Case I: Choc Delights Choc Delights is an international company that produces and sells premium chocolate. The company has strong brand recognition and a reputation for high quality products. Choc Delights’ customers are large grocery store chains or grocery distributors, who resell to smaller chains or independent grocery stores. Prices are negotiated individually and depend on the volume to be purchased, the country where the products are sold, and any particular promotional or marketing arrangements, among others factors. Despite its leadership position in some Western European countries, Choc Delights’ market share on a unit basis has been dropping in recent years. Unit market share refers to the percentage of units sold by a company compared to the total units sold in the market. Table 1
Choc Delights unit
market share (%)
Total units of
chocolate sold in
the markets
(million kg)
Four years ago
33%
Three years ago
33%
Two years ago
29%
Last year
24%
185
195
205
215
The CEO of Choc Delights has asked A.T. Kearney to help him find opportunities for the company to increase its sales in countries outside Western Europe in an effort to depend less on its domestic markets. 1. In discussing possible reasons why Choc Delights has been losing market
share, a sales manager suggests the following reasons:
I. Strong economic recession in domestic markets over the past four
years
II. Newer competitors have a lower cost of production
III. Launch of innovative products by the main competitor in the last year
IV. Competitors have been lowering their prices
V. Increasing penetration of chocolate private labels in supermarkets
Which of the above would you consider as potential valid reasons?
A)
B)
C)
D)
E)
I, II, V
III, IV, V
I, III, IV
II, III, V
All of the above
2. Which of the following statements is valid based on the data in Table 1?
A) The chocolate market has been showing a steady growth rate (in units sold)
during the past four years
B) The unit sales of Choc Delights did not grow in any of the past four years
C) The unit sales of Choc Delights fell 5 percentage points in the last year
D) Choc Delights has lost more than a fifth of its unit market share over the past
four years
E) The unit sales of Choc Delights fell more than 20% in the past four years
3. The market demand for chocolate is expected to fall 10% next year. Based on
the data in Table 1, by how much would Choc Delights have to increase its
unit sales from last year to regain the market share it had three years ago?
A)
B)
C)
D)
E)
3%
9%
24%
33%
38%
The team decides to evaluate the potential impact of an aggressive marketing campaign
on the sales of Choc Delights. One of the ideas suggested was to replace the
company’s regular Easter gift pack for a new bundle pack combined and invest in media
advertisement for this new offering. This new bundle pack would contain twice the
quantity of chocolate of a regular Easter package and would be sold at a 20% higher
retail price. The head of marketing for Choc Delights provides you with the following
information:
•
•
•
•
The media advertising would cost € 1,25 million
A regular Easter pack contains five 25 gram chocolate eggs
The average retail price of a regular Easter pack is 10€
Choc Delights normally sells 2,5 million regular packs in the Easter
•
•
•
The total cost of a regular Easter pack for Choc Delights is 6€. Half of this amount
covers the production cost, while the other half covers all the distribution cost.
The distribution cost does not vary significantly from a regular to a bundle pack
The production cost of a pack varies proportionally to the quantity of chocolate in
it
4. Based solely on this information, what percentage increase in the number of
Easter packs sold would be required to pay back the advertising investment?
A) 20%
B) 25%
C) 50%
D) 75%
E) 100%
The team conducts a workshop with the executive board of Choc Delights to discuss the
factors that are increasingly defining the chocolate market and what opportunities they
could create both now and in the future for Choc Delights. The CEO is particularly
interested in understanding opportunities in the area of product innovation and new
product launch.
5. Which of the following trends do you consider LEAST relevant to the address
the CEO’s request?
A) Health is becoming a major driver in new product development; last year, 10%
of products were marketed as vegetarian, 7% as free from additives and 7% as
organic
B) Portion control is increasingly imperative, with smaller bars and larger ‘sharing
packs’ introduced to curb overeating
C) Convenience is a major driver for chocolate lovers, who want to grab a bar
from a local store or throw a multi-pack into the trolley during a weekly shop
D) Governments are increasingly pressuring manufacturers to tackle obesity,
although only 12% of consumers see fat content in chocolate as an important
factor
E) Price per gram is rising fast in developed markets, despite research showing
that consumers feel cheated if bars get smaller while price remains static
When discussing geographic growth trends, the team presented Exhibit 1 showing
historic, current and forecasted data on sales of chocolate in different world regions.
Exhibit 1 – Size of chocolate retail markets (in US$ billions)
35
29
18
24
42
North America
36
Western Europe
44
BRIC
20
Other
22
11
9
12
5 years ago
Currently
In 10 years
6. Based on the data provided in Exhibit 1, which of the following statements is a
valid conclusion about sales of chocolate?
A) Over the past five years, the North America market has grown faster than the
Western Europe in terms of sales
B) Five years ago, sales in Western Europe represented less than a quarter of
total global chocolate sales
C) Sales in BRIC markets are expected to grow as fast in the next ten years as
they have grown in the previous five years
D) If the forecasted growth trends continue, the ‘Other’ markets will have tripled its
size in less than 25 years
E) If the forecasted growth trends continue, the North America and Western
Europe markets will still account for more than half of the global chocolate
market in 20 years from now
The CEO is interested in learning the A.T. Kearney’s view on the rising proliferation of
consumer tastes. Specifically, he asks the team “what kind of chocolate will we be
eating in the next decade?”
7. Which of the following trends is LEAST helpful in providing an answer to the
CEO?
A) Chocolate is becoming increasingly premiumized, and luxury brands will
become almost mass market as consumers develop a palate for everyday
glamour
B) While children prefer sweeter chocolate, concerned parents will look for
chocolate with added health value
C) Milk chocolate is still the favorite flavor, accounting for 40 percent of value
sales of chocolates last year
D) Food origin is an increasingly important driver for consumer purchasing
decisions in more developed chocolate markets, particularly at high-end
retailers
E) A recent survey found that 35% of respondents believe dark chocolate to be
healthier and that this type of chocolate will continue to grow significantly