What was Cadbury’s standing in India prior to the Kraft

acquisition? Was this a reason to go for the acquisition route?
Justify.

Cadbury was incorporated in India in July 1948 as a private limited company
under the name of Cadbury Fry (India). At that time they imported and sold
chocolates. During nearly 63 years of its existence it established five
manufacturing facilities at Thane, Gwalior, Bangalore and Himachal Pradesh.
While its corporate office was in Mumbai its sales offices were in New Delhi,
Mumbai, Kolkata and Chennai.
It enjoyed a market share of over 70% as the highest Cadbury Brand share in
the world in the chocolate segment of the confectionery industry. It operated in
four categories mainly: chocolates, malted food drinks (bournvita), candy
(Halls) and Gums (bubbaloo). Its core purpose was to “make today delicious”
which clearly expressed the spirit of what the company stood for.

Cadbury diary milk (CDM)
It had been the market leader in the chocolate category and in the year March
2011 it had a market share of 30%. They did focus on the trend of chocolate
consumption and they changed the perception of Indian consumers that
chocolates are not only meant for kids. It also shifted CDM to the social
acceptance of chocolate consumption by adults. Through their campaigns,
Cadbury’s have also associated CDM to celebrations and as a necessary sweet
to always have at home.

Cadbury Bournvita.
It was launched in the year 1948. In the year 2011 it had the market share of
17%. One of the principal reasons for the continued success of Bournvita was
its periodic re-invention in terms of product, packaging, promotion and
distribution. As the competition increased decade by decade the brand
positioning changed. In the 1970’s the focus was on “good upbringing” as an
important building block for childhood, In 1980’s it focused on “intelligence”
and In 1990’s the company focus on both “physical and mental” benefits.

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It gained 30% of market share within three months of its launch in bubblegum market. The product was targeted at teens as they were the largest consuming segment of this category. Bournville. At the time of acquisition by KFI. In 2009 it had revenue of around $454 million and was growing at a CAGR of 22% for a four year period. Bubbaloo In the gum category the company launched its bubble gum brand Bubbaloo in Indian market in the year 2007. bytes was sweet. The idea was all about breaking the stereotypes. Being in India for over six decades the company had understood the market dynamics and consumer behaviour. While the most of the snacks in India were salty. Cadbury’s products have availability across hundreds of villages. 20000 visi cooler outlets for selling chocolates were also installed. halls’ positing was changed to ‘refreshment’ platform. halls and Eclairs. Cadbury India owned key brands such as CDM. Later. perk.000 retail outlets. served through 1200 distributors. all of which had strong customer loyalty. which gave it an extensive market reach. It was leader in the medicated candy market. Cadbury Bytes In 2004-05 the Cadbury made its entry in to packaged snack market with Cadbury bytes. Distribution Only 2% of Indian retail sector is organised. towns and cities through over 5. celebrations. 5star. The positing was that of the only sweet snack in the world of salty snacks.Halls It was launched in the candy category in the year 1968 and positioned as a ‘therapeutic’ candy competing in the cough lozenge market. It was positioned for teenagers and stood out because of its unique flavoured liquid filling. Bournvita. 2 .50. They kept the brand alive by advertising and campaigns. Finally they adopted the tagline of ‘soothes sore throat’ which was most successfully positioned.

no matter how big a player it is. Kraft got popular brands like Cadbury Diary Milk. And this acquisition would save $300 million in manufacturing. Kraft also had 11 popular brands which had revenue exceeding $1 billion each and 70 products which had revenue over $100 million each. With this acquisition KFI made for itself a very impressive portfolio of power brands. Entering by itself would have been a bad move as it could have been very tough for a new player to enter in such a market. Yes. Halls. 4) Great move for the company. bournvita. Acquiring a company with such a market reach and reputation was in favour of KFI. Indian chocolates market is very competitive with brands like Cadbury. There are also small local brands. with this Kraft can manufacture their products in India and would not require to set up their own plants. Through Cadbury. all of which had good market share. Overall it would result in decreasing of the costs for the company. all of these were very good reasons to go for the acquisition route as- 1) Access to a wide market. KFI also got an entry into other emerging markets in Europe and Asia-Pacific regions 2) Great portfolio of brands Through acquisition. 3) Economies of Scale Cadbury has manufacturing facilities in India. etc.. Nestle and Amul. 3 . All these brands are old and have good backward integration. Since Cadbury is present in India for over 6 decades. it had an extensive market reach throughout. $200 million in Administration and $125 million in marketing and media. Cadbury bytes.Was this reason to go for the acquisition route? Justify.

4 . If nestle had got Cadburys then it would have become one single biggest confectionary giant in emerging markets. Mexico. This could help in launching new products in global markets as well as development of new products. Through their combination. which are up to KFI standards. China and India). To survive in the Asian markets.5) Knowledge sharing. Acquiring Cadburys saved that opportunity for KFI for the emerging markets. there was news that Nestle and Hershey’s too are in the race of acquiring it. KFI have also introduced global manufacturing processes. Kraft can gain synergy. The competition was also too fierce. $200 million in administration and $125 million in advertisement and media. 7) The likelihood of Nestle and Hershey coming together When KFI was in the process of acquiring Cadbury’s. And the employees of both companies can share their knowledge. (As the CEO of Kraft stated the new company would have $50 billion in revenue in each year in markets like India. their purchasing pattern towards confectionery products. skills and build up competencies which are required to foster organizational growth. over all the costs of the firm will decrease. 6) Synergy. This merger has also allowed both the companies to exchange their patent recipes in similar products such as chocolate bars. standards and sales practices in Cadburys (visi coolers). An acquisition of one of the giants helped in covering those weaknesses and brought KFI into focus in these markets. closing doors for any future entries by KFI. Through the acquisition the Kraft can understand the Indian consumers. Brazil. Kraft can reduce their manufacturing cost that is $300 million. Market follows the philosophy of survival of the fittest and most innovative. 8) To survive among competition. KFI was not very well equipped in terms of market knowledge.

KFI would also make up good revenues in time. where Cadburys is a market leader.9) Overcoming entry barriers. 10) Gaining market share The Cadbury acquisition helped KFI get a substantial market share across AsiaPacific and European markets. Such an acquisition brings in pre-made supply chain. Here. KFI won in all these aspects by acquiring KFI and in one leap. 5 . Through this acquisition. The major benefits came for emerging markets such as India. distributors and a customer base for the acquirer. Acquiring a company which has its foothold in a particular country is considered to be a better option than going up the long way of launching oneself from scratch. especially in the Indian market. it got a strong presence in the Asia-Pacific regions.

Strengthening of existing brands and extending product lines was an economical and efficient solution. It enjoyed a market share of over 70% the highest Cadbury brand share in the world so it decided to strengthening these brands instead of launching their own brands because through this Kraft would make lots of profits rather than launching their products and incurring cost on them. halls and range of cakes and biscuits. These brands had a very strong foothold in the minds of consumers and great market share. Indian consumer. 6 . 5star. All these manufacturers and their brands are very deeply entrenched in the minds of customers. Extending product line of CDM and strengthening it via introducing global standards and practices in production and distribution came as a good idea. so if Kraft launch their products it would also take time to build and capture the Indian market. it takes years to the companies to make their stand in the market. It would not be easy for KFI to launch any of its products against giants like Nestle and Amul. Strengthening existing brands When Cadbury was acquired by KFI. As India is a country where people would not easy accept the foreign brands. Though KFI is a giant itself. Indian market also had other products in the same category by Amul and Nestle. Other companies have much stronger backward and forward integrations and dumping the products in market would be a waste. it already had a very impressive portfolio of brands such as CDM and Bournvita Cadbury bytes. This makes the confectionaries market in India very crowded and highly competitive.Why does KFI appear hesitant to use Cadbury India to launch its own global brands in India? Assess the strategic importance of this. perk. The market also had some local players with only local reach.

both of which are doing good. after it has made its name known among the consumers. It is also possible that KFI may launch some augmented versions of their heritage products under the banner of Cadburys. Energies should be spent on competing with rival products rather than own product.Cannibalisation. 7 . They might launch their Brands such as Jacob’s coffee. KFI is not totally hesitant to launch its products. That would give an advantage to KFI. KFI might launch some of its other products in India in due course of time. This sort of selfcannibalisation would have been unproductive for KFI. Oscar Meyer and Maxwell house in niche segments or in up markets. Understanding market It is a better idea to wait and learn the market dynamics while surviving and growing through existing products. If Kraft launched their products along with Cadbury’s products it. would have created competition between the existing brands of Cadbury and KFI’s rather than competing with competitors’ like Nestle and Amul etc. It has Tang and Oreo in the market. Also.

2) They can further acquire the local manufacturers in India so that Cadburys could reach to every level and zones of the market. Brazil and Russia where Cadbury has little or no presence. the Cadbury brand occupied its own brands category because of its influence was across multiple regions. Kraft could use Cadbury to strengthen their global base in emerging market like India and use their core competencies to maximise profits.  Heritage brands. 1) Kraft can distribute Cadbury’s brand products in market such as China. Kraft can pump such products in the Indian market and can increase market share. 8 . Jacob’s coffee (Europe) and Oscar Meyer (North America) were considered as regional brands. Kraft had core competencies through their sales capabilities. Tang (Asia Pacific).What else should they do with their Indian operations to improve business performances?  Core competence Kraft is a very strong company on global scale. after Nestle. Diary cheese (England) and Vegemite spreads (Australia). which are confined in the single country. It has huge market share with revenues of $49. After the acquisition. Heritage brands were classified into as regional brands which operates in a particular region and as local brands. While A1 Steak Sauce (USA). Kraft has heritage brands which hold the number one or two position in the market where it operates.207 billion. It can further grow and improve their competencies in the Indian market and can gain competitive advantage. This way it will help Kraft to achieve global market share through Cadbury’s products and maximise its profits. It was considered as a supra-regional brand because of its popularity in both Asia Pacific and Europe.

these retail/coffee stores would become a market development platform for KFI. Kraft can make investment in organised retail format like CCD and Brista. These retail stores would be focused to an up-market audience who would like to come in for a gourmet experience with one of the world’s best manufacturers. Through this they can sell their products and give customers a better experience of KFI’s heritage products. Also. Hershey or from the Indian giants like Amul. Therefore. with best practices from around the world and local approach. 6) Establish organised retail store. The holidays and workhours too need to be scheduled carefully. This would also become a platform to sell as most of Heritage KFI products would not be sold in general stores. so that best talent is hired and best practices are followed. 9 . 4) It can leverage the biscuits portfolio of Groupe Danone. Britannia etc. sell packets of the said coffee and also maintain inventory of other global brands. the trade unions need to be dealt with properly. it needs to keep an open mind to the work cultures of those nations where it has entered. the workforce needs to be in harmony and a state of mutual respect. But it left the India because Danone was engaged in a bitter litigation with Britannia industries and their Indian promoter. the Wadias.2%. KFI had leveraged and integrated the global infrastructure of Danone especially in Emerging market which resulted in sales growth of 12% and profit growth of 24. For any organisation to work smoothly. A Cadbury experience could be provided for young ones as well. Same practice of hiring talents could be practiced into all emerging markets as every ounce of insight into customer’s behaviour is precious. into the markets it has entered. KFI would need to see itself as a GLOCAL organisation. KFI could invest into Starbucks like coffee chain where it would serve its Jacob’s coffee. 5) As KFI is new to some markets which it has entered through Cadburys route. These people would also bring insight into Indian markets.3) Kraft could hire talent from its competitors like Nestle. which it had acquired in 2007.

CASE REPORT FOR STRATEGIC MANAGEMENT. IN INDIA.THE CADBURY ACQUISITION BY Shivani Shrivastava. Group. Section.6 10 . Mubarak Havanur Manal Verma.II KRAFT FOODS Inc. V. Swaroop B.B.