Avoiding meltdown

Cadbury has emerged relatively unscathed from its recent health scares

cadburyIt has been a turbulent year for confectionery giant Cadbury, with two health scares in the past six months threatening to damage consumer confidence in the company that’s behind some of the UK’s most iconic brands.

Last summer Cadbury was forced to pull 1 million chocolate bars from shelves nationwide after traces of salmonella were discovered in a number of products, including its core Dairy Milk line. The recall cost £30m, 50% more than initially expected. Despite restoring market confidence in the labels, Cadbury’s woes look set to continue, with the company facing criminal charges under environmental health laws for allegedly producing food unfit for human consumption and failing to effectively communicate the extent of the problem to governing body the Food Standards Agency (FSA).

David Hallam, consumer analyst at Evolution Securities, says it is unlikely the court case would have material influence on consumption levels, with consumers having returned to eating Cadbury chocolate products over the autumn. But commentators say the action, if launched, could prove more costly than the initial sums spent on recalling products. Moreover, Cadbury is now courting fresh controversy after it emerged that thousands of its Easter eggs could harm people with nut allergies after they were made on the same production line as products containing nuts.

The ensuing recall relates to over 20 core products including a number of boxed eggs, alongside offshoots of core lines Creme Egg and Dairy Milk. The company has played down any suggestions of a mounting backlash, with a spokesman describing the measures as precautionary and pointing to the "tiny proportion" of packs affected by the recall.

Evolution’s Hallam says while the incident may prove damaging to the brand in the short term, financially the impact should be "relatively small" when compared to its substantial profits. "If you own a brand you want to be very careful that you are seen to be doing the right thing," he says. "The issue is not so much consumer confidence because it only affects a minority of nut allergy sufferers, but more a case of whether these products are back on the shelves in time for Easter."

cadbury%20logoDespite its troubles, particularly in the UK where an ongoing sales decline was compounded by hot weather last summer, Cadbury’s ambitions have not wavered. Founded in 1824 by John Cadbury who set up a store in Birmingham, the company has an esteemed history in Britain.

Today it is among the world’s largest chocolate producers, forming part of the Cadbury Schweppes group, a major force in the international confectionery and soft drinks markets. The company has built its portfolio introducing new products to a sector renowned for its conservative approach to innovation. One commentator says: "Most products in the segment were launched years ago, so it is hard to launch successful new brands into what is a very conservative market."

However, the source adds, executives at Cadbury remain "determined to push standards further and be more adventurous" in their approach to both innovation and the marketing of those products.

Last year the company launched Cadbury Melts, its first major push into the premium end of the block chocolate market, and its biggest brand launch since Cadbury Snaps in 2004. It also extended its core Flake range with the introduction of a dark-chocolate variant, and is now gearing up for the extension of its Australia-based product range The Natural Confectionery Company (TNCC) into the UK, targeting the market for healthy sweets following the recent backlash against foods high in fat, salt and sugar. Hallam says in the past three years Cadbury has put more resources into bringing new products to the market with greater frequency, on a larger scale and with greater breadth geographically.

Cadbury is stepping up its assault on the UK confectionery market with one of its single biggest product launches in its history: it is taking on the £300m chewing gum segment with this week’s UK launch of Trident, backed by a £10m high-profile TV advertising and marketing push. The move pits it directly against Wrigley, which has enjoyed a virtual monopoly over the market for the best part of a century and has a 95% share of the UK market. The launch follows Cadbury’s £2.7bn acquisition of US chewing gum company Adams in 2003, making it the second-largest player in the global gum market.

The launch coincides with a broader shift of brand strategy, away from a long-running emphasis on over-arching brand campaigns reach more targeted audiences through specific products. The company recently terminated its ten-year sponsorship of ITV’s Coronation Street, a move spearheaded by marketing director Phil Rumbol, who joined the company early last year. One commentator says: "Cadbury used the Coronation Street sponsorship to get behind smaller products that it couldn’t afford to support with advertising. The eternal conundrum for Cadbury has been to what degree you get behind Cadbury and what degree you get behind the individual brand."

With the launch of new products and marketing campaigns for major brands, illustrated by the revival of the "Flake Girl" earlier this month after a five-year absence, Cadbury is committed to strengthening its brand, but it has several hurdles to contend with if it is to retain consumer loyalty in the long term.

Timeline

1824    Cadbury founded by John Cadbury
1831    Business converted from a grocery shop to a manufacturer of drinking chocolate and cocoa
1847    The Cadbury brothers, with Joseph Fry and Son, create the first modern chocolate bar in 1847 1969    Merges with Schweppes to create Cadbury Schweppes
June/July 2006 Salmonella fears sparked after contamination from a leaky waste pipe at the company’s Malbrook plant. Recalls over 1 million chocolate bars
November 2006 Launches TV ad for Cadbury Snaps as part of brand relaunch
February 2007 Recalls thousands of Easter eggs after failing to warn products could contain nuts. Enters UK gum market with launch of Trident chewing gum brand backed by £10m advertising and marketing spend.

avoiding

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