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Case Analysis: Roger’s Chocolates

Izmir Vodinaj

PLCY 399: Strategic Management

Spring 2016

Prof. Vasudevan Ramanujam

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Index

Executive Summary…………………………………………………………………………………………………3-4

Porter’s Forces Model………………………………………………………………………………………………5

Competitive Environment……………………………………………………………………………………….….6

VRIO Analysis…………………………………………………………………………………………………….…7

SWOT Analysis……………………………………………………………………………...................................8

Options Analysis…………………………………………………………………………………………….………9

Final Recommendation………………………………………………………………………………………….…10

References…………………………………………………………………………………………………… …….11

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Executive Summary

Roger’s Chocolates, a premium chocolate firm from Canada, is attempting to double or triple its size in

the next 10 years. The company has just assigned a new CEO, Steve Parkhill, who is expected by the board to

take this mission forward.

The Canadian chocolate market was US$167 million in 2006, a year prior to the appointment of the new

CEO, and it was projected to grow at 2% annually. The premium chocolate market, however, has been growing

at 20% annually. The market trends indicate that consumers prefer more organic with no trans-fat chocolates,

especially dark chocolates. The environment is highly competitive and fragmented with a few large and many

regional competitors.

Roger’s positions itself as a high-end chocolate firm selling at moderately high prices to affluent loyal

customers mostly ages 18 – 50. It distributes its chocolates through four main channels: retail, wholesale, online

and mail order, and its own delis which it has acquired, Sam’s Deli. These channels serve as the main revenue

streams bringing respectively 50%, 30%, 10%, and 20%, as shown in Figure 1.

Figure 1. Roger’s Revenue Stream % by channel

50%

30%

10%

20%

Sales % by Channel.

Retail Wholesale Online & Mail Sam's Deli

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The firm currently operates mostly in Canada with a small % of sales in the US and global market of

chocolates. Roger’s sells a variety of regular and specialty chocolates, and it has recently entered the ice

cream market. The multichannel distribution has become a real challenge for Roger’s often leading to stock-

outs. Seasonality in the chocolate market where 24% of the annual sales come from Christmas, and the

undependable Chinese suppliers all make production, planning, and forecasting difficult for the firm. Besides

that, the factory does not have performance metrics in place which can measure and track success or lack

thereof.

This case analysis is intended to bring forth the key strengths and weaknesses of Roger’s as well as

threats and opportunities. It uses strategic analytical tools like SWOT, VRIO, and Porter’s Forces. Finally, a set

of options for Roger’s and a final recommendation conclude the paper.

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Porter’s Forces Model

Force -> Threat of Entry Bargaining Power of Suppliers

Intensity of Rivalry Bargaining Power of Buyers

Power of Substitutes

These factors increase this force ->

Capital requirements to compete with Roger’s

Roger’s is not large enough to demand special pricing or customization

Many Competitors of different sizes

Exit barriers high

Buyers face little switching cost

Other types of gifts

Other types of sweets such as fruit etc.

These trends exert are of NEUTRAL impact on this force ->

Customer switching costs are not too high

Switching cost

These factors reduce this force ->

Established brand equity

Various suppliers

Premium chocolate industry growth 20%

Many buyers

Products are differentiated

Overall strength of this force, LOW, MODERATE, HIGH ->

Moderate Moderate - High Moderate Low-Moderate Moderate high

Overall conclusions from the above Five Forces analysis ->

The premium chocolate industry is a moderately attractive industry with few large players and many small ones going through a 20% growth rate.

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Competitive Environment (pg. C57)

Factors Roger’s Godiva Bernard Callebaut

Lindt Ghirardelli Purdy’s Rocky Mountain

Laura Secord

Market International International National International International National

Size Medium Large Medium Large Large Medium

Customers Affluent customers mostly 18 – 54 (pg. C62)

Affluent Affluent Common/low Affluent Common Common Common

Product Variety of regular and specialty chocolate, ice cream

Many types and colors, truffles

Bars for immediate consumption

Large selection of bars and small bags of truffles for immediate consumption

Pure chocolate squares

Variety, hedgehogs

Candy and less chocolate

Distribution Wholesale, retail, Online, phone, mail, Sam’s Deli

Wholesale and gift retail stores

Retail and grocery stores

Mass Merchandisers, Drug and Grocery Retailers

Malls, corporate gifts and volume purchases

Malls

Price Medium - High

High High Medium High Low Medium-High

Medium-High

Packaging, Advertising

Very attractive

Very attractive

Attractive Attractive Attractive

Product Quality

High Medium High Medium High Low Very low Very low

Other Seasonal expensive collections

New flavor introductions

Gift box production

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VRIO Analysis

Resource V R I O Competitive advantage

Tangible

Channels Y Y Y N While this can be an advantage if the online and offline channels were effectively integrated, Roger’s is not optimized to take full advantage of all channels.

Optimized Website, SEO Y N Y Y This gives Roger’s a competitive advantage allowing it to attract customers around on the website.

Sales Agents Y N N Y Sales agents are very helpful, yet the sales force is disorganized having different motives to sell which can negatively affect the brand image.

Capital Y Y Y Y Roger’s has maintained very good margins as a privately held company. (pg.C64)

Intangible

Loyal Customers Y Y Y Y This is a competitive advantage for Roger’s, and they are able to execute it well through the thank you notes and their fast shipping online to the shopping experience on their stores and the quality of chocolates.

Company culture Y Y Y Y This is a competitive advantage for Roger’s even though their loyalty to the past can hinder their ability to put new technology in place to benefit them with their efficiencies.

Brand Y N Y N While they have a strong brand attachment to some customers, they have very low awareness across other customer segments which can harm them in the long term.

Capabilities

Processing Technology Y N N N Mismanagement of production and distribution resources.

Firm’s distinctive competence

Roger’s distinctive competence is its ability to provide high quality products through multiple channels and build loyal customers.

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SWOT Analysis

Strengths Weaknesses

Innovative Retailer of the Year in 2000 (pg. C60)

Taste award in 2006 (pg. C58)

Loyal customers through a strong brand image (pg. C57)

Variety of products (pg. C57)

High quality (pg. C57)

Passionate employees with low turnover rates (pg. C60)

Supportive of social causes (pg. C60)

Conflict of ideas among board members as what the right course of action to grow should be (pg. C56)

Importing raw products from West Africa where unethical practices and conflicts are occurring (pg. C56)

No performance metrics in factory (pg. C59)

Not dependable Chinese suppliers (pg. C59)

Inventory and production poor planning capabilities leading to product stock-outs (pg. C60)

Opportunities Threats

20% growth rate annually for premium chocolates (pg. C56)

Social Trends: Organic chocolates, no trans fats, dark chocolates (pg. C56)

Environmental trends: friendly practices of procurement, packaging and operations on demand (pg. C56)

Increase brand awareness in other areas through advertising and well-trained reps (pg. C62)

The global market

Competitors like Hershey’s and Cadburys entering into premium chocolate market (pg. C56)

Demand by seasonality making forecasting very difficult (pg. C59)

Wholesale sales decreasing (pg. C61)

Overall Conclusion

Overall, Roger’s is in a favorable position with many distribution channels established, loyal customers, and in an industry (premium chocolate market) that is at a 20% growth rate. However, performance metrics, poor inventory and management planning, sales decreases in wholesales, and increasing competition from large companies like Hershey’s place Roger’s in a difficult position.

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Options Chart

Option Cost Impact

Seek Global Market Through Retail High High

Seek Global Market Through Wholesale High High

Seek Global Market through acquisitions High High

Seek Global Markets through website High High

Seek global markets in multiple channels through retail, wholesale, acquisitions, and online presence High High

Expand in US and Canada through all channels Moderate-High High

Expand in Canada alone through all channels Moderate-High Moderate

Seek presence in online portals like Amazon, Ebay Moderate Low-Moderate

Seek the organic market through new suppliers Moderate Low-Moderate

Increase brand awareness through offline and online means Low-Moderate Moderate

Adapt cutting edge technology to improve efficiencies and forecasting Low-Moderate Moderate-High

Employment training program Low Moderate Moderate

Develop performance metrics for production and the whole organization Low Moderate-High

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Final Recommendation

Looking at the industry growth, competition, and the firm’s current capabilities, a series of steps taken

strategically can benefit Roger’s in its expansion quest.

Before any action happens, the company must begin by improving the production and inventory

efficiencies. This requires implementation of cutting edge technologies to track inventory and through predictive

analysis build models that project future sales accurately. This would prevent the cases of stock outs and give

Roger’s a competitive advantage to make informed strategic decisions. After that, attempt to begin making

organic chocolates should be made by searching for other suppliers. While this may not have an immediate

impact, in the long-term it will give Roger’s a competitive advantage since the trends indicate that societies are

going towards green and organic. Furthermore, employee training programs that prepare them for expansion

should be put in place in order to rebuild the culture towards a high growth mentality that embraces economies

of scale.

Finally, once the preceded actions have taken place, the expansion should begin through the retail

stores and increase in advertisements in Canada and the US which will serve to increase awareness. After that,

all channel (retail, wholesale, acquisitions, website, and online portals) global strategy should be developed and

executed properly.

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Bibliography

Rothaermel, Frank T. Strategic Management: Concepts & Cases. New York: McGraw-Hill Irwin, 2013. Print.