2. This is a case study developed to demonstrate the Strategic Planning Process
for a fictional European Chocolate Company – Chocolatine.
Disclaimer: The information contained in the case study is only meant for
demonstrative purposes and should NOT be taken outside of this context.
3. Table of Contents
Company Overview Current Strategies
Chocolatine Overview 5 Chocolatine’s Current Strategies 23
Chocolatine Products & 2020 Forecast 6 Strategic Alternatives
Income Statement 7 Chocolatine’s Strategic Alternatives 25
Balance Sheets 8 Multi-criteria Analysis (Criteria) 26
Cash Flow Statement 9 Multi-criteria Analysis (Results) 27
Operations Metrics & Financial Ratios 10 DCF Analysis 28
External Analysis Forecast Scenarios 29
Chocolatine’s Supply Chain 12 Forecast Scenarios – DCF Analysis 30
Strategic Group Map – Chocolate Industry 13 Recommendations
Chocolate Industry Outlook 14 Chocolatine’s Strategic Plan 32
Competitive Forces 15
Broad Factors (PEST) Analysis 16
Internal Analysis
Chocolatine’s Competitive Advantage 18
Value Chain 19
Product Market Segments 20
SWOT Analysis 21
5. Chocolatine Overview
Vision
To build profitable
partnerships that deliver
the brand to new
customers
Mission
To develop our product range while meeting
environmental standards and providing best
quality products and service
Values
• Expertise
• Luxury
• Innovation
• Ethical Trading
Chocolatine is a leading premium chocolatier based in Europe that manufactures innovative and
accessibly priced luxury chocolate. It was founded in the 1990s, originally selling its chocolates
online, and opened its first physical store in 2004.
The company is vertically-integrated, with its own cocoa plantation in West Africa where it is
able to source and control the quality of its raw materials. Chocolatine engages directly with
farmers and pays a premium for cocoa grown to sustainable standards of stewardship. The
company has also recently invested in a state-of-the-art production facility where all of its
chocolates are made.
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
2019 Earnings & Costs Breakdown ($000s)
About Chocolatine
6. Chocolatine’s Products
2020 Projected Unit Sales (%)
2020 Projected Cumulative Revenue ($000s)
SELF-
PURCHASE
55%
GIFTS
41%
EXCLUSIVE
4%
2020 Projected Product Category Performance ($000s)
Chocolatine has three product categories targeted at the luxury market:
Self-Purchase, Gifts, and Exclusive.
These categories are made up of a mix of premium quality Dark Chocolate
(min. 70% cocoa), Milk Chocolate (min. 40% cocoa) and Caramel or White
Chocolate (35% or more cocoa).
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
7. Chocolatine’s Income Statement
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
Income Statement
Currency, $000s 2018 2019
Revenue 126,288 139,598
Cost of sales (40,510) (44,089)
Gross Profit 85,778 95,509
Operating expenses (71,465) (79,590)
Operating profit 14,313 15,919
Finance costs (867) (668)
Profit before tax 13,446 15,251
Taxation (2,929) (3,275)
Profit / (loss) for the year 10,517 11,976
8. Balance Sheet
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
Balance Sheet Balance Sheet
Currency, $000s 2018 2019 Currency, $000s 2018 2019
Non-current assets Equity and Liabilities
Intangible assets 2,806 3,346 Share capital 136 136
Tangible assets 36,342 41,825 Share premium 14,099 14,099
Total Non-CurrentAssets 39,148 45,171 Retained earnings 21,560 30,557
Total equity 35,795 44,792
Non-current liabilities
Borrowings 11,678 4,480
Total Non-CurrentLiabilities 11,678 4,480
Current assets
Inventories 12,222 15,084 Current liabilities
Prepayments 1,074 1,768 Trade payables 13,808 11,438
Cash and cash equivalents 10,164 283 Currenttax liabilities 1,327 1,596
Total CurrentAssets 23,460 17,135 Total CurrentLiabilities 15,135 13,034
Total Assets 62,608 62,306 Total Equity and Liabilities 62,608 62,306
13. Strategic Group Map for Premium Chocolate
1
Company Overview
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
2
External Analysis
$100 - $1,000
$5 - 20 $21 - $30 $31 - $50
Zertuz
GmbH
2019NetSalesRevenues(US$Million)
Product Price Range ($)
Chocolatine
$1,000 – 5,000
> $5,000
Lindt &
Sprungli
Neuhaus
Holdings
Ferrero
Rocher
Godiva
Data Sources: Candy Industry, Company websites, Google Search
14. Chocolate Industry Outlook
1
Company Overview
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
Industry Overview Market Growth
Data Sources: Candy Industry, International Cocoa Organization, Fortune Business Insights, Busineswire.com, Mordor Intelligence
2
External Analysis
Market Segmentation
• Increasing health consciousness, higher disposable
incomes, and the influence of the organic, vegan,
sugar-free, and gluten-free trends are key factors
that will drive demand for premium dark
chocolates.
• The branding of seasonal and premium dark
chocolates as gifs is also another major growth
driver.
• The industry has seen several businesses
undertaking expansion strategies such as M&A to
gain competitive advantage.
The infographics summarize important statistics for
the chocolate market.
Raw Material Cost
The average cost of cocoa has been increasing due to a
supply crunch.
US $ 2,294
per tonne of
cocoa in 2018
US $ 2,341
per tonne of
cocoa in 2019
VS
The premium chocolate market segment is
broadly categorized into two segments – dark
chocolate, and white & milk chocolate
The global cocoa and chocolate market size is
expected to witness significant growth due to
increasing demand for speciality and premium
chocolates in the developed economies
15. Competitive Forces
Intensity
of
Industry
Rivalry
Threat of Potential Entrants - Moderate
• Low barriers to entry
• Significant fixed costs/investments required
• Sourcing for high quality cocoa could be a challenge for entrants
• Low brand loyalty
Bargaining Power of Buyers - Moderate
• Fragmented, purchase small volumes
• Presence of many industry competitors
• Low switching costs
• Low to medium price sensitivity
Threat of Substitute Products - High
• Low switching costs
• Significant number of premium chocolate
substitutes
Power of Complementary Products/Services
• Potential to partner with other service providers (e.g.
hotels, spas, conferencing) offering premium quality
services could boost sales and brand visibility
Bargaining Power of Suppliers - High
• Few alternative suppliers, especially for
premium quality raw cocoa
• Fair trade/environmental protection
regulations allow suppliers to set higher prices
1
Company Overview
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
2
External Analysis
Intensity of Industry Rivalry - High
• High concentration of rivals in the chocolate industry
• Low switching costs for customers
• Variety of premium chocolate offerings
Based on Porter’s 5 Forces Model
16. Broad Factors Analysis - PEST
Political ▪ Government proposed ‘sugar tax’ could be extended to
wide range of products, including chocolates
▪ Environmental/social protection and climate change
policies
o Tax laws could increase the cost of production,
impacting profitability margins
o Environmental/social protection policies can strengthen
long-term sustainability of resource availability and
improve brand reputation
Economic ▪ Increase in global cocoa prices due to a supply crunch
▪ Changes in consumers’ disposable incomes
o Increasing prices will put pressure on profitability
margins
o Reduced disposable incomes will decrease demand for
confectionaries, reducing revenue potential
Socio-demographic ▪ Growing health consciousness driving demand for
healthier, organic products
▪ Prevalence of lactose/gluten intolerance driving
demand for vegan and gluten-free confectionaries
o Growth in health consciousness presents an
opportunity to align the brand’s “high chocolate
content” with a new market segment
o Vegan and gluten-free segments also present new
market segments and potential revenue streams
Technological ▪ Changing consumer preferences is pushing innovation
in both product development & experiential customer
engagement (e.g. launch of multisensory hotel in
Shanghai, China by Mars)
o Changing customer preferences will require flexible
production processes, fast lead times, and low
inventory in order to be responsive & cost efficient
o Leveraging technology and innovation could help
improve brand visibility and customer loyalty
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
Sources: Business Logger, Business Insider
18. Competitive Advantage
PersistBuild Core
competence
Capabilities
Strategies
Competitive
advantage
Sustainable
competitive
advantage
Build
Build
Resources
Leveraged
• Chocolatine owns a plantation where it sources most of its raw
materials ensuring greater control on product quality
• Chocolatine has recently invested in an automated, capital
intensive production process
• Chocolatine uses “tasting sessions” with customers to
drive collaborative product innovation
• Chocolatine has an “all about chocolate” qualification
for employees to develop expertise on the products
• Chocolatine pursues a differentiation strategy which allows it to charge
premium prices for its products
• Chocolatine emphasizes a high cocoa content in its products which
drives up the premium quality
• Chocolatine is vertically integrated and therefore has strong control over
its sourcing, production and distribution processes, as well as
intellectual property rights
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
19. Firm Infrastructure: Company-owned fleet of vehicles, as well as own-brand retail stores and website support the distribution of products to
customers
Technology: Chocolatine has a state-of-the-art automated production facility and industry leading ERP system to track end-to-end
transactions
Procurement: Chocolatine sources for raw cacao directly from its plantation in West Africa and has strong working relationships with a range
of suppliers for the remaining ingredients
Cocoa plantation local team
& GM – responsible for
growing, harvesting, drying,
packaging & shipping
Raw material received into
local warehouse
Human Resource Management: Chocolatine promotes employees career progression through internal promotions and offering training
programs (“All about Chocolate” qualification)
Automated production
process
Weekly tasting sessions to
drive launch of new flavors
Finished products inventory
is held in a temperature-
controlled warehouse
Distribution via own fleet of
vehicles to own-brand stores
or directly to customers
Sales channels - online and
own-brand retail stores
B2C marketing strategy –
social media is key
Strong brand identity –
innovation
Inbound
Logistics
Operations Outbound
Logistics
Marketing &
Sales
Value Chain
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
20. Product Market Segments
Product
General Public
Chocolate
Connoisseurs
B2B Customers
Health
Conscious
Self-Purchase ✓
Gifts ✓ ✓
Exclusive ✓ ✓
Specialty
Offerings
Chocolatine’s current focus is selling
premium, high content chocolate. It
targets the Chocolate Connoisseur, as
well as a broader customer segment of
people looking for an innovative take
on luxury chocolate.
In response to changing consumer
demands, Chocolatine plans to
introduce even greater variety in its
product offering to attract new
segments that could present future
revenue potential.
Chocolatine’s closer focus in these
market segments will allow the
company meet changing demands and
remain profitable.
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
21. SWOT Analysis
Strengths
Strong vertical integration
Focus on product development
Financially stable
Weaknesses
Too reliant on only one product category – chocolates
Only serving domestic market
High inventory levels
Opportunities
New product development (organic, raw, artisanal)
Market development (international, B2B customers)
Threats
Increased competition (supermarkets, small premium players)
Rapidly changing consumer tastes
Ethical issues (plantation workers & brand perception)
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
23. Chocolatine’s Current Strategies
Functional-level
• Achieve superior efficiency through leveraging vertically
integrated business
• Enhance quality and brand image by sourcing ethical raw
materials within the integrated supply chain and trusted partners
Business-level
• Product-focused strategy: Focus on producing
high quality, ethically sourced, accessible
premium chocolate to target market
Corporate-level
• Single line of business
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
25. Chocolatine’s Strategic Alternatives
Strategic Alternatives Alternative A Alternative B Alternative C
Offerings Deluxe & Luxury Ruby & Emerald Vegan & Sugar-free
Annual production (000s) 500 700 500
Expected units of sale (000s) 250 620 230
Average product price $43 $20 $10
Revenue $10,625 $12,400 $2,300
Material cost/unit $11.00 $4.80 $2.50
Labor cost/unit $1.60 $1.20 $0.40
Other variable production costs $0.30 $0.30 $0.10
Variable cost/unit $12.90 $6.30 $3.00
Total variable cost $3,225 $3,906 $681
Fixed production overheads $400 $400 $400
Total fixed cost $400 $400 $400
Operating profit $7,000 $8,094 $1,219
Operating margin 65.9% 65.3% 53.0%
CAPEX (one-time expense) $2,000 $1,200 $1,000
Material cost ratio 25.9% 24.0% 25.0%
Labor cost ratio 3.8% 6.0% 4.0%
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
After performing the external and internal
analysis and reviewing its current
strategies, Chocolatine is considering these
three strategic alternatives to expand its
product collection and attract new
customers:
A. Selling to B2B Customers
B. Selling Bridal & Party Favours
C. Selling Specialty Chocolates
The table on the right summarizes the
production capacity and financial details of
each of the alternatives.
26. Multi-criteria Analysis (criteria)
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
Decision Rule Score
Pillar Attributes Attractive Moderate Unattractive Weight
Financial
Operating Margin >65.0% >50.0% <50.0% +2
NPV >100,000 >80,000 <80,000 +3
Customers
Expected Sales Units
(000s)
>400 >300 <200 +2
Price per Unit >$30 >$15 <$15 +1
Operations
Material Cost Ratio <25.0% <30.0% >30.0% +2
Labor Cost Ratio <4.0% <5.0% >5.0% +1
To determine the optimal strategic alternatives, Chocolatine uses the following scorecard to evaluate the attractiveness of each alternative:
27. Multi-criteria Analysis (Results)
Pillar Attributes Alternative A Alternative B Alternative C
Score
Winner Weight
Financial
Operating Margin 65.9% 65.3% 53.0% A 2
NPV 96,323 101,871 71,556 B 3
Customers
Expected Sales Units
(000s)
250 620 230 B 2
Price per Unit $43 $20 $10 A 1
Operations
Material Cost Ratio 25.9% 24.0% 25.0% B 2
Labor Cost Ratio 3.8% 6.0% 4.0% A 1
Total Points Scored 4 7 0 B
Based on the result of the multi-criteria analysis, Chocolatine should ideally pursue the strategy of selling Bridal & Party favours in addition
to its existing products. This will allow Chocolatine to take advantage of its extra production capacity, increase its revenue while maximising
its returns.
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
28. DCF analysis
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
6
Recommendations
CASE STUDY - CHOCOLATINE 2018 2019 2020 2021 2022 2023 2024 2025
DCF Valuation (B. Sell bridal & party favors)
Free Cash Flow
EBIT 8,094 9,308 10,704 12,310 14,156 16,280
Less Taxes 1,214 1,396 1,606 1,846 2,123 2,442
Less Capex 1,200 - - - - -
Plus Depreciation 200 200 200 200 200 200
Less Changes in Working Capital 500 525 551 579 608 638
Unlevered Free Cash Flow 5,380 7,587 8,748 10,084 11,625 13,400
Total FCF (Current Operation + Alternative B) 2,340 720 15,799 20,601 25,442 30,666 37,451 45,505
DCF Valuation
NPV ofTotal FCF (CurrentOperation + Alternative B) 101,871
CostofCapital 15%
$2,340
$720
$15,799
$20,601
$25,442
$30,666
$37,451
$45,505
$0
$10,000
$20,000
$30,000
$40,000
$50,000
2018 2019 2020 2021 2022 2023 2024 2025
Unlevered Free Cash Flow
(B. Sell Bridal & Party Favors)
Current Operation B. Sell bridal & party favors Total
5
Strategic Alternatives
29. Forecast Scenarios for Strategic Alternative
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
6
Recommendations
5
Strategic Alternatives
Scenario Analysis Alternative B. Sell bridal & party favors
Currency, $000s Forecast Scenarios
Low Case Base Case High Case
Expected units ofsale (000s) 550 620 670
Average productprice $18 $20 $22
Revenue $9,900 $12,400 $14,740
Material cost/unit $4.9 $4.8 $4.7
Labor cost/unit $1.3 $1.2 $1.1
Shipping cost/unit $0.4 $0.3 $0.3
Variable cost/unit $6.6 $6.3 $6.1
Total variable cost $3,638 $3,906 $4,080
Inventory storage cost $400 $400 $400
Total fixed cost $400 $400 $400
Operating profit $5,862 $8,094 $10,260
Operating margin 59.2% 65.3% 69.6%
Capex (one-time expense) $1,320 $1,200 $1,080
30. Forecast Scenarios – DCF Analysis
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
6
Recommendations
5
Strategic Alternatives
2,340 720
15,799
20,601
25,442
30,666
37,451
45,505
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
2018 2019 2020 2021 2022 2023 2024 2025
Free Cash Flow (Base Case)
Current Operation Base Case Total
2,340 720
17,760
22,718
27,877
33,466
40,671
49,208
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
2018 2019 2020 2021 2022 2023 2024 2025
Free Cash Flow (High Case)
Current Operation High Case Total
2,340 720
13,781
18,419
22,933
27,781
34,132
41,689
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
2018 2019 2020 2021 2022 2023 2024 2025
Free Cash Flow (Low Case)
Current Case Low Case Total
32. Chocolatine’s Strategic Pillars
Vision
To build profitable partnerships that deliver
the brand to new customers
Mission
To develop our product range while meeting environmental standards and providing best
quality products and service
Customers
• Offer a diverse range of
offerings to meet customer
preferences & quality
expectations
Financial
• Achieve high revenue and
operating margin
• Minimize production costs while
maintaining product quality
Operations
• Produce products in the most
efficient and ethical way
Strategies
• Optimize inventory
management to reduce costs &
risk of inventory obsolescence
• Increase product offerings
(bridal & party favors) to boost
sales
Strategies
• Conduct regular online surveys
to collect customer feedback on
new product offerings
• Expand product offerings based
on customer demand
Strategies
• Optimize production process to
support faster lead times and
small batches
• Coordinate between plantation,
R&D, operations and sales to
minimize inventory held
1
Company Overview
2
External Analysis
3
Internal Analysis
4
Current Strategy
5
Strategic Alternatives
6
Recommendations
