Tutorial 6 - Montreaux Chocolate

Strategic Marketing – SUMMER SCHOOL 2014 1

Are Americans ready for dark chocolate?

Tutorial 6: Montreaux Chocolate

© Imperial College Business School

The Extended Marketing Mix

4 + 3 = 7



Service vs. Product



And innovation diffusion

Product Life Cycle



• Assessing ideas: Risk vs. Return

Where do good ideas come from?

New Products and New ideas


https://www.youtube.com/watch?v=NugRZGDbPFU


CASE INTRODUCTION

What do you think about the case?

What are the important pieces of information?

What are the important issues?

What are Raymond’s expectations of Torres?


• $54.4 billion in sales (6.32% profit)• Culture of innovation and NPD• Exclusive rights purchased from Montreaux Chocolate

Company in June 2011– NPD delegated to Consumer Foods Group

• Learning from original Swiss manufacturers– Swiss Engineer assists Andrea’s team for 2 years

• Targets by end 2015:– National distribution– $115 MM in annual sales– 0.60% market share

Apollo & The Chocolate Factory



• Chocolate = 52.6% of 35B+ confectionary market – $17,664 US chocolate sales

• Annual growth of demand at about 2 to 2.8%• Lancaster Company and Fishers Inc control ~ 70% of

chocolate market • 4 key product segments

– 3.5 oz+ bbb (100g) 7,149 million

– Seasonal chocolate 4,407 million

– 3.5 oz- bbb 3,479 million

– Snack-size chocolate (<0.6 oz) 2,522 million

• Mass market (80.3%) and premium (19.7%)• Target market: 45+, female, married, children, $50,000+

income, college educated

Market Facts & Trends (1)


Market Sizing


• Premium chocolate through mainstream channels• Dark chocolate sales rising due to alleged health benefits• Low-calories options face increasing demand• Stand-up pouches and bigger sizes• New labelling

– Portion control– Sharing– Save a piece for later– Me-time

• Higher prices due to commodity costs • Older consumers eat darker chocolate

Factors Affecting Demand

Market Facts & Trends (2)


© Imperial College Business SchoolStrategic Marketing –

SUMMER SCHOOL 201410


• 45 ideas 12 selected 5 survivors 3 winners• Idea generation• Bases Idea Screening Test (4/12 criteria)

– Distinct Proposition, Attention Catching, Need/Desire, Advantage • Bases Snapshot Concept Test (1 and 2)

– Project team tasters– 8 focus groups to fish out best options– Second based snapshot concept test

• 200 consumers per concept do online review• Bases II testing: internet survey: trial interest

– Average results 23% definitely, 40% probably

Describe the Process

New Product Development


MONTREAUX: LOOKING AHEAD


• Product – Taste, ingredients, cacao-level,…– Size (how many ounces?– Packaging (bars, squares, bags…)– Name (European heritage, own brand or new brand?)– Labelling (what aspects of content must be listed?)

• Place?• Promotion

– Advertising & promotion budget?– Where to spend money?

• Price– $4.49 or not– Subject to fruit type?

Key challenges (1)


Marketing Mix


Operational

Production capacity• Plant building (are there alternatives?)

– How risky is this investment?

Learning• Expertise development• What happens when the Swiss expert leaves?

Key Challenges (2)



Additional Research

Online Survey

+ low cost

+ fast response

+ no geographic constraints

+ design flexibility

- limited sampling

- no interviewer

- random replies

Focus groups

+ visible/audible reactions

+ high interaction

+ physical contact (a.o. taste) with product

+ Follow-up questions

+ other ideas expressed

- limited # opinions

- ~ participant / moderator

- costly and time-intensive



– In-test market– In 2 to 4 nationally representative cities– Educate sales force– USD 3 million– > 1 year– Final introduction > 3 years after acquisition– Competitor risk (alternative could reach market first)

– Further product testing– Regional roll-out– National Launch– Expertise development– Production Capacity

What are the next steps to take?

Key Challenges (3)



- Global confectionary market: $157,640 M in 2011 (3.2% growth)

- Strong growth expected up to at least 2016- 22.6% of market is USA ($35,648 M)- Chocolate retail sales in USA: $17,664 M

- Expected growth of 2% per annum up to at least 2016- Growth is driven by innovation

Is there room for a new taste?

VIDEO: Malcolm Gladwell and Spaghetti Sauce

What does the market look like

Chocolate Confectionary


https://www.youtube.com/watch?v=iIiAAhUeR6Y


How can Apollo differentiate itself from the rest?

• Taste• Targeting• Experience• Consumption patterns• Health• Quality• Sizes

What are the most salient issues?

Chocolate Confectionary



Q1: Are the forecasts realistic or need they be challenged?

Q2: Is there a need to flex the budget to launch successfully?

Q3: What drives consumer adoption?

– Consumer Attitudes • Chocolate has strong fan base: for many no substitute exists• Improve retail experience

– Usage• When, where and why

– Benefits• Imagined and real

Some questions to think about…

Viability of New Product
