Case Study # 1: Cadbury Crisis Management (Worm Controversy) In India chocolate consumption was very low in the early 90’s but as the decade advanced the consumption drastically increased. The late 90’s witnessed a good chocolate market condition. The chocolate market in India is dominated by two multinational companies – Cadbury and Nestle. The national companies – Amul and Campco are other candidates in this race. Cadbury holds more than 70% of the total share of the market. Nestle has emerged by holding almost 20% of the total share. Apart from chocolate segment, there is also a big confectionery segment which is flooded by companies like Parry’s, Ravalgaon, Candico and Nutrine. All these are leading national players. The multinational companies like the Cadbury, Nestle and Perfetti are the new entrants in the sugar confectionery market. (Management paradise) There are several others which have a minor share in these two segments. According to statistics, the chocolate consumption in India is extremely low. If per capita consumption is considered, it comes to only 160gms in the urban areas. This amount is very low compared to the developed countries where the per capita consumption is more than 8-10kg. Observing this fact it would not be appropriate to consider the rural areas of India as it will be extremely low. This low consumption is owing to the notion behind consuming chocolates. Indians eat chocolates as indulgence and not as snack food. The major target population is the children. India has witnessed a slow growth rate of about 10% pa from the 70’s to the 80’s. But as the century advanced the market stagnated. This was the time when Cadbury launched its product- Dairy Milk as an anytime product rather than an occasional luxury. All the advertisements of Dairy Milk paid a full attention to adults and not children. And this proved to be the major breakthrough for Cadbury as it tried to break the conventional ideas of the Indians about chocolate.

The Worm Controversy
On October 2003, just a month before Diwali, the Food and Drug Administration Commissioner received complaints about infestation in two bars of Cadbury Dairy Milk, Cadbury India’s flagship brand with over 70% market share. He ordered an enquiry and went directly to the media with a statement. Over the following 3-week period, resultant adverse media coverage touched close to 1000 clips in print and 120 on TV news channels. In India, where Cadbury is synonymous with chocolate, the company’s reputation and credibility was under intense scrutiny. Sales volumes came down drastically in the first 10 weeks, which was the festival season; retailer stocking and display dropped, employee morale – especially that of the sales team – was shaken.

The challenge was to restore confidence in the key stakeholders (consumers, trade and employees, particularly the sales team) and build back credibility for the corporate brand through the same channels (the media) that had questioned it. In defense, Cadbury issued a statement that the infestation was not possible at the manufacturing stage and poor storage at the retailers was the most likely cause of the reported case of worms. But the FDA didn’t buy that. FDA commissioner, Uttam Khobragade told CNBC-TV18, “It was presumed that worms got into it at the storage level, but then what about the packing – packaging was not proper or airtight, either ways it’s a manufacturing defect with unhygienic conditions or improper packaging.” That was followed by allegations and counter-allegations between Cadbury and FDA. The heat of negative publicity melted Cadbury’s sales by 30 per cent, at a time when it sees a festive spike of 15 per cent. For the first time, Cadbury’s advertising went off air for a month and a half after Diwali, following the controversy. Consumers seemed to ignore their chocolate cravings.

Question:

1. How will the Cadbury can restore the confidence of the consumer?
Make an elaborate plan on how you are going to do it. Use the Decision-making Process. a) Diagnose problem
b) Analyze environment
c) Articulate problem or opportunity d) Develop viable alternatives
e) Evaluate alternatives f) Make a choice
g) Implement decision
h) Evaluate and adapt decision results