Cadbury Schweppes
Industry Analysis: Cadbury Schweppes (CS) is comprised of a global confectionery and beverage company. For the purpose of this case we will maintain our focus on the confectionery business and the assessment of adding to their sugar confectionery portfolio. CS is number three in the beverage business but see the opportunity to become the largest confectionery in the world. The categories are chocolates, sugar and chewing gum. At this time Adams is the number two sized in the gum business. This industry operates on “bigger is better in confectionery”. Their strategic discussions and ambitions appear to stay true, in mentality, to this mantra. This mantra could be potentially dangerous to the business. CS had a presence in over 70 countries and was highly concentrated in America with 75% sales occurring here. Threat of new entrants: Yes significant barriers to entry do exist at this level, significantly because of strong brand identities. Name recognition is a key factor for dominating the markets for confectionery goods. Only a few names dominate the markets, the chocolate market is Nestle, Hershey, and Cadbury while the gum market is led first by Wrigley and then Adams. These companies dominate their brand and heritage with in itself makes the barrier very hard to overcome. Bargaining power of buyers: since they are one of the largest confectionery companies they do possess large buying power. However, situations that could potentially be harmful to Cadbury are brand reliability or reputational issues such as recalls or issues such as this. In that situation they could lose buying power. Threat of substitutes: is moderate. This is only because the potential does exist for generic supermarket brands to impose on their brand. They could do this since the supermarket shelves in the “hot zones” are controlled by the supermarkets themselves and who would also be promoting their off brand of the product. Bargaining power of suppliers: Cadbury