Chocolates EI Rey

Case Report

Submitted by

Lalitha Gunnam

Grace Fang

Oct 15th, 2015

1. Is Jorge Redmond dream of making Venezuelan cocoa beans and chocolate world famous

realistic and achievable why?

Jorge Redmond’s dream of making Venezuelan cocoa beans and chocolate world famous

can be realistic and achievable with proper brand positioning, large market demand and effective

marketing programs. Firstly, Redmond could position Chocolates El Rey in a way that differentiate

from other chocolates, such as its single-origin premium cocoa ingredient, combined taste and

special aroma. Also, the existing brand image in the global market with increased international sales

created a better opportunity for Chocolates EI Rey to reinforce its unique and high quality brand

image.

Secondly, the chocolate industry is a huge industry that entails a large market potential that

Venezuela could penetrate to. It is not only about the finished chocolate to retail market, but also as

raw material to food services, beverages, and industrial. In 1995, EI Rey opened a new plant which

produced more chocolate types to satisfy more customers with diverse demands. Moreover, in order

for Redmond to fulfill his ambition, he should understand the value that Venezuelan cocoa beans

had for Chocolate EI Rey and the value that chocolate had for the consumers, which was seen as

decadent, possessing a sensuality and seductiveness.

Thirdly, Redmond had successfully pitched EI Rey chocolates to top chefs and restaurants

all over the world while expanding into the international food service markets. Redmond invited top

chefs and writers of gourmet magazines to visit “Cacao Route”, witnessing how cocoa was planted,

harvested and processed, as well as EI Rey’s plant, where chocolate was produced from the

beginning to the end. These visits not only sell EI Rey chocolate but also Venezuela, a country with

an exquisite cocoa bean production. In addition, EI Rey held annual tastings at international food

fair to demonstrate its high quality and to increase brand awareness.

However, Jorge should also consider the unstable political conditions and high inflation rate

in Venezuela and try to control the negative impacts on his chocolate business.

2. What are the pros and cons of using country-of-origin as part of his branding strategy?

Pros:

Venezuela has ideal combination of temperature, soil, and rainfall for cultivating cocoa, and its

entire cocoa production was either “Criollo” or “Trinitario” which were both considered to be

premium cocoa beans.

Venezuela cocoa beans not only have high quality, but also have a more unique and combined

flavor and a flowery aroma, which other cocoa beans don’t have. This can be a great point in

advertising to increase positive brand awareness.

The variety and country of origin of cocoa beans is very important to the flavor of finished

chocolate. Some premium brands also began to advertise the type or origin of the cocoa beans

used in their production.

Chocolate EI Ray was the only chocolate producer who used only single-origin beans of the

finest qualities available. This is an great opportunity to apply a hungry marketing strategy,

which allows the company to achieve control of supply and demand while maintaining a high

commodity price and profit purpose.

Cons:

Venezuela’s cocoa production only accounts for 0.5% of world production, which means vey

limited supply of top-quality cocoa beans. This cannot be easily resolved since cocoa harvesting

is a long-term investment, while most people don’t want to take the risk to wait seven years to

get benefits from investments under Venezuela’s unstable politics.

Unlike a company’s brand image, the management of a company cannot control a country’s

image. Therefore, sudden occurrences in the country could be harmful to the company's brand

image. The close relationship between brand and country creates associations in consumers’

minds, which can damage Chocolate EI Rey’s image due to Venezuela’s unstable politics poor

economic conditions.

3. Which segments should be targeted in what priority? Consumer? Retail? Food services?

By 2005, the US chocolate market represented $14.9 billion sales. The major challenge

faced by the US chocolate industry was finding high-quality raw materials. According to the Mintel

survey, 62% of Americans prefer to buy specialty or premium chocolate. Since El Rey was the only

chocolate producer to use only single-origin beans of the finest qualities, entering US chocolate

market is a good way to improve El Rey’s growth.

I believe that El Rey should first enter the US first in the “retail segment”. This is because

there is major shift in brand preferences among American consumers. The smaller premium

chocolate brands, which are available at food, drug stores, were being preferred than the large

premium chocolate brands like Hershey’s, Kraft, etc. As a result of increasing demand, smaller

premium chocolate brands are receiving more shelf space in mainstream food, drug, and mass

merchant outlets, which is a good opportunity for Chocolate EI Rey to increase it’s retail sales in

the US as a small foreign premium chocolate brand. This would require some expenditure on

marketing and advertising as well.

Secondly, El Rey should focus on the “food services segment”. El Rey has the capacity to

increase production in the same lines. In the food service industry, EI Rey mainly provides its

chocolate as raw materials. The company had successfully pitched EI Rey chocolates to top chefs

and restaurants all over the world while expanding into the international food service markets. So,

EI Rey should take this advantage and continue to work on food services segment in the US market

as their 2nd priority. One of the disadvantage would be if different products were needed additional

machinery would have to be bought which would cost of lot of money for El Rey

Thirdly, El Rey should enter the “consumer segment”. This is because most chocolate in the

US was consumed in the winter and on holidays such as Easter, Christmas, Valentine’s Day and

Halloween and the US consumers have strong palate for more and more refined chocolate.

Premium chocolate sales differed by gender. 89% of men mostly buy chocolate to give as gifts

during Christmas or Valentine’s Day compared to 69% of women.