REPORT !

APRIL 20, 2015

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Author:!NEREA!GÓMEZ!ÁLVAREZ!(77153957)!

Module:!STRATEGIC!MARKETING!

LEEDS!BECKETT!UNIVERSITY!

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EXECUTIVE(SUMMARY(!This! report! analyses! and! examines! the! current! market! position! of! the! UK!chocolate! manufacturer! and! retailer! Thornstons! using! a! range! of! strategic!marketing!analysis!models!to!identify!and!discuss!the!issues!in!the!case!itself.!A!brief!history!of!the!company!and!its!operation!is!initially!outlined.!Methods!used!include! SWOT! analysis,! PEST! analysis,! Ansoff’s! Growth! Vector!Matrix! analysis,!Boston! Consulting! Group!GrowthIShare! analysis,( Porter’s! Value! Chain! analysis!and!a!segmentation!analysis.(!After! taking! the! analysis! into! consideration,! the! discussion! focuses! on! the!recommendations! for!the! future!strategic!direction!of!Thorntons,! to!become!an!international! FMCG! (fastImoving! consumer! good)! company! and! to! restore!profitability!as! customer! focused! ‘multichannel’! business.! These!recommendations! are! based! on! the! results! of! the! previous! analysis,! and!explained! with! examples.! The! implementation! of! the! different! proposals! is!explained!at!the!end!of!the!report.!

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TABLE(OF(CONTENTS((INTRODUCTION…………………………………………………………………………………………(1((ANALYSIS…………………………………………………………………………………………………..(1(EXTERNAL!ENVIRONMENT!(PEST!ANALYSIS)………………………………………………..!1!INTERNAL!ENVIRONMENT!(SWOT!ANALYSIS)………………………………..……….…….!2!ANSOFF’S!GROWTH!VECTOR!MATRIX!ANALYSIS…………………..……….……………….!3!BOSTON!CONSULTING!GROUP!GROWTHISHARE!ANALYSIS……………………………!4!PORTER’S!VALUE!CHAIN!ANALYSIS……………………………………………………………….!4!SEGMENTATION!ANALYSIS……………………………………………………………………………!6!!RECOMMENDATIONS…………………………………………………………………………………(7(IMPLEMENTATION………………………………………………………………………………………..!9!!CONCLUSION……………………………………………………………………………………………..(9((REFERENCE(LIST……………………………………………………………………………………..(10(

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INTRODUCTION)!Thorntons!is!one!of!the!United!Kingdom's!leading!manufacturers!and!retailers!of!specialist! chocolates.! However,! the! restructure! situation! of! the! company!together!with!falling!profits!occurred!in!2013!and!2014!have!led!to!closed!stores!and! customers! reducing! their! orders! for!next! year.!More!pressure! comes! from!investment! brokers! recommending! their! investors! sell! their! shares.! Now! the!company!is!carrying!a!£32.9!million!debt.!!!Jonathan!Hart,! their!Chief!Executive,! has!design! a!project! to!become!a! globally!effective! confectionary! manufacturer! and! expand! their! brand! outside! British!boundaries.!They!want!to!become!an!international!FMCG!(fastQmoving!consumer!good)! brand,! repositioning! the! company! as! a! commercial! rather! than! retail!business.!!!

ANALYSIS)EXTERNAL)ENVIRONMENT)(PEST)ANALYSIS))POLITICAL)/)LEGAL)

• Expanding! into! a! global! market! determines! the! political! or! legal!conditions!of!the!brand!depending!on!the!country!of!sale.!

• Consumer!policy!can!be!different!in!the!outside!countries.!• Nutritional!laws!can!affect!the!brand!too.!!

ECONOMIC)• Cocoa!costs!easing!(Hart!and!Killick,!2014,!p.!42).!• Global! chocolate! market! at! $111bn! has! grown! consistently! since! 2009!

(2.0%!CAGR)!and!is!expected!to!continue!to!grow!(3.15%!CAGR!to!2019)!(Ibíd.,!p.!24).!

• Per!capita!consumption!remains!robust!in!the!market!(Ibíd.,!p.!24).!• Core!market! remains! resilient:! he!Boxed!Chocolate! Category! has! grown!

£38m! over! the! last! 5! years! with! Inlaid! Boxed! a! key! driver! with! £27m!growth!(Ibíd.,!p.!8).!

)SOCIOCULTURAL)

• Shopper!behaviour!is!changing!(Ibíd.,!p.!18).!• Seasonal!demand!variation!in!the!market!(Ibíd.,!p.!9,!21).!

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)TECHNOLOGICAL)

• Increasing!use!of!new!technologies!to!help!the!brand!management.!• Shop!online!systems!(website,!apps…):!eQcommerce.!

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INTERNAL)ENVIRONMENT)(SWOT)ANALYSIS))STREGHTS)

• Plan! to! reQconstruct! the! business! is! progressing! with! an! identified!strategy!(Ibíd.,!p.!2,!38).!

• Leading!market!share!in!Inlaid!Boxed!(Ibíd.,!p.!9).!• Positive!brand!perception!(Ibíd.,!p.!14).!• Leading!in!brand!awareness!(Ibíd.,!p.!10Q11).!• No.!1!premium!brand!position!in!the!UK!(Ibíd.,!p.!4,!6).!• Thornstons!is!a!top!20!global!chocolate!company!(Ibíd.,!p.!25).!• Market!leading!bran!values!(Ibíd.,!p.!10,!14).!• Highest! advocacy! in! the! sector,! increased! by! broadening! distribution!

(Ibíd.,!p.!10,!12Q13).!• Highest!gifting!consideration!(Ibíd.,!p.!5,!10,!14).!

!WEAKNESSES)

• Source!of!UK!growth!unclear!(Ibíd.,!p.!17).!• Source!of!global!growth!unclear!(Ibíd.,!p.!26,!27).!• The!brand!does!not!focus!exclusively!on!a!specific!target!(Ibíd.,!p.!7).!• Wide!range!of!premium!products!(Ibíd.,!p.!6).!!• No!differentiation!compared!to!their!competitors!(Ibíd.,!p.!6).!• Warehousing!sometimes!is!unable!to!meet!demand!(Ibíd.,!p.!34).!

!OPPORTUNITIES)

• EQcommerce.!• Social!networks!to!help!the!brand!management.!• FMCG! new! product! development! (NPD)! focused! on! fewer! and! stronger!

products!launches!(Ibíd.,!p.!4).!• Planned! investments! in! the! brand,! people,! business! infrastructure! and!

brand!communications!(Ibíd.,!p.!4,!34).!• Want!to!grow!internationally!(Ibíd.,!p.!24Q27).!• Key!seasons!(Ibíd.,!p.!9,!21).!• Gifting!proposition!(Ibíd.,!p.!29).!

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THREATS)• Heavily!indebted:!£32,9!million!(brief,!p.!2).!• Reduction! in! retail!portfolio:! “Hold! stores”! (Ibíd.,!p.!30Q32).!Retail! rightQ

sizing!on!track!and!investing!in!flexible!state.)• Market!pressures!(Ibíd.,!p.!41).)• Huge!range!of!brands!competitors!in!the!same!market.)• Reduced! sales! as! a! result!of! the! economic! downturn! or!recession! in! the!

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ANSOFF’S) GROWTH) VECTOR) MATRIX)ANALYSIS))) ) ) )))))))))Current)product) ))))))))))))))))))))))New)product)) ) )Current)market!!)New) market)

))KEY)ISSUES)Thorntons! has! a! strong! market! penetration! thanks! to! the! inlaid! boxed!confectionary! (Ibíd.,! p.! 20)! and! the! seasonal! product! launches! in! Easter,!Christmas! (Ibíd.,! p.!21)…!Regarding! to! the!new!product!development! category,!the!market!shares!of! the!chocolate!blocks!and!the!single! flavour!chocolates!are!too!low!for!the!moment!(Ibíd.,!p.!22),!but!it!can!be!a!normal!situation!taking!into!account! that! the!market! is! not! familiarised! yet!with! the! products.! The!market!extension! is! driven! by! the! international! growth! in! key! markets! like! North!America,!Australia,!rest!of!the!world,!duty!free!and!global!accounts!(Ibíd.,!p.!26).!The!diversification!to!new!products!in!new!markets!is!not!clarified!yet!and!it!can!be!the!most!important!key!issue!for!the!company.!!)

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Market)penetration)• Inlaid! boxed!

confectionary.)• Seasonal!product!(Easter,!

Christmas).))

Product)development)• Continental! single!

flavour.!• Nostalgia!

chocolate!blocks.!

Market)extension)• Growth!of!international.)

Diversification))• Not!clarified!yet.!!

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BOSTON) CONSULTING) GROUP) GROWTHPSHARE)ANALYSIS)

)))KEY)ISSUES)It!has!been!impossible!to!analysis!more!than!two!products!of!the!company!due!to!the!lack!of! information.!This!two!products!analysed!are!those!boxed!and!boxed!inlaid.!According! to! the! relative! share! (calculated!on! the!basis!of!market! share!compared!to!the!core!market)!and!the!annual!market!growth!rate!in!the!market,!both! products! are! positioned! as! “cash! cows”,! “products! which! generate! more!cash! than! they! use! and! can! be! used! for! funding! other! products! or! strategic!business!unites!(SBUs)”!(Lancaster!and!Massingham,!2014,!p.!466).!!The! purpose! of! this! analysis! is! to! create! a! balanced! portfolio! of! products,! to!ensure!that!the!company!has!sufficient!net!positive!cash!flow!from!its!cash!cows!(achieved)! to! fund! its! stars! (high! growth! and! high! share)! and! turn! them!eventually!into!cash!cows.!According!to!the!report,!it!is!possible!to!invest!in!new!products!with!probabilities!to!become!stars!or!question!marks!(high!growth!and!low!share).!!!

PORTER’S)VALUE)CHAIN)ANALYSIS)PRIMARY)ACTIVITIES)

• Inbound)logistics:!o Raw) materials) ! ) FMCG! Systems! investments! (Ibíd.,! p.! 17).!

Forward! purchasing! secures! costQprice! certainty! (Ibíd.,! p.! 43).!

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Cocoa! price! pressures! easing! (Ibíd.,! p.! 42).! Supply! chain! strategy!designed!to!support!margin!growth!(Ibíd.,!p.!5).!

!• Operations:!

o Manufacturing)! ) No! investment! currently! needed,! continuous!improvement! ongoing,! extra! shifts/people! as! required! (Ibíd.,! p.!35).!

o Maintenance)! ! Strong! and! disciplined! culture! of! cost! control!(Ibíd.,!p.!5).!!

• Outbound)logistics)!o Storage)! ) Capacity! and! efficiency! investment,! with! new! 325k!

pallet!warehouse!in!November!2014!(Ibíd.,!p.!34).!OutQsourced!and!unified!warehousing!(Ibíd.,!p.!17).!!

o Distribution)! )Broadening!distribution!(Ibíd.,!p.!11,!13,!18),!outQsourced!distribution!(Ibíd.,!p.!17).!!

• Marketing)and)sales:!o Optimising! the!marketing!mix! to!maximise!ROI,!differentiate,!and!

build!shopper!affinity!to!the!brand!(Ibíd.,!p.!37).!o Continue!to!invest!in!brand!communications!(Ibíd.,!p.!5).!o Investments!in!the!brand!and!business!infrastructure!(Ibíd.,!p.!5).!o Strengthen!the!margins!through!clearly!established!brand!position!

and!disciplined!pricing!strategy!(Ibíd.,!p.!5).!o Account!management,!trade!marketing!and!category!management!

not!clear!(Ibíd.,!p.!17).!!

• Service:!o Investing!in!people!to!inspire!legendary!customer!service!(Ibíd.,!p.!

30).!!

SUPPORT)ACTIVITIES)• Firm) infrastructure) ! ! Investments! in! business! infrastructure! not!

clarified!(Ibíd.,!p.!5).!!KEY)ISSUES)This! theory! suggests! that! activities! within! an! organisation! add! value! to! the!service! and! products! that! the! organisation! produces,! and! all! these! activities!should!be!run!at!optimum!level!if!the!organisation!is!to!gain!any!real!competitive!advantage.! “Although! the! broad! categories! of! value! activities! are! common! to!most! organisations,! individual! components! of! value! activities! will! tend! to! be!company!specific”!(Lancaster!and!Massingham,!2014,!p.!421).!

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!As! we! can! see,! Thorntons! wants! to! add! value! to! the! company! thanks! to!investments! in! the! different! activities,! but! the! specific! strategic! measures! to!achieve!it!and!the!cost!of!them!are!not!clearly!expressed.!One!of!the!key!issues!is!that!with!the!information!provided!in!the!Strategy!Presentation!is!not!possible!to!know!the!current!situation!of!the!company!compared!to!its!competitors,!not!in!a!detailed!way.!!!

SEGMENTATION)ANALYSIS)The! brand! currently! offers! three! different! targets! depending! on! the! products!offered!within!the!premium!category:!!SAFE)SPENDERS)Chocolate!is!seen!as!an!occasional!treat!–!either!if!there’s!some!going!around,!or!if!they!deserve!it.!Taste!and!quality!are!important,!but!value!for!money!is!the!key!for!this!group!(Ibíd.,!p.!7).!For!this!group!the!“Entry'Level'Premium”'category!has!been!designed,!a!tradeQup!from!the!mainstream!brands!(Ibíd.,!p.!6).!)TASTY)TREATERS)Chocolate! lovers! who! are! always! open! to! a! little! treat.! They’re! open! to! new!flavours!but!they’re!just!as!happy!to!play!it!safe.!For!them,!chocolate!is!less!about!adventure!and!experimentation!and!more!about!a!regular!tasty!treat!(Ibíd.,!p.!7).!For!this!group!the!“Premium”!category!has!been!designed,!an!alternative!for!the!other!premiumQbrand!(Ibíd.,!p.!6).!!CHOOSY)CHOCOHOLICS)Passionate!about!chocolate!and!more!discerning!chocolate!lovers,!always!on!the!lookout! for! new! tastes! and! new! indulgent! experiences,! demanding! more! and!spending!more!to!get!it!(Ibíd.,!p.!7).!For!this!group!the!“Premium'Plus”'category!has!been!designed,!an!affordable!alternative!to!luxury!brands!(Ibíd.,!p.!6).!!!KEY)ISSUES)After!analysing!this!three!target!groups,!it!can!be!observed!that!the!brand!is!well!positioned! as! a! company! for! “premium! shoppers”.! There! are!many!differences!between!the!three!targets!groups!involved!within!this!category!and!their!habits!tasting!the!chocolate!products.!!These!segments!are!based!on!“behavioural!segmentation,!which!includes!factors!as:!occasions!for!purchase,!user/usage!status,!benefits!sought!and!loyalty!status”.!!

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!“Although! the! broad! categories! of! value! activities! are! common! to! most!organisations,!individual!components!of!value!activities!will!tend!to!be!company!specific”!(Lancaster!and!Massingham,!2014,!p.!91Q92).!!The!purpose!of!the!brand!is!to!design!a!separate!market!product!range!for!each!market! segment! (differentiated! market).! But! the! range! of! products! offered! to!these! targets! is!not! fulfilling! an! empty!market!niche,!which!helps! the!brand! to!differentiate! itself! from! its! competitors.!This! can!be!a!big!key! issue! taking! into!consideration!the!wide!range!of!brands!within!the!same!chocolate!market.!)))

RECOMMENDATIONS)After! taking! the!analysis! into! consideration,! the!discussion! focuses!now!on! the!recommendations! for!the! future!strategic!direction!of!Thorntons,! to!become!an!international! FMCG! (fastQmoving! consumer! good)! company! and! to! restore!profitability!as!a!customer!focused!‘multichannel’!business.!!!One!of!the!main!objectives!that!the!company!wants!to!meet!is!the!repositioning!of!the!brand!as!a!commercial!rather!than!retail!business.!Commercial!marketing!is! pitching! goods! to! corporations! and! individuals.! The! goal! of! commercial!marketing!is!to!develop!a!relationship!between!the!client!and!the!product.!This!is!achieved!by!creating!a!brand!identity!with!which!the!consumer!can!relate.!!!Thorntons! intends! to! position! itself! as! a! premium! quality! product! at! a! very!reasonable!price.!However,!as!has!been!extracted!from!the!analysis,!the!number!of!brands!offering!similar!products! is! too!broad!and!Thorntons’!positioning! is!not! differentiated! from! other! companies.! It! can! become! a! huge! problem!when!the!chocolates!are!sold!as!FMCG,!cause!these!products!require!low!involvement!and! the! brand! consumers! can! turn! to! be! easily! switchers.! The! brand! must!therefore!offer!a!differentiating!feature!from!other!competitors.!!!One!of! the! approaches! can!be! the! “gifting) proposal”.! The! aim! is! to! create! the!idea!that!the!brand!is!the!best!choice!for!buying!one!of!the!sweetest!gifts!in!the!market.!Thereby!the!problem!of!seasonal!product!selling!can!be!solved!too,!as!it!is!extended!to!more!general!and!ongoing!celebrations!like!weddings,!birthdays,!Mother's!Day,!Valentine's!Day,!a!new!job...!and!all!that!special!occasion!that!can!be!celebrated.!!!!

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!!Another!way! to!make! these! products!more! differentiated! in! the!market! is! the!creation! of!customized) products! that! offer! consumers! the! option! of! choosing!the!chocolates! inside!the!box!and!package!decoration,!according!to!de!different!celebrations.! Possibly! creating! a! small! stand! inside! the! retail! or! supermarket!(modernising) inPstore) environment)!would!be! enough! for! the! consumers! to!chose!their!favourite!without!being!forced!to!opt!for!a!limited!and!specific!range!of!chocolate’s!category.!!!Moreover,! this! will! allow! the! company! to! develop! an! exhaustive! study! of! the!consumers’! favourite! products! and! it! will! facilitate! warehousing! and! stock.! In!addition,! this! will! allow! the! company's! investment! in! the! new) product)development)(NPD)!for!more!specific!consumers!as!chocolate!with!less!sugar!or!designed! for!coeliacs,! for!example.!This!will!also!simplify! the!Thorntons’! target!groups!and!it!will!clarify!more!precisely!the!niche!markets!that!need!to!be!filled.!!Other! option! to! differentiate! Thorntons! from! the! other’s! brands! is! to! “wrap)environmentally”!all!their!products.!It!is!known!that!environmental!protection!by! brands! is! increasingly! popular! among! consumers.! The! idea! is! to! create! a!wrapping!paper!whose!production!wastes!the!least!amount!of!natural!resources!possible!and!100%!recyclable.!!Another! factor!that! the!company!could!exploit! is! the!online) shopping! through!the!website.!Using!EQCommerce,!Thorntons!can!expand!their!market!to!national)and) international) markets! with! minimum! capital! investment.! The! company!can!easily!locate!more!customers,!best!suppliers!and!suitable!business!partners!across! the! globe.!Gathering! and!using!demographic!data! through!web! contacts!and! social! media! can! help! to! target! the! business! too,! engaging! customers! for!launching!new!products!and!services.!!!After! analysing! the! study! of! international! sales! through! the! website,! the!company!will!know!exactly! the!most! important!and!costQeffective!points! in! the!globe! to! start!a!not! too! large! franchises) system,! if!desired.!The!better!market!penetration! will! in! turn! generate! increased! sales! volumes! and! stronger!purchasing! power,! via!which! the! organisation! can! command! greater! discounts!from! its! suppliers.!Moreover,! the! franchise! system! can! provide! a! very! costQeffective! route! for! business! development,! and! it!requires! only! a! simplified! and!relatively!lowQcost!management!system.!!

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IMPLEMENTATION)The! implementation! of! these! recommendations! in! the! business!will! be! a! longQterm!process! that!will!require!a! large! investment!of!money! for! the!company!at!the!beginning.!Nevertheless,!over!time!these!changes!will!begin!to!create!bigger!profits! than! before! and! the! company! will! be! able! to! achieve! the! objectives!specified! in! the! briefing.! Once! the! implementation! process! is! completed! there!needs! to! be! a! period! of! monitoring! and! assessment! of! the! functionality.! This!needs! to! be! done! so! that! the! investment! is! not! wasted! and! the! system! is!thoroughly!effective.!!!

CONCLUSION)A!marketing!strategy! long!term!has!been!developed!to!meet! the!objectives!and!challenges!proposed!by! the!company.!After!an!exhaustive!analysis!of!problems!involving! the! current! situation!of! the! company,! a! list! of! recommendations!was!prepared!with!the!main!objective!to!reposition!the!brand!as!a!FMCG’s!company!through!techniques!such!as!the!“gifting!proposal”,!the!customised!products,!the!modernising!of! inQstore!environment,!the!new!product!development,!the!online!shopping!and!the!franchises!system.!!This!new!business!plan!will!allow!the!company!to!pay!off!its!current!debt!and!to!create! profits! through! investments! in! the! future.! In! addition,! the! international!expansion! plan! also! helps! the! progressive! growth! of! the! company,! positioning!itself!as!a!prestigious!chocolate!brand!chocolate!that!offers!reliability!and!quality!service!at!the!best!price.!!!!!!!!!!!!!!

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REFERENCE)LIST)Lancaster,! G.! and! Massingham,! L.! (2014)!Essentials' of' marketing'management.!New!York:!Taylor!&!Francis.!!Hart,!J.!and!Killick,!M.!(2014)!Thorntons'Strategy'Presentation.!!!

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