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Cadbury ranked amongst Indias most respectedcompanies

Cadbury India has been ranked 5th in the FMCG sector, in a survey on Indias mostrespected companies by sector conducted by Business World magazine.

Conducted by the Indian Market Research Bureau (IMRB), India's most respectedcompanies (by sector) looks at companies across 17 sectors. The fundamental purposewas to find out which companies were respected the most among their peers. Companieswere rated on seven parameters like Innovativeness, Quality and depth of topmanagement, Financial performance and return to shareholders, Ethics and transparency,Quality of Products or Services, People practice/talent management & Globalcompetitiveness.

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

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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-consciousWest, are eyeing India's sweet-toothed consumers as a major opportunity. However, whilerising disposable incomes will certainly increase spending on indulgent products,companies wishing to enter India for the first time face a formidable competitor in theform of Cadbury which has been there since 1948.

Moreover, although growth in chocolate sales was slow for many years, the market hasrecently started to boom, on the back of increasedadvertising, special pack formats andretail expansion, and Cadbury is reaping the dividend from its long-term commitment tothe market.

According to Cadbury India's marketing director Sanjay Purohit, the company's chocolatesales have grown by almost 20% during each of the last two years, largely a result ofsignificant 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 culturalproducts like mithai," Purohit explains.

Mithai, a generic name for Indian sweets, are consumed on a daily basis as snacks eatenalone or with a cup of chai. Huge quantities are also given as gifts during festivals likeDiwali, which ushers in the New Year, and mithai are also a crucial part of weddingceremonies - the first gift of an Indian bride to her husband's family is often several kilosof high quality mithai.

By using advertising to associate chocolate with mithai, Cadbury has succeeded inopening up a huge consumer base. "Until the 90s people thought that only children eatchocolate," says Purohit. "Now we have a large portion of adults across different socialsegments who see chocolate as a wonderful, indulgent product, eaten at the sameoccasions 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 verystrong demand during the Diwali festival," the company said.
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It has also made some product adjustments to reach out to new consumers. As elsewherein Asia, Cadbury chocolates are sold in individual single pieces in India. One of thenewest individual pieces for the Indian market, Chocfuls, is a caramel candy with a hardshell 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 andspend on chocolate in every country," says Purohit. "So if you are going to makechocolate 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 offthan other markets", despite having to increase the cocoa butter content in its milkchocolate formulations to help them withstand the Indian heat. In fact, Cadbury's 60-yearpresence in India has driven the growth of the country's cocoa production, and it can nowmeet 60% of cocoa demands at its five Indian factories from the domestic market.

This long presence also means that "Cadbury_Dairy_Milkdefines 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 tremendousadvantage."

Cadbury is certainly well ahead in the category, with a 72% share of India's IR12.3bn($279m) chocolate market last year, compared toNestl's 24.7%, according to ACNielsendata. Cadbury also has an extensive sales network that reaches some 500-600,000 outletsdirectly and 1.5m outlets indirectly.

But new entrants see an opportunity in the rapid development of India's retail market andPurohit agrees that this will really help the chocolate category take off. Currently mostconfectionery 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 likeCadbury's are set to perform better in larger retail formats, where there is space to stockan entire range of products and the display is 'more appetising'. "We see double the rate ofsales 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 buthe believes this will increase to some 25% in the next five years. Euromonitor haspredicted that India's retail market will grow by 28% between 2006 and 2010, with salesgrowing from US$80bn growing to US$103bn.

"As India continues to grow and retail formats allow excellent placement and visibility ofproducts, 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 ourposition in the market."
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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 iskeen to add new products. Purohit concludes: "If you look at the kind of products weoffer in the rest of the world that we don't already have here, this is an indication of wherewe want to go in India."
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Cadbury

UK firm Cadbury-Schweppes is currently the number one confectionery firm in WesternEurope, holding 11.6 per cent of the market, as well as being number one in terms ofglobal sales.

The firm was originally established as a cocoa and chocolate firm in England in the lateeighteenth century, but has now grown rapidly to encompass sweets, beverages andchewing 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 Turkey-based Intergum.

This year, the company has boosted profits with its very successful moves within thechewing 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 marketswith its acquisition of the Green & Blacks range, Meade added.

Like many other successful companies, Cadbury has made conscious efforts to reorganiseoperations 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 tomove production to Poland, while Cadbury is currently focusing on moving the mainoffices out of central London to a cheaper location.

Cadbury are clearly determined to hang on to their number one spot. In fact, only lastweek the confectionery giant announced that it will demerge its 10bn beverage arm inorder to focus on chocolate, sweets and gum.

Nestle

Unlike Cadbury, Switzerland-based food firm Nestle has a much wider product range thatencompasses beverages, coffee, infant nutrition, ice cream, soup and health care, and ithas lost 0.8 per cent of its market share since 2001.

However, the company still holds the number two position in Western Europe with 9.1per cent of the market share, thanks to successful sales of brands such as Milkybar, KitKat, 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.

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However, Nestle has been much less proactive than other companies in acquiring organicchocolate subsidiaries, Kazanchuk added, "which might in the medium term put thecompany 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 thiscategory.

For example, the company recently reformulated the Milkybar brand with all-naturalingredients, taking advantage of current concern for food additives.

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CADBURY INDIACadbury India is a food product company with interests in Chocolate Confectionery, MilkFood Drinks, Snacks, and Candy. Cadbury is the market leader in ChocolateConfectionery business with a market share of over 70%. Some of the key brands ofCadbury are Cadbury Dairy Milk, 5 Star, Perk, Eclairs, Celebrations, Temptations, andGems. In Milk Food drinks segment, Cadbury's main product - Bournvita is the leadingMalted Food Drink in the country.

Cadbury is the world's largest confectionery company and its origins can be traced backto 1783 when Jacob Schweppe perfected his process for manufacturing carbonatedmineral water in Geneva, Switzerland. In 1824, John Cadbury opened in Birminghamselling cocoa and chocolate. Cadbury and Schweppe merged in 1969 to form CadburySchweppes plc. Milk chocolate for eating was first made by Cadbury in 1897 by addingmilk powder paste to the dark chocolate recipe of cocoa mass, cocoa butter and sugar. In1905, Cadbury's top selling brand, Cadbury Dairy Milk, was launched. By 1913 DairyMilk 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 byimporting 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 in2007.

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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 quarterperiod 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 increasedby 12 per cent to Rs 21.44 crore (Rs 19.16 crore).

Other income increased to Rs 2.66 cr (Rs 2.49 crore).

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Financial statement

Statement of Directors' responsibilities in relation to theFinancial 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 distinguishingfor shareholders the respective responsibilities of the Directors and of the auditors inrelation to the financial statements.

The following statement, which should be read in conjunction with the auditors' statementof auditors' responsibilities set out in their report, is made with a view to distinguishingfor shareholders the respective responsibilities of the Directors and of the auditors inrelation to the financial statements.

The Directors consider that in preparing the financial statements the Company has usedappropriate accounting policies, consistently applied and supported by reasonable and

prudent judgements and estimates, and that all accounting standards which they considerto be applicable have been followed. The Directors have responsibility for ensuring thatthe Company keeps accounting records which disclose with reasonable accuracy thefinancial position of the Company, and which enable them to ensure that the financialstatements comply with the Companies Act 1985.

The Directors have general responsibilities for taking such steps as are reasonably open tothem to safeguard the assets of the Company and to prevent and detect fraud and otherirregularities.

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competition

The confectionery industry is highly competitive: the Group's brands compete with manyother 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 andenhance brand recognition by introduction of new products, new packaging, extensiveadvertising 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 around43% 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 Zealandand India. The sugar confectionery market is significantly more fragmented, with agreater 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 accountfor approximately 62% of the global total: our number two position is built on strongmarket shares in the Americas, parts of Continental Europe, Japan, Thailand and SouthAfrica.

2005 $ Share Total Chocolate Gum CandyCadbury Schweppes 9.9% 7.5% 25.7% 7.2%

Mars 9.0% 14.8% - 3.0%Nestl 7.8% 12.6% 0.1% 3.2%Wrigley 5.8% - 35.9% 2.7%Hershey 5.5% 8.2% 1.7% 2.7%

Kraft 4.3% 7.7% 0.5% 0.4%

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Notes 2005m

2004(restated)

m

Fixed assets

Tangible fixed assets 4 114 115Investments in associates 5 9 9Investments 5 5,397 5,699

5,520 5,823Current assets

Debtors 6 - Due within one year 132 141

- Due after one year 30 20Cash at bank and in hand 8 -170 161

Creditors: amounts falling due within one year

- Borrowings 11 (2,159) (2,589)- Other 8 (118) (190)Net current liabilities (2,107) (2,618)Total assets less current liabilities 3,413 3,205Creditors: amounts falling due after more than one

year

- Borrowings 11 (843) (899)- Other 9 (100) (5)

(943) (904)Net assets 2,470 2,301

Equity capital and reserves

Called-up share capital 12 260 259Share premium account 12 1,135 1,098Revaluation reserve 12 1 1Other reserves 12 542 624Profit and loss account 12 532 319Equity shareholders' funds 2,470 2,301
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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% Confectionery2. 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, SaltedSnacks, Soft Drinks

There are over 1.5 million retail outlets for FMCG in India. Over two-third ofthese 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 offertremendous scope for growth.

Chocolate confectionery is sold at premium in India compared to other brandedimpulse 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.

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Current low penetration of Chocolates

22% adults in urban India.

Creating Value in Future

Effectively managing growth drivers1. Gifting Child Connectivity and low end VFM.2. New channels.

Optimising manufacturing efficiencies.

Aiming for best in class TMC in Cadbury Schweppes plc. (CS) for CDM andEclairs.

Competitiveness in logistics and distribution using IT.

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 progress1. Expansion2. 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 products2. Possibility of providing huge variety

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3. Good speed of response to consumer likings4. 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.

top back

GIRISH M BHAT, DIRECTOR ( FINANCE & COMMERCIAL)

Market Share

Chocolates 69.2%

Sugar Confectionery 4.0%

Food Drinks 14.2%

Business Categories - Value

Contribution per category

Chocolates 64%

Sugar Confectionery 12%

Food Drinks 24%

Shift in focus from 1994
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Chocolates segment have grown to 64% from 59%, Sugar confectionery hasgrown 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

Sugar Brand portfolio one among many1. though dominant in Eclairs category2. very strong price led competition

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

Concentrated advertising campaign to ensure positioning and recall.

Increasing marketshare through

Broadening consumer appeal1. 4,50,000 outlets2. 2,100 + distributors.3. Strategy aimed at fostering new users4. 8 million new consumers added in 2000.

Total now above 60 million

Aggressive product development.

top

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
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Dominated by branded players

Market Size (Volume) 22,500 tpa

Growth Rate (last 3 years) 12% p. a.

Cadbury's share 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) 1,63,000 tpa

Growth rate (last 3 years) 15% p.a.

Share of unorganised sector 1,00,000 tpa


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) 73,500 tpa

Growth rate (last 3 years) 8.5% p.a.

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Share of white drinks 68%

Share of Brown drinks 32%


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. Games2. 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 expansion1. Substantial increase in below line sales and marketing activities2. Focused advertising3. Launch of three new products

a. Milk Treatb. Perk Slimsc. Chocobix.

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

Reduced material costs1. By improved procurement of materials and reduced wastages2. Reduced manufacturing costs3. Reduced interest costs4. By superior management of operating funds, working capital efficiencies

and tight control over capital expenditure.

SUMMARY OF GROWTH RATES 1994-2000

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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 manufacturingReduction in manufacturing costs

Supply chain efficienciesFurther reduction in material costs.Increase trading margin.Increase utilisation of assetsBrands and production capabilitiesKeep Capex close to depreciationFurther improvement in working capital norms.Effective use of propertiesUse of Information Technology for business improvement and reducing costs.Web enabled SCM.Enhancing organisational capability through people

Training and developmentSharpening culture workshopsPerformance linked incentives for managersPeople care index measurement.Generation of surplus cash.Improved returns to shareholders.

Some recent business improvement projects

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Inhouse projects teams of senior managers have been working closely with CSGroup and some well known consultants to

1. Identify new growth opportunities2. Improve manufacturing costs and supply chain processes.3. Effectively use of information technology.

top

QUESTION & ANSWER SESSION

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

Business challenge is non-improvement in domestic market and increasing

material costs. If this happens, margins will fall.

International products are imported by under-invoicing so as to reduce importduty. This has created low imported product costs when compared to locallymanufactured goods.

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

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

In sugar confectionery also except clair, none of new launches in last 3 yearshave fared well.
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he country's largest-selling chocolate manufacturer Cadbury India Ltd said on Wednesdayit is now back on the track with growth rates going back to the days before it received asetback in the market following large-scale complaints of infestation of its products in themarket place last October.

It has imported machinery for auto-wrapping and put in place a new packaging systemdesigned to keep infestation at bay and a comprehensive qualitycontrol audit that continuously monitors its retail network to ensure proper handling ofproducts.

Senior company officials who spoke to reporters at its Indur plant, 50 km outside Punecity said the company, which recorded loss in sales of an estimated Rs 70 croreimmediately after the peak-Diwali season reports of infestations of its products, is nowshowing healthy growth and said turnover this year will exceed Rs 720 crore it recordedlast year.

"The incident affected the chocolate category as a whole but we are maintaining our 67-70 per cent market share," Sharad Gangal, General Manager, HR, said.

The other players in the market comprise Nestle, which has an estimated 29 per centshare, 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 inIndia and a system that trains its retailers and sales people on proper storage and handlingof the product, the company is now revving up to sweeten up its sales with the onset ofthe 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, introducednew foil and poly-laminated packaging and have incurred over Rs 4.5 crore in additionalinput 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.Thecompany now seems all set to pip competitionwith a first mover advantage in the whiteand brown chocolate combo category. It is in the process of launching the `two-in-one' inbar 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 madeat the 5.5 lakh capacity/day Indur plant, the wafer snack will be made at its Hyderabadand Warana plants and other multiple locations because of the fragile nature of theproduct.

Meanwhile, the company is in the process of setting up a new plant at Baddi in HimachalPradesh which will initially manufacture 1,000 tonnes/day of its malt-based drink,

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Bournvita, Gangal said. Cadbury already has three existing manufacturing facilities atThane, Indur and Malanpur (Gwalior) in additional to third party operations.

The Pune plant manufactures 13,000 tonnes of `crumbs', that go into making chocolate atall 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 isnow rearing to go again - home/eq.mktng The country's largest-selling chocolatemanufacturer Cadbury India Ltd said on Wednesday it is now back on the track withgrowth rates going back to the days before it received a setback in the market followinglarge-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 onWednesday it is now back on the track with growth rates going back to the days before itreceived a setback in the market following large-scale complaints of infestation of itsproducts in the market place last October.

It has imported machinery for auto-wrapping and put in place a new packaging systemdesigned to keep infestation at bay and a comprehensive qualitycontrol audit that continuously monitors its retail network to ensure proper handling ofproducts.

Senior company officials who spoke to reporters at its Indur plant, 50 km outside Punecity said the company, which recorded loss in sales of an estimated Rs 70 croreimmediately after the peak-Diwali season reports of infestations of its products, is nowshowing healthy growth and said turnover this year will exceed Rs 720 crore it recordedlast year.

"The incident affected the chocolate category as a whole but we are maintaining our 67-70 per cent market share," Sharad Gangal, General Manager, HR, said.

The other players in the market comprise Nestle, which has an estimated 29 per centshare, 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 inIndia and a system that trains its retailers and sales people on proper storage and handlingof the product, the company is now revving up to sweeten up its sales with the onset ofthe 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, introducednew foil and poly-laminated packaging and have incurred over Rs 4.5 crore in additionalinput 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.Thecompany now seems all set to pip competitionwith a first mover advantage in the white

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and brown chocolate combo category. It is in the process of launching the `two-in-one' inbar and marble form under its popular Dairy Milk brand.

The company is also seeking an entry into the fast-growing `bag snack' category withBytes, 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 Hyderabadand Warana plants and other multiple locations because of the fragile nature of theproduct.

Meanwhile, the company is in the process of setting up a new plant at Baddi in HimachalPradesh which will initially manufacture 1,000 tonnes/day of its malt-based drink,Bournvita, Gangal said. Cadbury already has three existing manufacturing facilities atThane, Indur and Malanpur (Gwalior) in additional to third party operations.

The Pune plant manufactures 13,000 tonnes of `crumbs', that go into making chocolate atall its facilities. Cadbury India manufactures 17,000 tonnes of chocolate annually.

Cadbury officials said the company sells 10 lakh bars of chocolate every day.

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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 latestadvertisement has with Liril's launch advertisement that appeared in the mid-Seventies isits permissiveness: what is perhaps important to the current one is whether it can recreatethe "magic of lemony indulgence" ushered in by the launch advertisement, along with itspermissiveness.

Close-up's lemony variant is attempting the nostalgic route to repositioning itself. Thebrand has been attempting several repositioning strategies in the recent past. Cadburysuccessfully repositioned its mould (milk chocolate) variant during the mid-Nineties,even managing to change the target segment for the variant a very difficult task formarketers operating in any kind of market. The body of knowledge concerning brand

repositioning is unfortunately not vast but the concept is receiving increasing attentionwith the proliferation of product categories and brands.

With brand equity being the driving force behind brands, the ones which are stronglyestablished either in terms of consumer preferences or in terms of recall are underpressure to create a roadmap which will lead to effective repositioning.

Why brand repositioning?

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Brand repositioning is required because of several reasons:

When new offerings flood the market, the superiority of the established brand has tobe 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 theconsumer goodwill they enjoy or by exploring ways to appeal to the consumers

When a contemporary image is required in some categories because of changingpsychographics

When brands desire to change their target segment (rarely)When brands want to communicate improved offeringsWhen 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 butwas forced to reposition itself by Moov, which made rapid strides. Dove is repositioningitself 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 thedishwash market. Esteem's "Shall we go for a drive, please?" campaign (where the sonhopes his dad's pleasure at the ride in the car will overshadow his poor marks) wastriggered 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 asecond 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 thesame economy proposition: Ambassador even today is widely acknowledged as acomfortable car for Indian roads and is also known for its space. Some of the recentofferings in the passenger car market today use this as a strong proposition. The brandcould have used this effectively to create a favourable perception of itself. Maruti 800became almost a legend as much known for derailing Fiat and Ambassador as it is for itsfuel economy.

Even in fast moving consumer goods involving mundane household products, timelyrepositioning matters. The Ujala brand of blue used to whiten clothes made history withits liquid variant. The pioneering (and the brand which held the dominance for years)Robin Blue had a powder variant before Ujala was introduced. Powerfully repositioningRobin Blue (even before introducing the liquid variant as a follower) might have reducedthe impact of the new entrant because of the favour and trust Robin Blue enjoyed withconsumers.

Burnol, the antiseptic cream for burns (it did attempt some sporadic repositioningexercises) no longer seems to occupy the same space in the consumer's mind. Womencontinue to cook as before and probably mostly in a hurry to catch up with the pressures

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of life. Burnol being a handy brand to overcome the inevitable small burns could havebeen a probable proposition to reposition it.

With several categories jostling for consumer mindspace, there is a relevant propositionrequired 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 ensurethat the category does not fade from the consumer's mind because of a number of othercategories emerging to create generic competition in terms of the share of consumer'swallet.

For example, a brand traditionally used for burns may be forgotten because of severalcategories of products and offerings like a cream for heels, herbal antiseptic ones formultiple injuries and corn caps. Forhans toothpaste, Zambac and Saibal multipurposeantiseptic 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 whichcould 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 andobservation. With changing lifestyles and nuclear families in urban markets (especially inthe 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 gripswith the changing psychographics of the target segment. Fair and Lovely's repositioningas a brand for the aspiring girl making a mark in a male-dominated world (woven aroundthe 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 ofteeth is associated with traditional habits which have been highlighted to create a realisticassociation between the brand and the target segment. Product/brand attribute relevanceto the habit of the user (children) and the buyer of the category (concerned mother) hasbeen used to reposition the brand. Lifebuoy's repositioning on health based on hygiene isan attempt to take into consideration the priorities consumers place on heath in adeteriorating environment one of the issues raised frequently by mass media andconsumer groups.

Changing the target segment

It is difficult for an established brand to change its target segment overnight because ofthe prolonged associations and perceptions related to imagery and price.

However, there have been rare instances of a brand repositioning itself for a new targetsegment. Cadbury, in an effort to make chocolates appeal to adults, created therepositioning around `spontaneous joy' (the girl's dance in the cricket field) and since thenthe mould version of its offering continues to be positioned for adults. With the companyoffering different offerings for different segments, the strategy for the mould version

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synergises with the overall strategy of the brand. Timex, which was targeting the lower-end watch market when it entered India, has introduced expensive watches with hightechnology at the higher end of the market. Technology, with its rub-off on the product'sattributes, 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 theviewpoint of consumer perception.

Bata, during the Nineties started dealing with designer brands: it had developed thePower brand for youth and a number of offerings for middle-class consumers. In therecent 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 clearassociation. Communicating the newness can be seen in the `new, `improved' versions ofold established brands. The point that is important in such a positioning is that consumersshould be able to relate to the improved claims made by the brand. If Rin is repositionedto 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 ofthe company, competitive context and consumer perception. A brand could create severalsub-brands over a period of time in tune with the changes in the environment. HeroHonda, after the success of its CD 100 almost two decades ago, continues to hold swayover the market by creating several sub-brands each distinctive from the other. It createdSS, Passion and Splendor with differing appeals. Sometimes, a premium offering needs tobe repositioned when consumers become more receptive to the brand over a period oftime. 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 alreadycreated in the consumers' minds.

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Cadbury sales take a beating

PUNE: The retail offtake of Cadbury products, especially the Dairy Milk brand, has droppedby 40 to 50 per cent in the city since the Maharashtra Food and Drugs Administrationconfirmed infestation of worms in some packs.

The company, however, believes that its current efforts at building awareness among theretailers is actually helping its sales pick up again. Interestingly, the loss of Cadbury hasbeen the gain of imported chocolate brands like Toblerone, Ferrero, Arcor Rocher andRaffaello and not of other Indian brands like Nestle and Amul.

We expect the incremental sales during this month, which mainly come from the specialfestival packs, to be the same as last year as the confectionery company does not publicisethe 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 Rs2.5 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 40per cent drop in its Dairy Milk sales in Pune, but the sales of other chocolate-coated brandsof 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 thecity, also saw a drop of around 20 per cent in its Cadbury sales last month. I sell 30 packs ofArcor 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 watchthe 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 batchof Dairy Milk, which was receiving consumer complaints, and replaced it with new stock. Hisfamily owns four of the nine Cadbury distributorships in the city and has over 40 per centshare 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 managerof Cadbury India. Though the days of customers asking Kya chocolate mein keeda hai (Isthere a worm in the chocolate) are not fully behind Cadbury, its project, Vishwas, launched tobuild 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.

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No worms in chocolates, says Cadbury

MUMBAI: Cadbury India Ltd said on Tuesday that chocolate samples at its factories werefree of any "infestation" after Maharashtra health officials said they found dead and liveworms in chocolates picked from a store here.

"We have checked all samples of Cadbury dairy milk Chocolate at the factory and havefound them to be of good quality and free of any traces of infestation," Cadbury India salesand markets director Vidyut Arte said in a statement.

Cadbury issued the statement after officials at the Maharashtra food and drug administrationsaid tests confirmed that worms were present in Cadbury chocolates taken from the smallsuburban store.

The state government lab conducted the tests following complaints by a group of peopleabout live worms in chocolates bought from the store. Arte said Cadbury India learned aboutthe laboratory report through local media reports.

Govt plans to prosecute Cadbury

MUMBAI: The Maharashtra Food and Drugs Administration has decided to prosecuteCadbury India Ltd after finding two dead worms and one live worm in its chocolate bars, FDAcommissioner Uttam Khobragade told TNN on Monday. Cadbury India has contested thefindings.

The FDA has tested a few bars of Cadbury chocolate at the public health laboratory andfound 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 chocolateproducts as ''it leaves room for air to get in''. He said the FDA had suggested it should seal allits chocolate products the way it does for its ''5-Star'' brand. C

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After worms, company plans better packaging

MUMBAI: Cadbury India has decided to go in for better packaging to tide over wormsightings being reported by consumers from all over the state.

The companys move to change its packaging from a wrapper to a heat-sealed pack maycost a few crores of rupees annually.

Cadbury has maintained that improper storage, and not its factory conditions, has beenresponsible for the continuing episodes of worm infestation in its chocolates.

However, it has now accepted the Food and Drugs Administrations suggestion to packageits products differently to reduce the incidence of infestation. Cadbury currently packs its milkchocolates 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 Indias assistant generalmanager Ramesh Barath said,

We take two precautions in our packaging to make sure worms dont get to creep in fromany side. After the bars come out of the production line, the foil is pressed in by a machineand 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 itschocolates 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 meltsonly at 26 degrees, said managing director of Cadbury India Bharat Puri.

However, these prescriptions melt in the face of market forces, as most retailers cannotafford to keep chocolates in refrigerated luxury. Intriguingly, there are no norms governingstorage 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 isentrusted with this job.

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COMPETITORS OF CADBURY

Cadbury India is in the midest of a strategy overhaul, but its future depends on how it keepscompetitor Nestle at bay. Shareholders of the Rs 428-crore confectionery manufacturer CadburyIndia Ltd must be a happy lot. From the Rs 200 levels the stock was trading at a year ago, it istoday quoting at Rs 770. The soaring share price reflects the sustained improvement in thecompany`s bottomline in the past two years. But managing director Rajeev Bakshi feels that thecompany has to do much more to keep its shareholders happy. The last time the company wentinto overdrive was in 1991-92, when Nestle launched its chocolates in the Indian market. Till thenCadbury 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, atadults. 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 marketshareof 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 themiddle of another strategy overhaul. Bakshi is busy rallying his employees around parentCadbury Schweppes vision -- superior shareholder value and a Cadbury in every pocket. Anunintended 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 waythe company manages its business and sharpening the corporate culture. The attempt there is toinvolve the entire company. Getting the entire system to move towards a higher aspiration, ismuch 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 bigareas is to focus on the viability of new projects. The idea here is to ensure that each projectinvestment is viable vis-a-vis capital costs. The second big areas is performance. The overridingperformance matrix is economic profitability. For the analytically inclined, economic profitability isnet 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 theculture and leadership capabilities, and linking rewards to the new performance matrix. Unless wehave people in the organisation who are there with the right competencies, the organisationsdoes not move forward.

According to Hozefa Topiwalla, analyst at ASK-Raymond James, The new strategy looks at allareas of business. They are taking each product and seeing which one gives value and which onedoesn`t. The company will phase out products that don`t add any value to it bottomline. WhenBakshi was appointed managing director last April, he threw the entire company behind each ofthe company`s businesses -- chocolates, brown drinks and sugar confectionery. From last July toMarch this year, the company was focusing on chocolates, which is the number one business interms 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 launchedthree new brands -- Picnic (a chocolate bar with raisins, wafer and caramel) Gold (Cadbury`sDairy Milk with a soft centre launched to commemorate the company`s golden jubilee) andEnglish Toffee (a chewy toffee). To reach out to the mass consumer, the company took the marketby storm by its small pack strategy with chocolates priced at Rs 3-5 with even its new launchessuch as Byte (a strawberry flavoured candy). What is important here is that this strategy was inline with its vision of a Cadbury in every pocket.

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The strategy seems to have paid off. Today the company holds a 70 per cent share of thechocolates 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 followCadbury into the low unit pack segment as its (Nestle`s) parent is keen on making chocolates akey area in the Indian market.

From March this year, the focus moved to the brown drinks business and Bournvita. (The browndrinks business contributes 20 per cent to the company`s turnover.) In the recent past in the maltbeverages market, the browns have been under pressure from the whites, with the whites gainingmarketshare at the expense of browns. Brands like SmithKline Beecham`s Horlicks benefitedfrom this trend. Bournvita`s closest competitor is Nestle`s Milo. While Milo marginally ate intoBournvita`s marketshare, most of it was lost to white drinks like Horlicks. Horlicks with its nutritionplan advertisements proved to be a tough competitor for Bournvita. Milo`s entry further affectedBournvita`s growth. Early this year, Bournvita`s marketshare dropped to 12 per cent. Given thefact that Bournvita was the next big brand after Cadbury`s Dairy Milk chocolate, it was importantfor the company to capitalise on the brand.

The focus on Bournvita over the past four months has been quite aggressive. Bournvita was re-launched 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 SmithKlineBeecham`s Horlicks and Heinz Complan, which share 70 per cent of the malted beveragesmarket in India. With its new positioning, Bournvita could regain the marketshare it lost of Horlicksand Milo. So growth in this segment is expected to be high, says Topiwalla. In the past threemonths 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 atone`s whims and fancy. For instance, Cadbury`s Eclair could be defined as a confectionery or asa toffee. While Eclairs has been in the market for years, as a holistic business the sugarconfectionery area is relatively new for Cadbury India. This business contributes 23 per cent tothe 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, becauseproducts in this category have been traditionally reserved for the small scale sector. It continuesto be reserved for the small scale sector. Against this background when you enter a segment thatis reserved fro the small scale sector, you are up against players who follow very differentbusiness systems. For example, a player like Nutrine or Parle, operate on a certain net salesvalue per tonne with different cost structures, advertising to sales ratios and profit profile. Thisbusiness system did not fit into our existing business systems, that is chocolates both the coststructures are based on very different paradigms, says Bakshi. So unless we had the wherewithalto actually add value through manufacturing and thereby have a different cost structure, we justcould not have a go at it, he adds. Googly was primarily launched to get our feet wet and toascertain how to do business in the sugar category, says Bakshi.

According to another analyst who has been tracking the company. The strategy of introducing aslew of new products and taking price increases in the products is apparently paying off. For thefirst half of this calendar year, the company reported sales of Rs 175.90 crore. Net profits stood atRs 10 crore. Total expenditure at Rs 180 crore includes Bournvita relaunch activities. Thecompany has been systematically repaying its debt, hence reducing its interest costs. For theyear 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 belaunching two new brands by the end of the year. For calendar year 1999, Ask-Raymond

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James analyst Topiwalla projects an 18.6 per cent growth in the company`s net revenuesto Rs 504 crore. And a 55 per cent growth in net profits to Rs 40.3 crore. But Bakshi ismore concerned about maximising shareholder value. In terms of economic profitperformance, at 18-20 per cent he feels the company is a bit behind their peer group whowould 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 jobon the line.

Cadbury second plant under watch

Mumbai - Cadbury India`s second plant in Maharashtra is now under the lens of Maharashtra`sfood and drugs administration. Cadbury Dairy Milk is mainly manufactured at Cadbury`s factoriesin Talegaon near Pune and Thane, which cater to the entire country. The company`s chocolatesreach over 650,000 retailers directly and indirectly. The FDA started inspecting Cadbury India`splants after worms were allegedly found in a Cadbury Dairy Milk chocolate bar. The chocolate barwas produced at Cadbury`s Talegaon plant. The FDA has also sent the allegedly contaminatedpieces for testing at its laboratories.

The revenue and the bottom line of the local arm of British confectionery and beverages giantCadbury Scheweppes could take a hit if the FDA decides to initiate action against it. CadburyDairy Milk, the flagship brand, contributed about 30 per cent to the company`s Rs 687.30 croreturnover in 2002. Cadbury India is the market leader with brands like Dairy Milk, Five Star, Perkand Gems, with a market share of over 65 per cent. Cadbury Dairy Milk has a 30 per cent shareof the packaged chocolate market. After the discovery of the infested bar from batch number28F311, the company checked the factory samples of this batch and found them to be of goodquality 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 UK-based chocolate, confectionery and beverages major Cadbury Schweppes has identifiedIndia among its top 12 focus markets globally, in an announcement made last week.

Under a new management structure which would emerge following the proposeddemerger of its beverages arm Americas Beverages into a separate company, the CadburySchweppes management announced last week that its commercial strategy would hingeon 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 apresence in India. The 12 core markets have been forecast to account for growth in excessof 60% over the next five years.

Cadbury India, growing in double digits the past two years, has forecast a healthy 2007riding on the back of factors such as sharper focus on core brands, product rationalisationand working closely with trade channels.

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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 pushingproducts in categories other than chocolate where it is a dominant player. Of CadburySchweppes 13 focus brands clocking above average revenue growth and operatingreturns, two are in India as of now Cadbury Dairy Milk and Halls.

But sources say its a matter of time before Cadbury India brings brands such as Tridentand Dentyne gums, and Flake chocolates into India, Trident being the front-runner. The13 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 companyleads the Rs 1,500-crore organised chocolate market with a 72% value share as per ACNielsen data. However, it trails rivals in other categories. In beverages, for example,Cadburys Bournvita occupies second slot behind Glaxo Smithklines Horlicks. Its otherbeverage brand, Delite, was pulled off shelves following weak offtake. The companyrecently re-entered the gums category with Bubbaloo. Its 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 twobrands Halls and Eclairs. At the global level, the demerger process separating thebeverages arm from confectionery is expected to be completed by the second quarter of2008. It will result in the formation of two companies Cadbury Plc holding theGroups confectionery business, and CSAB Inc which will hold the Americas Beveragesbusiness.

Elaborating on its decision, Cadbury Schweppes announced: To help drive furtherrevenue growth under a new category management structure, we are focusing ourresources on fewer number of markets, brands and customers.

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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 CadburyIndia Ltd must be a happy lot. From the Rs 200 levels the stock was trading at a year ago, it istoday quoting at Rs 770. The soaring share price reflects the sustained improvement in thecompany`s bottomline in the past two years. But managing director Rajeev Bakshi feels that thecompany has to do much more to keep its shareholders happy. The last time the company wentinto overdrive was in 1991-92, when Nestle launched its chocolates in the Indian market. Till thenCadbury 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, atadults. 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 marketshareof 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 parentCadbury Schweppes vision -- superior shareholder value and a Cadbury in every pocket. Anunintended 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 waythe company manages its business and sharpening the corporate culture. The attempt there is toinvolve the entire company. Getting the entire system to move towards a higher aspiration, ismuch 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 bigareas is to focus on the viability of new projects. The idea here is to ensure that each projectinvestment is viable vis-a-vis capital costs. The second big areas is performance. The overridingperformance 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 theculture and leadership capabilities, and linking rewards to the new performance matrix. Unless wehave people in the organisation who are there with the right competencies, the organisationsdoes not move forward.

According to Hozefa Topiwalla, analyst at ASK-Raymond James, The new strategy looks at allareas of business. They are taking each product and seeing which one gives value and which onedoesn`t. The company will phase out products that don`t add any value to it bottomline. WhenBakshi was appointed managing director last April, he threw the entire company behind each ofthe company`s businesses -- chocolates, brown drinks and sugar confectionery. From last July toMarch 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 sugarconfectionery.

Chocolates contribute 55 per cent to the company`s turnover. Last year the company launchedthree new brands -- Picnic (a chocolate bar with raisins, wafer and caramel) Gold (Cadbury`sDairy Milk with a soft centre launched to commemorate the company`s golden jubilee) andEnglish Toffee (a chewy toffee). To reach out to the mass consumer, the company took the marketby storm by its small pack strategy with chocolates priced at Rs 3-5 with even its new launches

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such as Byte (a strawberry flavoured candy). What is important here is that this strategy was inline 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 thechocolates 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 akey area in the Indian market.

From March this year, the focus moved to the brown drinks business and Bournvita. (The browndrinks business contributes 20 per cent to the company`s turnover.) In the recent past in the maltbeverages market, the browns have been under pressure from the whites, with the whites gainingmarketshare at the expense of browns. Brands like SmithKline Beecham`s Horlicks benefitedfrom this trend. Bournvita`s closest competitor is Nestle`s Milo. While Milo marginally ate intoBournvita`s marketshare, most of it was lost to white drinks like Horlicks. Horlicks with its nutritionplan advertisements proved to be a tough competitor for Bournvita. Milo`s entry further affectedBournvita`s growth. Early this year, Bournvita`s marketshare dropped to 12 per cent. Given thefact that Bournvita was the next big brand after Cadbury`s Dairy Milk chocolate, it was importantfor the company to capitalise on the brand.

The focus on Bournvita over the past four months has been quite aggressive. Bournvita was re-launched in March this year and repositioned as a nutritional drink, as against a health drink itwas earlier positioned as. This pitches the brand against white beverages such as SmithKlineBeecham`s Horlicks and Heinz Complan, which share 70 per cent of the malted beveragesmarket in India. With its new positioning, Bournvita could regain the marketshare it lost of Horlicksand Milo. So growth in this segment is expected to be high, says Topiwalla. In the past threemonths 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 atone`s whims and fancy. For instance, Cadbury`s Eclair could be defined as a confectionery or asa toffee. While Eclairs has been in the market for years, as a holistic business the sugarconfectionery 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-crorechocolate 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, becauseproducts in this category have been traditionally reserved for the small scale sector. It continuesto be reserved for the small scale sector. Against this background when you enter a segment thatis reserved fro the small scale sector, you are up against players who follow very differentbusiness systems. For example, a player like Nutrine or Parle, operate on a certain net salesvalue per tonne with different cost structures, advertising to sales ratios and profit profile. Thisbusiness system did not fit into our existing business systems, that is chocolates both the coststructures are based on very different paradigms, says Bakshi. So unless we had the wherewithalto 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 toascertain how to do business in the sugar category, says Bakshi.

According to another analyst who has been tracking the company. The strategy of introducing aslew of new products and taking price increases in the products is apparently paying off. For thefirst half of this calendar year, the company reported sales of Rs 175.90 crore. Net profits stood atRs 10 crore. Total expenditure at Rs 180 crore includes Bournvita relaunch activities. Thecompany has been systematically repaying its debt, hence reducing its interest costs. For theyear ending January 1999, turnover stood at Rs 431 crore. Net profits stood at Rs 26.02 crore.

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Bakshi says he has big plans for Cadbury`s sugar confectionery portfolio and will be launchingtwo new brands by the end of the year. For calendar year 1999, Ask-Raymond James analystTopiwalla projects an 18.6 per cent growth in the company`s net revenues to Rs 504 crore. And a55 per cent growth in net profits to Rs 40.3 crore. But Bakshi is more concerned aboutmaximising shareholder value. In terms of economic profit performance, at 18-20 per cent hefeels the company is a bit behind their peer group who would be doing 25-30 per cent. So theattempt clearly is to move up and be at respectable numbers, if not exceed in terms of economicprofitability. Let`s hope he succeeds his job on the line.

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