CHARLES CHOCOLATES

PRESENTED
BY:

GHINA HAROON
HIBA TAHA USMANI
JUNAID MAHBOOB
KHURRAM ASGHAR
MAHEEN AFTAB
VISION  “Charles Chocolate believes in providing the
ultimate chocolate experience that builds
STATEMENT memories by offering a diverse range of premium
chocolate products”
  “Charles Chocolate aims to provide the top quality
MISSION chocolate products globally, that our customers
STATEMENT and employees expect from us while keeping in
mind the well being of society and our commitment
to traditional excellence”
  Political: Not mentioned.
 Economics:
 US Market of chocolates has been growing at 6%
PEST annually generally.
 Premium chocolate market growing at 10%
annually.
 Growth has slowed down after the financial crisis of
2008.
  Social:
 Baby boomers focus on quality and ethics.
 The demand was growing for dark chocolate due to
PEST its heart healthy anti-oxidant properties.
 Child labour and forced labour is considered to be a
part of cacao production.
 Environment friendly packaging.
  Technological:
 Proportion of people shopping online in US has
PEST increased over the last decade by about 59% .
 But Charles has been unsuccessful in this field.
 Generates only 6% sales via Online selling.
  Threat Of New Entrants:
PORTERS 5  Threat of new entrants is low because new entrants
FORCES need to invest a high capital in order to enter the
chocolate market.
MODEL
  Substitutes Available:
 Threat of substitutes is very high because there is a
PORTERS 5 lot of competition prevailing in the chocolate
market. The competitors in the international
FORCES market include Godiva, Lindt etc. Moreover strong
MODEL regional competitors include Delice chocolates and
Cardons. Whereas other competition includes
Belgian producers and Dolce Via.
  Bargaining Power Of Supplier: No mention of
suppliers in the case.
PORTERS 5  Bargaining Power of Consumers:
FORCES  It is high because high number of substitutes are
available.
MODEL  Other local companies offer discounts which
provides high quality chocolate at lower prices.
  Competitive Rivalry:
PORTERS 5  A number of competitors.
FORCES  Some competing at quality.
 Some at price.
MODEL  Others at Brand Image.
 OPPORTUNITIES WEIGHT RATING

New Franchises 0.3 4 1.2

Discounted prices 0.1 1 0.1

Upgrade Online Store 0.15 3 0.45

EFE MATRIX
Change Brand Image 0.3 1 0.3

Extend Product Line 0.15 2 0.3

Increase Internal Capacity 0.1 1 0.1

TOTAL 2.45
 THREATS WEIGHT RATING

Intense Competition 0.5 3 1.5

EFE MATRIX
Aging Consumer Base 0.3 4 1.2

High Prices 0.2 2 0.4

TOTAL 3.1
 Strengths
SWOT Matrix •Company heritage
•Variety of premium products
•Top of the range chocolates
•Rich chocolate aromas
•Excellent retail experience
Opportunities •Premium organic and dark
•Growth in US market for chocolates can be produced
chocolates to add to the already existing
•Growing demand for organic top of the range variety.
and dark chocolates •Stores may be franchised and
•Acquisitions/Takeovers opened in international
•Franchising Charles stores markets and provided with
•Penetration in international excellent retail experience to
market capture higher market share.
•Growing online sales
Threats Charles can use its heritage to
•Competition from Godiva, tackle the competition by
Lindt, Delice and Cardon’s building memories for
•Slowdown in tourism customers that would
•Financial crisis encourage brand loyalty.
Weaknesses
•No measure of employee
productivity
•Poor demand forecasting
•Resistance of new ideas
•Less focus on online sales
•Charles must start
forecasting demand to
produce more of the products
that are high in demand such
as organic chocolates.
•Online sales must be
emphasized to benefit from
the increasing online purchase
of products.
 • US$19.3 billion market for chocolates in 2011
 6% Growth Rate
• $2.7 billion Premium Chocolate Market
 10% Growth Rate
PREMIUM  New Entries into Premium Chocolates
CHOCOLATE  Hershey’s & Cadburys

MARKET  ¼ of sales occur in 8th week prior to Christmas

 Growing demand for organic and dark chocolate
 Heart healthy anti-oxidants properties
 GODIVA LINDT DELICE
• “Nestle” • Large Swiss • Rhode Island
• Glitzy Firm • Location:
packaging • Mid-Quality Tourist &
• High price chocolate bars downtown
• Widespread & Truffles • High Quality
COMPETITORS distribution • Mass
merchandisers,
• Frequent flavor
introductions
• Quality lower
than Charles drug & grocery • Copper box-
retailers Customized
• 15% higher
price points • Price: 90% of • Pricing: Similar
Charles to Godiva
• High-End
product: sold
for 200-300%of
Charles price
 CARDON’S BELGIAN DOLCE VIA
• 120 Year old • High End • Emphasized
Boston Firm custom Malls stores &
• Successful in chocolates Candy
England but • American companies
launch failed in Retailers, • Sold more
Chicago Online or Candy than
COMPETITORS • Price: 35% Niche Chocolates
lower than wholesalers • Franchise
Charles • Sold single Model
• Moderate bean or • Higher Price
Quality organic than Cardons’s
• Strong chocolates but lesser
business in Quality
corporate gifts
& group
purchases
  Founded in 1885.
 England’s oldest chocolate company.
 Head Quarters was located in Portland’s old port
area.

CHARLES  Products:
 Premium line of chocolate
CHOCOLATES’  Portland Creams
HISTORY  Truffles
 Nuts and chews
 Almond bark
 Chocolate covered ginger
 Premium chocolate novelties
  In 2009, company won a prestigious superior
taste award from Belgium institute for taste.

 The award described the product as (“classy,

HISTORY refined and elegant”, “top of the range”, “rich
chocolate aromas”.)
  Chocolates were produced in a factory owned by
Charles on the outskirts of Portland.
 Production took place from 7 am to 4 pm each day.
 Bach processing and hand packaging were used.

 Problems:
PRODUCTION  Set-up times cost
 No measures of productivity in the plant.
 Demand forecasting was difficult due to seasonal
demand.
 Production planning was difficult due to
distortions arising from fluctuating inventory
levels.
 Bringing change in the firm is difficult because a
strong culture prevails.
  Revenues from four areas:
1. Retailing
BUSINESS 2. Wholesaling
LINES 3. Online/Phone sales
4. Sandwich Heaven
  11 wholly owned retail stores
 Produced 50% of the sales
RETAIL  Excellent retail experience
 America’s innovative retailer of the year award
 Stores in tourist locations
  Produced 30% of the sales
 Five categories:
1. Souvenir shops
WHOLESALE 2. Large retail chains
3. Tourist retailers
4. Corporate accounts
5. High end food retailers
  Produced 10% of the sales
 60% orders from regular customers
ONLINE/  Increasing number of online customers
PHONE SALES  Orders processed in 3 to 4 days
 Delivered to US, Canada and 50 international
countries.
  Purchased by Charles in 2009
SANDWICH  Produced 10% of the sales
HEAVEN  Sold Charles’ ice cream
 Faced staff recruiting problems
  Company targeted affluent customers
 Cruise ship visitors and tourists became online and
phone customers
 Locals were frequent and loyal customers.

 Brand emphasized heritage

MARKETING  Traditional packaging
 Packed in burgundy boxes and tins
 Tins featured old-fashioned scenes and American
art
  Brand Perception
 Most people not aware of the brand
 Those aware of it praise the retail experience and call it
the ‘best chocolate they have ever had’

 Advertising
MARKETING  Tourist Publications
 Seasonal Print Media
 Radio Ads
 Donations to charitable events
 Direct Mail
 Search Engine Rankings
 Website
  Troubles
 Increase awareness without diluting the brand
MARKETING  Discounting or making cheap products would risk
brand integrity
 Heritage image does not appeal to younger crowd
  Strong Financial Position
 Initially faced a significant growth rate
 Growth rate has slowed down since slowdown in
tourism following financial crisis
FINANCIALS  While chocolate sales fell after 2008, Charles
managed to grow its revenue slightly due to
contributions of Sandwich Heaven
 Margins were 50% of sales
  Jim Bell (1989-2012)
 Healthy company, great cashflows and good
margins.
LEADERSHIP  Steve Parkland got on board- previously a vice
president of operations for meat processing
companies.
 Deal to buy shares, every year for 3 years.
  Senior Management Team:
1. Mary Bird- Vice president sales and marketing.
Managed marketing plans, retail stores, online
store, wholesaling, retail operations,
communications, and order desk staff.
(shareholder)
2. Ray Wong- Production Vice president, not a
LEADERSHIP shareholder. Computer programmer, who
developed all internal production planning
systems.
3. Sven Amundsen-financial officer, mainted
books by hand. Owned shares.
  Bird wanted to reduce out of stock, and launch new
products.
 Wong retained control on scheduling and
CONFLICT? production.
 Wholesale manager gone as far to overturns Bird’s
decision.
  Franchising discussed.
 Online business seemed very attractive.
 Corporate gift market was promising
 Needed to revise cruise ship traffic approach.
GROWTH  Open more stores in Boston?
OPPORTUNITIES
 Or extend product line in Maine?
 Should Charles extend beyond New England?
  Joint venture?
 Acquisition?
 Keep playing it safe?
GROWTH
OPPORTUNITIES  Tear away from traditional brand image?
 If sales were to be increased, where to place the
factory?