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Cadbury makes a sweet comeback

T R Vivek | October 30, 2004

Cadbury India's four factories in India churn out close to 8,000 tonnes of chocolate and the company sells a million bars every day.

But Bharat Puri, managing director of Cadbury India will never forget the batch of Dairy Milk chocolates numbered 28F311 manufactured last year at the company's plant in Thane, near Mumbai.

That was the worm-infested batch that triggered a crisis for the company that had always prided itself on its squeaky clean image.

The timing of the controversy couldn't have been worse. Festival season sales (Cadbury sells almost 1,000 tonnes of chocolates during Diwali) plummeted 30 per cent.

Until then, in the country's FMCG sector plagued by slow, low single digit topline and bottomline growth, Cadbury was a sweet exception. But its net profit in 2003 dipped 37 per cent to Rs 45.6 crore (Rs 456 million) as compared to a 21 per cent increase the previous year.

Now, a year later, Cadbury says that consumers have long forgotten the controversy and are back to their merry chocolate-chomping ways.

"Sales are back to the pre-controversy levels. Consumer confidence in the product is back and there has been a steady progression in sales," says Sanjay Purohit, head (marketing) Cadbury India. The company expects to close the year with a high double digit sales growth.

According to Purohit, damage contol wasn't easy. Something somewhere had gone wrong but it was important for Cadbury to be seen as a responsible and pro-active company to win back the trust of consumers.

It helped that the Maharashtra Food and Drug Administration had given a clean chit to the company's two plants in the state. Cadbury went into overdrive to tell consumers that improper storage of what is essentially a perishable commodity might lead to worm infestation.

Last November Bharat Puri, Cadbury's mild-mannered MD, went to media offices around the country meeting reporters, answering mostly hostile queries and patiently explaining the company's stand on the issue.

"Unlike the cola companies which were caught in a controversy just a month earlier and displayed an ostrich-like attitude, Cadbury did not go into denial mode. It accepted that there was a problem, which may not have been of its own making, and made a commitment to the consumer that it would plug all possible safety loopholes," says a Mumbai-based brand consultant.

As a result Cadbury improved the packaging and paid more attention to the way its chocolates were stored by nearly 650,000 retailers across the country.

In the aftermath of the controversy, the company launched Project Vishwas, a retail education programme under which 190,000 retailers in key states were covered. The programme entailed generating awareness and providing assistance in improving storage quality.

"What you see now is the most over-engineered packaging for a Dairy Milk chocolate anywhere in the world. Even our festival packs come with a tamper-proof outer sealing and improved packaging inside," explains Purohit.

The new double packaging even for the smallest offering, the 13 gm Rs 5 Cadbury Dairy Milk, had the bar wrapped in aluminium foil and enclosed in a polyflow pack, which was sealed on all sides.

The larger Cadbury Dairy Milk packs came in poly-coated aluminium foil, which was heat-sealed and then wrapped in the branded outer package. Both these initiatives are country specific and Cadbury invested nearly Rs 25 crore (Rs 250 million) this year on new machinery for the improved packaging.

The company also carried out quality checks at its facilities as well as its carrying and forwarding warehouses and distributor warehouses and found products free of infestation.

"Our quality control goes beyond the factory gate to the distributors, but our control over the retail chain does diminish," said Purohit.

Besides all the negative publicity, the worms also put paid to Cadbury's plans of becoming a major sourcing hub for British chocolate and beverage giant Cadbury Schweppes.

As part of a global realignment of its supply chain management, finishing touches were being given to a plan that would have seen Cadbury India emerge as a major supplier of chocolates to the Asia-Pacific region and the Middle East.

"This controversy, and the adverse publicity it has received in several countries, has set our plans back by several months. The outsourcing model would have resulted in significant revenue generation for Cadbury India," Puri had remarked.

Even the parent company, seen globally as a flagbearer of corporate governance, had expressed concern about the problem.

To offset the negative impact of the controversy and to re-establish the dominance of Dairy Milk in its category, Cadbury also signed up Bollywood icon Amitabh Bachchan as brand ambassador. With the help of its advertising agency O&M, it created a campaign which aimed for both rational and emotional appeal.

One of the ads showed Bachchan visiting a Cadbury plant, inspecting the systems and processes and finally consuming a bar of chocolate to be convinced that there's nothing wrong with the brand.

The other ad featured Bachchan and his granddaughter to emphasise that the product was absolutely safe for children.

With the new campaign in place, Cadbury stepped up its advertising spend significantly this year to nearly Rs 40 crore (Rs 400 million). With a turnover of Rs 729 crore (Rs 7.29 billion) in 2003, Cadbury has a 70 per cent market share in chocolates and Dairy Milk chocolate has 30 per cent market share, despite competitors like Nestle and Amul.

The company bounced back soon after the campaign hit the screens. Between October 2003 and January 2004, Cadbury's value share melted from 73 per cent in to 69.4 per cent. The recovery began in May 2004 when Cadbury's value share went up to 71 per cent.

Cadbury's Indian operations are not just the largest in Asia but also the cheapest. In India, Cadbury has the largest market share anywhere in the world and has been the fastest growing FMCG company in the last three years with a compound annual growth rate of 12.5 per cent.

So, despite the bitter moments of the last year, the company is hoping that the future will be much sweeter.



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