Table of content

Topic Page No.

Introduction 2

Competition analysis 3-12

Ratio analysis 12-19

Problem statements 20-21

Recommendations 21-26

Conclusion 27

Introduction

Roger’s is a premium chocolate company in Canada. It was founded by Charles

“Candy” Rogers in 1885, Rogers’ Chocolates based in Victoria, British Columbia.

The company has different category of products such as Victoria’s cream, nut, truffle,

almond, pure milk chocolate, white bars, dark chocolate and orange peels etc. it also

has no sugar added chocolate and ice-cream. Moreover, the company has

distributed its product widely in USA and Canada. Its website is also attractively

made to make enough sales. Since the products are hand wrapped and

technological equipment is used to produce, it charges high. Although it’s

extraordinary quality and large distribution, it lacks some factors in meeting customer

demand and keeping pace with its largest competitors Hershey, Godiva, Bernard

and Cadbury and so on. In the report, we highlighted some problems which restrict

the company in making sales and come up with strategic solutions.

Competitor Analysis

2

For analyzing the competitors of Rogers’ Chocolate, we need to perform SWOT

Analysis. The SWOT analysis shows the strengths, weakness, opportunities and

threats of the company. The SWOT analysis of Rogers’ Chocolates reveals

important strengths, some weaknesses and threats, and many opportunities for

growing. This analysis shows that the company has a tremendous opportunity to

improve and expand its business. Below we show the SWOT analysis of Rogers’

Chocolate:

3

We discuss the main elements of the SWOT analysis of Rogers’ Chocolate below:

Strengths

Market- The market of premium chocolate is expanding at a rate of 20% annually

and this is the segment where Rogers’ is targeting its huge diverse product.

Well Established and Reputable Brand- The Rogers’ Chocolate is well

distinguished brand name in Canada with very high quality chocolate.

4

Loyalty and repeat purchase- Customers at Rogers’ Chocolates have a high index

of loyalty and repeat purchase. People who has taste the quality of the product have

experimented the chocolate experience that Rogers’ offers.

Quality and Tradition- Rogers’ has a strict control of the quality of the raw

materials; the use of natural ingredients in their products attentive to the concerns of

today. In addition, most chocolates are handmade, then hand-packed and assorted

in fine art tins.

Award Winning Recognition- For classy, refined and elegant quality and taste of

their chocolate line Rogers’ Chocolate was identified and rewarded a prestigious

Superior Taste Award from the International Taste & Quality Institute (ITQI) in 2006.

Social Involvement- Rogers’ has built strong community connections; it has been

part of its history to be truly caring about the community. Thus, Rogers’ supports

over 700 not for profit organizations with chocolate donations to help them raise

monies in their area across Canada and the U.S. for worthwhile causes.

Weaknesses

Passion- Rogers’ employees are passionate but their passion sometimes means a

strong resistance to change.

Market- Tourism is a very important market for Rogers’ and it has introduced some

weaknesses since sales have slowed considerably since 2001, in part for the decline

in American tourism after the 911 attach, and in part for the weak US dollar. In

addition, Rogers’ is focusing mainly in the western Canada; this gives to national

competitors some advantages.

5

Timing action- Rogers’ has pursued a conservative approach summarized by “wait

and see” which allows to the competence to take the initiative to gain the market

shares.

Technology- Rogers’ have been using the same equipment for many years even

though there are available technologies to prolong shelf life of products and cut down

on production time. The tradition at Rogers’ put barriers to the adoption of new

technology and slowdowns their productivity.

Packaging- Their packaging is homemade and less attractive than their competitors.

Some companies are gaining their market share only by attractive packaging.

Poor Wholesale Network, Market Coverage and Poor Attractive Web- The

wholesale network and market coverage of Rogers’ Chocolate is not strong. They

are losing their market share due to expansion of operation in wholesale market and

attractive wholesale package towards the potential super stores. Moreover the

presence in the web of Rogers’ Chocolate is very low and there they cannot cover

the most profitable markets.

Opportunities

New product development- The emerging of new generations requires effort to

attract these new customers. The current increase in demanding of natural,

sugarless products offer new opportunities to the premium chocolate market.

Web sales- The targeted segments have a huge rate of internet use and on-line

purchases. Rogers’ has an opportunity to expand its online sales by improving and

promoting its web site. This could help Rogers’ to attract new and young customers.

6

Strategic alliances and turnkey store in a store- Turnkey store-within-a-store

setup would allow adding a mini-Rogers’ store in their shop offering to Rogers a

rapid expansion to other segments.

Other opportunities are franchising, the development of special line of chocolates,

publicity in national, regional, worldwide events, dumpers for seasonal demand,

incorporation of technology, re-engineering of processes, and the improvement of

the image in relationship with raw material providers.

Threats

Economy and Demand Fluctuations- instead of the Canadian market growth for

premium chocolate in the last years, other forces are taking importance. Some of

them are the permanent risk of a new global recession due to the current currency

war, weaknesses of the American dollar and the loss of international tourism.

Redefinition of the word “Chocolate”- the EU has redefined the word “Chocolate”

allowing low quality products to receive this denomination. This gives the opportunity

to some low quality goods producers to capture the market.

Competition- The business is shared with big players with different strategies. For

example Godiva (Nestle) achieves price higher than Rogers’ with lower quality

products, Callebaut products have a huge penetration in Western Canada as well as

Cadbury and Hershey. Moreover, Lindt & Purdy also have high target and captured

market share in this industry.

7

Some other Distinctive Competitor analysis

Rogers’ Chocolate

Godiva Callebaut Lindt Purdy

Quality Very high Not as high as Rogers

Good Quality

Product quality is mid range

Lower than Rogers’

Price High price as their product quality is high

15% high price point from Rogers’

Similar price points to Godiva

90% of Rogers’ pricing

Price point significantly lowers than Rogers’.

Packaging Handmade and not gorgeous

Glitzy packaging

Superior with copper and gold boxes

mid range Are very good

Outlets 11 retail outlets of their own

Widespread distributions among retailer

32 stores Distributed in mass merchandisers, drug and grocery stores

50 outlets

Competitors Analysis with the help of Porter’s Five Force Models

Using the model developed by Michael Porter in 1979 called Five Force Model; the

premium chocolate industry can be explained and analyzed. It is a theoretical tool to

elaborate the potential threats but also the chances of a particular industry.

8

1. Bargaining Power of Suppliers

In production of premium chocolate the primary raw material is cocoa bean,

secondary sugar, and milk. The suppliers of the chocolate industry have significant

bargaining power over the industry because of the limited suppliers. In addition the

supplier groups bargaining power increases if there are no substitute products.

Because the cocoa bean is a required ingredient in chocolate the suppliers do not

have any substitute products for which they must compete. This lack of substitutes

increases the bargaining power of the chocolate industry

2. Bargaining Power of Buyers

There are many buyers in the premium chocolate market. Large chains command a

lot of power; however, there are also a lot of independent sellers. Since many

premium chocolate manufacturers have their own unique selling point and the

9

products are not standardized, buyers cannot easily switch to another manufacturer

and get the same product.

Another condition that affects the power of buyers is product differentiation. If

the product is undifferentiated, the buyer has the power to play competitors against

each other and reduce the cost. The premium chocolate has a differentiated product,

which reduces the power of buyers. Rogers have brand identification and customer

loyalty, which makes it hard for buyers especially the loyal ones not to consume

Rogers for their premium chocolate consumption.

Today, buyers demanding chocolate more than just a taste, they becoming more

health conscious therefore the demand for organic chocolate and dark chocolate are

growing.

3. Threat From Substitutes

Some substitute products for premium chocolate could be traditional chocolate and

other confectionary products customers could use to satisfy their sweet tooth. Other

snack food items may also be considered substitute products. The chocolate

industry must compete with numerous substitute products ranging from candies and

cookies. Many non-chocolate snacks, such as peanut butter, fruits, yogurt and ice

cream are also available.

So there is a good variety of substitutes available for the customers that make the

threat of substitute products high in the chocolate confectionary industry, especially

in the premium segment. Rogers’s chocolate is often used as gift during numerous

seasons and celebrations including Christmas, Easter, Halloween, Valentine’s Day,

anniversaries and birthdays. Other types of gifts during these seasons are viewed as

substitute products.

10

Many chocolate brands and a wide variety of seasonal gifts make the threat of

substitute products is considered low to moderate in this industry. However, if

Rogers Chocolates can maintain its local heritage especially in its traditional area

like Victoria and British Colombia then the threat for Rogers can be minimized.

4. Intensity of Rivalry

The intensity of rivalry among competitors in an industry can create price wars,

advertising battles, new product lines, and higher quality of customer

service .Competition in the premium chocolate market consists of strong regional

brands with a few larger competitors, such as Godiva and Lindt. The market is

growing at 20% annually which suggests less intense rivalry among competitors.

Premium chocolates may be more perishable than traditional chocolate, however,

with a 6-month shelf life, there is less urgency to sell off products. With high levels of

product differentiation, customers are often loyal to a brand which decreases

rivalry. That situation considers less intense rivalry among competitors; moreover

every area has their own local king like Rogers in Victoria.

Nevertheless, in 2008, Global economy was severely hit by the crisis that originated

from the United States and quickly spread to the whole world including Canada.

Premium chocolate majority consumers in Canada come from tourists especially

Americans as bordering neighbour. When the tourist’s number drops and the

demand for premium chocolate also falls, the fierce rivalry will increase

5. Threats of New Entrants

Entry into the premium chocolate market would require a large capital investment for

branding and production facilities. Traditional manufacturers have been moving into

the premium chocolate category because of the high category growth and because

they have the financial and capital resources. Customers value brand and quality so

11

these can both be seen as barriers to entry for newcomers to the premium chocolate

market.

Furthermore, the USFDA redefinition of “chocolate” makes it easier for

manufacturers to call their product chocolate. So the threats of new entrants in the

chocolate industry are low. The market is difficult for new players to enter, as it is

dominated by major international players with a long and established history and

success and a huge amount of capital is required to start the business, such as

Nestlé’s, Hershey’s and Cadburys have been moving into the premium chocolate

market through acquisitions or up market launches since this segment still posses

high percentage of growth.

Ratio Analysis

Profitability ratio:

Gross profit margin

2006 = = = 0.546=54.6%

2005 = = = 0.551=55.1%

12

Gross profit margin tells how much profit is earned on your products without

considering indirect costs. Small changes in gross margin can significantly affect

profitability.IN 2006 and 2005 the gross profit margin of Rogers are almost same.

Operating profit margin❷

2006 = = = 0.097=9.7%

2005 = = = 0.127=12.7%

This ratio is the measure of the operating income generated by each dollar of sales.

In 2006 the operating income under 1 dollar is .097 dollar and in 2005 it was .127

dollar. So in 2005 it was better

❸ Net profit margin

2006 = = = 0.0752=7.52%

2005 = = = 0.0891=8.91%

13

This ratio says that how much money are you making per every $ of sales. This ratio

measures your ability to cover all operating costs including indirect costs. After

analyzing the net profit margin of 2006 and 2005 we can say that the result is not so

differ. it is almost same.

Return on total asset ❹

2006 = = = 0.1062=10.62%

2005 = = = 0.126=12.6%

It is the ratio to measures your ability to turn assets into profit. This is a very useful

measure of comparison within an industry. The return on total asset of Rogers

chocolate in 2005 is better than 2006

❺ Return on stockholder’s equity

2006 = = = 0.157=15.7%

14

2005 = = = 0.2236=22.36%

Rate of return on investment by shareholders. This is one of the most important

ratios to investors. This ratio tells how to make enough profit to compensate for the

risk of being in business. The ROE of Roger in 2005 is better than 2006.

❻ Return on invested capital

2006 = = = 0.1332=13.32%

2005 = = =0.1727=17.27%

This ratio measures the income earned on the invested capital. Here the return on

invested capital of roger in 2055 is also better than 2006.

15

Liquidity Ratio :

❶ Current ratio

2006 = = = 1.367

2005 = = = 1.245

This ratio reveals Rogers’ Chocolates ability to pay off its short terms debts

obligations. Although, having a current ratio over 1 is normally acceptable, however,

current ratio would overestimate a company's short term financial strength. This ratio

tells how much dollar you have to pay per dollar debt. So here the ability to pay its

liabilities in 2006 is better than 2005.

❷ Quick ratio

2006 = = = 0.4612

2005 = = = 0.5785

16

Quick ratio that excludes inventories has been calculated. It tells us that most part of

the assumed liquidity of Rogers’ belongs to inventory. As we know, most of times it is

difficult to turn inventories to cash.Here 2005 was better than 2006.

Leverage Ratio:

❶ Debt to asset ratio

2006 = = = 0.324

2005 = = = 0.4388

Debt to asset ratio provides information about the company's ability to absorb asset

reductions arising from losses without jeopardizing the interest of creditors.This ratio

also provides information about how much debt against per dollar.So after

calculating this ratio the roger was in better position in 2006 compared to 2005.

❷ Long term debt to capital ratio

2006 = = = 0.152

17

2005 = = = 0.1535

This ratio indicates long-term debt usage. This ratio in 2006 and 2005 are almost

same.

❸ Debt to equity ratio

2006 = = = 0.4799

2005 = = = 0.7818

This ratio Compares capital invested by owners/funders (including grants) and funds

provided by lenders.IN this situation we can say that roger was in better situation in

2006.

Long term Debt to equity ratio❹

2006 = = = 0.1794

18

2005 = = = 0.2951

This ratio indicates how well creditors are protected in case of the company's

insolvency. Here Rogers were also in better position in 2006.

❺ Times-Interest earned ratio

2006 = = = 12.60

2005 = = = 17.493

This ratio indicates a company’s ability to meet the interest payment on its debt. In

2006 the company is earning 12.6 times the amount it is required to pay its lenders

for interest. And in 2005 it was 17.493 times.

Activity Ratio:

❶ Days of Inventory

2006 = = = 104.639=105 days

2005 = = = 105.236=105 days

19

This ratio measures the number of days a company takes to sell its average balance

of inventory.So in 2006 and 2005 Roger had the same ability.

❷ Inventory turn over

2006 = = = 3.488

2005 = = = 3.468

Inventory turnover ratio is used to measure the inventory management efficiency of a

business. In general, a higher value of inventory turnover indicates better

performance and lower value means inefficiency in controlling inventory levels.The

Inventory turnover of Roger in 2006 and 2005 are almost same.

❸ Average collection period

2006 = = = 11.056 =11 days

2005 = = = 14.056=14 days

20

The Average Collection Period (ACP) is another litmus test for the quality of your

receivables business; giving you the average length of the collection period. In this

situation Roger had better ability in 2006.

❹ Total asset turnover

2006 = = = 1.411

2005 = = = 1.407

This ratio tells how efficiently your business generates sales on each dollar of

assets. An increasing ratio indicates you are using your assets more productively.

The total asset turnover of Rogers chocolate in 2006 and 2005 are almost same.

Problem Statement

There are many factors responsible for the recent downfall of Rogers Chocolate.

Few of them can be categorized below:

Supply Chain Management: There is a dearth in the supply of raw materials. The

raw materials imported are not delivered as per the scheduled time.

Operations: The flow of operation is not very smooth. The production chain is very

long and time consuming. This increases the cost of production as compared to their

Competitors.

21

Price: Rogers’ being a premium chocolate company has priced their products higher

than other chocolate brands in the Market. Due to many factors like hand wrapped

chocolate, packaging process, ingredient and quality Roger’s Chocolate had to price

their product much higher as compared to their competitors.

Distribution: Rogers’ Chocolates only distributed their product to USA and Canada.

They should distribute their product to other geographic areas in order to meet

customers demand and draw more sales.

Sales and Marketing: Out-of-stock is the major problem for the company. It cannot

often meet the market demand. There have a many cases where their products were

not available in the market. This generated in loss of sales and reduced their

opportunity for growth. Customer retention and acquiring new customer becomes a

threat due to this factor. Again the wholesalers work on filling shortage of products

and face over-stock problem. So the inventory management system needs to be

improved.

Advertising: For packaging art tins for chocolate assortment from China but China

couldn’t supply the tins in scheduled time because of their shortage of electricity.

Again, the company had old fashioned packaging and traditional image of the brand.

To make profit, the company needs to attract old generation as well as young

generation. The taste and choices of people changes with the passage of time. But

the suppliers were unable to find source organic trade capabilities to capture young

generation.

Service: The website had links to resellers but the sales agents failed to understand

the value of providing links of their top accounts. It helped to customers to find the

nearest store of Rogers’ and the company can also make higher sales.

Recommendations

Here we give some recommendations for solving the problem of Rogers Chocolate.

Strategic Recommendation:

22

In this part we try to mention and explain the strategic recommendations based on

the problem statements which are gained from the case study. Now in Roger's

Chocolate we found some major problematic issues as well as some minor problems

which are also associated with major problematic findings and other factors. So we

will divide the recommendations, into 2 parts. First we will provide strategic

recommendation for the main problems form a general view after that we will focus

on other associated problems with more precision.

Major Problems' Recommendation:

1. Here, Roger chocolates strategy is “Focused Differentiation". But they focused

market cannot generate a high profit margin which is the main obstacles for their

business. They are only serving a particular segment of market which is Baby

Boomers. So the number of customers is lower. So to earn more they have to enter

in a broader market without any compromising in their product quality for a huge

number of customers who are willing to pay more based on the quality. So to charge

a higher premium they have to look for "Broad Differentiation" strategy to fulfill their

targeted higher profit margin. In this situation, they have to attract young generation.

Because the red alarm is "Baby Boomers" are at the verge of their lifer-line so that

after their death of the baby boomers; the young generation will become their main

customer base. As a result the company needs to attract by implementing different

tactics. In a word the more number of customers are willing to pay high premium for

the product the more profitable the organization is.

2. The company has also faced some problems in their Value chain. They are

facing problems in both forward and backward integration.

23

a) First we will focus on backward integration; the "Suppliers issues". The suppliers

are not providing the raw material in time for the production of chocolate. Moreover,

for packaging the "TIN" raw materials come from China there is also problems in

maintaining time of receiving the raw material in due time. So to maintain the proper

flow of the raw materials which also ensure the utilization of 100% of production

capacity, the company should make pressure on the suppliers for urgent or on time

delivery or try to find more efficient suppliers.

b) Now the company has also problems in Distribution of its Wholesales part."

Most of the time the company faces back order problems which reduce the profit

margin greatly. The special orders comes from the wholesalers are larger in size and

due to the lack in inventory the company fails to deliver the orders in due time. So

the company should maintain the inventory in the optimal level so that they can fulfill

the special orders and individual orders. They also have to look after that they have

to maintain the inventory in a way that would not let them face the unnecessary and

cost bearing surplus quantity. As a result the proper determination of the amount of

inventory to support the wholesalers’ orders and transpiration mobility needs to be

maintained efficiently.

Associated and others problems recommendations:

These main 2 strategic recommendations are given from a general view. Because

when we try to implement those recommendations several questions comes to our

mind. Such as

A) How to attract the young generation to gain broad differentiation?

24

B) How to create pressure on suppliers for urgent or due time shipments?

C) How to reduce back orders in more specific ways?

D) How to maintain internal control to implement a proper execution of strategy?

E) How to eliminate all problems in cost advantages ways?

F) Which sources will be more suitable for financing? Etc.

In below we try provide more specific strategic recommendations of the problems

associated or generated from the main 2 problems as well as other minor problems

comes from various factors.

1. As the company's loyal customers are baby boomers so that have to attract the

young generation towards their products by developing organic or diet product. As a

result this differentiated product concept will help the company to attract more

customers.

2. Another possible solution is to attract new generation which is they have to

customize the web-site product presentation according to the preference of different

aged customers.

3. The company's current packaging is traditional and old fashioned which does not

allow them to expand their market share. So to attract the customers of various

demographic levels the packaging should be more glitzy and fashionable or

modernized.

25

4. The company has to hold the customers by performing customer loyalty program

such as by giving gift, discount, coupon and free delivery for all retails, wholesalers

and individual customers.

5. The company has to be more influential over the suppliers to get raw materials in

time for the production by expanding their size. They have to expand the size to buy

larger lot of inventories. So they can create pressure on the suppliers. Or they can

search for more efficient suppliers both for their production raw material and "TIN" for

packaging and maintain a good relationship with internationally recognized and

successful suppliers will able to deliver the raw materials in due time.

6. The company's business is mostly based on U.S.A and Canada. But they have to

execute the business globally or capturing the global market by acquisition of the

niche chocolate company of another geographic location. Because it will help them

to reduce the plant cost, real estate cost and allows them to serve a group of

customers of the acquired company's. The franchise, joint ventures also allows them

to expand their business.

7. Roger chocolates should introduce a specific productivity and efficiency

measurement within the company so that the company can recognize the inefficient

activities. In return it will increase their efficiency so that they will able to support both

special and general or rural order simultaneously.

8. One of the most important vital points to improve their overall revenue is to

maintain the proper flow of inventory to support the manufacturing activity

continuously. Out of sock or over stock of inventory decreases their sale and

revenue margin. So they have to implement a proper inventory management to

ensure the correct flow of inventory in the production line.

26

9. The efficient production management and inventory management will reduce the

back order significantly so that the company will gain a higher margin from the

wholesale sector.

10. The firm has to establish proper internal control management by training the

employees to reduce the resistance of the change that is associated with current

market condition. And they have to reduce the cost of production as the wage and

salary is competitive.

11. To be a successful organization; the company should strengthen internal

communication through the mutual understanding of the internal capabilities and

competencies which will be linked to the proper training program for employees.

Because when the employees actually recognize the objective, vision, mission,

cultural, value, ethics based on the Rogers' business perspective only then all the

effort, strength, capabilities and competencies will be integrated and the company

will become a mustang in the race of the earning profit by reducing their weakness

12. The company should reduce the cost of operation by reducing discount over

surplus time, opportunity cost due to the shortage, wastage reduction, and value

analysis. In one word, efficient utilization of all resources will help them to reduce the

cost of operation.

13. Lastly, in the end of the day every organization main focus is to earn profit more

than any competitors. From the case study we find the Roger's company is not

implementing debt-equity ratio efficiently because they have more weight on the

equity portion. But if they use the debt portion more in the operation and investment

it will intensify the return; as for all organization more financing from debt will work as

leverage. Yes it is true that the risk will be then more. But in business perception

27

without taking risk the company cannot earn more profit. Optimization of risk is here

associated with also financial objective and implementation strategy. So, whether the

overall equation works or not actually depends on the trial-error approach of

strategy. But key point is the less trial they need to perform the more the opportunity

to be a market leader.

Conclusion

After analyzing this case we try to focus on the organization internal and external problems.

In this aspect the company's CEO should focus on both problems in production and operation

of the firms.

By analyzing different ratio and market competition the company actually find a hard time

because of the size, demand for new strategy implementation, old fashion packaging and

28

product, distribution channel, suppliers inefficiency and to fulfill aging customers demand.

So to overcome the problems the company should focus on their internal weaknesses as well

as external opportunities to retain revenue and intensify the growth. They have to increase the

retail sales system within the region after that they need to focus on the broader market which

is outside the current business area. However, in the quest of growth they have to maintain

the lower cost but easier access to the market.

To continue the operation of the company in a successful way the company should implement

a successful strategy that helps them to earn a sustainable competitive edge which will ensure

conducting the business with above average profitability of the market average.

29