The Demand Analysis Cadbury Dairy Milk

THE DEMAND ANALYSIS
OF
Cadbury Dairy Milk
Introduction:
The first eating chocolate recipe was developed by Dr. Hans Sloane, on his traveling to South America where he had focused on cocoa and food values. From this recipe Cadbury had introduced the milk chocolates. The Cadbury dairy milk was first introduced in UK in 1905 and then it was introduced in India in 1948. Cadbury Dairy Milk has been the market leader in the chocolate category for years and has been a part of every Indian's moments of happiness, joy and celebration. Today, Cadbury Dairy Milk alone holds 30% value share of the Indian chocolate market.
Independent Variables affecting demand of Cadbury Dairy Milk

Price: This product is a brand loyal product, so if there is a slight increase in the price, the demand of the product will remain unaffected. But if there is a decrease in the price, the demand of the product may slightly increase. Income: If the income of the people increases, the demand of the product also increases and if the income of the people decreases, the demand of the product decreases because then people will go for lower price chocolate like clair or melody of Rs.1 or Rs. 2. So, there is a positive relationship between income and the product demand. Population & Age group: This product is meant for the children, adults and also for the old people so the age groups are not much affected the demand of the product so demand remain same and by the increase in the population, the demand of the product also increases. Brand Image: The brand image of the Cadbury plays an important role in the demand of the Cadbury. This product has built such a brand image that it has much attracted the mind of the consumers so they will not like to switch over to the other brand. Consumers taste and preferences: Cadbury produced milk chocolates by using the high quality of cocoa bean and the taste has still remained the same which has touched the heart of the consumers. So, they will not like to go for any other product. Competition: There are many competitors like Cadbury 5-star, Nestle KitKat, parle chox, foreign chocolates (Chinese Chocolates), lotee etc. in the market so if the price of the competitors increases, the demand of the dairy milk also increases. But if the price of the competitors decrease, the demand of the dairy milks not much affected by it. Price of Complementary Goods: Cadbury dairy milk is made from the milk, sugar, cocoa bean and cocoa powder. If the price of these complementary goods increases then there will be no change in the demand. Because Cadbury dairy milk is a brand loyal product so there will not be any effect on the demand of the product.
Advertisement campaign: Advertisement campaign has played a vital role in attracting the major part of the population towards the Cadbury dairy milk. It was through this campaign like Real Test of Life & Kuch Meetha Ho Jaye that Cadbury shifted its focus from kids to the all age people and later through Khanewalon Ko Khane Ka Bahana Chahiye & Pappu Pass Ho Gaya, Cadbury has associated dairy milk to celebrations and every moment of achievement and success. So, it is through advertisement that Cadbury has gained social acceptance which has played a major role in increasing his demand. Celebrations & Occasions: During the festivals and occasions, the consumption of Cadbury increases because its a product for enjoying the taste of each and every moment with harmony.
PRICE ELASTICITY
The product is a brand loyal product so if we increase the price by 20% then demand of the product will decrease by 5% that means elasticity of price is <1. So, product is less elastic. (If we increase the price by Rs. 1 then demand will fall by 5 pc per 100 pc) 7
EP = Qd . P
Px Q = 5 . 5 1 100 = 0.25
6
P R 4 I C 3 E 2
1 0 90 95 100
Demand
105
110
115
120
[Products price elasticity is <1 because our product is in monopolistic market]
Arc price elasticity:

EP = Q2-Q1 . P2+P1
= = P2-P1 Q2+Q1 95-100 . 6 + 5 6-5 95+100 -0.28
INCOME ELASTICITY
If the income rises by 20% then the demand will rise by 10% the curve is positively sloped means that elasticity of Income is >0 and <1. (When the average income was Rs. 10,000 and demand was 100)
EI = Qd . I
Ix = Q 10 . 10000 2000 100
I N C O M E
14 13 12 11 10 9 8 0 90 95 100 105 110 115 120
= 0.50
Demand
Arc income elasticity:

EI = Q2-Q1 . I2+I1
I2-I1 Q2+Q1 = 110-100 . 12000+10000 12000-10000 110+100 = 0.52
CROSS ELASTICITY OF DEMAND

If there is an increase in the price of Kit-Kat or Munch by 20% to 25% then the demand for the dairy milk will increase by 8%. (When there is an increase of Rs.1 in the substitutes price then the demand of the dairy milk will increase by 8%)
EXY = QX . PY
PY QX = 8 . 5 1 100
7 6
P R 4 I 3 C E 2
= 0.4
1 0 90 95 100 105 110 115 120
Demand
Arc cross- price elasticity:
EXY = Qx2-Qx1 . Py2+Py1

= = Py2-Py1 Qx2+Qx1 108-100 . 6+5 6-5 108+100 0.42
Cross Elasticity for Complementary Goods:

If the price of the cocoa bean, milk and other complementary goods like plastic packaging materials will increase constantly than the cost of the production will increase and by this the price of the relevant product will also increase but the demand of the dairy milk will remain constant because of it is a normal good.
Short run and long run impact in the elasticity of the demand In the Short run period of time , the demand for the dairy milk is less
elastic because if the price of the dairy milk chocolate suddenly increases Rs.5 to Rs.7, than the demand of the product will also decrease but in the long run the demand may not be much affected.
There are some criteria that also affects and they are like:
Our product should be in the monopolistic competitive market product. No change in the taste and quality.
In the Long run period of time , the demand for the dairy milk is more elastic
because if the price of the dairy milk in the 2005 was Rs.5 and in the 2010 it will be Rs.10 and, the quantity and the quality will remain the same and the other products also like Kit-Kat and Munch, if they dont change any of the things like price, quality and quantity than it will greatly affect the demand of the dairy milk and it will started decreasing day by day.
Assumptions:
There are possibilities of change in technology & chances of Product innovation in the long run. There are possibilities of increasing good quality chocolate manufacturing units. Band Wagon Effect: The band wagon effect is totally depended on the mentality of the human beings. The advertisement campaign with Amitabh Bachchan has made an increase in the demand of the dairy milk. It indicates that if the one person is going to buy dairy milk chocolate than the other also want to buy the same chocolate. Snob Effect: This is a kind of totally contra effect of the band wagon effect. If a person bought one particular product then the other person wants superior product than the person had already bought. But in our product the demand does not affect by the snob effect.

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THE DEMAND ANALYSIS

Cadbury Dairy Milk

Independent Variables affecting demand of Cadbury Dairy Milk

[Products price elasticity is <1 because our product is in monopolistic market]

Arc price elasticity:

14 13 12 11 10 9 8 0 90 95 100 105 110 115 120

Arc income elasticity:

CROSS ELASTICITY OF DEMAND

1 0 90 95 100 105 110 115 120

Arc cross- price elasticity:

EXY = Qx2-Qx1 . Py2+Py1

Cross Elasticity for Complementary Goods:

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