Cadbury Case

EARLY HISTORY The history of Cadbury as manufacturers of chocolate products in Birmingham dates back to the early part of the 19th century, when John Cadbury opened a shop in the centre of the city, trading as a coffee and tea dealer. Soon a new sideline was introduced - cocoa and drinking chocolate, which he prepared himself using a mortar and pestle. The founding of the Cadbury business dates back to 1831 when John Cadbury first made cocoa products on a factory scale in an old malt house in Crooked Lane, Birmingham. In 1847 the business moved to larger premises in Bridge Street, which had its own private canal spur linking the factory via the Birmingham Navigation Canal to the major ports of Britain. Business continued at the Bridge Street site for 32 years and by 1878 the workforce had expanded to 200, so more space was needed. This heralded the move to Bournville and the building of what is now one of the largest chocolate factories in the world. John Cadbury retired in 1861 handing over the business to his eldest sons Richard and George. It is to their leadership that the success of the enterprise is owed as the company prospered. The origin of the group goes back over two centuries. Some of the most loved international brands are from the stable of Cadbury Schweppes – Cadbury Dairy Milk, Dr Pepper, Flake, Trebor Basset, Snapple, Motts and 1

with the acquisition of Adams, brands like - Halls, Clorets, Trident, Dentyne and Bubbas bubble gum range will now be part of the Group’s portfolio. 55,000 people populate the humming offices of Cadbury Schweppes across the globe. Cadbury Schweppes is the No.1 confectionery and third largest soft drinks company in the world. They manufacture, market and distribute branded chocolates, confectionery and beverages that bring smiles to millions of consumers across 180 countries. The Core purpose of Cadbury Schweppes is “Working better together to create brands people love”. They are respectful of the social and natural environment in which theyoperate; supportive of our consumers, customers and colleagues; proud of our heritage, and passionate about success. This passion for success led to the company expanding its business overseas and thus briging the flavour of chocolate to people and tickling their taste buds. Cadbury’s expanded their business to many countries like Australia, America, Canada, India etc. When Cadbury Dairy Milk chocolate was first introduced in the early 1900s it made an immediate impact quickly becoming the market leader. The success story has continued. It is still the top selling chocolate brand in the 2

country and the Cadbury Mega Brand's broad family of products today has an international retail value approaching US$1billion. As an international brand Cadbury Dairy Milk carries the same distinctive image all over the world. Wherever you buy a bar of Cadbury Dairy Milk the pack design will be exactly the same, only the language will be different. The famous slogan "glass and a half of full cream milk in every half pound" with the picture of milk pouring into the chocolate bar, is one of the all-time greats of British advertising.

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ABOUT CADBURY INDIA LTD. Cadbury India began its operations as a trading concern in 1947. Cadbury in the Indian sub continent defined the first taste of chocolate. The company today employs nearly 2000 people across India. With brands like Dairy Milk, Gems, 5 Star, Bournvita, Perk, Celebrations, Bytes, Chocki, Delite and Temptations, there is a Cadbury offering to suit all occasions and moods. They bring the sweetest of smiles to millions of consumers through their dearly loved brands distributed through 5.5 lakhs outlets. Cadbury India's four factories in India churn out close to 8,000 tonnes of chocolate and the company sells a million bars every day.(locations of factories.)

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PURPOSE AND VALUES Objective: Grow shareholder value…over the long term. Strategy: Create robust and sustainable regional positions in our core categories of confectionery and beverages through organic growth, acquisition and disposal. Process: They achieve this by Managing For Value. Managing For Value Process incorporates: • Setting stretched financial objectives. • Adopting Value Based Management for major strategic and operational decisions and business systems. • Creating an outstanding leadership capability within our management. • Sharpening

our

company

culture

to

reflect

accountability,

aggressiveness and adaptability. • Aligning our management rewards structure with the interests of our shareowners across the country. 5

MANAGEMENT TEAM AT CADBURY CHAIRMAN C. Y. PAL VICE CHAIRMAN RAJIV WAHI

MANAGING DIRECTOR BHARAT PURI NON EXECUTIVE DIRECTORS

EXECUTIVE DIRECTORS

- Harsh Mariwala

- Girish Bhat

- Jaithirth Rao - Suresh Talwar

- Radhakrishnan Menon - Jaiboy Phillips - Chandramouli V - Vidyut Arte - Sanjay Purohit

Company Secretary Ms Monaz Noble General Managers - Vivek Aggarwal - Finance - Sunil Taldar - Sales - Jimmy Gandhy - Materials - Sharad Gangal - Human Resources - Ajit Tawde - Science & Technology - Cedric Vaz – Operations - Shivanand Sanadi - Legal

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ENVIRONMENT AND SOCIETY At Cadbury India, it is believed that good values and good business go hand in hand. Nutrition, Education, Security and Love Cadbury India has a large factory in Malanpur, one of the most under developed districts in Central India. In 1999, theylaunched the Cadbury Community Initiative Programme under the banner: Nutrition, Education, Security and Love. In setting up the programme, the local Corporate Affairs Manager, Narender Katoch, initiated a long-term dialogue with local stakeholders to engage them in helping the compnay identify what community support theyshould be providing. As a result, theyfocused on healthcare and education in the nearby village of Gurikha. A nursery school was started and key improvements were made to the primary school. The consultation and a bit of lateral thinking led to some real social improvements: fresh drinking water from a new village pump, a doctor’s clinic, vet services for milk producing animals and fruit trees for each household to plant during the rainy season. They also helped increase school attendance levels. Last year, the education programme supported the Indian Government’s Year of Women Empowerment. Special focus was given to the rights and 7

contribution of girls and to the counteraction of female infanticide through a variety of initiatives, including awareness generation and gender sensitization programmes leading to formation of women self help groups. Reaching Out Programme Reaching Out Programme is one small beginning in their endeavour to lend a helping hand to the needy. They collect from those who have and give it to those who need it the most. They have recently completed the Medicine Collection Drive in which they collected medicines and distributed it among those sections of society that needed it the most. They also have a toy box programme. Used toys are collected and donated to needy children.

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MILESTONES OF CADBURY The June 2003 issue of Business Today identified Cadbury India as one of India's

best-managed

companies

in

2003.

Cadbury India was identified as one of India’s Best Managed Companies in 2003. India’s Finance Minister, Mr Jaswant Singh at Business Today’s Best Managed Companies Awards ceremony, felicitated Mr Bharat Puri, Managing Director of Cadbury India. It was the only Multinational Company featured in the list of Best Managed companies in India. Cadbury India was lauded for its value creation, for its strategy of focusing on power brands, and its aggressive foray into the low end market with Chocki

as

well

as

launches

at

the

top

end.

Cadbury succeeded in reducing the impact of the slow down in the Indian FMCG industry & was also recognized for its innovation and consistent development of new products for consumers in India.

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NEW PRODUCT LAUNCHES Cadbury launches Rich Dry Fruit Collection for gifting this festive season. Come Diwali and the gifting options for consumers just got better with the launch of Cadbury Celebrations Rich Dry Fruit Collection a range of premium chocolate gift boxes. Available in attractive packs, the Collection caters to a premium gifting consumer and is an ideal festive gift. It is a unique combination of the best Cadbury chocolate and premium dry fruits. This combination will be available in select outlets in select cities across India for the first time. The Rich Dry Fruit Collection comes in four different formats. Each of these is a mix of select premium dry fruits enrobed in rich Cadbury Dairy Milk chocolate. This launch will augment the existing Diwali offerings from Cadbury such as the Celebration packs with collection of assorted chocolates. Cadbury Celebrations aims to be the preferred gifting choice among family and friends this season.

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Cadbury's

Creative

Launch

A new

after

dinner'

segment

Cadbury India Limited, in its endeavor to continuously provide a chocolateexperience, brings the magic of Cadbury Dairy Milk (CDM) Desserts - with rich indulgent crème center, in exotic & traditional flavors of Tiramisu and Kalakand. CDM Desserts offer the perfect rounding off taste, after meal that adds special Meetha’ moments to the family. The rich tastes of CDM combined with the unique crème center in exotic flavors provide a special chocolate experience. CDM Desserts add delight to the after-meal moments, especially with the consumers whose current choice of sweets range from home made delicacies to fruits to meethai.

Hence CDM Desserts positions itself as the perfect after meal, with the idea “Khaane

Ke

baad

Kuch

11

Meetha

Ho

Jaye”.

THE WORMY CONTROVERSY RISE OF THE CONTROVERSY State FDA Commissioner Uttam Khobragade said a group of people approached him with chocolates that had worms in them. Sebastian Fernandez had purchased Cadbury Dairy Milk chocolate from a shop at Pick and Pay, Vile Parle. Fernandes discovered that the chocolate (Batch No 28F3I10703) had worms in it. Fernandes complained to the shopkeeper Jitendra Shah who later informed Pravin

Marve,

vice-president,

Andheri

Vyapar

Manch.

Marve then contacted the FDA and gave them the sample. FDA Joint Commissioner Hindurao Salunkhe said Cadbury's Talegaon plant will also be inspected. Bharat Puri, managing director of Cadbury India will never forget the batch of Dairy Milk chocolates numbered 28F311 manufactured last year at the company's plant in Thane, near Mumbai. That was the worm-infested batch that triggered a crisis for the company that had always prided itself on its squeaky clean image.

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EFFECTS OF THE CONTROVERSY ON CADBURY The state Food and Drug Administration has ordered seizure of Cadbury's Dairy Milk chocolates from all over Maharashtra after worms were found in two of them in Mumbai. Cadbury India, whose chocolates had ridden into controversy late last year during the festival season because worms were discovered in some stocks of its Dairy Milk chocolates is probably hoping the association with Bachchan will help consumers forget the bad press the company got on account of the discovery. The Food and Drug Administration had then seized the company's stocks and the Cadbury India management had explained it was bad storage practices by retailers and distributors that had led to the worms. Cadbury India's sales fell following the discovery. And even the government got into the act with the central health ministry asking for a report on the controversy. The timing of the controversy couldn't have been worse. Festival season sales (Cadbury sells almost 1,000 tonnes of chocolates during Diwali) plummeted 30 per cent. Until then, in the country's FMCG sector plagued by slow, low single digit topline and bottomline growth, Cadbury was a sweet exception. But its net profit in 2003 dipped 37 per cent to Rs 45.6 crore (Rs 456 million) as compared to a 21 per cent increase the previous year. 13

ROLE OF THE PUBLIC RELATIONS PR concerns the total communications of your total organization/group of organizations. It is unlike advertising, where you are sharing skills of planning, creative and media buying teams with an out-sourced agency. PR calls for a very intimate understanding of the total inner workings of your organisation at all levels - workers to Board levels. It requires the integration of knowledge and communications. It is not a part time job for a Marketing Services Manager. If it is to work and serve the larger objective, the PR department should be independent, servicing others like production, personnel, marketing, finance, corporate agendas. Therefore, the PR Head should be part of the top management team - reporting directly to the CEO. He also needs to share everyone's confidences. The PR department of Cadbury’s played a very effective role in managing the reputation and keeping up the goodwill of the company. After being struck with the Worm Controversy it was not possible to create a very good impact on consumers who trusted the company the most. But through the efforts and a good PR team Cadbury’s managed to wriggle its self out of the controversy with a clean chit.

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STEPS TAKEN TO SOLVE THE CONTROVERSY • NOT DENYING THE FACT It helped that the Maharashtra Food and Drug Administration had given a clean chit to the company's two plants in the state. Cadbury went into overdrive to tell consumers that improper storage of what is essentially a perishable commodity might lead to worm infestation. Last November Bharat Puri, Cadbury's mild-mannered MD, went to media offices around the country meeting reporters, answering mostly hostile queries and patiently explaining the company's stand on the issue. "Unlike the cola companies which were caught in a controversy just a month earlier and displayed an ostrich-like attitude, Cadbury did not go into denial mode. It accepted that there was a problem, which may not have been of its own making, and made a commitment to the consumer that it would plug all possible safety loopholes," says a Mumbai-based brand consultant. As a result Cadbury improved the packaging and paid more attention to the way its chocolates were stored by nearly 650,000 retailers across the country.

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• TAKING PRECAUTIONS In the aftermath of the controversy, the company launched Project Vishwas, a retail education programme under which 190,000 retailers in key states were covered. The programme entailed generating awareness and providing assistance in improving storage quality. "What you see now is the most over-engineered packaging for a Dairy Milk chocolate anywhere in the world. Even our festival packs come with a tamper-proof outer sealing and improved packaging inside," explains Purohit. The new double packaging even for the smallest offering, the 13 gm Rs 5 Cadbury Dairy Milk, had the bar wrapped in aluminium foil and enclosed in a polyflow pack, which was sealed on all sides. The larger Cadbury Dairy Milk packs came in poly-coated aluminium foil, which was heat-sealed and then wrapped in the branded outer package. Both these initiatives are country specific and Cadbury invested nearly Rs 25 crore (Rs 250 million) this year on new machinery for the improved packaging. The company also carried out quality checks at its facilities as well as its carrying and forwarding warehouses and distributor warehouses and found products free of infestation.

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• GAINING BACK TRUST The Big B promoted the Big C in the chocolate business - Cadbury in India. Indian cine superstar Amitabh Bachchan has signed on to become the brand ambassador of the chocolate major for two years. AB played a pivotal role in all communication relating to Cadbury's products and brands, be it in print, on television or the great outdoors, the company's managing director Bharat Puri has been quoted as saying in media reports.

With the help of its Public Relations Dept. and advertising agency O&M, it created a campaign which aimed for both rational and emotional appeal. One of the ads showed Bachhan visiting a Cadbury plant, inspecting the systems and processes and finally consuming a bar of chocolate to be convinced that there's nothing wrong with the brand. The other ad featured Bachhan and his granddaughter to emphasize that the product was absolutely safe for children.

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Cadbury stepped up it’s advertising spend significantly this year to nearly Rs 40 crore (Rs 400 million). With a turnover of Rs 729 crore (Rs 7.29 billion) in 2003, Cadbury has a 70 per cent market share in chocolates and Dairy Milk chocolate has 30 per cent market share, despite competitors like Nestle and Amul.

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• BENEFITS OF A GOOD CAMPAIGN The company bounced back soon after the campaign hit the screens. Between October 2003 and January 2004, Cadbury's value share melted from 73 per cent in to 69.4 per cent. The recovery began in May 2004 when Cadbury's value share went up to 71 per cent. Cadbury's Indian operations are not just the largest in Asia but also the cheapest. In India, Cadbury has the largest market share anywhere in the world and has been the fastest growing FMCG Company in the last three years with a compound annual growth rate of 12.5 per cent. So, despite the bitter moments of the last year, the company is hoping that the future will be much sweeter.

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CONCLUSION •

PR needs research, planning, implementation and evaluation.

•

PR needs to be based upon a strategy, including the budget.

•

PR is a very vital tool for management, but the top leaders and policymakers must also be involved in the strategy.

• Theymust be knowledgeable and be up-to-date on what key audiences or “publics” know (or think they know) about our organization, if theyexpect to communicate effectively with them.

PUBLIC RELATIONS FORM AN INDISPENSABLE PART OF ANY ORGANISTION. Public relations include ongoing activities to ensure the company has a strong public image. Public relations activities include helping the public to understand the company and its products. Often, public relations are conducted through the media that is, newspapers, television, magazines, etc.

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