Montreaux Chocolate USA

Adrian Nguyen
A-Team
UWMCC 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
“Introducing Euphoria
 Flavours Pomegranate by Healthy
› Pomegranate
Cravings – Reward yourself
› Blueberry
› Cranberry
with happiness and good
health”
 Price
› $4.49 MSRP
 Acquire Pennsylvania factory
 Recommendation - Montreaux
USA Launch Strategies
Further Testing The Launch in Selected Test
Stage a Regional Rollout National Launch
Market Markets

Pros • Fine-Tune Consumer Insight • Gather Additional Consumer Insight • Middle-Of-The-Road Approach • Display Commitment to Retailers

• Most Representative of Market • Biggest Opportunity to Increase

• Most Limited Liability and Risks • Average Expenditures
Condition 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 • Less than 100% Commitment to

• Greatest Resource Commitment
Markets Market
• Convincing Retailers for Limited
• Requires New Factory
Batch Purchases

• 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 “Introducing Euphoria
› Shareability, portion control, economical Pomegranate by Healthy
Cravings – Reward yourself
› 3.5oz – less unique, less revenue generation
with happiness and good
 Healthy Cravings – Apollo sub-brand health”
 Confusion in European credibility
 Capturing The Market

 Cater to as many Socioeconomic Status

demographics as
possible
› 45-64 Age group
› Everyday sophisticates Age Consumer Type
› Brand loyalists
› Women

Gender Differences
 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 Launch in Selected Test

Stage a Regional Rollout National Launch
Market Markets

Pros • Fine-Tune Consumer Insight • Gather Additional Consumer Insight • Middle-Of-The-Road Approach • Display Commitment to Retailers

• Most Representative of Market • Biggest Opportunity to Increase

• Most Limited Liability and Risks • Average Expenditures
Condition 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 • Less than 100% Commitment to

• Greatest Resource Commitment
Markets Market
• Convincing Retailers for Limited
• Requires New Factory
Batch Purchases

• 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 volume
Type Awareness Type ACV # of Trial Quality of Product % of Households Repeat Purchase Repeat Volume
Households (MM) Repurchasing Occasions (MM)
2.82 Mediocre 28% 4 3.16
Low 2.82 Average 33% 4 3.72
2.82 Excellent 38% 4 4.29
3.05 Mediocre 28% 4 3.42
Low Medium 3.05 Average 33% 4 4.03
3.05 Excellent 38% 4 4.64
3.71 Mediocre 28% 4 4.16
High 3.71 Average 33% 4 4.90
3.71 Excellent 38% 4 5.64
2.82 Mediocre 28% 4 3.16
Low 2.82 Average 33% 4 3.72
2.82 Excellent 38% 4 4.29
3.71 Mediocre 28% 4 4.15
Medium Medium 3.71 Average 33% 4 4.90
3.71 Excellent 38% 4 5.64
4.51 Mediocre 28% 4 5.05
High 4.51 Average 33% 4 5.95
4.51 Excellent 38% 4 6.85
3.42 Mediocre 28% 4 3.83
Low 3.42 Average 33% 4 4.52
3.42 Excellent 38% 4 5.20
4.36 Mediocre 28% 4 4.89
High Medium 4.36 Average 33% 4 5.76
4.36 Excellent 38% 4 6.63
5.30 Mediocre 28% 4 5.94
High 5.30 Average 33% 4 7.00
5.30 Excellent 38% 4 8.06
 Projections – Graph
$70.00
Retail Sales Value
($ MM)
$60.00 Montreaux Sales
Volume ($ MM)
Acceptable Hurdle
$50.00 Rate
Sales in $ MM

$40.00
Band range of
$30.00 ACV, Quality and
Awareness
$20.00

$10.00

$-

Number of Purchases in MM
 Ideal Corporate Goals -Revisited
2012 Market 2015 Estimate Aggressive
 Corporate 2015 2015

goals overly Chocolate

Market Size
$
17.664
$
19.120
$
19.120
aggressive
(BN)

› Despite double Annual

Growth Rate 2% 4%

annual market
adoption rate Average
Montreaux
$ $ $
Sales (MM) 39.02 42.24 45.65
 Accomplished
national rollout 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
“Introducing Euphoria
 Product specifications Pomegranate by Healthy
› Euphoria by Healthy Cravings Cravings – Reward yourself
with happiness and good
› Pouch health”
› 70% Premium Cocoa
 American credibility
› Sub-brand of Apollo
End of Presentation
Additional Potential Opportunities
and Risks
 Opportunities  Risks
› Partnering with other firm › Introduction of superior
than the Big Two rival product
› Develop better › Product not well-tested
infrastructure › Manufacturing
 Perhaps more factories and
manufacturing centers
capabilities not up to par
› Product specifically › Ability to Scale
targeted to men
› Virtual integration with
Suppliers
 Mexico
 Porter’s Five Forces Analysis
 Bargaining Power of Buyers
› Low to moderate
› Large volume orders
› Lack of threat of backward integration
› Reliance on industry product
 Threat of New Entrants
Bargaining › Low
Power of › Very expensive manufacturing costs
Buyers › Lack of distribution channels
› Regulatory restrictions
› Confectionery and chocolate market
relatively saturated

 Threat of Substitutes
› High
› Alternate
confectionery Competitive Threat of
Threat of
available Rivalry Within New
Substitutes Industry
› Competition during Entrants
holidays

 Bargaining Power of Suppliers

 Competitive Rivalry
› Moderate to high
Within Industry › Supplier group is concentrated
› High Bargaining
Power of › No threat of forward integration
› Equally capable
competitors Suppliers › Industry is important customer to
supplier
› Slow growing
› High storage and fixed
costs
› High exit barriers

Source: http://jmfrrell.blogspot.ca/2011/06/chapter-4-industry-analysisporters-five.html
 Distribution Methods
 Go through retail Distribution Channels Breakdown
channels
› Supermarkets and
grocery focus Supermarkets/Groce
ry
 Premium chocolate 16%
moving into this Convenience Stores
distribution channel 12%
Drugs Stores
55%
9% Big-Box
9% Supercenters

Other
 Distribution Formats
Market Share Revenue ($ in MM)

Snack-size Chocolate; 2.52

Bar/Bag/Box (>3.5 oz); 7.15

Bar/Bag/
Box(<3.5
oz),
3.479
Bar/Bag/Box (>3.5 oz)
Seasonal Chocolate; 4.41 Seasonal Chocolate
Bar/Bag/Box(<3.5 oz)
Snack-size Chocolate