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Cadbury India: Product Life Cycle Management

CASE STUDY, MARKETING MANAGEMENT
ET Cases, 18 pages
AUTHOR(S) : Syed Abdul Samad and Dr. Nagendra V Chowdary

Case Preview

Cadbury India: Product Life Cycle Management

 

“We have stayed ahead of competition by growing the category. This category growth has come through behaviour-changing advertising, innovation and growing width and depth of distribution.”

-- Mondelez India Foods Limited

 

Since 2012, Cadbury India (Cadbury) had been trying to extend its market into rural markets. Cadbury, which made its entry into the Indian market in July 1948, had been reinventing over the last seven decades by making itself relevant through the expansion of its distribution network with innovative product lines like – Perk, Shots, Silk, etc. It had also been trying to reach out to varied groups of customers through its innovative advertising and repositioning its existing product lines. The Indian consumer is fond of sweets and consumed them as a dessert after meals and also to celebrate success and occasions like festivals, weddings, etc. Cadbury tried to reposition its products as a gift item and as a sweet for celebrations. It also switched the perceptions of the consumers that chocolates were just for the kids and repositioned its products not only for teenagers but for all the age groups.

AIDed (Advertising, Innovation and Distribution) by its multi-pronged approach of changing consumption behavior of Indians in general and rural Indians in particular, would it be able to stay ahead of the pack? Would its AID formula succeed in increasing the chocolate consumption levels of the Indian consumers and the market size, and in turn keep rechristening its PLC? Would it be able to extend its Product Life Cycle (PLC) and stay relevant in terms of its product value chain in the Indian chocolate market?...................

Chocolate Market in India

India was among the fastest growing markets in the world in terms of chocolate consumption. Growing at a Compounded Annual Growth Rate (CAGR) of 25%, India’s confectionery market was worth about 5,000 crore in October 2013 and was expected to cross 7,500 crore by 2015.1 Nearly, 70% of revenues are contributed by sugar confectionery and the remaining 30%2 are accounted for by the chocolate confectionery market, which is worth 2000 crore3 (organized market). However, the per capita consumption among Indians is very low at 75gm-100gm per year, while the British and French consume 6 kg per capita per year.The confectionery industry is broadly divided into – chocolate confectionery, sugar confectionery and gums. In India, this industry is divided into – chocolates (5 Star, Eclairs, Munch), hard-boiled sugar candies (Mango Bite, Mint-O, Mentos), lollipops (Nutrine Lollipop, Alpenliebe), lozenges (Poppins), and gums (Big Babol, Boomer). 

The chocolate market in India was witnessing a change in consumption patterns due to the growing middle class, their increased affordability and availability of a broader range of brands (Exhibit I). Chocolates were increasingly being bought by Indians for everyday consumption as a snack rather than occasional luxuries and even replacing traditional sweets, snacks and savouries with chocolates for in-home consumption and gifting during celebratory occasions.

Cadbury: Company Profile

Cadbury was the world’s second largest confectionery company headquartered in Uxbridge, London. The company which was best known for its products like Dairy Milk, Bournville, etc., was established in 1824, by John Cadbury (John). To start with, the company sold tea, coffee and drinking chocolate (Exhibit III). But with Benjamin Cadbury, John’s brother (in 1847) and later John’s sons, Richard and George, joining (in 1861) the company, Cadbury was on the growth trajectory with many product innovations...........

Cadbury India: Staying Relevant

Cadbury, in India, had a well appreciated portfolio of chocolate, gum and candy brands. It manufactured and sold chocolate blocks, slabs or bars; coated wafer biscuits; malted food; and sugar confectionery. In the chocolate confectionery business, the company has maintained their undisputed leadership over the years, through some of its key brands, namely Cadbury Dairy Milk, 5 Star, Perk, Gems, Eclairs and Celebrations.............

Innovation

Cadbury entered India, in 1948, and operated by importing chocolates and introduced Milk Chocolate and Bournvita in the country. But within a few years, during 1950s, the company set up its first plant at Thane in Maharashtra and started manufacturing chocolate and Bournvita. During the 1960s, the company set up a Cocoa Research Centre in Kerala in association with the Kerala Agricultural University to initiate research on standardization of cocoa farm practices, development of management strategies for major pests and diseases of cocoa, production of hybrid seeds for area expansion programme in South India, etc.............

Advertising

Cadbury Dairy Milk (CDM), the most sought after brand from the Cadbury stable, entered the Indian market in 1948. Since then ‘Cadbury’ had become synonymous with chocolate in the country. CDM remained at the top in terms of consumption and market share not just because of its taste and quality but also because of the company’s effective and memorable communication/advertising campaigns...........

Distribution

The Indian market is very vastly spread across 3.2 million square kilometres inhabited with more than 1.2 billion people and more than 240 million households. The retail network in the country is spread across 7,935 towns and 640,867 villages25 with 14 million retail outlets serving the Indian customers – of which only 4% have space larger than 500 square feet. The larger outlets include hypermarkets, apparel stores, electronics stores, restaurants and fast food outlets, multiplexes and gaming, departmental stores, footwear stores, mobile stores, super markets.............

Cadbury’s Product Life Cycle Extension Challenges

Over the years, Cadbury had been extending its product life cycle in India, through various means like product category innovations and product line extensions, captivating advertisements, and expanding distribution network. It had been able to weather the negative effects of ‘worms in CDM’ and ‘the Kashmir-Temptations ad’. It had extended its chocolate market to adults and created occasions to consume chocolate. It left no stone unturned to woo and retain customers. It was again attempting to extend its PLC by expanding into the Indian rural market.........

Assignment Questions

I. What do you mean by product life cycle? What does ‘Product’ in product life cycle mean?

II. How do you think Cadbury India has been AIDed by Advertising, Innovation and Distribution channels to manage/extend its product life cycle across its product value chain?

III. ...........

Exhibits

Exhibit I: Chocolate Consumption Pattern in India

Exhibit II: Chocolate Demand in Rural India

Exhibit III: An 1885 Advertisement for Cadbury’s Cocoa

Exhibit IV: Cadbury India: Segment-wise Market Share

Exhibit V: Cadbury’s Innovations

Exhibit VI: Cadbury's Kashmir Ad

Exhibit VII: Gems' Taglines Over The Years

Exhibit VIII: FMCG India - Sales Channel Breakdown

Exhibit IX: Cadbury Distribution Structure

Exhibit X: Changing Dynamics of Rural Consumption in India

Exhibit XI: Cadbury India Sales Growth (%)

Annexures

Annexure I: Major Brand’s Market Shares in India

Annexure II: Mondelez International, Inc. Selected Financial Data

Annexure III: Cadbury India – Financial Highlights

Annexure IV: Cadbury India’s Notable Product Introductions

Annexure V : Cadbury Ads in India

Teaching Note Preview

Cadbury India: Product Life Cycle Management

 

Synopsis

This case study enables a discussion on how AID (Advertising, Innovation and Distribution) can be used to extend the Product Life Cycle (PLC) as Cadbury India demonstrated over seven decades of continuing performance. This also highlights very subtly Cadbury India’s competitive strategies to stay ahead of the pack in the Indian chocolate market. Cadbury, which was operating in Indian since 1948, was reinventing itself with its innovative products, emotionally charged advertisements and the expansion of its distribution network in the country. With these, the company was extending its product life cycle by reaching a new set of consumers with new customer value propositions.

For instance, over the years Cadbury had been able to change the perceptions of the consumers that chocolates were just for the kids. Through its advertisements it repositioned its products for teenagers, then for adults and now as a product that is meant for people of all the age groups. It also repositioned its products as a gift item and as a sweet for celebrations, where Indian consumer consumed traditional sweets during festivities and other occasions. With around 70% of market share but very low consumption levels in India, can Cadbury increase the Indian per capita chocolate consumption levels and market size? Would it be able to maintain its market share and stay ahead of the pack? Would it be able to extend its PLC with its rural distribution?

Prerequisite Conceptual Understanding (PCU)/ Before the Classroom Discussion

A working knowledge along with the business implications of the following concepts would enable an effective discussion leading to more practical solutions than a mere intellectual exercise. The participants were asked to read the following concepts from 14th edition of Marketing Management textbook to help them better connect the concepts:

1. Philip Kotler, et al., “Chapter 8: Competitive Dynamics”, Marketing Management, 14th Edition (Indian Adaptation), Pearson Education, Inc., 2013 – To understand how Cadbury used the following components of competitive strategies to protect and increase its market share and thus was able to manage its PLC effectively –

  • • Expanding the total market
  • • Protecting the market share
  • • Increasing the market share
  • • PLC management through AID (Advertising, Innovation and Distribution)

 

2. In addition, students were asked to watch advertisements of Cadbury India Products and make some observations about the themes/concept of the ads.

Recommended Reading for the Faculty

It is highly recommended and suggested that the faculty intending to use/using this case study should read the following material (apart from what’s being suggested in PCUs) for enhancing the rigor and intended purport of the case study.

  • a) Theodore Levitt, “Exploit The Product Life Cycle”, Harvard Business Review, November-December 1965 – To get to the historical and evolutionary routes of PLC

 

Expected Learning Outcomes

At the end of this case analysis and discussion, the participants (students) were expected to understand the implications/answer the following questions that would expand their horizons of PLC management and competitive strategies (from the marketing perspective):

  • • How product life cycle (of a product category) can be managed through its product value chain through a firm’s competitive strategies
  • • How Cadbury India stayed relevant and stayed ahead of competition with continuous innovation through its product value chain
  • • How Advertising, Innovation and Distribution (AID) channels can be used to manage/extend the product life cycle more effectively
  • • What would it take for Cadbury India to increase the per capital chocolate consumption level in India from 80 per year to wither 10,000 a year or 5000 a year?

 

Positioning/Case Setting

This case study can be used for either of the following modules/topics in the Marketing Management Course:

  • • Competitive Strategies – To understand how companies have to device their strategies to stay ahead of its competitors
  • • Product Life Cycle – To understand the various stages of a Product Life Cycle and what the company needs to do to extend the life of its products
  • • Advertising – To understand how advertisements can be used in repositioning and changing the consumer perceptions with respect to its products
  • • Distribution – To understand the role of a company’s distribution network in growing its consumer base

 

Assignment Questions

  • I. What do you mean by product life cycle? What does ‘Product’ in product life cycle mean?
  • II. How do you think Cadbury India has been AIDed by Advertising, Innovation and Distribution channels to manage/extend its product life cycle across its product value chain?
  • III. How do you think, Cadbury India used competitive strategies (especially to do with expanding market, protecting its market share and increasing its market share) to manage its PLC?
  • IV. ....................

 

Case Analysis

The classroom discussion was facilitated under three broad sections as explained in Exhibit (TN)-I. However, the classroom discussion and analysis for this case study could be summarized through the Board Plan [Exhibit (TN)-II]............

Exhibits

Exhibit (TN)-I: Classroom Discussion – Suggested Plan

Exhibit (TN)-II: The Board Plan

Exhibit (TN)-III: Product Life Cycle Stages

Exhibit (TN)-IV: Other Shapes of PLC

Exhibit (TN)-V: Competitive Strategies

Exhibit (TN)-VI: Cadbury’s PLC

Exhibit (TN)-VII: Product vs Market Potential

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Abstract

Best Selling Case Study
This case study enables an interesting analysis of how a category's product life cycle can be managed over its product value chain using a set of competitive strategies (for protecting and increasing market share). Cadbury India, present in India since independence, July 1948, had been reinventing itself over the last seven decades by making itself relevant AIDed by its Advertisements, Innovation and Distribution. Having about 70% of market share in Indian chocolate market, Cadbury faces a major challenge: what should it do to increase Indian per capita chocolate consumption levels (at ₹80 per year currently) to UK (₹10,000 per year) and US (₹5,000 per year) consumption levels? AIDed (Advertisements, Innovation and Distribution) by its multi-pronged approach of changing consumption behavior of Indians in general and rural Indians in particular, would it be able to stay ahead of the pack?



Pedagogical Objectives

  • To understand how product life cycle (of a product category) can be managed through its product value chain through a firm's competitive strategies
  • To understand how Cadbury India stayed relevant and stayed ahead of competition with continuous innovation through its product value chain
  • To examine how Advertising, Innovation and Distribution (AID) channels can be used to manage/extend the product life cycle more effectively
  • To discuss and debate on what would it take for Cadbury India to increase the per capita chocolate consumption level in India from ₹80 per year to either ₹10,000 a year or ₹5,000 a year

Positioning/Case Setting

This case study can be used for either of the following modules/topics in the Marketing Management Course:

  • Competitive strategies - to understand how companies have to device their strategies to stay ahead of its competitors
  • Product Life Cycle - to understand the various stages of a Product Life Cycle and what the company needs to do to extend the life of its products
  • Advertising - to understand how advertisements can be used in repositioning and changing the consumer perceptions with respect to its products
  • Distribution - to understand the role of a company’s distribution network in growing its consumer base


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