Cadbury’s comeback

GOLDYN ABRIC SAM.S.M

Case Analysis

About the company

• Cadbury India is the Indian arm of British confectionery giant Cadbury Schweppes.

• Now called “Mondelez International”.• Mondelēz International proposes to be the world’s largest

chocolatier, biscuit baker and candy maker, and the second-largest maker of gum.

‘The Defect’

• On October 2003, worms were found in the bars of Cadbury Dairy Milk (CDM) in certain shops in Kerala and Maharashtra.

• Quick to respond, the Maharashtra Food and Drug Administration seized the chocolate stocks manufactured at Cadbury's Pune plant.

• In defense, Cadbury issued a statement that the infestation was not possible at the manufacturing stage and poor storage at the retailers was the most likely cause of the reported case of worms.

• But the FDA didn't buy that.

• FDA commisioner, Uttam Khobragade told CNBC-TV18, "It was presumed that worms got into it at the storage level, but then what about the packing - packaging was not proper or airtight, either ways it's a manufacturing defect with unhygienic conditions or improper packaging.“

• That was followed by allegations and counter-allegations between Cadbury and FDA.

• The heat of negative publicity melted Cadbury's sales by 30 per cent, at a time when it sees a festive spike of 15 per cent.

The strategy• Bharat Puri , the Managing Director then, formulated the strategy.• As a brand under fire, in October itself, Cadbury's launched project

'Vishwas' - a education initiative covering 190,000 retailers in key states. • But what the company did in January 2004 is what really helped de-

worm the brand.• By investing up to Rs 15 crore (Rs 150 million) on imported machinery,

Cadbury's revamped the packaging of Dairy Milk. The metallic poly-flow, was costlier by 10-15 per cent, but Cadbury didn't hike the pack price.

• Cadbury's roped in brand ambassador Amitabh Bachchan to do some heavy duty endorsement putting his personal equity on the line for the brand.

• The company upped ad spends for the Jan-March quarter by over 15 per cent.

The Comeback

• The recovery began in May 2004, and by June, Cadbury's claimed that consumer confidence was back.

Stats

• For the year ended December 2003, the company’s net profit fell 37 per cent to Rs 45.6 crore as compared with a 21 per cent increase in the previous year.

• Value share melt from 73 per cent in October 2003 to 69.4 per cent in January 2004. In May, however, it inched up to 71 per cent.

• CDM sales volumes declined from 68 per cent in October to 64 per cent in January 2004. It edged up to 65.9 per cent in May 2004.

Comments• Experts believe that the reason for Cadbury's success was that it took

crisis head-on.• "The nature of the relationship that Cadbury's has built with the consumer

is responsible for latitude the consumers are giving it.• "They are seeing it as a lapse, not a breach of trust - this difference is key.

What Cadbury's set out to deliver, it goofed up once but it seemed to be very sincere in its intent to get things right.“

• Sanjay Purohit, executive director of Cadbury India, would not give the entire credit to the brand mascot. He claims that it was the astute action taken by the company which helped. “We responded to consumers concern over the issue rapidly. Also, the communication campaign worked effectively in giving out the central message,” he says.

• Cadbury's could be case study of a sweet recovery from a crisis. It continues to lead the Indian chocolate market with over 70 per cent marketshare.

References

• http://www.business-standard.com/india/news/cadbury-recoversworm-shock/155019/

• http://articles.economictimes.indiatimes.com/keyword/cadbury-schweppes

• http://www.rediff.com/money/2006/dec/24cad.htm• http://www.cadburyindia.com/in/en/About/index.aspx