In September 2003 Thorntons, the Uk’s largest manufacturer and retailer of specialist chocolates, completed a three-year planning period aimed at achieving a turnaround in the company’s performance. While company turnover had been increased to £167m (= €250m) providing Thorntons with an 8 percent share of its core market, boxed chocolates, profit after tax had declined to the lowest level for seven years (Exhibit 1). During that time Thorntons had set out to follow a series of strategic initiatives involving the reorientation of the company towards becoming a retail-focused business, increasing the scale of the company’s manufacturing and retailing operations and developments that would affect the company’s product range, the markets served and product positioning.
For Thorntons’ core products, the ranges of boxed chocolates, certain key manufacturing and selling activities are conducted in-house with the quality of the boxed chocolate selections assured by the use of quality ingredients and through the manufacturing expertise the company has developed. In addition in-house manufacture is felt to protect the exclusivity of Thorntons’ principal recipes. None-core products, such as solid chocolate bars, are largely supplied by outside producers. Similarly the manufacture of basic liquid chocolate, a capital intensive process, is by an outside supplier, the supplier achieving buying and processing economies of scale beyond those that would be available to Thorntons. Packaging, which accounts for a large part of the product’s perceived value, is also manufactured by outside suppliers.
The majority of the company’s sales are made through company-owned shops. The company’s own retail outlets provide a good quality of service and offer the inclusion of personalised messages, written in icing, on such gifts as Valentine’s Day chocolate hearts and Easter eggs. At extra cost products can also be purchased gift-wrapped. The company’s shops have become a part of the UK high street. In an independent market research survey, consumers asked to rank their typical high street, included Thorntons in fifth place. Establishing and maintaining the company’s shops requires a considerable commitment of resources. For a new shop the average cost of fitting out often exceeds £100,000. Once established shops need further expenditure to cover wear and tear. The layout and appearance of Thontons’ own shops are frequently altered, with the changes developed and evaluated in the company’s mock shops in Derbyshire and the south of England prior to their high-street introduction. The company also makes use of franchised outlets that have occasionally prompted concern regarding the quality of particular outlets or through their occupying a major location or an inappropriate location.
Exhibit 1Thorntons Group: selected company information
Sales96.695.697.6111.3132.8141.3153.4159.9163.8167.1 Operating profit12.610.15.811.312.913.110.510.110.49.4 Profit after tax7.86.7(15.1)8.69.09.75.184.108.40.206
Fixed assets51.050.4220.127.116.119.1104.496.788.883.2 Net assets47.350.133.338.444.848.149.140.043.043.0 Gearing ratio (%)16711051301118667
No of UK outlets
* £1 = approx. €1.5.
The freshness of the product is a distinctive feature of Thorntons chocolates. For many other manufacturers, addressing the wider chocolate market, the greater use of vegetable fat (other than cocoa butter) results in products with a shelf-life of over a year. Although Thorntons’ own research had indicated that freshness is not the first concern for consumers when purchasing a gift of chocolates, the company believes that it is essential to maintain the customer’s experience of a fresh product....