Case: Cadbury Schweppes: Capturing Confectionery (A)

Case: Cadbury Schweppes: Capturing Confectionery (A)

Introduction

In late 2002, global confectionery and beverage maker Cadbury Schweppes needed to decide whether or not to make an acquisition bid for Adams, an underperforming gum company which had been put up for sale by pharmaceutical giant Pfizer. The origin of Cadbury Schweppes goes back over 200 years to Jacob Schweppe, who perfected a process for manufacturing mineral water in Geneva, Switzerland in 1783, and also to John Cadbury, who first started selling tea and coffee in 1824 in Birmingham, UK. In 1969, the two enterprises merged to form a company that was to become one of the three top global companies in the confectionery, beverage and gum industry. Cadbury Schweppes plc operates in the global confectionery market. The market is large, growing and has attractive dynamics. The global confectionery market is the world's fourth largest packaged food market and in 2004, it represented 10% of that market.

Current Strategies

Growth strategy is concentration for the Cadbury Schweppes. In a strongly competitive market, suffering from sluggish growth compared to Swiss behemoth Nestlé and US giant Mars, British confectioner Cadbury is hoping to boost sales by capturing the impulse market unawares and placing vending machines in unlikely places.

The market for confectionery products is flat, or even declining, in the majority of countries where Cadbury enjoys its strongest position, such as the UK, Canada, Australia and Ireland. It is developing markets in India and China which are forming the focus of Cadbury's push for sales, but on the home market, CEO John Sunderland has revealed an interesting strategy aimed at cornering the impulsive chocolate eater. Vending machines are popping up in those places where people do not generally eat chocolate, such as hospitals, offices or pubs. "The key is making it easy for consumers to act on their impulse," explains Sunderland: "wherever it is economically and culturally feasible, we want to have Cadbury chocolates available."

External Analyses

Porters Five Forces

Supplier Power - The Cadbury has many contracted suppliers that can support their on-going operations. Although there is an existing competition, the raw materials such as nuts or special ingredients are sufficient enough to satisfy their production. The good relationship of the company in their suppliers is considered as an advantage.

Barriers to Entry - Since the company is already popular and widely known, Cadbury can earn the trust of the countries. The only hindrance that might affect the production of the Cadbury is to find a good location and gather the requirements for the smooth entry and the foreign policy that might affect the operation.

Power of Buyer - The demands is not that high because of the existing health conscious. The price subjectivity of the products is not a question for the people but the increasing number of competitors that offers the same type of products at a lower cost might be the cause of the customer loyalty alteration.

Rivalries - Many businesses are competing against the Cadbury and planning to take over ...