You are on page 1of 29

Table of content

Topic
Introduction
Competition analysis
Ratio analysis
Problem statements
Recommendations
Conclusion

Page No.
2
3-12
12-19
20-21
21-26
27

Introduction
Rogers 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 Victorias 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 its
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
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:

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.

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.

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.

Some other Distinctive Competitor analysis


Rogers
Godiva
Chocolate
Quality
Price

Very high

High price
as
their
product
quality is
high
Packaging Handmade
and
not
gorgeous

Outlets

Callebaut Lindt

Not as high Good


as Rogers
Quality
15% high
price point
from
Rogers

Purdy

Product quality Lower than


is mid range
Rogers

Similar
90% of Rogers
price
pricing
points to
Godiva

Price point
significantly
lowers than
Rogers.

Glitzy
packaging

Superior
mid range
Are
very
with
good
copper
and gold
boxes
11
retail Widespread 32 stores Distributed in 50 outlets
outlets of distributions
mass
their own
among
merchandisers,
retailer
drug
and
grocery stores

Competitors Analysis with the help of Porters 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.

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

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. Rogerss chocolate is often used as gift during numerous
seasons and celebrations including Christmas, Easter, Halloween, Valentines 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 6month 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 tourists 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
Nestls, Hersheys 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 margin

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
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

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

Return on stockholders 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.

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 :
Current ratio

2006 =

2005 =

= 1.367

= 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.
Quick ratio

2006 =

2005 =

= 0.4612

= 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:
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.
Long term debt to capital ratio

2006 =

= 0.152

2005 =

= 0.1535
17

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

2006 =

= 0.1794

2005 =

= 0.2951

18

This ratio indicates how well creditors are protected in case of the company's
insolvency. Here Rogers were also in better position in 2006.
Times-Interest earned ratio

2006 =

= 12.60

2005 =

= 17.493

This ratio indicates a companys 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:
Days of Inventory

2006 =

= 104.639=105 days

2005 =

= 105.236=105 days

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.
19

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.
Average collection period

2006 =

2005 =

= 11.056 =11 days

= 14.056=14 days

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.
Total asset turnover

20

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.
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 Rogers Chocolate had to price
their product much higher as compared to their competitors.

21

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
couldnt 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:
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
22

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.
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

23

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?
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?
24

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.
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
25

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.
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

26

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
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.
27

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
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

28

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

You might also like