Cadburys, Cocoa and Coconuts

Here is a terrific example of how a long established business sees an emerging economy not just opportunity for growing sales and profits but also as a centre for production.

Spurred on by rising incomes and consumer demand, Cadburys is hoping to consolidate its dominant position in the Indian chocolate market by encouraging coconut plantations to switch production and establish a much bigger cocoa production capacity in India. The incentives to expand cocoa supply in India are strengthened by the 30% tariff imposed on imports of cocoa into India from countries such as Ghana and the Ivory Coast. The FT reports that Cadburys is is hoping to source all of its cocoa beans domestically by 2015 and coconut farmers may hold the key as cocoa seedlings grow alongside coconut palms in southern India and therefore do not require fresh clearing of forests for plantations.

The FT article claims that Cadbury controls more than 70 per cent of the chocolate market in India with a presence in 1.2m stores while Nestlé controls about 25 per cent. It enjoys a dominant position in a market where sales are rising by more than 20 per cent per year.

Reinforcing that market dominance is key for Cadburys - it has spent heavily on marketing revamped chocolate brands in the Indian market including heavy cricket-related sponsorship - but having a domestic supply chain will do more that pure marketing plays to keep their profits rising.