ase analysis

2.1. Consumer segment

The consumer segment that Day Chocolate is aiming at is the so-called “concerned
consumer”. These types of consumers find it important where their products come from.
They want to buy Fair trade products like Day Chocolate because they find it important
that with buying that product, they really help those who have produced it. Fair trade
products insure the integrity of these companies, and therefore the “concerned
consumer” is willing to pay more for a certain product, knowing that the producers in
third world countries benefit from this. Although the concept is becoming more and
more popular, usually (not always) this type of consumer has a fairly good income. This
is usually the case, not because people with a less good income are not interested in
Fair trade, but because Fair trade products are mostly slightly more expensive than
regular products, and people with a lower income need to keep a tight budget. This is
probably the reason that Day Chocolate is selling their products in the top UK
supermarkets instead of in a lower price range.

According to Adams & Raisborough (2008), there is a suggestion that customers who
are interested in buying fair trade products are located in the so called middle-class.
Besides, there seems to be a relation between higher education of buyer and fair trade,
by which it can be proposed that middle-class segmented buyers have more money to
spend.

What makes the Day Chocolate a strong brand

In order to say what makes the Day Chocolate a strong brand one has to have a closer
look at the company’s competitive advantage, their strengths and weaknesses, the
customer equity and their marketing mix.

Regarding the company’s products, its structure and its mission it gets obvious that its
competitive advantage is its fair trade mark. In 1970, the fair trade market has been
established by Oxfam, a charity organization, and several other European aid
organizations. Consumers who are buying fair trade products are seen as being ethical
consumers. Ethical customers are concerned with topics like for instance ‘fair labour
conditions, environmental care and fair prices’ (Transfair USA, 2008). Thus, it can be
stated that Day Chocolate’s competitive advantage is its fair trade mark because it
addresses a special type of customer who are willing to pay more money for products
and are loyal to companies who are selling fair trade products.
Moreover, one the one hand, the company’s product excellence is one of their main
strengths. They pay very much attention to the quality of their products and their
suppliers und this is why the customers are very satisfied and are willing to pay more.
The customers can be sure that they will buy great quality und thus they are very loyal.

However, as far as ‘not loyal customers’ are concerned, with the fair trade mark comes
-in their point of view- the weakness of Divine chocolate. Because of the fact that the
company is doing business in a fair way with African cocoa farmers, the price of their
products is higher than that of most of their competitors.

In addition to that the portfolio of products is not very high and there is little diversity.
So the customer has to go to competitors when they wish to buy more diverse fair trade
products. Moreover, the company does not operate globally, which can be seen as
another weakness of the Day Chocolate Company. It does not reach a wide range of
markets, but is mainly operating in the United Kingdom, the United States, Norway,
Canada, Sweden and the Netherlands. So one can deduce that they are operating on an
international level and they are a potential global. In order to establish their company/
products more global they need to define their competences and find out how they can
utilize this internationally

As far as customer equity is concerned it can be stated that it consists of value equity,
brand equity and relationship equity. Customers who are truly concerned with the issue
of fair trade are very likely to stick with Day Chocolate if they are the only fair trade
brand in the region or if they offer the best price/quality ratio.

Taking a closer look at Day Chocolate’s marketing mix, following “four Ps” can be taken
into consideration: The product, price, place and promotion.

The first product was a classic milk chocolate bar, which is called ‘Divine’ and was first
launched in 1998. Made with 28% cocoa and real cocoa butter “it melts in the mouth
irresistibly and has been developed to appeal to the British public’s palate preference for
creamy chocolate” (Bized 2010). Following in the footsteps of Divine The Day Chocolate
Company has launched the following products: Darkly Divine (launched in 2001 as a
response to the growth in the dark chocolate market and gourmet-cooking sector),
Divine Mini Eggs (launched in 2002 as a seasonal product) and Dubble (launched in
2000 as a result of a partnership between the Day Chocolate Company and Comic
Relief). The Divine range is continually expanding. Christmas products, such as chocolate
coins and Christmas tree baubles, were first sold for Christmas 2002 and Divine white
chocolate and Divine milk chocolate with hazlenut was on the shelves in time for Fair
trade Fortnight during March 2003 (Bized 2010).
Regarding the product prices it can be said that the products are not cheap but at the
same time they are affordable. The customers are aware of the fact that they pay more
for the product having in mind that they support fair trade.

Promotion: ??

The Day Chocolate Company is a unique North-South partnership leading the way in
producing good quality fairly traded chocolate to the British market. The company is
working with organisations and individuals in the private, public and voluntary sectors in
order to raise awareness of fair trade (Bized 2010).

All in all it can be concluded that it is mainly their fair trade brand image that makes the
brand a strong one. Further conclusions??!!

Market trends, threats and opportunities

The chocolate industry is becoming more focused on very specific target markets. For
instance the premium chocolate is very popular. This means that there are more “adult”
flavours such as chocolate with spices, exotic tastes like mangos etc. Other trends
include single origin (chocolate made with cacao exclusively from one region), organic,
Fair Trade and sustainable (The Gourmet Retailer, 2008).

Another trend in the chocolate industry of recent years is healthy chocolate. Chocolate is
healthy when producers add functional healthy ingredients to their product. In this way
they promote the benefits of cocoa because cocoa contains antioxidants [1] . This is why
dark chocolate has been promoted the most as it contains the most cocoa. Besides, by
adding fruits to the chocolate, the product contains more antioxidants (Confectionery
News, 2007).

Furthermore, a recent trend is that fair-trade products are called ethically sourced. This
is the reason why sales of this type of chocolate have increased in the last years due to
the fact that buyers and the industry are more concerned about where the ingredients
come from. They do not favour the idea of having child labour connected with their
chocolate.

Regarding the market trends in the chocolate industry, one big opportunity for Day
Chocolate could be to make their chocolate not only a fair trade product, but also a
premium product. They could expand their market by developing many different
original tastes. If there is more choice, it is likely that they will attract more consumers.
Another opportunity lies in printing the cacao content on their products for consumers
that pay attention on this. Finally, they could start a new, completely organic, product
line. Seeing that it is fair trade and organic this would probably be attractive to their
current consumer segment, namely the “concerned consumer”.

In addition, another opportunity for the company is the fact that the fair-trade market is
growing, which will give Day Chocolate the opportunity to expand not only their
portfolio of products, but also to expand geographically. Nevertheless, the growth of
the fair trade market also brings threats. More companies learn that some of their
consumers are willing to pay more in order to buy fair trade chocolate and this may lead
to more competition. Companies that are afraid of losing their customers to fair trade
brands develop their own fair trade products.

Another important threat is the recent financial crisis. The crisis may affect the sales of
fair trade chocolate/ products, because buyers may tend to buy cheaper chocolate
instead of expensive fair trade chocolate.

Problems and possible future actions

Regarding to the screening process of international market segmentation, firms
competing internationally should segment markets on the basis of customers and not
on basis of countries. Otherise it would ignore the differences between customers within
countries. In the priliminary screening process, the following criteria are important to
analyse:

Market size growth

Buying power of customers

Culturally similar markets

When those critieria are applied to the day chocolat case it can be notified that their
market size is an increasing market with the aim to a global market. Aditonally the
buying of power of customers is medium/high. Customers who like the product
excellence of the fairtrade products are willing to pay more for excellent chocolate. The
culturally similarity of the markets are medium/high. Although there are some small
differences, the chocolat market is rather similar in the US , UK, Netherlands and
Scandinavia. Therefore, the day Chocolate company has potential to be successful in
other markets as well. The Day Chocolate company has already a beverage assortment,
which could be further extended to vendor machines, e.g. at airports or railway stations.
The expansion of the market could be developed by the use of premium chocolate in
different tastes. The market trends showed that fruit chocolates have increased
popularity. It would be smart to focus on those kind of chocolates.

Furthermore, their expansion could be improved by building relationships with retail

companies. In addition to their contracts with Starbucks and co-op they should try to
establish agreements with other retail channels. In this point of view, global retailers are
probably the best alternative, because they would be able to reach more markets
through one channel.

Aditionally, a new market possibility could be the supply of other fair trade products.
Such as the supply of fair traid coffee. Therefore, they have the ability to build a strong
brand in fair trade coffee. (Hollensen S., 2008)

One difficulty is the fact that The Day Chocolate Company still is in its embryonic phase
to global expansion. At the moment the UK and the USA are their main markets,
however, they have potential to expand to other countries worldwide.

Moreover, a possible problem is that the number of competitors is increasing because

companies are now realizing the growing demand for fair trade chocolate and, as
mentioned before, as consequence develop their own fair trade brands.

Finally, the fact that due to the financial crisis the demand for the fair trade products is
likely to decrease, may postpone the company’s global expansion.

Because of these occurring difficulties The Day Chocolate Company should try to
expand globally. In order to expand the company makes use of an incremental, step-by-
step entering strategy. Due to their products they should enter advanced/ developed
countries with a high GNP per capita because in these countries the number of
customers, who are willing to pay more for fair trade chocolate and can also afford it, is
higher. The company should expand incrementally in combination with a resource
concentration strategy. Firstly, day Chocolate will have to establish their company in
similar markets as the United Kingdom and they have to be sure that those markets’
customers are keen on buying ethical products.

To be able to deal with the increasing number of competitors the company should try to
differentiate their products from competing ones.

As far as their internationalization is concerned, Day Chocolate should expand to France

and Germany because in these countries fair trade sales are very high compared to the
rest of the world. While concentrating on these two countries the company should not
pay much attention to Japan and the Mediterranean countries because these countries
have very low fair trade sales (Datamonitor, 2008). However, the company should be
aware of the fact that they probably need to adapt their products to the new markets.
New market segments or new countries?