Microeconomics – Cadbury Study Essay
This is an analysis of the company Cadbury Limited and its impact on the confectionery market, which will focus on what forces have grown this company, its development, products and competitors, and how it has achieved its success. 2. Short history of the company The name of Cadbury had first made its appearance in 1824, when John Cadbury opened a shop on Bull Street nr. 93, Birmingham, which sold cocoa and drinking chocolate. In 1831 he opened a factory and started producing drinking chocolate and by 1842 he was selling 11 types of cocoa and 16 types of drinking chocolate.
The year 1847 was a breakthrough, as it was the year when the first chocolate bar was produced. (Cadbury, 2012) From then to this day, the company has expanded to become one of the top confectionery companies in the world. (Alibaba, 2010) Other milestones were achieved in 1866, when the Cadbury brothers, John’s sons, launched “Cadbury Cocoa Essence”, UK’s first unadulterated cocoa, which helped increase sale dramatically. (Cadbury, 2012) Then in 1875 came the first milk chocolate bar, and year 1905 marked the beginning of the famous Dairy Milk brand.
In year 1920 the trademark purple color packaging of Cadbury chocolate was introduced and in 1928 the “glass and a half” symbol was used. (Cadbury, 2012) In 1969 Cadbury merged with Schweppes, and by the time Cadbury World opened in 1990, the brand had become popular worldwide, with a large range of products to offer for consumption. (Cadbury, 2012) In 2008 Schweppes and Cadbury demerged and in 2010 Cadbury became part of Kraft foods, now known as Mondelez International Inc. (Cadbury, 2012) 3. The confectionery market and Cadbury’s place in it
Cadbury is part of the global confectionery market, which resemblances a monopolistic competition and is “large, growing and has attractive dynamics. The global confectionery market is the world’s four largest packaged food market. ” (Manohar Prasad, 2011) A large category of the market is made of chocolate, also the largest segment of Cadbury’s production and it accounts “for over half of the global confectionery market by value. ” (Manohar Prasad, 2011) Cadbury is also the “largest global confectionery supplier, with 9. 9% of global maket share. (Manohar Prasad, 2011) The market of confectionery has been evaluated at ?5. 41bn in 2011, after a 7. 5% growth since the previous year.
The chocolate sector was estimated to account for 74% of the market’s value, while the sub-sector with the biggest growth was the one of boxed chocolates and sharing bags. It is said the reason behind this is the continual saving because of the economic crisis, which has increased demand for those products. As a result, the manufacturers, including Cadbury, are introducing more variations of these products, instead of adding “new products in an already saturated market. (Key Note, 2012) The market is also expanding on-line, with the option of purchasing the merchandise off the internet and also because of the “interactive online campaigns and manufacturers’ use of phone ‘apps’” (Key Note, 2012), which adds a new angle to the market. „Although the confectionery industry is doing well overall, there are certain points of concern. Premium brands are struggling to cope with the economic crisis. ” (Key Note, 2012) Because of this, it is farely hard to be a newcomer in the market at this time, considering that brands which already have customer fidelity are struggling.
Cadbury accounted for 15% of the manufactuing of consumer chocolate in 2003, as shown in the diagram: (Info Comm, 2003) Cadbury’s market extends to the whole globe, but the brand is very well known in the UK, Ireland, Australia, New Zealand and, more importantly, India, where it is the leader of the market by far. Being very well know in these markets, “consumers have established patterns of chocolate consumption. If markets successfully identify and isolate consumer segments, it becomes easier to target products and advertising in a more meaningful way to increase consumption. (Akhil Puri, 2008) One of the reasons for Cadbury’s success is concerned with market segmentation.
The company has developed several products specific to different kinds of segments, such as: the break segment: products which are consumed during breaks or in a short time span, for which there is Cadbury’s Perk and snack range; the impulse segment: products which are easy to carry, usually picked up in supermarkets or corner store, such as Cadbury’s Dairy Milk and other small batons; the “take home” segment: products which are normally shared with other people, family mostly and consumed at a later stage: family packs. Report, 2009) According to Cadbury’s Annual Report 2008, the company has a huge spread in the emerging markets, these markets having accounted for “one third of our confectionery revenue and 60% of our revenue growth. In the last five years, Cadbury’s emerging markets confectionery businesses gre on avarage by 12 p. a. ” (Cadbury, 2008) 4. Competitors First let’s look at a map from 2009 that shows main competitors, bearing in mind that Kraft Foods will buy Cadbury in 2010.
The drawback in this map is that it does not show the influence Cadbury will have on the Indian market, which is one of its main revenue bringers. After 2010 however, Cadbury’s influence will expand in Kraft’s areas as well, Kraft Foods becoming the leader in the market. A closer look shows us that in 2008, Cadbury was the second in the market, it’s main competitors being Mars, Nestle, Kraft, Hershey and Ferrero. (Adbrands, 2008) In 2011 however, after the takeover, Kraft Foods became the leader in the market, after Mars, Nestle, Ferrero and Hershey, in that order. Top 5, 2011) It has been a hard struggle for all the players in the market to maintain market share and consumers happy, as both prices of cocoa (Indexmundi, 2012) and sugar (Indexmundi, 2012) have skyrocketed in the past decade, with a more pronounced slope in the last 4 years. This has led to downsizes of products and rising prices from all the manufacturers. However, one of the reasons Cadbury is the top player is because of the strategic launches of counter products to the competitors offers, at far lower prices, while still maintaining quality. (Akhil Puri, 2008) 5.
Products Cadbury products are convenience goods, which tend to be price inelastic and also income inelastic. (Nikunj Malaviya, 2009) Below we have a short, not exhaustive, list of Cadbury’s brands of products (most of the brands have at least five individual and different products under their name): (Cadbury, 2012) The below listed brands all relate to the chocolate industry, on which we will be concentrating. Astros Clusters Bournville Caramilk Cherry Ripe Chomp Creme Egg Crispy Crunch Crunchie Curly Wurly Dairy Milk Dairy Milk Buttons Dairy Milk Caramel Double Decker
Dream Eclairs Flake Fudge Milk Tray Mini Eggs Picnic Roses Snack Star Bar Time Out Twirl Wispa The products above have been through a lot of changes since the beginning of production, with different recipes being introduced or readjusted and they can vary from country to country, as different ingredients might be or not approved in consumption. A notable incident of this, in which Cadbury had a lot to lose, was the replacement of cocoa butter with palm oil in the Dairy Milk products, which they claimed it would “make the chocolate softer to bite” (Business News, 2009).
After the outraged chocolate lovers „vowed never to buy it again” (Business News, 2009), the company decided to come back to the original recipe. Another change in the products came from downsizing. Kraft Foods, owner of Cadbury, stated that this decision came from “a number of economic factors including ingredient costs. “ (Kraft Foods, 2012) This has led to outraged consumers, which feel they are cheated by buying less for the same price and would prefer to buy the same amount of chocolate for more money, as it is the product they are after, at its original size, not the lesser amount. BBC, 2012) Lastly, an important step in the production of Cadbury products came after Dairy Milk gained a Fairtrade certificate, which helped sales of cocoa from Ghana and also bought public appreciation, sales growing considerably.
Advertising A large role in Cadbury’s success lies in advertising. The famous “A glass and a half full of joy”, emphasized by the drawing on the packaging of the two milk glasses that are tipped over to let milk slip into the chocolate, relates back to the beginning of the brand. One of the most famous advertising movement was “The Real Taste of Life”, which shifted the market of chocolate from kids to adults. Brand Republic, 2008) Another for of advertising was the opening of Cadbury World in 1990, which is a themed park on the original spot the first Cadbury factory was built and the Chocolate Center of Excellence, which opened in 2012, where new innovation labs are situated, to help coming up with new products. 7. Success on the market and market strategies A fixed figure of income or profit is hard to conjure for Cadbury since its integration in Kraft Foods company. Nevertheless, the success of the company cannot be denied.
Being a longstanding brand has helped create a base of loyal customers and the brand attracts new customers through advertisements and promoters. One of Cadbury’s secrets for success is the “careful selection of the finest cocoa beans from west Africa, as well as tasty hazel nuts from Turkey. … Finally there’s the skilful marketing Cadbury always takes extreme care in selecting and marketing the right range of products in every cause. ” (Report, 2009) The strategies which now drive Cadbury are: survival on the market, profit maximization, growth overseas, diversification and improving product image. Santosh Kumar, 2011) “Cadbury’s philosophy is to continue as a driving force in the confectionery market, and thus constantly analyse its offerings for consumers. The core objective of Cadbury’s innovation programme is to generate incremental volume for the company and achieve the vision of market leadership in every segment in which it operates.
The role of innovation is critical as it allows Cadbury to develop ahead of its competitors in those areas of the market which are new or growing. (The Times 100, 2011) After the Kraft Foods takeover, the company was exposed to a much more diverse clientele and as a result, there has been a reporting increase in sales. Furthermore, Kraft Foods, now Mondelez International Inc. , has invested in brand new technologies (Food Manufacture, 2011) which helped grow the production of a lot of products. 8. Conclusion Through this analysis I have come to the conclusion that the confectionery market, especially the chocolate sector, seems to be going through a mild period, the worst having past already, after the economic struggle started in 2008.
Seeing as Cadbury has been in the market for almost two centuries and has gone and, on some level, is still going through struggles to maintain its position on the market, I believe opening a new business is a risky move. However, Cadbury’s success is easily recognizable, as the company is still evolving into emerging markets, their marketing strategies are working and the technological progression helps keep them at the top. Overall, I believe that, even though there is room for improvement, the Cadbury brand is synonymous with innovation and success and will remain one of the leaders in the confectionery market for a long time.