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Theo Chocolate Case Study - Strategic Marketing UST Graduate School
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Theo Chocolate Case Study - Strategic Marketing UST Graduate School

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  • 1. GROUP 4Bastasa, Christian!Dar, Roma Ann!Gotangco, Jerome!Gravador, Mona!Guzman, Rachel!Surrio, Clarice Ann!Strategic Marketing!USTGS!
  • 2. Outline•  The Story!•  The Challenge!•  Recommended Strategy!
  • 3. The Story•  Joe Whinney, CEO!•  “To do for cacao what Starbuckshad done for coffee”!`!•  The first, organic, Bean-to-BarChocolate Factory in the US!•  Quality, Sustainability & Fair Trade!•  Theobroma Cacao!•  March 2006!•  Fair-Trade Certified, single-origin,blended dark chocolate bars!•  Fremont, Seattle!
  • 4. The “Theonistas”“I think it’s disturbing that cacao tree onlygrows in certain underdeveloped parts of theworld, where those who grow the cocoa treeshardly have eaten the chocolate that resultsfrom what they have grown. It is a disparityTheo will spend its existence bridging.”!“That a majority of cocoa farmers have nevertasted chocolate! Theo is righting this wrong.”!“I was shocked to learn what a hugepercentage of the world’s cacao is produced byslave labor and children.  As a chocolate lover,it is satisfying to work for a company that isbucking this shameful trend.”!
  • 5. “High-end organic chocolate!Products: Food with high-cocoa content”!
  • 6. Products: Non-Food •  Chocolate University! •  Factory Tours! •  Retail Store! •  Event Venue!
  • 7. Direct Competitors (Niche Market)
  • 8. Gourmet Chocolate Competitors Compe&tor   Year  Founded   Compe&tor   Year  Founded   Askinosie  Chocolate   2005   Amano  Ar4san   2006   Cabaret  Brewed   2003   Charles  Chocolate   2007   Chocolove   1998   Chuao  Chocolate   2002   Cocoa  Pete’s   2002   Dagoba  Organic   2001   DeVries  Chocolate   2005   Endangered  Species   1993   Ithaca  Fine   Fran’s  Chocolate   1993   2002   Chocolate   Jacques  Torres   Joseph  Schmidt   2000   1983   Chocolate   Confec4ons   Malie  Kai   N/A   Michael  Mischer   2004   Noka  Chocolate   2004   Patric  Chocolate   2006   Recchiu4   1997   Scharfeen  Berger   1996   Confec4ons   Taza  Chocolate   2005   Tcho   2007   Vermont  Nut  Free   Theo  Chocolate   2004   Chocolates   1998  
  • 9. Competitors (Market Share) Firm   Brand   Weight   Retail  Prices  Theo   Dark  Chocolate  (Organic)   3  oz   $4.00  Cadbury   Green  &  Black    (Organic)   3  oz   $3.69   Hershey  Bar   2.6  oz   $1.19  Hershey   Symphony   4.25  oz   $1.69   Extra  Dark   3.25  oz   $2.50  Nestle   Crunch   4.40  oz   $1.25   Twix   3.02  oz   $1.19  Mars   Snickers   3.25  oz   $1.19  
  • 10. Success Factors •  Unique value proposition – the only organic, fair-trade, bean-to-bar chocolate factory in the US! •  Growing brand strength! •  Numerous awards! •  Endorsement/partnership with celebrities and environment personalities like:! •  Jane Goodall! •  Ben Affleck – Eastern Congo Initiative ! •  Passionate and competent Theonistas!
  • 11. Success Factors •  Based in Fremont, Seattle – one of the most liberal,educated, wealthy cities in the US; home of Starbucks,Amazon.com, Nordsrtorm – a hotbed for start-upbusinesses!•  Seattle has become a hub for "green" industry and amodel for sustainable development!•  2006 - Al Gore’s Inconvenient Truth!•  Social Networks take over the Internet (early – mid-2000s) !
  • 12. Success Factors •  US is the largest chocolate market!•  Market demand for certified organic coca developedrapidly from 2003-2009!•  Increase in global demand for organic food - fastestgrowing sector of the US food industry!•  Popularity of natural/organic grocery stores in the US:Whole Foods, Trader Joe’s!•  Big retail chains with increased organic offering(Walgreens, Walmart, Costco, Safeway)!
  • 13. Tenets / U.S.P.•  All ingredients that are grown sustainably!•  Sustainable packaging and printing methods!•  Green energy sources to power the factory!•  Partnering with growers by ensuring they earn a living wageand have access to education for their families!•  Honoring and respecting employees and suppliers!•  Educating about social and environmental accountability 7days a week thru public tours of the artisan factory!•  Production process as core competency: bean-to-bar , madein small batches (artisan)!
  • 14. The Challenges•  Catering to its niche market had not been profitable, canTheo afford to continue to target just these customers?! •  IF YES, how to reach more of them to become more profitable?! •  IF NO, who should they target now given the total population/market for chocolate consumers/buyers, considering the different reasons why people buy chocolates!•  Seasonal nature of chocolate!•  Large competitors shifted to high-margin health-basedchocolate products by acquiring other niche/organicchocolate producers!
  • 15. The Challenges•  Distribution and direct-to-retail costs run as high as 50%of the price of a bar impacting returns!•  Distribution and transportation issues!•  Theo is too small and not well-known enough to attract“Class A” food brokers!•  Factory tours made staffing the store a challenge – needto hire more!
  • 16. The Challenges •  Theo now has 40 employees but is unprofitable for the past 3 years (July 2006 – June 2009)! •  The vision and strategy are laudable but are they viable?! •  Can Theo withstand more unprofitable quarters in order to achieve its vision?! •  The bedrock upon which Theo had built its foundation – socially responsible business practices throughout the value chain – had yet to prove that it is strong enough to support a profitable business! •  Decide whether Theo could continue to operate with its current business model or whether growth necessitated compromise on its principles on some level!
  • 17. Sales by Channel, Q4 FY09 %  of  Total  (Q4)   4%   Theo  Retail  Store   39%   39%   Direct  (to  retailers)   Distribu4on   Co  packing   18%  
  • 18. Finished Chocolate Productsand Market Share 2%   10%   14%   44%   Candy/Bars   Tablets   Boxed   30%   Seasonal   Other  
  • 19. Theo Chocolate Financials 2006 - 2009 Year  1  (2006)   Year  2  (2007)   Year  3  (2009)   Net  Sales   $1,125,808   $2,669,264   $3,096,194   Gross  Margin   157,294   767,179   857,788   %  of  Net  Sales   13.6%   28.7%   27.7%   Sales  &  Marke&ng   504,634   940,693   1,097,359   Expenses   General  &  Admin   749,619   1,018,024   1,079,063   Expenses   Total  Opera&ng   1,254,253   1,958,717   2,176,422   Expenses   OPEX  as  %  of  Net   111.4%   73.4%   70.3%   Sales   Opera&ng  Income   ($1,096,959)   ($1,191,358)   ($1,318,634)   (Loss)   Net  Income  (Loss)   ($1,241,901)   ($1,368,125)   ($1,499,450)  
  • 20. Theo Chocolate Net Sales by Quarter Sep   Dec     Mar   Jun     Sep     Dec     Mar   Jun     Sep     Dec     Mar   Jun     Qtr   ‘06   ‘06   ‘07   ‘07   ‘07   ‘07   ‘08   ‘08   ‘08   ‘08   ‘09   ‘09   Ending   Q3   Q4   Q1   Q   Q3   Q4   Q1   Q2   Q1   Q2   Q3   Q4   CY06   CY06   CY07   2CY07   CY07   CY07   CY08   CY08   FY09   FY09   FY09   FY09   Net   Sales   ($000,   150   310   330   340   450   700   850   670   620   970   690   801   rounded   off)   Δ  over   same   quarter   n/a   n/a   1142%   1142%   206%   123%   159%   99%   38%   40%   -­‐19%   21%   in  prev.   year  
  • 21. Theo Chocolate PESTEL Matrix Poli&cal   Economic   Socio-­‐Cultural   •  As  a  food  company,  it  is   1.  US  economic  recession   1.  Shie  in  consumer   regulated  by  the  US   and  uncertainty  has   preference  for  organic/ FDA.   affected  spending   natural  food  products.   •  Countries  of  its   habits  of  ci4zens.   2.  Percep4on  that   suppliers  have  history   2.  Weakening  value  of  US   chocolate  do  not   of  civil  unrest   dollar  has  effect  on   promote  a  healthy   •  Peru  and  Ecuador  had  a   interna4onal  trade.   lifestyle.   history  of  3  wars  in  the   3.  “It’s  just  chocolate.”   20th  century.   Technological   Environmental   Legal   1.  Social  Media  influence   1.  Cacao  can  only  be   1.  Export  laws  of  the   people  on  purchasing   grown  15-­‐20  degrees   supplier  countries.   decisions.   above  and  below  the   2.  Theo  has  to  ensure  that   2.  Online  presence  of   equator.   all  its  suppliers  are  law-­‐ companies  to  connect   2.  Cacao  is  a  seasonal   abiding  to  s4ck  to  its   directly  with  consumers   crop.   credo  of  suppor4ng   3.  Pervasiveness  of  mobile   3.  Climate  change  can   only  “fair-­‐trade”  crops.   technology.   affect  crop  produc4on.  
  • 22. Recommendations   Theo now has 40 employees but is unprofitable for the past 3 years (July 2006 – June 2009)!   The vision and strategy are laudable but are they viable? - YES!   Can Theo withstand more unprofitable quarters in order to achieve its vision? – NO, should do something about it (strategy)!   Decide whether Theo could continue to operate with its current business model or whether growth necessitated compromise on its principles on some level – NO, must not compromise the very reason the Company exists, just like Starbucks, Theo can fight for its life without losing its soul - there are other ways to become profitable!
  • 23. Recommendations   Distribution and direct-to-retail costs run as high as 50% of the price of a bar impacting returns!   Distribution and transportation issues!   Theo is too small and not well-known enough to attract class A brokers!   Factory tours made staffing the store a challenge – need to hire more!
  • 24. Recommendations Current   Desired   Performance   Performance  
  • 25. Recommendations Structure   System   Performance   Gap   Capability   Culture  
  • 26. Structure President  &  CEO  VP  –  Sales  &   COO   CFO   Marke4ng   Retail  Store   Head  of   Manager  &  Staff   Confec4ons   Head  of   Agents  &  Reps   Engineering   Roas4ng  Team   Shie   Management  
  • 27. Capability  Training and Development for all Theonistas!  Succession Plan! Culture!  Leaders and mangers must continue to inspireeveryone they touch, consistently acting as rolemodels, walking their talk – their passion to live theTheo mission at all times!
  • 28. System – 4Ps of Marketing Expand  Distribu&on  Channels  –  local  (US)  and  interna&onal  PLACE   customers   Study  the  possibility  of  crea4ng  a  Starbucks-­‐like  store  where   chocolate  drinks  are  served,  instead  of  coffee  or  partner  with   Starbucks  in  providing  their  Signature  Hot  Chocolate   Customers  converted  as  Brand  Ambassadors  by  building  a  PROMOTION   Founda4on  where  customers  could  volunteer  and  interact   with    others     With  bigger  market  to  serve,  produc4on  will  increase  –  should  PRICE   strive  to  u4lize  100%    capacity  from  the  current  33%  -­‐  due  to   economy  of  scale,  price  could  be  reduced  PRODUCT   Expand  Product  Lines  to  expand  market  served  
  • 29. Recommendations  Catering to its niche market had not been profitable, can Theoafford to continue to target just these customers?!   If yes, how to reach more of them to become more profitable?! Promotion: Intensify marketing campaign! Place: Expand Distribution Channels - Local (US) and International Markets!
  • 30. Recommendations  If no, who should they target now given the total population / marketfor chocolate consumers / buyers, considering the different reasonswhy people buy chocolates! Promotion: Intensify marketing campaign! Place: Expand Distribution Channels –! Local (US) and International Markets! Price: With bigger market, can produce more, economy of scale, price can be lowered! Product: Expand Product Line, capture all markets for chocolate buyers, one market at a time!
  • 31. Recommendations WHY  BUY   END   INFLUENCER   BUYER   CHOCOLATE   CONSUMER  For  consump4on   Doctors    /  Medical  Reps.   Adults  /  Teens   Children  /   Partner  Companies     Adults                (CSR,  ER  Programs)   School  Cafeteria  /   Hotels,    Restaurants,  Bakeshops   Events   Schools   Endorsers    For  gie-­‐giving  /   Flower  shops   Corporate   Recipients  give-­‐away   Partner  Companies     Accounts                (CSR,  ER  Programs)   Less  fortunate   Travel  Agencies  ,  Hotels   Individual:  Hosts   children    Restaurants   for  all  occasions   Schools,  Churches   Endorsers     X-­‐Deals  -­‐  Movie  Theaters   (premier  nights  for  films  like   The  Inconvenient  Truth)  
  • 32. Recommendations END   WHY  BUY  CHOCOLATE   INFLUENCER   BUYER   CONSUMER  Chocolate  Drink  as  an   Partner  Companies     Corporate  Accounts   Anyone  alterna4ve  to  coffee                (CSR,  ER  Programs)   –  office  vending   Hotels,  Restaurants   machine,  office   Endorsers     mee4ngs/   conferences   Individuals  Use  chocolate  as  flavor   Company  Purchaser   Manufacturers   Anyone  to  other  food  and  drinks  such  as  cakes,  alcoholic  drinks,  medicines,  vitamins  Use  chocolate  for   Beauty  Salons,  Spa   Teens  /  Adults   Teens  /  Adults  beauty  products     Derma  Clinics  (hair  &  body)   Manufacturers  of  beauty   products  
  • 33. Recommendations Other  Products   INFLUENCER   BUYER   END  CONSUMER  Chocolate   Partner  Companies     Corporate  Accounts     Teens  University    -­‐                (ER  Programs)   Adults  including  online   Hotels,  Restaurants,   Individuals   For  professional  program     Schools   and  personal  (video   learning  conference)  Factory  Tours   Partner  with  Travel   Corporate  Accounts     Children  /  Teens  /   Agencies,  Schools,   Adults   Companies  (ER  Program)   Individuals  
  • 34. Recommendations The  Six  Stages  of  the  Buyer  Experience  Cycle   (In  which  stage  are  the  biggest  blocks  to  customer  sa&sfac&on?)   Purchase   Delivery   Use   Supplements   Maintenance   Disposal  The  Six  Stages  U&lity  Levers   Customer   Produc&vity   Simplicity   Convenience   Risk   Fun  &  Image   Environmental   Friendliness  
  • 35. Purchase   How  long  does  it  take  to  find  the  needed   Local  &  Interna4onal  Markets   product?   Is  the  place  of  purchase  arrac4ve  and   Physical  –  distributors,  retail  stores,   accessible?   bookstores,  specialty  stores,  drugstores,   How  rapidly  can  you  make  a  purchase?   brokers,  agents,  tourist  des4na4ons  –   souvenir  shops   Online  –  website,  social    network  sites  Delivery   How  long  does  it  take  to  get  the  product   Six  Sigma  &  ISO  Standardized  Manual  of   delivered?   Policies  &  Procedures   Do  buyers  need  to  arrange  delivery   themselves?  How  costly  and  difficult  is  it?   How  difficult  is  it  to  unpack  and  install  the   new  products?  Use   How  effec4ve  are  the  product’s  features   Health  Benefits  –  an4oxidant,  an4-­‐ and  func4ons?   depressant  (comfort  food),  reduce  heart   Does  the  product  deliver  far  more  power  or   diseases,  lower  cholesterol   op4ons  than  required  by  the  average   users?   As  a  symbol  of  love  /  affec4on  (gie)   Is  the  product  easy  to  store  when  not  in   use?   As  a  way  to  support  CSR  /  social  and   Does  the  product  require  training  /  expert   environmental  responsibility  ini4a4ves   assistance?   INNOVATION  –  will  not  melt  even  if  not  in   refrigerators  (room  temperature);  will  not   arract  ants  
  • 36. Supplements   Do  you  need  other  products  to  make  this   No,  but  there  are  complements  –  like  wine   product  work?  How  costly  are  they?     (eg  Theo  Pairing  Kit)   How  easy  are  they  to  obtain?  How  much   4me  do  they  take?  Maintenance   Does  the  product  require  external   Not  upgrade  but  wide  range  of  op4ons  –  eg   maintenance?  How  costly?   with  nuts,  with  alcohol   How  easy  is  it  to  maintain  and  upgrade  the   product?  Disposal   Does  the  use  of  the  product  create  waste   Packaging  materials  are  biodegradable   items?   How  easy  is  it  to  dispose  the  product?  How   costly  is  the  disposal?   Are  there  legal  or  environmental  issues  in   disposing  of  the  product  safely?  
  • 37. Strategy  Canvass   FACTORS  OF  COMPETITION  Taste  Variety  Price  Unique  Flavors  Availability  Health  Benefits  Packaging  Mel&ng  Temperature  Brand  Image  Package  Size  
  • 38. Financial  Stability   &  Growth   Customer   Sa&sfac&on   Opera&onal   Excellence   Partners   Sa&sfac&on,  Learning    Growth  
  • 39. Corporate DashboardFINANCIAL  STABILITY  &   F1  -­‐  Increase  ROI  by  ?%    GROWTH   F2  -­‐  Grow  Revenue  by  ?%   F3  -­‐  Reduce  Costs  by  ?%    CUSTOMER  SATISFACTION   C1  -­‐  Reduce  Customer  Complaints  by  ?%   C2  -­‐  Increase  New  Customers  by  ?%   C3  -­‐  Increase  Market  Share  by  ?%  OPERATIONAL  EXCELLENCE   P1  -­‐  Install  globally-­‐benchmarked  systems  and  processes   P2  -­‐  Align  all  departments’  strategy  maps   P3  -­‐  Reduce  processing  &me  to  ?days    PARTNERS  LEARNING,   L1  -­‐  Reduce  absenteeism  and  tardiness  by  ?%  SATISFACTION    &  GROWTH   L2  -­‐  Close  Competency  Gaps   L3  -­‐  Reduce  Turnover  Rate  by  ?%  
  • 40. Long-­‐Term  Shareholder  Value   Financial   Produc&vity  Strategy   Growth  Strategy  Stability  &   Expand     Increase     Growth   Improve     Increase     Revenue       Customer     Cost  Structure   Asset  U&liza&on   Opportuni&es   Profitability   Complete     System     Customer   Best     Product     Customer     Lock-­‐In  Sa&sfac&on   Total  Cost   Leadership   Solu&ons   Opera&ons     Customer   Innova&on   Regulatory  &  Social     Management     Management     Processes  Opera&onal   Processes   Processes   Processes  Excellence   Knowledge   Quality  Tools  –  ISO,  TQM,   Informa&on   Management   Kaizen,  Six  Sigma,  5S   Technology   Organiza&on  Development   Partners   Ini&a&ves  thru  a  Competency-­‐ Partner  of  Choice   Anract,  Mo&vate,  Develop  and  Retain    Sa&sfac&on,   Based  HR  System   Inspiring  Leadership   highly  competent,     Learning  &   strongly  commined    and   very  sa&sfied  Partners   Culture  of  Trust,  Excellence,     Theo  Academy   Growth   Teamwork  &  Fun  
  • 41. Thank You!Bastasa, Christian!Dar, Roma Ann!Gotangco, Jerome!Gravador, Mona!Guzman, Rachel!Surrio, Clarice Ann!Strategic Marketing!USTGS!