Company and Product Background
Cadbury is an international company that dealswith confectionary. It is ranked second worldwide in the industry after Mars,Inc. The company was founded in 1824, and its headquarters are in Uxbridge, London, in the UK. Cadbury is operational in over 50 countries across the globe. It was founded in Birmingham in 1824as a beverage company that dealt with coffee, tea, and drinking chocolate. The main market was the wealthy people since these products had a high cost of production and high taxation on importation. The company then moved to London in 1854. It received a big boost by the tax reduction in cocoa importation. It was therefore easier for the company to obtain cocoa and they started to produce cocoa alone later in 1873. They developed a new product line that included Cadbury’s cocoa essence. This later led to the development of assorted cocoa products, to which the diversification of production within cocoa goods is attributed.
In 1969, the company merged with Schweppes to become Cadbury Schweppes.The merger helped the company acquire several other businesses, such as Sunkist and Typhoo tea among others. In the United States, their products started selling through the only licensed distributor, Hershey Company.
In 2007, Cadbury Schweppes announced that they would be splitting the company into two along the nature of the products. One would focus on beverages while the other would focus on confectionaries and chocolate products. The demerger finally came into being in May 2007.
The company was then sold to Kraft Foods in September 2010. Cadbury was sold at 8.40 pounds per share which valued the company at about $18.9 billion. After the takeover, Kraft Foods issued a statement that stated that it would transform the company into the leading confectionery in the world. Today, the company operates in many countries including Australia. They have confectionary factories in Melbourne, Victoria and Hobart.
In 1922, Cadbury and their main rival Fry’s merger saw the new company expand across international borders. At the time, Australia was the main export market and the then company management decided that it was best if the first place that the company would set up in would be Australia. This led to setting up of a factory in Tasmania. The location was preferred due to the availability of cheap HEP power and high quality dairy products since at the time a high demand was observed for dairy milk chocolate bars. Road tankers were used to transport milk that was obtained from the milk depot, Cadbury’s Burnie. The milk was originally obtained from the region North West of Tasmania. This factory soared to become the largest in Australia and has been further described as the largest in the southern hemisphere. The most important feature of the factory is its pure granite machines which have been used for over 60 years and still in good working conditions (CAFTA & AIFST 1988). This factory has however not been operational since 2001 and the company has attributed this stoppage in production to upgrading.
In 1905 the company launched its first dairy milk bar that had a relatively higher composition of milk than any of the previous products, and it was immediately a popular product. By 1913, it had risen to become the most popular of their products, and fruits and nuts were later introduced to the bar to add its value and popularity, which worked positively. These trends have continued since the early stages of the introduction of the products and have been on the rise to date. Very many countries have reported high demand of the product and this has consequently led to their increased production. It is popular to people across a wide range of age bracket and has been in the recent past used for different occasions. Bars’ packaging into different sizes has determined their usage as presents and cakes, thus allowing for them to be used by different people across different classes and financial statuses.
In 2006, the product was given another formulation and in 2009cocoa butter was replaced with palm oil. At the same time, the size of the block was reduced from 250 grams to 200 grams, which led to a big public outcry since there was no reduction in prices. The reformulation was unwelcome by the customers and the company went back to the initial formulations where cocoa butter was used in 2009. Despite the small dip between 2007 and 2009 due to reformulation, there was again a positive response from the customers after the original proportions were reintroduced to the brand. This led to the increase in demand for the product and other products that have been attributed to Cadbury. The brand and company at large have therefore taken charge again in the Australian market in the confectionary and chocolate industry.
An Analysis of the Market
The Cadbury milk chocolate has been among the most popular brands among producers in Australia. The popularity of the product led to introduction of its equivalents by many other companies and this has really put Cadbury at its best. This has meant that Cadbury has to keep its high quality and customer satisfaction so as to ensure that it retains its place in the market. Its competitors have come up with impressive products to rival it, especially during the period between 2006 and 2009, when consumers did not respond positively to the change in formulation of the milk chocolate. Despite the recent global economic recession, the chocolate related manufacturers in Australia remained resilient and have really emerged victorious in their business.
In a research carried out in 2011, over six million of the Australian population purchased chocolate products within the period between January and December 2011. This population accounted for over 36% of the total country population that was aged above 14years. This research was carried out on a population of persons aged 14 +. 18641 Australians were engaged in research. According to the research, Cadbury products were the most popular.Over 2 million people had purchased dairy milk chocolate. The research also reported that over 899000people purchased Cadbury fruit and nut while the third place was taken by Lindt Dark, which had been purchased by 648000 people. Cadbury Caramello and Cadbury Hazelnut had been purchased by 614000 and 588000 respectively. This showed that there was a large potential for chocolate products but it was also evident that Cadbury’s supremacy in the industry had little direct rivalry. Their dairy milk chocolate was the most popular and its sales dominated the market taking over 30% of the total chocolate purchases in Australia, within the aforementioned age groups. The competitors are good as well and pose a significant danger to Cadbury in a case when the company products may not please its customers, like in the period between 2007 and 2009. The Australian market is therefore still large and there is a lot of potential for products in confectionary products. There are many young couples that are wedding everyday and they create further market for the confectionaries that are used during their occasion.
This high rate of population that purchases chocolate in Australia shows the stage the industry is in and allows projecting its lifecycle. Kerzner(2006) outlines that there are different stages in the lifecycle of a product.Among these stages, there is the maturity stage, which sees the organization in charge of the product realizing high competition and increasing such products in the market. This is the stage which dairy milk chocolate in Australia has been at. There are many companies that are currently competing to feed the population with chocolate. However, Cadbury dominates the market due to their early establishment and other advantages that the company has due to its high revenue and diversity in many other products. The stage is characterized by innovations that improve the existing products in order to ensure that they surpass the competitors. Other companies reduce their prices and/or increase prices in order to match their competitors. Cadbury, however, took a different channel during the crucial stage and this led to the decline of their sales and product popularity. Change in formula and quantity without change in price led to the reduction in demand and the company had to go back to their old packaging and formulation in order to regain their market share and product popularity.
The company was started in 1824 and has become the second largest confectionary in the world. Some of the competitors were established after 1950s and by then, Cadbury had already established their market, and their products were well known by most people.
Before its halt for upgrading in 2001, Cadbury Tasmania factory was the largest factory not only in Australia, but also in whole southern hemisphere. It is therefore a mammoth company that commands its market and provides a stiff competition to its lesser competitors.
Its most popular product, Cadbury milk chocolate was first produced in 1905 and became their best selling product by 1913. This has therefore enabled the company to improve the product as appropriate thus ensuring that they have an unrivalled formula in the production of their chocolate.
The company was purchased by Kraft foods in 2010. That was a step that enabled it to improve its products due to the high revenues that are available for the same. Advertising has also been improved and has been done at very high levels to ensure that a maximum number of people are reached by information about the chocolate.
ThisCompany is well-known for its old-aged machinery in their Australian factory at Tasmania. This acts as a tourist attraction that would later provide market to the goods they produce. This gives their products high ranks among the people and they feel the traditional touch of the product, thus preferring it to new products in the market.
The 2007-2009 period, when the company tried to change the formulation of their products, was a mistake in the trade. This led to a significant drop in their product popularity, which equally affected their sales. This was a major blow to the company and there was a need to ensure that the changed values were restored. By the time the restoration was complete, other companies had jumped to the mistake and embarked on massive advertisement so as to ensure that they get a significant number of customers in the process. This change has, therefore, significantly destabilized the dairy chocolate from Cadbury and created a big weakness.
Recent studies have indicated that chocolate can be used to prevent some of the diseases and skin conditions (Kalafatis, Tsogas & Blankson 2000). This is good news to industries such as Cadbury since more people will be expected to consume chocolate. If more medical recommendations are made, this will help provide the bright future for the industry and this will finally result in increased demand for chocolate goods, such as milk chocolate.
There is an increasing population of those who wish to take more chocolate in Australia. The number of young couples who wish to wed is increasing and exchange of presents is equally becoming more rampant in the Australian society. It is therefore true to say that there is a prospect of increase in the market with the increase in population.
The company has been ranked among the best in the world. It is therefore easy for the company to retain its position in the future in comparison with those struggling companies who are yet to pose authentic threats to the company.
Improvement in technology has seen the increase in amount of milk produced. The availability of ready milk and its position near farms ensures that the company’s products are the best and relatively cheap to produce due to nearness to raw materials. This will predictably allow for easy production and lower production costs in the future.
There are reports showing that every Australian consumes an average of 5-6 kilo of solid chocolate every year. This therefore can be used to show how much potential there is in the market for Cadbury milk chocolate which is currently the leading chocolate product in Australia.
The economic recession in the world has shown that there is nothing that industries can do about it in case it occurs. Recessions are unpredictable and though they did not affect the Australian confectionaries industry, they might recur and give the industry a major blow.
Food regulation policies might discourage some of the popular products in the world markets in the near future. Any industry may be affected and Cadbury would not be an exception.
There are many other upcoming companies that manufacture similar goods thus posing a stiff competition to Cadbury. An example is the Grisold family that started creating popular chocolate novelties in 1985. They formed a company Chocolatier Australia which has with time crept into the market. It has held a strong grip in the market and had even found its way into major chocolate outlets in Australia. Such companies cause competition to Cadbury and their improvement, which is not limited, will potentially lead to even more competition in the future. Other competitor products are Darell Lea and Lindt.
Cadbury milk chocolate is a popular brand across different age groups. It is popular among primary and secondary school children, as well as adults. It is therefore hard to draw a line on the age or special characteristics that Cadbury milk chocolate customers possess. In other words, the market and customer composition is highly assorted and undifferentiated. The company has declined to place automatic vending machines in primary schools but have availed them in some secondary schools where there are high nutritional standards.
On average, every Australian consumes over 5 kilos of chocolate every year making it the most popular flavor. Almost every Australian consumes chocolate in different circumstances. Cadbury has provided different packages for different periods and occasions. Weddings and season gifts are well distinguished and romantic scenes are also well described. A clear line is drawn between the two and this has really increased the extent to which chocolate market would reach. Commanding the market through milk chocolate, Cadbury is set to dominate the Australian industry in the future. This is because it is the company with the largest number of consumers having recorded over 2 million customers for their milk chocolate alone in 2011while the closest rival had less than 900, 000 customers.
The future market is not expected to change significantly and there are prospects that there are more entrants into the market. The company is well aware of that and is currently carrying out global advertisements that will ensure that their supremacy, especially in Australia, remains unrivalled. Therefore, there are few prospects of expected changes in the demographics of the market segment.
Positioning Strategy or Value Proposition
This refers to the activities that a company may get involved in, in order to create a positive image in the minds of the customers. Value proposition ensures that the customer has the best attitude towards a product and ensures that the customer feels a maximum utility after buying a commodity (Hamburg, Schor & Winn 1953). This way, the customer will appreciate the amount of money spent on the product and think it was used to purchase a high value commodity.Kaplan & Norton (2004) note that customer satisfaction is the hub and the main source to create sustainable value.
There are several ways that different companies use to improve their value proposition. Rackham & De Vincentis (1999) suggest that a proposition statement should include impact, capability, cost, and proof. The statements are not used publicly, but are rather kept in the company as a blueprint to stipulate what needs to be done in the marketing of the commodities. Some of the methods used are explained as follows in relation to Cadbury milk chocolate in Australia. Kalafatis, Tsogas & Blankson (2000) use the following criteria to determine the market
Firstly, a company can use the characteristics of the product to position their product. The characteristics of the commodity that are pleasant to the customer are the main tool that the company uses to lure its customers to prefer the product ahead of any other. Cadbury has used a very well thought advertisement that shows a happy reunion to the people living in different areas. Also, the company has come up with a new worldwide campaign dubbed ‘Joyville’ that would ensure better and closer interaction between the product marketer and its consumers. The main tool that will be used during the campaign is Joy, perceived to be the most unique ingredient in the milk chocolate. Joy differentiates Cadbury dairy milk product from any other and is expected to reach the public in Australia within the next few months. A television advert has been developed in Sidney by Saatchi & Saatchi group. This Joyville commercial is expected to reach out to millions of people in the world and Australia is among the highest targets.
The company may as well use reduced prices to lure more sales. This strategy works in most cases but due to ostentation goods, it at times fails to lure some of the customers. Some customers perceive that lowly priced goods are of poor quality and would never buy them. It is notable that Cadbury does not us e this strategy in the Australian market. In 2007, the company changed the formulation of their products as well as the quantity from 250grams to 200grams, yet there was no change in prices. Though there was a large outcry from customers, which led to them restoring the previous formulation and price in 2009, they never went below their normal prices.
The company could also base their strategy on use or application. In their case, Cadbury would make planned timing on the best time to market and advertise their products. This year, massive advertisements were conducted across all mediajust before Easter. This is because the company targeted the Easter season since many people give gifts to their loved ones. It was estimated that there were over 6 million people who were expected to purchase chocolate products and their advertisements ensured that most of these made choices were oriented at Cadbury.
Cadbury can as well use their competitors positioning to place their goods in the market. They have continually done this by placing better advertisements and having pride in their history which no other company has. Customers would therefore opt for the more experienced company, and this has helped Cadbury Australia build up a legacy that does not match with any of its competitors. The recent Joyville commercial is a good example on how higher the company places itself ahead of all its competitors.
It is also evident that cultural symbols may be used to place an organization and its product. Cadbury set up a factory in Australia that has commanded the whole southern hemisphere. The factory uses old machinery that is as old as 60 years. These machines act as tourist attraction features, which translates to more publicity and a feeling of originality. Those who visit the factory will appreciate the culture integrated in the factory and eventually opt for their products. Further, they will appreciate the company as the first to produce milk chocolate and want to help in retaining the culture and originality of the products. The company also prides itself, among its historical achievements, as the sole provider of the Australian army with chocolates between 1939 and 1945 (CAFTA& AIFST 1988). This has therefore acted as a mark of quality and has become a major source of supremacy by Cadbury products in Australia.
It is therefore evident that Cadbury milk chocolate has the highest market segment and is set to retain the same in future This will ensure the company remains on top and their customer satisfaction is upheld at all levels. Their mission ad code of ethics is customer friendly and their colors are equally well articulate with the product and their taste. The company therefore holds a higher potential in the Australian market, with three running factories and the largest factory under an upgrading phase in Australia, making it all evident that there is a high probability that it will remain on the driving seat of the country’s milk chocolate producer.
Chocolate remains the most popular flavor in the Australian market. This has prompted increase in the number of industries that produce the commodity in the country. The invasion of Cadbury in 1922 and their successful contribution into the World War 2 between 1939 and 1945 further raised its profile among the most successful companies in the confectionery industry. This led to its rise in Australia and further strengthened its status and perception by the Australians.
Its product, milk chocolate, was introduced n 1905and rose to become its leading product in terms of sales by 1913. The product has since then been diversified and other features such as nuts and fruits have been introduced to differentiate it from any other products. This has led to the characteristic quality in the market and this has remained intact for several generations.
Today, Cadbury milk chocolate remains the leading product in the Australian market and takes a high percentage of the total customer base (Over 20% of the total). It is therefore evident that it has cemented its roots in Australia and is further seeking to improve through global commercials that will differentiate their milk chocolate through the use of ingredient Joy. The company has a large capital base and therefore has a large room for further innovation and advertisement strategies that will ensure it keeps its position in the market.