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Charles Chocolates

Vivian Cheung

April 1, 2016
Professor Barbara Orser
New Venture Creation

1.0 Key issues

1.1 Marketing
The vice president of marketing and production is overseen by Mary Bird, who manages
and develops marketing strategies. The main marketing issue that was identified was Charles'
chocolates lack of brand awareness. The company targets a niche market due to its premium
pricing and old fashioned packaging. Currently, the main target market would be tourists.
Charles chocolates hopes that their customers' unique experience at their retail stores and their
high quality products would turn their first time customers into loyal and returning customers.
Since the main retail locations are situated in tourist locations such as Bar Harbor, Boston's Back
Bay and Beacon Hill areas, the company would have a hard time establishing a long term
relationship with the consumers and to expand their brand name. Charles chocolates faces the
challenge of increasing its brand awareness without diminishing the brand itself. Due to the high
pricing of Charles chocolates, it deters customers and wholesalers from sampling the brand.
However, if Charles chocolates chooses to discount the products, it could decrease the brand
integrity. Since there are major risks associating with the marketing and pricing, Bird must
analyze different possible outcomes for a variety of alternate solutions.
1.2 Manufacturing
The main production factory is 24,000 square foot, located outside of Portland. The
factory consists of 75 retail, 35 production and 20 management, administration and sales nonunionized employees. There are many job functions which allowed employees to execute a range
of tasks. With such a wide diversity of tasks, it would be advisable to keep track of production
efficiency and productivity outputs. However, Charles' main production factory do not
implement these measurements. This affects production planning because without productivity
measurements, the production manager is unable to fully analyze which areas in the factory need
improvement. As a result, the factory is not functioning at its full potential.
On top of the issue mentioned previously, Charles chocolates' fall under the category of
seasonality products which makes it difficult to predict demands and create production plans.
The product has a shelf life (up to a year), forcing the production managers to make a judgement
on how much inventory to produce without creating waste. An overstock of products forces retail
stores to push or discount the products which may decrease the integrity of the brand. It would be
impossible to predict the exact number of inventory needed while creating zero wastage, so in
order to reduce wastage, production managers underestimate how much they would need to
produce. This issue causes products to be out-of-stock which hinders customers from purchasing
their desired products and may create customer dissatisfaction. Charles chocolate must find a
way to better manage their inventories to prevent over and under stock.

1.3 Human resources

Social trends are constantly changing and current growing demand chocolate companies
to perform corporate social responsibility and to provide health benefits in their products.
Various chocolate companies were accused of operating their business under forced and child
labour in the cocoa bean production in West Africa which drives consumers away from
purchasing from these companies. Currently, Charles chocolates lacks the initiative to take part
in promoting corporate social responsibility. Charles chocolates needs to pay more attention to
current trends to appeal to the current market or else the company will lose many potential
customers. If Charles chocolates promotes ethical labour and contributes to causes in our society,
Charles chocolates should promote these company values and contributions in their marketing.
This would help build the brand image and appeal to a larger market.
1.4 Financial
In the past, Charles was considered to be in a strong financial position. However, growth
had began to decline significantly in the past few years. The decline could be due to the decline
in tourism since the financial crisis. Chocolate sales have declined since 2008, but the company's
revenues have increased slightly due from Sandwich Heaven. There is a potential that Charles
chocolates may have to sell or close down the business if their cash flow does not begin
increasing in the next year.
1.5 Strategic positioning
The chocolate market in the U.S was evaluated to be US$ 19.3 billion in 2011 and has
been continuously growing at 6% annually. Specifically, the premium chocolate market was
worth $2.7 billion, while growing at 10% annually. With this piece of secondary information, it
could be deducted that there is a substantial market for the products Charles chocolates has to
offer. The key issue is to properly appeal their products to consumers. By looking at other
successful chocolate companies, it would be possible for Charles chocolates to better understand
which areas they need to improve on. For an example, although Godiva's chocolate quality is not
as high as Charles, Godiva is still able to achieve a 15% higher price due to its desirable and
modern packaging and marketing strategies. On the other hand, the popular Swiss chocolate
company, Lindt, sells their mid-quality chocolate bars and truffles at 90% of Charles' pricing.
Both of these companies succeed using different marketing strategies. Godiva focuses on its
packaging appearance which would appeal to consumers seeking gifts and Lindt sells their
products to mass merchandisers such as drug and grocery stores rather than upholding a high
quality brand image. Currently Charles chocolates' strategic positioning only appeals to a niche
market including tourists and loyal customers. Charles chocolates lacks the strategic positioning
to appeal to a sustainable market. Therefore, Charles chocolates must learn from their
competitors' positioning and reposition their brand to appeal to a larger market.

2.0 Analysis of issues

Considering all the issues outlined in the previous section, it is important to analyze
which issues need to be dealt with immediately and which issues are less pressing. Many of the
issues described previously are intertwined with one and another. For an example, a more
pressing issue would be the financial aspect of the company. The foundation of a successful
business would be being able to generate profit. Since Charles chocolates have declining
revenues for years, it could potentially result in a bankruptcy. However, without addressing other
issues such as positioning and marketing strategies, it would be difficult for Charles chocolates to
increase their revenues and improve their financial position. On top of that, how Charles
chocolates decides to position their brand would affect their marketing strategy. Therefore
although it is most important to solve the financial situation, the first thing to re-evaluate would
be the strategic positioning of the company.
After looking at other successful competitors' strategic positioning, Charles chocolates
needs to decide if they would like to maintain their high quality branding image or to diminish
their brand and receive more publicity. By maintaining their high quality chocolate image, the
company needs to be selective in regards to who they allow to distribute their products.
Typically, high end chocolate companies only sell their products through their company retail
stores and other high end distributors such as hotels. On the other end, Charles chocolates could
choose to distribute their products through any medium such as drug stores, supermarkets and
convenience stores and to lower their premium pricing. This alternative would create more brand
awareness by having their products distributed in more locations and having the opportunity for
more consumers to afford the product. However, by decreasing the prices, it would compromise
the quality of their products. Since the company stated their high level commitment for the high
quality of their products, Charles chocolate should maintain their original strategic positioning
of possessing a high quality brand but find different marketing strategies to appeal to consumers.
Since the company is determined to not disrupt the quality of their products, the company
needs to revise their marketing strategy. From Godiva's promising results, Charles chocolates
should partially imitate Godiva's marketing strategy. Charles chocolates has higher quality
products than Godiva, but Charles chocolates still prices their products lower than Godiva's.
Charles chocolates should advertise their achievements such as winning the prestigious "Superior
Taste Award" from Belgium's Institute to validate their high quality products. Charles chocolates
needs to conduct a validation process from their consumers to better understand how the
company could reinvent their image to better suit the consumers' needs. A possible alternative
would be for Charles chocolates to offer customizable gift boxes and more modern packaging
styles. Or Charles chocolates could maintain their edgy vintage style packaging and advertise
their image by showing off their uniqueness from other competitors. However, the alternative
should be decided from results obtained from the market analysis conducted through surveys,
face to face interviews or polls.
Next, the inventory and production issues must be resolved in order to optimize
efficiency and decrease wastage. First off, it would be important for the factory to begin
investigating their productivity levels through productivity and efficiency measurements. This
would allow the company to better understand the areas they lack in and where improvements

need to be made. As for the inventory issue of over and under stocked items, promoting online
sales could reduce wastage and customer dissatisfaction for not finding their desired product on
their time of convenience. Online shopping would allow the company to better organize and
analyze the inventory data entries. These data entries could help create a more accurate
production plan by determining which product is in high demand during which season and to
have a more accurate knowledge of the number of existing inventory. Online shopping offers
many advantages for the company, such as providing more convenience for consumers,
appealing to the newer generation, and including the reasons stated previously.
3.0 Primary recommendations
There are many opportunities for Charles chocolates to grow, but the company should
grow in a direction that would appeal to consumers through primary market research. The most
effective way to gain the most accurate data in determining what consumers seek would be
validating company ideas through surveys, interviews and samples. This way, it would allow the
company to better understand which marketing strategies to select. For an example, Charles
chocolates should conduct a mass survey to existing and new consumers in regards to what
packaging appearance they desire - whether it be a completely new style, or the same heritage
themed style or a combination. By receiving confirmation from the consumers, Charles
chocolates would lower the risk of their strategies failing.
Another growth plan the company should focus on would be to adapt to current trends.
For an example, because our market is shifting to a more technology based society, Charles
chocolates should grow their online business. More and more consumers are enjoying the
convenience of shopping from home. As stated in the previous section, by implementing more
online sales, it would bring many benefits to the company such as increasing revenues and
having more accurate inventory data. Currently, Charles' online business only offers free
shipping for orders over $500, but successful businesses such as Amazon and Ebay often offer
free shipping to appeal to more consumers. Another trend that Charles chocolates could follow
would be the healthy eating and the social awareness trend. Charles chocolates could advertise
their health benefits and social responsibility to appeal to a new market. There are many different
ways Charles chocolates could adapt to the market's needs, but the company needs to follow
more recent trends to appeal to more consumers by keeping up with their constant changing