Case Study – Dairy Milk in France

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Synopsis Cadbury Schweppes, a UK based chocolate company, is the world’s fourth biggest supplier of chocolate and sugar confectionery. The group’s strategy is to increase profitability, brand strength and volume on a global basis from its two streams – beverages and confectionery. One of its products, Dairy Milk was introduced in 1905. It has become the most successful moulded chocolate in UK history and the basic ingredient for many other Cadbury products. 95 years later, Dairy Milk is the leader in chocolate bar products and the company’s major source of revenue. Sales from Cadbury’s Dairy Milk alone are estimated at over £135 million for 1995. Cadbury considers its success is based on three factors: quality, value for money and good advertising. Issue Cadbury Schweppes already has manufacturing plants in 25 countries and sales in further 165 countries. Recently, it is planning to enter the French market with its Dairy Milk product with either of these two methods – i. As a subsidiary product Cadbury already has production facilities in France in the form of its subsidiary, Chocolate Poulain. The company can use this subsidiary to produce Dairy Milk as well. However, Chocolate Poulain is already producing at near full capacity and changes in production due to Dairy Milk’s introduction will not only affect the sales of Chocolate Poulain, but the whole machines need to be recalibrated. By exporting the product Exporting Dairy Milk to France is also an option since the French market is very close to UK and Cadbury already exports Cadbury Fingers to France. However, the French chocolate industry is dominated by multinational foreign owned groups such as Nestle Rowntree, Lindt and Sprungli, Kraft and General foods, and Mars Alimentraire SA, which all are subsidiaries of foreign groups. Simply exporting Dairy Milk may be insufficient to tackle competition from these leading enterprises.

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Advantages of Entering the French Market Cadbury would realize several possible advantages in going abroad. By penetrating a foreign market the company could –     Maintain a stable growth of a company by maximizing the use of its production capacity and thus increase economies of scale and scope. With its brand name, Cadbury could counterattack the competitors it faces in the domestic market by attacking their domestic market. Keep up with the financial strength by increasing its sales and profit. The foreign market could present higher profit opportunities than the domestic products. Reduce its dependence on the UK market and therefore diversify its market specific risks.

Drawbacks of Entering the French Market

Minesh Rajbhandari [#1311]

EIA, SAIM, Summer 2009

Case Study – Dairy Milk in France

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In order to market the product in France successfully, Cadbury would have to find out on how it can improve in order to have great performance. It is also good to find out what are the situations that they could avoid in order to be successful. In order to market products the following issues should be considered –  Total French production of chocolate bars and confectionary, which has increased by 24.5 per cent between 1988 and 1991, has slowed down in more recent years, partly due to the economic slump. Consumption of chocolate products, which has been growing until 1991, remained fairly static in 1992, reflecting a fall in demand due to the gloomy economic situation. Sales of milk chocolate bars, which account for 24 per cent by volume of total sales of chocolate bars, decreased by 3.7 per cent. The market has been hit by price wars. Sales of low price products increased by 23 per cent and this have spread out to chocolate market.

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PEST Analysis i. Political France has an advanced parliamentary democracy and politically highly stable. The power is centralized in the Parliament, the Prime Minister and the President. France is also a member of the European Community and has excellent relations with the UK. Hence in terms of political conditions, it is favorable. ii. Economic Economically, France has the fourth largest GDP in the world. It is a first-world advanced market based economy. It is a very large potential market with high standard of livings and purchasing powers. The economy is highly open internationally and more trade is done with European partners. So, in terms of economic condition, it is favorable. iii. Social With regards to its social situation, France has a broadly central/southern European culture which has many similarities with the UK. However cultural differences do exist, which must be considered during market planning. So, socially, it is moderately favorable. iv. Technological France has a high technology level and many industries are based on the technological sector. Thus, technologically, it is favorable. Threats Due to its confectionary products, it is very important for Cadbury to be aware of any present or upcoming threats. The company should take note of the changes in the consumer’s buying trend. It is perceived that consumers might shift from chocolates to “healthy” snacks. If this were to happen, there might be a poor product development which would tarnish Cadbury’s name. Needless to say, price wars would occur between

Minesh Rajbhandari [#1311]

EIA, SAIM, Summer 2009

Case Study – Dairy Milk in France

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its competitors like Mars, Lindt & Sprungli, and Nestle. Due to the abovementioned, there would be seasonal sales slumps all year round which will reflect to an increase in cost of the raw materials needed. Cadbury would then have to be prepared for growth of small local gourmet chocolates and regional candy manufacturers. Conclusion Taking only the environment analysis into consideration, introducing Cadbury Dairy Milk in France is highly favorable for Cadbury Schweppes. However, this is only a small portion in making strategic decisions. In order for Cadbury to reach the peak of achievement, the company would have to stress on the global growth of the product. It can be a risk to market it in the region France, but with careful study of the target market segments and its economic position, this can be attained. Careful considerations to look at its major competitors and to obtain the rules and regulations of France are equally important as well. Needless to say that in order for the company to market its products globally, it is understood that heavy capital and marketing expenditures have to be sacrificed. Cadbury has somehow gone through this process throughout the past decade; it shouldn’t be an issue that would raise a problem. However, we need to bear in mind that it was not an easy ride for Cadbury to market all its products in all regions. It took Cadbury almost 165 years to reach to its successful peak today.

Minesh Rajbhandari [#1311]

EIA, SAIM, Summer 2009

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