“Introducing Euphoria Pomegranate by Healthy Cravings – Reward yourself with happiness and good health”

Montreaux Chocolate USA Adrian Nguyen

A-TeamUWMCC Case Competition

“Introducing Euphoria Pomegranate by

Healthy Cravings – Reward yourself with happiness and good

health”

Outline

Situation Big Questions Ideal Corporate Targets Thought Framework Recommendation Supporting Evidence

› Qualitative and quantitative Revisiting Corporate Goals Summary

Supplementary Information

The Situation

Apollo acquires rights to Montreaux for America on June 2011

Consumer Food Group (CFG), a subsidiary, forms Montreaux USA

Andrea Torres, director of new development, is faced with multiple decisions

The Big Questions

Next steps for Montreaux USA?› How are we launching the

product Time to upgrade

logistics?› Pennsylvania factory

The Big Questions

American or European branding?› Heritage› New product line

Brand Sub-brand

New product name?

Ideal Corporate Targets

National distribution of Montreaux product line

$115 million in annual sales by 2015 0.60% market share

› Top 25 in revenue Acceptable hurdle rate of $30MM

› Needed for full national rollout

Thought Framework

Support each decision with evidence

Calculate projections

Pros and cons matrix

Nielsen’s 12 Product Success Factors

Recommendation - The Product

Name› Euphoria by Healthy Cravings

Branding› Apollo sub-brand

Features› 70% Cocoa› Pouch Bag Format› Premium chocolate› Health positioning

Slogan Flavours

› Pomegranate› Blueberry› Cranberry

Price› $4.49 MSRP

Acquire Pennsylvania factory



health”

Recommendation - Montreaux USA Launch Strategies

Further Testing The Market

Launch in Selected Test Markets

Stage a Regional Rollout

National Launch

Pros • Fine-Tune Consumer Insight• Gather Additional Consumer

Insight • Middle-Of-The-Road Approach

• Display Commitment to Retailers

• Most Limited Liability and Risks

• Most Representative of Market Condition

• Average Expenditures• Biggest Opportunity to

Increase Market Share

• Discover New Opportunities • Limited Liability and Risks• Greatest Revenue

Opportunity

• Begin Market Share Dominance

Cons • Possibly Redundant Data• Long Result Reading Time (1

Year)• Conservative Strategy • Very Expensive

• Delaying Market Entrance • Delaying Market Entrance • Potential Lost Opportunity • Requires New Factory

• Difficulty In Finding Suitable Test Markets

• Less than 100% Commitment to Market

• Greatest Resource Commitment

• Convincing Retailers for Limited Batch Purchases

• Requires New Factory

• Most Expensive ($3 MM) • Poor Regional Selection

• Limited Production Capabilities SELECTED LAUNCH PLAN

Marketing Strategies and Tactics

Market Trends Product Choices Capturing the Market

› The Ideal Customer Mainstream Distribution Channels

US Chocolate Market Trends 2011

Low-calorie options such as reduced fat and aerated chocolate

Premium chocolate products moving to mainstream channels (i.e., supermarkets, mass merchandisers)

Dark chocolate popularity rise Packaging transition to stand-up pouches and

bigger sizes New labeling with terminology emphasizing

shareability, portion control, and saving a piece for later

Increases in pricing attributable to rising commodity costs

Product Choices – BASES Testing

70% Cocoa concentration› Preferred taste versus 90% in

qualitative testing› Emphasize health positioning

Bold Flavours› Blueberry, pomegranate, cranberry

Narrowed from top five ‘winners’ Pouch format

› Shareability, portion control, economical

› 3.5oz – less unique, less revenue generation

Healthy Cravings – Apollo sub-brand

Confusion in European credibility



health”

Capturing The Market

Socioeconomic Status

Consumer Type

Gender Differences

Age

Cater to as many demographics as possible› 45-64 Age group› Everyday

sophisticates› Brand loyalists› Women

The Ideal Customer

Older aged upper-middle class female 45-64 age group Motivations

› Personal health considerations› Luxurious reward› Mood enhancement› Enjoys trying out new flavours

Quantitative Data

Purpose› Identifying ideal launch path

Calculating Sales Projections Chocolate Market’s Future

› Relation to Corporate Goals

Montreaux USA Launch Strategies

Explaining the details

Further Testing The Market

Launch in Selected Test Markets

Stage a Regional Rollout

National Launch

Pros • Fine-Tune Consumer Insight• Gather Additional Consumer

Insight • Middle-Of-The-Road Approach

• Display Commitment to Retailers

• Most Limited Liability and Risks

• Most Representative of Market Condition

• Average Expenditures• Biggest Opportunity to

Increase Market Share

• Discover New Opportunities • Limited Liability and Risks• Greatest Revenue

Opportunity

• Begin Market Share Dominance

Cons • Possibly Redundant Data• Long Result Reading Time (1

Year)• Conservative Strategy • Very Expensive

• Delaying Market Entrance • Delaying Market Entrance • Potential Lost Opportunity • Requires New Factory

• Difficulty In Finding Suitable Test Markets

• Less than 100% Commitment to Market

• Greatest Resource Commitment

• Convincing Retailers for Limited Batch Purchases

• Requires New Factory

• Most Expensive ($3 MM) • Poor Regional Selection

• Limited Production Capabilities SELECTED LAUNCH PLAN

Calculating Projections - Methodology

Calculated all possible sales volumes scenarios using methodology formulas› Market-adjusted trial rates, repeat volume, etc.› 3^3 = 27 Possible Scenarios› Determined sales volumes

Combination of three factors › Awareness type

Marketing campaign effectiveness› ACV type

Market reach effectiveness› Product quality

Repeat rate of consumer

Calculating Projections – Work Example

Calculating repeat volumeType Awareness Type ACV # of Trial

Households (MM) Quality of Product % of Households Repurchasing

Repeat Purchase Occasions

Repeat Volume (MM)

Low

Low2.82 Mediocre 28% 4 3.162.82 Average 33% 4 3.722.82 Excellent 38% 4 4.29

Medium3.05 Mediocre 28% 4 3.423.05 Average 33% 4 4.033.05 Excellent 38% 4 4.64

High3.71 Mediocre 28% 4 4.163.71 Average 33% 4 4.903.71 Excellent 38% 4 5.64

Medium




High




Projections – Graph

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00 Retail Sales Value ($ MM)Montreaux Sales Volume ($ MM)Acceptable Hurdle Rate

Number of Purchases in MM

Sale

s in

$ M

M

Band range of ACV, Quality and Awareness

Ideal Corporate Goals -Revisited

Corporate 2015 goals overly aggressive› Despite double

annual market adoption rate

Accomplished national rollout

2012 Market 2015 Estimate Aggressive 2015

Chocolate Market Size

(BN) $

17.664 $

19.120$

19.120

Annual Growth Rate 2% 4%

Average Montreaux Sales (MM)

$ 39.02

$ 42.24

$45.65

Market Share 0.22% 0.22% 0.24%

Nielsen’s 12 Product Success Factors

Acceptable downsides› Taste

Findability› ACV focus

Product delivery and loyalty› New factory› Perpetual

improvement

Summary

Market goals› Nielsen’s 12 Success Factors› Accomplished national rollout

Expand manufacturing capabilities› Pennsylvania

Montreaux USA marketing plan› Target demographics› Focus on supermarkets

Product specifications› Euphoria by Healthy Cravings› Pouch› 70% Premium Cocoa

American credibility› Sub-brand of Apollo



health”

End of Presentation

Additional Potential Opportunities and Risks Opportunities

› Partnering with other firm than the Big Two

› Develop better infrastructure Perhaps more factories

and manufacturing centers

› Product specifically targeted to men

› Virtual integration with Suppliers Mexico

Risks› Introduction of

superior rival product

› Product not well-tested

› Manufacturing capabilities not up to par

› Ability to Scale

Porter’s Five Forces Analysis

Competitive Rivalry Within

Industry

Bargaining Power of

Buyers

Threat of New

Entrants

Bargaining Power of Suppliers

Threat of Substitute

s

Bargaining Power of Buyers› Low to moderate› Large volume orders› Lack of threat of backward

integration› Reliance on industry product

Threat of Substitutes

› High› Alternate

confectionery available

› Competition during holidays

Threat of New Entrants› Low› Very expensive manufacturing

costs› Lack of distribution channels› Regulatory restrictions› Confectionery and chocolate

market relatively saturated

Bargaining Power of Suppliers

› Moderate to high› Supplier group is concentrated› No threat of forward integration› Industry is important customer

to supplier

Source: http://jmfrrell.blogspot.ca/2011/06/chapter-4-industry-analysisporters-five.html

Competitive Rivalry Within Industry

› High› Equally capable

competitors› Slow growing› High storage and

fixed costs› High exit barriers

Distribution Methods

Go through retail channels› Supermarkets

and grocery focus

Premium chocolate moving into this distribution channel

15.8%

11.7%

9.0%8.8%

54.7%

Distribution Channels Breakdown

Supermarkets/Grocery

Convenience Stores

Drugs Stores

Big-Box Su-percenters

Other

Distribution Formats

Bar/Bag/Box

(>3.5 oz);

7.149

Seasonal Chocolate;

4.407

Bar/Bag/

Box(<3.5 oz), 3.479

Snack-size

Choco-late; 2.522

Market Share Revenue ($ in MM)

Bar/Bag/Box (>3.5 oz)Seasonal ChocolateBar/Bag/Box(<3.5 oz)Snack-size Chocolate

Documents

“Introducing Euphoria Pomegranate by Healthy Cravings – Reward yourself with happiness and good health”