Case Study The Day Chocolate Company

Introduction

This paper is dealing with the Day Chocolate Company, which has been first established in 1993 by a co-operative set of Ghanaian farmers. Thanks to liberalization of the cocoa market in Ghana (1990s) the first step of export was made. Because of the fact that farmer’s benefits were not thought of by the governmental cocoa agent, the need for a cocoa agent became obvious. This is why the Kuapa Koko was established in 1993 to appeal to the benefits for the farmers. With two farmer representatives the Ghanaian farmers agreed to start The Day Chocolate Company in 1995.

The farmers’ aim was to establish a farmer owned organisation, where farmers were able to work together for their own benefit and trading their own cocoa (Divine 2007).

On the following pages the consumer segment, at which day Chocolate is aiming at, and the assessment about what makes it a strong brand is given. Furthermore, the general market trends (opportunities and threats) are presented as well as the question of how Day Chocolate should cope with those opportunities and threats. Finally, it will be discussed where Day Chocolate should go when internationalizing to other parts of the world.

Case 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?

Conclusion

The Day Chocolate Company needs to create a global marketing plan in order to be able to internationalize. A strategy which combines the step-by-step manner and the resource concentration seems to be most aptly. Besides, they are able to attain the attention of a wider customer base by building relationships with global retailers. When expanding to other countries it would be a good choice to first establish channels in Germany and France as these countries are, according to a recent survey, interested in fair trade products (Datamonitor, 2008). When they keep on examining customer wishes and market information they are probably on a good way on becoming more global.