Worm turns for Cadbury

Mohini Bhatnagar
28 November 2003

Cadbury India, beleaguered by the worms controversy, is paying a heavy price even as its sales are plummeting and raw material costs are spiralling

Hyderabad: The worms in the chocolate bars controversy has hit Cadbury India where it hurts most and that is in sales. The company today faces tough times ahead as the business environment for its chocolates becomes increasingly negative with rising raw material prices and low consumer sentiments, post the worms controversy in October this year.

While the sales of chocolates (institutional and retail) fell by 3 to 4 per cent last month and are predicted to be down by 10 per cent in November by the trade, Cadbury India has had to incur additional costs in upgrading packaging and damage control promotional efforts. To add to all this, prices of milk and cocoa have been on the upward path in recent months, adding further to the costs.

The largest impact on sales has been in Maharashtra, and specifically in Mumbai, which is where the whole controversy arose as worms were found in Cadbury chocolates in allegedly eight outlets across the state.

If it weren't bad enough that the controversy blew up at the festival season when the chocolates sales are at their peak, the company may also just have to shelve plans of becoming a major sourcing hub for British chocolates and beverages giant Cadbury Schweppes. As part of a global realignment of its supply chain management, the company was giving finishing touches to a plan that might have seen Cadbury India emerge as a major supplier of chocolates to the Asia-Pacific region and the Middle East.

The outsourcing model could have resulted in significant revenue generation for Cadbury India. Initially the company blamed retailers for not storing the products properly but is now engaged in putting in place a regular monitoring and checking system of the storage of the chocolates.

Cadbury India managing director Bharat Puri says the company has made substantial investments in packaging in order to maintain product quality from the manufacturer to the customer. And now it is making all attempts to reassure the consumer and win back their confidence and interest in the category.