Cadbury leads the way with Dairy Milk

Cadbury’s decision to consolidate under the Dairy Milk brand gives it plenty of ammunition against Masterfoods and Nestlé but, asks Caroline Parry, is the market a better place for it?

Cadbury’s Dairy Milk celebrates its centenary next year but this trouper of a brand is far from exhausted. Its heritage and longevity are key to Cadbury Trebor Bassett’s plans to take on Nestlé Rowntree-owned Kit Kat with the launch of Dairy Milk Wafer (MW last week).

The details of Dairy Milk Wafer come just weeks after the news that Cadbury is also planning to create a new category of indulgent adult snacking with the debut of Cadbury Snaps, first revealed in this magazine (MW June 24).

The wafer-thin chocolate, which will be packaged in a tube to encourage sharing, is its first new brand in two years and is being hailed as a genuine innovation by industry experts.

The new product development plans should add lustre to Cadbury’s interim results, which are expected to be delivered today (Wednesday). However, the activity is set against an overall backdrop of stagnating chocolate sales in the UK. The market is worth £3.6bn and Euromonitor estimated last year that growth would slow to just 0.8 per cent in 2003.

Cadbury and rivals Nestlé and Masterfoods, formerly Mars, face the serious challenge of finding areas of new growth.

The two recent launches are the first high-profile products Cadbury has developed since last year’s move to consolidate a number of brands under the Dairy Milk umbrella. The strategy has led to the demise of several sub-brands, including Wispa and Caramel (MW May 8, 2003), and the development of new variants, such as Dairy Milk with mint chips.

Crucially it means that Cadbury can now support a portfolio of different products by investing in just one brand.

In many ways, this is a natural extension of the company’s eight-year £10m sponsorship of ITV1’s flagship soap, Coronation Street, during which it has pushed a range of brands but has maintained an overall focus on Dairy Milk.

David Hallam, FMCG analyst for Williams De Broe, says that Cadbury is following a classic FMCG model with Dairy Milk. “It is their highest-profile brand and using it as an umbrella brand has reinforced that position,” he says.

Paul Cousins, director of Catalyst Marketing Services, says that Cadbury has been working hard to make sure that it “owns” chocolate and the taste of chocolate in the UK. “They have made the Dairy Milk umbrella branding seem very natural and there is logic behind it,” he says.

“The launch of Dairy Milk Wafer means it can support the product and go after Kit Kat, but at the same time it is still supporting the overall Dairy Milk brand.”

To date, this strategy appears to have been a success. Dairy Milk was already the leading brand in the block chocolate market, claiming sales up 15 per cent. This was despite the relaunch of Masterfoods’ key brand, Galaxy, last autumn and Nestlé’s launch of Double Cream in July 2002.

Euromonitor data shows that Dairy Milk has a 30.9 per cent share compared with Galaxy, its nearest rival, which has 9.8 per cent.

Aside from the cost-cutting benefits of pooling resources, the relaunch of Dairy Milk has also allowed Cadbury to enhance its on-shelf presence by developing a “purple patch”.

It is understood that it is now looking to do the same with the Flake brand. This will involve four variants when Flake Praline is launched later this year (MW June 24), and will create a “yellow patch” on shelves.

A Cadbury spokeswoman says that availability and display are at the heart of Cadbury’s success in recent years. The ability to place the wide range of variants together has been welcomed by retailers because it creates an impact in store.

However, rivals are critical, saying that the strategy is about “brand blocking” the retail fixture rather than meeting consumer need or demand.

While the development of its impulse brands is important to Cadbury, the launch of Snaps in the autumn marks the start of a new phase.

One industry insider says Cadbury wants to develop a new range of chocolate products that are not bought to eat immediately, but are instead geared towards sharing in a more innovative way than the range of boxed chocolates currently available.

It is understood that Andrew Cosslett, a former UK marketing director who was promoted from UK managing director to president of Cadbury in Europe, Middle East and Africa last year, developed key aspects of the marketing strategy.

One analyst says Cosslett, who is also a former Unilever marketer and spent two years as chairman at Cadbury Schweppes in Australia, is able to look at the UK market in an objective way because of his experiences in other markets.

An agency insider says that although Cadbury does have a history of high-profile marketers, there is less autonomy in the marketing department now. He attributes this to budget cuts and the amount of the marketing budget that is swallowed up by the Coronation Street sponsorship.

But the insider adds that it is also true that people working at Cadbury now are not the type to court publicity. Other industry insiders believe that the launch of Dairy Milk Wafer is a sign of Cadbury’s confidence in the development of the umbrella brand.

However, buyers believe that the confidence is tinged with an arrogance that it will be easy for the company to sweep into the category while Kit Kat is suffering. Sales of Kit Kat, Nestlé’s best- selling bar, fell by 5.4 per cent in 2002, according to Information Resources data.

Nestlé is working hard to reverse this trend. Managing director Chris White is steering the company through a transitional period after carrying out a full review of its portfolio. He scrapped Kit Kat’s advertising which starred Lock Stock and Two Smokin’ Barrels star Jason Stratham, and is developing the brand with the launch of a indulgent product, Kit Kat Editions (MW June 17).

Nestlé has also announced plans for a low-carbohydrate version and the activity follows last year’s launch of Kit Kat Kubes.

Masterfoods is also following a strategy of extending its core brand with the launch of the more indulgent Mars Delight.

But such extensions cannot compare with the scope of the Dairy Milk rebranding. Insiders says it is unlikely that Masterfoods or Nestlé could overtake Cadbury, but they warn against the latter becoming complacent.

One insider believes this could be the start of a new round of chocolate wars that might not benefit the category overall. Indeed, the new Cadbury product might only add wafer-thin growth to the market.


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