Premium Chocolates, like Imported Roses, are seen as a luxury rather than a necessity. Although many people want to have or receive these items, they may opt not to buy them unless there is a special occasion or extra money. In 2006, the market for premium chocolates in Canada grew by an impressive 20%, reaching a market size of US$167 million. This substantial growth has led current market players like Rogers Chocolates and Purdys to consider new strategies for expanding their market presence.
Additionally, there is significant interest from big traditional manufacturers such as Hersheys and Cadbury to enter this segment (Zietsma 2007). Rogers Chocolates, a renowned brand in Victoria and British Colombia, has limited brand awareness outside of this area. The newly appointed CEO has set a goal to double or triple sales within ten years. The key factors contributing to success in the premium chocolate market include understanding consumer needs, building brand awareness, offering a diverse product range, and improving competitiveness.
Rogers’s chocolates faces numerous challenges in the midst of intense competition, with a multitude of unproven strategies, both old and new. Furthermore, being a small/medium-sized company, Rogers has limited resources to implement all these strategies. The management’s decision-making is of utmost importance as they strive to effectively handle the company’s strengths and weaknesses while simultaneously addressing the industry’s threats and opportunities.
Porter’s Five Forces Model: Competitive driving forces in the premium chocolate industry
Porter’s “five forces” model is a tool used to assess a firm’s competitive advantage in the market (Thompson, Strickland, Gamble 2010). The chocolate and cocoa industry can leverage this model in order to analyze the competitive landscape. The level of competition within the industry can lead to price wars, advertising battles, introduction of new product lines, and improved customer service.
There are various factors that contribute to increased competition, including the presence of numerous well-matched competitors, a sluggish industry growth rate, a decrease in demand, high fixed or storage costs, minimal switching costs, and aggressive rivals (Thompson, Strickland, and Gamble 2010). In the Canadian market for premium chocolates, competition involves both strong regional brands and a small number of global players such as Godiva, Lindt, Callebaut, and Purdy’s. Despite a projected 2% decline in the overall size of the chocolate industry in Canada, the competition remains fierce.
However, the premium chocolate market was growing at a rate of 20 percent annually (Zietsma 2007). This situation is characterized by less intense competition among competitors, with each area having its own local leader, such as Rogers in Victoria. However, in 2008, Canada and the rest of the world were severely impacted by the economic crisis that originated from the United States. This crisis led to a decline in tourism and a decrease in demand for premium chocolate, particularly from American tourists who are our neighboring border country. As a result, the fierce competition among premium chocolate brands is likely to increase.
According to Thompson, Strickland, Gamble (2010), existing industry members are frequently likely to enter market segments or geographic areas where they currently do not have a market presence. It appears that Hershey’s and Cadburys have been entering the premium chocolate market through acquisitions or upmarket launches, as this segment continues to experience significant growth (Zietsma 2007). The market is currently dominated by a small number of established players who hold significant market shares.
The chocolate industry presents a formidable entry barrier in the form of economy of scale, as the presence of large companies with high production output reduces the threat of new entrants. Furthermore, product differentiation serves as another obstacle for potential entrants. The industry boasts numerous competitors with highly recognizable brand names and loyal customer bases, including Rogers Chocolate. Consequently, a new company would need to invest considerable resources to overcome the reputation and extensive customer base of existing companies.
Threat of Substitutes
Rogers’s chocolate is frequently given as a gift for various occasions such as Christmas, Easter, Halloween, Valentine’s Day, anniversaries, and birthdays. Other gift options during these seasons, such as flowers, jewelry, and stuffed animals, are seen as alternatives. However, these alternatives can only be chosen if the recipient does not solely desire “Chocolate” as their gift. The presence of numerous chocolate brands and a diverse range of seasonal gifts results in a relatively low to moderate level of threat from substitute products in the industry.
However, Rogers Chocolates can reduce the threat by maintaining its local heritage, particularly in its traditional areas like Victoria and British Columbia.
Power of Buyers
If a buyer accounts for a significant portion of a supplier’s sales, they have greater leverage over the supplier. In the case of Rogers’s chocolate, its 11 retail stores contribute 50% of its sales and hold substantial power. Nevertheless, under the previous president Mr. Jim Ralph’s leadership, the company managed to expand its wholesale market to 30%. As a result, they must pay careful attention to their significant wholesale buyer.
The bargaining power of buyers is influenced by several factors, including product differentiation. When a product lacks differentiation, buyers can take advantage of competitor options and lower costs. However, in the premium chocolate market, product differentiation decreases the power of buyers. This is because Rogers has a strong brand identity and loyal customer base, making it challenging for buyers to switch to other brands for their premium chocolate needs. Additionally, as consumers become more health-conscious, their demand for chocolate expands beyond taste alone. Consequently, there is an increasing desire for organic and dark chocolate.
Suppliers’ Power
In the chocolate industry, suppliers have a strong position in negotiations because there are few suppliers and no alternative products. This can harm a company’s profits by raising prices or lowering product quality. As cocoa beans are essential for making chocolate, suppliers face no competition from substitutes. Therefore, the absence of alternatives further enhances the bargaining power of the chocolate industry.
Within the premium chocolate industry, specifically Rogers Chocolate, the impact of low to moderate competitive forces is relatively insignificant. Nevertheless, there exists a significant threat from Hershey’s and Cadburys due to their vast resources and experience. The supplier force is perceived as the weakest since it solely affects costs; moreover, as long as there remains a demand for chocolates, the market will remain substantial. The potential profitability for new entrants external to the industry is limited by high barriers to entry. However, if key players in the chocolate industry such as Hershey’s demonstrate genuine interest in entering the premium chocolate market, it could potentially alter the dynamics.
Drivers of Change
Those competitive forces, individually or collectively, can drive change. Consumer behavior towards health consciousness is another unique driver of change. There is a growing worldwide demand for organic products and dark chocolate. Rogers has responded to this healthy lifestyle by offering non-sugar added chocolate.
Companies that practice good corporate social and environmental responsibility are also associated with a strong image. Therefore, in order to thrive in the market, premium chocolate players must be able to adapt to changes and surpass consumer expectations. This is because brand and quality greatly influence customer purchasing decisions.
Key Success Factor in the premium Chocolates Industry
It is important for the company to recognize that they need to have the necessary features desired by consumers, whether they are purchasing premium chocolate for themselves or as gifts.
Consumers prioritize taste as the primary factor in product selection, followed by packaging, shopping experiences, and price. Rogers Chocolates is highly regarded as one of Canada’s leading chocolate producers, with numerous customers asserting that it offers the finest chocolate they have ever sampled (Customer Review 2010). The retail stores enhance customer satisfaction through pleasant fragrances, a visually appealing environment, and amiable staff. As premium chocolates are frequently given as gifts for personal or corporate occasions, distinctive and captivating packaging is crucial.
Rogers has appealing packaging, and its competitors are making significant efforts to improve their own. Thirty percent of Rogers’ customers consist of wholesale distributors and stores, and the company’s rapport with these customers has been crucial in driving its growing success. Rogers strives to provide competitive prices, exceptional customer service, and prompt inventory management.
Brand Awareness
In 2006, Rogers’ Chocolates held approximately 6% of the Canadian Chocolates market, which was worth $167 million. Consumers are willing to pay a higher price for chocolates of superior quality. However, this may be intimidating for retail and wholesale customers who are unfamiliar with the brand and hesitant to try it. Therefore, it is crucial for chocolate companies to establish a strong brand name and image. While Rogers Chocolates is a well-known local heritage brand in Victoria, it has less recognition throughout the rest of Canada. Customers either have a deep affection for the brand or are completely unaware of its existence.
Diversified Products
“We purchased a variety of chocolate treats from Rogers Shop in Vancouver on October 3, 2009. Our selections included raspberry filling dark chocolate, pistachio and fruits in milk chocolate, a white chocolate bar, a lemon meringue, and a couple of truffle bars. Tom from California shared his review, stating that we may have bought too much chocolate between the two of us. However, he believes that one can never have too much chocolate.” (Customer Review 2010)
To cater to market demand, the company must strive to offer innovative and tasty products that people can choose as their own favorites. Rogers has also addressed the preferences of health-conscious consumers by providing non-sugar chocolates. Furthermore, Rogers is able to serve a diverse customer base through its wide range of product offerings.
Improved Competitive Advantage
Competition has greatly affected Rogers’s business, urging them to continuously seek improvement in various areas. These areas include product innovation, operational and manufacturing processes, marketing and advertising strategies, inventory and distribution management, as well as customer relationship management. To thrive in the competitive market, the company must evaluate their capabilities and effectively utilize them.
The company possesses a robust set of strengths. Rogers Chocolate operates as a small/medium business, therefore, its weaknesses are not yet very detrimental, and the company is currently in a fairly strong position. However, when examining the threats, it is necessary for the company to address its weaknesses, particularly in Branding, Production, and Inventory, in order to maintain sustainability in the business. The opportunity table reveals significant potential for Rogers to grow and expand. Nonetheless, Rogers needs to extend its strengths beyond Victoria, particularly targeting young people, and undoubtedly rectify its weaknesses in order to cater to the expanding market.
Strategies and positioning
Rogers Chocolates is renowned for its top-quality, luxurious chocolate. As stated on their website, Rogers prioritizes the creation of exceptional products and stylish packaging. Despite holding a modest 6% market share in the premium chocolate industry, Rogers offers competitive prices that are slightly lower than Godiva and Callebaut. Individuals seeking high-quality chocolate hold Rogers in high esteem. Their products are crafted with superior ingredients and do not contain any additives.
Rogers’ Chocolates is dedicated to creating and promoting superior products that uphold our century-long reputation for quality and excellence (Rogers Chocolates 2010). We conduct all aspects of our business with integrity, staying true to our proud Canadian heritage. Our objective is to significantly increase total sales within a decade. In order to achieve this, we will primarily focus on raising brand awareness. While Rogers’s products have already proven their superiority, they are currently only available in British Columbia. As a result, it is imperative for the company to expand its market reach by including regions such as East Canada or even overseas.
Rogers has already won the 2010 Olympics Official Chocolates alongside Purdys (Lazarus 2008), which presents an incredible opportunity for national and international awareness. To expand the market, the company is considering factors like licensing, franchising, and partnerships. One idea being considered to develop the wholesale network involves creating a turnkey store-within-a-store setup, allowing wholesale clients with a retail presence (e.g., department stores) to include a mini-Rogers store in their own shop. Additionally, Rogers’s management aims to increase online shopping. These strategies align with the company’s goal to double and triple sales within ten years.
Being a small/medium company, Rogers’s management has limited options for expansion without risking its culture and tradition. Licensing, franchising, and creating store-within-a-store concepts are cheaper alternatives to opening their own retail stores in new areas. However, it raises the question of whether these options align with Rogers’s commitment to providing excellent retail experiences. (source) In early 2009, Parkhill and Rogers’s management decided to prioritize the expansion of the company’s retail network.
Parkhill explains that Rogers will keep focusing on its retail business while also expanding its wholesale channel. However, he emphasizes the importance of carefully selecting partners who align with the company’s brand. He believes that the success of Rogers’ wholesale and online sales stems from the exceptional customer experience provided in their stores, where customers are greeted and offered complimentary samples of their premium chocolates. As Rogers is known for its high-quality chocolates, it is crucial to ensure that the experiences for both shoppers and consumers remain excellent.
If the Brand is being franchised or if a small shop is created at the corner of somebody else’s store, it becomes difficult to control the quality of service and the store ambiances. People not only talk about how good Rogers Chocolate is, but also about their great experiences in Rogers Store. Therefore, the decision to develop Rogers’ own retail is a good one and aligns with its goal and philosophy.
References
- Customer Review 2010, Rogers Chocolate, Available http://www. yelp. ca/biz/rogers-chocolates-vancouver [Accessed 5 June 2010]
- Lazarus 2008, Sweet deal for Purdy’s and Roger’s Chocolates, August edn, Marketing Magazine
- Morrissete 2008, On the case: How sweet is this, really , Financial Post Magazine
- Rogers Chocolate 2010, History, Available: http://www. rogerschocolates. com/history [Accessed 5 June 2010]
- Thompson, Strckland, Gamble 2010, Crafting and Executing Strategy: The Quest for Competitive Advantage. Concepts and Cases, 17th edn, McGraw-Hill Irwin, United States
- Zietsma 2007,Case: Rogers’ Chocolates, Ivey Management Service
