Premium Chocolates are like Imported Roses which not consider necessities for one life. People love to have or get one of those products. However, if there isn’t a special occasion or surplus cash, some people will not buy that unnecessary stuff.
In Canada, premium chocolates were growing at 20 percent annually and the Canadian market size for Chocolates was US$ 167 million in 2006. An attractive growth from premium chocolates makes the current player like Rogers Chocolates, Purdys and others are thinking new strategies to expand market. In addition, some big traditional manufacturers like Hersheys and Cadbury are also very interested and keen to enter this segment (Zietsma 2007).
Rogers Chocolates is a king in Victoria and well known in British Colombia. However, outside this area the brand awareness is still low. The new appointed CEO is being targeted to double or triple Sales in ten years. The key successes in premium chocolates are: understand the consumer’s needs, brand awareness, diversified products and enhanced competitiveness.
There are many challenges for Rogers’s chocolates to grow in this ever-growing competition, and there are many old and new strategies that haven’t been proven effectively. Moreover, Rogers is small/medium Company that has limited resources to apply all those strategies. The management decision-making will be very crucial to manage its strength and weakness while at the same time; they have to overcome the threat and opportunities in the industry.
1. Competitive driving forces in the premium chocolate industry
Porter’s Five Forces Model
Porter’s “five forces” model uses five competitive forces that determine a particular firm’s capability to compete (Thompson, Strickland, Gamble 2010). The chocolate and cocoa industry can use the “five forces” model as an analytical tool to determine the competitive market.
Figure 1: Five competitive forces by Michael Porter
1. Competitive Rivalry
The intensity of rivalry among competitors in an industry can create price wars, advertising battles, new product lines, and higher quality of customer service. There are many circumstances that intensify rivalry which some of them are as follows: many balanced competitors, a slow growing industry, demands falls, high fixed or storage costs, little switching costs, aggressive competitors and many other circumstances (Thompson, Strickland, and Gamble 2010).
Premium Chocolate competition in Canada involves strong regional brands and few global players such as Godiva, Lindt, Callebaut, and Purdy’s. Even though The Canadian market size of chocolates industry as a whole had been falling (2 % grow projected). However, the premium chocolate market was growing at 20 percent annually (Zietsma 2007). That situation considers less intense rivalry among competitors; moreover every area has their own local king like Rogers in Victoria.
Nevertheless, in 2008, Global economy was severely hit by the crisis that originated from the United States and quickly spread to the whole world including Canada. Premium chocolate majority consumers in Canada come from tourists especially Americans as bordering neighbour. When the tourist’s number drops and the demand for premium chocolate also falls, the fierce rivalry will increase
2. 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 (Thompson, Strickland, Gamble 2010). 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 (Zietsma 2007).
The market is only control by few large and old players which occupy significant market shares. The chocolate industry has a significant economy of scale entry barrier because large companies exist in...