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Publication: 08/2012

Cacau Show: strategic marketing for

sustainable growth

Raul Amaral Rego 1

Summary

Alexandre Tadeu da Costa, the chief executive officer of Cacau Show, the world’s largest

chain of franchised chocolate stores, decided to review the company’s competitive strategy

after more than two decades of growth. To do this, he asks his principal managers to analyze

the distinctive features of the business based on market diagnostics, the franchising system,

the industrial area, the R&D policy, the retail strategies for food service operations and the

people management policy. The managers have the task of formulating a long-term strategy

for sustained growth and remaining competitive, in accordance with the fundamental

principles of the company, which are defined as the pillars of its value proposition.

The proposed study aims to explore the marketing mix expanded to include services,

which encompasses the decisions concerning product, distribution, promotion, pricing,

people, physical evidence and processes. The case study involves formulating a proposal for

the Cacau Show 2020 Strategy that includes guidelines for the company’s value proposition,

1 Case study developed by Professor Raul Amaral Rego. This case study is solely for the purpose of classroom

discussion and does not propose to render an opinion on managerial effectiveness or ineffectiveness or to serve as

a primary source of data.

Copyright © 2012 Insper Institute of Education and Research

No part of this case study may be reproduced or transmitted by any electronic or mechanical means, including

photocopying, recording or any storage system, without the express written consent of Insper Institute of

Education and Research. Violators will be subject to the penalties set forth in articles 102, 104, 106, 107 of Federal

Law 9610 of 02/19/1998.

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the attributes that form the customer’s brand experience, the relationship with employees

and the relationships with the franchise owners, among other aspects.

Introduction

Not since making his first big sale when taking his first steps as an entrepreneur had

Alexandre felt this level of excitement. With over a thousand stores opened, Cacau Show had

become the world’s largest chain of franchised chocolate stores, a thunderous success

achieved in just over two decades. But Alexandre was worried about the company’s future.

“Don’t let success throw you off course,” he kept saying to himself while driving, repeating

one of the seven core beliefs of the Cacau Show brand.

With a strong innovative spirit, he had decided to review the company’s business model,

a process he called the Cacau Show 2020 Strategy, which focused primarily on strengthening

the competitive advantages of the store chain to increase competitiveness and align the

growth strategy with safeguarding market share. Now he was on his way to the hotel where

the strategic planning workshop was set to take place.

Alexandre thought about what new directions Cacau Show might take. He recalled when,

at age 17, he had sold chocolate truffles door to door, and also remembered his heartfelt

speech at the opening of the first store. Among other memories that came to his mind, he

thought about how there could be no limits to the development of a business that was driven

above all by a passion for chocolate.

The company Cacau Show

After making his welcoming remarks, Alexandre gave a speech to open the workshop:

“Ladies and gentlemen, I know it would be difficult for the competition to establish the

same competitive edge as Cacau Show, considering the complexity of this business built

from an intense synergy between the manufacturing area, the franchising system, the retail

operations and the food service operations. We know that our competitors have

unceremoniously imitated our products, prices and store designs. But this is not the main

reason why we are here.” Then, finding the table beside him, Alexandre revealed three items

that caught everyone’s attention: a Cacau Show catalogue, an Easter egg and five U.S.

hundred dollar bills.

Holding up the catalogue, he said, “Everyone knows that Cacau Show’s origins are in

door-to-door sales and companies that offer different types of products that were developed

by my family. Back then, Mavil’s2 worked with a wide range of items and a large diversity of

2 The company of Alexandre’s parents.

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suppliers and vendors. Although the company did not succeed as a chocolate reseller, on my

initiative the chocolates returned through the use of this catalogue (Exhibit 1), which uses the

Cacau Show brand created by my mother.

Then, showing the Easter egg, he continued, “Easter symbolizes renewal and ever since

the day we managed to fill orders for over two thousand chocolate eggs3, it has held a special

meaning to the company. We evolved from homemade bonbons filled with cherry liqueur to

hundreds of products using state-of-the-art technology. From distribution limited to bakeries

and small local markets, we went on to operate nationwide. We have grown continuously

and consolidated the company over the past five years, a period that saw accelerated growth

in the number of franchised stores (Table 1) and in sales revenue (Table 2).”

Finally, he held the five U.S. hundred dollar bills in the shape of a fan and asked the

audience, “Cacau Show started in a 12 m2 office with this initial capital. What is the

difference between that and our 55,000 m2 factory in Itapevi (São Paulo state), or our assets

that include a network of over one thousand franchised stores?”

Some attendees tried to answer, but Alexandre intervened with his own response: “No!

We had the vision for a good business in the past and we are here with a vision for a good

business for the future. The approach to working with discipline and both feet on the ground

remains the same. Learning, innovation, valuing people and passion are the same in both

situations. That is why it is important for us to remember that independently of any change

that might occur, Cacau Show 2020 must ensure a non-negotiable commitment to these

principles. We can change the body of the business, but not its soul! Therefore, let these

principles guide us in this task! Let’s get to work.”

The confectionery market (chocolates, candies, sweets and derivatives)

The director of marketing, Monica Ogawa, was the first to give her views, presenting a

summary of the market study that had been commissioned.

“We do have a lot of faith in our principles. But even so, the study shows that we cannot

underestimate the changes that have to take place down the road, both in terms of

competitor profiles and consumer trends.” To that end, Monica highlighted three aspects

that she considered relevant: the market’s potential for growth, consumer food trends and

the potential of new competitors joining the direct sales segment.

“Known internationally as confectionery, the global market for chocolates, candies, sweets

and derivatives continues to be very attractive. The market is valued at close to 140 billion

dollars per year, and chocolate products account for nearly half of the total sales revenues. In

Brazil, the chocolate products market is estimated at approximately 380,000 tons per year,

3 At the time, due to the suppliers’ inability to meet such a high demand, Alexandre decided to mold the products

himself, initiating Cacau Show’s productive operation.

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with an average annual growth rate of approximately 11% in the past five year.” She

expressed her belief that Brazil, where the consumption of chocolate is 2.2 kg per capita, still

offered a lot of market growth potential, citing the example of developed countries, where

consumption exceeds 10 kg per capita.

With respect to this data, Alexandre commented, “Within this positive scenario, we can

set ambitious targets in accordance with our vision”.4

“I agree with you,” Monica replied. “And consumer trends, according to the study we

used in our analysis5, should play a role in strengthening our brand, since we have always

been pioneers at launching products that keep up with trends in the global market.” To

illustrate this, Monica presented a summary (Table 3) of these trends, showing how they are

expected to influence the confectionery market (Table 4), retail operations and food services

(Table 5). She emphasized that these trends were crucial in reviewing Cacau Show’s value

proposition, and should be carefully analyzed.

“So the path toward growth will be easy. Can we stop planning now?” Alexandre asked

provokingly.

Monica answered, “It’s not that simple! Although the competition may not be the

company’s main concern, we must be alert to current competitors and new players in the

direct sales segment. For example, Grupo CRM6 has invested in the construction of a new

industrial plant and the acquisition of new equipment and the Dan Top brand in order to

enter the supermarket channel.” She went on to emphasize that the creation of Chocolates

Brasil Cacau, a company directed at consumers in the “C” and “D” lower income groups,

had envisioned ambitious growth targets, aiming to reach over 500 stores in three years, with

operations in all areas of the country. Although it has yet to be seen as a real challenger to

Cacau Show’s business, it should not be underestimated in the long term.

“Besides Brasil Cacau, other companies have been growing within the franchise system,

such as Qoy Chocolate, Planet Chokolat, Mundo di Chocolate and Fábrica di Chocolate. It

would be worth evaluating whether they could introduce new ways to attract consumers. In

this regard, I’d like to present a comparison between Cacau Show and some of these

companies (Table 6).”

As an example, Monica highlighted Qoy, a company that used to operate under the name

Doce Cacau, for its investment in a project to change the physical environment and

decoration of its stores, as well as product design and packaging. With regard to Planet

4 DA COSTA, Alexandre Tadeu. Uma trufa e... mil lojas depois. São Paulo: Alaúde, 2010.

5 BRASIL FOOD TRENDS 2020. São Paulo: FIESP/ITAL, 2010.

6 Group made up of the Kopenhagen and Chocolates Brasil Cacau companies.

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Chokolat, she mentioned a new project for stores and product design, aimed at greater

sophistication. Chocolates Katz, meanwhile, was used an example of a traditional company

that always operated locally (city of Petrópolis, Rio de Janeiro state) with a single store, and

opted for franchising as a means of expansion and certainly as an attempt to explore the

attractive market pioneered by Cacau Show.

Monica noted, “The growth of the sales segment via company-owned stores and the

franchising system can be seen. I believe that the main reason behind the growth of this type

of store offering chocolate-themed products and services is to provide products that are

unlike those found in supermarkets, bakeries and convenience stores. They are different in a

number of ways: flavors, recipes, packaging and the exclusive environment of stores and

food services, which also include dessert, chocolate fondue, hot and cold beverages, ice

cream and even savory snacks.”

Beyond these direct competitors, Monica noted that the booming market is enabling the

emergence of independent stores, generally offering more sophisticated and pricier products

made from imported materials, as in the case of the Cau Chocolate, L’Univers de Chocolat

and Renard.

Concluding her presentation, Monica also noted that the growing importance of this

channel, in quantitative terms, has the potential to attract industrial giants. “Following the

trend of operating in multiple channels, large companies like Nestle that already operate in

door-to-door sales can end up competing with Cacau Show stores. Additionally, the growth

of the market will have the potential to attract the interest of international chocolatier

networks such as Rocky Mountain Chocolate Factory (RMCF), See’s, Fannie May Candies,

Godiva and Neuhaus.”

Cacau Show’s Value Proposition

Alexandre was emphatic: “Without a doubt, we should not underestimate the

competition. But I believe strongly in the strength of Cacau Show’s value proposition. And

obstacles are there to be overcome! I believe we already have enough market data for

analysis. However, I’d like the other directors to evaluate strategies to strengthen the pillars

of this proposition: products, distribution and people.”

Sergio Butuem, industrial director, then stepped in to explain in detail that technology

was a strategic factor in obtaining the perfect chocolate, via the systematic acquisition of

modern equipment, professional specialization, company-owned chocolate production, the

development of new suppliers and the procurement of distinctive materials. Technology was

also important in increasing industrial productivity and reducing production costs, a critical

factor in ensuring the profitability of a business centered on competitive pricing7. With

7 Prior to the existence of Cacau Show, the Brazilian market was characterized by mass-produced products

offered at low prices, along with more sophisticated products sold at high prices. The country’s largest chocolatier

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visible pride, Sergio concluded, “The product is the central element of the company’s value

proposition, obtained through efficient, large-scale production. It guarantees distinctive

chocolates offered at low prices, the main element behind the company’s success.”

Juliana Takahashi, manager of Research, Development and Innovation, added, “We

cannot overlook the role of continuous investment in innovation8, which is crucial to putting

together a distinctive product mix. Renewing the product mix guarantees that customers will

return to the stores, because it feeds their desire to try new things. So besides offering

accessible prices, Cacau Show’s strength lies in the capacity to come up with delicious

products for people who love chocolate. And through innovation, we create the mass

prestige market for chocolates.”

Juliana also emphasized the importance of the company’s creation team, a

multidisciplinary group comprised of food engineers, master chocolatiers and designers.

“I understand your position,” Alexandre intervened, “but I consider all the pillars to be

equally important. Consider, for example, the company’s expertise in distribution, which

was based on the principle of reaching the client wherever, however.”

Alexandre highlighted the company’s experience in a large variety of sales channels. He

recalled when they used to sell products to Mappin, a former department store, and when

they used companies that resold products through home delivery. He mentioned

distribution on a national scale through catalogues, the contracting of exclusive resellers,

sales to a large retail network (Lojas Brasileiras), door-to-door sales and the sale of products

under company-owned third party brands.

“The opening of the first Cacau Show brand store (Exhibit 2) only occurred more than ten

years after the company was founded. Another four years of experience in stores operating

under a trademark licensing system passed before we decided to migrate9 to the franchising

system. Only then did we create the conditions for the company’s growth, obtaining

economies of scale that enabled the consolidation of the low-cost strategy. I would like Túlio

to speak a bit more about this pillar.”

network had very high margins, and a kilogram of fine bonbons sold for up to 10 times the cost of a kilogram of

chocolate, its main ingredient. Cacau Show’s value proposition was based on the idea that a markup of 100%

could also make good business when aligned with an expansion in the number of stores, which would lead to a

larger sales volume and good returns in terms of absolute margins.

8 Currently, the company launches new products every 15 days, reaching 100 new products per year.

9 One year after this change, the network grew from 63 to 169 units. Since then, the company has experienced

high demand from those interested in franchising the brand, leading to a strong pace of growth. To meet this

demand, the company built a production plant in Itapevi (São Paulo) that was over three times larger than the

previous plant, increasing its production and storage capacity in order to supply the largest fine chocolate

network in Brazil, with more than one thousand stores.

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Commercial director Túlio de Freitas then highlighted that the success achieved with the

franchised stores, aside from the good products sold at attractive prices, was also due to the

ability to deliver on the company’s main promise, as expressed in its mission statement:

“Provide the maximum number of people with a memorable experience and excellent

products and services, serving as a benchmark in the management of the chocolate

business.” In relation to the distribution pillar, Túlio listed two areas that he considered to be

essential for the future of Cacau Show.

The first of these was the physical environment, which he said could create an inviting

store atmosphere, creating favorable conditions for interacting with customers. Once a

unique selling point, he observed that the building design and visual communication of

Cacau Show stores were being imitated by new companies entering the market.

Secondly, he mentioned franchisee support services, which have earned the Seal of

Excellence10. He explained that the quality of the services provided to clients depended on

the satisfaction of franchisees, which in turn depended on the efficiency of Cacau Show’s

internal processes. As an example, he described the system that guaranteed the supply of the

stores and the optimization of the product mix, fundamental factors in supporting sales, as

well as the franchisee training program, which plays an important role in the continuous

refinement of client relationship standards.

“You touched exactly on the important point here: people!” Alexandre interjected. He

then asked the director of human resources to conclude the presentations.

Andréia Vieira obliged and highlighted the fact that the “machine” would not work

without the third pillar of the value proposition; that is, the enormous importance that the

company has always placed on the well-being of every individual involved in the business.

For Andréia, Alexandre’s leadership style would have been the binding element in the

creation of an unparalleled organizational culture: “People working with simplicity, with

attention to the details that could make a difference to the business, with objectivity, hard

work to attain success, mutual respect and the sincere wish to share in the victories. In this

search for a balance between reason and emotion, Cacau Show built foundations of high

quality service with a human touch, so clients could really see everyone’s passion for the

business.”

Andréia concluded her presentation by pointedly reading an excerpt from Alexandre’s

book: “A day lived without passion is a day wasted. Work is an important aspect of life that

consumes a large part of our time, and those who live without passion are throwing away

time. The great challenge for entrepreneurs is to grow without losing that essence we carry

within our hearts and that makes us wake up happy every day.”

10 Seal granted by the Brazilian Franchising Association.

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A brief silence fell over the hall. Alexandre used the opportunity to close the first day of

work. “We have already gone over today’s scheduled time, and I think now is the right time

for us to reflect on everything that was said. Get some rest, everyone.”

Proposals for the Cacau Show 2020 Strategy

The following day, Alexandre was first to arrive at the room reserved for the workshop.

He was full of anticipation and asked himself what changes could be made to Cacau Show. It

was decision time, and the other managers had already begun to arrive and take their seats.

Alexandre opened the workshop with a heartfelt speech:

“First of all, I’d like to say how proud I am to have you on my team. I noticed that many

of you stayed late discussing the proposals. I recalled the days when I spent sleepless nights

packing bonbons. I thought about how those chocolates changed my life and also the lives of

the many people who shared my dream. Now, I try to look at the future. I no longer feel

certain that our value proposition continues to be as robust as I used to think. Do we need to

reinvent Cacau Show? Invest in new areas of competence? On the other hand, our business

has become a complex. Many variables are at play. We will need to define a focus when it

comes to the development strategy, because trying to change everything all at once doesn’t

work. Either way, I hope we choose a path on which we can continue to exercise the

incredible power of wanting more.”

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Exhibits

Exhibit 1 - First catalogue with the Cacau Show brand

Source: DA COSTA, Alexandre Tadeu. O Cacau é Show. São Paulo: IPSIS, 2008.

Exhibit 2 – Cacau Show: storefront of the first franchised location

Source: DA COSTA, Alexandre Tadeu. O Cacau é Show. São Paulo: IPSIS, 2008.

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Table 1 – Growth in Cacau Show stores under trademark licensing (red) and franchising

(blue)

Sources: DA COSTA, Alexandre Tadeu. O Cacau é Show. São Paulo: IPSIS, 2008; Company.

Table 2 – Growth in Cacau Show annual revenue (R$ thousand)

Source: Company

Years

Past 9 years

Annual revenue (R$ thousand)

Numbers of stores

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Table 3 – Food macro trends

Macro trends Impact on RETAIL

Sensoriality and

Pleasure

The valuing of more sophisticated, gourmet and higher-value products, gastronomic

experiences, regional products and new textures and flavors.

Healthiness and

Wellness

Greater demand for dietary and weight control products, consumption of natural and

organic products, functional products, products with fewer calories.

Convenience and

Practicity

Greater demand for ready- meals, easy-to-prepare foods, practical packaging and delivery

products and services, snacks, products for individual consumption, products for

consumption in different places and situations.

Reliability and

Quality

Value on brands that guarantee origin, traceability, quality and safety management systems

certification, informative labeling and other forms of information on product characteristics

and production processes.

Sustainability and

Ethics

Concern for the environment and social causes, tendency to value products with a smaller

carbon footprint, smaller environmental impact, with environmental labeling, recyclable

and recycled packaging, with fair trade origin certificates, produced by companies with

recognized social responsibility.

Source: BRASIL FOOD TRENDS 2020. São Paulo: FIESP/ITAL, 2010

Table 4 – Trends in the consumption of chocolates, candies and sweets

Macro trends Trends – Confectionery

Sensoriality and

Pleasure

Products with greater added value in all consumer segments (premiumization). Products

that indicate origin, source of recipe and ingredients, brand status for premium products.

New textures, exotic ingredients (LEWIS, 2007).

Increased consumption of dark chocolate. Products with higher cocoa content. Use of

traditional methods, revival of traditions, appeal to nostalgia. Premium products, with

combinations of different flavors, with exotic flavors (ANNETTE; HORTON, 2009).

Healthiness and

Wellness

Focus on natural products, followed by products with lower fat and calorie content,

functional and energetic products (LEWIS, 2007).

Functional products, chocolates with visual appeal (using collagen), ingredients that satiate

hunger. Naturally healthy and nutritious ingredients such as açaí (acai) and pomegranate

(superfruit). Natural products, with natural coloring and flavoring agents, without

additives. Vegetarian products. Higher consumption of dark chocolate (ANNETTE;

HORTON, 2009).

Convenience and

Practicity

Stand-up pouch packaging, small packaging for individual consumption (LEWIS, 2007).

Reliability and

Quality

Products that indicate origin, brand exclusivity (LEWIS, 2007). Higher quality products.

Increased consumption of organic products (ANNETTE; HORTON, 2009).

Sustainability and

Ethics

Products with minimal packaging as a means of reducing waste, lightweight and easily

recyclable packaging (LEWIS, 2007). Increased consumption of fair trade products, with an

appeal to solidarity (ANNETTE; HORTON, 2009).

Sources: ANNETTE, Felicity; HORTON, Natasha. Innovations in confectionery: Key trends, growth opportunities

and emerging markets. USA: Business Insights, 2009; LEWIS, Helen. Growth opportunities in confectionery:

emerging flavors and new added value segments. USA: Business Insights, 2007.

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Table 5 – Impact of macro trends on retail and food services

Macro trends Impact on RETAIL Impact on SERVICES

Sensoriality and

Pleasure

Value on: stores as a form of entertainment

and leisure, distinctive atmosphere,

merchandise mix that offers variety,

specials and new products, use of state-of-

the-art technology.

Value on: gastronomic experience,

variety, the exotic, cultures,

sophistication, entertainment, socializing,

tastings; environments that match the

products offered; service quality,

innovation, technology; chefs.

Healthiness and

Wellness

Merchandise mix with healthier products,

information on food nutritional value,

sanitized environments, natural lighting

and ventilation.

Use of healthy ingredients, recipes that

use less fat, organic products, functional

ingredients, healthy snacks; environments

that match healthy lifestyles.

Convenience and

Practicity

Facilitated access, quick service, ease of

payment, delivery, neighborhood stores.

Good locations, quick service, ease of

payment.

Reliability and

Quality

Quality of products and processes, safety,

origin, traceability, prestige brands,

supplier certification, preventive

maintenance, quality control.

Credibility, quality of products and

processes, food safety, materials with

guaranteed origin, value on information

on production processes and products,

quality guarantee, safety, hygiene and

cleanliness.

Sustainability and

Ethics

Products using local produce, organic

products, products with a proven origin,

products processed sustainably; stores by

companies known to be sustainable and

ethical and that value employees; loss

control, construction rationalization

processes, use of recycled material,

accessibility for disabled persons.

Products using local produce, organic

products, products with a proven origin,

products processed sustainably; stores by

companies known to be sustainable and

ethical and that value employees; loss

control, construction rationalization

processes, use of recycled material,

accessibility for disabled persons.

Source: BRASIL FOOD TRENDS 2020. São Paulo: FIESP/ITAL, 2010.

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Table 6 – Main companies offering chocolate products in company-owned and franchised

stores: years in operation, number of stores, product lines and services

Company

Years operating

on the market

and number of

stores

Chocolate product lines, other products and services

Kopenhagen

http://www.kopenhagen.com.br

> 80 years

over 250 stores in

Brazil

Chocolates: various chocolate bars; bonbons; truffles; cherry

brandy bonbons; products with chocolate covering

(marshmallows, honey bread, marzipan, chocolate sticks,

dried figs, etc.); chocolate drops; cat tongues; crispies;

sweetened tablets; children’s line; light line. Other products:

candies and gum; milk candy; marzipan; desserts; small

liqueur bottles; ice cream. Services: cafeteria services; snack

bars; others.

Cacau Show

http://www.cacaushow. com.br

> 20 years

over 1,000 stores

in Brazil

Chocolates: various chocolate bars; bonbons; truffles, cherry

liqueur bonbons; products with chocolate covering

(marshmallows, honey bread, alfajores, marzipan, chocolate

sticks, banana compote, etc.); chocolate drops; cat tongues;

children’s line; diet line; gift chocolates; liqueur chocolates;

crispies; sweetened tablets; special therapeutic line; organic

chocolate; chocolate with a high cocoa content. Other

products: cookies; desserts; ice cream; books; plush toys;

nougats; Services: espresso coffee service; chocolate fondue;

others.

Chocolates Brasil Cacau http://www.chocolatesbrasilcaca

u.com.br

> 2 years

over 100 stores in

Brazil

Chocolates: various chocolate bars; bonbons; truffles; cherry

liqueur bonbons; products with chocolate covering

(marshmallows, honey bread, wafers, chocolate sticks, etc.);

chocolate drops; cat tongues; children’s line; diet line; gift

chocolates; rose-shaped chocolates in gift packaging; liqueur

chocolates; crispies, sweetened tablets. Other services:

cookies; desserts; plush toys. Services: espresso coffee

service; others.

Showcolate http://www.showcolate.com.br

> 10 years

over 80 stores in

Brazil and abroad

Services: chocolate fondue; fruit with chocolate; fruit skewers

with chocolate; espresso coffee service; others.

Other products: desserts.

Fábrica diChocolate http://www.

fabricadichocolate.com.br

> 6 years

over 40 kiosks in

Brazil and abroad

Chocolates: chocolate bars with filling; bonbons with truffle

filling; chocolate lollipops.

Other products: fruit skewers with chocolate; alfajores;

chocolate-covered candy apples on sticks; desserts.

Services: chocolate fondue; juice, soft drinks, water and tea.

Source: Companies