Rogers

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Rogers’ Chocolates Marketing case
ABSTRACT
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. Rogers’ Chocolates is a king in Victoria and well known in British Colombia. Rogers' Chocolates focuses on the premium chocolate market and differentiates itself by delivering award winning quality products at a fair price; this combination creates a good value for its customers. The company is privately held and currently focuses its business in four market areas, direct retail ,online order , wholesale, and sales from a restaurant in Victoria. 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. The past president focused a growth strategy in the wholesale market and current order fulfillment strategy is to give priority to online and mail-order business, followed by wholesale accounts, leaving the retail locations last to be serviced internally. Sales have seasonal swells during the holidays and demand forecasting has been an issue; they have increased inventory to deal with these sales patterns but still encounter out of stock situations. The new president has been given a goal by the board of directors to double or triple the size of the company within 10 years. Keywords: premium chocolate, quality, growth global strategy, brand awareness, brand loyalty.

INTRODUCTION Rogers’ Chocolates

Rogers brand is well respected among those who want high quality chocolate. Rogers’s products have no additives and use high quality ingredients. The brand is very well-established in Victoria and has loyal consumers. Where tradition and quality meet sensational taste. This is Rogers’ Chocolates. The first Rogers’ chocolates were made in 1885 by Charles (Candy) Rogers in the back of his grocery shop in Victoria, B.C. Surprisingly little has changed in our Victorianinspired stores. Their chocolate-filled aromas and the pleasure of selecting hand-wrapped chocolates remain simply irresistible. Exquisite chocolates, beautifully wrapped and ready for giving. Rogers’ Chocolates has something to surprise and delight the chocolate lover in everyone. Rogers’ Chocolates philosophy are honours its time-tested brand by making only premium products, packaging them elegantly, and choosing our retail partners carefully. At Rogers’ Chocolates, we also believe that the quality of our products starts with the procurement and mixing of fine ingredients but extends to the high level of customer service you can expect from all facets of our organization. Eliminating the use of hydrogenated fats and oils, and using natural ingredients whenever possible, has positioned Rogers’ as a leader in the confections industry, providing healthy alternatives to consumers. As quality chocolate continues to gain popularity among health-conscious, educated consumers, Rogers’ products are becoming increasingly revered for their aesthetic appeal, wholesome ingredients, and overall exceptional taste. 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. To grow a market, factors such as Licensing, franchise and partnership is being considered. One idea under consideration for developing the wholesale network and also aim to increase the number of online shopping. However, Rogers’s management can only choose to act on several options while not putting a risk on its culture and tradition.

MAIN ISSUES AND CONCEPTUAL DISCUSSION Competition in Premium Chocolate Industry
According to the analysis of the Rogers` chocolates the company would be adopted the Focused Differentiation Strategy that is based on differentiation-compete in niche market with differentiated products. A wide variety of high-quality, hand-wrapped products are the highlight of the Rogers’ company. The premiere line, Victoria Creams is sold alongside truffles, nuts and chews, almond bark, nut corn and various assortments. In addition to pure milk chocolate, dark chocolate and white chocolate bars, and baking/fondue chocolate blocks, Rogers’ also produces specialty items that include tasty treats like chocolate-covered ginger, caramels, brittles and orange peel. No-sugar-added chocolates are also sold as well as a premium ice cream. So the buyers segments for the company are narrow and company has small segment of loyal customers Moreover the company has the reputation of very quality products. The company heavily relies on using natural ingredients whenever possible. Their chocolates have been

described as “classy, refined, and elegant”, “top-of-the-range” and “unique”. So company positioned itself as a provider of the premium and high quality products in the chocolate industry.

Figure 1 : Type of Competitive
To satisfy the needs of its niche market the company implement the strategy of focused differentiation and the products are handmade and widely accepted in its niche market. But the current problem of the company is that the brand of the company is known only in Victoria and the company should take steps to expand itself and to look for more customers in other areas too. As far as the company`s functional strategies and tactics appear to be consistent with its competitive strategy the financial analysis, the annual cash flow statement and balance sheets show that the company is not getting the targeted revenue. As cost of sales has increased, most notably overhead costs which more than doubled from 2005 to 2006. So its functional strategies and competitive strategies are not entirely consistent with each other. The company is not paying attention toward the new innovation and production of new products that will definitely help the company to expand and increase its brand awareness to other areas. Rogers’ success largely depends on consumer experiences in the retail locations. Given the decreased consumer traffic in the Vancouver area, Rogers’ sales will be impacted dramatically because its retail distribution network is focused primarily in this area. Rogers’ will need to evolve its distribution network to gain market coverage so that decreased consumer traffic in the Vancouver area will not mean the downfall of the company. Through licensing, franchising or partnership opportunities, Rogers’ could expand its market coverage without a large capital output. Currently the performance of the company is not accordance with its potential so management should take steps to expand the company and change its competitive strategy of serving a narrow market to a broad market.

5 Forces Model In The Premium Chocolate Industry
The competition in the premium chocolate industry can be explained by applying the Porters 5 forces model. This model, named after Michael Porter (1979), can be looked upon as a framework to analyze and structure an industry. It is a theoretical tool to elaborate the potential threats but also the chances of a particular industry. Porter mentions

five forces that have an impact on an industry; suppliers, buyers, potential entrant, substitutes and the rivalry among existing firms.

Figure 2 : Five competitive forces by Michael Porter
1. Bargaining 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. In production of premium chocolate the primary raw material is cocoa bean, secondary sugar, and milk 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 2. Bargaining Power of Buyers There are many buyers in the premium chocolate market. Large chains command a lot of power; however, there are also a lot of independent sellers. Since many premium chocolate manufacturers have their own unique selling point and the products are not standardized, buyers cannot easily switch to another manufacturer and get the same product. 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. 3. Threat From Substitutes Some substitute products for premium chocolate could be traditional chocolate and other confectionary products customers could use to satisfy their sweet tooth. Other snack food items may also be considered substitute products. The chocolate industry must compete with numerous substitute products ranging from candies and cookies. Many nonchocolate snacks, such as peanut butter, fruits, yogurt and ice cream are also available. So there is a good variety of substitutes available for the customers that make the threat of substitute products high in the chocolate confectionary industry, especially in the premium segment. 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. 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. 4. Intensity of Rivalry The intensity of rivalry among competitors in an industry can create price wars, advertising battles, new product lines, and higher quality of customer service .Competition in the premium chocolate market consists of strong regional brands with a few larger competitors, such as Godiva and Lindt. The market is growing at 20% annually which suggests less intense rivalry among competitors. Premium chocolates may be more perishable than traditional chocolate, however, with a 6-month shelf life, there is less urgency to sell off products. With high levels of product differentiation, customers are often loyal to a brand which decreases rivalry. 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 5. Threats of New Entrants Entry into the premium chocolate market would require a large capital investment for branding and production facilities. Traditional manufacturers have been moving into the premium chocolate category because of the high category growth and because they have the financial and capital resources. Customers value brand and quality so these can both be seen as barriers to entry for newcomers to the premium chocolate market.

Furthermore, the USFDA redefinition of “chocolate” makes it easier for manufacturers to call their product chocolate. So the threats of new entrants in the chocolate industry are low. The market is difficult for new players to enter, as it is dominated by major international players with a long and established history and success and a huge amount of capital is required to start the business, such as Nestlé’s, 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 . 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 Nestlé’s , 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.

S W O T Analysis
Table 1 : SWOT Analysis of Rogers Chocolates

Intern al Strengths

       

Well established and reputable Brand Experienced Management Team Rich history and tradition in Canada Award winning recognition Revenues Loyal customers Devoted Employees and Passionate Employees Quality products & hand wrapped

     Weaknesses     

Production process - not efficient and no measuring capabilities Demand forecasting - difficult due to seasonality of sales Management’s and Employee’s resistance to change Management team conflicts Packaging Lack of brand image and customer awareness Cost of setting up and cleaning equipment Inventory Management - Out of Stock and Over stock production planning issues Wholesale Online Sales only 4%

Exter nal

   Opportunities      

Growth in European and Asian markets Retail and Online expansion Increased production capacity Trends and shifts in consumer confectionary market 2010 Olympics Joint partnerships - NHL, MLB, NBA, etc. Kiosks in airports Second shift possibilities Organic and/or Fair Trade Line

Threatsats

    

Economy and demand fluctuations Competitors :Godiva - Bernard Callebaut - Lindt
- Purdy’s - Cadbury and Hershey

Consumer Traffic - decrease in tourism Environmental concerns and human rights concerns expressed by some consumers Governmental FDA rules “redefining” chocolate
Easy entry of new firms



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 major factors of success come together at once – a great product that everyone wants and loves, solid science to provide validity, pent-up market demand for the product, an experienced company with the right infrastructure to meet that demand, and an excited and motivated group of people ready to bring that product to the marketplace. The following are the success factors in the premium chocolates industry:
1. Understanding the Consumer’s Needs

The company must understand that they must have the features required by the consumers. The customers of premium chocolate industry are very quality conscious and they are not quantity conscious. The high graded and quality chocolate products are one of the most important success factors in this industry. All the premium chocolate manufacturers should give importance to the high quality of products and use high quality ingredients in the manufacturing of chocolates products to attract and retain the customers. Because the customers of premium chocolate industry pay high prices for the products so they don’t compromise on the quality of the product.With this high quality of products recognition, it can be expected that if the company delivers one quality product, it is capable of delivering others. Having such a strong sense of quality associated with products, the companies have seen a great success all across their product lines.
2. Identifying Target Market

Rogers target market is both end users and consumers who buy chocolates to indulge themselves or to give as a gift. Rogers target buyers are new and existing chocolate buyers that love quality chocolates. Demographics tend to be mainly women ages 25-55 years old with middle to high household income of $50,000 up ward. They generally have college education and are professionals, white collar workers, managers, or owners. The majority will be frequent travelers and internet users. A niche differentiator strategy will be employed to differentiate the “new Rogers brand” image in Eastern Canada and US. To drive internet sales, Rogers will promote the website benefits of convenience and fast delivery. More attention to Rogers retail shops will be pursued in order to get that “exclusivity feel”.
3. Brand Awareness

Another most important success factor in the premium chocolate industry is the strong brand name of the company and its brand recognition. When a consumer goes to a store to purchase products they are most likely going to pick up products those have strong brand names. Because positioning of the image of the product in the mind of people as a good brand very important for the success of the company 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. 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.
4. Diversified Products

The third key success factor for premium chocolate industry is the ability to invent new products and keep existing customers. When the company decides to release a new product,

the company should spend numerous hours (and dollars) to ensure that the product will not only taste fantastically, but it will also be readily accepted into the market. So that these products were all released within a similar time frame, and all met a great success. With such a broad range of widely known products, the company should be able to retain its existing customers, and gain new ones via new product released. 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. 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 alarge customer segment
5. Human Resources Management

The management of the employees working in any industry is the key success factor for the success of the industry. The premium chocolate industry is very labor intensive industry so it requires quality skills and practices not only at lower level but also at upper level of management. Because the management and its attitude with the workers is very important and good attitude always boost up the morale of the workers and their effectiveness and efficiency at work place is increased. So the good HR practices in chocolate premium industry are a factor to success as the employee satisfaction increases and the level of their devotion and commitment rises.
6. Enhanced Competitiveness

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 too beserve their capabilities and make the most of them in order to stay and win in the competition. 7. Marketing and distribution It is very important for the manufacturers to make marketing, segmentation, targeting and distribution strategies for their products because the expensive nature of the products. The manufacturers should identify their segments before targeting them, whether and how they should approach to the premium chocolate customers (Chocolate Hedonists (selfindulgers), Young Chic Gift Givers (personal gifts and business gifts) or organic chocolate consumers.). 8. Creative Strategies and positioning The development of the creative strategies is also very important success factor in the premium chocolate industry. The manufacturers should carefully make and then implement the creative strategies for their products. They should make the advertising strategies both

for new user and existing customers, and a media plan should also be made. This will help the manufacturers to make the people aware of their products and strengthen their brand image and ultimately it will have positive effect on their business. 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. And Rogers’ chocolate also have a lot competitors with low price and low quality such as Carbury, Harsley’s or Delfi.

CONCLUSION
After the analysis of the company it is obvious that the company has good quality products and strong foundation but the company is only known to the Victoria and outside the Victoria the people are not aware of its name. So management should take the steps to expand the company to other areas through broad differentiating strategy. Therefore, the decision of developing Rogers own retail is good decision and consistent with its goal and philosophy Rogers company should also use the changing technology to reduce the cost of production and increase the efficiency in production.





Rogers Premium chocolate will seek out partnerships or collaborators and reach consumers on a global level to generate sales. Increase online sales , also increase brand awareness via internet. Rogers will re- structure its management team to a more efficient & cohesive team Rebrand their traditional images to inspire new client base to try their products. Restructure retail shops with lower contribution margins Create retail experience around rich tradition and history, production and quality. Deliver unique retail experience Keep existing and loyal customers satisfied with customer rewards and promotions Promote, Promote, Promote: Chocolate of the month clubs, special occasion gifts, or made chocolate base on personal order.

       

  

Continue to fulfill its commitment by participating in recycling and reducing emissions as part of a commitment to sustainability. Roger’s good corporate social practices will also focus on human rights, packaging, procurement, and concerns of labor and other environmental concerns are threat for the company. Rogers Premium chocolate must concerned the main threat is the economic crisis in the world. The economies of the most countries are suffered badly the inflation rose up and a result of which the customers switched to cheaper products. Rogers Premium chocolate must awared about politic / regulation such as The US-FDA redefinition of the chocolate opens the doors for the cheaper manufacturers to compete with bigger companies.





Another condition that affects the power of buyers is product differentiation. Rogers brand must keep well respected about high quality chocolate. Rogers’s products have no additives and use high quality ingredients Premium chocolate manufacturers such as Rogers will be competing against lower quality chocolates in some cases as consumers are more budget conscious gain buyers/end users of fine chocolates especially in a down economy The suppliers of the chocolate and cocoa industry have significant bargaining power over the industry because of the limited number of these suppliers.
The strongest competitive force in the premium chocolate industry is the threat of substitutes and the weakest force is the threat of new entrants as this industry requires a huge amount of capital investment.







 The chocolate and cocoa industry must compete with numerous substitute products that can
threaten the industry’s profitability. Another significant category of substitutes is snacks such as peanut butter, fruits, potato chips, ice cream, etc.


Rogers’ also must concern another condition that increases the intensity of rivalry among competitors is if the industry has high fixed or storage costs.

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