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Cadbury Case Essay

Case Summary

Cadbury Plc. is a multinational confectionery (chocolate, chewing gum and candy) company which was founded in 1824 by John Cadbury. In the first years, a time when only wealthy people could afford its products, Cadbury only sold cocoa and chocolate. After World War I, Cadbury started its mass production of chocolate and later was consequently enlarging the company’s capabilities and portfolio via acquisitions and the creation of further products and stand-alone brands. In 2003, Cadbury made a momentous strategic marketing decision, namely to establish Dairy Milk as the Megabrand of the company, inhering, besides others, the two famous and former stand-alone brands Caramel and Wispa. Wispa consumers were longing for the chocolate bar in its traditional way and therefore protested through different social media. The management was forced to re-launch the bar; with tremendous success.

Situation and problems

Cadbury’s brands evolved out of a long company history and through several global, regional and local adaptations. The year 2003, when Todd Stitzer became new CEO, was a year of change for Cadbury. Through synergies, the structure was simplified and management capabilities were improved in order to reduce costs and increase margins. Declining sales of Wispa and Caramel were the main reason for the company to include, beside others, these two brands in Dairy Milk, in order to make a Megabrand out of it. Prior field tests indicated that consumers would accept and continue buying both Dairy Milk products and therefore confirmed this management decision. Nevertheless, due to the loyal and big customer base of Wispa and Caramel, reactions showed that – at least concerning Wispa – this decision was inaccurate.

Now the question arises, if Cadbury should also re-launch the Caramel bar as a stand-alone brand or should it continue having it incorporated in the Dairy Milk range. Furthermore and more generally, it is debatable how the firm should manage its brand architecture and branding strategy in future and how it should illustrate its products concerning packaging and advertising in order to expand market shares of the chocolate-, candy- and chewing gum market. These factors are essential, because the importance of powerful brands, packaging and advertising are strongly valued and influencing the company’s growth.

The Confectionery Market

The relationship of a company’s products with the market influences its brand architecture. In Cadbury’s the target market has relatively homogenous needs and interests (a research from Cadbury itself has shown, that confectionary is a part of everyday life). Additionally, due to growing globalization, media habits of confectionery consumers tend to assimilate more and more. To reach a relatively homogenous target market, global corporate-dominant branding is most effective, because a wide market is appealed. In addition to that, the degree of market integration is rather high. Integrated markets mean that customers with similar purchase needs worldwide and the same or similar competitors (for example Mars Inc.) are present in different regions. Nevertheless there are also smaller local competitors in the confectionery market. When markets are relatively integrated, but still local competitors exist, a combination of corporate- and product brands is useful.

Cultural embeddedness is also a crucial factor for branding strategies. As already mentioned, confectionery consumers have relatively similar needs, but it is also the case that consumption preferences for confectionery can be embedded in local cultures, meaning preferences of taste. Therefore Cadbury should also consider cultural differences concerning its brands. As the confectionery market is a multinational market with comparatively high degrees of homogeneity, market integration and cultural embeddedness, literature suggests Cadbury to focus on a limited number of brands as well as to make sure that the brands are harmonized in order to increase the power of them (Douglas and Craig 1999).

Beside this rather robust construction of the global confectionery market, there also exist several trends which are important for Cadbury to consider. Although the market is relatively mature in several sectors, some issues create space for global growth. Indeed, in some regions such as Northern America and Western Europe the market stays fairly mature, but consumption rises in developing regions, like India and Eastern Europe. In developed countries a lot of growing potential is offered through niche sectors, such as low-fat, low-sugar, organic or Fair-Trade confectionery. Another opportunity for growth is the development of new flavors, because consumers’ demand of intense flavors is increasing (Leatherhead Food International 2006).

Cadbury’s Brand Architecture

As also emerged from related literature due to the conditions of the confectionery market, Cadbury follows a hybrid branding strategy with multiple brands, which means it possesses a combination of corporate brands (Cadbury) and product brands (Wispa). Dairy Milk can be regarded as a sub brand of Cadbury. It uses its Cadbury brand worldwide, but offers many product variants. Cadbury’s branding architecture can be seen as a result of prior management decisions as well as competition and was shaped throughout its complete history.

Due to its history and past development, the company possesses high operational capabilities and access to different distribution channels. Its brands are appreciated by huge and often loyal customer bases which are spread over many national markets. The Cadbury and Dairy Milk brand should stand for tradition, a fact which also wants to be communicated via the traditional packaging. Further, it has to be evaluated how Cadbury should manage its brand architecture – especially in the case of Caramel – in order to strengthen its position in the multinational confectionery market.

Suggestions for the Management

For retaining Cadbury’s integrity, credibility and value, it is important to pay attention to the terms custody and consistency. This means that further brand extensions should sometimes be refused and Cadbury should be consistent concerning the usage and the positioning of its brands. Nevertheless decisions concerning the branding strategy are often dependent by the situation. The case of Wispa showed that it was an unpopular decision to abandon the stand-alone brand and subsequently re-launching Wispa was the only right thing to do, even though it demonstrates inconsistency of Cadbury. Due to the apparent absence of protesting consumers who claim for a re-launch of Caramel, we suggest Cadbury not to bring back the stand-alone brand. Additionally a re-launch would further increase the number of Cadbury’s inconsistent decisions and we fear that the company could lose a part of its credibility.

Therefore we would propose to keep Caramel in the Dairy Milk range, but to modify its packaging and advertising. A packaging, which strongly reminds of the old design of the chocolate bar and advertisements, which focus on customers’ familiar taste and eating experience would be helpful to strengthen the position of Caramel even though it is still part of Dairy Milk. Before introducing any actions we strongly propose to undertake market analysis in order to have a clearer picture of what consumers appreciate most about the chocolate bar and which values are mostly associated with it. Concerning the general future development it is absolutely necessary that Cadbury continues exploiting market opportunities and trends. Developing regions, such as India or Eastern Europe offer opportunities to increase its sales and scope.

The question if Cadbury places confectionery in these growing markets through the introduction of new product- or corporate brands or uses its existing brands is market dependent and is relative to the existing establishments of the company’s brands. Sufficient market research is an important requirement for expanding into new markets, because specific cultural and regional taste preferences need to be satisfied. Also niche markets, such as low-fat, low-sugar, organic or Fair-Trade products, offer promising opportunities for Cadbury. Due to the general transition of a great number of consumers towards healthiness, we would recommend to focus on their perceptions and needs as well. We think it would be a promising strategic decision to introduce a product line which consists of low-fat and low-sugar confectionery and targets figure- and health-conscious consumers.

For these niche markets we suggest to develop a seperate brand. Traditional confectionery consumers may have completely different attitudes towards Cadbury’s products than health-conscious consumers and therefore it is important that there is some kind of separation. In the end, regarding the Caramel question, it will be up to Cadbury themselves to weigh up competences and environment, to find out to which extent theoretical approaches should be taken into account on one side, and how important the own history and experience, development, cultural differences and customer loyalty in general will affect final decision making on the other side.

Literature

Douglas, Susan and Craig, Samuel (1999), “International Brand Architecture: Development, Drivers and Design”, Stern School of Business, University of New York.

Leatherhead food International (2006), “The Global Confectionery Market – Trends and Innovations”
http://www.researchandmarkets.com/reports/39940/the_global_confectionery_market_ trends_and


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