In this PEST analysis of Cadbury, we examine how this leading chocolate company has dealt with external factors in the UK and in other countries.
Cadbury is synonymous with chocolate consumption worldwide. Opening shop in the early 19th century, Cadbury has emerged as a global brand with factories and offices the United Kingdom and North America, and a notable presence in Asia and Africa as well. In 2008, the Schweppes brand was sold to the Dr Pepper Group, and in 2010, Cadbury was acquired by Kraft foods in the US. Hence, Cadbury and its range of products are now owned by the American confectionary giant.
The following is a PEST analysis of Cadbury which also will help to shed light on various external factors that affect the chocolate industry. We will make special emphasis on Cadbury UK, as this is where the company originally began.
Political
In the context of the UK, the change of government from the Labour party to the Conservative/Liberal Democrat is bound to influence Cadbury’s operations. By last estimates, the 8 Cadbury factories in the UK had employed 3,000 workers. However, the stringent restrictions on the entry of skilled workers from rest of Europe can affect Cadbury’s hiring decisions in the future.
The imposition of taxes is yet another political factor that will determine how Cadbury manages its investment and payment to shareholders. For example, Value-added Tax rose by 2.5% in 2010 and increased chocolate prices and reduced sales. And even before that in 2007, Cadbury Schweppes decided to outsource a major portion of its accounting and HR to an Indian firm in the face of increasing operational expenses and reducing margins. If other business units follow suit, this can result in a loss of hundreds of jobs across the globe. But conversely, it will also create new employment opportunities in countries like India.
Economic
Even though the global economic downturn did affect Cadbury’s expansion plans (owing to a reduction in disposable income of customers and other stakeholders), sales actually remained quiet steady.
In fact, Cadbury was able to gain a 30% increase in its annual profits, predominantly from the sales of Dairy Milk and Trident. But even then, recession did play its part as the company managed only to hit the lower end of its 4%-6% revenue for 2009, the peak of the recession. And while Dairy Milk chocolate and Trident Gum sold well, other brands like Halls also saw a rise in their annual sales.
Social
In one respect, Cadbury was born as a result of social factors. Being run by a Quaker family, their opposition to alcohol served as the basis of running a business that sold tea, coffee, cocoa, and liquid chocolate. But while chocolate and other products sold by the company are socially acceptable worldwide, Cadbury has been on the receiving end of controversies, the recent one involving Cadbury products being ‘Halal Certified’ to cater to Muslim markets around the world.
In addition, there are also concerns in the western world owing to rising cases of obesity, especially among children. Many nutritionists recommend people to reduce their consumption of chocolate and candy, which is likely to affect Cadbury sales in the future.
Technology
Finally, technology has changed Cadbury’s production and packing process over the years, starting with the introduction of new brew machines to blend coffee and cocoa gains. Recent moves in this regard include the use of pathogen testing systems and filing patents for heat-resistant chocolate.
Conclusion
In this PEST analysis of Cadbury, we saw how this leading chocolate company has dealt with external factors in the UK and in many other countries as well. Of course, the format of the presentation barred us from discussing how the acquisition of Kraft Foods will affect company performance in the future.
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