The Worlds Largest Confectionary Organisation - Case Study Example

CASE STUDY: Cadbury Schweppes BY YOU YOUR ACADEMIC ORGANISATION HERE YOUR HERE HERE CASE STUDY: Cadbury Schweppes Company background Cadbury Schweppes is currently the world’s largest confectionary organisation and currently maintains significant market share in many of the world’s largest confectionary market environments (Cadbury, 2008). The company produces a wide variety of chocolate products, chewing gums, and through its acquisition of other branded companies, manufactures and distributes well-known international brands including Trident and Halls Vapor Drops. The sales of the company’s chocolate products make up a whopping 80 percent of the entire company revenues in both the UK and Ireland (Bowery, 2006). This very high share of the market reinforces why Cadbury company continues to focus heavily on developing new marketing strategies in order to make their chocolate products stand out from competition. In the late 1990s, Cadbury developed an internal mechanism deemed the formal suggestion programme which was designed to receive various stakeholder feedback regarding the viability of Cadbury products and the company’s marketing efforts as a means to improve the Cadbury image (Myers, 1999). This tends to reinforce that the company remains strongly focused on marketing and branding strategies in order to differentiate Cadbury products from other competition. Situational Analysis Currently, in terms of marketing strategy, Cadbury appears to be focused on differentiating its chocolate products from those of competitors by focusing on both quality and by utilising humour in its contemporary marketing approaches. One of the company’s most notable brands, Cadbury Dairy Milk, has utilised television promotion which utilised a drum-banging gorilla in order to link the Cadbury brand with a more flexible, humorous and modern organisation. This ad appears to have achieved significant sales successes for the Dairy Milk brand, prompting the company to allocate a significant cash budget to produce a sequel to this humorous promotion (Dutta, 2008). Says Phil Rumbol, the marketing director of Cadbury, “We recognised that gorilla had an enigmatic, almost random element to it that audiences had responded to, and had generated masses of debate online” (Dutta, 2008, p.2). This represents a significant change from previous marketing efforts at the company, which attempted to place the company, in the minds of the consumer audience, as an organisation which is committed to tradition and confectionary excellence as part of a more upscale marketing focus. It seems that today, in order to make the company more appealing to mass markets and modern audiences, some of its most famous brands required readjustment to promotional strategies. It does not only appear that Cadbury is facing new consumer behaviours and attitudes which are affecting its choice of marketing focus, but also a wide variety of other external factors as well which are dictating current strategy in terms of business operations and branding. Using the PESTEL model as a template, Cadbury appears to have significant advantages over other multi-national companies in terms of the external political environment. The United Kingdom is a progressive, democratic country which not only promotes the establishment and success of business, but also provides companies with the tools and governmental expertise necessary to help companies bring value to national economy. Especially in today’s economic climate, having a partnered ally in the government ranks only serves to benefit both Cadbury and the citizens of the UK as well. There do not appear to be any significant hindrances in this particular market in terms of exportation guidelines or setting limits on production and marketing efforts, therefore in terms of the firm’s UK presence, no significant political situations can be identified which hinder the success of Cadbury in all of its UK business divisions. The economic environment, however, greatly impacts the success of Cadbury in terms of sales revenues generated by consumers. It is relatively common knowledge that the entire globe is facing a credit crunch which has strongly depleted consumer home values and has also resulted in the elimination of many jobs in the UK, leaving many consumers with much less disposable income than in previous years. Many of these consumers have cut back on their personal spending, which may impact Cadbury’s pricing models and promotional focus in the short-term. However, Cadbury appears to understand this and also recognises that small pricing reductions in its confectionary products can lead to positive gains. Said David Williams, one brand manager at Cadbury, “If you mark a £1.29 product down to £.99, the results are immediate, quantified and verifiable” (Reid, 1997, p.27).Should the consumer spending issue in the UK continue to grow, Cadbury maintains the ability to make small pricing changes to make the product appear more affordable to many buyers in order to ensure that sales volume expectations are met during these difficult economic conditions. Consumer confidence also appears to be quite low today in many areas including public trading and the overall consumer marketplace, as well as in overseas consumer markets. However, this is not necessarily a strategic disadvantage for Cadbury as a wide variety of its highest-selling products actually come at a very small price tag, such as the Dairy Milk brands and other chocolate products, therefore many of these products could be deemed impulse purchases and are certainly not high-involvement for the most part in the eyes of consumers. Thus, when other high-ticket products made by competing or non-competing companies are struggling to figure out how to lure consumers into their stores, Cadbury can likely weather this economic storm simply because its products are low-end and competitively priced as low-ticket items. The social environment, also part of the PESTEL diagram, is significantly important to what is driving current marketing efforts at Cadbury, as well as the firm’s overall business and manufacturing strategies in the UK. Changing consumer behaviours, such as the aforementioned shift toward humour in advertising, are radically redesigning current promotional strategies. There also appears to be a higher social calling toward all things healthy, especially in terms of food products in the UK, which is causing many companies to change the focus of how they promote their many food products. For example, many companies are banning advertisement of foods which are higher in salt, sugar and fat in order to appeal to the new consumer attitudes toward healthy eating (Bowery). This represents a significant disadvantage for companies like Cadbury which, by design, produce products which are often high in fat and sugar content. In order to compensate for this new consumer shift in healthy lifestyles and their new demand for healthy eating, Cadbury is attempting to focus on promoting the benefits of dark chocolate to sustaining a healthy lifestyle (Bowery). Though this advertisement strategy does not necessarily let consumers know that dark chocolate still maintains fat and sugar content, it does create a lifestyle connection with customers by illustrating dark chocolate’s anti-oxidant properties and benefits for heart health and circulation. The technological environment in the local UK marketplaces is always in a state of evolution, with new softwares and equipment being developed regularly to enhance business operations. From a research and development perspective, Cadbury appears to be adopting many of these new technologies, especially in terms of product development, in order to make the company stand out. In 2007, the company began manufacture of liquid-centre chewing gum under the Trident brand (Annual Report, 2007). This represented innovation in manufacturing as a new technology for product creation. The company is also attempting to save costs related to its supply chain by outsourcing most of its information systems support (Annual Report), which appears to be an external technological factor which is impacting many companies looking to reduce costs in this difficult economic climate. Rather than adopting new technologies to support online and internal software necessities, these functions are being outsourced to other agencies to cut payroll, supply chain, and IT infrastructure expenditures. The legal environment in which Cadbury currently thrives within in the UK could not provide any research evidence indicating that significant changes have occurred in recent years. The company must comply with various legislation regarding consumer protectionism and, in opposite accord, the company is still protected by various intellectual property laws. The company acknowledges it is currently involved in external legal disputes (Annual Report), however there is no indication that the current legal environment poses a threat to the business overall. Interestingly, further under the PESTEL model, there appears to be a growing consumer shift toward all things ecological in the UK (and abroad), with a focus on environmental friendliness and the corporate contribution to reducing waste and atmospheric emissions. To meet consumer and legal demands in this area, the company acknowledges an effort to reduce carbon emissions at its manufacturing facilities by 50 percent by 2020 and to begin using biodegradable packaging whenever possible (Annual Report). It does not appear that these changes are largely mandated by law, which shows that the company is focused on sustainable products and packaging for environmental friendliness and responsible manufacturing. SWOT analysis for Cadbury The SWOT model represents the various strengths, weaknesses, threats and opportunities presented for Cadbury. Strengths: A very diversified brand portfolio. Cadbury maintains a widely diverse family of brands which does not represent a focus on only chocolate products, but on chewing gum products and carbonated drinks as well. Having a diversified business portfolio can allow the company to promote these products, in levels appropriate for sales expectations, in the event of consumer sales declines in one particular brand category. High market share. Cadbury maintains approximately 9.9% of the total global market share in similar product categories. Weaknesses: Experience in foreign markets. Cadbury has only recently expanded its product lines from the UK into the U.S. markets, therefore the business is not well-versed in American consumer attitudes and behaviours. Share Value. Cadbury’s total market capitalisation is over £10 billion, however with only 341 million shares outstanding (on the market), the company’s current stock price is only $30.74, representing a company with considerable debt obligations (marketwatch.com, 2009). Opportunities: New Market Potential. New market environments such as India and China, which are developing economies, provide opportunities to expand the Cadbury brands and introduce new foreign consumers to Cadbury products. Company Acquisitions. Cadbury maintains the ability to acquire other companies which may be struggling in today’s global economic crisis to further diversify the company’s family of brands. Threats: Rising Competition Levels. Cadbury is facing higher competition from other food manufacturers offering similar products such as U.S. Mars Company, Nestle of Switzerland, and Stollwerck of Germany (Wagstyle, 2001). Consumer Attitude Shifts. As previously identified, consumer behaviours toward healthy eating may not just be a fad, but a long-term lifestyle adjustment. This could jeopardise Cadbury’s 80 percent profitability in chocolate products if higher volumes of consumers begin counting calories as a matter of lifestyle adjustment. Alternative marketing strategies Though the utilisation of humour in advertising, as mentioned previously, found short-term success in boosting sales of the Dairy Milk products, there is evidence that this strategy might not be a long-term goal for positioning some of Cadbury’s brands. Due to the success of the gorilla advertisement for Dairy Milk, the company created a sequel to this promotion which did not include the gorilla, but included humour using a different variety of actors. One marketing expert suggests that “the campaign was so powerful that consumers expect to see the ape in all ads” (Barrett, 2008, p.25). After producing the sequel promotion without the gorilla, Dairy Milk began to lose market share (Barrett). This may suggest that the company was too quick to move forward, away from the gorilla marketing strategy, by adopting new humour for Dairy Milk products. It may not be just the humour that the consumers were rallying for, but in the overall scope of a gorilla banging drums which linked Dairy Milk with innovation in marketing. If the creative promotion utilising the ape brought a 9% increase in sales volume (Barrett), alternative marketing strategies, other than utilising different actors, is an alternative strategy to rebuild market share in Dairy Milk products. Recently, the company began marketing The Natural Confectionary brand of jelly sweets which emphasised the lack of artificial colouring and flavours, however the firm did not link the Cadbury brand name on any of the new product packaging (Parry, 2008). The product achieved dismal sales results and many retailers who carry The Natural Confectionary products will not support it (Parry). Attempting to launch the product without the Cadbury brand attached is likely the fault for the sales failure. Recommendations for improvement Because there is a consumer lifestyle change and value system related to healthy eating, if Cadbury desires to further diversify its food brand portfolio by adopting The Natural Confectionary brand, it should continue to focus on the natural elements of the product but clearly link it to the Cadbury brand name. The name Cadbury should be attached to all packaging as consumers already recognise the Cadbury brand and are likely loyal to it due to its longevity in the European marketplace. It is recommended that in order to make The Natural Confectionary products thrive, the business should position this product in terms of product quality and market the product as a trusted member of the Cadbury name. A temporary price drop on these products would also act as an incentive to get more consumers interested in buying the natural products, which could be repriced accordingly once the sales volumes have increased. It is further recommended that Cadbury take advantage of the opportunity to reutilise the successful gorilla marketing campaigns associated with the Dairy Milk products. It is likely difficult to establish a positive brand loyalty in mass consumer segments, however the success of the first advertising scheme which utilised the ape should be capitalised upon further before this method eventually moves to the end of its expected life cycle. This framework for humour was dismissed too quickly, especially with such an initially-large increase in market share for this chocolate product. In many ways, the gorilla may represent a new, contemporary image for Dairy Milk which could continue to vault this particular brand into sales success well into the 2010s. Because the high volume of opportunity for expansion into different emerging markets exists, Cadbury should begin conducting consumer research about Indian, Chinese or even Middle Eastern consumers to determine what drives their eating patterns and their feelings about confectionary products. Prior to new market entry, Cadbury must understand the social, religious, and economic principles which drive consumer lifestyles and behaviours in these regions in order to launch a successful, foreign marketing campaign in these new markets. However, with Cadbury’s currently-low stock price, high volume of debt, and diminishing market share in the UK markets, new foreign marketing strategies should be developed. Additionally, by examining the current feasibility of existing supply chain strategies, new market entry into these emerging economies could be completed in just under one year if the company remains focused on learning about lifestyle elements of the foreign consumer. Exposing new consumers to the different Cadbury branded products will only serve to achieve higher exposure around the globe and provide Cadbury with the added sales boost necessary to weather the current economic conditions being experienced in the UK, overall European, and American marketplaces. These efforts may also be appealing to different consumer segments with lifestyle values related to corporate social responsibility when they witness Cadbury improving the lifestyles of consumers who are not currently given many food brands to select from. Cadbury could capitalise on this effort toward corporate social responsibility by promoting these efforts and make the company stand out above other competitive forces. Finally, another recommendation for the company is to further capitalise on humour in advertising as a means to boost profitability. The company, in this new, contemporary effort, does not have to cease efforts to position certain brands related to quality, but should recognise that humour is a big seller for particular brands. For instance, the Cadbury Crème Egg utilised on-air promotions which illustrated the chocolate egg removing its trademarked foil wrapping and jumping into a food blender whilst another promotion showed the same egg sitting on a block of wood in anticipation for a passing sawblade to cut its head off (Ewart, 2008). These efforts significantly boosted the sale of the Crème Egg brand. Clearly, the modern consumer audience is excited and interested in unique advertising styles such as these and such promotions only serve to build brand loyalty in the long-term. By creating innovative advertising for the multitude of products manufactured by Cadbury, particular niche markets may flock toward Cadbury as a brand which fits their lifestyle and personal values frameworks. Conclusion All of the aforementioned strengths and weaknesses to current business strategy at Cadbury, as well as opportunities for change, illustrate that Cadbury is not limited to current, existing marketing focus in order to build higher profitability. Despite the challenges of rising competition, Cadbury products are still priced within an acceptable pricing model and are still attractive to customers for this reason in times when economic conditions are uncertain and unstable. Cadbury is a company which has been recognised by European consumers since the 1800s and has a well-established brand reputation which many consumers can likely recall instantaneously. With a little bit of marketing flexibility and a focus on quality, the company can outperform many of its current competitors and seize the necessary market share to build a company which remains highly profitable for years to come. The key to Cadbury’s future successes lie mostly in understanding what the consumers really want and create the systems and marketing focus in order to deliver it to them. Bibliography Annual Report. (2007). ‘Cadbury Schweppes’. http://www.marketadvices.com/reports/Cadburyschweppes2007.pdf (accessed 12 Mar 2009). Barrett, Lucy. (2008). ‘The ad is just the start’, Marketing, London. 16 Apr 2008: 25. Bowery, Joanna. (2006). ‘Cadbury hones in on products’, Marketing, London. 22 Nov 2006: 15. Cadbury. (2008). ‘Cadbury Corporate Factsheet’. http://www.docstoc.com/docs/1745786/Cadbury-Corporate-Factsheet (accessed 12 Mar 2009). Dutta, Kunal. (2008). ‘Cadbury unveils successor to ‘gorilla’ spot’, Campaign, Teddington. 28 Mar 2008: 2. www.proquest.com. (accessed 12 Mar 2009). Ewart, Tom. (2008). ‘Cadbury Crème Egg: Magnetic Egg’, Marketing, London. 19 Mar 2008: 23. Marketwatch.com. (2009). ‘Cadbury’. Stock Quotations. http://www.marketwatch.com/quotes/cby. (accessed 13 Mar 2009). 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