% to 18.5% in 2005 driven by lower
material cost. Raw material cost declined from 44.4% of sales in F12/04 to 43.1%
of sales in F12/05.
Operating Margins 2005 2004

EBITDA 18.5 18.1

Adjusted EBITDA 18.5 17.7

Improved working capital and asset management

The company has been able to improve working capital management. Operating
cash flow has registered a CAGR of 15% in the last 4 years. Fixed asset turnover
has also gradually improved over the last 3 years. Net indebtedness (total
financial liabilities net of liquid assets) has declined from a high 2.5x in 2002 to
0.3z currently.
2002 2003 2004
2005-
Sep
Operating Cash Flow 1743 2391 2420 1966

7.1 9.6 14.7 18.1

Rotation of Operating Net Working
Capital
Rotation of Fixed Assets 4.0 3.9 4.2 4.7

Net Indebtedness 2.5 0.9 0.3

1.0
"India Infoline Ltd (IIL) and India Infoline Securities Ltd (I SL) do r
 1
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CADBURY: THE LEADER L
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Cadbury, a subsidiary of Cadbury Schweppes is a dominating player in the Indian L
p
chocolate market with strong brands like Dairy Milk, Five Star, Perk, etc. Dairy
.*4
milk is in fact the largest chocolate brand in India. Cadbury India now stands only J
L
second to Cadbury UK in sales of Dairy Milk. The company is pushing the gifting J
segment, through occasion-linked gifts. Chocolates contribute to 64%of L
J
Cadbury‘s turnover. Confectionery sales‘, accounting for 12% of turnover, is L
contributed largely by Eclairs. The company attempted expanding its J
L
confectionery product portfolio, with launch of sugar-based confectionery Googly J
and Frutus, without much success. Cadbury also has a strong brand Bourn vita in LJ
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the malted health drink category, which accounts for 24% of turnover. IP
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 Chocolate consumption: in India is extremely low. Per capita consumption is
around 160gms in the urban areas, compared to 8-10kg in the developed
countries. In rural areas, it is even lower. Chocolates in India are consumed as
indulgence and not as a snack food. A strong volume growth was witnessed in
the early 90's when Cadbury repositioned chocolates from children to adult
consumption. The biggest opportunity is likely to stem from increasing the
consumer base.

Competition: Cadbury continues to dominate the chocolate market with about

69% market share. Nestle has emerged as a significant competitor with about
20% market share. Key competition in the chocolate segment is from cooperative
owned Amul and Campco, besides a host of unorganized sector players. There
exists an even larger unorganized market in the confectionery segment. Cadbury
holds 4% of the market share in this segment. Leading national players are
Nutrine, Parry's, Ravalgaon, Candico, Parle‘s, Joyco India and Perfetti. The
MNC‘s such as Joyco and Perfetti have aggressively expanded their presence in
the country in the last few years.

Malted food drinks: Category

consists of white drinks and
brown drinks. White drinks
account for almost twothirds of

Lv. °s
the 82,000-ton market. South and East are large markets for food drinks,
accounting for the largest proportion of all India sales.

Cadbury‘s Bourn vita is the leader in the brown drink (cocoa based) segment. In
the white
drink segment, SmithKline‘s Horlicks is the leader. Other significant players are
Heinz (Complan), Nestle (Milo), GCMMF (Nutramul) and other SmithKline brands
(Boost, Maltova, Viva). Cadbury holds 14% market share in food drinks segment.

Performance: Despite tough market conditions & increased competition Cadbury

managed to record a double digit (11%) top line growth in 2004. The company
achieved a volume growth of 5.2%. This was achieved through innovative
marketing strategies and focused advertising campaigns for flagship brand Dairy
Milk... Net profit rose sharply by 41.8% to Rs520mn. Reduced material and
energy costs and tighter control over working capital and capital expenditure
enabled the company to improve profitability. Company added 8mn new
consumers and saw its outlets grow to 4.5 lakhs and consumers to 60mn.

Cadbury’s Ad Campaign

Kuch meetha ho jaye suggests Cadbury India, its brand

ambassador Amitabh Bachchan smiling down the
hoardings lined along Mumbai's Marine Drive right down to the company's 1
corporate head office at Mahalakshmi. While the chocolate major is waiting for I
I
Diwali to see a turnaround in its business after the worms controversy, at the
1
moment it's all about driving growth for the category which has seen a decline I
I
since the first quarter of this year.
I
Being the market leader in chocolates with a 70 per J
cent share, the company has attempted to stretch the boundaries within
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chocolate confectionery. It has also been adventurous in unleashing a brand new I
I
category within chocolate early this year. Introducing the concept of sweet
I
snacking, it launched Cadbury Bytes in the south with the positioning 'Snacking I
I
ka meetha funda.' The product is a crunchy wafer pillow with a choco-cream
J
centre and is being rolled out nationally. L
Explaining the need to introduce this new category, Bharat Puri, Managing
J
L
Director, Cadbury India, says, "While we were sure of our core competencies, p
there was need for innovation to deliver double-digit growth. What we found was .*4
J
that we were under-represented in the area of snacking on the go and that there L
was a need for a light crunchy snack." While entry into salted snacks was ruled J
L
out, sweet snacks were the obvious choice, and Bytes is unique to the chocolate J
major's Indian portfolio. L
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In spite of the new categories being explored by Cadbury, its star brand remains L
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Cadbury Dairy Milk (CDM), which continues to corner almost 30 per cent of the
LJ
chocolate market. It is followed by brands such as 5-star, Perk and Gems. Each L
IP
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of these has been revamped over the years to generate excitement for the
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category. For instance, recently Perk was rejuvenated as a crunchier wafer while I
CDM came up as a white-and-brown variant in the market. I
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"The chocolates category thrives on excitement. It's all about giving the consumer I
a choice and taste which they enjoy," adds Puri. For instance, in beverages, in I
1.
spite of its malted food brand Bourn vita, Cadbury decided to introduce a milk I
additive brand such as Delite, just to give its consumers the real taste of J
L
chocolate. Delite has added flavours such as strawberry and mango and is not
I
expected to encroach upon Bourn vita‘s shares. According to Puri, "There are still I
a large section of people who do not add anything to milk. This will apply to I
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children for whom milk is a problem and having an additive will make it a J
pleasurable experience." L
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Making changes in its distribution network, Cadbury split its sales and marketing L
team between its mass (confectionery) and core brands last year. "Chocolates J
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needed to get retailed at larger and better outlets while all the products below Rs
I
3 needed a different distribution network," says Puri. Today Cadbury's distribution
P
network reaches out to six lakhs outlets each for its confectionery and chocolate J
brands.
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JL
Cadbury follows
LJ
small packs strategy
JL
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Small has indeed JL
JJ
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proved to be beautiful LL
for Cadbury. The J
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company, after finding JP
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[r~A_ ■°°o <-°o“ “i —'<&--<&“ =i*. =ai = v * =

exceptional success in the launch of small packs of Perk chocolate, has now
launched Picnic in small packs of 26 Gms. priced at Rs 10. The 43-gm packs are
still available and are priced at Rs 15.
Cadbury has embarked on a strategy which involves increased consumption of its
products through enhanced reach, affordability and visibility, which it feels can
confectionery segment, largely contributed by Eclairs. Other confectionery brands
such as Gollum, Frutus, Nice Cream, etc launched in the last two years did not
receive a good market response and the company has decided to minimize focus
on those brands. Eclairs was re-launched with unique packaging in cartons during
2001.

Food drinks (25% of turnover)

Cadbury‘s Bourn vita is the leading brand in the brown drinks segment of milk/
malted food products. Overall share in the malted food drinks market is estimated
at 15%. Brown drinks earlier positioned as taste enhancers were losing market to
white drinks during the last few years. Cadbury re-launched Bourn vita with a new
formulation and advertising campaign positioning it on the health benefit platform
to compete with white drinks. The brand was re-launched in the South - the largest
food drink market in the country, during 2003. Bourn vita sales registered a 12%
growth in value terms in 2001 to Rs, contributing 24% to total turnover.

Cadbury’s other products include Cadbury’s Drinking Chocolate and Cadbury’s

Cocoa powder. These account for only 1 % of Cadbury‘s turnover.

CADBURYS FAILURES:
How Cadburys positioning went 1
haywire with 'gems'
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Gems present an unusual case of 1
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how a textbook-perfect, ultra-sharp
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positioning can actually become a I
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disadvantage L
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At 34, Gems is one brand in the Cadbury‘s portfolio that refuses to grow up. Of
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course, that is not such a liability now that children play a key role as consumers. I
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What it does mean, however, is that Cadbury has to constantly work at keeping I
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its ageing brand forever young. How has it managed so far? Gems was a
J
sluggish performer in the late nineties and its market share slid dramatically. L
Now, the brand appears to be regaining some of its toddler energy and a
J
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campaign that is scheduled to break in 2003 is expected to help further. p
.*4
Gems present an unusual case of how a textbook-perfect ultra-sharp positioning J
can actually become a disadvantage. Of course, Cadbury doesn‘t consider this a L
J
problem yet. Cadbury actually consider Gems one of our power or advantage L
brands simply because it was specifically developed for the kids segment. And it J
L
has no competition at all in India. J
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Cadbury‘s problem is that Gems — which is technically called a -sugar-pannedll J
confectionery item that comes in colourful little buttons — has traditionally been LJ
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so sharply targeted at children below ten years that it did not lend itself readily to IP
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brand stretch as its target audience grew older. Even as Cadbury successfully I
extended its appeal from children to adults from 1996 onwards for its regular I
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chocolates, the company learnt a bitter lesson when it tried doing the same with
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Gems. I
1.
Market Segmentation I
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This can be done in two ways, product forms and customer based L
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With respect to product forms I
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There are four major segments in the chocolate industry I
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A. Moulded chocolate segment L
This segment constitutes 50 % of the total market Cadbury diary milk Cadbury s J
L
flagship brand has 50 % of this segment market .To position CDM in this segment J
Cadbury used the traditional demographic variables of age, socio economic L
groups and usage intensity. CDM was positioned as a product that elders brought I
for their children and recently it has shifted this positioning and has not only P
J
included parental love but has said that it is gift for someone you love and that L
can be anybody not only parents and children Cadbury has associated itself to J
L
enduring and emotional values of love sharing and affection and reward J
considering that CDM acts as a trendsetter for all the brands in this segment. L
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Amul tried to be different and at its initial product launch as Cadbury had targeted L
children they had targeted teenagers but unfortunately they were unsuccessful. I
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The Cadbury brands in this segment are Cadbury diary milk, Cadbury fruit and 1
nut and Cadbury temptation CDM is the leading brand here and others act as an I
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endorser of the brand here.
1
From around 1993 this segment began showing signs of maturity. This was I
I
hurting CDM. This led to Cadbury attempting to rejuvenate the segment. They I
changed their core customer from children to that of the universe, which means J
L
from children to adults this attempts to redesign the market to enticing all age I
groups, helped bring about changes in this segment. Today the notion associated I
I
with the consumption of chocolates is that of casual ness instead of just product I
consumption. Today this segment grows at 40 % per annum and is likely to I
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remain an important segment for further growth. J
B. Count line Bars Segment L
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This segment forms 33 % of the chocolate market. This segment is mostly L
p
targeted to the teenagers. Major Cadbury brands are 5 star, break, crisp, and
.*4
double decker, perk. 5 star in doing well here about 50 % of the segment while J
L
the rest of the brands acts as endorser nestle has a minor presence in this J
product category with bar one. L
J
Growth of a sub segment chocolate wafers: Chocolate wafers are the new L
products being offered by the chocolate companies today in order to expand the J
L
market. In 1995 Cadbury and nestle launched perk and Kit Kat respectively. J
These were wafer-enrobed chocolates in a new context and a different benefit LJ
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offering. Both chocolates had a snack positioning. Perk offered the anytime IP
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anywhere snack proposition thodi se pet puja whereas Kitkat tried to promote
snacking through have a break have a Kitkat the growth rate of this segment is 15
%- 20 % annually and is estimated to be worth over Rs 100 crores making it a
very lucrative segment.
Internationally confectionery products like wafer chocolates have a very high
tonnage and have a much bigger future than plain chocolates. Market research
and succeeds of these two brands suggest that Indian consumers and ready to
accept wafer chocolate proposition. This conviction of both Cadbury and nestle
towards this segment can be gauged from the fact that both brands are seeking
unprecedented allocation of funds to the tune of 60 to 70 % of the total
advertisement budget of both companies and chocolates.
A new entrant in this category is Cadburys Picnic it is three layered
chocolatecoated wafer bar with dry fruits and caramel and crispies priced at Rs
14 for 40gm bar. Picnic will be used not only to expand the functional segment of
the market but also to counter kit Kat and other important bars (Snickers, Mars,
and Lion) as against perk which is positioned as a light snack picnic is positioned
as a heavy near meal substitute. In keeping with the company new strategy of
expanding the market this product has been launched to develop the snacking
area in the chocolate market.

C. Choco-panned segments

This segment forms 4 % of the total market and Cadbury has 100 % of the
market in this segment. The major brands are nutties caramels butterscotch band
tiffins. All of these brands have been used by Cadbury to drive variety induce
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gifting practices and serve to some specific taste preferences. Cadbury doesn‘t 0 ocP0
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advertise these brands they have been used as flanker products.
A
The opportunity for growth in this segment is high with the imminent entry of 1
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multinationals like mars and Hershey‘s. This is also likely to pose a threat to I
Cadbury what with its complacency. 1
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D. Sugar panned segment I
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This segment forms 15 % of the total and Cadbury has about 98% of this .Its I
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major brands being gems and eclairs. Eclairs has been used strategically to L
foster chocolate consumption among children as well as adults by offering ' guilt .
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free eat no more than a bite full at a convenient price point (65% of eclairs eaters L
are from the household earnings less than RS 4000 per month) 1.
1.
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E. A gem is still Cadburys primary tool to protect its franchise in the child
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segment. It‘s been previously associated in its commercial with the J
international spy character James bond. Around 1995 gems were L
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repositioned to broad base its appeal from 3 to 6 yr. olds to teenagers as well. oWo

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However this failed due the product form which has become deep-rooted with
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kids and hence the company has reverted back to its target segment of kids I
with a new offering of choco gems I
Market Segmentation with respect to the consumer buying power
1
These are I
• High-income customers (price greater than Rs 25 for 40gm) who will go in for I
1
premium chocolate brands. I
• Middle income customers (Price between Rs 10-25) who are price sensitive I
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• Children who are mostly price driven and will consume more of toffees in the J
price range of Re 0.50 - Re 1 L
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PSYCHOGRAPHICS AND DEMOGRAPHICS I
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This is attempted in terms of the consumers J
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a. High income customers J
It is estimated the age group buying the chocolates would be 232 on wards the L
p
income level is estimated to be Rs 8000 per month. The customer are mostly
.*4
urban and are mostly professional (engineers doctors executives) J
L
The psychographic profile: They can either be individuals indulging themselves or J
they could be indulging their children. They are inner-directed people who form L
J
their own values and norms and believe in not adhering to the social norms. They L
are some what occasion driven in their buying behavior J
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b. Middle income customers J
LJ
The age group of this segment will be 15 plus. The income level is estimated to L
IP
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be around Rs 5000 a month. The consumers can be urban semi urban and is L
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currently spreading to rural areas
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The Psychographic profile: They are likely to be variety seeking in their behavior. 0
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They are self expressing by nature and inner directed to the extent. They like to A
indulge themselves but with a little bit of cushion support. I
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c. Children I
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The upper age limit is estimated to be 12 yrs. They mostly purchase their L
chocolates with their pocket money or get as gifts from elders. The consumers
J
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Product Positioning I
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0®°°0

Positioning:-In marketing, positioning has come to mean the process by which

L
marketers try to create an image or identity in the minds of their target market for J
its product, brand, or organization. It is the 'relative competitive comparison' their
L
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product occupies in a given market as perceived by the target market. L
J
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The differentiation planks used in the Indian chocolate market are JJ
LL
Product quality (levels of fat /cocoa) e.g. Kit Kat though priced higher then perk JJ
LL
sells more due to better quality. J
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Chocolate with additives likes fruit and nut. J
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Packaging: A chocolate being predominantly an impulse driven purchase J

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category, packaging is an important mode of attracting attention at the display 1
counter I
• International heritage of its product I
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• Functional attributes like the energy bar I
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• As a gift item
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• As a snack the positioning of a chocolate as a gift item is receding now it more L
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itself being positioned as a snack or a quick meal substitute I
Size small sizes to increase trial rates this is gaining tremendous today since the I
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companies in a bid to offer chocolates at affordable prices are reducing their I
packing size. I
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Shape (e.g. chocolates in the shape of toys targeted at children) for Christmas L
season chocolates were shaped as Mickey mouse and this proved very J
L
successful for the season also the shape has to be such the product is worth
p
sharing this has been attributed as a major season for the success of third launch .*4
J
of kit Kat. L
J
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.Evaluation of the Advertising strategy J
Marketing L
strategy J
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Right Wrong J
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CDM L
IP
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Five Star L
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 Right Perk Amul Chocolates
Picnic
Advertising
Strategy Cadbury‘s
Temptation
Wrong Cadbury‘s All Silk Bar-One
Gems

Product market boundary

For deciding the product market boundary the [product market will be defined as
the set of those products which at as substitutes to satisfy the specific needs that
are already identified of the customer. Further for defining the product market the
consumer judgment of similarity

And substitution will be used which are going to be more reliable then the
categories defined by the industry classification. To refine the categories further
only those products that fall in the processed food category are considered the
following

• Ice cream - Ice cream is eaten as a desert or milk based snack. People also
consume it to feel themselves as a part of upper strata of society (this is the
attitudinal aspect associated with eating out in famous parlors like Basin
Robbins). It satisfies the need for food social belonging and hence competes
with chocolates for money spend by the consumers to satisfy the needs.
[r~A_ ■°°o <-°o“ “i—'<&--<&“ =i*. =ai = v * =

Biscuits with mew variant of biscuits like chocolate cream elaichi cream puffed
biscuits launched in India biscuits are increasingly becoming snack budget of
the consumers further glucose biscuit are positioned as a source for energy
same as some chocolates like 5 star which are positioned as energy bars,
hence they compete with each other directly.
Wafer chips and packaged nankeens: with their high visibly easy availability
and aggressive advertising by multinationals like Pepsi chips are competing
with snacks like wafer chocolate which are purchased by consumer on impulse
basis.
Fast food: fast food consists of western food like pizzas burgers and traditional
Indian food like samosa and pakoras. Many chocolate marketing companies
realized that if they want to position chocolates as snacks they would have to
compete with these fat foods directly through their advertisement.
Sweet / Pans: sweets and sweet pan consumed after dinner as a desert
directly competed with chocolates, which is also eaten many times after eight.
Sugar based confectionery chocolate eclairs directly compete with many sugar
based confectioneries particularly toffees in Indian market many of these
toffees like pan pasand coffee bite melody have become popular and eroded
the market share of chocolate eclairs from time to time.
Soft drinks with the advent of fountain machines soft drinks have become
easily accessible and convenient for consumption. This has therefore resulted
in soft drinks being increasingly perceived as a n impulse purchase item with
this occurrence chocolate have come in direct competition with cold drinks.
Chewing gum this segment is also experiencing a rapid growth with its worth
about Rs 150 crore. There is a virtual explosion of the chewing gum in the re1
segment and it cannibalizes the chocolates in the lower price segment.

-•t— — V -
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The product market boundary can be illustrated as follows:

Foods Snacks Fast Food

Desserts Soft Drinks Ice

cream

Moulded Count Line

Chocolate
Bars

Consumer Buying Behaviour

The product comes under Fast Moving consumer Foods (FMCG) and the product
is generally purchased as a convenience good. The general characteristics of this
product are:
It is a low involvement product, but there are significant differences in various
brands in market. The following matrix may help in studying the behavior of
consumer for this particular product.
In this product, consumers are often found to do a lot of brand switching. Although
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{ The consumer expects some benefits from chocolates, but he chooses a brand
without much evaluation, and evaluates it during consumption only. But next time,
quite often he may reach for another brand out of boredom or a wish for a
different taste. Brand switching occurs for the sake of variety rather than
dissatisfaction.
ConsumerBuying Behavior

High Involvement Low Involvement

Significance Difference Variety seeking behavior

Complex buying behavior
in Brands

Dissonance reducing Habitual buying behavior

Few Difference in Brands
buying behavior

Cadbury has 70% of market share, and hence this variety-seeking behavior had
not affected its sales negatively. This had been possible due to various factors
like lack of strong competition. However, with the new entrants in the market,
there has been stiff competition. There are few segments like water chocolates
segment where company faces strong competition from Nestle, the second major
player in the market. In these segments company should try to increase brand
loyalty for its brands. This increased consumer loyalty will also act as deterrent
towards development of strong competitions in other segments. Further to
increase the overall size of market, company should try to increase consumers
involvement with chocolates. (Company can use consumer involvement achieved
by soft drink marketers in USA as a benchmark. In USA, consumer involvement in
soft drinks is much higher than other beverages like coffee).

INDUSTRY STRUCTURE AND DYNAMICS

With Cadbury cornering almost 65 % market share and nestle getting another 24 I
% industry has all the characteristics of a duple. This industry is characterized by I
I
a near total absence of unorganized sector as compared to its substitutes like ice
I
creams chips etc. Various internationally famous brands such as mars Hershey I
1.
etc are either imported in a very small quantity or are smuggled to avoid high
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import duty. Other chocolates like Toblerone Twix snickers are being imported J
through California foods in India. These help in expanding the premium imported
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segment of the chocolate market. As these brands have miniscule volumes and
I
high price they are not giving any serious competition to Indian brands. I
I
The market has been stable over a long period of time with two major companies J
Cadbury and nestle occupying the major share in the market. . However with the L
J
threat of entry of new competitors and also the broad basing of the market the L
repositioning of the entire chocolate eating concept we foresee a lot of action in J
L
the market. This is already seen in the war of perk and Kitkat, which had very
I
nearly taken on the intensity of cola wars. Nestle has started threatening the long
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enjoyed lead of Cadbury and Cadbury is all set to defend its territory. J
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 I
Market Share I
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□ Cadbury □ Nestle □ Amul □ Others □*
4
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There have not been many changes in the competitive strategies, Marketing J
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practices product modification of different brands till 1994. All major brands have J
been repositioned once or twice only. But with the maturing market the new
L
J
marketing strategy is to target new breeds of consumer the consenting adult L
rather then the indulged child. In keeping with this market redefinition a lot of in
brands have been repositioned onto a new plank the most successful plank being
J
Cadbury diary milk, which led to an increase in 20 % of consumption.
L
«

Till now frequency of the new product development was also very low but after J
JL
the launch of Kitkat this industry is experiencing a lot of action. Cadbury came JL
L
ii
II
with perk in response to Kitkat in a very share time frame. Cadbury had also
I
launched relish a brand in count line bar segment there has not been significant 0 ocP0
n

II
technological development in India in chocolate. But to create excitement and
A
growth in the category Cadbury has launched many new products, which led to 1
I
change in consumer taste and preferences. These products are based on strong
I
international R &D capability of the chocolate majors. I

Kit Kat is manufactured in a newly commissioned plant in go and due to 0 °D0°Q

I
cumulative production volume nestle is not likely to enjoy the benefits of learning I
curve. But apart from relative cost advantage Cadbury has pursued vigorously I.
I
product differentiation strategy. Apart from manufacturing products suitable for I
Indian taste and distribution Cadbury has established strong brand equity and J
L
brand loyalty among Indian consumers. I
1.
Seasonal factors like weather festival etc do affect the demand for chocolates. In
I
summers due to lack of cold chain at all places chocolate are not able to bear the I
I
heat and humid condition. Thus retailer do not stock them this shows high
I
bargaining power of the retailers. J
L
Chocolates have emerged as a gift item to be used during traditional Indian
IP
festivals like deepawali and New Year. Companies like Cadbury come with
J
frc Po

special gift packs thus demands shoot up during festival season Demand is also
L
sensitive to economic factors like recession in economy or substantial increase in JJ
L
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price of chocolates. However in the year 1997, chocolate manufacturers were
spending only 80 % of the festival budget as compared to the previous year. LJ
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Advertisements spent across corporate India were pruned in the last festival I
seasons which led to a fall in demand. Companies are hopeful of being able to I
I
reverse the trend for the current year. I
Entry barriers I
1.
I
• Brand image J
L
• Requirement of specialized machinery
I
• Lack of raw materials (cocoa) in sufficient quantities I
I
• Government regulation in the form of excise duties I
• Need of heterogeneous and wide distribution (being an impulse purchase J
L
category) J
Exit barriers L
J
• Government regulation L
• Specialized assets like machinery cold chains etc I
P
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Key Success Factors:

• Research and Development: JJ

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With increasing competition in the industry R&D may become an important and JJ
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critical factor for success in newly emerging segments of the market. Indian J
ii
players like Amul are not able to launch chocolates in fast growing count line L
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wafers segment of the market, as they don‘t have appropriate technology. But still
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moulded chocolates, which constitute 62 % of the market, do not require any

special R&D.

• Price

Price can be used as a basis for competition in the industry. In 1995 perk was
launched at a price Rs 4 less than Kitkat was. This brand was specially produced
for Indian markets and successfully competed with internationally famous Kitkat.
But low on price without brand equity may not really help as Amul and various
regional brands are priced lower then category leaders without having much
success.

• International Lineage

The international image associated with chocolates acts as a propeller for the
sales considering the significance of user imagery and aspirational aspect of this
product category. The lead can be attributed to the international lineage despite
the higher price compared to the price of perk However this has to be taken into
consonance with the price factor considering that the Indian consumer is price
sensitive.
• Product Quality

Product quality per se may not be critical success factor. But many instances
prove that poor product supported with high decibel advertising is; likely to be a
failure Cadbury has constantly improved the product quality along with rest of the
marketing mix as a tool to create growth in the category.
[P"A“

I
L
{ Chocolate being an impulse purchase wide and heterogeneous distribution
channels are important so that the consumers have it within arms length of desire.
In India distribution of chocolates gain special significance due to very hot
weather condition during summer months

• Availability of capital

Chocolate manufacturing is a capital-intensive business and clear lack of

unorganized sector underlines the importance of capital availability.

• Quickness of response

With the increasing competition fast response is assuming significance. For

example perk was launched 15 days of the launch of Kitkat to counter the threat.

Product Life Cycle

Market research is a process designed to link managers to consumers through
information. It is used to identify opportunities and make better-informed
decisions about products, which have future market potential.

Market research has revealed that Chocolate play more of a functional role than
one of pure indulgence: they are often a meal substitute. Research also shows
that successful snack brands in the confectionery category tend to have more
'foody' values and often contain ingredients such as cereal, wafer, biscuits,
peanuts and fruit to break up the chocolate delivery.
Cadbury's philosophy is to continue as a driving force in the confectionery market,
I
and thus constantly analyze its offerings for consumers. The core objective of 0 ocP0
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Cadbury's innovation programme is to generate incremental volume for the
A
company and achieve the vision of market leadership in every segment in which it 1
I
operates. The role of innovation is critical as it allows Cadbury to develop ahead
I
of its competitors in those areas of the market, which are new or growing. I

0 °D0°Q

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1. Product Development I
I.
Cadbury set out two objectives for the development of Fuse: I
I
1. to grow the market for chocolate confectionery; J
L
2. To increase Cadbury's share of the snacking sector. I
1.
The concept was developed after market research identified the growth of I
snacking and a definite gap in the market for a chocolatier snack. A number of I
I
ingredients were devised and tested following a survey which questioned I
consumers about their snacking habits and preferences. A research and J
L
development team was then asked to develop a number of product recipes which
IP
addressed the needs expressed by consumers.
J
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Not all products successfully emerge from the product development phase.
L
Research and development involves combining various ingredients to develop JJ
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potential new products. Considerable development time is spent on all brands of
Cadbury‘s, carefully engineering the ingredients in order to deliver the right LJ
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balance of chocolate, food elements and texture. More than 250 ingredients were
I
tried and tested in various combinations before the recipe was finalized. 0
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Any new product in the snacking sector must establish points of difference from A
existing products within the market - thus creating a unique selling proposition I
I
(USP) i.e. a product with unique appeal which is not shared by any of its I
competitors. Whereas other confectionery snacking products focus primarily upon JI
L
ingredients, with chocolate used only to coat the bar, the product developers J
decided to use Cadbury's chocolate to ''fuse'' together a number of popular L
I
snacking ingredients such as raisins, peanuts, crisp cereal and fudge pieces. I
I

2. Early Consumer Testing

III
.*4
As products are developed, they must be tested to ensure that consumers would
I
be willing to buy them. As approximately 85% of all new products launched into I
I
the grocery and allied trade sectors fail in their first year, extensive research helps
I
to reduce the risk of launching a new product into an already competitive market. 1
The brands go through two extensive 'in home placement' tests. The results of III
frc Po

these tests were multiplied into repeat purchase and purchase frequency figures I
I
to allow. Cadbury to anticipate the volume of bars required for the launch of any J
new brands. L
II
A key element of any new product launch is the development of a strong brand I
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II
I
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name
The design brief for the brands require two objectives:
1
1. To communicate the dynamic and slightly wacky personality of the new
I
I
product and create interest at the point of purchase (i.e. in store) 1
2. To bring the brand name to life by communicating the fusion of Cadbury‘s I
I
chocolate with the snacking ingredients. I
3. Pack Design J
L
Packaging enables a manufacturer to convey both the tangible and intangible I
I
attributes of a product. The packaging for Cadbury's new product sought to
I
position it as a unique, exciting and delicious chocolate snack, which would stand I
I
out from its competitors. It was important to emphasize the qualities and appeal I
whilst at the same time reinforcing that it was a Cadbury brand. J
L
The packaging achieved impact by using bright, fiery colours for the product J
name and contrasting them against the deep and instantly recognizable 'Cadbury L
p
purple', which communicated the manufacturer's heritage. The colours were also .*4
used in a gun powder style to suggest an explosive taste. The vibrancy of the J
L
design aimed to differentiate it from other products in the sector so that it would J
have an immediate point-of-sale impact both on-shelf and in store display units. L
J
Three different packaging formats are developed in order to maximize the various L
multi-purchase opportunities available. The key pack size was the single bar,
J
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designed to entice trial and to encourage repeat purchase. The 'treat size' and the J
LJ
multi-packs were aimed at families. L
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[P"A“

Brand name: Like packaging, brand names play a critical role in the success of a
il&
product, by helping to create a product's 'personality'. The new product aimed to
have broad appeal to 16-34 year olds, although it was primarily targeted at 16-24
A

year olds. The name of the new brand is chosen to communicate the idea. The
logo is also in association with the brands name.

4. Further Consumer Testing

Testing is vital throughout the entire product development process. It helps to
provide valuable information that can be used to fine-tune the product and
minimize many of the launch risks.
In research, brands are tested for texture, 'interesting eat' and combination of
ingredients, than its competitors and each carry a rating.
5. The launch strategy

The launch strategy of any new product is critical. Cadbury has two targets for its
products - trade customers who stock the product and consumers who buy it. In
recent years, product launching has become an art, which can make or break a
product. A successful launch makes potential customers aware of the new
product and keen to try it.

Before consumers could try the product, however, it was important for Cadbury to
gain the support of its trade customers. Retailers had to view it as helpful in
encouraging customers to visit their shops. If the product had failed to interest
retailers and distributors, the costs of investment would not have been met and
they would not have stocked the product.
Cadbury conducts one-to-one briefings with over 70 key trade customers. This MUM

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helped Cadbury build awareness and commitment to the launch and obtain
JiiiJib
significant orders for in-store displays and merchandising ahead of the launch oJJJ
date. The trade commitment was reflected in high levels of display support in Ul
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store during the launch. Q
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Traditionally, new confectionery products are initially launched in one region of the
III
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country, in order to gauge the product's success, before moving on to other 111
regions over a period of time. Time Out and Wispa Gold, for example, were M
J1L1
launched in this way. jjyi
There were certain key requirements to the co-ordination of the launch: M
Secrecy had to be paramount!
WW4

Marketers who had identified the gap in the market had to work closely with
individuals from research and development as well as other external agencies.
J*L
Manufacturing operations, in conjunction with marketing and finance, had to
evaluate a new factory investment for Board approval.
L
JJIJ
Having a catchy 'hook' for a new launch helps to make consumers notice the
product. Cadbury selects a date and then christens that day as that brands day.
L
JM
JM
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This involved tight management of stock distribution, with more than 40 million If!
bars being moved from Cadbury depots into the trade only a few days prior to the
launch date.
Press releases were tailored to specific audiences. In each case, a strict embargo D °o°oO0oo°

route
JJM
was imposed to ensure that the impact of the day was not diluted. The only
exceptions were briefings with The Grocer, and Marketing (trade publications) and
the media, which reviewed the product in its business pages. Public relations
(PR) support was substantial. It told the story of the brand being launched
explained that it had taken so many years to develop, the investment incurred,
the plant in which it is being manufactured and the advertising cost involved. The
results of the TV campaign and PR campaign were so successful that Cadbury
was under pressure to meet repeat orders post-launch!

6. Post-launch results

After a new product launch, it is important to analyze whether the product has
managed to meet its launch objectives. Cadbury tries to find out as to how much
increase has their been in the percentage of its market share with the launch of
the new product.
One way of evaluating the effectiveness of advertising and promotional
campaigns is to ask market research volunteers to identify advertisements using
prompts in a recall test. The Fuse launch had created massive awareness of the
new brand; achieving greater prompted awareness Cadbury's competitors
reacted to the success of Fuse by increasing their own new product activity.
Control Institutions Facilitating Institution
Objectives

The major objective of the study is as follows: I

I
□ To study the Marketing Segmentation of Amul, Nestle, and Cadbury. 1.
I
■ To understand the Consumer Buying Behavior of Chocolate. J
■ To study the Industry Structure and Dynamics
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 I
I
RESEARCH METHODOLOGY I
I
I
EXPLORATORY RESEARCH
1.
Exploratory research is most commonly unstructured, informal research I
J
that is undertaken to gain background information about the general nature of the L
research problem.
I
I
Exploratory research is usually conducted when the researcher does not know
I
much about the problem and needs additional information or desires new or more I
J
recent information L
Exploratory research is used in a number of situations: J
L
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• To gain background information L
• To define terms I
• To clarify problems and hypotheses P
J
To establish research priorities A variety of methods are available to conduct L
exploratory research: J
L
Secondary Data Analysis J
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Experience Surveys J
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P
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Case Analysis I
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Focus Groups II
A
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Projective I
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Techniques I
J
The L
marketing I
I
technique of I
different
players in the #4
DESIGNS, TECHNIQUE, AND DATA COLLECTION METHOD
chocolate III
industry is Non-probability sampling was resorted to and the methods used
Sample Design: I
I
unknown for sampling and Judgment sampling.
is Convenience I
me. So, I
I
Data Collection: Data was collected from Secondary data. Secondary data was
through
III
soured from various published sources which include magazines like Business
Exploratory I
India and Business
research I World. Newspapers like Brand Equity, Brand Wagon and The I
o^o

I|
Times
want of
to India
find were also used. Annual Report of Cadburys and Nestle were also
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referred.
out the
marketing
technique of
different
players and
make
comparative
analysis
between the
techniques
[P"A“

DATA COLLECTION METHOD

A
|la% l|JW

!L > PRIMARY SOURCES J

(a) From retailers, dealers, and shops.

(b) From general public

> SECONDARY DATA

(a) From the company web site, brochures of various products

available in the market.
(b) From the competitors web site.
(c) From various newspapers and magazines.
Data Analysis Techniques used are:

> Correlation
> Simple Average
> Percentage

RESEARCH TECHNIQUES

In terms of data capture and analysis there are two main types of market
research

• Qualitative Research
• Quantitative Research
[P"A“

I
L
{ Qualitative Research is about investigating the features of a market through
indepth research that explores the background and context for decision making.
There are two main qualitative methods - depth interviews and focus groups.
However qualitative research can also include techniques such as usability
testing, brainstorming sessions

Quantitative Research

Quantitative research is about measuring a market and quantifying that

measurement with data. Most often the data required relates to market size,
market share, penetration, installed base and market growth rates.

However, quantitative research can also be used to measure customer attitudes,

satisfaction, commitment and a range of other useful market data that can tracked
over time.
Quantitative research can also be used to measure customer awareness and
attitudes to different manufacturers and to understand overall customer behavior
in a market by taking a statistical sample of customers to understand the market
as a whole. Such techniques are extremely powerful when combined with
techniques such segmentation analysis and mean that key audiences can be
targeted and monitored over time to ensure the optimal use of the marketing
budget.
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At the heart of all quantitative research is the statistical sample. Great care has to
be taken in selecting the sample and also in the design of the sample
questionnaire and the quality of the analysis of data collected.

Market research involves the collection of data to obtain insight and knowledge
into the needs and wants of customers and the structure and dynamics of a
market. In nearly all cases, it would be very costly and time-consuming to collect
data from the entire population of a market. Accordingly, in market research,
extensive use is made of sampling from which through careful design and
analysis, Marketers can draw information about the market. The perfumes can
then undergo quantitative research.
a) TARGET POPULATION:

the population of the study consisted of retailers and dealers. Target population
was taken from the cities of Ghaziabad, Modinagar and Noida.

b) SAMPLING UNIT:

Random sampling was chosen that is where any outlet of the whole population
was likely to be selected as any other outlet that is all the outlets of the population
have equal chances.

Shops pursuing promotional tools (both dealers and retailers) in Ghaziabad,

Modinagar and Noida cities.
c) SAMPLE SIZE:
I
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a total of 50 shops were observed from the cities -Ghaziabad, Modinagar and
II
Noida. A
I
d) . SAMPLING METHOD: Purposive Sampling I
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0®°°0

ERRORS IN THE STUDY

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J
The various errors that can arise during the conduction of survey are: L
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As we are using secondary data thus it is not necessary that information which L
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we collected may be accurate. L
METHOD DATA ANALYSIS J
L
Based on the type of data collected and the target segment with the appropriate J
L
statistical methods, inference should be made. The response set of one variable J0**0
is compared with another set of variable to ensure a detailed analysis of data.
L
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We have used the SPSS software to analyze our data accurately. After the i
respondents had filled in the questionnaires, the data was entered into the n
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software and the analysis was made thereby.

SWOT ANALYSIS OF CADBURY INDIA

Strengths

• Strong Brand names like Cadbury dairy milk, Five Star and Eclairs

• Rich Product Mix

• Support from the parent Cadbury Schweppes

Weakness

• Ltd. Key products, only one central brand (CDM). Pralines range totally wising in
India.

• Lack of launching products in rural India

Opportunity
• The Indian market and more specifically
the urban areas where the penetration
of Chocolates is low can be developed
as acompetition
Stiff future market through affordability
in confectionary segment
and availability
Threat
 Positioning With Respect To the Price Segments
Positioning Drives attitude Drives Drives variety, gifting and I
Price and behaviour taste preferences I
snacking and I
I
Consumption
I
1.
Kitkat I
High (above Cadbury‘s Temptation J
Rs. 25 L
Cadbury‘s fruit & Nut
For 40 gms.) I
Cadbury‘s Roast Almond I
I
Cadbury‘s Bounville I
Cadbury‘s Nut Milk Tangro J
L
Almond J
L
J
Cadbury‘s Perk
L
Medium (Rs. Tango Fruit & Nut I
10-25 for Cadbury‘s Creamy Bar P
J
40 gms.) Tango Cashew Tango L
Crispy Amul Fruit & Nut J
Cadbury‘s L
crackle Nestle Crunch J
L
Cadbury‘s diary J
Milk L
J
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P
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 I
I
Amul Milk Chocolate I

Amul Bitter Amul I

Low Nestle Orange

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(Below Rs. Premium Milk Amul Crisp I
Nestle Cadbury‘s Relish I
10 1
For 40 Classic Nestle Rich Dark
I
gms.) Tango Milk Mystique I
J
Price, Positioning and Ad Descriptions of All the Brands L
Compan Weight Price Positioning 1
y Brand Advertisement m
campaign □*
4
Cadbury Dairy Milk 48 gm. Rs. Product for people who are The real taste of I
Chocolate 15 Natural and spontaneous Life J
L
Fruit & Nut 50 gm. Rs. Piggybacking on Cadbury‘s J
L
Roast 80 gm. 19 dairy Milk J
Almond 35 gm. Rs. L
Creamy
bar
40 gm. 38 i
Bourmville Rs.
n
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Rs.
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13 L
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.
Crackle 40 gm. Rs.
Product for teenagers, fun Crack, Crack,
12
Alternative to Diary Milk Crackle
5Star 40 gm. Rs. Source of energy for body & Energy bar
10 mind

Perk 35 gm. Rs. Anytime, anywhere snack Thodi si pet puja

12
Break 25 gm. Rs. Light chocolate bar to fulfill a I want a break
6 snack need rather than just
taste

1.00
Diary Milk Eclairs teenagers _jo
Eclairs bhi khaye duniya
Close to chocolate with a twin bhool jaye ‘
taste -tough from outside and
soft creamy Filing within.
Nestl Kit Kat 36g Rs 15 Snack for routine usage
Have a break Have a Kit
e I
m Kat Have a Kit Kat Play it I
Cool I
I
Milky Bar 40g Rs 13 Milkybar , give me the Nutrition for children and J
m power sugary taste L
I
Crunch 40g Rs 13 Fun Product Chicken or Egg I
1
m Have a Crunch
Bar One 50 Rs 10 Snack For those in between I
gm times I
J
Classic 40g Rs 10 L
1
Eclairs m Rs0.5
7gm II
0
I
Amul Premium 40g Rs 10 Gift for all ages - Gift for someone you love □*
Milk m Rs 10 expression of love 4
I
Orange 40g Rs8.5 J
Crisp m 0 L
J
Fruit & nut 40g Rs 12 L
Bitter m Rs10 J
40g L
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40g
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 STATEMENT OF FINDING
The result which I get through analyzing and evaluating the data drawn from the 1
I
schedule and expressed in the form of percentage of sample size and their I
results can better explain the level of customers satisfaction on after sales. 1

During my study what I find is described below. °D0

0

°Q
• There is no holiday in a week for the Group C & Group D employee. I
• To segment the customer in different category such as grocery. I
I.
• The service which is provided by different chocolate industries to the I
customer is good. I
J
• Right Execution of product by the sales man in different root is good. L
• The Businessman group figures out to be very much aware regarding I
1.
product. I
I
• Working of management staff is good. I
• Subordinate are skillful. They are able to motivate the worker time to I
J
time. L
• Date of manufacturing and when it will get rotten given on packaging. IP
Limitation
J
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Entry barriers L
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• Brand image L
JJL
• Requirement of specialized machinery L J
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• Lack of raw materials (cocoa) in sufficient quantities
MU
• Government regulation in the form of excise duties M
JJll
• Need of heterogeneous and wide distribution (being an impulse purchase JJll
JJll
category) JJll
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Exit barriers JJll
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• Specialized assets like machinery cold chains etc l
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Distribution JJll
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Chocolate being an impulse purchase wide and heterogeneous distribution JJll
channels are important so that the consumers have it within arms length of JJll
desire. In India distribution of chocolates gain special significance due to very hot JJll
weather condition during summer months. JJll
JJll

Rural Market

Contrary to most FMCG players, Cadbury is not looking at the rural markets for D °o°oO
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route
growth. Most of the sale comes from urban areas. Chocolate consumption in
JJll
urban India itself is low. There is a large untapped demand in urban market alone.
Only 60mn people out of the urban middle class population of about strategy of
various companies can also be estimated. Instead of present use of mass media,
specialized media targeted at different segment will catch the fancy of media
planners. At the same time one can see an increasing association between the
brands and various highly published events in order to increase the brand equity
in the minds of all the stakeholders. Further there will be lot of improvement in
packaging and modification of products as per Indian conditions. A trend in the
future wherein the innovative packaging can be used as a differentiating factor in
order to increase the usage of the product can be foreseen. It is seen that the
chocolate giants is slowly shifting to the large untapped interiors, with the
increasingly saturating market in the urban areas and also increasing clutter. The
first mover advantage by monopolizing the distribution network will work in great
favor of the company; hence it can be recommended that Cadburys should move
in before any of the other companies can realize what hit them.
 I
CONCLUSION I
I
The objective of the study was to study the Marketing Segmentation of Amul, I
I
Nestle, and Cadbury, Consumer Buying Behavior of Chocolate Industry and also 1.
to study the Industry Structure and Dynamics. I
J
a. Advertising plays an important role in creating brand awareness, brand recall L
and brand recognition which are important in helping a customer make I
purchase decision of that brand. I
I
b. Brand should adopt itself to the local culture.
I
c. Brand should be kept alive. J
L
d. The styles and code to the brand should change as clientele advance and
J
L
grow. J
L
e. Brand should continuously evolve with the culture and the product should
I
innovate.
P
Thus, we can say that companies, which want to make their brands No. 1, should J
adopt the above findings in their brand building exercise. However for
L
J
generalization of the results, a study needs to be undertaken based on a larger L
sample across different industries.
J
L
BIBLIOGRAPHY J
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1. Kotler, Philip. —Marketing management ‘‘12th edition 2006,Pearson L
I
P
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 Education 1
I
2. Aaker, David et al, —Advertising Management I
1
‘‘ I
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3. Business Line —Catalystll I
J
4. Financial Express —Brand Wagon ‘‘ L
I
5. Times Of India —Brand Equity ‘‘ I
I
6. Back Issues of business world I
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7. Strategic Brand Management I
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8. Internet Sources L
• www.cadbury.co.in
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• www.business-standard.com Hi
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• www.financialexpress.com J
L
• www.economictimes.com J
L
• www.hinduonline.com J
L
• www.indiaserver.com J
• www.indiainformer.com
L
J
• www.india-today.com L J
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