Cadbury India Ltd. (CIL) and the Cadbury’s brand are synonymous with chocolate in the minds of Indian consumers. The company began manufacturing operations in Mumbai in 1946. In the 1960s, CIL launched a range of products such as Crackle, 5 Star, Gems, Tiffins, Nutties, Butterscotch and Caramels. Most of these products became instant successes and led to rapid growth in chocolate consumption in India. Following this, the company launched Cadbury’s Eclairs in 1972, priced at 25 paise. Eclairs, was a runaway success, despite being priced higher than the available sugar confectioneries in the market at that time. In 1990, CIL’s domination of the Indian chocolates segment was threatened by the entry of Nestle India (Nestle), the Indian subsidiary of global FMCG major, Nestle S.A (Switzerland), into the Indian chocolate segment. Nestle, which entered India in the 1950s, was a leading player in the coffee and milk products segments in India. It entered the chocolate segment in India with the launch of a range of premium chocolates under the Nestle brand name. In 1994, Nestle introduced BarOne (chocolate bar with peanuts) and soon garnered a respectable market share in the chocolate segment. CIL carried out many successful advertisement campaigns on TV and other media, As a result, CIL brands gained high consumer recognition. During the 1980s, CIL identified children as its target audience and developed campaigns that appealed to this segment. However, by the mid-1990s, chocolates were being positioned a near-meal substitutes by both Nestle and CIL. This was because the market was moving from being ‘children-centric’ to encompass adults as an important target segment. In 1994, to cope with this change in the composition of the target audiences, CIL decided to target Cadbury’s Dairy Milk (CDM) at adults instead of only children. The result was a new campaign which repositioned CDM. The company brought out a series of advertisements that carried the tagline, ‘Kya Swaad Hai Zindagi Mein’ (Real Taste of Life – RTOL). These advertisements depicted people from various backgrounds ‘celebrating life,’ with CDM in the backdrop. In 1995, Nestle entered the wafer-chocolate segment by launching its global ‘bestselling’ wafer chocolate brand KitKat in India. CIL responded quickly by launching its own wafer chocolate brand, Perk, to meet the KitKat challenge. Both the brands were backed by promotional campaigns and decibel advertising. Even though KitKat’s ‘Have a Break, Have a KitKat’ campaign becoming a huge hit, Nestle’s sales lagged far behind CIL’s. In 1996, while CIL’s market share was 76%, Nestle’s was only 10%. Though CIL continued to be the market leader in the chocolate segment during the late 1990s, it faced problems regarding the market shares of 5 Star and Perk. 5 Star’s market share had declined to 15% in 1997 from over 20% in 1995; and Nestle’s aggressive marketing of KitKat had placed Perk under threat. CIL’s management thus decided to focus on new product launches to stay ahead of the competition and regain market share. CIL launched a number of new products in 1998, such as Picnic, Byte, English Toffee and Cadbury Gold. Much to the company’s dismay, these new products failed to click with the consumers, largely because of their taste. During that same period (the late 1990s) Nestle’s range of snack-substituting chocolates such as Charge, Nuts, KitKat orange and Crunch, ate into the share of most of CIL’s new launches. In late 1999, a new two-fold vision was formulated for CIL – one, doubling shareholder value and, two, putting ‘a Cadbury in every pocket.’ To achieve this, the company planned to increase the depth of chocolate consumption by adding 10 million consumers every year, launching more new and innovative products, relaunching existing major brands, and revampimg the marketing mix, advertising and promotional strategies, and focusing on the gifts segment. To increase the depth of chocolate consumption, CIL strengthened its distribution network to reaching 80,000 additional retail outlets every year. It also offered low-priced packs for the masses and launched new products that targeted different age groups. In February 2001, Mathew Cadbury (Mathew) became CIL’s Managing Director. He continued with the policy of placing ‘a Cadbury in every pocket. The company therefore went ahead with the launch and relaunch of chocolates. During 2001, CIL also launched a range of gift packs for various festive occasions and celebrations such as Diwali (Diwali Range), Valentine’s Day (Sweet Nothings Range), and Rakhi. In January 2002, CIL launched ‘Celebrations,’ a selection of assorted chocolates in three flavors aimed at the ‘gifting’ segment. Innovative promotional and advertisement strategies were developed to support all the above launches/relaunches. Many of CIL’s advertisement campaigns became very popular and the company bagged various awards for the same. In 2001, CIL’s sales volumes grew by 5.8% (against a targeted volume growth of 10%). This growth was attributed to the launch of small pack variants of the leading brands and the new advertisement campaigns. When Puri replaced Matthew as the Managing Director in January 2002, there was a radical shift in the company’s policies. Puri changed CIL’s vision statement from ‘A Cadbury in every pocket’ to ‘Life full of Cadbury and Cadbury full of life.’ As a result, the company shifted its focus from launching new brands to rejuvenating and strengthening the existing brands (CDM, 5-Star, Perk, Gems and Eclairs). In addition, CIL planned to extend its reach to semi-urban and rural markets. CIL also decided to sell its products through ‘non-traditional’ outlets like music stores (such as MusicWorld), malls, renowned bookstores and popular apparel outlets (such as Pantaloons and Wills Sport boutiques). The March 2002 decision to change the positioning and advertising of CDM was essentially a part of the above shift in strategy. Despite the numerous measures taken by CIL during 2000-2001, only CDM managed to show positive growth; the market shares of the other brands remained stagnant. According to analysts, for the past few years, the company had failed to achieve the growth volumes it had set for itself. Meanwhile, Nestle managed to take away over 6% of CIL’s market share between 2000-2002. According to analysts, of the 6%, 3% of the market share was acquired by Nestle during the first quarter of 2002 alone. Both Nestle and CIL had launched many products during 2001-2002. Unlike Cadbury’s ‘new’ products Nestle’s products differed substantially from its existing range. By providing variety, Nestle was able to increase its share in the chocolates and confectioneries market from 26% in 2000 and 29% in 2001 to 32% in March 2002. Analysts felt that because Cadbury did not launch new products, its product portfolio lacked variety compared to Nestle’s. According to them, this was the main reason for the decline in CIL’s volume share from 66% in 2001 to 63% in March 2002. However, even when CIL brought out new products – Picnic, Cadbury Gold, Triffle, Relish – many of them were non-starters. Some analysts attributed the failure of many CIL brands to the slump in the confectionery market. While Nestle derived its revenues from various sectors such as milk products, coffee, culinary products, confectionery and other beverages, CIL was present only in the chocolates, sugar confectionery and malted food segment. Thus, Nestle had the option of diversifying its risks across its vast product portfolio, something CIL could not do. In addition, Nestle had 1 million retail outlets, while CIL had only 0.45 million outlets.

1. Discuss the strategies followed by CIL until the early 1990s to establish itself as the market leader in the chocolate segment. Why did CDM change the positioning of its brand in 1994? To what extent did CIL succeed in its attempts to reposition CDM? 2. Do you think repositioning CDM in 2002 was a good strategy? Justify your stand. Discuss the future prospects of CIL in light of severe competition from Nestle. What, according to you should CIL do to retain its market position and keep the competition at bay?