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Cadbury targets higher productivity - Views on News from Equitymaster
 
 
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  • Dec 9, 1999

    Cadbury targets higher productivity

    Cadbury India has chalked out a restructuring strategy that includes modernisation of existing plants, cutting excess staff, selling off its headquarters 'Cadbury House', Bombay and relocating to cheaper locations.

    Cadbury is India's largest chocolate manufacturer with 70% market share. Chocolate sales of Rs 3.2 bn comprise the core business of Cadbury (74% of FY99 turnover). It has a presence in the malted food drinks segment through Bournvita (14% market share) and its confectionery products account for 5% share. Its other products include drinking chocolate and cocoa powder.

    Cadbury has already invested Rs 1 bn over the last 2 years to expand its milk processing, crumb making, wafer and eclair manufacturing capacities. This has given the company increased production flexibility and has doubled its manufacturing facilities. The newer and more sophisticated Malanpur factory has facilities to produce more value-added products. The restructuring exercise is the next logical step to these investments.

    It is adding a new production line to increase confectionery production. Cadbury plans to increase its market share in the confectionery segment by launching new products from its parent Cadbury Schweppes portfolio of 300 brands. The most important aspect of the current restructuring exercise is the company's decision to sell off its corporate headquarters and relocate to a cheaper location.

    All these initiatives are aimed at rationalising costs and improving productivity. The company wants to become lean and invest more on brand promotion and improving its distribution network to gain volumes and sustain market share. The proposed steps are positive and will improve margins, which have been under pressure lately.

     

     

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