Confectionery for the Poles: Market Development by Cadbury in Poland Arup Sarkar (063010), Mansi Saxena (063024), Nitin Shivnani (063033), Ritu Agarwal (063041), Shivna Jain (063050), Sunny Kadian (063055)
3/10/2013
CERTIFICATE This is to certify that Group 6 Members Mr./Ms. Arup Sarkar, Mansi Saxena, Nitin Shivnani, Ritu Agarwal, Shivna Jain, Sunny Sunny Kadian Roll Nos. 063010, 063024, 063033, 063041, 063050, 063055 have completed their their Term project report report entitled towards part fulfillment of the requirements for the award of of the Post Graduate Graduate Diploma in Management (IMG-6) 20122014. This Term Report in International Marketing Management is the result of their own work and to the best of my knowledge no part of it has earlier comprised any other report, monograph, dissertation dissertation or book. This project was carried out under my overall overall supervision.
Date: Place: ----------------------------------Dr Anupam Narula Internal Faculty Guide
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CERTIFICATE This is to certify that Group 6 Members Mr./Ms. Arup Sarkar, Mansi Saxena, Nitin Shivnani, Ritu Agarwal, Shivna Jain, Sunny Sunny Kadian Roll Nos. 063010, 063024, 063033, 063041, 063050, 063055 have completed their their Term project report report entitled towards part fulfillment of the requirements for the award of of the Post Graduate Graduate Diploma in Management (IMG-6) 20122014. This Term Report in International Marketing Management is the result of their own work and to the best of my knowledge no part of it has earlier comprised any other report, monograph, dissertation dissertation or book. This project was carried out under my overall overall supervision.
Date: Place: ----------------------------------Dr Anupam Narula Internal Faculty Guide
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TABLE OF CONTENTS Acknowledgement Acknowledgement ………………………………………… ……………………………………………………………… …………………………………………… ……………………… 5 Executive Summary............................. Summary................................................ ......................................... .......................................... .................... 6 Introduction………………………………………………………………………………………………….7 PART 1 Cultural Analysis ………………………………………………… ……………………………………………………………………… ……………………………………… ………………….. 8 Economic Analysis …………………………………………… ………………………………………………………………… ………………………………………… …………………….. 10
………………………………………………………………………………………………. ……………………………………. 10 Economic Landscape …………………………………………………………
SWOT Analysis Analysis ……………………………………………………………… ……………………………………………………………………………………………………. ……………………………………. 11
Population Staistics …………………………………………………………………………………………….. 11
Macroeconomic Indicators …………………………………………………………………………………. 13
Economic Performance ………………………………………………………………………………………. 14
Political Analysis …………………………………… ………………………………………………………… ……………………………………… ……………………………… …………… 15
Political Risk Rating ……………………………………………………………………………………………… …………………………………………………………………………………………………………. …………. 16
SWOT Analysis ………………………………………………………………………………………………… ………………………………………………………………………………………………………………… ……………… 18
Market Orientation ………………………………………………………………………………………… …………………………………………………………………………………………………………. ………………. 19
Foreign Investment Policy ………………………………………………………………………………………………. ………………………………………………………………………………………………. 19
Tax Regime …………………………………………………………………………… ………………………………………………………………………………………………………………… ……………………………………….. ….. 20
Exports and Imports …………………………………………………………………………………… ……………………………………………………………………………………………………….. ………………….. 21
Business Etiquette ……………………………………………………………………… ………………………………………………………………………………………………………….. ………………………………….. 23
Entry Strategy …………………………………………… ………………………………………………………………… ……………………………………… …………………………. ………. 25 PART 2 Market Audit and competitive analysis of confectionery industry in Poland Market Overview ………………………………………………………………………………………. 27 Market Data ……………………………………………………………………………………………… 28
Market Value ………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………. ………………. 28
Market Volume …………………………………………………………………………………………… ………………………………………………………………………………………………………………. …………………. 29
Market Forecast ………………………………………………………………………… …………………………………………………………………………………………………………….. ………………………………….. 30
Market Segmentation ………………………………………… ……………………………………………………………… …………………………………….. ……………….. 31 Geography Segmentation ………………………………………………………………………….. 32 Market Share …………………………………………………………………………………………….. 33 Five Forces Analysis …………………………………………………………………………………….34 Competitive Analysis …………………………………………………………………………………..35
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PART 3 Marketing Operations of Cadbury in Poland Marketing Strategy …………………………………………………………………………………… 38
Product Mix ……………………………………………………………………… ………………………………………………………………………………………………………… …………………………………………… ………… 39
Promotion Mix ………………………………………………………………………………………….. 41 Sales Promotion ………………………………………………………………………………………… 43 Market Distribution …………………………………………………………………………………… 46 Future trend for Cadbury ………………………………………… ……………………………………………………………… ………………………………… …………… 47 References ………………………………………………………………………………………………….49 Appendix …………………………………………………………………………………………………….50
Appendix 1 (Cadbury Profile)…………………………………………… Profile)………………………………………………………………………………… ………………………………………………..50 …………..50
Appendix 2 (Poland Profile)………………………………………………… Profile)…………………………………………………………………………………… ……………………………………………..51 …………..51
Conclusion ………………………………………………………………………………………………….52
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ACKNOWLEDGEMENT We take this this opportuni opportunity ty to express express our our profound profound gratitud gratitude e and deep regards regards to our guide Professor Professor Anupam Anupam Narula Narula for his exempla exemplary ry guidance, guidance, monito monitoring ring and and constant constant encouragement throughout the course of this project. The blessing, help and guidance given by him time time to time shall shall carry carry us a long way way in the journey journey of life life on which which we are about about to embark.
We also take this opportunity opportunity to express a deep sense sense of gratitude to everybody who helped us through their valuable inputs or encouragement which has helped us to take this project to its final conclusion.
We
are obliged to staff members of the library of FORE School Of Management, for
their valuable assistance. We are grateful for their cooperation during the period of our assignment.
Lastly, Lastly, we thank thank our Instit Institute ute for for giving giving us us wonderful
an
opportunity to make this project and have a
learning experience.
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Executive Summary Poland officially the Republic of Poland , is a country in Central Europe, bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, and Lithuania to the north. The four most advanced countries in East Europe which were not a part of the Soviet Union were Poland, Hungary, the Czech Republic and Slovakia, of which Poland had the largest population and percentage of private sector business, as well as a strong consumer market. It also had good prospects for investment, offered a skilled labor force and faced neither ethnic strife nor border disputes. Rapid changes in political, economic and social factors influenced Cadbury Schweppes' decision to enter Poland's developing market. Another strong factor was that, despite Poland having, at that time, one of the largest confectionery markets in Central and Eastern Europe, none of Cadbury Schweppes' major international confectionery competitors had established strong businesses there. Market value The Polish confectionery market grew by 4.9% in 2011 to reach a value of $2,914.6 million. Market volume The Polish confectionery market grew by 3.1% in 2011 to reach a volume of 293.1 million kg. Category segmentation Chocolate is the largest segment of the confectionery market in Poland, accounting for 62.4% of the market's total value. Geography segmentation Poland accounts for 4.1% of the European confectionery market value. Market share Kraft Foods, Inc. the parent company of Cadbury is the leading player in the Polish confectionery market, generating a 33% share of the market's value. Market rivalry The Polish confectionery market is fairly concentrated, with the top four players holding 71.6% of the total market value.
The first part of the report deals with analysis of the political, economic, social and cultural factors of Poland relevant to the confectionary industry. In the second part we have analysed the whole confectionary market of Poland in terms of market size, growth, forecast, consumption habits of Polish people, available distributing and advertising mediums and pricing strategy. In the last part we have discussed the marketing mix as well as the product mix of Cadbury, we have also discussed about the target market of Cadbury, product adaptation, sales promotions in the Polish market. Finally, we have concluded by giving the future trends for confectionary market in Poland.
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Introduction Having established itself as a leading player in the English confectionery market Cadbury Schweppes wanted to enter the high potential markets of Eastern and Central Europe. There was a dilemma for the company as to which country to choose as the entry point to these markets. It finally chose Poland as its entry point because of many significant developments taking place there. The Central and Eastern European countries can be divided into two groups: those which were originally within the Soviet Union, and others. The key difference is that the countries within the latter group only had communist regimes for 45 years and free enterprise still existed to some degree. The four most advanced countries within this group were Poland, Hungary, the Czech Republic and Slovakia, of which Poland had the largest population and percentage of private sector business, as well as a strong consumer market. It also had good prospects for investment, offered a skilled labor force and faced neither ethnic strife nor border disputes. Having developed a stable parliamentary democracy and signed an association agreement with the European Union, Poland recognized that to shed its former communist image and face market forces with a proactive, commercial approach would require major changes in its culture and attitude. One way in which it could do this was to encourage development in Poland by its European partners, and Poland already had a good relationship with the UK, which has a Polish community of some 150,000. These rapidly changing political, economic and social factors were key influences in Cadbury Schweppes’ decision to enter Poland’s developing market. Another strong factor was that, despite Poland having, at that time, one of the largest confectionery markets in Central and Eastern Europe, none of Cadbury Schweppes’ major international confectionery competitors had established strong businesses there. Although the Company could have taken a ‘wait and see’ approach (running the risk of missing a vital opportunity to develop an early market lead), it decided that there were sufficient indicators to justify an investment in Poland. 7|Page
PART 1 Cultural analysis of Poland
Figure: Flag of Poland
Hofstede’s Rankings for Poland
Power Distance
With a score of 68, Poland is a hierarchical society. This suggests that people accept a hierarchical order in which everybody has a place and which needs no further justification. Hierarchy in an organization is seen as reflecting inherent inequalities, centralization is
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popular, subordinates expect to be told what to do and the ideal boss is a benevolent autocrat. Individualism
Poland, with a score of 60 is quite an Individualistic society. This suggests that there is a high preference for a loosely-knit social framework in which individuals are expected to take care of themselves and their immediate families only. In individualistic societies offence causes guilt and a loss of self-esteem, the employer/employee relationship is a contract based on mutual advantage, hiring and promotion decisions are supposed to be based only on merit, management is the management of individuals. The Polish culture houses a “contradiction”: although highly individualistic, the Polish need a hierarchy. This combination (high score on power distance and high score on Individualism) creates a specific “tension” in this culture, which makes the relationship very delicate but intense and fruitful once you can manage it. Therefore, the manager is advised to establish a second “level” of communication, maintaining a personal contact with everybody in the structure, allowing to give the impression that “everybody is important” in the organization, regardless of their designations. Masculinity / Femininity
Poland scores 64 on this dimension and is thus quite a masculine society. In masculine nations people “live in order to work”, managers are expected to be decisive and assertive, the emphasis is on equity, being competitive and performance and conflicts are resolved by fighting them out. Uncertainty Avoidance
Poland scores 92 on this dimension and thus has a extremely high preference for avoiding uncertainty. Nations exhibiting high uncertainty avoidance maintain rigid codes of belief and behaviour and are intolerant of unorthodox behaviour and ideas. In these nations there is an emotional need for rules (even if the rules never seem to work) time is money, people have an inner urge to be busy and work hard, precision and punctuality are the norm, innovation may be resisted, security is a very important element in individual motivation. Long term orientation
Poland scores 32 on this parameter, making it a short term orientation culture. Societies which are short-term oriented generally exhibit great respect for traditions, a relatively 9|Page
small propensity to save, strong social pressure to “keep up with the Joneses”, impatience for achieving quick results, and a strong concern with establishing the Truth i.e. normative. Western societies are typically found at the short-term end of this dimension, as are the countries of the Middle East.
Economic analysis Summary
Poland‘s economy is one of the strongest in Eastern Europe. European Union (EU) membership has helped Poland in terms of providing employment and structural funds. Poland was the only country in the EU that managed to avoid a recession in 2009, with the economy posting growth of 1.7% due to strong economic policies, robust domestic demand, low reliance on exports, and a flexible currency. The economy grew by 3.8% in 2010. According to Datamonitor forecasts, the economy is expected to grow 4.1% in 2011. However, the country still needs to implement economic changes before it adopts the euro as its standard currency. Economic Landscape
The financial system of Poland is dominated by a strong and stable banking sector. Polish banking has been highly resilient and reported an increase in profits to the tune of 37% year-on-year in 2011. According to the IMF, banks reported a healthy capital adequacy ratio of 13% in 2011, with Tier 1 comprising around 90% of total capital.
Poland was ranked 14th in transnational corporations' top prospective host economies for 2012–14, published in the United Nations Conference on Trade and Development World Investment Report 2012. FDI in Poland grew to $15.13bn in 2011, up from $8.85bn in 2010.
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SWOT Analysis
Strengths
Weaknesses
The Strong demand in the Polish
Investment, which has been the key
market and integration into the
driver of Poland's domestic demand
German
make
story, is likely to slow in 2012 as
Poland less exposed to the unwinding
infrastructure spending ahead of the
macroeconomic
European football championship tails
export
machine
headwinds
originating from the Eurozone.
off. However, investment will recover
A credible and independent central
in mid-2013.
bank continues to bolster economic stability and investor confidence. Opportunities
Threats
Polish manufacturing is moving up
On the downside the zloty which is
the value-added chain as it integrates
increasingly being used as a liquid
into German supply chains, which is
benchmark for the wider Central and
its largest trading partner, while the
Eastern
economy
as
overshoot the Czech Republic and
regional
Hungary if another period of financial
Warsaw
is
also
emerges
financial hub.
diversifying as
a
European
region,
will
distress occurs. This in turn will continue to pose a risk to Poland’s financial stability.
Population Statistics Social Landscape
At 38.07 million in 2011, Poland's population is one of the largest in Europe. However, population growth is stagnant and the country has been witnessing declining birth rates. Poland enjoys high life expectancy and literacy rates. The ethnic and religious mix is quite 11 | P a g e
uniform, with Roman Catholic Poles representing almost 90% of the population. As per the United Nations Development Programme's Human Development Report published in 2011, the country's Human Development Index (HDI) was 0.813, which placed it 39th out of 187 countries. Demographic Composition
At 38.07 million, Poland's population is one of the biggest in Europe. In 2012, the infant mortality rate is 6.42 deaths per 1,000 live births and the death rate is relatively high at 10.24 per 1,000 people, while life expectancy at birth for the whole population stands at 76.25 years Composition by age and gender
In 2011, around 14.72% of Poland’s population was less than 15 years of age. Those aged between 15 and 64 years constituted 71.62% of the population, and around 13.67% of the total population was aged 65 and above. Urban/rural composition and migration
In 2010, 61% of the population was urban; however, the country will experience negative urbanization to the tune of 0.1% during 2010–15 according to the Central Intelligence Agency's (CIA's) The World Factbook.
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Macroeconomic Indicators
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Source: World Bank
Performance GDP and growth rate
The GDP growth in Poland averaged 4.5% during the six-year period 2002–07; this rate is significantly higher than the negative growth rates prevailing during 1990–99. Real GDP growth increased to 6.6% in 2007 compared to 1.4% in 2000. Real GDP grew due to an increase in private consumption and strong growth in FDI and exports. Although the growth rate plummeted to 5% in 2008, it remained higher than the growth rates of other European nations. The sound monetary and fiscal policies along with the reform measures played an important role in the resilience of the Polish economy
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Political Analysis Summary
Poland has had a turbulent political history. The country became democratic after World War I, but the Soviet Union installed a communist regime following World War II. After many decades of communist association, Poland regained its democracy in 1989. The country is a member of both the North Atlantic Treaty Organization (NATO) and the European Union (EU). As one of Europe’s rapidly growing economies, and the proposed site for NATO's missile defense system, Poland continues to be of political significance to Europe and the world. Bronisław Komorowski won the presidential elections held in July 2010 following the death of President Lech Kaczynski in a plane crash on April 10, 2010. The Civic Platform (Platforma Obywatelska [PO]), which now has a control of both the government and the presidency, promises to dismantle more communist policies and focus on economic reforms.
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BMI (Business Monitor International) Political Risk Ratings
Donald Tusk's re-election in late 2011 was the first time since the fall of communism that a government won a second term, marking an important achievement for Poland's maturing democracy. The country now enjoys broad political stability. Poland's long-term political risk rating of 86.4 reflects analysts’ expectations that, as long-term economic and political convergence with the West continues, political conditions will remain favourable.
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Table: Poland’s Risk Ratings
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SWOT Analysis
Strengths
EU
Weaknesses
membership
and
accession
to
facilitate
medium-term
eventual
Eurozone
should
reformist party, such as Palikot's
political
Movement, shows a growing level of
stability.
The
Sudden rise in popularity of a radical
discontent with traditional parties
next
general
election
is
and
the
electorate's
desire
for
Threatened
by
this
scheduled in 2015, giving the Civic
change.
Platform-led
coalition
to
development, the governing coalition
implement
politically
painful
could be tempted to bow to populist
space
austerity measures.
reforms in an effort to appease the electorate and halt the party's rise.
Opportunities
Threats
There is scope for further integration
The need to implement deep fiscal
with key Euro-Atlantic institutions,
reforms in an effort to bring the
which
country's
will
elevate
Poland's
fiscal
accounts
under
international profile making it an
control could see support for Civic
attractive investment destination.
Platform starting to wane. Indeed,
Election of Bronislaw Komorowski
several of the PO deputies have
(formerly
already defected.
president
of
Civic
provides
Platform) the
as
ruling
coalition with a head of state sympathetic to the government's agenda,
thereby
removing
the
potential roadblock of a presidential veto.
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Market Orientation
Foreign Investment Policy Since the collapse of communism and the country’s subsequent transition to a market economy, Poland has embraced foreign investment. The principal investors in Poland remain the US and Western European states. EU membership in March 2004 has further consolidated Poland's reputation as a stable and open economy which is open to foreign investment. Indeed, strengthening trade links as well as convergence towards Western European levels of wealth and standards of corporate regulation have provided further incentives for the foreign investor to invest in Poland. Successive governments since 1990 have passed legislation which aim at cutting red tapism surrounding foreign acquisitions. These include passing the Law on Economic Freedom in 2004, which has simplified the process of registering a company in Poland. Further reforms include the improvement in regulation relating to bank loans and bankruptcy law, as well as a reduction in the corporate income tax rate to 19% from 27%. The current Civic Platformled coalition government is widely seen as pro-reform and pro-business, which will likely attract more foreign investment into the country. The government's commitment to privatising state-owned industries will provide further opportunities for foreign investors to gain exposure to key industries within Poland. Foreign investors are permitted to operate in almost all Polish markets, with the exception of some strategic industries (including air transport, broadcasting and gambling) as well as real estate. Foreign firms are treated in the same way as domestic companies with regard to property rights and are not restricted while remitting profits abroad. Foreign investors who maintain a permanent residence in Poland are permitted to set up joint-stock companies, limited liability companies, limited joint-stock partnerships, professional partnerships, registered partnerships and limited partnerships. In July 2004, the government amended the Economic Freedom Act, with updated rules and compliance procedures regarding the operation of branches and representative offices in Poland. Foreign investors wishing to establish a branch in Poland must first register with the National Court Register. While a branch is permitted to conduct all of the activities of the parent company, a representative office, on the other hand, is limited to only doing promotional activities on behalf of the parent firm. Registration of either a branch or a
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representative office now no longer requires the acquisition of permits, which greatly improves the efficiency and transparency of the whole process. Foreign Trade Regime Upon gaining membership of the EU in 2004, Poland agreed to adhere to the same trade regulations, including the Community Customs Code and Community Tariff. There are now no customs barriers to trade with other EU nations, while trade with non-EU nations is dictated by EU regulations. EU tariffs are generally lower than previous Polish tariffs resulting in cheaper imports. Poland adheres to the EU's Generalised System of Preferences. Licensing regulations, which are the same as elsewhere in the EU, restrict trade in few goods and with some non-EU nations. Notably, EU import quotas apply to steel products and textiles as well as on some Chinese products, for example. Trade in few agricultural products may also be restricted or subject to preferential tariffs under the EU's Common Agricultural Policy. Among goods which are subject to quota limits are petrol, diesel fuel and heating oils, alcohol and cigarettes. Imports of strategic goods, including weapons and some chemical and transport equipment require a licence or concession. A licence is also needed for most alcoholic drinks, gas and some agricultural products. Tax Regime The tax regime became more benign for investors in the years approaching the country's EU membership, and legislation has also been streamlined. Revisions of corporate, individual and VAT regulations are under discussion in parliament, but implementation has been postponed. Corporate Tax: The principal rate is 19%. Resident firms are taxed on cumulative global income. Non-resident firms are taxed only on the total income earned in Poland. Dividends paid to corporate and individual shareholders are subject to a 19% withholding tax. Dividends paid by a Polish firm to a firm based in an EU member state are exempt under certain circumstances. Dividends paid between elements comprising a corporate group are also exempt. A tax credit regime is in effect, unless tax treaties state otherwise. Individual Tax: Rates increase progressively to a maximum of 32%. Individuals may be subject either to limited or unlimited tax liability. Resident individuals are taxed on cumulative global income. Non-resident individuals are taxed only on the income earned in 21 | P a g e
Poland. An 18% tax applies to some income, such as dividends and interest. An individual may elect to be taxed at a flat rate of 18% on business income under some circumstances. Indirect Tax: Polish VAT regulations were generally harmonised with EU directives on EU accession in May 2004. The main rate is 23%. Poland permits VAT refunds based on rules in EU directives. Capital Gains: Gains of individuals and companies from disposal of business assets are taxed as income. Gains by individuals from share sales are taxed separately from income at 19%. Income of an individual on the sale of a residence, other building or non-business land is taxed at 10%. This income may be tax-exempt if the proceeds are used to buy another similar asset within the next two years, or the sale of the asset takes place five years after purchase.
Exports and imports
Trade growth has been robust in the Polish economy. The country conducts almost twothirds of its merchandise trade with EU nations. In 2011, total exports amounted to $224.35bn, whereas imports stood at $238.46bn. Since 1989, EU exports to Poland have increased by 300% and EU imports from Poland have increased by more than 200%. Most of the Polish imports from the EU consist of machinery and electrical goods, which make up almost 27% of the country's total imports. In 2011, Germany received 27% of Polish exports, followed by the UK (6.6%), the Czech Republic (6.4%), France (6.3%), Italy (5.6%), the Netherlands (4.5%), and Russia (4.2%). In 2011, Germany provided nearly 28.7% of Poland's imports, making it the country’s most important single import trading partner. Germany was followed by Russia (10.3%) and the Netherlands (5.9%). Other important partners were Italy, China, France, and the Czech Republic. Total trade increased from $400.02bn in 2010 to $462.81bn in 2011.
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Source: WTO Country Profiles
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Major trade partners and major trade commodities
Figure: Poland’s Foreign Trade
Business Etiquettes
Shake hands, firmly but briefly, with everyone (including children) when introduced. It is also customary to shake hands once again upon your departure. Men should wait to see if women extend their hands in inter-gender meetings. In formal settings, local men may kiss the hands of women in greeting, but the replication of this
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practice by foreigners may not be well received. Note that it is impolite to reach over someone else's handshake. Also, avoid keeping your left hand in your pocket while shaking hands with your right. Close friends or relatives may greet each other effusively, with much hugging and kissing of cheeks.
The decision to address each other by first names may be decided by mutual consent, although the best practice is to err on the side of formality and use titles and surnames when first meeting someone. Note that there is a ceremony that celebrates the decision to go to a first-name basis.
Politics and other complicated issues, such as religion and culture, are acceptable topics of discussion in most European countries. The Poles, like other Europeans, tend to be well informed about politics and to have their own opinions. While conversation on such issues is not discouraged, visitors should not expect Eastern Europeans to be entirely approving of Western concepts, ideas and political viewpoints.
Food, sports, and sightseeing are good topics of conversation.
Note that despite the demands of work, Poles love to stay up late, talking and sharing drinks. Leaving early may be taken as an insult by them, so be prepared for a long night.
Drinking is often part of the social element, but note that Poles are experts at such activities. Vodka-drinking contest are the norm but the Poles are the real experts and foreigners should expect to lose. You should also expect your glass to be refilled every time it is empty until the vodka runs out. It is also to be noted that when a Pole flicks his finger against his neck, he is inviting you to join him for a drink (probably vodka).
Littering, chewing gum while speaking to someone and any kind of loud behavior is generally considered to be unacceptable in Poland.
If you are invited to a Polish home, be sure to bring a gift. Flowers for the hostess is a good choice, but note that red roses are reserved for romantic situations in many cultures, while lilies are often associated with funerals.
During meals, the host may invite you to eat additional portions. It is traditional in many European cultures to turn down the first invitation.
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When eating at restaurants, always use utensils. Note that very few items are eaten with the hands. Also, make sure to adhere to the European standard of the fork in the left hand and the knife in the right hand. Avoid the Americanized "cross over" where one uses the knife only to cut meat, while using the fork in the right hand otherwise. Keep your utensils together on one side of the plate when you have finished eating. The best practice is to always place your knife and fork together in the 4 o'clock position on your plate. Meanwhile, if you wish to pause between courses, cross your utensils on the plate.
Western business practices are quickly becoming the norm across Europe, including such things as business lunches. One should not, however, enter into business discussions without some light introductory conversation, politesse and other such niceties. In this regard, it is acceptable to ask about your counterpart's family. If the lunch or dinner meeting is your idea, you should insist on payment being your responsibility.
Generally, Poles dress in a causal but conservative manner, except at dinners or other more formal engagements. Conservative suits (dark in colour with ties and white shirts) are usually worn by businessmen, while women's business attire consists of dark skirts and dresses. Discretion is advised in the realm of business, while trendy fashions may be more acceptable in other less formal domains of life.
Market strategy adopted by Cadbury Schweppes for entry into Poland
Entry Strategy Cadbury Schweppes had three 'route to market' options to consider in order to tap Poland's growing confectionary market. The options were:
Export from other Cadbury Schweppes companies
Acquire or form a joint venture with a local Polish confectionary company
Establish a fully owned factory locally.
When Poland first left the communist regime the government in power pursued a policy of open trade which resulted in a flood of imports into the Polish market. To protect local
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industry the Polish government established import duties which were particularly high on goods such as confectionery.
Under the prevailing conditions, exporting to Poland was not an economically viable option available to Cadbury Schweppes. Cadbury Schweppes thoroughly evaluated the leading Polish confectionery companies to assess their suitability for acquisition or joint ventures. However, several problems, such as over-staffing or lack of investment, were found to be common across all of the companies. So, after having rejected the first two options, Cadbury Schweppes decided to explore local manufacture as the most appropriate route into the Polish market.
Market Strategy Although the total confectionery market in Poland was known to be quite large with all the data and statistics available, market research was conducted to determine whether this existing market would be suitable for Cadbury Schweppes' products.
Tastes in confectionery vary the world over and Cadbury Schweppes chose to manufacture products from its existing confectionary range which would particularly suit the Polish taste. The company also decided to manufacture a range of products which were budget-priced under the name of Piasten, Cadbury Schweppes' brand in Germany, which was the biggest trading partner of Poland.
Having identified the product range to be introduced and its acceptability to Polish consumers it was then possible for Cadbury Schweppes to forecast the potential sales which could be achieved in Poland.
This information, together with estimates of the costs involved in setting up and running the manufacturing operation, helped the Company to determine that the project was financially viable. Cadbury Schweppes finally took the decision to invest in building a factory and developing a new confectionery business on a greenfield site in Poland.
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PART 2 Market Overview
Market Definition
The confectionery market consists of retail sales of chocolate, gum, cereal bars and sugar confectionery. The market is valued according to retail selling price (RSP) and includes any applicable taxes. Any currency conversions used in the creation of this report have been calculated using 2011 annual average exchange rates. For the purposes of this report, Europe consists of Western Europe and Eastern Europe. Western Europe comprises Belgium, Denmark, France, Germany, Greece, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland, Turkey, and the United Kingdom. Eastern Europe comprises the Czech Republic, Hungary, Poland, Romania, Russia, and Ukraine. Market Analysis
The Polish confectionery market has experienced moderate growth over the past few years. The market is predicted to continue growing moderately over the forecast period to 2016. The Polish confectionery market had total revenues of $2,914.6 million in 2011, representing a compound annual growth rate (CAGR) of 5% between 2007 and 2011. In comparison, the Russian and Czech markets grew with CAGRs of 5.4% and 3.1% respectively, over the same period, to reach respective values of $11,667.5 million and $861.9 million in 2011. Market consumption volumes increased with a CAGR of 3% between 2007-2011, to reach a total of 293.1 million kg in 2011. The market's volume is expected to rise to 334.3 million kg by the end of 2016, representing a CAGR of 2.7% for the 2011-2016 period. The chocolate segment was the market's most lucrative in 2011, with total revenues of $1,819 million, equivalent to 62.4% of the market's overall value. The sugar confectionery segment contributed revenues of $769.1 million in 2011, equating to 26.4% of the market's aggregate value.
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The performance of the market is forecast to decelerate, with an anticipated CAGR of 4.1% for the five-year period 2011 - 2016, which is expected to drive the market to a value of $3,560.9 million by the end of 2016. Comparatively, the Russian and Czech markets will grow with CAGRs of 4.2% and 2.7% respectively, over the same period, to reachrespective values of $14,365.5 million and $982.6 million in 2016.
Market Data Market Value The Polish confectionery market grew by 4.9% in 2011 to reach a value of $2,914.6 million. The compound annual growth rate of the market in the period 2007–11 was 5%.
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Market Volume The Polish confectionery market grew by 3.1% in 2011 to reach a volume of 293.1 million kg. The compound annual growth rate of the market in the period 2007–11 was 3%.
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Market Forecast Looking specifically at value sales, Poland’s outperforming economy and the effect this is having on disposable incomes will lend itself well to value sales growth in confectionery as premiumisation continues to kick in. With incomes expected to continue growing considerably over the next few years, premiumisation will be a very important driver of growth as the industry adapts to the higher spending power of the Polish consumer. Per capita consumption of confectionery in Poland is comparatively high, with sugar confectionery products proving most popular. However, the 2009 financial crisis had a negative effect on both volumes and values, with sales coming in lower than the preceding few years. Nevertheless, forecasts remain optimistic about the performance of the sector, which is viewed as one of the most promising regionally.
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f=BMI forecast. Source: Central Statistical Office, National Bank of Poland, BMI
Market Segmentation Category segmentation
Chocolate is the largest segment of the confectionery market in Poland, accounting for 62.4% of the market's total value. The Sugar confectionery segment accounts for a further 26.4% of the market.
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Geography segmentation Poland accounts for 4.1% of the European confectionery market value. Russia accounts for a further 16.4% of the European market.
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Market share Kraft Foods, Inc. is the leading player in the Polish confectionery market, generating a 33% share of the market's value. Mars, Inc. accounts for a further 14.7% of the market.
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Five Forces Analysis The confectionery market will be analyzed taking manufacturers of chocolates, gum and sugar confectionery as players. The key buyers will be taken as retailers, and cocoa farmers and other raw material producers as the key suppliers. Summary
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The Polish confectionery market is fairly concentrated, with the top four players holding 71.6% of the total market value. The market has a wide range of products, differentiated both by their inherent characteristics and by investment in branding. A variety of brands are available and products can also be differentiated with respect to quality and price. Consequently, buyer power is prevented from becoming disproportionately strong in this market. The key ingredients, such as sugar and cocoa products, are bought in commodity markets, and so manufacturers have little control over their prices; although maintaining inventories and engaging in practices such as hedging, can reduce the effect of price volatility. Entry into this market is highly dependent on growth prospects and also on the size of existing players. Confectionery products are vulnerable to the threat of substitutes, such as savory snacks and fresh fruits, due to low switching costs and consumption patterns in different geographies. The competitive rivalry is deemed as moderate in this market, with branding contributing to a high level of customer loyalty. Price elasticity and product differentiation play a small part in terms of competitive rivalry in the confectionery market.
Competitive Analysis The Polish confectionery market is fairly concentrated, with the top four players holding 71.6% of the total market value. Leading companies have diverse product lines, although food and drink products are central to their business. Such factors protect their margins against local fluctuations. Switching costs for consumers and retailers are low. The threat from private labels, offering a cheaper alternative to branded products, increases during times of economic downturns or slowdowns, as consumers become increasingly price-conscious. However, product differentiation, both by inherent characteristics and by strong branding, should allow players to maintain their hold on consumers, and thus weaken rivalry.
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In a business, where automated, high-volume manufacturing is the norm, capacity increases are relatively easy to implement and fixed costs are high, rival ry is enhanced. Overall, there is a moderate degree of rivalry in this market.
Leading Manufacturers in Poland
Colombina S.A.
Colombina is a Colombia-based company engaged in food processing. The company's product mix includes: cookies, wafers, snacks, candies, lollipops, chocolates, pastries, chewing gums, ice creams and preserves. It has production facilities in La Paila, Colombina Delcauca, La Constancia, Procalidad, Inalac Lis and Robin Hood.
Its chocolate confectionary brands include; Nucita, Choco Break, Choco Ball, Choco Break, and Kick; other nonchocolate confectionary brands include; Pirulito, Splot, Chupetas, Tiger Pops, and Colombinetas. Moreover, its other brands under the cakes, sauces and snacks market include Ponky, La Constancia and Snacky whilst its cookie brands include; Nucita, Bridge, Capri, Splendid, Muuu, Maria, Moments and Brinky.
Mars, Incorporated
Mars primarily produces and distributes food products worldwide. The company offers chocolates, candies, chewing gums, rice, entrees, sauces, and beverages. Additionally, it provides dog and cat food.
The chocolate segment offers products under the following brand names: M&M's, Snickers, Dove, Galaxy, Mars, Milky Way and Twix, among others. Mars Chocolate has 28 manufacturing facilities.
Nestlé SA
Nestle (or 'the company') is the largest food and beverage company in the world. The company's products include beverages, milk based products, ice creams, prepared dishes, and pharmaceutical products. Nestle operates in Europe, the Americas, Asia and Africa.
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The confectionery division primarily offers chocolates and chocolate based candies. The segment's products are offered under Aero, Butterfinger, Cailler, Crunch, Kit Kat, Orion, and Smarties brand names.
Kraft Foods Inc.
Kraft Foods the parent company of Cadbury is one of the leading food and beverage companies in the world. The company offers snacks, beverages, cheese, convenient meals, and various packaged grocery products. It markets its products in around 170 countries.
The Kraft Foods Europe segment's product offering includes biscuits, confectionery, beverages, cheese, grocery, and convenient meals. The key brands offered by the segment include Milka, Suchard, Jacobs, Gevalia, Carte Noire, Kraft, Dairylea, Sottilette, Miracel Whip, and Simmenthal among others.
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PART 3 Marketing Strategy
Expansion: Expanding the current product lines
Cadbury is expanding its current lines and adding more variants to its existing product range. Like in its chewing gums range: Centre filled gum: Trident Splash, Hollywood Sweet Gum and Stimorol Fusion Longer lasting flavor: Trident (mini sticks), Stimorol Ice and Dentyne Ice Line filling by adding new tastes to existing bars and coming up with new packages smaller and bigger, gift packs, etc.
Brand Image: Improving the product image and repositioning the brand
High profile brands with strong consumer loyalty are fundamental to maintaining market share as well as in generating sales growth in the confectionery industry. A highly successful brand image also gives products a long life cycle. It also explains the dominance of multinationals that bring with them well-known international brands into the market place. Large companies with big promotion budgets are able to maintain strong brand images and introduce new brands.
Cadbury was initially targeting the the youth but now its targets all alike. Cadbury’s mission is about promising high quality to all its customers and hence, it is working on building a stronger brand image. The Poland confectionary market is huge and Cadbury is a major player in the market because of strong brand image and value to its customers. Cadbury is focusing on retaining and further improving its image to the target customer.
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Innovation:
Cadbury also came out with a technology that makes the chocolate melting resistant, this latest technology has added to the advantage of cadbury as the shelf life can be easily maintained at different temperatures and selling the chocolate to other nations become easier. Also with the new technology they can still maintain the smooth texture of the chocolate that cadbury promises. the technology is very new and it is still to be patented by cadbury. Also cadbury is coming up new flavours and combinations like Cadbury bubbly which is an aerated chocolate and Cadbury Toffee popcorn.
Product Mix:
Cadbury has a huge product offering in Poland including chocolate bars, beverages that mostly include drinking powders as it is a cold country and also special packs and chocolates for special occasions like Easter, Christmas, Halloween and other gift packs. Also Cadbury is the second largest player in the chewing gums market and came up with a new factory in Poland in 2007.
Product offering: ●
Chocolate bars
●
Snacks
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Beverages
●
Special gifts and Easter range
●
Chewing gums
Product line width ●
Chocolate bars
Product line length
Cadbury dairy milk, dairy milk bubbly, mint bubbly, nutty caramel, fruit n nut, toffee popcorn, Cadbury wispa, crispello, twirl, crunchie, starbar, orange cream, pepermint cream
●
Beverages
Bourneville, hot chocolate instant, drinking
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chocolate, milk chocolate, caramel, hazelnut, fudge ●
Special gifts and Easter, Halloween
Cadbury crème n egg, Cadbury egg n spoon
and Christmas range.
chocolate mousse, Cadbury egg n spoon white mousse (crunchy spiders and dead heads for Halloween), snow-bites, chocolate snowman, etc.
●
Chewing Gums
Trident, Hollywood, Dirol and Stimorol
Line Stretching:
●
Up market: Better variants of the Cadbury bars with nuts and fruits and richer cocoa content
●
Two way: In case of Cadbury bubbly there were better variants with white chocolate fills, mint fills, etc. and there was a variant that was Cadbury mini in a smaller size at a lower price
Product Adaptation/Modification:
Cadbury is a transnational firm with a geocentric orientation. It uses a ‘glocal’ strategy for its products which involves standardization as far as possible, but adaptation whenever necessary. Tastes in confectionery vary the world over and Cadbury chose to manufacture products from its existing range which would particularly suit the Polish taste. It also decided to manufacture a range of budget-priced products under the name of Piasten, Cadbury Schweppes' brand in Germany. This included the popular Wunderbar and Curlywurly chocolate bars. Other Piasten products included chocolate tablets, candies and ‘panned’ – a range of chocolate-covered peanuts.
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Since Cadbury changed its product mix as well as slightly changed its communication strategy for Poland, their overall strategy can be considered as Dual Adaptation.
Packaging:
The packaging has started including a sealed plastic wrapper inside the outside foil. Cadbury has been using a new 'PURITY-SEALED' packaging for its flagship product – Cadbury Dairy Milk. Cadbury’s is currently working towards a heat-sealed or a flow-pack packaging that offers a high level of resistance to infestation from improper storage. Generally the shelf life of a about 12 months. Cadbury has patented the purple colour in chocolate packaging at least and it is globally using the same colour globally. Purple is the significant of royalty. Also the packaging is done in small packs, large packs, Gift Packs, and special packages for occasions. The package of Cadbury chocolates also creates the brand image to communicate the Cadbury brand with consumers. Cadbury’s products are always packed with different colors (along with purple) and pictures according to different tastes. More importantly, the labeling of Cadbury’s products is such that responsible consumption messages are provided along with nutritional information to help educate consumers about the role of treats in the diet.
Promotion Mix: Advertising:
Despite the generally held view that chocolates are meant only for children, Cadbury realized that children would be attracted to any chocolate, irrespective of the brand. Therefore, Cadbury has targeted adults with their advertising since the early 1990s. A majority of Cadbury’s advertisements feature people over 18 years of age. Cadbury tries to put across the message that: “In every adult, there is a child - let that child express itself, give in to temptation, and satisfy his or her desire to sink teeth into a smooth, creamy, delicious chocolate”.
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This approach appears to be unique to Cadbury. Its biggest competitor, Nestle, often stresses the energy giving aspects of chocolate (for example, in advertising for Nestle Charge), or on other attributes of the chocolate - taste in the case of Nestle Crunch, as a light snack in the case of Nestle Bar One. Nestle specifically targets children in the advertising for Milkybar (or Galak as it is called in Poland and the rest of continental Europe), its white chocolate, again emphasizing its energy giving properties.
To counter Milkybar, CIL has the Dream or Dairy Treat - where it targets the mothers of children by trying to convey the message that its product is full of the goodness of milk, and so equivalent to consuming milk itself.
Television, print media and posters have been the main media of communication for Cadbury’s advertisements. Cadbury’s TV campaigns in Poland were devised illustrating the essential consumption occasions. In addition, according to the sources from Cadbury’s website, there are other types of advertising form being used in Cadbury which is the trade advertising, informative advertising and the consumer advertising. Cadbury has launched a lot of periodic trade advertising to monitor quality checks and educate its retailers as well as promoting sales. For the purpose of inform and remind customers, Cadbury published an advertising regarding “the facts about Cadbury” in 55 trade publications. More importantly, Cadbury has launched a response cell through toll free number and an email-ID to encourage its customers to give feedback.
With continued fragmentation of the traditional commercial television audience base, the industry has turned to other mediums for brand building promotions. ln particular, outdoor and transit advertising is increasingly being utilised following the successful example in the soft drinks industry. Sponsorships, both local and global also continue to enjoy popularity among industry marketers.
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Figure: Ad spend by medium in Poland
For confectionary industry TV continues to remain the preferred mode of promotion as it has the widest reach as is evident from the figure above.
Sales Promotions: Cadbury uses innovative methods of sales promotion. They spearheaded the ‘Text N Win’ sales promotions by taking advantage of the popularity of mobile ph ones and they were one of the first large companies to focus on internet marketing and social media for the purpose of sales promotions. An example is their ‘Get Active’ campaign throughout Europe, including Poland, which consisted of a program of rewarding sports equipment in return for a collection of Cadbury's 44 | P a g e
chocolate wrappers. This was an innovative way to address the weight problem in Poland as the proportion of the Polish population aged 15 and over that is classified as obese reached 20.2% in 2010 and the overweight population reached 33.9%.
Standard sales promotion techniques like sampling, couponing, contests, bonus packs and tie-in promotions are also regularly used by the company. Examples:
Cadbury ran a three-month promotion in conjunction with airport retailers in Poland – which involved a ‘three for two’ offer across the Cadbury Luxury Selection portfolio, including the newer Dark and Milk Chocolate Multi-Packs. Supported by in-store displays and point of sale materials, the promotion resulted in the Cadbury Luxury portfolio claiming 10% of the airport retailers’ overall premium confectionery category during the period.
Furthermore, every year Cadbury launches discount selling or price off sales promotion activities during Christmas time in supermarkets and it does increase sales dramatically every year.
Cadbury extensively used sampling while launching its products in Poland. A major in-store sampling and couponing campaign was devised whereby three day sampling events were carried out over major stores in Poland. This was repeated 8-10 weeks later to coincide with the launch of product variants.
Cadbury also likes to go in for joint promotions. An example is its partnership with travel retail channels, such as airlines that offer Cadbury Luxury Selection Praline Tower Pack exclusively on-board their flights with the product consistently appearing in the airlines top three confectionery products for sale on-board since then.
Personal Selling:
Personal selling is a two way communication between sellers and buyers. It can be done through face to face communication, through the internet or telephone. The benefits of personal selling are that firms can gain the feedback quickly from customers, demonstrate the benefits of particular products and adjust their message immediately to capture customers’ concern and desire needs. 45 | P a g e
Personal selling had been used by Cadbury a long time ago. But it is not being used anymore as the brand awareness and brand identity of Cadbury has increased substantially and they do not require the use of personal selling.
Public Relations:
Public relations can be very beneficial for a company like Cadbury but it is also a risky way of communication as firms cannot control the negative aspects. Cadbury has utilized a variety of tactics for public relations in Poland such as:
Sponsorship of websites
Radio promotions
Media gifts to presenters of drive time radio shows and afternoon TV.
Product placement and point of sale
The most distinctive form of building public relation for Cadbury is its Trading Terms that declare the Cadbury conditions of purchase for detailers to offer the best quality of chocolate and service for consumers. The Cadbury Nutritional labeling global standard to explain about consumer health and ingredient are also indicated on the company website which includes the detailed product information and consumer health issues. Cadbury also has a long tradition of sports sponsorship, both in its original country andand of supporting major international events.
Direct Marketing:
For the purpose of boosting the awareness and stimulating sales, Cadbury had launched a series of direct marketing campaigns such as the Dairy Milk’s door drop campaign through the leaflet firms. Mailings and inserts to house were also frequently used in the Cadbury’s direct marketing campaigns. Those campaigns have met the objectives of Cadbury such as increasing the sales dramatically as well as acquitting a lot of valid customer information. For example, in order to extend the reach of its popular gorilla campaign, which was used throughout Europe including Poland to capitalize the target customers, who were 18-34 years old, Cadbury had used mobile marketing to deliver extra content and take the brand awareness and brand identity to a new level amongst the target audience.
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Interactive/Internet Marketing:
Interactive media has taken many forms in the case of Cadbury, such as the company website, mail box and virtual reality mall kiosks:
The frequently asked questions on Cadbury’s website are being used effectively to gain an insight into the customer wants as well as complaints.
Cadbury likes its customers to engage in the operations so as to offer the desired taste of chocolate for its target customers.
Customers can chat on Cadbury’s website to obtain more product information and provide feedback to the Cadbury management team.
Market distribution Cadbury dairy milk is produced at the chocolate factory. After the chocolate is produced and goes through the process of all quality checks. It is transported to the staff rooms and then Cadbury sells it product to shops. The placement strategy of Cadbury dairy milk is to sell the chocolate at every corner shop, super stores, bakers shop, petrol pumps and even medical stores also included in it. It is the mission statement of Cadbury to provide chocolate to all type and class of customers.
Supermarkets / Hypermarkets form the leading distribution channel in the Polish confectionery market, accounting for a 58.8% share of the total market's value. Convenience Stores accounts for a further 14.9% of the market.
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Product Placement:
Cadbury’s chocolate products are placed in the confectionery section in stores, alongside other confectionery products that are for in-home consumption. Point of Sale: As Cadbury’s products are sold primarily in retail outlets, they insist on developing in-store marketing support. This consists mainly of attractive floor units, shelf headers and glorifiers to make the products stand out in the store.
Pricing
Demand for confectionery is highly price elastic. Value for money is a key part of the purchase decision. Confectionery also faces strong competition from substitutes such as com chips and biscuits, which increases the importance of competitively pricing and positioning product lines.
Cadbury dairy milk applies the reasonable and affordable policy to charge the price from its competitors. Because it is the vision of Cadbury that Cadbury is in every pocket. It charges similar price like its competitors and provides better quality. It is using Competitive pricing strategy because the products have similar or low prices as compared to its competitors and have long life cycle of the product. Cadbury wants to survive in the market for long run. However Cadbury has products in the premium range as well, Products like Bournville and Temptations, here the pricing is again competitive but in the premium range. But the pricing strategy stays in line with the Cadburys aim to target every one and hence the pricing is affordable and competitive but still maintaining the quality of the product and keeping the brand Cadbury strong in the mind of the customer so that it can sustain loyalty
Future Trend for Cadbury:
In terms of further strategic growth, Cadbury should apply Ansoff Growth Matrix while focusing on new products and prospective markets. There is no need for Cadbury to advance and promote the existing chocolate products since they are already widely acknowledged in terms of quality and high reputation among the Cadbury's target markets.
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Cadbury is accomplishing its strong hold in Eastern Europe through Poland and it can go deeper into the Eastern European market as there is a huge scope for confectionary market and it is growing at a fast pace.
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REFERENCES http://businesscasestudies.co.uk/cadbury-schweppes/poland-a-developing-market/polanda-developing-market.html#axzz2MJ6GwFNE
http://www.slideshare.net/liyanahassan/cadburys-marketing-strategy
http://www.cadbury.co.eu/products
http://www.piasten.com/site/piasten_en.phphttp://businesscasestudies.co.uk/cadburyschweppes/launching-a-new-product-into-a-developed-market/the-snackmarket.html#axzz2MJ6GwFNEhttp://www.managementparadise.com/forums/marketingmanagement/209002-marketing-mixcadbury.htmlhttp://www.slideshare.net/kiranshaukat2/complete-ppt-of-cadbury
http://news.medill.northwestern.edu/chicago/news.aspx?id=212690
http://www.glenboden.com/show_article_page.php?article_id=296 http://www.ebscohost.com/
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Appendix 1- Cadbury Profile
Cadbury is a British confectionery company owned by Mondelēz International Inc which is the corporate name for the global snacks company of Kraft Foods Inc. and is the industry's second-largest globally after Mars, Incorporated. With its headquarters in Uxbridge, London, England, the company operates in more than 50 countries worldwide.
The company was known as Cadbury Schweppes plc from 1969–2008 until its demerger, in which its global confectionery business was separated from its US beverage unit (now called "Dr Pepper Snapple Group"). It was also a constant constituent of the F TSE 100 f rom the index's 1984 inception until its 2010 Kr aft Foods takeover. The company’s Indian business has a leading presence in chocolate with a 71% market share. Also,the company also has leading market shares in Thailand in gum and candy at 63% and 31%respectively. In Malaysia, it has a number one market share in chocolate at 29%, and in gum, a number two position with a 19% market share. Further, in the Australian confectionery market, the company has a number one position in chocolate (53% market share).
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Appendix 2- Poland Profile
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