RMCF

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rmcf, rocky mountain chocolate factory, supply chain , premium chocolate , organic , procurement, strategy, store locations, competitions, strategic management, business strategies, growth strategies

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RMCF

  1. 1. Rocky Mountain Chocolate Factory Inc. http://www.youtube.com/watch?v=yDH5BdbPymw
  2. 2. Timeline 1981: Founded by Crail & 2 partners in Colorado. 1982: Franchised first store in Colorado Springs& Park City,Utah 1983: Co-founding partners left RMFC 1986: RMCF went public(NASDAQ) 1992: Franchise Development Agreement covering Canada with Immaculate Confections Ltd. of Vancouver, BC. 1995:Store concept revised from Victorian décor
  3. 3. Procurement Chain Cocoa beans from Africa, Mexico Chocolate from Guittard Choco Factory Nuts beans from all over the world • Company owned store • Franchised stores
  4. 4. RMCF’s products • • • • • Approximately 300 chocolate candies Other confectionery products are premium ingredients and proprietary recipes In products include nut clusters, caramels, butter creams, mints and truffles Special designs packages for seasonal holidays such Christmas, Easter,… “Finest, highest quality ingredients” with no artificial preservation Products manufactured in RMCF's factory Products made in-store Ice-creams,coffee others 10% 40% 50%
  5. 5. •1400 centers in US •Concerns of expensive rent structures, Regional centers competing food and beverage concepts Outlet centers •110 factory outlets in US Store locations Tourist areas Street Fronts Airport and other entertainmentoriented shopping centers
  6. 6. Competitors 1. Scharffen Berger and Joseph Schimidt •-medium-sized gourmet chocolate companies •-$46.6 million and $61.1million 2. Principal competitors •Alpine Confection Inc., Godiva Chocolatier Inc., See’s Candies Inc., Chocoladefabriken Lindt & Sprungli AG, Fannie May and Ethel M’s/ethel’s 3. Godiva Chololatier •Annual sale - $500million •Franchised retailed stores, company owned stores and distribution •Part of UK group, which is largest consumer goods company in Turkish food industry 4. Chocoladefabriken Lindt & Sprungli •Multiple brand names; Lindt, Ghirardelli, Caffarel, Hofbauer and Kufferle •Lindt & Sprungli; recognized leader in premium chocolate in more than 80 countries 5. Alpine confection Inc •Sale $125 million •Owned many candies company; Maxfield Candy •Produce confections under license for Hallmark and Mrs. Fields 6. See’s Candies •Manufactured over 100varieties of candies and over 200 retail candy shops 7. Wayne Zink and Randy Deer (new competitors) •Endangered Species Chocolate Company •Sale &16million •Natural food stores •Ganic and healthy products made with fair-traded ingredients
  7. 7. Steep Analysis P S •Political-legal •Socio-cultural E T •Ecological •Technological E •Economic
  8. 8. Socio-cultural Factors Changing lifestyle • Trend of handmade chocolates • Premium chocolate to account for 25% of US market; sales predicted at $4.5 billion. Status symbol and consumption pattern • Rise in demand for premium segment of chocolates • Focus on chemical and preservatives free chocolates Human rights Health care Localized marketing • Concerns about exploitation of African workers • Unethical organizations and fair trade practice • Rising awareness about healthy benefits of cocoa • Demand for dark chocolate: reduces risk of hypertension, improved sugar metabolism • Advertisements in regional and local newspaper • Customized in-store promotions • Concerns for Arab and States laws
  9. 9. Technological Factors Improvement in telecommunication infrastructure Easy to provide ongoing support to franchises Change in automated machinery Patent protection Introduction of NETZSCH’s ChocoEasy Transportation network Propriety rights in US and Canada Improved manufacturing Application for other expanding markets Aids in delivery
  10. 10. Economic Factors Inflation Price fluctuations Unemployment Rising prices changes in price of raw materials Reduces income of people Intra-company trade Lowers demand for premium-chocolates Reduce purchasing power Reduces Per Capita Income
  11. 11. Economic Factors Economic Integration • Reduces trade barriers Currency Convertibility • Currency conversion between company and franchises Credit availability • Recessiondecrease in GDP • Lowers loans
  12. 12. Ecological Factors Global warming Pollution • Changing world temperature might impact plantation • The transportation services as well as emission of waste from chocolate factory.
  13. 13. Political Factors Franchising Regulations and tax laws Corporate tax and repatriation tax subject to change Safety-health Standards Packaging laws, food certificates Regulation of foreign ownership Percentage of ownership in foreign country subject to change Trade regulations Custom duties
  14. 14. External Factor Analysis Summary (EFAS Table) External Factors Opportunities 1) Growing demand in new markets 2) Low-fat healthier snacks and health-related benefits of chocolate 3) Growth remained for gourmet (higher-priced premium segment) 4) Consumption of confectionary are still high 5) Change in trend from massproduced to handmade chocolates Threats 1) introduction of new manufacturing process called NETZSCH’s Chocó Easy 2) The supply and price of the ingredients Coco bean subjects to volatility 3) Competitors are stronger and greater and high local confectionary competition 4) Economic and consumer trends 5) Unethical Issue Weight 0.15 0.05 Rating 3 3.5 Weighted Score 0.45 0.175 Comments 1) 2) 0.15 2.5 0.375 3) 0.1 2.5 0.25 4) 0.05 4 0.2 5) 0.15 3.5 0.525 1) 0.1 3 0.15 2) 3) 0.1 2.5 0.375 4) 0.1 0.05 2 2 0.2 0.1 5) Total Scores 1.00 2.8 increasing at a rate of 25% a year in the Asia-Pacific region and 30% in China Diabetes, heart-attacks, low blood pressure , low cholesterol level 25% in market, Russia is key market for European growth Western Europe and North America; market are most mature but consumption is high Premium chocolate to account for 25% of US market; sales predicted at $4.5 billion Smaller chocolate companies are no longer dependent on large chocolate manufacturers monetary fluctuations, economic, political and weather conditions Greater name recognition, financial, marketing, and resources both domestically and globally Consumer changing tastes and eating habits and recessionary forces of U.S economy Exploitation of African workers and preference of ethical firms
  15. 15. Internal Factor Analysis Summary (IFAS Table) Internal Factors Strengths 1) Product quality and freshness 2) Marketing advantage 3) Own trucking system 4) attractive stores sizes generate strong name recognition 5) Packaging Weight Rating Weighted Score 0.1 0.15 0.05 0.15 3.5 3.5 4 4 0.35 0.525 0.2 0.6 0.05 3 Comments 1) 0.15 2) 3) 4) 5) Weaknesses 1) Small store sizes and inventory storage 2) No patent protection for recipe 3) 4) Franchisees sell more store-made products or products purchased from third-party suppliers Company owned only 5 stores 0.1 2.5 0.25 1) 0.15 3 0.45 2) 0.15 2.5 0.375 3) 4) 0.05 2 0.1 5) 5) Little practice of mass production Total Scores 0.05 1.00 2.5 0.125 3.125 Store personal making fudge from start to finish Unique in-store candy demonstrations Deliver quickly and cost effectively 40 stores at tourist areas, 1400 regional centers, 95 stores at the mall won 3 National Paperbox Association Gold Awards in 2002, copper package 1,000 square feet, approx. 650 of which is selling space Registration for trademarks, service marks, symbols, slogans, logos and emblems, but not for invention Adversely affect total revenue and operations of company Company focus on franchising more ( more than 280 franchises stores ) large confectionary companies mostly concentrated on mass production and have cost effective.
  16. 16. SFAS Table Strategic Factors Weight Rating score S H O R T S2) Marketing advantage 0.1 3.5 0.35 X S4) attractive stores sizes generate strong name recognition 0.15 4 0.6 W2) No patent protection for recipe 0.1 3 0.3 X W3) Franchisees sell more store-made products or products purchased from third-party suppliers O1) Growing demand in new markets 0.15 2.5 0.375 X 0.1 3 0.3 O3) Growth remained for gourmet (higher-priced premium segment) T1) introduction of new manufacturing process called NETZSCH’s Chocó Easy T3) Competitors are stronger and greater and high local confectionary competition 0.15 2.5 0.375 0.15 3.5 0.525 0.1 2.5 0.25 Total 1 3.075 Inte r Med iAte X X X X X X X X X L O N G X X Comments -Unique in-store candy demonstrations -40 stores at tourist areas, 1400 regional centers, 95 stores at the mall -Registration for trademarks, service marks, symbols, slogans, logos and emblems, but not for invention -Adversely affect total revenue and operations of company -increasing at a rate of 25% a year in the Asia-Pacific region and 30% in China -25% in market, Russia is key market for European growth -Smaller chocolate companies are no longer dependent on large chocolate manufacturers -Greater name recognition, financial, marketing, and resources both domestically and globally
  17. 17. 2004-2008 Time-series analysis to check performance over the years. Ratios covered: 1. Return on investment 2. Net profit margin 3. Fixed asset turnover 4. Inventory turnover 5. Current ratio 6. Debt to asset ratio
  18. 18. 1.Profitability Ratios: ROI % ROI 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% ROI 2004 12.91% 2005 17.23% 2006 21.33% 2007 25.71% 2008 30.73% ROI = Net profit/ total assets A measure of management’s efficiency, it shows the return on all the assets under its control, regardless of source of financing.
  19. 19. 20,000,000.00 15,000,000.00 10,000,000.00 5,000,000.00 - 2004 total Assets 2005 2006 year 2007 2008 Net profit after tax(NOPAT) •Increased sales to speciality markets. •Decrease in general and administrative costs. •Lower depreciation cost.
  20. 20. 2.Net profit margin NPM 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% NPM 2004 2005 2006 2007 2008 Net Profit Margin = Net Profit / sales x 100 Masures after-tax profits are generated by each dollar of sales.
  21. 21. 40000000 30000000 20000000 NOPAT Sales 10000000 0 2004 2005 2006 Increase in sales revenue increase in royalty fees from 5% to 10%. 2007 2008
  22. 22. Activity Ratios 3. Fixed Asser Turnover Fixed Asset turnover 6.00000 5.00000 4.00000 3.00000 Fixed Asset turnover 2.00000 1.00000 0.00000 2004 2005 2006 2007 2008 Fixed asset turnover = Sales/Fixed assets Measures the utilization of the company’s fixed assets (i.e., plant and equipment)
  23. 23. 40000000 30000000 20000000 fixed Assets 10000000 Sales 0 2004 2005 2006 2007 2008 Fixed assets reduced due to lower company owned stores.
  24. 24. 4.Inventory turnover 12 10 8 6 inventory turnover 4 2 0 2004 2005 2006 2007 2008 Inventory turnover =Net sales/ inventory Indicates the effectiveness of the inventory management practices of the firm.
  25. 25. 40000000 30000000 20000000 Sales 10000000 inventory 0 2004 2005 2006 2007 2008 Decrease in inventory due to increase in instore products(product mix shift).
  26. 26. 5. Liquidity ratios: current ratio Axis Title current ratio 4 3.5 3 2.5 2 1.5 1 0.5 0 2004 2005 2006 2007 2008 current ratio 2.6669 3.5694 3.5905 3.3044 2.352 Current Ratio = Current Assets : Current Liabilities current ratio
  27. 27. 12000000 10000000 8000000 current assets 6000000 current liabilities 4000000 2000000 0 2004 2005 2006 Change in inventories due to increase in instore production, maturing of notes. 2007 2008 Lower incentive compensation cost.
  28. 28. Leverage Ratio 6. current liabilities to equity 40.00% 30.00% 20.00% current liability to equity 10.00% 0.00% 2004 2005 2006 2007 2008 Current liabilities to equity= current liability / equity x 100 Measures the short-term financing portion versus that provided by owners.
  29. 29. 20000000 15000000 10000000 current liabilities 5000000 equity 0 2004 2005 2006 2007 2008 •New line of credit of $300,000. •Increase in accounts payable. •Repurchase of stock; undervalued.
  30. 30. Financial Summary Ratio Current ratio Fixed asset turnover Analysis Bad Good Inventory turnover Bad Current liabilities to equity Bad ROI NPM Good Good Firm is better with long-term debt management rather than cash management.
  31. 31. Strategic alliance- successful??? • RMCF was rated the Number One Franchise Opportunity in the candy category by Entrepreneur magazine. • Ranked 60 in Forbes annual listing of Americans best 200 Small Companies. “Operators are the ones that really make this company a success.
  32. 32. Strategy INTERNATIONAL Franchising and licensing is recommended. To gain access to distribution channels To overcome financial ,political and regulation barrier.
  33. 33. Business Level Strategy Lower cost competitiveness strategy • cost reduction from experiences, tight cost, overhead control • cost minimization in areas like R&D, service, sales force, advertising and so on
  34. 34. Cost leadership  RMCF sought low-cost, high-return publicity opportunities through participation in local and regional events, sponsorship, and charitable causes No engaging in national advertising 1% of monthly sale from each franchised store Benefits Risks  RMCF sought low-cost, high-return  Cost efficiency  Negative perception of  Cost minimizing in national advertising product value  Defense against competitors customers on  Barrier for entrants sale from each franchised store  Standardized products  1% of monthly  Above-average returns on  Low attractiveness investment  Easily imitate by competitors  Generate high market share  Fast technology changing  High bargaining power to its suppliers
  35. 35. RMCF matches with the business strategy  Manufacturing o new manufacturing process called NETZSCH’s Chocó Easy o Speed & cost effective by automated process  Trucking o Deliver quickly and cost effectively o fill products from 3rd parties on return trip Su Myat Naing 5318123
  36. 36. Recommendation  Marketing Strategies to focus on ethical practices of the firm and emphasis on handmade chocolates to capture handmade chocolates trend and use existing brand recognition to next level.  Do joint venture to increase global presence and use firm’s quality chocolates as defense against competitors as well as to satisfy increasing demand.
  37. 37. Recommendation • Expansion to countries such as Japan and china would be advisable • China have shown 30% of increasing consumption of chocolates and 25% in Asia specific. Stores can be open in a place such as Shanghai ,Hongkong and Japan.
  38. 38. Expected Behaviour in China  Chocolate confectionery is expected to experience ongoing healthy constant value growth over the forecast period.  due to leading players further expanding into lower-tier cities and the premium trend in China.  A widening range of gift packs focused festivals will be a strong driver for sales growth.  manufacturers are seeking new sales areas in wedding sales by offering wedding gift packs.  Ferrero and Hershey’s are expected to continue to dominate wedding gift sales http://www.euromonitor.com/chocolateconfectionery-in-china/report
  39. 39. Japan 2008 2008 2008 The United States has been Japan's largest economic partner, taking 31.5 percent of its exports, supplying 22.3 percent of its imports Approximately-80,000 to 90,000 person per month of tourist First Class- Five airport No specific trade agreement with United States. Japan is a high Income country http://www.tourism.jp/en/statistics/
  40. 40. Confectionary Consumption in japan Japanese Confectionery: Market Overview © Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6593 Market Analysis Report AAFC No. 11181E
  41. 41. Japanese Lifestyle Indulgent foods such as premium chocolate, functional chewing gum and candy have become popular among Japanese office employees seeking a break from work stress. According to a consumer survey conducted by Datamonitor: • >77% of Japanese consumers believe it is very important to find a way to escape from their stressful lives; • 16% of Japanese workers snack at work in the morning at least twice a week. • 44% of surveyed consumers snack in the afternoon during work hours more Japanese Confectionery: Market Overview © Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6593 Market Analysis Report AAFC No. 11181E
  42. 42. Consumption pattern Japanese chocolate consumption in 2008 was equal to more than 6% of the world’s chocolate market value. The Japanese chocolate market is expected to reach $4.6 billion by 2013. Japan’s chocolate market chracterised as:  Premium ingredients and functional benefits;  Product segmentation that targets very specific consumer groups; and  High-end packaging that provides convenience and portion control. Japanese Confectionery: Market Overview © Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6593 Market Analysis Report AAFC No. 11181E
  43. 43. Health Conscious • Survey revealed that 49% of female and 40% of male Japanese consumers find enhanced nutrients in food and beverages very appealing. Japanese consumers continue to be willing to pay high prices for food products that are perceived to be of high-quality and that offer dietary supplements. Prefer dark and organic chocolate. Japanese Confectionery: Market Overview © Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6593 Market Analysis Report AAFC No. 11181E
  44. 44. News article: Fiat shares surge after deal to buy remaining Chrysler stake • Fiat is about to buy the remaining 41% shares of Chrysler. It states that with this Fiat might be able to widen Fiat global reach as well as help Fiat lower its cost and compete more effectively with bigger players like Volkswagen • The new business strategy being used cost leadership. As the firm will appeal to wider market as well as reduce cost from technology sharing. • http://www.bbc.co.uk/news/business-25571200
  45. 45. News article: Strategy change helps Washington glazing firm grow 35% • Fendor Ltd is a Washing based firm which specializes in fire glazing. Due to saturated market of their core service they have diversified their business to high security environments like detention centres and mental health facilities. This diversification has enabled them to achieve growth by 35%. • The strategy used by them is differentiation strategy because they now reach beyond intended glazing market to security and has differentiated their product from others via products like CleanVent and CleanGuard. • http://www.thejournal.co.uk/business/businessnews/strategy-change-helps-washington-glazing-6558097
  46. 46. Thank You

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