Cadbury PESTEL Analysis | Business Teacher
The PESTLE analysis will examine the political, economic, socio-cultural, technological, legal and environmental factors of Cadbury’s external environment (Johnson et al 2014; Angwin et al 2011).
Government concerns regarding obesity have led to proposals for a sugar tax and pressure being placed upon manufacturers to reduce the amount of sugar in their products (Butler 2015). Further proposed political responses to the activity of businesses were also proposed after the hostile takeover of Cadburys by Kraft (Morris 2014). Political decisions such as austerity and the subsequent falls in disposable income have also led to Cadburys undertaking ‘shrinkflation’ where the size of a chocolate bar has been reduced rather than leaving it the same size and passing the increased cost on to the consumer (Ruddick 2017). This process started after the 2008 recession and there are warnings that this will continue during the Brexit process (Mondelez 2017; Ruddick 2017).
Due to the weak pound in 2010, Kraft were able to buy Cadbury at a lower price than its actual value (Morris 2014). The low interest rates in the UK also enabled Kraft to borrow £7 million from a British bank to secure the sale (Morris 2015). Further economic costs of this sale included the relocation of manufacturing to Poland, which was cheaper and Kraft were perceived as being focused on the amount of profit it could obtain from Cadbury, rather protecting the brand itself (Wallop 2016). The cost-conscious focus of Mondelez has also seen recipes being changed and products becoming smaller to address rising production and ingredient costs (Ruddick 2017; Lewis 2015).
Cadbury has been relatively responsive to changing consumer demands. It has undertaken partnerships with Fairtrade in products such as Dairy Milk. However, this may be under threat if Mondelez undertake their own certification of its ingredients (Mondelez 2017). Cadburys have also responded to campaigns to reintroduce chocolate bars, such as Wispa. Growing health concerns have also led Cadbury’s to produce smaller bars and to also try and reduce the level of sugar in their products (Mondelez 2017). By undertaking this proactive activity to the threat of future legislation, Cadbury not only responds to its customers, but may also be able to cut the potential costs that this action may entail (Butler 2015).
Technological advances in manufacturing, which may be developed through research and development, will help in in addressing the rising costs of raw ingredients and transportation and this may include innovations such as heat resistant chocolate which would be more suitable for hotter climates in emerging markets (Mondelez 2017). Like many organisations, Cadbury use social media, such as Facebook, as a form of connecting and communicating with its customers (Cadbury 2017). This helps reinforce the relationship between the organisation and its customers and enables the changes in both the organisation and its customers to be responded to. Cadburys has also used apps based on gameplay to engage consumers in specific activities such as the crème egg game in 2011, which linked to the London Olympics of 2012.
Environmental issues for Cadbury include the amount of packaging which they use and the organisation has reduced the amount used for Easter eggs and the production of its organic Green and Black chocolate (Mondelez 2017). Other environmental concerns will relate to the carbon footprint created by their supply chain including manufacturing and distribution. Further plans include supporting farmers who grow cocoa beans to ensure that this is carried out sustainably. However, Mondelez are proposing switching from Fairtrade to their own project which has been criticised for not being independently audited and also turning their backs on a well-respected initiative (Wallop 2016).
Legal issues which impact on Cadbury is the requirement to provide details of ingredients and calorie details to assist consumers with making choices based on fat content. Other legal issues which Cadburys have arguably facilitated for future business activities have potentially arisen as a result of the hostile takeover by Kraft and the possibility of a review of the regulatory framework surrounding this (Morris 2014). The concerns regarding obesity may also lead to a strengthening of the regulatory framework such as the proposed sugar tax. Legal requirements in the UK have increased for food manufacturers due to EU membership and these may reduce after the Brexit process is complete. However, due to past food scandals in the UK, it is unlikely that consumers would want to see food regulations regarding health and safety and ingredients to be greatly relaxed.
- Angwin, D, Cummings, S and Smith, C (2011) The Strategy Pathfinder: Core Concepts and Live Cases, (2nd ed), Chichester: John Wiley and Sons Ltd, Chichester
- Butler, S. (2015) ‘Sugar tax will not change diets, says Cadbury chief’ Guardian, October 22 [online] Available from https://www.theguardian.com/business/2015/oct/22/sugar-tax-not-change-diets-cadbury-mondelez-childhood-obesity-public-health-england
- Cadbury (2017) ‘Homepage’ [online] Available from https://www.cadbury.co.uk/
- Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regnér, P. (2014) Exploring Strategy, Text and Cases (10th ed.) Harlow: Pearson Education Ltd
- Lewis, K. (2016) ‘Cadbury’s Creme Eggs sales and satisfaction falls after controversial recipe change’ Independent, March 24 [online] Available from http://www.independent.co.uk/news/uk/home-news/creme-egg-easter-cadbury-mondelez-recipe-sales-a6950221.html
- Mondelez (2017) ‘Mondelez International Inc. Form 10-K Annual Report’ [online] Available from http://www.annualreports.co.uk/HostedData/AnnualReports/PDF/NASDAQ_mdlz_2016.pdf
- Morris, B. (2014) ‘The Cadbury deal: How it changed takeovers’ BBC Business News, May 2 [online] Available from http://www.bbc.co.uk/news/business-27258143
- Ruddick, G. (2017) ‘Cadbury says chocolate could get smaller after Brexit’ Guardian, March 24 [online] Available from https://www.theguardian.com/business/2017/mar/24/cadbury-warns-chocolate-could-get-smaller-after-brexit
- Wallop, H. (2016) ‘The many ways Cadbury is losing it magic’ Telegraph, March 21, [online] Available from http://www.telegraph.co.uk/food-and-drink/features/the-many-ways-cadbury-is-losing-its-magic/