The Day Chocolate Case Report Essay Example for Free

The Day Chocolate Case Report Essay Introduction The following report discusses the company named the Day Chocolate company. In this report we will take a close look to the case of this company. The Day Chocolate company is different than other chocolate companies as it pays attention to the ones that are making the chocolate: the farmers. The day chocolate company buys all cocoa at Fair trade prices, which means that the farmers receive a guaranteed minimum price for their cocoa. One of the goals of the company is to bring Fair-trade chocolate into the mainstream market but also to produce this chocolate for an affordable price and with a high quality. In this days customers are paying more and more attention to the wellness of the farmers. The day chocolate company is responding well to this need of the consumers. By taking a substantial market share, and paying fare prices to the farmers, often living of just a few dollars a week or even less, they try to help the farmers. The origin of the day chocolate company lies in the United Kingdom. In 1997, together with NGO Twin Trading and The Body Shop, Kupua Kooko sets up the day chocolate company. By introducing the Divine Fair trade milk chocolate bar into the UK confectionary market, the first farmer owned Fair trade chocolate bar is available for the consumer. In a short time the company gained a considerable market share. In the upcoming chapters we will explain why this Fair-trade chocolate was such a success. The source of this success can be found by looking at the segment that Divine is operating in and looking at the trends in this segment. But we are also researching how Devine became such a strong brand and we are taking a close look at the strengths, weaknesses, opportunities and threats of the company. Furthermore we are going to investigate the opportunities the Day Chocolate company has to expand their business across the domestic borders, here we will also search for the country which is most appropriate for the Day Chocolate company to settle. ? Consumer segment Day chocolate company To make a company more compatible you first have to decide who or what type of customer the company will serve. The best way to do this is to divide the market into segments of consumers, a process called market segmentation. After this is done, it is important to make the decision on which segments the company is going to focus. The day chocolate company is focusing on two main target groups. For each of these target groups they developed a brand, Devine and Dubble. The first target group the day chocolate company is focusing on is a group called ‘concerned consumers’. The consumers who fall into this group are paying extra attention to the environment and human rights. Therefore Fair trade products are developed to serve the needs of this type of consumers. The day chocolate company developed a Fair trade brand for this group, called ‘Devine’. In 1998 the company launched the Fair Trade chocolate bar on the market in the UK. The day chocolate company was one of the first companies to launch a Fair Trade chocolate bar. The price of this chocolate bar is slightly higher than the price of a normal chocolate bar, as the day chocolate company is paying the farmers a fair price for their cocoa. But the consumer finds human rights that important, that they are willing to pay that little extra for their chocolate. A third of all UK consumers have now recognized the Fair trade mark. The second target group the day chocolate company decided to focus on is children. In the beginning of 2000, the company announced a competition where children could come up with a new Fair trade chocolate brand, which would be especially developed for children. In October 2000 the brand Dubble was launched. Dubble is a crunchy Fair trade chocolate bar available for a lower price, this way children can buy the chocolate bar themselves. The day chocolate company also developed a website which is easily accessible for children, they can play games on it and read about Fair trade products. The brands Devine and Dubble are becoming more and more popular. They are for sale in all the top supermarkets in the United Kingdom. But the company also supplies chocolate for own label products in the Co-op and Starbucks. Up till now, the day chocolate company only sold its products within the UK and the USA Day chocolates strengths and weaknesses. Competitive advantage. A very influential factor for future success of the company as well as for the products it is selling it is called a competitive advantage. The competitive advantage can result either from cost advantage, pricing your product lower than that of other companies, or differentiation advantage, having a unique or a better quality product than other companies. Divine chocolate targets the second category, making use the differentiation advantage. Divine Chocolate is the first ever Fair-trade chocolate bar aimed at the mass market’ according to their own statement. The fair trade logo is what makes them stand out from other chocolate companies. By being widely available and well-priced, they make fare trade chocolate available for an ever/always growing public. Strengths and weaknesses One of the biggest strengths of how the Divine chocolate company handles their business is how they approach fair-trade. Besides paying $1600 per tonne of cacao, with the world price being as low as a $1000 per tonne, Divine pays a social premium of $150 dollars per tonne. This premium is being invested in local social projects, sustainable development of the area and better farming. This increases the wellbeing of the cacao planters, but also has a positive influence on Divine Chocolate. By investing in farming and social development, the cacao will be of higher quality. This approach also creates positive publicity for the company, and gives the buyers the feeling that they add to the wellbeing and development of cacao farmers and third world countries in general. An other strength of Divine Chocolate is their availability. By being the one of the biggest, Divine creates economies of scale. Because of this, the company can market chocolate for a lower price, making the company’s products available and affordable to more customers. Also, by being sold in places such as Starbucks, which has a very positive and well-known brand image, and being backed by charity organizations, Divine chocolate has become a reliable and well-known brand. Moving forward to threats and weaknesses the Day Company has a vulnerable reputation by selling the company’s products to very critic customers. The company should pay a lot of attention to whether the farmers are still receiving a fair price, and pay attention to their overall wellbeing. Next to this, they rely heavily on cacao supplies from Ghana, a country that is not situated in the most stable of regions, with civil wars and economic instabilities in the surrounding countries. If there are major issues to be dealt with, there is also a problem of ownership. Being owned and managed by three parties (Kuapa Kokoo, Twin Trading and Oikocredit), all having a big share in the company, it is important that they remain uniform in how to operate the company. ? Customer equity Customer equity is a way of measuring the performance of a company by customer loyalty. As Kotler and Armstrong state: ‘the total combined discounted customer lifetime values of all of the company’s customers (†¦) the more loyal the companies profitable customers, the higher the firms customer equity. The Day Chocolate is actively binding with new customers and keeping in touch with them through social media like twitter and Facebook. They also have an annual poetry contest. By doing this, they become a lifestyle brand, and increase their customer equity Marketing mix The marketing mix is a theory based on four P’s, Product, Price, Place and Promotion. The product of Day Chocolate is, obviously, chocolate. They sell many different flavors of chocolate and special Christmas and Eastern products. All of these products have a fair-trade trademark, which means that Day Chocolate has paid a fair price for the cacao. The price of a Divine Chocolate bar starts at around 75p for a 45 gram milk chocolate bar. This price is about the same as comparable with other fair-trade products in the market. The price is significantly higher than non-fair-trade products. Divine Chocolate also sells gift baskets on their own site, running from 10 to 40 pounds. The raw product, cacao beans, is imported from Ghana. Those beans are then shipped to America and the UK, where the cacao is turned into chocolate. Most of the sales of the finished chocolate bars is in the domestic UK market. The products are sold in all the large retailers and Starbucks. Co-op sells the Chocolate under their own label. The product gets promoted in many ways. Day Chocolate gets a lot of free publicity by simply being a fair-trade product. The positive things they do for the Ghanaian farmers have caused a lot of good, and free, publicity. Next to this, there is an annual poetry contest. Day Chocolate also advertises and samples new products to familiarize the public with there products. And last, Twitter and Facebook are extensively used to keep in touch with customers. Chocolate market trends In order to better understand the confectionary industry and mostly the chocolate market it is important that we take into consideration the general chocolate market trends from a few different national markets as well as from the global chocolate market. In the end of this section, chocolate market threats and opportunities will be examined in order to help build on the final section of this report, namely market expansion. Starting with USA, where Divine is present since 2006 only as a wholesaler, the following market trends have been distinguished: †¢Even with recession slowing down markets, chocolate sales have increased by 3% reaching 17$ bil in 2009. It is expected that the U. S. chocolate market will exceed 19$ bil in 2014. †¢Americans appreciate more the experience provided by chocolate than the simple consumption of it, chocolatiers making innovation one of their main goals. †¢Chocolate is seen as an affordable indulgence by the American consumers. Moving forward to the UK, where Divine satisfies customer taste for chocolate since 1997, similar market trends are recognized: †¢Chocolate represents the top snack choice for UK consumers and it is bought by 50% of the population †¢Consumer’s level of concernment regarding the provenience of the cocoa and company’s ethics has increased †¢The more affluent middle-class parents avoid buying chocolate for their children †¢UK chocolate consumers tend to buy a chocolate flavor for longer periods of time than trying new ones †¢About 40% of the consumers buy less chocolate for health reasons. When talking about the global chocolate market that seems to be growing steadily, m.uch of the growth is attributed to developing regions such as Eastern Europe, Russia, China and India. Moreover, India is suggested as turning out to be the most lucrative place of investment into the chocolate market by 2014. In the already developed world, the growth comes from product differentiation, niche sectors and Fairtrade products. Firms from the chocolate industry understand how much innovation counts for sustainability and huge investments are made to innovate chocolate products. Another interesting trend is represented by the per capita consumption of chocolate that tends to be slightly higher in Nordic and Scandinavian Countries than in other European countries. Opportunities Threats It seems that most of the opportunities and threats that the chocolate market is confronted with have much to do with consumer perception of the product. Firstly, regarding opportunities, for some consumers chocolate represents the ultimate comfort food, even being considered in different studies that chocolate works as an aphrodisiac or can be helpful against depression. Another opportunity is represented by the meaning of chocolate when it is offered as a gift. Many anniversaries, holidays, birthdays act as opportunities for chocolate to be bought and given as a gift. Secondly, moving to threats, chocolate is seen by some potential consumers as being unhealthy by making them gain weight and their children have an anxious behavior. Moreover, consumers question the ethics of the firm producing chocolate and provenience of the cocoa beans. ? Day Chocolate marketing recommendation. After discussing Day Chocolate brand’s strength and weaknesses, market opportunities and threats, it is conclusive that Day Chocolate has a bright future ahead by continuing to deliver satisfaction to its consumers through same products, but opportunities of becoming even more successful should not be overlooked. Firstly, the consumer is becoming more aware of the properties of the product, from the cocoa beans used for making the chocolate to the nutrition figures on the back of the wrapping and to the impact the buying of a chocolate bar, for example, would have on the land of provenience of the beans. Day Chocolate gives the consumer the opportunity of participating to developing of such areas as Ghana with the help of Fairtrade demonstrating that the company understands consumer concerns. By continuing to provide a means of consumer participation to Fairtrade and development of third world countries, Day Chocolate will definitely satisfy the niche of concerned consumers. Secondly, regarding the consumers concerned with the health issue of chocolate, Day Chocolate could easily promote a dark chocolate or a rice chocolate product relating it to the health benefits these types of chocolate present. This way the consumers will feel even more that their concerns are listened to and cared for, Day Chocolate improving customer relationship. Thirdly, when talking about the countries that present a considerable market increase in the latest periods of time, Russia, India, China, even Eastern Europe should be definitely considered as potential market targets and further research should be undertaken in order to see how profitable it would be to expand into one or more of these markets. Moreover, many economists argue that India will prove to be the most lucrative chocolate market by 2014. The matter of distance, cultural as well as psychic should not be overlooked when considering the markets mentioned above, even if the numbers are presenting tempting opportunities for Day Chocolate. The company did not expand so many times that necessary experience could be attributed to the firm’s advantages, a factor that makes us look for expansion to a closer, culturally as well as geographically, area in Europe. Moreover, when considering expansion as an alternative, significant data show that Scandinavian countries Germany have a great chocolate market that is growing annually. In conclusion, the Day Chocolate company’s products offer great satisfaction for consumers concerned with fair trading and give them the opportunity of participating to the development of the lands of provenience for the cocoa beans. For consumers concerned with health issues new, health focused products could be marketed. After considering new products, new markets have also been considered. Alternatives are present both in Europe as well as outside Europe, but only the ones closer to the home market would make most economical and managerial sense. Expansion. In the past years since the founding of the Devine Chocolate, the company has shown to be successful, obtaining a large market share, a excellent brand image, big profits, good business strategy, and the company’s success is still growing. The company has a good market position and it is not likely to be having large problems in the short term, as well as long term orientation. However, it is wise to keep on searching for opportunities to become even more successful in the future. Therefore a tempting and logical step would be to expand the company’s business across the domestic market borders. To make the expansion a success, the risk of failure should be low. Therefore the market should behave similar to the English chocolate market so that cultural distance does not represent too much of an impediment. Day Chocolate needs to search for such a market because the key of the company’s success is the fact that the English chocolate market consists of a large market for luxury chocolate and product awareness such as the Fair-Trade. Besides that, the flavor of the chocolate was adapted to the taste of the English consumers. This means looking for a market where consumers are willing to pay a relatively high price for luxury chocolate products, and have high product awareness. Studies by the International Cocoa Organization (ICCO) have shown that the most chocolate is consumed by the north-western European countries and the Scandinavian countries. Below you find a list of the 15 countries with the highest chocolate consumption per person in 2005. Germany †¦ 11. 12 kilograms of chocolate per person (up 7. 8% from 2002), Belgium †¦ 11. 03 kgs (up 24. 2%), Switzerland †¦ 10. 74 kgs (down 1. 7%), United Kingdom †¦ 10. 22 kgs (up 2%), Austria †¦ 9. 43 kgs (up 18. 3%), Norway †¦ 8. 53 kgs (up 3. 1%), Denmark †¦ 7. 74 kgs (down 16. 3%), France †¦ 6. 78 kgs (down 2. 6%), Finland †¦ 6. 77 kgs (up 3. 7%), Sweden †¦ 6. 76 kgs (down 17. 1%), United States †¦ 5. 58 kgs (up 4. 1%), Australia †¦ 5. 31 kgs (up 22. 1%), Italy †¦ 4. 26 kgs (up 8. 1%), Canada †¦ 3. 90 kgs (no change), Poland †¦ 3. 67 kgs (up 11. 2%). The United States is the biggest chocolate market worldwide, however the facts mentioned above shows us that the consumption per person is very low. Besides the average consumption, we should keep in mind that this is the very first expansion of the company. It would not be wise to start expanding in the largest market in the world as the first expansion. The same goes for Russia, China and India. Those markets have very high potential but just like the U. S. Expanding to one of these countries has a very high risk because huge investments will be needed and when the expansion turns out the be unsuccessful the results will be far more dramatic than in case of an expansion in a smaller country, in northern Europe for instance. Besides those risk and consumption reasons, expanding in northern Europe first would be wise because those markets are similar in customer taste to the U. K. market. The northern European countries have a strong and stable economy so the consumers are willing to pay more for a better product. Furthermore, these consumers generally have a high level of products awareness, Day Chocolate would definitely benefit from this because of its brand image and Fair-Trade label. Next to the market significance, also the cultures are not very different. According to the cultural dimensions study by Geert Hofstede the cultural difference between for instance, the U. K. and Germany, is very low. Thanks to this low level of cultural distance it is easier for the company to sell the products, because advertising campaigns do not have to be totally different, and overall procedures will be smoother than in a country with a totally different culture. This also stimulates to expand in northern European countries because the chance of success is proven to be high, thanks to both cultural, as well as market significance. Looking at the taste of the consumers, expanding in Northern Europe would also be a good thing to do because the general taste of the consumers turns out to look very much the same as the taste of the U. K. consumers according to a study by the ICCO. When choosing one single country to be the first one to expand to, we would advice to start in Germany. There are several reasons why Germany would be a good country to start with. First of all, the German consumers are wealthy and are willing to pay extra money for better quality products and have a high level of product awareness. Next to that, the taste of the German consumers corresponds a lot to the U. K. consumer taste. Furthermore, there is a very low level of cultural distance, which makes it easier to market the products. Finally, German chocolate market is the biggest of Europe, however it is not too big for Devine Chocolate to expand to this country because it is not much bigger than the English one. And this expansion will succeed other northern European countries would be very easy to expand to. All these reason make us conclude that German is the ideal country to expand towards. ? Conclusion When looking back at all the different components of the company that we have examined there are several conclusions than can be drawn. First of all there are two well indentified target groups which the Day Chocolate company is aiming at. In the case of Devine chocolate it are ‘concerned’ consumers who are willing to pay more for a better product and have a high level of product awareness. The second target group, of Dubble, are kids. When looking at the growth of the global chocolate market and the forecasted growth of the market, the future is looking good for the Day Chocolate Company. However the number of competitors in the market segment of high-quality ‘fair’ chocolate products is going to rise in the upcoming years, therefore expansion would be a smart move. Also product diversification would be a smart move. The chocolate market suffers under the ‘health-issue’. Therefore other, healthier products need to be developed. The brand image of the company is excellent at the moment, but in the future large numbers of companies are going to try to copy this. Therefore it is extremely important for Day Chocolate to keep on promoting itself as product aware company, and it should emphasize on its help towards the farmers and their local projects. The company should expand outside of the U. K. and Germany would be the most appropriate country to start with. The market is big but not too big for Day Chocolate. The consumers are willing to pay extra for good products and have a high level of product awareness and their taste is very much the same as the English taste. Furthermore, the cultural distance is low and the geographical distance is small. All these reasons make Germany an ideal country to start expanding the Day Chocolate Company outside of the U. K.