Montreaux Chocolate USA: Are Americans Ready for Healthy Dark Chocolate?

I: Key Challenges and Marketing Issues for the new product

line

Name is the Game: Apollo held a 15.4% share in U.S. Confectionery markets, making it second

highest in market share after Fisher’s in 2011.Such big market shares would imply stronger

associations of Apollo with that of its confectioneries. The new associations with Apollo would

be challenging to predict, as they have, till now, never tested the waters with chocolates. All the

more intriguing challenge would be to decide, under what brand the product should be

forwarded. Is it through the old and connoted “Apollo” or the brand “Montreaux” to which the

consumers may not confide upon?

Taste vs Health: Deciding upon either taste or health would end up with an obvious trade-off as

both factors propose a strong potential market. This decision would reflect on the whole product

line which may be laid in the future. Health was the primary messages proscribed by second

BASES yet the secondary message “taste” is not to be ignored.

Nielsen’s 12 New-product Success Factor:

a) Salience:

a. Distinct Proposition: Montreaux proposes to offer innovation by understanding

the wants of the consumers. It proposes to deliver healthy foods without

compromising on taste by offering pomegranate, cranberry and blueberry flavors

which is quite novel in taste combinations.

b. Attention Catching: Ingenious combinations such as cranberry, pomegranate etc.

are quite innovative and hence garner the required attention from the consumer.

Such communications indulge the consumer into selective attention as the

physical stimuli is most likely noticeable by value proposition which are highly

relevant to their need (Ex: “Healthy”, “Low calorie”) and are largely deviated

from the normal stimuli (achieved here through taste).

For those who are not the immediate target market, messages as these would

comply with the attitudes and beliefs of the consumer; hence selective retention

would mean building the consumer brand knowledge.

b) Communication:

a. Message Connection: Since the target customers are 45- 64 years old and mainly

females (accounting for 94% affinity against men with 90%) concerned about

health and weight with a proviso of a sale. The female are most likely to

experience the chocolates as a personal reward and a mood enhancer. The

package should reflect the same with discount offers for more sales. This would

convince the men too as they are directed most among any other values proposed.

A trade-off in doing so would be to giving upon the men and catering to women

who prefer premium or specialty ones which add up to only 19.7% of the

chocolate market in U.S.

b. Clear, Concise Message: The promotion or the packaging should deliver precise

and accurate messages. Words such as “Mood Changer”, “Healthy bite” would

attract the attention of women in U.S. as they are more inclined towards food that

are healthy (low B.P and cardiovascular fitness). In case of men, “quick energy”,

“Easy bite” would do since a clear and concise message would deliver the

message short and sweet.

c) Attraction:

a. Need / Desire: Identify the age groups who prefer Dark Chocolate.

b. Advantage: The product is ahead of its competitors by staying different through

value proposition.

c. Credibility: This factor is extremely important for new products as they are not in

their comfort zones while trying out the product. If it is a success it could add to

the brand knowledge and association.

d. Acceptable Downsides:Identifying the downsides way before the consumer or the

customer does, gives an edge for the marketer.

d) Point of Purchase:

a. Find-ability: The case describes that the consumers’ purchase at super markets is

fairly equal doing so in candy aisle and at checkout points.

“Out of sight – Out of mind” is the mantra during shelf placement!of the products

in the super markets. Product placements affect the purchasing behavior of the

customer. According to the case, the affinity towards consumption of dark

chocolate increases as people grows older.And since our target customers are

adults (Population: 92% of total population as on 2010 which is 188,212 which is

approximately 60.9% of the total population) and they are more than 50%, it is

ideal to have an “eye-level shelving”. In “waist-level shelving”, visibility

variation becomes major influence on product sales.

b. Acceptable Costs: Price and other obscure factors such as calorie counts will

contribute to the acceptable costs the consumer is willing to make.

e) Endurance

a. Product Delivery:It is basically the say-to-do ratio which the company promises

to deliver. The more consistent the product is in delivering the assurance the more

loyal the consumer would be towards you’re the products.

b. Product Loyalty:Meeting the expectations of the consumer and staying ahead of

the competition would bring certainty in loyalty.

Howzat Bro! : Being pioneers at chocolate making do not discount Montreaux from conducting

an ethnographic survey as the tastes of Americans need not match that of the Europeans. The

product should connect to the consumers by delivering the values proposed.

Need for BASES II: BASES II is time consuming and the fact that contenders are on your tail

would only mean quicker and appropriate actiona are a must.Hence a further refined focused

group testing would mean larger work-force working towards minimization of point errors.

Instead focusing on the production facilities would help facilitate in smoothening of the process.

Sources:

! http://articles.economictimes.indiatimes.com/2010-01-20/news/27572872_1_shelf-space-

product-shelves

II: ARE OBJECTIVES ACHIEVEABLE?

David Raymond, a marketing director in the new marketing division committed to achieving the

following goals by year-end 2015:

National distribution of the new montreaux product line

$115 million in annual sales

Be in top 25 in revenue(0.60% market share )

These goals can be achieved by Apollo as Apollo has revenue of $54.4 billion in 2011 and net

income of $3.5 billion and acquired the number two position in the Global market with a share of

15.4%.The US confectionary market has a total revenue of $35.648 billion in 2011 with a 2.8%

growth rate between 2007 to 2011.The revenue for chocolates in this confectionary market has

increased 30% from 2007 to 2010. The US chocolate market is expected to grow at 2% by 2015.

To create a market of a European chocolate which leads the global market share of confectionary

market and is 2ndin the global market with 33.2% has to be done keeping in mind the European

culture rather than branding it as a complete American product. People know Apollo mainly

because of gums and candies and with this only it ranks number 2 in global confectionary

business. Hence this decision of Apollo to collaborate with the Swiss company would be fruitful.

Also Apollo in the past 3 yrs has innovated 70 new products and all have been successful so

there is a strong brand value that Apollo carries with it which would be beneficial. Since the

consumers in US focus on fitness and health which has been sharpened in the last three decades,

Apollo have an upper hand in launching the montreaux dark chocolate as it is low in calorie and

as it has more of cocoa content. Seeing the U.S chocolate market trends in 2011 which includes

low calorie options, dark chocolates sales benefiting from flavones etc. would be beneficial in

achieving their goals. Also since they have analyzed the U.S market so well regarding the dark

chocolates lovers they can achieve their goals very easily.

A possible hindrance to their achievability could be number of competitors and the rate of new

product introduction.

III: Consumer Attitude and Motivation towards new product

concept

To understanding the consumer behavior we need to analyze the motivation that is forcing the

customer to exercise his / her choice.

“DARK CHOCOLATE, ONCE CONsiDERED A RARE TREAT is NOw MAiNsTREAM

PRODuCT”

Before we dwell into all the charming benefits that a dark chocolate possess, we should first

look at the chocolate industry as a whole which fared seemingly well in the times of unsteady

and lagging economy, growing 19% from 2007 to 2012. This growth can be attributed to

consumers’ demand for affordable luxuries or indulgence, as well as the foodie culture that has

increased interest in premium, high-quality and artisanal varieties of chocolate. Yet on account

of countering trends the industry will face slow sales growth – 15% from 2012 – 2017.

Consumer’s Attitude: Even though the Research predicts that by 2020 the demand for cocoa

would increase by 30% outstripping the supply, leading to higher prices of the chocolate,

especially the Dark chocolate, consumer demand for the affordable indulgence that chocolate

provides is expected to remain and interest in chocolate as part of the larger food culture will

continue.

Secondly, when it was further analyzed, the consumption trend for chocolate was observed that

89% picked up chocolate as a treat/ reward to themselves.

87% considered it as a favourable snack option.

83% bought chocolate much because of its value for money size.

72% were concerned with the energy and fitness factors that a Dark chocolate has to offer.

Coming onto the importance of Dark Chocolate, more importantly from the perspective

of the Montreaux USA, there has been a paradigm shift in USA where customers are attracted

towards the Dark chocolate over the age-old favourite Milk chocolate.

It has been noted that the increasing demands in the US’ chocolate confectionery industry is due

to the increased demand for the ones high on cocoa.

Dark chocolate's share of the U.S. market for chocolate bars will approach 20% this year, from

just over 18% in 2008, according to Euromonitor

The reasons for this are:

Increase in the number of customers who are fitness freak. The benefit of having the high

cocoa content is having a lower sugar content and that's what would appeal to calorie-

counters.

Even the customers in the age group of 40-60 are preferring dark chocolate to milk

chocolate as it has huge nutritional value compared to the milk chocolates. The flavanol

content of the dark chocolate helps significantly in maintain Blood pressure and also as

studies prove provides UV protection for the skin.

Some 46% of men age 55+ and 48% of women over age 55 favor dark chocolate,

followed by 38% of men that prefer milk and 40% of women that also prefer milk. These

numbers are indicative of the trend toward the increasing favor for dark chocolate.

Indeed, 73% of all chocolate consumers are aware that dark chocolate is healthier.

Therefore taking into account all of these factors and changing trend in the chocolate industry the

Montreaux USA target audience were:

Women (94% v/s men 90%) ,

People aged 45-65,

Educated college youngsters who were more conscious about health and fitness and lastly

consumers having household income of $50000 and above.

Moreover Montreaux concept of coming up with mini bars were also favourable and viable

because as mentioned approx 40% of the adults indulged in dark chocolate in mini snack sizes

which satisfied their taste and also was low on calories.

A possible hindrance to their achievability could be number of competitors and the rate of new

product introduction.

IV: Forecast Model for Dark Chocolate using BASES II

Testing in August 2012

Projections and calculations:

Purchase Volume Estimate, Year 1

Trial Purchase Intent

Definitely would buy 23%

% of "Definites" who actually buy 80%

"Definite" Purchase 18.4%

Probably would buy 40%

% of "Probables" who actually buy 30%

"Probable" Purchase 12%

Trial Rate (Definite + Probable) 30.4%

Hence 30.4% (10.2027264 MM / 36.48 MM) of target market who would buy the product

atleast once.

Marketing Adjusted Trial Rate (Trial Rate * Awareness * ACV)

Low Support C.A * Low ACV 2.5536%

Low Support C.A. * Medium ACV 2.7664%

Low Support C.A * High ACV 3.36224%

Medium Support * Low ACV 3.1008%

Medium Support C.A * Medium ACV 3.3592%

Medium Support C.A * High ACV 4.08272%

High Support C.A * Low ACV 3.648%

High Support C.A * Medium ACV 3.952%

High Support C.A * High ACV 4.8032%

Average 3.51424%

Standard Deviation 0.6977%

Range with S.D. 2.81654% - 4.21194%

Range 2.5536% - 4.8032%

Trail Households (Households * Marketing- Adjusted Trial Rate)

Households 120 MM

Range of Trial Households with MATR 2.5536% - 4.8032% 3.06432 MM

– 5.76384 MM

Repeat Volume (Trial Households * % Households Repurchasing * Repeat Purchase

Occasions)

Repeat Purchase Occasions 4

% Households Repurchasing Mediocre Product with 28% 3.432 MM –

6.455 MM

% Households Repurchasing Average Product with 33% 4.0449 MM –7.6082

MM

% Households Repurchasing Excellent Product with 38% 4.6577 MM –8.76103

MM

Total Volume (Trial + Repeat Volume) 7.72202 MM –

14.52487 MM

Retail Sales Volume ( Retail Selling Price * Total Volume) $34671869.8 -

$65216666.3

Montreaux Sales Volume (Retail Sales Volume * 0.65) $22536715.37 -$42390833.095.

V: Evaluation of NPD Process

Changes recommended for Apollo:

The team assistance provided to Andrea Torres, Director NPD, did not comprise of experts who

dealt with American chocolate consumers. Instead they relied on the expertise of Montreaux’s

team which did not cater to the US market till then. Hence choice of the 45 ideas (prior to

collaboration with Nielsen’s BASES) might not have considered tastes relevant to US market.

Another recommendation for montreaux is that they should have chosen another company in US,

who were already the market leaders in the chocolate industry to launch their brand. A third

recommendation is that billng counters in malls, starbucks shelfs, exhibition stalls could be used

to market the introductory packs. And also since Apllo specializes in candy and gums,

introduction of fancy cookies, dark chocolate gums and lacto dark chocolate candy can be done.

5. SWOT ANALYSIS

Strength

1. Apollo as a brand.

2. Strong R&D.

3. Brand awareness

Weakness

1. Non acceptance of brand

2. Apollo never had any experience in

chocolate market

3. Cost incurring and risk involved

Opportunity

1. New market to explore

2. Leverage on the health benefits of dark

chocolate

Threat

1. Competition

2.Nation wide Acceptance of the dark

chocolate

3. Competition from other confectionary items