Kraft Foods Inc. in IndiaThe Cadbury Acquisition
Prepared By: Sunanda Gupta (1023) Vineet Sharma (1026)
What was Cadbury's standing in India prior to the KFI
acquisition? Was it Spectacular? Was this a reason to go for the
acquisition route? Justify.Cadburys standing in India prior to the
KFI acquisition: Enjoyed 70% market share- the highest Cadbury
brand share in the world in the chocolate segment of the
confectionery industry CDM had been the market leader in the
chocolate category for years and in March 2011 enjoyed a market
share of 30 percent Cadbury Bournvita launched in 1948 enjoyed a
market share of 17 % in 2011 Launched Halls in 1968 and was the
undisputed leader in the medicated candy market
Cont. Launched brand Cadbury Bytes in snack market in 2004-05 In
2007, Cadbury launched bubble gum brand Bubbaloo in the gum
category and within 3 months of launch captured 30% of the
bubblegum market
Reasons to go for Acquisition Route Cadburys leading position in
confectionery market and strong presence in emerging markets
Likelihood of Nestle and Hershey coming together Acquisition by
Kraft puts it nearly 70% ahead of rival Mars in terms of
confectionery sales in emerging markets Wanted to take advantage of
the Cadbury distribution in developing markets of India, Brazil and
Mexico Reduce its R&D costs and also speed up development of
new products
Cont. Cadbury presence in over 550,000 independent retail
outlets throughout the country gave it extensive market reach To
reduce competition from Nestle and Mars Acquisition would save $300
million in economies of scale in manufacturing, $200 million in
administration, and $125 million in marketing and media Cadburys
contribution whooping 90 % of the total revenuesDec June Revenue
24% $540 m 30% $13.8 bn
Kraft Foods Pre-Cadbury
New Kraft Foods
Top 12 emerging markets account for 80% of emerging market
retail sales Market share
Top 10 Global Packaged Food Players Performance Globally
2001-2008
Why does KFI appear hesitant to use Cadbury's to launch its own
global brands in India? Asses the strategic importance of this.
Many acquired brands get reduced to ghosts of their illustrious
past. Some are even exorcised. e.g. Air Deccan, Daewoo Mati but
case of Coca-cola underestimating Thumps up Cadburys strong brand
recognition in India, while Kraft brand presence in India is very
little despite the fact it entered Indian market thrice To prevent
cannibalization of Cadburys current brands Oreo biscuits (sandwich
cookie) launched under the Cadburys brand name in India as Cadbury
enjoys much greater brand equity as compared to Kraft. May follow
this strategy in other emerging markets as well
Cont. First product to be launched from Krafts portfolio in 2011
was Tang. Grow the existing market rather than introduce something
new. Risk that the companys much-loved brands will not get the
attention they deserve in a big food company that sells everything
from instant coffee to hot dogs. ( for US markets ) Backing up well
established brands like Halls was a no brainer. Instead of Trident
gums of Kraft, investments were made in the bubblegum brand
Bubbaloo
Cont. Confident of Cadburys Indian operations with growth rate
of 22-25 %
Kraft Foods 5-10-10 strategy for developing marketsCUSTOMISED
STRATEGY 5 CATEGORIES Chocolates Coffee Biscuits Powdered drinks
Candy and gum 10 POWER BRANDS MILKA chocolates LACTA chocolates
CADBURY JACOBS coffee CLUB SOCIAL/TUC crackers OREO cookies
BISKAUT/TIGER biscuits TANG beverages HALLS TRIDENT gums 10
PRIORITY MARKETS Brazil Russia India China Mexico South Africa
Indonesia Ukraine Poland Australia/ New Zealand
RECENT DEVELOPMENTS & FUTURE STRATEGY Kraft to split its
global food business into two separately run companies to provide
greater opportunities for its brands. Will spin off its Oreo,
Cadbury, Milka, Trident and LU brands to create a global snacks
business with annual revenue of about $32bn (19.6bn) Grocery brands
including Philadelphia, Capri Sun, Maxwell House coffee and Jell-O,
to be part of its North American grocery business; estimated annual
revenue of $16bn(9.8bn)
Different strategic priorities, growth profiles and operational
focus Kraft reports 13.3% increase in revenue to $13.8bn (8.6bn)
for the three months to 30 June
