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Why Cadbury is still a favourite

By Shobhana Subramanian in Mumbai
Last updated on: May 24, 2006 18:16 IST
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It's light, it's heady, it's chocolate. Cadbury India is now an expert at it: turning market perceptions around to its strategic advantage.

After all, with a share that varies in a 69-71 per cent band of the organised Indian chocolate market, the Rs 900-crore (Rs 9 billion) company sets the rules.

When cocoa prices soared in the 1990s, it started selling light chocolate-enrobed snacks, appealing to the weight conscious and extracting higher value from the same tonnage. A few years later, to expand market volumes, it repositioned the chocolate as a substitute for traditional mithai. 

Cadbury has the market nicely covered, with offerings that range from a new 5-gm bite for Rs 2 that's light on both the conscience and wallet, to the nuts-coated Celebrations gift packs with prices from Rs 125 to Rs 300.

While the upper-end Desserts range sells for Rs 20 a slab, its classic Cadbury Dairy Milk has just been dropped to an irresistable price point of Rs 5.

On affordability, the brand is ready for deep market penetration, according to Sanjay Purohit, head, marketing.

"If you can grow the topline by getting in more consumers, you can always hike the prices later," says Dipankar Sanwalka, executive director, consumer markets, KPMG, who feels margins can be managed even as tonnages go up.

It'll be a long haul. The average Indian consumes just 100 gm of chocolate every year, compared to 8-9 kg in the UK, where chocolates are standard fridge items. Cadbury is keen on the upmarket opportunity here too.

The worm controversy of 2004 was a setback no doubt (sales grew just 8 per cent that year), but that has been dealt with (sales rose15 per cent in 2005).

Given how vulnerable chocolates are to heat, enlarging volumes in India is mostly a matter of distribution dynamics and cool-chain management: the ground effort, that is.

Cadbury has set up a new two-tier distribution system with one set of distributors for chocolates and another for under Rs 5 products.

This way, it can cover supermarkets with as much efficiency as kiosks. Nonetheless, distribution is still a challenge. Chocolates must sell fast so that no part of the chain finds its capital blocked for too long, especially since telecom paraphernalia is proving such a lucrative alternative for distributors.

"We need to manage their return on investment," says Purohit, thankful for the growth of large-format stores where sales are brisk. Modern stores account for barely 5 per cent of sales currently, but Purohit sees it at 20 per cent in a few years.

The ground efforts also require the air cover of advertising: which must not just get the consumer yearning for a treat, but also rationalise it within the social context. "Indians have a sweet tooth," says Purohit, "and we're trying to get them to serve chocolate on all occasions that mithai would be."

Thus, the new flavour variants. Desserts Kalakand Creme, for example - a  study, in itself, of using the lightness of modern expression to rejuvenate tradition.

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Shobhana Subramanian in Mumbai
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