The Sales Related Issues of Thorntons PLC - Term Paper Example

? Thorntons PLC Inserts His/Her Inserts Grade Inserts (15, July, Word Cont: 2045 Thorntons is a popular name in the UK chocolate industry and enjoys a rich history in the country. The sales of the company are dropping and in order to increase the sales of the company in the Christmas season in Hull City the company will need to position itself clearly in the chocolate industry either as a low priced chocolate seller or as a luxury chocolate company. This repositioning will resolve the sales related issues the company is currently facing. In this paper micro-environment and macro-environment will be scanned in order to understand the chocolate industry and problems Thorntons is facing. A SWOT analysis will also help in understanding of the issues the company is facing. Key words: Thorntons, Chocolate, Chocolate Industry UK, Hull City, Christmas Contents 1.Introduction 4 2.Situational Analysis 4 2.1 External Marketing Audits 4 2.1.2 Micro-Environment Analysis 6 2.2 Internal Marketing Audits 9 2.2.1 Operating Results 9 2.2.2 Strategic Issue Analysis 10 2.2.3 Marketing Mix Effectiveness 10 3.SWOT Analysis 11 4.Conclusion 12 5.Bibliography 13 Figure 3: Balance Scorecard of Chocolate Industry UK 18 Source: Trading Vision 18 1. Introduction In this paper an attempt will be made to provide insights about the positioning of Thorntons Plc and its products in the competitive period of Christmas 2011 in Hull in UK. The industry in which the company operates is very competitive and apt strategies are needed to gain competitive advantage over other firms. For this purpose a situational analysis will be conducted taking into account both micro-environment and macro-environment. Finally a SWOT analysis of the company will be conducted in order to understand the present position of the company and the external factors that can benefit or hurt the company in future. 2. Situational Analysis 2.1 External Marketing Audits 2.1.1 Macro-Environment Analysis This section will include a commentary on the most important factors of the macro-environment in the chocolate industry. Political The political environment of the United Kingdom is relatively stable. The company does not have to worry about the problems of turbulent political environment that are prevalent in developing markets. There are although specific regulations regarding marketing of food items that the company has to abide by at all times. In order to prevent child obesity the government is looking to reduce chocolate sizes and that will affect the company (Daily Mail UK, 2009). Regulations such as these can affect a change in production, marketing, and distribution strategy of the company. Economical Economic conditions of United Kingdom are not ideal and the country is still feeling jolts from the economic recession of 2008. But still the situation of chocolate industry is considerably better compared to other industries. The industry has been able to survive the recession and, opposite to other industries, has shown growth as well (Piercy, Cravens, & Lane, 2010). Although the chocolate industry is generally regarded as one of those industries that were able to survive the recession, Hull city’s economic conditions are not good which may not be good news for the chocolate industry. The unemployment level in the city is higher than the country average (Hull City Council, 2011). This is not a good sign for the chocolate companies operating in the region. Socio-cultural The culture of gift giving in Christmas is the main reason behind the increase in sales of chocolates in this season. It is common for people to exchange gifts with loved ones and therefore the season offers great opportunity to the chocolate industry as a whole. In UK chocolate is mainly consumed by children between 0 and 14 years of age and by urban consumers (Research and Markets, 2008). In Hull City around 18.2 percent of the population is between 0 and14 (Hull City Council, Age Structure, 2008). This shows that there is a significant market for chocolate products in the city. Technology There have been great advancements in the field of technology which will aid the production and marketing process for all companies in the industry. Social media has developed greatly which can be used to attract customers. Internet is playing a huge role in retail industry as customers can easily go online and shop for products. 2.1.2 Micro-Environment Analysis Important micro-environmental factor include markets, customers, competitors, suppliers, and ethical issues. These will be discussed below. Markets Chocolate industry of UK is estimated at around 3.7 billion pounds (Trading Vision, 2011). The chocolate market of UK did not shrink in the recession as expected but continued to grow which shows that the potential in the market is huge. In the Christmas season sales increase as people buy gifts and chocolate for their loved ones. The market of UK is dominated by mainly three big firms Nestle, Mars, and Kraft as they enjoy around 83percent of the total market share (Trading Vision, 2011). The other 17 percent is divided into small players in the market. The chocolate industry is expected to grow in future as well given the passion British people have for chocolates. An increase in health consciousness has also not stopped the growth of the industry which also hints that the industry will grow in future. There are so many derivatives of chocolates that the industry is not facing any threats from the health consciousness of the overall market. This is why it is safe to assume that the chocolate industry in United Kingdom is set to grow in future. Figure 2 of appendix show the future expected growth of chocolate industry in UK. Customers The main consumers of chocolates are the young people specifically the age group of 0-14. But in general all age groups in United Kingdom consume chocolates on a regular basis. Especially in the Christmas season all age groups of people purchase chocolates. Adults of ages 40 and more mostly purchase chocolates for the purpose of gift giving. Children mainly purchase chocolates for their own consumption. There might also be taste preference difference between children and adults and the company should take this into account when marketing its products to both the segment of the population. Chocolate consumers also buy chocolate on impulse. One third of consumers in United Kingdom buy chocolates on impulse (Mintel, 2010). Competitors There are three major players in the chocolate industry namely Nestle, Kraft/Cadbury, and Mars (Trading Vision, 2011). These companies enjoy a significant share of the market and therefore are considered as market leaders. There are other companies with smaller share in the UK market as well who enjoy small market shares. Such companies include Ferrero, Hershey, Lindt, Divine Chocolate, Hotel Chocolat, and Thorntons (Trading Vision, 2011). The competitors all have their presence all over the country. Nestle is a very successful company in UK and its famous brand Kit Kat is very profitable for the company (Burrows, 2010). The company is looking to grow more in the industry using its infrastructure in UK. The famous slogan of the company ‘take a break’ is really famous all over the world. The giant companies Nestle and Cadbury have enjoyed global presence from a long time and therefore they have immense experience of marketing all over the world (Allen, 2009). These companies use this experience to attract the diverse clientele of United Kingdom and this is probably the reason behind their brand image and huge market share. Suppliers Chocolate is made from cocoa beans. The countries that produce cocoa beans include Ivory Costs, Indonesia, Ghana, Nigeria, Cameron, Brazil, Ecuador, and Malaysia. The leaders in cocoa production are Ivory Costs and Ghana. The two countries produce more than 50 percent of the total cocoa of the world (Pennington & Ball, 2011). Global cocoa production is given in the figure 1of appendix. The main suppliers of cocoa beans are in Africa where political situation is usually turbulent. This has a potential to disrupt the supply of good quality cocoa beans from these countries. The unrest in Ivory Coast was a main reason behind price fluctuation of cocoa beans in 2011 (Euro Monitor, 2011). Also the government in the cocoa producing countries is usually dictatorships which make dealings even more difficult. In democratic countries contracts and agreement held up no matter what party is in power but this is usually not the case under dictatorships. Also there are ethical issues involved in the production of cocoa since child labour is used in African countries and labour conditions are also not satisfactory. Ethics Ethics plays a major factor in the chocolate industry because obesity and health problems like diabetes are now spreading at greater pace. Child obesity is also an issue and therefore nongovernmental and governmental organizations are pushing for restrictions on sizes (Dobson & Gerstner, 2010) and marketing of food products to children (Mehta, et al. 2012). Marketing of chocolate might be regulated heavily in near future which may be a problem for companies. The ethical issues regarding supply of cocoa beans are also a big problem for the company. It is argued that cocoa farmers are not given appropriate remuneration for their efforts considering the high prices of chocolate products. Child labour and bad labour conditions are also some of the problem that companies have to face. Chocolate companies are getting pressure from many segments of the society to take efforts in making life easier for the farmers of cocoa beans (Athreya, 2011). Companies in the industry are therefore expected to act in a socially responsible way. Thortorns give due regard to ethical concern for child labour as shown in the figure 3 in the appendix. 2.2 Internal Marketing Audits This portion will include an internal marketing audit of Thorntons Plc. It will throw light on the internal environment of the company. 2.2.1 Operating Results The company has a rich history in the chocolate industry which serves as a valuable asset for the company. Thornton’s mission is to deliver chocolate heaven to the world (Thorntons Website, 2012). The company is also focusing on superior customer services and abiding by the established laws (2012). The company has a reputation in the industry and it has good infrastructure in UK given its old history. The company offers many types of chocolates but focuses on gift boxes. The online shopping experience they provide to the consumers is also very good (Thorntons Website, 2012). The company has its own production system in place and it procures raw materials from all over the world. 2.2.2 Strategic Issue Analysis The company is currently underperforming in United Kingdom and it is planning to close its stores. Thorntons is also reporting loses which is a point of concern for the company and its shareholders. The focus of the company is currently to close self owned stores and increase franchise stores (BBC, 2011). This might be a good ploy as it can reduce the costs of the company. Thorntons is also increasing its focus on selling its products through independent retailers and supermarkets (BBC, 2011). The problem with the company according to the experts is that Thorntons is not able to position itself correctly as it sells luxury chocolates and ordinary low priced chocolates (Richardson, 2011). This problem might be resolved by setting clear strategic goals and repositioning the brand. The company has to select a target market and then set its prices accordingly to cater to only that specific market segment. This can reposition the brand in the eyes of the consumer. 2.2.3 Marketing Mix Effectiveness As mentioned before the pricing strategy is not clear as it sells both high priced chocolates and ordinary chocolates. A clear pricing strategy is absent which may be causing the problems for the company. The company distributes its products through a network of its fully owned and franchised stores. Thorntons is currently relying more independent stores and retailers for the distribution of its products now. The products of the company are available on company’s website too. Thorntons is selling both packed chocolates and gift boxes to cater to different demands of the customers. The company uses television and internet to market its products. Thorntons made a human chocolate statue in many locations at UK this year to attract customers (Marketing Magazine, 2012). 3. SWOT Analysis Strengths Weaknesses Established Brand Name Rich History Established Infrastructure in Markets Good Public Image Reduced Sales Confused Pricing Strategy Consistent Profitability issues Issues in Distribution Opportunities Threats Growing Chocolate Industry Young population of Hull City Seasons like Christmas and Easter Governmental regulation regarding food marketing and chocolate sizes Increasing competition in the industry Ethical issues reading Cocoa farmers 4. Conclusion Thorntons is a well known brand in the UK chocolate industry. Its rich history and established infrastructure are its main strength. The company however needs a new pricing strategy which more focused towards a particular segment of society. They should clearly decide whether they are in luxury chocolate segment or in low priced segment, and then advertise accordingly. This can help the company solve its existing problems in Hull City. Currently communication of the company is also not clear because its strategy is ambiguous. It is vital that this ambiguity is removed so that the company is able to regain its past like stature in the UK and Hull market. 5. Bibliography Allen, L. (2010), Chocolate fortunes: The battle for the hearts, minds, and wallets of China's consumers. Thunderbird International Business Review, 52: 13–20. Athreya, B. (2011). White Man's “Burden” and the New Colonialism in West African Cocoa Production. Race/Ethnicity: Multidisciplinary Global Contexts, 5: 51-59. BBC UK. (2011). Thorntons set to close up to 180 Shops. [online] Available at: < http://www.bbc.co.uk/news/business-13939089> [Accessed 15 July, 2011]. Burrows, D. (2010). Nestle scraps UK marketing chief role in restructure. Marketing Week [online] Available at: < http://www.marketingweek.co.uk/nestl-scraps-uk-marketing-chief-role-in-restructure/3020609.article > [Accessed 15 July, 2011]. Daily Mail UK. (2009). Chocolate bars to be made smaller in Government anti-obesity drive [online] Available at: < http://www.dailymail.co.uk/news/article-1136092/Chocolate-bars-smaller-Government-anti-obesity-drive.html> [Accessed 15 July, 2011]. Dobson, P. & Gerstner, E. (2010). For a Few Cents More: Why Supersize Unhealthy Food? Journal of Marketing Science, 29: 770-778 Euro Monitor International. (2011). Chocolate Confectionery in the United Kingdom. [Online] Available at: [Accessed 15 July, 2011]. Hull City Council. (2012). Unemployment. [online] Available at: < http://www.hullcc.gov.uk/portal/page?_pageid=221,267426&_dad=portal&_schema=PORTAL> [Accessed 15 July, 2011]. Hull City Council. (2012). Age Structure. [online] Available at: < http://www.hullcc.gov.uk/portal/page?_pageid=221,267426&_dad=portal&_schema=PORTAL> [Accessed 15 July, 2011]. Marketing Magazine. (2012). Marketing Society Awards for Excellence 2012: Marketing teamwork. . [online] Available at: < http://www.brandrepublic.com/features/1135806/> [Accessed 15 July, 2011]. Mehta, K. Phillips, C. Ward, P. Coveney, J. Handsley, E.& Carter, P. (2012). Marketing foods to children through product packaging: prolific, unhealthy and misleading. Public Health Nutrition, 1-18. MINTEL. (2010). The state of the industry. [Online] Available at: [Accessed 15 July, 2011]. Pennington, J & Ball, A. (2011). The Dark Side of Chocolate. Journal Of Macromarketing, 31:412-413. Piercy, N, Cravens, W. & Lane, N. (2010). Marketing out of the recession: recovery is coming, but things will never be the same again. The Marketing Review, 10: 3-23. Research and Markets. (2008). Confectionery in the UK - Market Forecast & Consumer Demographics. [online] Available at: < http://www.researchandmarkets.com/reports/1524250/confectionery_in_the_uk_market_forecast_and.pdf> [Accessed 15 July, 2011]. Richardson, T. (2011). Where did Thorntons go Wrong? Guardian UK. [online] Available at: < http://www.guardian.co.uk/commentisfree/2011/jun/29/where-did-thorntons-chocolate-go-wrong> [Accessed 15 July, 2011]. Thorntons Website. (2012). Terms and Conditions. [online] Available at: < http://www.thorntons.co.uk/pages/cm/cm.asp?sCCPage=Customer_Services_Terms_And_Conditions&cookie_test=1> [Accessed 15 July, 2011]. Trading Visions. (2011). The Chocolate Scorecard. [Online] Available at: [Accessed 15 July, 2011]. Appendix Figure: 1 Global Cocoa Production: Figure 2: UK Chocolate Industry Actual and Expected Growth: Figure 3: Balance Scorecard of Chocolate Industry UK Source: Trading Vision Read More