Premium Chocolates are like Imported Roses which not consider necessities for one life. People love to have or get one of those products. However, if there isn’t a special occasion or surplus cash, some people will not buy that unnecessary stuff. In Canada, premium chocolates were growing at 20 percent annually and the Canadian market size for Chocolates was US$ 167 million in 2006. An attractive growth from premium chocolates makes the current player like Rogers Chocolates, Purdys and others are thinking new strategies to expand market.
In addition, some big traditional manufacturers like Hersheys and Cadbury are also very interested and keen to enter this segment (Zietsma 2007). Rogers Chocolates is a king in Victoria and well known in British Colombia. However, outside this area the brand awareness is still low. The new appointed CEO is being targeted to double or triple Sales in ten years. The key successes in premium chocolates are: understand the consumer’s needs, brand awareness, diversified products and enhanced competitiveness.
There are many challenges for Rogers’s chocolates to grow in this ever-growing competition, and there are many old and new strategies that haven’t been proven effectively. Moreover, Rogers is small/medium Company that has limited resources to apply all those strategies. The management decision-making will be very crucial to manage its strength and weakness while at the same time; they have to overcome the threat and opportunities in the industry.
Competitive driving forces in the premium chocolate industry Porter’s Five Forces Model
Porter’s “five forces” model uses five competitive forces that determine a particular firm’s capability to compete (Thompson, Strickland, Gamble 2010). The chocolate and cocoa industry can use the “five forces” model as an analytical tool to determine the competitive market. The intensity of rivalry among competitors in an industry can create price wars, advertising battles, new product lines, and higher quality of customer service.
There are many circumstances that intensify rivalry which some of them are as follows: many balanced competitors, a slow growing industry, demands falls, high fixed or storage costs, little switching costs, aggressive competitors and many other circumstances (Thompson, Strickland, and Gamble 2010). Premium Chocolate competition in Canada involves strong regional brands and few global players such as Godiva, Lindt, Callebaut, and Purdy’s. Even though The Canadian market size of chocolates industry as a whole had been falling (2 % grow projected).
However, the premium chocolate market was growing at 20 percent annually (Zietsma 2007). That situation considers less intense rivalry among competitors; moreover every area has their own local king like Rogers in Victoria. Nevertheless, in 2008, Global economy was severely hit by the crisis that originated from the United States and quickly spread to the whole world including Canada. Premium chocolate majority consumers in Canada come from tourists especially Americans as bordering neighbour. When the tourist’s number drops and the demand for premium chocolate also falls, the fierce rivalry will increase .
Threat of new entrants Frequently, existing industry members are often strong candidates to enter market segments or geographic areas where they currently do not have a market presence (Thompson, Strickland, Gamble 2010). Apparently, Hershey’s and Cadburys have been moving into the premium chocolate market through acquisitions or up market launches since this segment still posses high percentage of growth (Zietsma 2007). The market is only control by few large and old players which occupy significant market shares.
The chocolate industry has a significant economy of scale entry barrier because large companies exist in the industry that has high production output and it reduces the threat of entrants. In addition to economy of scale, product differentiation is another entry barrier in the chocolate. There are many competitors in the industry that have remarkably identifiable brand names and customer loyalty like Rogers Chocolate itself. New company must increase its spending to overcome the reputation and large customer base of the existing companies.
Threat of Substitutes
Rogers’s chocolate is often used as gift during numerous seasons and celebrations including Christmas, Easter, Halloween, Valentine’s Day, anniversaries and birthdays. Other types of gifts during these seasons are viewed as substitute products. These products are flowers, jewelry and stuffed animals. All of these products can be purchased instead of Rogers’s chocolate unless they just want only ‘Chocolate’ as gifts. Many chocolate brands and a wide variety of seasonal gifts make the threat of substitute products is considered low to moderate in this industry.
However, if Rogers Chocolates can maintain its local heritage especially in its traditional area like Victoria and British Colombia then the threat for Rogers can be minimized.
Power of Buyers
If a buyer represents a large percentage of the supplier’s sales, the buyer has more bargaining power over the supplier. Rogers’s chocolate 50% of sales is contributed from its 11 retail stores which is a strong one. However, since the previous president Mr. Jim Ralph had grown its wholesale market up to 30% thus, they have to take a good care of its big wholesale buyer.
Another condition that affects the power of buyers is product differentiation. If the product is undifferentiated, the buyer has the power to play competitors against each other and reduce the cost. The premium chocolate has a differentiated product, which reduces the power of buyers. Rogers have brand identification and customer loyalty, which makes it hard for buyers especially the loyal ones not to consume Rogers for their premium chocolate consumption Today, buyers demanding chocolate more than just a taste, they becoming more health conscious therefore the demand for organic chocolate and dark chocolate are growing.
Power of Suppliers
The bargaining power of suppliers is a competitive force that can diminish a firm’s profitability by raising prices or reducing the quality of the supplier’s product. The suppliers of the chocolate industry have significant bargaining power over the industry because of the limited suppliers. In addition the supplier groups’ bargaining power increases if there are no substitute products. Because the cocoa bean is a required ingredient in chocolate the suppliers do not have any substitute products for which they must compete. This lack of substitutes increases the bargaining power of the chocolate industry
The strongest Competitive Forces From the five competitive forces, they are relatively low to moderate in affecting premium chocolate industry especially Rogers Chocolate. However, the presence of Hershey’s and Cadburys in the premium chocolate market will cause the strongest threat as they have enormous resources and experiences. The weakest forces should be the supplier as they can only affect the cost thus as long as people still love chocolates then the market is still big. The potential profitability of new entrants from outside industry is low since the barrier of entry for this industry is very high. However, it will be a different story if those big guys in the chocolate industry like Hershey’s are very serious entering this premium chocolate market as happening lately.
Drivers of Change
Those competitive forces as explained above can be a driver of change either individually or collectively. Another unique driver of change is consumer behavior towards health consciousness. Today, the demand for organic products and dark chocolate are growing worldwide. Rogers has responded well to this healthy lifestyle by offering non-sugar added chocolate.
People also put strong image to the company that practice good corporate social and environment responsibility. Therefore, the premium chocolate players that will remain in the market are only those who could ride the changes and rise above the expectation of consumers because brand and quality play a significant role in customer purchase decision.
Key Success Factor in the premium Chocolates Industry
The company must understand that they must have the features required by the consumers. For premium chocolate consumers, their reasons in buying are for themselves or for gifts.
The first thing in the consumer mind for the products is the taste, and then packaging, shopping experiences, and the price. Rogers Chocolates has earned a reputation as one of Canada’s premiere chocolate makers and many consumers stating that Rogers’ is one of the best chocolate they have ever tasted (Customer Review 2010). The retail stores create a unique costumer experience with the aromas and image of the store and one of the friendliest staff. Since the premium chocolates serve as a gift either individually or as corporate gifts in special occasion then their packaging need to be unique and attractive.
The Rogers packaging are appealing and other competitors are trying very hard to improve theirs. Another 30 percent of Rogers’s costumers are wholesale distributors and stores. The relationship that Rogers maintains with these customers has been essential to the growing success of the company. They have to strive to provide competitive price, great customer service and inventory in a timely manner.
Rogers’ Chocolates had a brand share of approximately 6% out of $167 million Canadian Chocolates market in 2006. Consumer pay premium price for premium chocolates and this fact can be looked intimidating to the retail and wholesale customers who are unaware of the brand and unwilling to try it. Therefore, the chocolate’s companies need to have a strong brand name and brand image. Rogers Chocolates’ brand is iconic and local heritage in Victoria but less known in the rest of Canada. Either customers love the brand or completely unknown.
“We bought raspberry filling dark chocolate, pistachio and fruits in milk chocolate, a white chocolate bar and a lemon meringues and couple of truffle bars. Did we buy too much chocolate between the 2 of us? Nonsense, one can never have too much chocolate. ” The review above came from Tom, California who visited Rogers Shop in Vancouver on October 3, 2009 (Customer Review 2010).
People love to choose their own selection and favourites. The company has to strive to provide innovative and delicious products to meet the market demand. Rogers also has addressed the health conscious consumer by provide non-sugar chocolates. Rogers can offer a great breadth of products that enables the company to reach a large customer segment
Increased marketplace competition has significantly given an impact in Rogers’s business and as a result, Rogers must continuously seek for areas for improvement in order to enhance competitiveness against other competitor in the market. Improving weakness could be done in terms of product innovation, operational and manufacturing, marketing, advertising and promotion, inventory and distribution, and customer relationship. The company has to observe their capabilities and make the most of them in order to stay and win in the competition.
The company has a strong set of strength. Rogers Chocolate is small/medium business thus its weaknesses still not very damaging and the company situated in fairly strong position. However, looking at the threats, the company needs to repair its weakness especially in Branding, Production and Inventory in order to sustain in the business. The opportunity table shows great opportunity for Rogers to grow and expand. However, Rogers needs to expand its strength beyond outside Victoria especially towards young people and definitely repair the weaknesses to cater the growing market.
Strategies and positioning
Rogers Chocolates positioned as High quality – premium price Chocolate. As stated in the company website, Rogers’s philosophy is making only premium products and packaging elegantly. In the premium Chocolate market, Rogers’s chocolates control only 6% and price the products in high price point but still competitive and even slightly lower then Godiva and Callebaut. High Quality Rogers Callebaut Purdy’s Godiva Lindt Low Price Cadbury Hersheys High Price Low Quality Rogers brand is well respected among those who want high quality chocolate. Rogers’s products have no additives and use high quality ingredients.
Rogers’ Chocolates is committed in producing and marketing fine products which reflect and maintain our reputation of quality and excellence established for over a century. All aspects of our business will be conducted with honesty and integrity, upholding our proud Canadian tradition. (Rogers Chocolates 2010) GOAL: “To double or triple total sales within 10 years” Management’s Strategy Selection Based on Roger’s goal of doubling or tripling total sales within 10 years, then the main strategy will be increasing brand awareness. Rogers’s products are already proven superior despite their distribution which circulates mainly in British Colombia area, thus company has to expand its market range to greater area and to East Canada or overseas.
Rogers has already won the 2010 Olympics Official Chocolates together with Purdys (Lazarus 2008) which is a tremendous opportunity to create awareness nationally and internationally. To grow a market, factors such as Licensing, franchise and partnership is being considered. One idea under consideration for developing the wholesale network was the creation of a turnkey store-within-a-store setup that would allow wholesale clients with a retail presence — such as department stores to add a mini-Rogers store in their shop. Rogers’s management also aim to increase the number of online shopping. Those strategies are consistent with Rogers’s goal to increase the sales by double and triple in ten years.
However, being a small/medium company, Rogers’s management can only choose to act on several options while not putting a risk on its culture and tradition. Licensing, franchising and create store-within-a-store is a cheaper options to expand the market compare to open its own retail stores in the new areas however does it really appropriate to Rogers excellent retail experiences (source)s together with Purdys Conclusion In early 2009, Parkhill and Rogers’ management chose to focus on expanding the company’s retail network.
Parkhill says that Rogers will also continue to develop its wholesale channel, but will be selective in choosing partners who fit the company’s brand. “Our foundation is retail,” he says. “It’s the ‘Wow! experience that customers get when they walk into our stores, are greeted and are handed a free sample of our chocolates. From this customer experience, success comes in other things that we do such as wholesale and online sales. ” Roger is high quality premium chocolate thus the experiences for shop and consumes Rogers chocolate has to be excellent as well.
If the Brand is being franchised or create a small shop at the corner of somebody else store then the quality of service and the store ambiances can not be controlled. People not only say about how good Rogers Chocolate was but also their great experiences in Rogers Store. Therefore, the decision of developing Rogers own retail is good decision and consistent with its goal and philosophy.
- 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