Cadbury hires AT Kearney to curb costs

Cadbury India has appointed management consultancy firm AT Kearney to draw up a strategy to control costs in several areas, including sourcing of raw materials and packaging.

This is partly an outcome of the worms controversy more than a year ago. Sales had then declined and the company subsequently invested heavily in packaging and distribution.

Among other things, it changed the wrappers for its Cadbury Dairy Milk brand and introduced better coolers.

A Cadbury spokesperson confirmed the development but refused to divulge details about the consultancy firm's mandate.

But a senior Cadbury source said: "The mandate is to look at the sourcing of direct and indirect materials like renegotiating with suppliers for longer term contracts and vendor management. Other costs (indirect expenses) like travel costs and hotels are also being studied."

In other words, Cadbury is trying to reduce the cost per stock keeping unit (SKUs, or packs).

Though the company's sales have been on an upswing after the crisis, margins have been squeezed. While raw material as well as other packaging costs have gone up, the company is still apprehensive about increasing the prices of its products.

"Curtailing costs has no boundaries. The move is to improve efficiencies," said a senior Cadbury executive.

Cadbury is focusing on small packs because that is where volumes come from, especially in rural India. It is not clear whether the company will reduce the number of its SKUs.

The latest Cadbury sales and profit figures are unavailable as it is now closely held by British confectionery and beverage giant Cadbury Schweppes. On a turnover of Rs 729 crore, its net profit dived 37 per cent to Rs 45.6 crore in 2003.

Cadbury's Indian operations are not just the largest in Asia but also the cheapest. In India, Cadbury has the largest market share anywhere in the world.