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All perked up for battle

Purvita Chatterjee Cadbury's efforts to exploit untapped potential and reach every pocket has a lot to do with outwitting Nestle in the war of the wafers. Its latest annual report states: `Cadbury is all set to satisfy untapped potential. With brand launches, re-launches and new products, the thrust is on reaching every individual, satisfying different palates and being within varying budgets. Basing its o perations on this vision, Cadbury is charting a new course of action. With the product, place, price and promotion synergies working in tandem, it won't be long before we find a Cadbury in every pocket.' This may sound like a reiteration of its earlier claims, but in its heart of hearts, Cadbury India, in spite of being the leader in the chocolate market, is still trying to settle scores with Nestle in the wafer-coated chocolate market, where it has yet to grab a dominant share. Creating new launches and extensions may be an ongoing exercise for the Rs 511-crore chocolate multinational, but lately it has set its sights on the Swiss food giant, Nestle, which is going through a

rough patch with its flagship brand, KitKat. In fact, the wafer chocolate war started in 1995 when both Perk (from Cadbury) and KitKat (from Nestle) were launched. It had Cadbury running for cover to protect its largest brand, Cadbury's Dairy Milk, which it did by extending its positioning on the a dult platform. The power-packed campaign from HTA (`Have a Break') did wonders for the KitKat brand at that point of time, but its premium pricing proved to be the main hitch, which has seen its volumes dipping from 15 per cent in 1997 to 9.5 per cent th is June, as per ORG-Marg figures. Despite its share of the volumes coming down, KitKat still has a dominant share in the market while Cadbury's Perk has seen steady shares between 1997 and 2000 with present volume shares at 8.8 per cent, as per ORG-Marg figures. Perk has also stretched itself to variants such as Mango, Strawberry and Mint to generate some excitement around the brand. So, while KitKat has taken a battering with its premium pricing and image, Cadbury India is taking this chance to put its might behind its wafer category, with Perk and the newly-launched Milk Treat, to beat Nestle in this category. But then, the price points in the wafer chocolate category were redefined by Nestle when it launched Munch at Rs 5 last year. Cadbury had to react to this lowering of price within the wafer chocolates category and had to stretch Perk to Perk Slims at Rs 5 to counter it. Explains Rajat Sabharwal, an analyst with Kotak Securities, ``The growth rates have come to a standstill in wafer chocolates and the market is not buoyant in this category. With Nestle coming out with a lesser-priced brand, Cadbury is responding now.'' S o, despite Nestle's flagship brand suffering to a certain extent, a flanking brand such as Munch has taken care of the dipping shares. Highlights Nirav Sheth, an analyst with SSKI Securities, ``In the first three years since the launch of KitKat, its price rise has been too fast and this has backfired. Today, its price cuts have

been prompted by competitive pressures and the purpose is obviously to gather volumes.'' But then, the prices of cocoa have also been crashing, perhaps helping Nestle absorb the price cuts, which, possibly it would not have been in a position to do otherwise. Today, Nestle seems content with its strategy and admits that though shares of KitKat have dipped, Munch has succeeded in doing what it was expected to do. Says Sanjay Sehgal, Executive Vice-President (Marketing), Nestle India, ``Cadbury has reacted to u s. In fact, Munch could also be responsible for eating into the shares of KitKat along with Cadbury's own brand. There has been a redefinition of pricing strategy for KitKat and we are hoping it will show.'' KitKat continues to sell at a slight premium to Perk though it is now offering a price discount of nearly 20 per cent, which indicates that Nestle either had great margins on the brand earlier, or is in trouble. For Cadbury, Perk is basically a fighter brand being used to flank the mother brand. In fact, the fight is almost similar to what HLL did with Wheel (though it was not making money on the brand) to counter Nirma in the detergent market while Surf sat pre tty as the mother brand in Lever's portfolio. However, in the case of wafer chocolates, it is not a very happening category since consumers have realised that they are not paying for pure chocolate, but for a chocolate-coated biscuit. For Cadbury, its cash cow will always remain its Cadbury's Dairy Milk. Both are players fighting with their higher reserves, trying to establish themselves with a dominant share in the wafer chocolate category. The new Perk has four wafer layers covered with chocolate and is lighter and crisper. Its packaging has also undergone a change and has used Cadbury's trademark purple background with the dark brown wave of chocolate on the wrapper, indicating the presen ce of pure dairy milk chocolate, to set it apart from a common biscuit chocolate.

Cadbury is targeting a 12 per cent volume share for the Perk brand after this relaunch and expects to overhaul KitKat. As Bharat Puri, Director (Sales & Marketing), Cadbury India, declares: ``Our objective is to be the largest wafer-coated brand in the c ountry.'' A new campaign has been developed for the relaunch of the brand where through three commercials the differences in the new Perk are highlighted through dialogues alluding to matchfixing -- Khule Aam Khayiye. Kabhi Bhi. Kahin Bhi. Explains Piyush Pandey, National Creative Director, Ogilvy & Mather, ``Through the commercials we are trying to bring out various explanations about the changes in Perk.'' The original campaign of Thodi Si Pet Pooja, Kabhi Bhi, Kahin Bhi will continue th rough another new commercial, of a lady secretly eating Perk on the occasion of Karwa Chauth. Meanwhile, another wafer chocolate brand that has been targeting kids is Milk Treat, four wafers with butterscotch-flavoured cream embedded in milky white chocolate. Though Cadbury did have a white bar, Creamy Bar, it was never treated as a major brand. Milk Treat is pitted against Nestle's Milky Bar though it is in a moulded form unlike the former which is in count form. There are expected to be more variants under the Milk Treat brand for children. Both Milk Treat and Perk are priced on par at Rs 10 f or 27 gm. Despite all the action in the chocolate wafer segment, growth for Cadbury has always come from its mother brand - the Rs 117-crore Cadbury's Dairy Milk which today straddles all possible price points. Explains an analyst with Motilal Oswal Securities, ``For Cadbury, its growth has been coming from Cadbury's Dairy Milk and what it is doing to Perk is just to gather momentum in the chocolate market which thrives on innovation and excitement.'' In 1999, Cadbury recorded an eight per cent turnover growth in chocolate confectionery led by its flagship brand Cadbury's Dairy Milk, which registered a growth of over 40 per cent. The

malted food drinks category reported a growth of 14 per cent while t he sugar confectionery segment rose a mere three per cent. The Eclairs brand grew by a healthy 14 per cent. In fact, Cadbury has consciously stayed away from meddling too much with its heritage chocolate brands -- Dairy Milk and 5 Star. Explains Puri, ``As a marketer, it is best not to do too much to these heritage brands which already have strong equity. Not that we will never relaunch them but right now they enjoy a strong equity.'' But, it did relaunch its heritage brand of malted drinks, Bournvita, last year when it lost share to the white drinks segment. There are plans to extend this strong brand in the future, about which Cadbury does not want to reveal its plans right now. I nterestingly, there already exists a similar sounding dark chocolate brand for adults, Bourneville, in its kitty for many years, which has not seen much advertising. While its chocolate brands are continuing to get broadbased, its sugar confectionery brands will get upgraded to higher price points. For instance, its hard-boiled sweets such as Googly, Mocka and English Toffee are gradually being phased out, while the new brands such as Frutus, a chewy sweet (Re 1) and the jelly, Gollups (Rs 2), are expected to see some healthy growth. Adds Puri, ``It is not possible to build brands at such low price points. While there are volumes, the margins are thin in this catego ry.'' Besides, the latest Budget has hiked the duties of sugar confectionery products from eight per cent to 16 per cent, which in any case has led to an increase in prices and thereby affected brands such as Googly. But one thing that Cadbury has realised through all this is that it has got cheaper with more products in the Rs 3-5 category. Its premium brands such as Cadbury Gold, Truffle and even Picnic have never really been accepted in the chocolate market. Today , Cadbury is constantly looking at pushing volumes at the lower end of the market and brands such as Relish, Break, 5 Star and Dairy Milk have Rs 5 variants catering to

this lowest price point. Perk Slims is the latest Rs 5 brand to be added to this list . As for taking the chocolate wafer war to the enemy camp, it might take a while because Nestle also has deep pockets and has established itself in the chocolate wafer category in spite of dipping shares. However, Cadbury will always be the leader with its heritage brands. As Rajat Sabharwal, an analyst with Kotak Securities states, ``Nestle may be a key player in the Indian chocolate market but there is no possibility of it emerging as a category leader.'' Comment on this article to [email protected] Send this article to Friends by E-Mail Next: Advertising is investment Prev: Promo power Catalyst Agri-Business | Banking & Finance | Catalyst | Commodities | Corporate | Info-Tech | Letters | Logistics | Macro Economy | Marketing | Markets | News | Opinion | Variety | Info-Tech | Catalyst | Investment World | Money & Banking | Logistics | Page One | Index | Home Copyrights © 2000 The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line.