Cadbury New Imp

Cadbury –ranked amongst India’s most respected companies

Cadbury India has been ranked 5th in the FMCG sector, in a survey on India’s most respected companies by sector conducted by Business World magazine.

Conducted by the Indian Market Research Bureau (IMRB), India's most respected companies (by sector) looks at companies across 17 sectors. The fundamental purpose was to find out which companies were respected the most among their peers. Companies were rated on seven parameters like Innovativeness, Quality and depth of top management, Financial performance and return to shareholders, Ethics and transparency, Quality of Products or Services, People practice/talent management & Global competitiveness. This is the first time that Cadbury has made it to the top 5, which is an indication of the growing trust and public affirmation for brand Cadbury

Cadbury well placed to prosper as Indian confectionery market expands Cadbury is reaping the reward of a long-term commitment to India, as rising incomes and retail expansion spur growth in the confectionery category. Dominique Patton spoke with marketing director for Cadbury India Sanjay Purohit about the country's growth potential, and Cadbury's plans for this rapidly developing market. The world's leading chocolate makers, facing modest growth in the health-conscious West, are eyeing India's sweet-toothed consumers as a major opportunity. However, while rising disposable incomes will certainly increase spending on indulgent products, companies wishing to enter India for the first time face a formidable competitor in the form of Cadbury which has been there since 1948.

Moreover, although growth in chocolate sales was slow for many years, the market has recently started to boom, on the back of increased advertising, special pack formats and retail expansion, and Cadbury is reaping the dividend from its long-term commitment to the market. According to Cadbury India's marketing director Sanjay Purohit, the company's chocolate sales have grown by almost 20% during each of the last two years, largely a result of significant investment in marketing. But progress has been hard earned. "India is a land of people with a sweet tooth but we've had to battle against deeply entrenched cultural products like mithai," Purohit explains. Mithai, a generic name for Indian sweets, are consumed on a daily basis as snacks eaten alone or with a cup of chai. Huge quantities are also given as gifts during festivals like Diwali, which ushers in the New Year, and mithai are also a crucial part of wedding ceremonies - the first gift of an Indian bride to her husband's family is often several kilos of high quality mithai. By using advertising to associate chocolate with mithai, Cadbury has succeeded in opening up a huge consumer base. "Until the 90s people thought that only children eat chocolate," says Purohit. "Now we have a large portion of adults across different social segments who see chocolate as a wonderful, indulgent product, eaten at the same occasions as mithai." Cadbury's trading update in December confirmed the impact of this behavioural shift: "India is having a particularly good year with recent performance boosted by a very strong demand during the Diwali festival," the company said.

It has also made some product adjustments to reach out to new consumers. As elsewhere in Asia, Cadbury chocolates are sold in individual single pieces in India. One of the newest individual pieces for the Indian market, Chocfuls, is a caramel candy with a hard shell and soft chocolate centre that costs just 4 cents per piece. "If you look across the world, there is a direct correlation between per capita GDP and spend on chocolate in every country," says Purohit. "So if you are going to make chocolate present and part of everyone's repertoire, then you have to make it affordable." He claims, however, that the company's gross margins in India "are not any worse off than other markets", despite having to increase the cocoa butter content in its milk chocolate formulations to help them withstand the Indian heat. In fact, Cadbury's 60-year presence in India has driven the growth of the country's cocoa production, and it can now meet 60% of cocoa demands at its five Indian factories from the domestic market. This long presence also means that "Cadbury_Dairy_Milk defines the taste of chocolate in the country", suggesting that a different recipe may take some time to develop fans. Companies like US chocolate giant Hershey, rumoured to be looking to enter the market, should perhaps take note. "The taste palate has to be developed over a period of time," Purohit says. "Having developed the taste over 60 years we have a tremendous advantage." Cadbury is certainly well ahead in the category, with a 72% share of India's IR12.3bn ($279m) chocolate market last year, compared to Nestlé's 24.7%, according to ACNielsen data. Cadbury also has an extensive sales network that reaches some 500-600,000 outlets directly and 1.5m outlets indirectly. But new entrants see an opportunity in the rapid development of India's retail market and Purohit agrees that this will really help the chocolate category take off. Currently most confectionery sales in India are made through traditional outlets like kiosks or small 'mom-and-pop' stores that stock the entire range of basic groceries. But brands like Cadbury's are set to perform better in larger retail formats, where there is space to stock an entire range of products and the display is 'more appetising'. "We see double the rate of sales in these formats than traditional trade outlets," says Purohit. In recent years, Cadbury has only made around 7% of its total sales in larger retailers but he believes this will increase to some 25% in the next five years. Euromonitor has predicted that India's retail market will grow by 28% between 2006 and 2010, with sales growing from US$80bn growing to US$103bn. "As India continues to grow and retail formats allow excellent placement and visibility of products, the chocolate confectionery market is only going to see exponential growth," says Purohit. "And we're well poised to take a large share of the growth given our position in the market."

The company is also looking to expand in other categories where competition is tougher, with the presence of international brands Wrigley, Perfetti and Lotte. Cadbury has increased its share of total confectionery products to 31% in the last year. About a quarter of its sales come from its Bournvita chocolate drinks while the rest is largely generated by chocolate and a few other confectionery lines. And the company is keen to add new products. Purohit concludes: "If you look at the kind of products we offer in the rest of the world that we don't already have here, this is an indication of where we want to go in India."

Cadbury UK firm Cadbury-Schweppes is currently the number one confectionery firm in Western Europe, holding 11.6 per cent of the market, as well as being number one in terms of global sales. The firm was originally established as a cocoa and chocolate firm in England in the late eighteenth century, but has now grown rapidly to encompass sweets, beverages and chewing gum, processed and sold all over the world. Cadbury's dominance can be attributed to a number of factors, Meade said. In particular, the company has completed several successful acquisitions in Asia and Eastern Europe. These include the successful bids for Japanese candy company Sansei Foods and Turkeybased Intergum. This year, the company has boosted profits with its very successful moves within the chewing gum market, and the company now claims to be number one in 18 of the top 50 gum markets worldwide. The company has also made some steps in the organic and premium chocolate markets with its acquisition of the Green & Blacks range, Meade added. Like many other successful companies, Cadbury has made conscious efforts to reorganise operations in Western Europe in order to keep costs down. Only this month, the company announced the closure of a factory in the UK in order to move production to Poland, while Cadbury is currently focusing on moving the main offices out of central London to a cheaper location. Cadbury are clearly determined to hang on to their number one spot. In fact, only last week the confectionery giant announced that it will demerge its €10bn beverage arm in order to focus on chocolate, sweets and gum. Nestle Unlike Cadbury, Switzerland-based food firm Nestle has a much wider product range that encompasses beverages, coffee, infant nutrition, ice cream, soup and health care, and it has lost 0.8 per cent of its market share since 2001. However, the company still holds the number two position in Western Europe with 9.1 per cent of the market share, thanks to successful sales of brands such as Milkybar, Kit Kat, Smarties Aero and Polo. According to Euromonitor, Nestle has been successful takeover bids in emerging markets, especially in Brazil. "Nestle's successful strategy, for instance, in Brazil, contributed to reinforcing the global standing of the swiss giant at a world level," Kazanchuk said.

However, Nestle has been much less proactive than other companies in acquiring organic chocolate subsidiaries, Kazanchuk added, "which might in the medium term put the company in a less robust position versus its more immediate competitors." The company is also heavily involved with research into foods that target the health and wellness trends, and is keen to involve chocolate, traditionally seen as fattening, in this category. For example, the company recently reformulated the Milkybar brand with all-natural ingredients, taking advantage of current concern for food additives.

CADBURY INDIA Cadbury India is a food product company with interests in Chocolate Confectionery, Milk Food Drinks, Snacks, and Candy. Cadbury is the market leader in Chocolate Confectionery business with a market share of over 70%. Some of the key brands of Cadbury are Cadbury Dairy Milk, 5 Star, Perk, Eclairs, Celebrations, Temptations, and Gems. In Milk Food drinks segment, Cadbury's main product - Bournvita is the leading Malted Food Drink in the country. Cadbury is the world's largest confectionery company and its origins can be traced back to 1783 when Jacob Schweppe perfected his process for manufacturing carbonated mineral water in Geneva, Switzerland. In 1824, John Cadbury opened in Birmingham selling cocoa and chocolate. Cadbury and Schweppe merged in 1969 to form Cadbury Schweppes plc. Milk chocolate for eating was first made by Cadbury in 1897 by adding milk powder paste to the dark chocolate recipe of cocoa mass, cocoa butter and sugar. In 1905, Cadbury's top selling brand, Cadbury Dairy Milk, was launched. By 1913 Dairy Milk had become Cadbury's best selling line and in the mid twenties Cadbury's Dairy Milk gained its status as the brand leader. Cadbury India began its operations in 1948 by importing chocolates and then re-packing them before distribution in the Indian market. Today, Cadbury has five company-owned manufacturing facilities at Thane, Induri (Pune) and Malanpur (Gwalior), Bangalore and Baddi (Himachal Pradesh) and 4 sales offices (New Delhi, Mumbai, Kolkota and Chennai). Its corporate office is in Mumbai. Worldwide, Cadbury employs 60,000 people in over 200 countries. Major Achievements of Cadbury • • • • • •

Worlds No 1 Confectionery company World's No 2 Gums company. World's No 3 beverage company. World's No 3 beverage company. Cadbury Dairy Milk & Bournvita have been declared a "Consumer Superbrand" for 2006-7 by Superbrands India. Cadbury India has been ranked 5th in the FMCG sector, in a survey on India's most respected companies by sector conducted by Business World magazine in 2007.

Cadbury reports higher net, sales Our Bureau MUMBAI, Oct. 31 CADBURY India Ltd has reported a net profit of Rs 21.62 crore for the third quarter period of June 17-October 6, 2002, compared to Rs 18.25 crore for the period June 18, 2001-October 7, 2001. Net sales increased to Rs 217.94 crore (Rs 196.41 crore). Sales increased by 11 per cent and profit after tax and before exceptional items increased by 12 per cent to Rs 21.44 crore (Rs 19.16 crore). Other income increased to Rs 2.66 cr (Rs 2.49 crore).

Financial statement Statement of Directors' responsibilities in relation to the Financial Statements The following statement, which should be read in conjunction with the auditors' statement of auditors' responsibilities set out in their report, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the auditors in relation to the financial statements. The following statement, which should be read in conjunction with the auditors' statement of auditors' responsibilities set out in their report, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the auditors in relation to the financial statements. The Directors consider that in preparing the financial statements the Company has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all accounting standards which they consider to be applicable have been followed. The Directors have responsibility for ensuring that the Company keeps accounting records which disclose with reasonable accuracy the financial position of the Company, and which enable them to ensure that the financial statements comply with the Companies Act 1985. The Directors have general responsibilities for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

competition The confectionery industry is highly competitive: the Group's brands compete with many other multi-national, national and regional companies in various markets. The Group competes actively in terms of quality, taste and price of products and seeks to develop and enhance brand recognition by introduction of new products, new packaging, extensive advertising and promotional programmes. We are the world's leading confectionery group by sales value (see table below). Chocolate confectionery is primarily a branded market. Four groups account for around 43% of the world market, each with market share built on regional strengths. Our 7.5% chocolate share is built on strong positions in the UK, Ireland, Australia, New Zealand and India. The sugar confectionery market is significantly more fragmented, with a greater presence of local and regional brands and private label products, but our 7.2% share makes us global market leader. Gum is also a branded market. It is more global in nature with brands and products more consistent across geographies. Two groups account for approximately 62% of the global total: our number two position is built on strong market shares in the Americas, parts of Continental Europe, Japan, Thailand and South Africa. 2005 $ Share Cadbury Schweppes Mars Nestlé Wrigley Hershey Kraft

Total 9.9% 9.0% 7.8% 5.8% 5.5% 4.3%

Chocolate 7.5% 14.8% 12.6% 8.2% 7.7%

Gum 25.7% 0.1% 35.9% 1.7% 0.5%

Candy 7.2% 3.0% 3.2% 2.7% 2.7% 0.4%

2005 £m

2004 (restated) £m

114 9 5,397 5,520

115 9 5,699 5,823

132 30 8 170

141 20 161

11 (2,159) 8 (118) (2,107) 3,413

(2,589) (190) (2,618) 3,205

Notes Fixed assets Tangible fixed assets Investments in associates Investments Current assets Debtors - Due within one year - Due after one year Cash at bank and in hand Creditors: amounts falling due within one year - Borrowings - Other Net current liabilities Total assets less current liabilities Creditors: amounts falling due after more than one year - Borrowings - Other Net assets Equity capital and reserves Called-up share capital Share premium account Revaluation reserve Other reserves Profit and loss account Equity shareholders' funds

4 5 5 6

11 9

(843) (100) (943) 2,470

(899) (5) (904) 2,301

12 12 12 12 12

260 1,135 1 542 532 2,470

259 1,098 1 624 319 2,301

MATHEW CADBURY - MANAGING DIRECTOR CADBURY INDIA TODAY….. • • • • •

Index stock on BSE and NSE. Rs. 15 billion market capitalisation. 48,000 + shareholders. 1,900 + employees Rs. 5,711 million sales in 2000 : 1. 76% Confectionery 2. 24% Food Drinks.

• •

Rs. 1,069 million PBDIT Rs. 2,345 million total assets.

OUR PLACE IN CADBURY SCHWEPPES GROUP • • • •

1.8% of group sales 1.2% of group net assets. 1.8% of group PBIT (Profit before interest and tax) Part of 'developing markets' region Full support from group. Branded Impulse Market includes Chocolates, Biscuits, Ice Creams, Salted Snacks, Soft Drinks

•

There are over 1.5 million retail outlets for FMCG in India. Over two-third of these stock branded impulse products, but fewer than 25% sell chocolate.

Branded Impulse Market •

Current chocolate value share of total impulse category is 6.1% (CIL 4.4%). Though this is relatively small, changing tastes and lifestyles of consumer offer tremendous scope for growth.

•

Chocolate confectionery is sold at premium in India compared to other branded impulse products.

Consumer - Growth Opportunities • • • •

Impulse snacking is an Indian habit. Attitude and disposable income changes are favourable to impulse foods. Large youth population, 47% of urban India is growing dominant chocolate consuming segment. Child and gifting segments expected to grow at faster rate.

•

Current low penetration of Chocolates 22% adults in urban India.

Creating Value in Future •

Effectively managing growth drivers 1. Gifting Child Connectivity and low end VFM. 2. New channels.

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Optimising manufacturing efficiencies. Aiming for best in class TMC in Cadbury Schweppes plc. (CS) for CDM and Eclairs.

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Competitiveness in logistics and distribution using IT.

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Exploiting mass media to create / maintain large brands. 10+% Advertising / Sales.

Cocoa Beans • • •

About half of requirements bought locally. "Forward" purchases in case of imports. "Cash on delivery" purchases locally 1. Purchase Price declared by CIL, giving fair price to farmer. 2. Long term relationship

•

Local cocoa area development in progress 1. Expansion 2. Better yields

Chocolate Imports • • • • •

Greater presence of imported products Low volume high trade margin segment Reducing restrictions and duties Threat as well as opportunity. CS International portfolio being evaluated.

Impact of WTO - Lifting of QRs •

Window of opportunity for importing from CS group companies. 1. Better cost effectiveness for trying new products 2. Possibility of providing huge variety

3. Good speed of response to consumer likings 4. Large opportunity in Sugar Confectionery category •

Opportunity limited by rate of import duties.

Our Vision • •

Cadbury in every pocket Superior shareholder value.

This Requires • • • • •

Broadening our consumer appeal and extending our reach to newer markets. Sustained growth of our market share through aggressive product development. Striving for international quality in our products and processes. Focussing on cost competitiveness, productivity and innovative utilisation of assets. Energising and developing our people.

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back GIRISH M BHAT, DIRECTOR ( FINANCE & COMMERCIAL)

Market Share Chocolates Sugar Confectionery Food Drinks

69.2% 4.0% 14.2%

Business Categories - Value Contribution per category Chocolates

64%

Sugar Confectionery

12%

Food Drinks

24%

Shift in focus from 1994

•

Chocolates segment have grown to 64% from 59%, Sugar confectionery has grown to 12% from 9%, Food drinks has fallen to 24% from 32%.

CIL in relation to Competition • • • • • •

Stronger brands in Chocolates Defining Chocolate taste Dominant Chocolate market shares First mover advantage Established distribution network. Aggressive market development

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Sugar Brand portfolio one among many 1. though dominant in Eclairs category 2. very strong price led competition

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Only one player (Nestle) who competes across all categories.

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Concentrated advertising campaign to ensure positioning and recall.

Increasing marketshare through •

Broadening consumer appeal 1. 4,50,000 outlets 2. 2,100 + distributors. 3. Strategy aimed at fostering new users 4. 8 million new consumers added in 2000.

•

Total now above 60 million

•

Aggressive product development.

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OVERALL FUTURE STRATEGY • • • • •

Focus on maintaining dominance on Chocolate Confy market and leadership in Brown Drinks. New growth drivers in new Choc consumer segments like Gifting, Child connectivity, low end VFM and new channels. Grow sales volume around 10% p.a. (avg) over next 3 years. Best in class TMC in CSplc for CDM and Eclairs. Launch of one new major product every year.

Market Statistics - Chocolates

•

Dominated by branded players

Market Size (Volume) Growth Rate (last 3 years) Cadbury's share

22,500 tpa 12% p. a. 69.2%

Focus areas for growth • • • • •

Impulse snacking Child connectivity Gifting New channels & Institutional sales Further improve quality of products.

SUGAR CONFECTIONERY Market Statistics - Sugar Market Size (Volume) Growth rate (last 3 years) Share of unorganised sector Cadbury's share

1,63,000 tpa 15% p.a. 1,00,000 tpa 4.0%

Growing marketshare • • • •

Optimum utilisation of distribution network and reach Introduce technologically differentiated value added sugar products Focus on quality and packaging Regular introduction of variants.

FOOD DRINKS Market Statistics - Food Drinks Market Size (Volume) Growth rate (last 3 years)

73,500 tpa 8.5% p.a.

Share of white drinks

68%

Share of Brown drinks

32%

Cadbury's share

14.2%

Current scenario • • •

No. 2 in food drinks market. Positioned on platform of 'taste and energy'. Associated with children through programs such as 'Bournvita Quiz Contest'.

Reaching one step up • • •

Extend positioning of 'taste and energy' to adults. Continue programs for associations with kids. Increase association with kids through website 'bournvita.com' 1. Games 2. Education and information.

2000 KEY FIGURES •

Sales value grew by 11.8% 1. On top of volume growth of 5.2% 2. Despite difficult market conditions.

•

This came through market expansion 1. Substantial increase in below line sales and marketing activities 2. Focused advertising 3. Launch of three new products a. Milk Treat b. Perk Slims c. Chocobix.

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PBDIT margin improved to 18.7% (up from 16.7%) through

•

Reduced material costs 1. By improved procurement of materials and reduced wastages 2. Reduced manufacturing costs 3. Reduced interest costs 4. By superior management of operating funds, working capital efficiencies and tight control over capital expenditure.

SUMMARY OF GROWTH RATES 1994-2000

CAGR last 6 years Sales

20%

Total Assets

14%

PAT before Exceptional items

26%

Dividends Paid

25%

Total Shareholder Returns

27%

Plans for near term future

• • •

Increase share in impulse category Introduce new product offerings to grow overall business. Enhance Chocolate Confectionery products offer to drive growths in wider consumer segments. Introduce differentiated value added Sugar Confectionery products. Enhance share in Food Drinks market. High focus on Economic Profit

•

To evaluate Company and Brands performance :

• • •

Drive low cost manufacturing Reduction in manufacturing costs Supply chain efficiencies Further reduction in material costs. Increase trading margin. Increase utilisation of assets Brands and production capabilities Keep Capex close to depreciation Further improvement in working capital norms. Effective use of properties Use of Information Technology for business improvement and reducing costs. Web enabled SCM. Enhancing organisational capability through people Training and development Sharpening culture workshops Performance linked incentives for managers People care index measurement. Generation of surplus cash. Improved returns to shareholders. Some recent business improvement projects

•

Inhouse projects teams of senior managers have been working closely with CS Group and some well known consultants to 1. Identify new growth opportunities 2. Improve manufacturing costs and supply chain processes. 3. Effectively use of information technology.

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QUESTION & ANSWER SESSION •

Company is cutting down costs so that it would like to be best in class when compared to world class companies so that it would like to internationally cost competitive in next 3 years even at zero import duty from current level of 50%.

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Business challenge is non-improvement in domestic market and increasing material costs. If this happens, margins will fall.

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International products are imported by under-invoicing so as to reduce import duty. This has created low imported product costs when compared to locally manufactured goods.

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Cocoa is important raw material for company. 40-50% is imported while balance is locally procured.

•

Other brands except Cadbury Diary Milk has not grown that well.

•

In sugar confectionery also except Éclair, none of new launches in last 3 years have fared well.

he country's largest-selling chocolate manufacturer Cadbury India Ltd said on Wednesday it is now back on the track with growth rates going back to the days before it received a setback in the market following large-scale complaints of infestation of its products in the market place last October. It has imported machinery for auto-wrapping and put in place a new packaging system designed to keep infestation at bay and a comprehensive quality control audit that continuously monitors its retail network to ensure proper handling of products. Senior company officials who spoke to reporters at its Indur plant, 50 km outside Pune city said the company, which recorded loss in sales of an estimated Rs 70 crore immediately after the peak-Diwali season reports of infestations of its products, is now showing healthy growth and said turnover this year will exceed Rs 720 crore it recorded last year. "The incident affected the chocolate category as a whole but we are maintaining our 6770 per cent market share," Sharad Gangal, General Manager, HR, said. The other players in the market comprise Nestle, which has an estimated 29 per cent share, and the remaining 1 per cent shared by Amul and a host of regional level players. Armed with a new, air-tight packaging that is now exclusive to only Cadbury products in India and a system that trains its retailers and sales people on proper storage and handling of the product, the company is now revving up to sweeten up its sales with the onset of the festive season that begins with Raksha bandhan and continues till the New Year. "We spent over Rs 8 crore in importing auto-wrappers for the new packaging, introduced new foil and poly-laminated packaging and have incurred over Rs 4.5 crore in additional input costs per annum and are now confident that the packaging is infestation-proof," Gangal said. The company has also, simultaneously, activated a consumer grievance redressal cell.The company now seems all set to pip competitionwith a first mover advantage in the white and brown chocolate combo category. It is in the process of launching the `two-in-one' in bar and marble form under its popular Dairy Milk brand. The company is also seeking an entry into the fast-growing `bag snack' category with Bytes, a chocolate-inside-a wrapper-snack. While the two-in-one chocolate will be made at the 5.5 lakh capacity/day Indur plant, the wafer snack will be made at its Hyderabad and Warana plants and other multiple locations because of the fragile nature of the product. Meanwhile, the company is in the process of setting up a new plant at Baddi in Himachal Pradesh which will initially manufacture 1,000 tonnes/day of its malt-based drink,

Bournvita, Gangal said. Cadbury already has three existing manufacturing facilities at Thane, Indur and Malanpur (Gwalior) in additional to third party operations. The Pune plant manufactures 13,000 tonnes of `crumbs', that go into making chocolate at all its facilities. Cadbury India manufactures 17,000 tonnes of chocolate annually. Cadbury officials said the company sells 10 lakh bars of chocolate every day. Cadbury is now rearing to go again - home/eq.mktng The country's largest-selling chocolate manufacturer Cadbury India Ltd said on Wednesday it is now back on the track with growth rates going back to the days before it received a setback in the market following large-scale complaints of infestation of its products in the market place last October. Cadbury, packaging, FMCG The country's largest-selling chocolate manufacturer Cadbury India Ltd said on Wednesday it is now back on the track with growth rates going back to the days before it received a setback in the market following large-scale complaints of infestation of its products in the market place last October. It has imported machinery for auto-wrapping and put in place a new packaging system designed to keep infestation at bay and a comprehensive quality control audit that continuously monitors its retail network to ensure proper handling of products. Senior company officials who spoke to reporters at its Indur plant, 50 km outside Pune city said the company, which recorded loss in sales of an estimated Rs 70 crore immediately after the peak-Diwali season reports of infestations of its products, is now showing healthy growth and said turnover this year will exceed Rs 720 crore it recorded last year. "The incident affected the chocolate category as a whole but we are maintaining our 6770 per cent market share," Sharad Gangal, General Manager, HR, said. The other players in the market comprise Nestle, which has an estimated 29 per cent share, and the remaining 1 per cent shared by Amul and a host of regional level players. Armed with a new, air-tight packaging that is now exclusive to only Cadbury products in India and a system that trains its retailers and sales people on proper storage and handling of the product, the company is now revving up to sweeten up its sales with the onset of the festive season that begins with Raksha bandhan and continues till the New Year. "We spent over Rs 8 crore in importing auto-wrappers for the new packaging, introduced new foil and poly-laminated packaging and have incurred over Rs 4.5 crore in additional input costs per annum and are now confident that the packaging is infestation-proof," Gangal said. The company has also, simultaneously, activated a consumer grievance redressal cell.The company now seems all set to pip competitionwith a first mover advantage in the white

and brown chocolate combo category. It is in the process of launching the `two-in-one' in bar and marble form under its popular Dairy Milk brand. The company is also seeking an entry into the fast-growing `bag snack' category with Bytes, a chocolate-inside-a wrapper-snack. While the two-in-one chocolate will be made at the 5.5 lakh capacity/day Indur plant, the wafer snack will be made at its Hyderabad and Warana plants and other multiple locations because of the fragile nature of the product. Meanwhile, the company is in the process of setting up a new plant at Baddi in Himachal Pradesh which will initially manufacture 1,000 tonnes/day of its malt-based drink, Bournvita, Gangal said. Cadbury already has three existing manufacturing facilities at Thane, Indur and Malanpur (Gwalior) in additional to third party operations. The Pune plant manufactures 13,000 tonnes of `crumbs', that go into making chocolate at all its facilities. Cadbury India manufactures 17,000 tonnes of chocolate annually. Cadbury officials said the company sells 10 lakh bars of chocolate every day.

Effectiveness of brand repositioning S. Ramesh Kumar If a brand does not reposition at the right time, it may not get a second chance.

La-ira-ela ... what appeared to be a typical remix from Channel V turned out to be advertising repositioning the soap brand Liril. The commonality which the latest advertisement has with Liril's launch advertisement that appeared in the mid-Seventies is its permissiveness: what is perhaps important to the current one is whether it can recreate the "magic of lemony indulgence" ushered in by the launch advertisement, along with its permissiveness. Close-up's lemony variant is attempting the nostalgic route to repositioning itself. The brand has been attempting several repositioning strategies in the recent past. Cadbury successfully repositioned its mould (milk chocolate) variant during the mid-Nineties, even managing to change the target segment for the variant — a very difficult task for marketers operating in any kind of market. The body of knowledge concerning brand repositioning is unfortunately not vast but the concept is receiving increasing attention with the proliferation of product categories and brands. With brand equity being the driving force behind brands, the ones which are strongly established either in terms of consumer preferences or in terms of recall are under pressure to create a roadmap which will lead to effective repositioning. Why brand repositioning?

Brand repositioning is required because of several reasons: When new offerings flood the market, the superiority of the established brand has to be re-emphasised The established brands may not be able to offer either the same features or the variants that are being offered by the new brands (Ambassador and Robin Blue). Hence, there is a need for them to reposition themselves in a timely manner, relying more on the consumer goodwill they enjoy or by exploring ways to appeal to the consumers When a contemporary image is required in some categories because of changing psychographics When brands desire to change their target segment (rarely) When brands want to communicate improved offerings When motivation to buy products in the category is low Timely repositioning Contemporary perception could involve either the image or superior functional utility. Iodex was almost the unassailable leader for several years in the pain balm market but was forced to reposition itself by Moov, which made rapid strides. Dove is repositioning itself as a superior soap with moisturisers (as against its previous `trial for results' positioning). Vim Challenge was a response to several regional brands emerging in the dishwash market. Esteem's "Shall we go for a drive, please?" campaign (where the son hopes his dad's pleasure at the ride in the car will overshadow his poor marks) was triggered by the various offerings which entered the mid-segment passenger car market. If repositioning is not attempted by a brand in a timely manner, the brand may not get a second chance. The powerful positioning of economy by the no-frills Maruti 800 during the mid-Eighties could have been pre-empted by Ambassador, not necessarily by the same economy proposition: Ambassador even today is widely acknowledged as a comfortable car for Indian roads and is also known for its space. Some of the recent offerings in the passenger car market today use this as a strong proposition. The brand could have used this effectively to create a favourable perception of itself. Maruti 800 became almost a legend as much known for derailing Fiat and Ambassador as it is for its fuel economy. Even in fast moving consumer goods involving mundane household products, timely repositioning matters. The Ujala brand of blue used to whiten clothes made history with its liquid variant. The pioneering (and the brand which held the dominance for years) Robin Blue had a powder variant before Ujala was introduced. Powerfully repositioning Robin Blue (even before introducing the liquid variant as a follower) might have reduced the impact of the new entrant because of the favour and trust Robin Blue enjoyed with consumers. Burnol, the antiseptic cream for burns (it did attempt some sporadic repositioning exercises) no longer seems to occupy the same space in the consumer's mind. Women continue to cook as before and probably mostly in a hurry to catch up with the pressures

of life. Burnol being a handy brand to overcome the inevitable small burns could have been a probable proposition to reposition it. With several categories jostling for consumer mindspace, there is a relevant proposition required for a brand in the `small burns category' to get into the considerations set of consumers. The timing of repositioning (in such cases) should be worked out to ensure that the category does not fade from the consumer's mind because of a number of other categories emerging to create generic competition in terms of the share of consumer's wallet. For example, a brand traditionally used for burns may be forgotten because of several categories of products and offerings like a cream for heels, herbal antiseptic ones for multiple injuries and corn caps. Forhans toothpaste, Zambac and Saibal multipurpose antiseptic ointments, Eno's for acidity relief, Waterbury's Compound for `after-cough' recovery and Crook's Lactocalamine lotion are some of the brands of yesteryear which could have maintained their dominance of the consumer's memory with appropriate repositioning strategies. Contemporary image This matters in some categories which are conspicuous in terms of consumers' usage and observation. With changing lifestyles and nuclear families in urban markets (especially in the upmarket segments), the role of the male in the family is undergoing a change. The `relationship' repositioning of Raymond is a good example of a brand coming to grips with the changing psychographics of the target segment. Fair and Lovely's repositioning as a brand for the aspiring girl making a mark in a male-dominated world (woven around the cricket commentator commercial) too is one such example. Pepsodent's commercial in which the mother scolds her child for snacking and establishes the brand as a protector of teeth is associated with traditional habits which have been highlighted to create a realistic association between the brand and the target segment. Product/brand attribute relevance to the habit of the user (children) and the buyer of the category (concerned mother) has been used to reposition the brand. Lifebuoy's repositioning on health based on hygiene is an attempt to take into consideration the priorities consumers place on heath in a deteriorating environment — one of the issues raised frequently by mass media and consumer groups. Changing the target segment It is difficult for an established brand to change its target segment overnight because of the prolonged associations and perceptions related to imagery and price. However, there have been rare instances of a brand repositioning itself for a new target segment. Cadbury, in an effort to make chocolates appeal to adults, created the repositioning around `spontaneous joy' (the girl's dance in the cricket field) and since then the mould version of its offering continues to be positioned for adults. With the company offering different offerings for different segments, the strategy for the mould version

synergises with the overall strategy of the brand. Timex, which was targeting the lowerend watch market when it entered India, has introduced expensive watches with high technology at the higher end of the market. Technology, with its rub-off on the product's attributes, could be a powerful factor in moving a brand from lower to higher segments. Changing the target segment for an established brand is a delicate marketing exercise and several aspects of marketing mix elements are involved. These are important from the viewpoint of consumer perception. Bata, during the Nineties started dealing with designer brands: it had developed the Power brand for youth and a number of offerings for middle-class consumers. In the recent times, it has segmented its retail outlets into discount outlets and higher-end ones. In such a situation, it may be difficult for the brand to reposition itself with a clear association. Communicating the newness can be seen in the `new, `improved' versions of old established brands. The point that is important in such a positioning is that consumers should be able to relate to the improved claims made by the brand. If Rin is repositioned to provide extra whiteness, the attribute should be recognised by consumers. Decisions concerning repositioning A brand need not always rely on repositioning: the decisions are related to the strength of the company, competitive context and consumer perception. A brand could create several sub-brands over a period of time in tune with the changes in the environment. Hero Honda, after the success of its CD 100 almost two decades ago, continues to hold sway over the market by creating several sub-brands each distinctive from the other. It created SS, Passion and Splendor with differing appeals. Sometimes, a premium offering needs to be repositioned when consumers become more receptive to the brand over a period of time. Colgate Total, one such offering, was initially positioned on multiple benefits but later, the same benefits were positioned with the `12-hour protection' proposition. Brand positioning and repositioning deals with the mind of consumer. Brand repositioning is more complex as it has to take into account the perception already created in the consumers' minds.

Cadbury sales take a beating PUNE: The retail offtake of Cadbury products, especially the Dairy Milk brand, has dropped by 40 to 50 per cent in the city since the Maharashtra Food and Drugs Administration confirmed infestation of worms in some packs. The company, however, believes that its current efforts at building awareness among the retailers is actually helping its sales pick up again. Interestingly, the loss of Cadbury has been the gain of imported chocolate brands like Toblerone, Ferrero, Arcor Rocher and Raffaello and not of other Indian brands like Nestle and Amul. “We expect the incremental sales during this month, which mainly come from the special festival packs, to be the same as last year as the confectionery company does not publicise the Dairy Milk brand on the celebration pack,” said Devanand Shenoy, head of purchase, Foodworld. The grocery retail chain of the RPG group registers sales of Cadbury products of around Rs 2.5 lakh per month among its seven outlets in the city, 40 per cent of which used to come from Dairy Milk. This figure goes up to Rs 3.5 lakh during the festive season. In the last two months, since the first worm controversy broke, Foodworld has recorded a 40 per cent drop in its Dairy Milk sales in Pune, but the sales of other chocolate-coated brands of Cadbury have actually gone up by 15 per cent, Shenoy told TNN. Grocery retail chain Homeland Shopping Centres Pvt Ltd, which has 12 franchisees in the city, also saw a drop of around 20 per cent in its Cadbury sales last month. “I sell 30 packs of Arcor chocolates per day, compared to the 10 I did last year,” said Rajeev Sarin, director, Himalaya Shopping Centres Pvt Ltd, a franchisee of Homeland in Pune Camp. According to Subhash Mehta, proprietor of S. Mahindra Kumar, a leading Cadbury distributor in the city, the dealer offtake is almost the same as last year. “But we have to wait and watch the retail offtake, which mainly happens on the last two days of Diwali,” he said. According to him, the company had immediately removed from the market the tainted batch of Dairy Milk, which was receiving consumer complaints, and replaced it with new stock. His family owns four of the nine Cadbury distributorships in the city and has over 40 per cent share in the Rs 1-crore-plus Cadbury chocolate market in Pune. “We are doing well now, considering that the Cadbury name has 50 years of trust behind it. Moreover, public memory in India is very short,” said Deepak Banerjee, area sales manager of Cadbury India. Though the days of customers asking “Kya chocolate mein keeda hai” (Is there a worm in the chocolate) are not fully behind Cadbury, its project, Vishwas, launched to build awareness among retailers about storage requirements, seems to be paying off. For, even a small chocolate retailer like Dilip Jadhav, proprietor of Greetwel, says: “Chocolates should not be stored with grocery items as they may get infested with worms. They must be stored in dispensers and visi-coolers.”

No worms in chocolates, says Cadbury MUMBAI: Cadbury India Ltd said on Tuesday that chocolate samples at its factories were free of any "infestation" after Maharashtra health officials said they found dead and live worms in chocolates picked from a store here. "We have checked all samples of Cadbury dairy milk Chocolate at the factory and have found them to be of good quality and free of any traces of infestation," Cadbury India sales and markets director Vidyut Arte said in a statement. Cadbury issued the statement after officials at the Maharashtra food and drug administration said tests confirmed that worms were present in Cadbury chocolates taken from the small suburban store. The state government lab conducted the tests following complaints by a group of people about live worms in chocolates bought from the store. Arte said Cadbury India learned about the laboratory report through local media reports.

Govt plans to prosecute Cadbury MUMBAI: The Maharashtra Food and Drugs Administration has decided to prosecute Cadbury India Ltd after finding two dead worms and one live worm in its chocolate bars, FDA commissioner Uttam Khobragade told TNN on Monday. Cadbury India has contested the findings. The FDA has tested a few bars of Cadbury chocolate at the public health laboratory and found the contents classify as adulteration under the Prevention of Food Adulteration Act, Khobragade said. The prosecution will be launched in a week. Khobragade said the FDA had advised the company to change its packaging for chocolate products as ''it leaves room for air to get in''. He said the FDA had suggested it should seal all its chocolate products the way it does for its ''5-Star'' brand. C

Cadbury India Q1 net up 8.87% mumbai: confectionery major cadbury india has posted a 8.87 per cent increase in net profit at rs 13.49 crore for the first quarter ended march 31 as compared to rs 12.39 crore in the same period previous year. net sales for q1 were at rs 159.68 crore as against rs 149.91 crore in the fourth quarter of fy-01, managing director bharat puri said in a release here on monday. the exceptional items for the current quarter include rs 22 lakh toward refurbishment of the registered office and rs 63 lakh towards voluntary retirement scheme, he said. the company has engaged in the foods business, which is its only business segment. the geographical segementation was insignifcant as exports were less than two per cent of the cadbury's turnover. the total capital employed at end of q1 fy'02 was rs 283.67 crore, the release said. cadbury schweppes plc along with two of its subsidiary companies recently made a voluntary offer for purchase of upto 49 per cent equity shares held by the public in the company at rs 500 per share. the offer commenced on january 2002 and closed on february 22, post closure of the offer the shareholding of cadbury schweppes companies stands at rs 90.24 per cent of the paid-up share capital of the company. the company works 13 periods of four weeks each, basis per annum, the release added.

Cadbury net up 23.09 pc at Rs 73.51 cr MUMBAI: Cadbury India has posted a 23.09 per cent increase in its net profit at Rs 73.51 crore for 2002 as compared to Rs 59.72 crore in 2001. The board, which met on Friday, has recommended a dividend of Rs 2 per share for 2002 as against Rs 6 last year. Sales during this period grew by 9.73 per cent to Rs 687.3 crore in 2002 as against Rs 626.32 crore in 2001, while other income for last year was up at Rs 19.92 crore as compared to Rs 9.03 crore the previous year. The net profit for the fourth quarter was higher at Rs 18.6 crore as compared to Rs 16.62 crore in 2001 while net sales also grew to Rs 186.11 crore as against Rs 161.51 crore, in 2001, the release said. The company spent Rs 1.31 crore towards the voluntary retirement scheme. Cadbury Schweppes Overseas Ltd UK and Cadbury Schweppes Mauritius Ltd currently hold 94.5 per cent of the company's equity shares after the closure of the final open offer to purchase its equity held by the public. Upon the closure of the initial offer, the company applied for delisting of its equity shares from the Bombay and National Stock Exchanges. Consequently the company scrips have been delisted from BSE on January 20, 2003 and from NSE on February 7, 2003, the release said, adding it would keep the exit option open till January 19, 2004 for the balance shareholders to exit from their holding at Rs 500 per share.

After worms, company plans better packaging MUMBAI: Cadbury India has decided to go in for better packaging to tide over ‘worm sightings’ being reported by consumers from all over the state. The company’s move to change its packaging from a wrapper to a heat-sealed pack may cost a few crores of rupees annually. Cadbury has maintained that improper storage, and not its factory conditions, has been responsible for the continuing episodes of worm infestation in its chocolates. However, it has now accepted the Food and Drugs Administration’s suggestion to package its products differently to reduce the incidence of infestation. Cadbury currently packs its milk chocolates with a foil and a slip-in sleeve. According to an industry insider, the packaging costs about 25 paise per bar of chocolate, while heat-sealed packaging will cost about 65 paise.And considering that Cadbury chocolates sell one million pieces a day, repackaging will be a tall order for the company. Amul, a smaller player in the market, heat-seals its chocolate. Amul India’s assistant general manager Ramesh Barath said, “We take two precautions in our packaging to make sure worms don’t get to creep in from any side. After the bars come out of the production line, the foil is pressed in by a machine and the bars go into a cardboard carton, that forms the second proofing layer.’’ In addition to packaging, storage conditions are equally crucial for chocolates. Therefore, companies prescribe a certain temperature and separation from otherCadbury says its chocolates should ideally be stored at between 18 to 22 degrees Celsius whereas Amul recommends 15 degrees Celsius for its products. “The Cadbury chocolate is designed for our tropical conditions with less milk fat, and melts only at 26 degrees,’’ said managing director of Cadbury India Bharat Puri. However, these prescriptions melt in the face of market forces, as most retailers cannot afford to keep chocolates in refrigerated luxury. Intriguingly, there are no norms governing storage facilities at a retail outlet. The rules that directly apply at the point of sales are the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, but these govern quantity alone. The Prevention of Food Adulteration Act 1954 expects the state government to exercise vigil to ensure that all food articles are subject to regular checks. In Maharashtra, the FDA is entrusted with this job.

COMPETITORS OF CADBURY Cadbury India is in the midest of a strategy overhaul, but its future depends on how it keeps competitor Nestle at bay. Shareholders of the Rs 428-crore confectionery manufacturer Cadbury India Ltd must be a happy lot. From the Rs 200 levels the stock was trading at a year ago, it is today quoting at Rs 770. The soaring share price reflects the sustained improvement in the company`s bottomline in the past two years. But managing director Rajeev Bakshi feels that the company has to do much more to keep its shareholders happy. The last time the company went into overdrive was in 1991-92, when Nestle launched its chocolates in the Indian market. Till then Cadbury had been the undisputed leader of the business in India. To ward off competition, Cadbury changed the rules of the game by targeting its largest brand, Cadbury`s Dairy Milk, at adults. It was a prominent shift, with a new campaign, expensive packaging and new products. The move helped keep Nestle at bay for two-and-a-half years. Cadbury held on to its marketshare of 76 per cent against Nestle`s 10 per cent till 1996. But that was then. Today, for the second time in less than a decade, Cadbury India is in the middle of another strategy overhaul. Bakshi is busy rallying his employees around parent Cadbury Schweppes vision -- superior shareholder value and a Cadbury in every pocket. An unintended consequence of this exercise is that it brings the Indian company closer to the parent. The route to maximise shareholder value is to raise financial performance by improving the way the company manages its business and sharpening the corporate culture. The attempt there is to involve the entire company. Getting the entire system to move towards a higher aspiration, is much better than telling my finance or marketing guy to achieve separate goals, says Bakshi. Three sets of activities have been identified to increase the tempo within the company. One big areas is to focus on the viability of new projects. The idea here is to ensure that each project investment is viable vis-a-vis capital costs. The second big areas is performance. The overriding performance matrix is economic profitability. For the analytically inclined, economic profitability is net operating profit after tax minus the post tax cost of capital employed. In the third area life four big HR initiatives -- raising the bar of performance, sharpening the culture and leadership capabilities, and linking rewards to the new performance matrix. Unless we have people in the organisation who are there with the right competencies, the organisations does not move forward. According to Hozefa Topiwalla, analyst at ASK-Raymond James, The new strategy looks at all areas of business. They are taking each product and seeing which one gives value and which one doesn`t. The company will phase out products that don`t add any value to it bottomline. When Bakshi was appointed managing director last April, he threw the entire company behind each of the company`s businesses -- chocolates, brown drinks and sugar confectionery. From last July to March this year, the company was focusing on chocolates, which is the number one business in terms of economic profitability. This when the parent is the world`s largest manufacturers of sugar confectionery. Chocolates contribute 55 per cent to the company`s turnover. Last year the company launched three new brands -- Picnic (a chocolate bar with raisins, wafer and caramel) Gold (Cadbury`s Dairy Milk with a soft centre launched to commemorate the company`s golden jubilee) and English Toffee (a chewy toffee). To reach out to the mass consumer, the company took the market by storm by its small pack strategy with chocolates priced at Rs 3-5 with even its new launches such as Byte (a strawberry flavoured candy). What is important here is that this strategy was in line with its vision of a Cadbury in every pocket.

The strategy seems to have paid off. Today the company holds a 70 per cent share of the chocolates market with closest competitor, Nestle holding a mere 13 per cent. However, according to analysts, Cadbury can`t afford to be complacement as Nestle is likely to follow Cadbury into the low unit pack segment as its (Nestle`s) parent is keen on making chocolates a key area in the Indian market. From March this year, the focus moved to the brown drinks business and Bournvita. (The brown drinks business contributes 20 per cent to the company`s turnover.) In the recent past in the malt beverages market, the browns have been under pressure from the whites, with the whites gaining marketshare at the expense of browns. Brands like SmithKline Beecham`s Horlicks benefited from this trend. Bournvita`s closest competitor is Nestle`s Milo. While Milo marginally ate into Bournvita`s marketshare, most of it was lost to white drinks like Horlicks. Horlicks with its nutrition plan advertisements proved to be a tough competitor for Bournvita. Milo`s entry further affected Bournvita`s growth. Early this year, Bournvita`s marketshare dropped to 12 per cent. Given the fact that Bournvita was the next big brand after Cadbury`s Dairy Milk chocolate, it was important for the company to capitalise on the brand. The focus on Bournvita over the past four months has been quite aggressive. Bournvita was relaunched in March this year and repositioned as a nutritional drink, as against a health drink it was earlier positioned as. This pitches the brand against white beverages such as SmithKline Beecham`s Horlicks and Heinz Complan, which share 70 per cent of the malted beverages market in India. With its new positioning, Bournvita could regain the marketshare it lost of Horlicks and Milo. So growth in this segment is expected to be high, says Topiwalla. In the past three months Bournvita has gained 3 per cent marketshare and is today at 15 per cent. In India, the sugar confectionery market is a very diffused market and each category is defined at one`s whims and fancy. For instance, Cadbury`s Eclair could be defined as a confectionery or as a toffee. While Eclairs has been in the market for years, as a holistic business the sugar confectionery area is relatively new for Cadbury India. This business contributes 23 per cent to the company`s turnover. The company has two brands in this segment -- Eclairs and Googly. The sugar confectionery market, in value terms, is three times the size of the Rs 800-crore chocolate market. So it made sense to enter the market. Cadbury India held back all this while, despite its parent being the world`s largest manufacturer of sugar confectionery, because products in this category have been traditionally reserved for the small scale sector. It continues to be reserved for the small scale sector. Against this background when you enter a segment that is reserved fro the small scale sector, you are up against players who follow very different business systems. For example, a player like Nutrine or Parle, operate on a certain net sales value per tonne with different cost structures, advertising to sales ratios and profit profile. This business system did not fit into our existing business systems, that is chocolates both the cost structures are based on very different paradigms, says Bakshi. So unless we had the wherewithal to actually add value through manufacturing and thereby have a different cost structure, we just could not have a go at it, he adds. Googly was primarily launched to get our feet wet and to ascertain how to do business in the sugar category, says Bakshi. According to another analyst who has been tracking the company. The strategy of introducing a slew of new products and taking price increases in the products is apparently paying off. For the first half of this calendar year, the company reported sales of Rs 175.90 crore. Net profits stood at Rs 10 crore. Total expenditure at Rs 180 crore includes Bournvita relaunch activities. The company has been systematically repaying its debt, hence reducing its interest costs. For the year ending January 1999, turnover stood at Rs 431 crore. Net profits stood at Rs 26.02 crore.

Bakshi says he has big plans for Cadbury`s sugar confectionery portfolio and will be launching two new brands by the end of the year. For calendar year 1999, Ask-Raymond

James analyst Topiwalla projects an 18.6 per cent growth in the company`s net revenues to Rs 504 crore. And a 55 per cent growth in net profits to Rs 40.3 crore. But Bakshi is more concerned about maximising shareholder value. In terms of economic profit performance, at 18-20 per cent he feels the company is a bit behind their peer group who would be doing 25-30 per cent. So the attempt clearly is to move up and be at respectable numbers, if not exceed in terms of economic profitability. Let`s hope he succeeds his job on the line. Cadbury second plant under watch Mumbai - Cadbury India`s second plant in Maharashtra is now under the lens of Maharashtra`s food and drugs administration. Cadbury Dairy Milk is mainly manufactured at Cadbury`s factories in Talegaon near Pune and Thane, which cater to the entire country. The company`s chocolates reach over 650,000 retailers directly and indirectly. The FDA started inspecting Cadbury India`s plants after worms were allegedly found in a Cadbury Dairy Milk chocolate bar. The chocolate bar was produced at Cadbury`s Talegaon plant. The FDA has also sent the allegedly contaminated pieces for testing at its laboratories. The revenue and the bottom line of the local arm of British confectionery and beverages giant Cadbury Scheweppes could take a hit if the FDA decides to initiate action against it. Cadbury Dairy Milk, the flagship brand, contributed about 30 per cent to the company`s Rs 687.30 crore turnover in 2002. Cadbury India is the market leader with brands like Dairy Milk, Five Star, Perk and Gems, with a market share of over 65 per cent. Cadbury Dairy Milk has a 30 per cent share of the packaged chocolate market. After the discovery of the infested bar from batch number 28F311, the company checked the factory samples of this batch and found them to be of good quality and free of any traces of infestation, the company said.

India among Cadbury's top 12 global markets NEW DELHI: There could be a lot more sweet moments for Indian consumers. The UKbased chocolate, confectionery and beverages major Cadbury Schweppes has identified India among its top 12 focus markets globally, in an announcement made last week. Under a new management structure which would emerge following the proposed demerger of its beverages arm Americas Beverages into a separate company, the Cadbury Schweppes management announced last week that its commercial strategy would hinge on ‘fewer top markets and brands’. The Rs 1,058-crore Indian subsidiary, along with the UK, US, Australia, Mexico, Brazil, Russia and Turkey, now represents around 70% of Cadbury Schweppes’ global revenues. This, despite beverages brands such as Schweppes, Snapple and Dr Pepper not having a presence in India. The 12 core markets have been forecast to account for growth in excess of 60% over the next five years. Cadbury India, growing in double digits the past two years, has forecast a healthy 2007 riding on the back of factors such as sharper focus on core brands, product rationalisation and working closely with trade channels.

The Indian subsidiary, which now operates under five categories –- chocolates, snacks, beverages, candy and gums being the newest, is learnt to be in the process of pushing products in categories other than chocolate where it is a dominant player. Of Cadbury Schweppes’ 13 focus brands clocking above average revenue growth and operating returns, two are in India as of now — Cadbury Dairy Milk and Halls. But sources say it’s a matter of time before Cadbury India brings brands such as Trident and Dentyne gums, and Flake chocolates into India, Trident being the front-runner. The 13 focus brands make up for over 50% of Cadbury Schweppes’ confectionery revenues. With Cadbury Dairy Milk, Five Star, Perk and Celebrations in its portfolio, the company leads the Rs 1,500-crore organised chocolate market with a 72% value share as per AC Nielsen data. However, it trails rivals in other categories. In beverages, for example, Cadbury’s Bournvita occupies second slot behind Glaxo Smithkline’s Horlicks. It’s other beverage brand, Delite, was pulled off shelves following weak offtake. The company recently re-entered the gums category with Bubbaloo. It’s earlier foray in chewing gum through Bilkul did not work and the brand was subsequently discontinued. In snacks, Cadbury has one brand — Bytes — as of now, and its candy basket has two brands — Halls and Eclairs. At the global level, the demerger process separating the beverages arm from confectionery is expected to be completed by the second quarter of 2008. It will result in the formation of two companies — Cadbury Plc holding the Group’s confectionery business, and CSAB Inc which will hold the Americas Beverages business. Elaborating on its decision, Cadbury Schweppes announced: “To help drive further revenue growth under a new category management structure, we are focusing our resources on fewer number of markets, brands and customers.”

PUSHING AHEAD Cadbury India is in the midest of a strategy overhaul, but its future depends on how it keeps competitor Nestle at bay. Shareholders of the Rs 428-crore confectionery manufacturer Cadbury India Ltd must be a happy lot. From the Rs 200 levels the stock was trading at a year ago, it is today quoting at Rs 770. The soaring share price reflects the sustained improvement in the company`s bottomline in the past two years. But managing director Rajeev Bakshi feels that the company has to do much more to keep its shareholders happy. The last time the company went into overdrive was in 1991-92, when Nestle launched its chocolates in the Indian market. Till then Cadbury had been the undisputed leader of the business in India. To ward off competition, Cadbury changed the rules of the game by targeting its largest brand, Cadbury`s Dairy Milk, at adults. It was a prominent shift, with a new campaign, expensive packaging and new products. The move helped keep Nestle at bay for two-and-a-half years. Cadbury held on to its marketshare of 76 per cent against Nestle`s 10 per cent till 1996. But that was then. Today, for the second time in less than a decade, Cadbury India is in the middle of another strategy overhaul. Bakshi is busy rallying his employees around parent Cadbury Schweppes vision -- superior shareholder value and a Cadbury in every pocket. An unintended consequence of this exercise is that it brings the Indian company closer to the parent. The route to maximise shareholder value is to raise financial performance by improving the way the company manages its business and sharpening the corporate culture. The attempt there is to involve the entire company. Getting the entire system to move towards a higher aspiration, is much better than telling my finance or marketing guy to achieve separate goals, says Bakshi. Three sets of activities have been identified to increase the tempo within the company. One big areas is to focus on the viability of new projects. The idea here is to ensure that each project investment is viable vis-a-vis capital costs. The second big areas is performance. The overriding performance matrix is economic profitability. For the analytically inclined, economic profitability is net operating profit after tax minus the post tax cost of capital employed. In the third area life four big HR initiatives -- raising the bar of performance, sharpening the culture and leadership capabilities, and linking rewards to the new performance matrix. Unless we have people in the organisation who are there with the right competencies, the organisations does not move forward. According to Hozefa Topiwalla, analyst at ASK-Raymond James, The new strategy looks at all areas of business. They are taking each product and seeing which one gives value and which one doesn`t. The company will phase out products that don`t add any value to it bottomline. When Bakshi was appointed managing director last April, he threw the entire company behind each of the company`s businesses -- chocolates, brown drinks and sugar confectionery. From last July to March this year, the company was focusing on chocolates, which is the number one business in terms of economic profitability. This when the parent is the world`s largest manufacturers of sugar confectionery. Chocolates contribute 55 per cent to the company`s turnover. Last year the company launched three new brands -- Picnic (a chocolate bar with raisins, wafer and caramel) Gold (Cadbury`s Dairy Milk with a soft centre launched to commemorate the company`s golden jubilee) and English Toffee (a chewy toffee). To reach out to the mass consumer, the company took the market by storm by its small pack strategy with chocolates priced at Rs 3-5 with even its new launches

such as Byte (a strawberry flavoured candy). What is important here is that this strategy was in line with its vision of a Cadbury in every pocket. The strategy seems to have paid off. Today the company holds a 70 per cent share of the chocolates market with closest competitor, Nestle holding a mere 13 per cent. However, according to analysts, Cadbury can`t afford to be complacement as Nestle is likely to follow Cadbury into the low unit pack segment as its (Nestle`s) parent is keen on making chocolates a key area in the Indian market. From March this year, the focus moved to the brown drinks business and Bournvita. (The brown drinks business contributes 20 per cent to the company`s turnover.) In the recent past in the malt beverages market, the browns have been under pressure from the whites, with the whites gaining marketshare at the expense of browns. Brands like SmithKline Beecham`s Horlicks benefited from this trend. Bournvita`s closest competitor is Nestle`s Milo. While Milo marginally ate into Bournvita`s marketshare, most of it was lost to white drinks like Horlicks. Horlicks with its nutrition plan advertisements proved to be a tough competitor for Bournvita. Milo`s entry further affected Bournvita`s growth. Early this year, Bournvita`s marketshare dropped to 12 per cent. Given the fact that Bournvita was the next big brand after Cadbury`s Dairy Milk chocolate, it was important for the company to capitalise on the brand. The focus on Bournvita over the past four months has been quite aggressive. Bournvita was relaunched in March this year and repositioned as a nutritional drink, as against a health drink it was earlier positioned as. This pitches the brand against white beverages such as SmithKline Beecham`s Horlicks and Heinz Complan, which share 70 per cent of the malted beverages market in India. With its new positioning, Bournvita could regain the marketshare it lost of Horlicks and Milo. So growth in this segment is expected to be high, says Topiwalla. In the past three months Bournvita has gained 3 per cent marketshare and is today at 15 per cent. In India, the sugar confectionery market is a very diffused market and each category is defined at one`s whims and fancy. For instance, Cadbury`s Eclair could be defined as a confectionery or as a toffee. While Eclairs has been in the market for years, as a holistic business the sugar confectionery area is relatively new for Cadbury India. This business contributes 23 per cent to the company`s turnover. The company has two brands in this segment -- Eclairs and Googly. The sugar confectionery market, in value terms, is three times the size of the Rs 800-crore chocolate market. So it made sense to enter the market. Cadbury India held back all this while, despite its parent being the world`s largest manufacturer of sugar confectionery, because products in this category have been traditionally reserved for the small scale sector. It continues to be reserved for the small scale sector. Against this background when you enter a segment that is reserved fro the small scale sector, you are up against players who follow very different business systems. For example, a player like Nutrine or Parle, operate on a certain net sales value per tonne with different cost structures, advertising to sales ratios and profit profile. This business system did not fit into our existing business systems, that is chocolates both the cost structures are based on very different paradigms, says Bakshi. So unless we had the wherewithal to actually add value through manufacturing and thereby have a different cost structure, we just could not have a go at it, he adds. Googly was primarily launched to get our feet wet and to ascertain how to do business in the sugar category, says Bakshi. According to another analyst who has been tracking the company. The strategy of introducing a slew of new products and taking price increases in the products is apparently paying off. For the first half of this calendar year, the company reported sales of Rs 175.90 crore. Net profits stood at Rs 10 crore. Total expenditure at Rs 180 crore includes Bournvita relaunch activities. The company has been systematically repaying its debt, hence reducing its interest costs. For the year ending January 1999, turnover stood at Rs 431 crore. Net profits stood at Rs 26.02 crore.

Bakshi says he has big plans for Cadbury`s sugar confectionery portfolio and will be launching two new brands by the end of the year. For calendar year 1999, Ask-Raymond James analyst Topiwalla projects an 18.6 per cent growth in the company`s net revenues to Rs 504 crore. And a 55 per cent growth in net profits to Rs 40.3 crore. But Bakshi is more concerned about maximising shareholder value. In terms of economic profit performance, at 18-20 per cent he feels the company is a bit behind their peer group who would be doing 25-30 per cent. So the attempt clearly is to move up and be at respectable numbers, if not exceed in terms of economic profitability. Let`s hope he succeeds his job on the line.