Montreaux Chocolate USA Adrian Nguyen
A-TeamUWMCC Case Competition
“Introducing Euphoria Pomegranate by
Healthy Cravings – Reward yourself with happiness and good
health”
Outline
Situation Big Questions Ideal Corporate Targets Thought Framework Recommendation Supporting Evidence
› Qualitative and quantitative Revisiting Corporate Goals Summary
Supplementary Information
The Situation
Apollo acquires rights to Montreaux for America on June 2011
Consumer Food Group (CFG), a subsidiary, forms Montreaux USA
Andrea Torres, director of new development, is faced with multiple decisions
The Big Questions
Next steps for Montreaux USA?› How are we launching the
product Time to upgrade
logistics?› Pennsylvania factory
The Big Questions
American or European branding?› Heritage› New product line
Brand Sub-brand
New product name?
Ideal Corporate Targets
National distribution of Montreaux product line
$115 million in annual sales by 2015 0.60% market share
› Top 25 in revenue Acceptable hurdle rate of $30MM
› Needed for full national rollout
Thought Framework
Support each decision with evidence
Calculate projections
Pros and cons matrix
Nielsen’s 12 Product Success Factors
Recommendation - The Product
Name› Euphoria by Healthy Cravings
Branding› Apollo sub-brand
Features› 70% Cocoa› Pouch Bag Format› Premium chocolate› Health positioning
Slogan Flavours
› Pomegranate› Blueberry› Cranberry
Price› $4.49 MSRP
Acquire Pennsylvania factory
“Introducing Euphoria Pomegranate by
Healthy Cravings – Reward yourself with happiness and good
health”
Recommendation - Montreaux USA Launch Strategies
Further Testing The Market
Launch in Selected Test Markets
Stage a Regional Rollout
National Launch
Pros • Fine-Tune Consumer Insight• Gather Additional Consumer
Insight • Middle-Of-The-Road Approach
• Display Commitment to Retailers
• Most Limited Liability and Risks
• Most Representative of Market Condition
• Average Expenditures• Biggest Opportunity to
Increase Market Share
• Discover New Opportunities • Limited Liability and Risks• Greatest Revenue
Opportunity
• Begin Market Share Dominance
Cons • Possibly Redundant Data• Long Result Reading Time (1
Year)• Conservative Strategy • Very Expensive
• Delaying Market Entrance • Delaying Market Entrance • Potential Lost Opportunity • Requires New Factory
• Difficulty In Finding Suitable Test Markets
• Less than 100% Commitment to Market
• Greatest Resource Commitment
• Convincing Retailers for Limited Batch Purchases
• Requires New Factory
• Most Expensive ($3 MM) • Poor Regional Selection
• Limited Production Capabilities SELECTED LAUNCH PLAN
Marketing Strategies and Tactics
Market Trends Product Choices Capturing the Market
› The Ideal Customer Mainstream Distribution Channels
US Chocolate Market Trends 2011
Low-calorie options such as reduced fat and aerated chocolate
Premium chocolate products moving to mainstream channels (i.e., supermarkets, mass merchandisers)
Dark chocolate popularity rise Packaging transition to stand-up pouches and
bigger sizes New labeling with terminology emphasizing
shareability, portion control, and saving a piece for later
Increases in pricing attributable to rising commodity costs
Product Choices – BASES Testing
70% Cocoa concentration› Preferred taste versus 90% in
qualitative testing› Emphasize health positioning
Bold Flavours› Blueberry, pomegranate, cranberry
Narrowed from top five ‘winners’ Pouch format
› Shareability, portion control, economical
› 3.5oz – less unique, less revenue generation
Healthy Cravings – Apollo sub-brand
Confusion in European credibility
“Introducing Euphoria Pomegranate by
Healthy Cravings – Reward yourself with happiness and good
health”
Capturing The Market
Socioeconomic Status
Consumer Type
Gender Differences
Age
Cater to as many demographics as possible› 45-64 Age group› Everyday
sophisticates› Brand loyalists› Women
The Ideal Customer
Older aged upper-middle class female 45-64 age group Motivations
› Personal health considerations› Luxurious reward› Mood enhancement› Enjoys trying out new flavours
Quantitative Data
Purpose› Identifying ideal launch path
Calculating Sales Projections Chocolate Market’s Future
› Relation to Corporate Goals
Montreaux USA Launch Strategies
Explaining the details
Further Testing The Market
Launch in Selected Test Markets
Stage a Regional Rollout
National Launch
Pros • Fine-Tune Consumer Insight• Gather Additional Consumer
Insight • Middle-Of-The-Road Approach
• Display Commitment to Retailers
• Most Limited Liability and Risks
• Most Representative of Market Condition
• Average Expenditures• Biggest Opportunity to
Increase Market Share
• Discover New Opportunities • Limited Liability and Risks• Greatest Revenue
Opportunity
• Begin Market Share Dominance
Cons • Possibly Redundant Data• Long Result Reading Time (1
Year)• Conservative Strategy • Very Expensive
• Delaying Market Entrance • Delaying Market Entrance • Potential Lost Opportunity • Requires New Factory
• Difficulty In Finding Suitable Test Markets
• Less than 100% Commitment to Market
• Greatest Resource Commitment
• Convincing Retailers for Limited Batch Purchases
• Requires New Factory
• Most Expensive ($3 MM) • Poor Regional Selection
• Limited Production Capabilities SELECTED LAUNCH PLAN
Calculating Projections - Methodology
Calculated all possible sales volumes scenarios using methodology formulas› Market-adjusted trial rates, repeat volume, etc.› 3^3 = 27 Possible Scenarios› Determined sales volumes
Combination of three factors › Awareness type
Marketing campaign effectiveness› ACV type
Market reach effectiveness› Product quality
Repeat rate of consumer
Calculating Projections – Work Example
Calculating repeat volumeType Awareness Type ACV # of Trial
Households (MM) Quality of Product % of Households Repurchasing
Repeat Purchase Occasions
Repeat Volume (MM)
Low
Low2.82 Mediocre 28% 4 3.162.82 Average 33% 4 3.722.82 Excellent 38% 4 4.29
Medium3.05 Mediocre 28% 4 3.423.05 Average 33% 4 4.033.05 Excellent 38% 4 4.64
High3.71 Mediocre 28% 4 4.163.71 Average 33% 4 4.903.71 Excellent 38% 4 5.64
Medium
Low2.82 Mediocre 28% 4 3.162.82 Average 33% 4 3.722.82 Excellent 38% 4 4.29
Medium3.71 Mediocre 28% 4 4.153.71 Average 33% 4 4.903.71 Excellent 38% 4 5.64
High4.51 Mediocre 28% 4 5.054.51 Average 33% 4 5.954.51 Excellent 38% 4 6.85
High
Low3.42 Mediocre 28% 4 3.833.42 Average 33% 4 4.523.42 Excellent 38% 4 5.20
Medium4.36 Mediocre 28% 4 4.894.36 Average 33% 4 5.764.36 Excellent 38% 4 6.63
High5.30 Mediocre 28% 4 5.945.30 Average 33% 4 7.005.30 Excellent 38% 4 8.06
Projections – Graph
$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00 Retail Sales Value ($ MM)Montreaux Sales Volume ($ MM)Acceptable Hurdle Rate
Number of Purchases in MM
Sale
s in
$ M
M
Band range of ACV, Quality and Awareness
Ideal Corporate Goals -Revisited
Corporate 2015 goals overly aggressive› Despite double
annual market adoption rate
Accomplished national rollout
2012 Market 2015 Estimate Aggressive 2015
Chocolate Market Size
(BN) $
17.664 $
19.120$
19.120
Annual Growth Rate 2% 4%
Average Montreaux Sales (MM)
$ 39.02
$ 42.24
$45.65
Market Share 0.22% 0.22% 0.24%
Nielsen’s 12 Product Success Factors
Acceptable downsides› Taste
Findability› ACV focus
Product delivery and loyalty› New factory› Perpetual
improvement
Summary
Market goals› Nielsen’s 12 Success Factors› Accomplished national rollout
Expand manufacturing capabilities› Pennsylvania
Montreaux USA marketing plan› Target demographics› Focus on supermarkets
Product specifications› Euphoria by Healthy Cravings› Pouch› 70% Premium Cocoa
American credibility› Sub-brand of Apollo
“Introducing Euphoria Pomegranate by
Healthy Cravings – Reward yourself with happiness and good
health”
End of Presentation
Additional Potential Opportunities and Risks Opportunities
› Partnering with other firm than the Big Two
› Develop better infrastructure Perhaps more factories
and manufacturing centers
› Product specifically targeted to men
› Virtual integration with Suppliers Mexico
Risks› Introduction of
superior rival product
› Product not well-tested
› Manufacturing capabilities not up to par
› Ability to Scale
Porter’s Five Forces Analysis
Competitive Rivalry Within
Industry
Bargaining Power of
Buyers
Threat of New
Entrants
Bargaining Power of Suppliers
Threat of Substitute
s
Bargaining Power of Buyers› Low to moderate› Large volume orders› Lack of threat of backward
integration› Reliance on industry product
Threat of Substitutes
› High› Alternate
confectionery available
› Competition during holidays
Threat of New Entrants› Low› Very expensive manufacturing
costs› Lack of distribution channels› Regulatory restrictions› Confectionery and chocolate
market relatively saturated
Bargaining Power of Suppliers
› Moderate to high› Supplier group is concentrated› No threat of forward integration› Industry is important customer
to supplier
Source: http://jmfrrell.blogspot.ca/2011/06/chapter-4-industry-analysisporters-five.html
Competitive Rivalry Within Industry
› High› Equally capable
competitors› Slow growing› High storage and
fixed costs› High exit barriers
Distribution Methods
Go through retail channels› Supermarkets
and grocery focus
Premium chocolate moving into this distribution channel
15.8%
11.7%
9.0%8.8%
54.7%
Distribution Channels Breakdown
Supermarkets/Grocery
Convenience Stores
Drugs Stores
Big-Box Su-percenters
Other
Distribution Formats
Bar/Bag/Box
(>3.5 oz);
7.149
Seasonal Chocolate;
4.407
Bar/Bag/
Box(<3.5 oz), 3.479
Snack-size
Choco-late; 2.522
Market Share Revenue ($ in MM)
Bar/Bag/Box (>3.5 oz)Seasonal ChocolateBar/Bag/Box(<3.5 oz)Snack-size Chocolate