[Document Title]

MGMT480-01

PREPARED FOR DR. IMAN SEOUDI

Prepared by Lina Geoushy- 900071827
1. STEEP Analysis

Premium chocolate represents a fast growing and dynamic market in many parts of the world,

with global sales having risen by over 18% within the last year. Sales and customer awareness

are both growing for a variety of reasons, these include wider availability of premium chocolate

and the retail levels of new product activity. Additionally, more consumers are becoming

attracted to dark chocolate for its health benefits, while ethical concerns have increased demand

for organic and Fair-trade chocolate. The STEEP analysis of the premium chocolate industry

shows how the industry is changing and the different drivers that are changing the competition in

the premium chocolates industry.

Political Factors: Rogers’ Chocolates are not facing any political influences on its business, and

the political issues in the premium chocolates industry are less. However, under the US-FDA

guidelines, the large chocolate manufacturers are seeking the redefinition of the term chocolate.

The USFDA redefinition of chocolate makes it easier for manufacturers to call their product

chocolate. So this will definitely increase the competition for Rogers.

Economical Factors: There are a lot of economic factors that affect the consumer spending like

the inflation, taxes, unemployment, exchange rates, income levels, and mortgage rates. The

economic crisis affected the Canadian economy. When the income of people decreased, their

purchasing power decreased. Consumers are watching their spending and cutting down on

luxury items and going for cheaper versions of certain products. So many consumers are buying

cheaper chocolate instead of buying premium expensive products.

Sociocultural Factors: Consumers are becoming more conscious and they are inventing new

ways to go green and to adopt a healthy lifestyle. They are demanding more organic products
and expect manufacturers to be going green. There’s an increase awareness among consumers

regarding human rights concerns, and since Rogers’ get their raw cocoa product from West

Africa, their reputation might be affected. Moreover, consumers and employee are demanding

that chocolate companies follow good CSR practices because force labor and child labor are still

used in some of the production of cocoa beans.

Technological Factors: Although there are technologies that prolong shelf life of products and

cut down on production time, Rogers’ have been using the same equipment for many years. The

changing technology has a great impact on the competition in the industry.As one quarter of

sales in Canada occur 8 weeks before Christmas, the use of new technology can reduce

production time, thus giving an edge to the companies.

Task Analysis - Porters 5 forces model for Chocolates premium industry

1. Bargaining Power of suppliers

In production of premium chocolate the primary raw material is cocoa bean, sugar, and milk.

There are many suppliers of sugar and milk all over the world, they are almost the same

everywhere. Also, according to CAOBISCO, there are 4.5 million of cocoa farms around the

world, to whom the chocolate manufacturers are an extremely important customer, the

bargaining power of the chocolate premium industry suppliers is generally low. But since the

fine grade cocoa production represents a small part of the world’s supply, the bargaining power

of superior cocoa beans supplier’s is high.

2. Bargaining power of buyers

There are many buyers in the premium chocolate market. Since many premium chocolate

manufacturers have their own unique selling point and the products are not standardized, buyers
 cannot easily switch to another manufacturer and get the same product. Regarding the bargaining

power of Rogers Chocolates, the company has unique quality products and has distinctive and

exclusive taste so the buyers cannot get this unique quality of products from others, so they

cannot easily switch to other manufacturers and that reduces their bargaining power.

3. Threat of Substitutes

Some substitute products for premium chocolate are traditional chocolates and other sweet

products or snacks that customers could use to satisfy their need. The chocolate industry compete

with many substitute products ranging from candies to cookies. The customers have a wide

variety of substitute products available, like non chocolate products, which makes the threat of

substitute products high in the chocolate industry.

4. Competitive Rivalry within the industry

Competition in the premium chocolate market consists of strong regional brands with a few large

competitors, such as Godiva, Lindt, Callebaut, and Purdy's. The market is growing at 20%

annually which suggest less intense rivalry among competitors. That situation considers less

intense rivalry among competitors; moreover every area has their own local player, like Rogers

in Victoria. Premium chocolates may be more valuable than traditional chocolate, but with a 6

month shelf life, there is less urgency to sell off products. With high levels of differentiation,

customers are often loyal to a brand which decreases rivalry.

5. Threat of new entrants

Frequently, existing industry members are often strong candidates to enter market segments or

geographic areas where they currently do not have a market presence. Apparently, Hershey's and
Cadburys have been moving into the premium chocolate market through acquisitions or up

market launches since this segment still posses high percentage of growth. The market is only

control by few large and old players who occupy significant market shares. The chocolate

industry has a significant economy of scale entry barrier because large companies exist in the

industry that has high production output and it reduces the threat of entrants. In addition to

economy of scale, product differentiation is another entry barrier in the chocolate. There are

many competitors in the industry that have remarkably identifiable brand names and customer

loyalty like Rogers Chocolate itself. New company must increase its spending to overcome the

reputation and large customer base of the existing companies.

From the five competitive forces, they are relatively low to moderate in affecting

premium chocolate industry especially Rogers Chocolate. However, the presence of Hershey's

and Cadburys in the premium chocolate market is the strongest competitive force (threat of new

entrants) as they have enormous resources and experiences. The weakest forces is the bargaining

power of suppliers, as they can only affect the cost thus as long as people still love chocolates

then the market is still big, and the threat of new entrants as this industry requires a huge amount

of capital investment.
Competitor Analysis Table

Godiva Bernard Callebaut

• Glitzy packaging • Good quality
• High price points • Seasonal new flavor introduction
• Advertising; variations in chocolate molding • Superior packaging with copper and gold
and chocolate colors boxes that can be customized;
• Access to capital that Nestle can bring to the • Great seasonal displays
table • High price point
• Widespread distribution among retailers of • Emphasized retail strategy
gift item
- Quality isn’t as high as Rogers’

Lindt Purdy’s
• Large variety • Successful historic product
• Broadly distribution • Very successful with hedgehogs
• Cheaper in price • Large variety
• Emphasized product for immediate • Broad locations; lower price point
consumption Good packaging and store displays
•
• High quality and purity of chocolate
• Focus on group purchase and discounts
- Mid range quality and packaging offered for high-volume orders
- Product quality lower than Rogers’

Laura Secord Other premeium chocolate

• Good store locations
• High and customized
• Emphasized mall stores
Exclusive packaging
• Rocky Mountain11 good store locations - Only carried in high end chocoloatiers and
Franchise model retail stores
•
• High price point
2. Internal Analysis of the Organization
Resources, Capabilities, and Competitive Advantage

Rogers’ key resources and competitive capabilities include the company being a non-union,

producing the highest-quality, hand-wrapped chocolates, implementing set-up and equipment

cleaning times that were efficient to production, excelling in profitability in different markets,

keeping the traditional brand image, establishing financial strategies designed to minimize

taxable earnings, and placing a well-qualified president to uphold the company’s standards of

effective leadership.

Its resource weaknesses and competitive liabilities include demand forecasting with

seasonal production, increasing awareness without diluting the brand with weak messaging or

presentation to wholesale accounts, keeping the traditional image of the brand when trying to

attract younger buyers, and financial growth slowing at times due to decrease in tourism.

Their distinctive competencies lie in their tradition. Roger’s adheres to their traditional

values of supplying customers with unique, high quality, hand crafted products that leave a

lasting impression and turn customers into a loyal consumer base. They also Advertise through

travel channels such as guide magazines, flyers on ferry boats, hotel magazines and seasonal

print advertising, radio spots and minor TV advertising in Victoria. Another competitive

advantage is that Rogers’ markets are comprised of company-owned retail stores strategically

positioned in tourist areas; wholesaling chocolate products to independent gift stores, large retail

chains; tourist retailers such as airport shops; corporate accounts purchasing products for clients

and employees; and specialty high-end food retailers.

3. Functional Areas in the company

Operations: Rogers’ Chocolate Company initially used manual way of wrapping chocolates.

Although the chocolates were of high quality, the process was however very slow. Related to

mechanism of production was labor required in the whole production process. The company

relied on human labor in carrying out its operations. Even though hand wrapping is still being

used, the company has acquired many efficient machines that assist in carrying out production

process. More skilled labor force therefore, has been recruited unlike initially where most of

employees were unskilled. Thus, packaging techniques have improved. Consequently,

production process has increased a lot, thus making the company adjust according to fluctuating

market, the company plans to expand its operational region to ensure widespread distribution of

its products.

Human Resources: Rogers’ production employees are very efficient; they “learned multiple job

functions and enjoyed a variety of work and tasks”. Rogers’ had a very strong culture because

employees are dedicated to their job. Some of Rogers Chocolate Employees are third

generation employees and are proud and passionate about Rogers heritage and commitment

to quality. They believe in the brand and its image Rogers’ retail employees have very good

packaging skills. However, Some employees have been with Rogers for a long time and are

resistant when it comes to changing the way Rogers does business. Some believe that the

core values and heritage that Rogers claim will have to be compromised if they change too

much.

Marketing: Rogers Chocolates has earned a reputation as one of Canada's premiere chocolate

makers and many consumers stating that Rogers' is one of the best chocolate they have ever

tasted (Customer Review 2010). The retail stores create a unique costumer experience with the
aromas and image of the store and one of the friendliest staff. Another 30 percent of Rogers's

costumers are wholesale distributors and stores. The relationship that Rogers maintains with

these customers has been essential to the growing success of the company. They have to strive to

provide competitive price, great customer service and inventory in a timely manner. Regarding

Rogers’ brand Awareness, Rogers' had a brand share of approximately 6% out of $167 million

Canadian Chocolates market in 2006. Consumer pay premium price for premium chocolates and

this fact can be looked intimidating to the retail and wholesale customers who are unaware of the

brand and unwilling to try it. Rogers Chocolates' brand is iconic and local heritage in Victoria

but less known in the rest of Canada. Either customers love the brand or completely unknown.

Rogers also has addressed the health conscious consumer by provide non-sugar chocolates.

Organization: The Board of Directors run the company along with the President, Steve Parkhill.

There are three vice presidents. Ray Wang is the Vice President of Manufacturing, Bjorn

Bjornson is the Vice President of Financials and Kate Phoenix is the Vice President for Sales and

Marketing. Rogers’ employees are allocated into three departments: production, retail and

management. “There were about 110 non unionized retail and production employees”. 35

production employees, 65 retail employees and 20 management employees. An additional 20

employees worked seasonally in the management department.

Culture Rogers’ has a good culture because its “plant was non-union, which was a direct

reflection of the company’s long history and strong family values”. “Employees were quite

proud of the Rogers’ heritage and commitment to quality and were passionate about the

company”. Although this was a strong advantage to the company, the employees’ passion

towards the company has a disadvantage because they are resistant to change; “anything new

caused concern that the company was comprising its values and its heritage”. They represented a
 unified front as “permanent employees were on a first name basis with all of the senior leaders,

including the president”. This kind of culture develops, encourages, and maintains the bond

between the employees with one another and between them and the company.

4. SWOT

Strengths
• The brand is historical with roots to Canadian Victorian establishment and it has high perceived value

• Variety in product offering, different styles and tastes that are geared to certain seasons

• Variety in services, from special orders to wholesale orders

• Using natural ingredients when possible
• Offer a unique product that is considered elite and of high quality
• Rogers won the Retail Council Of Canada's Innovative Retailer of the Year Award in the small
business category in 2002. They received this by being a strong market leader and being innovative in
their industry.
• Some of Rogers Chocolate Employees are third generation employees and are proud and passionate about
Rogers heritage and commitment to quality. They believe in the brand and its image

• Parkhill who had previously worked as the VP for Maple Leaf Foods was in charge of six plants and 2,300
employees. Has an Ivy League MBA and has extensive work in Sales, Marketing and Operations.

• Customers Loyalty

• Social Awareness: Part of the workforce at Rogers is composed of disabled individuals who help out in
production.

• Margins are maintained at 50% on average which outperforms lower quality chocolate segments. Their
revenues have increased due to new products and acquisitions although overall sales percentage had decreased.

Weaknesses

• Equipment and Processes: Old Technology. Machines are not optimal or efficient. They bare more costs on
operating the old equipment. Their handmade processes are labor intensive and time consuming.

• Suppliers: Chinese suppliers cannot work efficiently to the schedule that helps the company run on an
optimal level. But Rogers does not have enough orders share for them to pressurize the supplier
• Capacity: They are limited in capacity as they have a 24,000 sq. ft. manufacturing facility, with 35
production employees. They cannot meet the current demands on time in that space.

• Software: capability to measure the impacts of new products like ice-cream is not available for accurately
forecasting whether to move forward with certain products.

• Resistance to change: Some employees have been with Rogers for a long time and are resistant when it
comes to changing the way Rogers does business. Some believe that the core values and heritage that Rogers
claim to have will be compromised if they change too much.

• Rogers depends on people to experience their product in order to become aware of their product. Due to their
lack in diverse locations, they are restricted in attaining brand awareness outside of their geographical
confines.

• Traditional Image does not attract new and upcoming Canadians and other buyers.

• Packaging and Design: Rogers has very traditional Victorian packaging that gives off the image of being
traditional or not innovative enough.

• Longevity of Product: Due to the lack of additives in their products. Rogers chocolates do not have a long
shelf life. To add more additives or preservatives in their chocolates would go against their quality image.

• Distribution Locations: Granville is situated behind some refuse bins. This is contrary to the brand image that
Rogers is trying to portray and promote.

• Wholesale integrity: Certain small wholesale customers have sold expired products which hurt the Brand
image of Rogers Chocolates.

Opportunities

• Increasing use of internet makes high-margin distribution channel appealing; great way to cheaply reach rural and
American customers

• There’s room for geographical expansion as well as improving advertisement methods

• Improvement to production and inventory management

• Winter Olympics provide unique opportunity to expose brand to affluent travelers from across North America and
the globe

• Corporate gifts channel offers good margins, even at discount, and high-volume orders

• Continue sponsorships of charities; get product to consumers to generate viral marketing

Threats

• Entrance of big players such as Nestle (through Godiva) with capital, distribution, marketing budgets

• Growth of Bernard Callebaut, another retailer with similarly priced and positioned product

• Change in diet of consumers is currently posing a serious threat to the company.

• Gradual change of preference from milk chocolate to dark chocolate has a negative effect to Rogers company that
manufactures milk chocolate.

• Pressure from customers, employees, and human rights organization

• USFDA redefinition of chocolate

Growth Options

I believe that Rogers' Chocolates should focus on strengthening current retail operations by

growing the retail business into new geographic markets by solidifying the performance of the

current locations and then opening additional stores in new areas the will expand their brand

recognition while preserving the quality of their product which designed its stores carefully to

reflect its heritage identity. But there’s a drawback because the company will need to hire new

retail employees and there is a risk that the store will be underperforming like the 2 in

Vancouver). There ice cream line is complementary to the business and should be further

developed and sold in the stores. Internally, and operational strategy to improve efficiencies in

production and demand forecasting will reduce costs, preserve product quality and optimize
 production and inventory capabilities. Thus, they should develop core competence in operations

management to drive efficiencies and optimize inventories.

Recommendations

1. (First 2 years) Parkhill should address the firm’s production and operation problems by

implementing integrated production planning and operation control system. This will help him

gain a proper control over the business. He should address these problems by implementing

integrated production planning and operation control systems as soon as possible (within the next

3 months).

2. (First 2 years) In the next step, he should develop new ideas of products and packaging in

order to attract diverse group of customers. Rogers’ can take advantage of change in consumer

preferences for organic and healthier chocolate. However, Rogers’ old fashion way of packaging

products seems to be one of the main causes of the firm’s slowdown. Therefore, new concepts of

products and packaging need to be developed in order to differentiate the firm from its rivals and

to attract diverse group of customers. Marketing research and consumer preferences survey

should be conducted to find out the customer needs. This strategy should be implemented right

after finishing the previous one.

3. (First 2 years) The third step will be to develop and expand the firm’s online selling system.

This will be a platform for the firm to capture a broader market and attract younger and new

customers. Currently, Rogers’ is confronting with “customers aging” issue. People nowadays

tend to do everything Online. Therefore, expanding online selling system and e-marketing will

help the firm target a broader market as well as younger generation. Rogers’ should develop a
user friendly, multi lingual website and do aggressive e-Marketing activities. Parkhill can

implement this strategy simultaneously with the previous one.

4. (3rd, 4th and 5th Year) After the three mentioned steps, Roger’s will be ready for expanding.

Expanding retail sales for Roger’s will take place in two steps as follows: In the first phase,

Parkhill should acquire 3 retail shops in downtown Victoria with long term lease agreement.

Marketing VP should help him in finding the most appropriate location. After two years, positive

results of the previous implemented strategies and after gaining the projected ROI will be ready

for more expansion. To be present in a wider market and take more advantage of the growing

market, Rogers’ should continue its expansion through acquiring high-end retailers in

Vancouver, Ontario, and Whistler.

References

Customer Review 2010, Rogers Chocolate, Available http://www.yelp.ca/biz/rogers-chocolates-

vancouver [Accessed 5 June 2010]

Kennon, Joshua (2010) Chase Candy Company – A Business Profile of a Regional Chocolate
Maker. Company Profiles and Analysis.

Lazarus 2008, Sweet deal for Purdy's and Roger's Chocolates, August edn, Marketing Magazine

Morrissete 2008, On the case: How sweet is this, really?, Financial Post Magazine

Rogers Chocolate 2010, History, Available: http://www.rogerschocolates.com/history [Accessed

22 May 2011]
Premium Chocolate The Sweet Sales of Success, viewed 13th May, 2010

Stewart, . "Your Future in Chocolate." Saturday Evening Post 4

March 2010: 1. Web. 20 May 2011.
<http://www.saturdayeveningpost.com/2010/03/04/lifestyle/food-
recipes/chocolate-future.html>

Victoria Times Colonist (2010) Rogers' Chocolates sweet on Canadian Navy's 100th anniversary
celebrations. Canwest Publishing Inc

Wheelen, Thomas L., and J. David . Concepts in Strategic

Management and Business Policy. 12th ed. New Jersey: Pearson,
2010. 150-170. Print.

Zietsma 2007,Case: Rogers' Chocolates, Ivey Management Service