For the exclusive use of U. PUTRO, 2022.

Indian School of Business

ISB303

March 21, 2022

Vijaya Sunder M

CREATIVE CHOCOLATES IN NIGERIA: TO TEST MARKET OR NOT?

No matter where you are in the world, the famous golden arches are often not far away. Like
McDonald’s, Coca-Cola, and Nike, Creative Chocolates had penetrated more than 100 countries, with
about 26,000 outlets worldwide in 2021. However, the company had not set foot on one continent:
Africa (see Exhibit-1). In 2022, Alan Rickman, the new chief executive officer (CEO) of Creative
Chocolates, was considering opening outlets in Africa and had to decide whether to test market or
not.
BACKGROUND OF CREATIVE CHOCOLATES

Creative Chocolates, a US$6 billion company headquartered in a Mid-Atlantic state of the United
States, manufactured warm fresh baked chocolates. From its beginnings as a small chocolate shop in
the late 1980s, Creative Chocolates had grown in the last two decades–thanks to its unique
proposition: chocolates freshly baked just-in-time for its customers. Although the idea of baked
chocolates originated in the 1850s, the market opportunity was not realized for over a century.

The founders of Creative Chocolates saw value in the concept of baking chocolates fresh in front of its
customers and invented a system for making chocolates within ten minutes of the order. The system
was similar to that of Subway, where customers could choose the type (kind of chocolate, flavor, etc.)
and quantity of ingredients (sugar, cocoa, milk powder, etc.). Based on the customers’ preferences,
the chocolates were baked fresh in front of them and wrapped for their convenience. Although
chocolates, in general, were not a new product, the “freshly baked” concept was new and attracted a
range of customers from schoolkids to young adults and even senior citizens.

Over the years, the firm introduced several varieties of baked chocolates. They created a unique
market positioning for themselves by selling their chocolates in outlets (stores and franchisees) owned
by them, but not via retailers. This helped them keep their secret of making fresh chocolates in-house.
Their customers loved the fresh chocolates, and some even got “addicted” to them.

Professor Vijaya Sunder M prepared this case solely as a basis for class discussion. This case is not intended to serve as an
endorsement, a source of primary data, or an illustration of effective or ineffective management. This case was developed
under the aegis of the Centre for Learning and Management Practice, ISB.

Copyright @ 2022 Indian School of Business. The publication may not be digitised, photocopied, or otherwise reproduced,
posted or transmitted, without the permission of the Indian School of Business.

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With about 16 brands, Creative Chocolates was among the top market players in the chocolate
confectionery business in the United States in 2011, with a market share of over 45%. Since then, the
top management of Creative Chocolates had focused their efforts on a growth strategy. By 2020, they
had successfully penetrated in more than 100 countries with about 26,000 outlets.

FOCUS ON AFRICA

As core Western markets continued to stagnate in 2021, confectionaries turned their attention to the
largely untapped African markets, particularly Nigeria. In 2022, Creative Chocolates’ new CEO,
Rickman, claimed that “it was not about if, but when” our brands would be entering Nigeria. “If we
can penetrate in Nigeria, entering other African countries would be easy,” said Rickman to his
executive team. However, there were mixed reactions to his proposal.

After the death of the executive of the second-generation family-owned Creative Chocolates, Rickman
took over the chief executive position. In fact, Rickman was the first CEO of the firm from outside the
family, hired with the specific aim of putting the company on a growth trajectory. Although young
compared to the experienced CEOs of competitor firms, he was a dynamic thought leader.

A report by PricewaterhouseCoopers(PwC) on long-term global growth projections up to 2050

predicted that between 2020 and 2050, over half of the global population growth would occur in
Africa.1 Nigeria’s population alone was estimated to reach around 400 million in 2050, which would
make it the third-most populous nation in the world.2 Nigeria’s per capita GDP had risen exponentially,
from US$379 at the turn of the millennium to US$2,360 in 2021. 3 Further, the Organisation for
Economic Co-operation and Development’s (OECD) Emerging Markets report found that about 46% of
Nigerians agreed that their disposable incomes had increased. 4 The World Bank’s Ease of Doing
Business index for 2020 also saw Nigeria rise to the 105th rank, up from the 145th rank in 2017, for
starting a business.5

Meeting with the Management Consultant

Responding to Rickman’s curiosity, many senior executives at Creative Chocolates felt that the flaw in
the idea of tapping into Africa’s largest economy was the lack of adequate supply chains. Nigeria is too
far away from South Africa and Morocco, where most of the raw material suppliers of chocolates are
located.

However, Rickman felt that Creative Chocolates had already let slip the first-mover advantage, with
rival Western Chocolates having already entered the Nigerian market in 2020. He thought that they
were missing out on a fast-growing, lucrative market. From the data of Western Chocolates, Rickman

1
PricewaterhouseCoopers. (2017). The world in 2050 – summary report. The long view: How will the global economic
order change by 2050? https://www.pwc.com/gx/en/world-2050/assets/pwc-world-in-2050-summary-report-feb-2017.pdf
2
Provost, C. (2013). Nigeria expected to have larger population than US by 2050. The Guardian.
https://www.theguardian.com/global-development/2013/jun/13/nigeria-larger-population-us-2050
3
Trading Economics (2021). Nigeria GDP per capita. Retrieved from https://tradingeconomics.com/nigeria/gdp-per-capita
4
OECD (2020). Business insights on emerging markets 2020. OECD Emerging Markets Network. OECD Development Centre,
Paris. http://www.oecd.org/dev/oecdemnet.htm
5
The World Bank. (2021). Doing Business 2020, Economy Profile: Nigeria,
https://www.doingbusiness.org/content/dam/doingBusiness/country/n/nigeria/NGA.pdf

Creative Chocolates in Nigeria: To Test Market or Not? | 2

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estimated that test marketing would cost US$75,000. Further, Rickman learned that Creative
Chocolates had a 50% chance of succeeding, if it went ahead without test marketing.

Reading reports on the African market convinced Rickman that they should get started with Nigeria
immediately. In a meeting, one of his executive team members said:

“We won’t know how consumers in Nigeria will respond to our product and the just-
in-time process of warm baked chocolates unless we make our chocolates available
to them. Remember that when McDonald’s entered Africa, they had to change their
menu to match the African palate. What worked in the United States may not work
here.”

Rickman arranged a meeting with a management consultant, who gave him several market research
reports and associated data. The market research reports showed that the probability of a positive
test market was only 60%. Rickman performed a few calculations based on his internal data and found
that if Creative Chocolates was successful in the Nigerian market, the company would make a profit
of US$800,000. The reports also revealed that if the business failed in Nigeria, the firm would lose
US$350,000.

"Assume we test market, and the outcome is positive; what do you think could be the likelihood of
our business’s success in Nigeria?" asked Rickman. “Based on our market research reports, it would
increase to 80%,” responded the management consultant. He added, “Alternatively, if the test fails,
and Creative Chocolates still makes a launch, the probability of success drops to 30%.”

With no experience of test marketing, Rickman pondered his next move.

Creative Chocolates in Nigeria: To Test Market or Not? | 3

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Exhibit 1
Creative Chocolates Outlets

Source: Created by Author.

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