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MARKETING PLAN FOR GODIVA CHOCOLATES BISCUITS, COFFEE AND COCOA RANGE This report is the marketing plan

n for the biscuits, coffee and cocoa range of Godiva Chocolates for its business in the United Kingdom. This is proposed to be implemented in preparation for the planned acquisition of Godiva Chocolates from Campbell Soup Company by Nestle. The structure of this marketing plan is based partly on the structure presented in Westwood (2005). Other academic books referenced for this reports structure and contents include Cohen (2004), Groucutt et al (2004), Knight (2004), Lancaster & Reynolds (2005), and Stapleton (1998). I. INTRODUCTION AND MISSION We will be acquiring Godiva Chocolates from Campbell Soup Company. This will give us a presence in the premium confectionary market to complement our existing confectionary market ranges. One of the product ranges of Godiva Chocolates is the biscuits, coffee and cocoa range. The products that Godiva have will strongly complement our existing products in the beverages and chocolate & confectionary range. The mission for this range will be to continue providing premium brand and quality biscuits, coffee and cocoa for our clients through a greater distribution access. This follows the overall mission for the brand and business of maximising profits without sacrificing quality or exclusivity. II. EXECUTIVE SUMMARY AND CORPORATE OBJECTIVE This will be the first year we will be managing the biscuit, coffee and cocoa range of Godiva Chocolates. Sales have expanded in recent years and the brand continues to be wellknown and have a high quality reputation. Unfortunately, while Godiva is a leader in the premium chocolate sector based on sales, the business overall has not been successful as profit margins are in the 11% range while the premium chocolate sector overall is achieving ~16% average margins (Lofthouse 2007). We believe that we can maintain the strong sales growth and yet be able to achieve much higher margins than what has been historically achieved by the business. The growth in the premium chocolate sector has been 8% to 10% in the past five years while, in comparison, mass market confectionary brands have achieved only ~2% growth (Lofthouse 2007).

The objective for the biscuits, coffee and cocoa range of Godiva Chocolates for the United Kingdom is to continue to grow the business by ~10% in revenues over the next three years. III. MARKETING AUDIT As this will be the first year for Nestle to manage the Godiva Chocolates range, an internal marketing audit yields no information directly related to Godiva Chocolates. Nevertheless, for UK confectionary business overall of Nestle, the following has been the performance in 2006: decrease of SKUs by ~40%, lower market share by ~0.6%, and increase in EBIT margin (Nestle 2006). This is an improvement in performance from 2005 when several issues in the UK business were identified: business not where it should be, change in management, and improvements in 2006 expected (Nestle 2005). The key products for this marketing plan are all the products included in the biscuits, coffee and cocoa range of Godiva Chocolates: coffee) Cocoa cocoa products include sampler boxes (e.g. hot cocoa sampler box), cocoa collections (e.g. holiday hot cocoa collection) and cocoa canisters (e.g. caramel hot cocoa canister) The rest of this section presents the SWOT analysis, the key assumptions utilised in their marketing plan, and a discussion of the segmentation, targeting and positioning. A. SWOT ANALYSIS This part of the marketing audit section presents the SWOT analysis for the Nestle organisation in the United Kingdom. Strengths of the Organisation Part of top global confectionary firm with strong global brand in Nestle SA; good Extensive financial and technical resources Complementary brands across other confectionary pricing points Good retail marketing organisation globally which the United Kingdom business can manufacturing experience Biscuits product examples include gift tins (e.g. biscuit assortment gift tins) and gift Coffee products include chocolate coffee (e.g. chocolate crme coffee), Godiva packs (e.g. Godiva signature biscuit gift pack, dark truffle heart biscuit gift pack) premium roast coffee and specialty premium coffee (e.g. crme brulee coffee, hazelnut decaf

leverage and depend on. Godiva has a retail-oriented business model and is a niche specialty

business (Adelman et al 2007). strengths of Nestle

Godiva would thus benefit from the retail marketing

Godiva is a strong brand name globally. Godivas brand resonates with its target

market, and is well-known globally resulting in its strong 10+% growth globally (Moskow & Aquino 2007) Weaknesses of the Organisation Improving business operations in the United Kingdom but overall still not at similar Currently no premium brand confectionary marketing staff Competitors are more established in the United Kingdom and have a more complete Godiva Chocolates with low operating margins versus competitors in premium performance levels with Nestle SA globally

distribution network confectionary sector (~11% for Godiva versus 16% average for competitors). Godivas low operating margin is largely due to the high cost of inputs such as labour and leases, and working capital usage (Moskow & Aquino 2007) Opportunities in the Sector Premium confectionary sector growing at ~10% rate, much higher than mass market confectionary sector (at 2%); strong demand expected to continue, particularly in the nearterm as key holidays coming up: Christmas holiday season and Valentines Day. Godiva sales are influenced considerably by seasonality with sales volumes increasing significantly during holidays seasons such as Christmas and Valentines Day (Adelman et al 2007) The United Kingdom is becoming increasingly richer with the list of millionaires growing and greater disposable income, particularly in the financial markets such as London (Milmo 2007) The largest single market in Europe is the United Kingdom with about a third of fair trade chocolate sales (Lofthouse 2007) Threats in the Sector Decreasing cocoa production: in 2006/2007, world cocoa production was lower by 7% (Lofthouse 2007)

2007)

Large part of cocoa production at risk: the Ivory Coast has ~37% of world cocoa

production but is politically unstable, and cocoa production is potentially at risk (Lofthouse Increasing competition with several premium brands entering the sector to capture the

large growth opportunities (The Grocer 2007) B. ASSUMPTIONS The key factors affecting the assumptions for the Godiva Chocolates business are the assumptions affecting potential growth rates in revenues, and also the assumptions affecting the cost inputs particularly as Godiva Chocolates has one of the lowest operating margins in the premium confectionary sector. Any changes to the assumptions could have a significant impact on the resulting financial performance of the business. The key assumptions for this marketing plan are: sector UK GDP will remain at current growth rates over the next few years Cocoa prices will not significantly increase; price increases reflect similar increase Organisational wage increases will not exceed inflation rate in the United Kingdom in There are no government regulations that will affect the premium confectionary the next three years

sin prices in recent years C. SEGMENTATION, TARGETING AND POSITIONING This section discusses the market to be targeted for the biscuits, coffee and cocoa range of Godiva Chocolates. There are two key markets that will be targeted for the biscuits, coffee and cocoa range of Godiva Chocolates. These markets continue to follow the current markets catered to by Godiva Chocolates. These are the corporate segment and the affluent retail market. The corporate segment consists of two key groups for specific purposes. The first group is for business gift giving which is an all-year round market but does have its peak during the holiday gift giving season. The second group is for corporate incentives program which are utilised by corporates for sales incentives, recognition or rewards. The affluent retail market is composed of retail clients who have a preference for premium confectionary products. The biggest group of these retail clients are found in London and, in this first year, we will continue to focus on this area for this particular retail market. It

will only be in the second and third years that we will be considering expanding our distribution channels further outside of the London area, with the exception of the one store we have in Kent. There are currently eight Godiva stores in the United Kingdom and these are located in the following (Godiva 2007): Seven (7) are located in central London in the following areas: Covent Garden, One (1) store is located in Bluewater, Kent which is in the Southeast of London but The biscuit, coffee and cocoa range of Godiva Chocolates will continue to be positioned as a premium confectionary range and priced at a significant premium relative to mass market confectionary brands and even some of the other premium confectionary brands. IV. MARKETING OBJECTIVES The key marketing objectives for the biscuits, coffee and cocoa range of Godiva Chocolates are as follows: years To increase the share of the biscuits, coffee and cocoa range within the Godiva Chocolates overall sales by an absolute 5% share within the next three years V. MARKETING STRATEGIES AND TACTICS The marketing strategies are defined across products, pricing, promotion and distribution. For the biscuits, coffee and cocoa range of Godiva Chocolates, the marketing strategies and tactics are as follows. Products Maintain current product range, focusing on increasing the sales of the current products in the biscuits, coffee and cocoa range Pricing Establish further premium pricing on best-selling product in the biscuits, coffee and cocoa range for retail affluent segment and determine best pricing and volume combination To increase sales by at least 10% each year in real terms in the next three years To increase margins from the current 11% to the sector average of 16% within the To increase the overall share of the retail affluent segment of the overall biscuits, Oxford Street, Kings Road, Gees Court, Knightsbridge, Fenchurch Street, Regent Street which is still located relatively near London

next three years coffee and cocoa range of Godiva Chocolates by an absolute 10% share within the next three

Maintain current pricing for the rest of the products in the biscuits, coffee and coca

range for retail affluent segment which have achieved average rates of growth. Those products which exhibited low growth rates will still be kept at current pricing levels with the key reasons for poor sales to be determined in the coming year Introduce discount pricing for corporate segment for first-time clients and also for longer-term clients (greater than three years). This is expected to increase the introduction of the products to first-time clients. For the longer-term clients, this is to ensure that we are able to keep these clients for their business gift giving and corporate incentives programs Promotion Increase affluent retail advertising and promotions to ensure greater brand and product awareness of target market. The plan is to identify the key advertising points for the retail affluent which may include specific magazine adverts or targeted promotional campaigns specific to the retail affluent segment Develop corporate segment through referrals and promotions, and proactive This will entail marketing targeting largest corporate names in the United Kingdom. segment both from new clients and current clients Distribution Increase distribution channels in London without significant investment in actual stores through affiliation with third party premium retail channels. With success of this initiative, increase of distribution channels outside London utilising similar affiliate distribution channel will be considered This strategy and tactics for distribution requires further explanation. The plan is to pursue increased distribution channels within London through a retail channel tie-up. Thus, this would not entail significant investments in store platforms for Godiva, which, in the past, has impacted negatively on operating margins. One option is to aggressively distribute the biscuits, coffee and coca range across mass channels but this would severely dilute the premium luxury brand name of Godiva (Moskow & Aquino 2007). The second option is to identify premium retail channels and utilise these channels, assuming there wont be any negative impact in using these retail channels. considered and discussed in a report by Greenberg et al (2007), with the following viewpoints: A possibility for this premium retail channel tie-up is Starbucks Coffee. Interestingly, this has been

assigning a sales force for corporate marketing and pursuing increased sales in the corporate

1.

Potentially a good fit as both brands (and their products) are high value, low-cost This approach could be pursued in a similar manner to the Starbucks JV with Hershey Quality of Starbucks and products has been established globally Premium biscuits, coffee and cocoa range should complement Starbucks offerings

indulgent offerings
2.

in the US
3. 4.

and enhance customer experience and convenience. It may be that the complete range of the biscuits, coffee and cocoa range of Godiva Chocolates will not be offered as some of the products could potentially compete with the Starbucks products. Excluding these competing products, the other products in the range should be attractive enough for Starbucks to consider the proposition VI. IMPLEMENTING PLAN The following is the master schedule of the key initiatives under marketing strategies and tactics with the specific responsibilities: MASTER SCHEDULE Month 1 2 3 4 5 6 7 8 9 1 0 Pricing changes and discount programs Retail advertising and promotions Corporate segment marketing Distribution channel expansion in London VII. CONTINGENCY PLANS The largest risk in this marketing plan is the potential reduction in cocoa production, which may impact on input prices. A large part of the cocoa production is from the Ivory Coast and its impact, if that source were to be closed out would be significant. The contingency plans for this risk include hedging cocoa prices over the next year to fix the cocoa input price, and working with alternative suppliers to reach a decision on cocoa supply agreements to limit the impact of reduced cocoa production. VIII. BUDGETS The budget presented is for the overall global Godiva Chocolates business. The biscuits, cocoa and coffee range financials for the United Kingdom are a part of these overall figures. These figures will be revised just for the relevant business considered once the Godiva 1 1 1 2 UK Marketing UK Retail Marketing UK Corporate Marketing UK Marketing Responsibility

Chocolates business has been acquired by Nestle and the full financials breakdown of the overall Godiva Chocolates business is available. The assumptions for the figures are as defined in the targets in previous sections for the biscuits, coffee and cocoa range but utilised as well for the overall Godiva business. For sales revenues, these are assumed to continue to grow at ~10% yearly. Operating profit margins are expected to improve and planned to reach sector average margins of ~16% within three years. The result is that net margins increase from the current estimated net margin of 6.8% to approximately 9.8% in three years. PROFIT & LOSS ACCOUNT GODIVA CHOCOLATES All values in US$ million 06/07A 07/08F 08/09F 09/10F Sales 500 550 605 665 Sales growth, % ~10% 10% 10% 10% Operating expenses 445 480 517 557 Operating profit 55 70 88 108 Operating profit margin, % 11.0% 12.8% 14.5% 16.3% Taxes 21 28 35 43 Net income 34 42 53 65 Net margin 6.8% 7.7% 8.7% 9.8% Source: 06/07A from Bivens & Goldman (2007). Forecast figures ere calculated from expectations in revenue growth and improvements in margins. Forecast tax estimated at 40%. IX. EVALUATION AND CONTROL There will be quarterly review of this marketing plan to determine the progress versus targets and defined plans. In this quarterly review, senior management will be given a report to update them of the progress. This marketing plan will also be evaluated and updated every twelve months, and submitted for approval to senior management. BIBLIOGRAPHY AND REFERENCES Adelman, D., Andrews, V. & Lee, D. 2007. Campbell Soup Company: Godiva has not fit into Campbells portfolio. Morgan Stanley Research North America, 9 August 2007. Bivens, T. & Goldman, K. 2007. Campbell Soup Company: Godiva on the block. Bear Stearns US Equity Research, 9 August 2007. Cohen, W. 2004. Marketing plan. 4th ed. Hoboken, NJ: John Wiley & Sons, Inc. Godiva, 2007. Godiva store locator. [online]. Godiva Chocolatier Inc. Available from

http://godiva.geoserve.com. [cited 2 November 2007]

Greenberg, M., West, J. & Kieley, A. 2007. Starbucks Corporation: Godiva makes a good strategic fit. Deutsche Bank Equities Research, 22 October 2007. Groucutt, J., Leadley, P. & Forsyth, P. 2004. Marketing: Essential principles, new realities. London: Kogan Page Ltd. Knight, P. 2004. Highly effective marketing plan. Harlow: Pearson Prentice Hall Business. Lancaster, G. & Reynolds, P. 2005. Management of marketing. Oxford: Elsevier ButtterworthHeinemann. Lofthouse, R. 2007. Luxury chocolate is piling on the pounds as Godiva becomes the latest to tempt buyers. The Business. [online]. [Published 18 August 2007]. Available from: http://www.factiva.com [cited 2 November 2007]. Milmo, C. 2007. The capital gains: London is the new plutocrats paradise. The Independent. [online]. [Published 8 February 2007]. Available from: http://www.factiva.com [cited 2 November 2007]. Moskow, R. & Aquino, P. 2007. Campbell Soup Company: Godiva may gallop off. Credit Suisse Equity Research, 09 August 2007. Nestle 2006. Consolidated financial statements of the Nestle Group 2006. [online]. Nestle SA. Available from http://www.nestle.com. [cited 2 November 2007]. Nestle 2005. Confectioney business review, 10 November 2005. [online]. Nestle SA. Available from http://www.nestle.com. [cited 2 November 2007]. Stapleton, J. 1998. How to prepare a marketing plan. 5th ed. Aldershot: Gower. The Grocer 2007. The need to include niche. William Reed Ltd. [online]. [Published 6 October 2007]. Available from: http://www.factiva.com [cited 2 November 2007]. Westwood, J. 2005. The marketing plan workbook. London: Kogan Page.

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