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Nestle’s loss is Cadbury’s gain - Views on News from Equitymaster
 
 
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  • Apr 10, 2000

    Nestle’s loss is Cadbury’s gain

    Cadbury India has plans to launch four new chocolate brands (as opposed to brand variants) in the current year.

    Cadbury controls a 70% market share in the chocolate market and this strategy is likely to help maintain its lead at a time when its main competitor Nestle is diversifying into mineral water which would require relatively large investment in distribution, apart from a higher advertisement and publicity expenses.

    There have been unconfirmed reports that Nestle has not been much headway with its latest chocolate offering ‘Munch’, which has been priced at half the rate of Cadbury’s ‘Perk’. Ironically Nestle had used the production line on which its immensely successful ‘Kit Kat’ brand was being manufactured for the production of ‘Munch’. ‘Kit Kat sells at Rs 15/- (for a 36 grams pack) as against ‘Munch’ which has been priced at Rs 5 (for a 19 gram pack). Thus the company would actually end up losing market share in volume terms the chocolate market over a period of time.

    Cadbury, meanwhile would tighten its hold even if two of its forthcoming four brands are successful. Last year Cadbury launched brands such as ‘Frutus’ and ‘Gollum’ in the 180,000 tonne confectionery segment which enabled it to cover up the volume loss it had from ‘Googly’. However, chocolates remain a far more lucrative proposition for Cadbury vis-à-vis confectionery. The company has already declared a 1:2 bonus last year and is likely to achieve a net profit in the range of Rs 550 m on a turnover of over Rs 6 bn in the current year.

     

     

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