MARKETING PLAN FOR GODIVA CHOCOLATES – BISCUITS, COFFEE AND

COCOA RANGE

This report is the marketing plan for the biscuits, coffee and cocoa range of Godiva

Chocolates for its business in the United Kingdom. This is proposed to be implemented in

preparation for the planned acquisition of Godiva Chocolates from Campbell Soup Company by

Nestle.

The structure of this marketing plan is based partly on the structure presented in

Westwood (2005). Other academic books referenced for this report’s structure and contents

include Cohen (2004), Groucutt et al (2004), Knight (2004), Lancaster & Reynolds (2005), and

Stapleton (1998).

I. INTRODUCTION AND MISSION

We will be acquiring Godiva Chocolates from Campbell Soup Company. This will give

us a presence in the premium confectionary market to complement our existing confectionary

market ranges.

One of the product ranges of Godiva Chocolates is the biscuits, coffee and cocoa range.

The products that Godiva have will strongly complement our existing products in the beverages

and chocolate & confectionary range.

The mission for this range will be to continue providing premium brand and quality

biscuits, coffee and cocoa for our clients through a greater distribution access. This follows the

overall mission for the brand and business of maximising profits without sacrificing quality or

exclusivity.

II. EXECUTIVE SUMMARY AND CORPORATE OBJECTIVE

This will be the first year we will be managing the biscuit, coffee and cocoa range of

Godiva Chocolates. Sales have expanded in recent years and the brand continues to be well-

known and have a high quality reputation. Unfortunately, while Godiva is a leader in the

premium chocolate sector based on sales, the business overall has not been successful as profit

margins are in the 11% range while the premium chocolate sector overall is achieving ~16%

average margins (Lofthouse 2007).

We believe that we can maintain the strong sales growth and yet be able to achieve much

higher margins than what has been historically achieved by the business. The growth in the

premium chocolate sector has been 8% to 10% in the past five years while, in comparison, mass

market confectionary brands have achieved only ~2% growth (Lofthouse 2007).

The objective for the biscuits, coffee and cocoa range of Godiva Chocolates for the

United Kingdom is to continue to grow the business by ~10% in revenues over the next three

years.

III. MARKETING AUDIT

As this will be the first year for Nestle to manage the Godiva Chocolates range, an

internal marketing audit yields no information directly related to Godiva Chocolates.

Nevertheless, for UK confectionary business overall of Nestle, the following has been the

performance in 2006: decrease of SKUs by ~40%, lower market share by ~0.6%, and increase in

EBIT margin (Nestle 2006). This is an improvement in performance from 2005 when several

issues in the UK business were identified: business not where it should be, change in

management, and improvements in 2006 expected (Nestle 2005).

The key products for this marketing plan are all the products included in the biscuits,

coffee and cocoa range of Godiva Chocolates:

Biscuits – product examples include gift tins (e.g. biscuit assortment gift tins) and gift

packs (e.g. Godiva signature biscuit gift pack, dark truffle heart biscuit gift pack)

Coffee – products include chocolate coffee (e.g. chocolate crème coffee), Godiva

premium roast coffee and specialty premium coffee (e.g. crème brulee coffee, hazelnut decaf

coffee)

Cocoa – cocoa products include sampler boxes (e.g. hot cocoa sampler box), cocoa

collections (e.g. holiday hot cocoa collection) and cocoa canisters (e.g. caramel hot cocoa

canister)

The rest of this section presents the SWOT analysis, the key assumptions utilised in their

marketing plan, and a discussion of the segmentation, targeting and positioning.

A. SWOT ANALYSIS

This part of the marketing audit section presents the SWOT analysis for the Nestle

organisation in the United Kingdom.

Strengths of the Organisation

Part of top global confectionary firm with strong global brand in Nestle SA; good

manufacturing experience

Extensive financial and technical resources

Complementary brands across other confectionary pricing points

Good retail marketing organisation globally which the United Kingdom business can

leverage and depend on. Godiva has a retail-oriented business model and is a niche specialty

business (Adelman et al 2007). Godiva would thus benefit from the retail marketing

strengths of Nestle

Godiva is a strong brand name globally. Godiva’s brand resonates with its target

market, and is well-known globally resulting in its strong 10+% growth globally (Moskow &

Aquino 2007)

Weaknesses of the Organisation

Improving business operations in the United Kingdom but overall still not at similar

performance levels with Nestle SA globally

Currently no premium brand confectionary marketing staff

Competitors are more established in the United Kingdom and have a more complete

distribution network

Godiva Chocolates with low operating margins versus competitors in premium

confectionary sector (~11% for Godiva versus 16% average for competitors). Godiva’s low

operating margin is largely due to the high cost of inputs such as labour and leases, and

working capital usage (Moskow & Aquino 2007)

Opportunities in the Sector

Premium confectionary sector growing at ~10% rate, much higher than mass market

confectionary sector (at 2%); strong demand expected to continue, particularly in the near-

term as key holidays coming up: Christmas holiday season and Valentine’s Day. Godiva

sales are influenced considerably by seasonality with sales volumes increasing significantly

during holidays seasons such as Christmas and Valentine’s Day (Adelman et al 2007)

The United Kingdom is becoming increasingly richer with the list of millionaires

growing and greater disposable income, particularly in the financial markets such as London

(Milmo 2007)

The largest single market in Europe is the United Kingdom with about a third of fair

trade chocolate sales (Lofthouse 2007)

Threats in the Sector

Decreasing cocoa production: in 2006/2007, world cocoa production was lower by

7% (Lofthouse 2007)

Large part of cocoa production at risk: the Ivory Coast has ~37% of world cocoa

production but is politically unstable, and cocoa production is potentially at risk (Lofthouse

2007)

Increasing competition with several premium brands entering the sector to capture the

large growth opportunities (The Grocer 2007)

B. ASSUMPTIONS

The key factors affecting the assumptions for the Godiva Chocolates business are the

assumptions affecting potential growth rates in revenues, and also the assumptions affecting the

cost inputs particularly as Godiva Chocolates has one of the lowest operating margins in the

premium confectionary sector. Any changes to the assumptions could have a significant impact

on the resulting financial performance of the business.

The key assumptions for this marketing plan are:

Organisational wage increases will not exceed inflation rate in the United Kingdom in

the next three years

There are no government regulations that will affect the premium confectionary

sector

UK GDP will remain at current growth rates over the next few years

Cocoa prices will not significantly increase; price increases reflect similar increase

sin prices in recent years

C. SEGMENTATION, TARGETING AND POSITIONING

This section discusses the market to be targeted for the biscuits, coffee and cocoa range

of Godiva Chocolates. There are two key markets that will be targeted for the biscuits, coffee

and cocoa range of Godiva Chocolates. These markets continue to follow the current markets

catered to by Godiva Chocolates. These are the corporate segment and the affluent retail

market.

The corporate segment consists of two key groups for specific purposes. The first group

is for business gift giving which is an all-year round market but does have its peak during the

holiday gift giving season. The second group is for corporate incentives program which are

utilised by corporates for sales incentives, recognition or rewards.

The affluent retail market is composed of retail clients who have a preference for

premium confectionary products. The biggest group of these retail clients are found in London

and, in this first year, we will continue to focus on this area for this particular retail market. It

will only be in the second and third years that we will be considering expanding our distribution

channels further outside of the London area, with the exception of the one store we have in Kent.

There are currently eight Godiva stores in the United Kingdom and these are located in

the following (Godiva 2007):

Seven (7) are located in central London in the following areas: Covent Garden,

Oxford Street, King’s Road, Gees Court, Knightsbridge, Fenchurch Street, Regent Street

One (1) store is located in Bluewater, Kent which is in the Southeast of London but

which is still located relatively near London

The biscuit, coffee and cocoa range of Godiva Chocolates will continue to be positioned

as a premium confectionary range and priced at a significant premium relative to mass market

confectionary brands and even some of the other premium confectionary brands.

IV. MARKETING OBJECTIVES

The key marketing objectives for the biscuits, coffee and cocoa range of Godiva

Chocolates are as follows:

To increase sales by at least 10% each year in real terms in the next three years

To increase margins from the current 11% to the sector average of 16% within the

next three years

To increase the overall share of the retail affluent segment of the overall biscuits,

coffee and cocoa range of Godiva Chocolates by an absolute 10% share within the next three

years

To increase the share of the biscuits, coffee and cocoa range within the Godiva

Chocolates overall sales by an absolute 5% share within the next three years

V. MARKETING STRATEGIES AND TACTICS

The marketing strategies are defined across products, pricing, promotion and distribution.

For the biscuits, coffee and cocoa range of Godiva Chocolates, the marketing strategies and

tactics are as follows.

Products

Maintain current product range, focusing on increasing the sales of the current

products in the biscuits, coffee and cocoa range

Pricing

Establish further premium pricing on best-selling product in the biscuits, coffee and

cocoa range for retail affluent segment and determine best pricing and volume combination

Maintain current pricing for the rest of the products in the biscuits, coffee and coca

range for retail affluent segment which have achieved average rates of growth. Those

products which exhibited low growth rates will still be kept at current pricing levels with the

key reasons for poor sales to be determined in the coming year

Introduce discount pricing for corporate segment for first-time clients and also for

longer-term clients (greater than three years). This is expected to increase the introduction of

the products to first-time clients. For the longer-term clients, this is to ensure that we are

able to keep these clients for their business gift giving and corporate incentives programs

Promotion

Increase affluent retail advertising and promotions to ensure greater brand and

product awareness of target market. The plan is to identify the key advertising points for the

retail affluent which may include specific magazine adverts or targeted promotional

campaigns specific to the retail affluent segment

Develop corporate segment through referrals and promotions, and proactive

marketing targeting largest corporate names in the United Kingdom. This will entail

assigning a sales force for corporate marketing and pursuing increased sales in the corporate

segment both from new clients and current clients

Distribution

Increase distribution channels in London without significant investment in actual

stores through affiliation with third party premium retail channels. With success of this

initiative, increase of distribution channels outside London utilising similar affiliate

distribution channel will be considered

This strategy and tactics for distribution requires further explanation. The plan is to

pursue increased distribution channels within London through a retail channel tie-up. Thus, this

would not entail significant investments in store platforms for Godiva, which, in the past, has

impacted negatively on operating margins.

One option is to aggressively distribute the biscuits, coffee and coca range across mass

channels but this would severely dilute the premium luxury brand name of Godiva (Moskow &

Aquino 2007). The second option is to identify premium retail channels and utilise these

channels, assuming there won’t be any negative impact in using these retail channels. A

possibility for this premium retail channel tie-up is Starbucks Coffee. Interestingly, this has been

considered and discussed in a report by Greenberg et al (2007), with the following viewpoints:

1. Potentially a good fit as both brands (and their products) are high value, low-cost

indulgent offerings

2. This approach could be pursued in a similar manner to the Starbucks JV with Hershey

in the US

3. Quality of Starbucks and products has been established globally

4. Premium biscuits, coffee and cocoa range should complement Starbucks offerings

and enhance customer experience and convenience. It may be that the complete range of the

biscuits, coffee and cocoa range of Godiva Chocolates will not be offered as some of the

products could potentially compete with the Starbucks products. Excluding these competing

products, the other products in the range should be attractive enough for Starbucks to

consider the proposition

VI. IMPLEMENTING PLAN

The following is the master schedule of the key initiatives under marketing strategies and

tactics with the specific responsibilities:

MASTER SCHEDULE

Month 1 2 3 4 5 6 7 8 9 10 11 12 Responsibility

Pricing changes and discount programs

UK Marketing

Retail advertising and promotions

UK Retail Marketing

Corporate segment marketing

UK Corporate Marketing

Distribution channel expansion in London

UK Marketing

VII. CONTINGENCY PLANS

The largest risk in this marketing plan is the potential reduction in cocoa production,

which may impact on input prices. A large part of the cocoa production is from the Ivory Coast

and its impact, if that source were to be closed out would be significant. The contingency plans

for this risk include hedging cocoa prices over the next year to fix the cocoa input price, and

working with alternative suppliers to reach a decision on cocoa supply agreements to limit the

impact of reduced cocoa production.

VIII. BUDGETS

The budget presented is for the overall global Godiva Chocolates business. The biscuits,

cocoa and coffee range financials for the United Kingdom are a part of these overall figures.

These figures will be revised just for the relevant business considered once the Godiva

Chocolates business has been acquired by Nestle and the full financials breakdown of the overall

Godiva Chocolates business is available.

The assumptions for the figures are as defined in the targets in previous sections for the

biscuits, coffee and cocoa range but utilised as well for the overall Godiva business. For sales

revenues, these are assumed to continue to grow at ~10% yearly. Operating profit margins are

expected to improve and planned to reach sector average margins of ~16% within three years.

The result is that net margins increase from the current estimated net margin of 6.8% to

approximately 9.8% in three years.

PROFIT & LOSS ACCOUNT – GODIVA CHOCOLATES

All values in US$ million 06/07A 07/08F 08/09F 09/10F

Sales 500 550 605 665

Sales growth, % ~10% 10% 10% 10%

Operating expenses 445 480 517 557

Operating profit 55 70 88 108

Operating profit margin, % 11.0% 12.8% 14.5% 16.3%

Taxes 21 28 35 43

Net income 34 42 53 65

Net margin 6.8% 7.7% 8.7% 9.8%

Source: 06/07A from Bivens & Goldman (2007). Forecast figures ere calculated from

expectations in revenue growth and improvements in margins. Forecast tax estimated at 40%.

IX. EVALUATION AND CONTROL

There will be quarterly review of this marketing plan to determine the progress versus

targets and defined plans. In this quarterly review, senior management will be given a report to

update them of the progress. This marketing plan will also be evaluated and updated every

twelve months, and submitted for approval to senior management.

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