Confectionery Industry Analysis for Kraft-Cadbury
PRE-ACQUISITION DUE DILLIGENCE
INDUSTRY ATTRACTIVENESS
The following data relate to the World confectionery market ( IN BILLIONS)
YEAR | 2006 | 2007 | | 2008 | | 2009 | | 2010 | | 2011 | MARKET VALUE | 76299.7 | 85474.8 | | 93287.6 | | 89619.1 | | 94793.2 | | 102334.9 |
MARKET VALUE CAGR – 6%
CONSUMPTION CAGR – 4.8%
* Chocolate is the no. 1 impulse buy in many countries including India
* The global chocolate confectionary market till around 2008 was dominated by 9 multinationals namely Cadbury, Ferrero, Hershey, Kraft, Leaf, Mars, Nestle, Warner-Lambert, Wrigley
2009 data
Company | | Net Sales in billions | | Number of employees | | Number of factories around the world | MARS Inc | | $16.50 | | 65000 | | 1353 | Nestle | | $11.39 | | 283000 | | 4563 | Ferrero Group | | $8.99 | | 21600 | | 18 | Cadbury | | $8.81 | | 47000 | | 64 | Kraft foods | | $8.83 | | 98000 | | 1683 |
PORTER’S FIVE FORCES MODEL
Using Porter’s Five Forces Model, a structural analysis of the industry shows:
* The threat of entry: LOW
* High Product differentiation
* High Economies of scale * Advertising necessary for brand awareness * Access to distribution channels: concentrated retail supermarket; * Capital requirements: High capital investments in production technology and supply chain technology * Cost advantages independent of size- Experience in production and distribution of major operators.
* Threat of substitutes: MODERATE/HIGH
* Growth in light food snacks, introduces possibilities: healthier snacks; fun fruit packaging; savoury snacks.
* Supplier power: MODERATE
* Milk, sugar subject to local country prices, maybe inflated but stable; * Cocoa * Concentrated source of supply for Cocoa * Cocoa product unique * Subject to price fluctuations, but larger manufacturers can hedge against this by backward integration (Like
INDUSTRY ATTRACTIVENESS
The following data relate to the World confectionery market ( IN BILLIONS)
YEAR | 2006 | 2007 | | 2008 | | 2009 | | 2010 | | 2011 | MARKET VALUE | 76299.7 | 85474.8 | | 93287.6 | | 89619.1 | | 94793.2 | | 102334.9 |
MARKET VALUE CAGR – 6%
CONSUMPTION CAGR – 4.8%
* Chocolate is the no. 1 impulse buy in many countries including India
* The global chocolate confectionary market till around 2008 was dominated by 9 multinationals namely Cadbury, Ferrero, Hershey, Kraft, Leaf, Mars, Nestle, Warner-Lambert, Wrigley
2009 data
Company | | Net Sales in billions | | Number of employees | | Number of factories around the world | MARS Inc | | $16.50 | | 65000 | | 1353 | Nestle | | $11.39 | | 283000 | | 4563 | Ferrero Group | | $8.99 | | 21600 | | 18 | Cadbury | | $8.81 | | 47000 | | 64 | Kraft foods | | $8.83 | | 98000 | | 1683 |
PORTER’S FIVE FORCES MODEL
Using Porter’s Five Forces Model, a structural analysis of the industry shows:
* The threat of entry: LOW
* High Product differentiation
* High Economies of scale * Advertising necessary for brand awareness * Access to distribution channels: concentrated retail supermarket; * Capital requirements: High capital investments in production technology and supply chain technology * Cost advantages independent of size- Experience in production and distribution of major operators.
* Threat of substitutes: MODERATE/HIGH
* Growth in light food snacks, introduces possibilities: healthier snacks; fun fruit packaging; savoury snacks.
* Supplier power: MODERATE
* Milk, sugar subject to local country prices, maybe inflated but stable; * Cocoa * Concentrated source of supply for Cocoa * Cocoa product unique * Subject to price fluctuations, but larger manufacturers can hedge against this by backward integration (Like