The overall chocolate market in Canada was finding itself in a slow-growth environment with only 2% annual growth projections after 2006 and the industry as a whole had been experiencing a decline in growth. The chocolate market has two distinguished sectors – lower quality, more affordable mainstream chocolate and premium, higher cost chocolate. The lower quality sector was performing poorly, whereas the premium sector was experiencing growth around 20% per year, leading traditional companies into the booming premium chocolate market through M&As and launching higher-quality product lines.
The chocolate industry is pretty fragmented. A small number of large players such as Godiva and Lindt are dominating the market shares with larger distribution channels than the smaller, strong regional brands such as Rogers’, Callebaut’s and Purdy’s.
Attractiveness of Premium Chocolate Industry through 5 Forces Model
Intensity of Rivalry
The premium chocolate market competition is made up of a few larger players such as Godiva and Lindt and several strong regional brands, including Rogers’. With annual market growth of 20%, there is less pressure for intense competition to exist among the manufacturers. The premium chocolate market is highly differentiated, leading to consumer brand loyalty, which decreases the levels of rivalry.
Threat of Substitutes
Substitutes such as traditional chocolate, ice cream and other emerging luxury confectionary products could be purchased by consumers. Chocolate connoisseurs that are loyal to their high-end quality products are unlikely to substitute, however.
Threat of New Entrants
Entering the premium chocolate market would require extensive investment into production facilities and establishing a brand image. Barriers are created for new entrants by existing consumer demand for reputable products and established quality brands...