Position of Cadbury's Chocolate in India - Case Study Example

Strategic Marketing- Cadbury’s case Study Critically evaluate the strategic role of marketing in achieving business success for a chocolate manufacturer. Support your answer with examples from the Cadbury’s case study. The success of Cadbury’s can be estimated from the fact that it has become a generic name for chocolates in India. In most parts of the country, a customer is generally found to ask the shopkeeper for a ‘Cadbury’ while intending to purchase a chocolate. The name Cadbury’s comes to the mind when someone thinks of buying a gift on a special festive occasion like Diwali. Chocolate which were traditionally considered to be a product for the kids has completely changed today. It is being consumed for a variety of reasons and one of the most important reasons for this change is the way the product has been marketed. Cadbury’s has been operating in India since 1948 and it has always tried to create big brands rather than products. At Cadbury’s everyone collaborates and works as teams to convert products into brands which they call “we spread happiness.” It is through effective marketing campaign that Cadbury has been able to shift consumer preferences. Earlier the most commonly used gift for festive occasions used to be Mithai. By creating advertisements which featured famous Bollywood celebrities like Amitabh Bachchan, Cadbury’s had been able to shift consumer’s preference from Mithai to Chocolates. The strategic role of marketing can be clearly understood by using the 4 P’s of marketing and the way Cadbury’s used it for achieving success. Promotion: Cadbury has been using various marketing communication strategies to create a strong brand that is close to the consumer’s heart. In 2008, it developed a website called dearcadbury.com whose sole objective was to portray that Cadbury is “a company people engage with, and that engages with people.” The website had two sections- one section was kept for the letters that the consumer’s send to Cadbury and the other section contained Cadbury’s response to the letters. There is one more section which provides information regarding the company’s progress on sustainability issues. Cadbury has publicly apologized when it faced problems due to the “worm controversy” and the “Kashmir ad” to show its respect and commitment for the consumers. It has launched several famous television advertisements which emphasize the fact that Cadbury’s can be used as a gift for any festive occasion. Its famous television advertisements like “Pappu pass ho gaya and Miss Palampur ads” are still strongly ingrained in the target customers mind. It also used radio for communicating with the target group by using catchy lines like “Kuch meetha ho jaye” to promote the message that chocolate can be used for all occasions. Price: Cadbury’s has a wide portfolio of products at various price points. Its products are available in price range of Rs 2, Rs 5, Rs 10, Rs18, Rs 25, Rs 38, Rs 45, Rs 55, Rs 60 etc. Place: As far as raw material procurement is concerned which is an important activity in the value chain, Cadbury has partnered with farmers in Kerala for cultivating cocoa which is the most important raw material for chocolates. In terms of operations, it has manufacturing units in various parts of the world in almost 60 countries and marketing and sales in almost every country of the world. In India itself it has 5 manufacturing plants owned by the company itself and sales and distribution in 4 parts of the country. It thus has an extensive manufacturing and distribution system which helps it reach every corner of the world. It has a reach of 0.6 million retailers in India. It also keeps adding sub- stockiest in order to reach to smaller towns and villages. It continuously upgrades its distribution channels in order to increase its visibility in retail outlets. Product: Cadbury developed its first recipe for milk chocolate in 1906 and named it as Cadbury Dairy Milk and is the most admired brand of Cadbury’s till today. It acquired Pascal Murray in 1964 which helped it enter into the sugar candy business. In 1969, it merged with Schweppes which helped it foray into the beverage market. In India it has products like chocolates, candies and gums. Its products can be classified under four main categories which are chocolate confectionary, candy, gum and milk food drinks. Some of the popular brands under chocolate confectionary are Cadbury’s Dairy Milk, Éclairs, Perk, 5 Star and Celebrations. In the milk food drinks category it has brands like Bournvita, in candies its famous brand is Halls and in gums it has Bubbaloo. It has chocolates in all categories which includes sugar free chocolates also for the diabetic patients. Its wide portfolio of products coupled with the great taste is something which makes the consumers come back to the brand, thus increasing customer loyalty. Moreover the biggest strength of Cadbury is that in spite of operating globally, it alters the taste of the chocolates based on local tastes and preferences. Even local brands like Amul are not able to develop products which perfectly match the taste of the Indian consumers. Differentiation in product has been a key strategy for Cadbury’s success compared to its competitors like Nestle and Amul. Targeting and Positioning: Cadbury’s had initially positioned itself as a product that was targeted towards the kids. In the mid 90’s it refined the category and positioned it as a product that could be consumed by all and it launched the famous campaign “Real Taste of Life’. It thus targeted the adults by emphasizing on the child in every adult. It then positioned itself as a product that can be bought, consumed and used as a gift for any festive occasion. It targeted all sections of the society from urban to rural and accordingly developed advertising campaigns which helped the brand to reach a large number of customers. 1. Using a structured approach and the information in the case study as well as other sources, undertake an analysis of the chocolate and confectionery market in India. What are your overall conclusions? Although there are certain sectors in the confectionary industry which has reached maturity in various parts of the globe, the global market is experiencing a constant growth. Among the global markets developing countries like India are the ones which are driving the growth on account of multinational suppliers becoming easily accessible and rapid economic development. As the Indian market continues to grow, competition becomes more intense as a result of which companies are speeding up new product launches, expanding their capacities and adopting innovative strategies to gain market share. The Indian chocolate and confectionary industry can be divided into chocolates, éclairs and toffees, lollipops, mints and lozenges, chewing and bubble gum and candies. In India the caramel industry is growing at around 15%. The organized market size of hard boiled candies, éclairs and toffees is around 1,20,000 tonne per annum. The candy market in India is valued at $664 million which accounts for 70% of market share. The domestic chocolate industry is benefiting from economic boom of the country and an increase in consumer spending. Growth of malls is also a prime factor which has resulted in an increase in consumer spending. According to Euromonitor, a CAGR of 6.5 % is expected in India during 2006-2011 which is much higher than the expected growth of the global chocolate market of 2%. In India, chocolate is still not considered a typical part of the diet. According to Nadia Chauhan, director Parle Agro Pvt Ltd the organized segment is around Rs 2000 crore and even the unorganized sector is believed to be of the same value. Rural segment is expected to contribute around 48% and the urban segment is expected to contribute 52%. The western and southern part of India is believed to contribute the most in this segment (International Confectionary Association, 2008). The figure below shows the industry (product) life cycle. It explains the characteristics of the industry at various stages of the lifecycle. An industry or product starts at the introduction stage followed by growth, maturity and decline. The characteristics of each of the stages are clearly explained in the diagram. [Source: Haberberg & Rieple] The chocolate industry in India is at the growth stage. Competitors: There are many new entrants who are fighting for a market share. Foreign players are entering the Indian market rapidly since they are able to see the tremendous potential that the Indian market has. There is an increase in acquisitions and expansion deals. Hersheys, Mars, Toblerone are some of the major foreign players in this segment. Nestle and Amul are the other competitors of Cadbury’s. Customers: Increase in consumer spending because of rapid economic growth has lead to a boom in this industry. Emergence of mall culture and availability of wide variety of chocolates has lead to an increase in consumer buying. Products: Every company is developing new products to cater to every target segment. Cadbury’s has a very wide portfolio of products at various price points which helps it to tap every segment. Sugar free chocolates are also gaining popularity very fast because of increasing health awareness. Thus there is a rapid increase in the portfolio of products which is a typical characteristic of the growth stage. Typical Pricing: An increase in competition results in almost same prices being charged for products in the same category. Companies are launching products at several price points to target every segment. Profits: Profits are high in this segment which is why the industry is attracting new players. Unit Costs: Unit costs decrease with an increase in sales volume and improvement in technology. Companies are spending heavily on new technologies which reduce costs. Moreover since there is an increase in sales the cost per unit is also decreasing. Marketing: All companies have speeded up their marketing process. Cadbury, Nestle and Amul spend huge amounts on television advertisements. They also spend considerable amounts in radio, print advertisements and outdoor. Every company is trying to differentiate its products in order to attract the target market. Cadbury’s has tried to differentiate itself by using various positioning strategies. Companies differentiate themselves by creating a powerful brand which increases customer loyalty. The above clearly shows that the industry is at the growth stage of the industry life cycle. As the competition increases the industry will see many more players entering the industry. Existing players are taking lot of initiatives in terms of product development, creating strong and powerful brands, investment in technology and increasing their capacities in order to take maximum advantage of this fast emerging segment. The taste and preferences of the Indian consumers are fast changing from Mithais to chocolates. Chocolates are preferred over Mithais because of its mid price, and convenience in terms of shelf life and packaging. The boom in retail and a rise in mall culture have resulted in wide variety of chocolates being available for the consumers and this has also lead to lot of impulse purchase. It can thus be concluded that the industry is at a growth stage and it’s the right time for companies to take maximum advantage of this growth. 2. Critically evaluate Cadbury’s core competences. Using examples from the case study describe and discuss how such organizations can strengthen their competences. Core competency of an organization refers to those capabilities that the organization should have in order to achieve competitive advantage. In today’s highly competitive business environment, it is not possible for an organization to be good in everything. Core competency helps an organization to focus on those areas where the company is best at. Core competencies allow an organization to consolidate its capabilities and resources into one coherent thrust. If the products of the company represent the branches of a tree, core competency represents the trunk of a tree. Core competencies can be the key to strategic marketing. It makes an organization unique and helps it in differentiating itself from the competitors. The core competencies of an organization are identified based on the strengths of the organization. A core competency must have the following characteristics: The core competency must be such that it is capable of being applied to multiple products and multiple markets. It must be able to make significant contribution as far as perceived benefits to the customer is concerned. It must be difficult if not impossible for competitors to copy (Hiebing & Cooper, 2004, p.13). The core competency of Cadbury lies in making delicious foods which the customers can feel good about. The core purpose of the company is to “make today delicious” which is a clear reflection of what the company wants to achieve (Cadbury, n.d.). Cadbury has been selling chocolates and confectionaries in India for the last 60 years and has a market share of 70%. It has always abided by its values of manufacturing high quality chocolates. They try their level best to convert products to brands. One of the core competencies of Cadbury’s is the way it markets its products. It is one of the major drivers of changing consumer’s preferences from Mithai to chocolates through its innovative marketing communication strategies. Cadbury has repositioned itself several times and each time it has been highly successful. The advertising campaigns used by Cadbury are extremely popular and is even remembered today. Advertisements like “Pappu pass hogaya and Miss Palampur” are extremely popular advertisements which are used by Indian customers in their daily conversations. It has helped in building brand awareness and brand loyalty. The advertisements have fetched several awards for Cadbury’s India Ltd. It not only uses traditional formats for reaching the consumers but applies a 360 degree campaign using radio, print, mobile, outdoor, online and on-ground forms of communication. Through its marketing communication, Cadbury’s has been able to position itself as a gift for all festive occasions. The delicious taste and new product development to suit to the tastes of the customers is another core competency of Cadbury’s. In spite of being a global company, Cadbury’s tries to understand the tastes and preferences of the local population and accordingly alters its products to match to their taste. In India, there is no other product which can beat the pure taste of Dairy Milk. When consumers think of chocolates, it is the taste of Dairy Milk that comes first in their mind. Even local chocolate manufacturers like Amul are not able to understand the taste of the Indian consumers as perfectly as Cadbury’s. Dairy Milk is regarded as a “gold standard” for chocolates. Superior taste which is difficult for competitors to imitate is one of the main competencies of Cadbury’s. As far as new product development is concerned, Cadbury’s has products to target almost every segment of the market. Its competitors do not have such a wide product line. Its target group involves children, youngsters and parents. It is the wide product range of Cadbury’s that helps it differentiate from its competitors like Nestle. Manufacturing and distribution is also a core competency for Cadbury’s. It has manufacturing plants in 60 countries around the world. In India it has 5 manufacturing plants owned by the company itself and 4 sales offices to cater to the 4 regions. Having such large number of plants helps Cadbury’s to cater to a wider geographical area. It is able to target a larger target group because of its world class manufacturing facilities all around the world. It has been successful in developing an extensive distribution channel along with sub brokers to penetrate the rural markets. Keeping in mind the income level and capacity to spend, Cadbury’s has accordingly developed products at price points which would be affordable for the rural masses. 3. Describe and discuss the relationship between brand character and product positioning. Using examples from the case study, critically evaluate how successful Cadbury’s have been with their positioning strategies. Brand character refers to the personality of the brand which is conveyed through several aspects like the look and tone of the brand expressions. The brand character must be uniform across all communications with the target group. It is constant irrespective of products or services offered by the brand. It helps an organization to portray one unique image of the brand. Brand Positioning is all about finding a unique place in the target customers mind. For a brand to be successful it should be able to find or create a suitable position in the customers mind and as mind’s change over time even the brand should change its positioning. In order to position a brand in the target segments mind the way the company wants to position it, it should use a 360 degree approach. The products, packaging, communication must be unified to deliver one single message (Cheverton, 2002, p.91). The positioning of a brand provides a framework for the kind of graphics, content, design to be used for advertising, print media, outdoor, direct marketing, public relations and other forms of marketing communication. It helps in fixing the target group (the group for which the product is being produced), the benefit (the reason for the target market to buy the product), reason to believe (why the target group should believe in the communication messages) and the brand character (feelings which result from graphic designs) (Anonymous, n.d.). As far as Cadbury’s is concerned the brand character of Cadbury’s can be classified and studied under the following heads; attributes, image, packaging, distribution, service and price. In order to inform the customers regarding these characters of the brand, Cadbury’s has adopted various positioning strategies and accordingly communicated the same message consistent with the brand character. In order to communicate brand attributes like quality and usefulness of chocolate consumption, Cadbury launched the famous campaign “Real Taste of Life”. The advertisement was aimed at changing its initial positioning as a product meant for kids to a product that was meant for all age groups. It tried to reposition the brand from “just for kids” to the “kid in all of us”. The advertisement became instantly popular by appealing to the child in every one. Dairy Milk became an expression of good feelings and spontaneity. Consistent with its brand characteristic of chocolates having the ability to change the mood, in the “Real Taste of Life” campaign a girl is shown dancing in the cricket field. The advertisement became an expression of spontaneity and happiness. In order to position its image as a gifting option and as a product which appeals to all age groups, it launched various advertisements. “Khanewalon ko Khane Ka Bahana Chahiye” tried to position Cadbury’s as a product for the masses. It helped in increasing consumption of chocolate among adults and it became a socially acceptable product. The “Kuch Meetha Ho Jaye” campaign was aimed at positioning Cadbury’s as a gift item. In India sweets are an integral part of any festive occasion. Sweets are used as gifts in most festive occasions. Cadbury’s positioned itself in this category by communicating to the customers that it could be used as a gift for these festive occasions. The packaging of the products of Cadbury’s is done with glossy and colorful wrappers which gives it a very elegant look. In an effort to position itself as a gift, it has developed various attractive packages for products like Temptations and Celebrations. This has helped Cadbury’s to position itself well as a gift item in the target segments mind. Moreover the package pictorially depicts how the chocolate would look inside. Consistent with its positioning of high quality, the packaging is done in a way which helps it in preserving the chocolate over a long time. Cadbury’s has an extensive distribution system. It has 5 manufacturing units in India and 4 sales offices in four zones to cater to the entire nation. It distributes its chocolates through more than 0.6 million retail outlets. In order to target the rural segment and to increase brand awareness in the rural segment, it launched the famous “Miss Palampur” commercial. The advertisement shows two small village girls running towards Choudhary’s house shouting with happiness to give the news of Radha’s victory. The Choudhary whose character is enacted by the famous Bollywood celebrity Amitabh Bachchan excited by the news distributes Cadbury’s dairy Milk to the villagers and when he finally calls Radha which is a cow. Choudhury is shown to be dreaming of Radha becoming a film star in few years. The advertisement is shot in a rural environment which makes it easier for the rural segment to connect with the brand. It also came out with products in lower price brackets since the income level in the rural segment is low. It came out with the same products in smaller sizes which helped it lower the price which could be afforded by the rural segment. The company tries to provide better service consistent with its positioning by making chocolates as per the taste of the locals. In spite of being a global company, it makes sure that it alters its taste to match to the local preferences which is one reason for its popularity. References: Anonymous. No Date. Positioning Statement- Overview. Partnership for Philanthropic Planning. [pdf]. Available at: http://www.pppnet.org/pdf/Partnership_for_Philanthropic_Planning_Brand_Standards_Guide_2.09.09.pdf [Accessed on June 25, 2010]. Cadbury. No date. Company Overview. [Online] Available at: http://www.cadburyindia.com/cadtoday/company.asp [Accessed on June 25, 2010]. Cheverton, P. 2002. How come your brand isn't working hard enough?: the essential guide to brand management, Volume 3 of If you're so brilliant. Kogan Page Publishers. Haberberg, A; Rieple, A. 2008. Strategic Management: Theory and Application. Oxford University Press. Hiebing, R.G.; Cooper, S.W. 2004. The one-day marketing plan: organizing and completing a plan that works. McGraw-Hill Professional. International Confectionary Association. December 2008. Indian Cofectionary Industry. Special Feature. [pdf]. Available at: http://www.international-confectionery.com/documents/0000/0034/Special_Feature-Dec_08.pdf [Accessed on June 25, 2010]. Read More