KATE’S KICKIN’ CHOCOLATES (2008)
Although Kate’s Kickin’ Chocolates has won an award from the main fiery foods competition in the United States and has excellent packaging, it is faced with a challenge of making a profit. In 2007, the company incurred a loss of $6,478 as primary problem. This indicates that the company needs to improve its operations in order to raise a substantial income. This loss has forced Kate, the founder of the company, to use her personal savings of $30,000 to cover the expenses that were above $50,000. Another problem with Kate’s Kickin’ Chocolates is that some of her chocolate did not meet some of the retailers’ preference because they were too spicy and hot. In the American market, only 15 percent of consumers preferred spicy and hot foods, and they were more preferred to men than men were.
Other secondary problems include the high cost of packages that is reflected in the price of the product. For example, the tins were expensive due to the labeling, and it needed extra care. In addition, Kate is facing stiff competition from the competitor who are using low-cost raw chocolates, but relatively higher quality chocolates than those at the supermarket and vending machine. As a result, her prices are relatively higher compared to some of her competitors. Some customers in specialty food stores were not willing to pay the premium prices of Kate’s products. For example, half tin of chocolate truffles was sold at $14.95, which was too higher compared to the hot sauce that was priced at $2.99-$5.99.
Full Situation Analysis
SWOT analysis
Strengths
There is a strong demand for chocolates because the market has consistently grown. Therefore, the company is expanding and encountering increased profits as time goes by.
The firm has a strong partnership with promoters and retailers. For instance, the firm entered into a contract with Seattle Chocolates, and it benefited as its partner agreed to act as a manufacturer of the products
The price of the products was in the range of everyone’s purchase.
The firm puts more emphasis on sales promotion and ensures that the packaging is excellent
The company enjoys a good brand positioning, and the quality of its products meets the expectations of the target market.
Weaknesses
Several retail outlets rejected the hot and spicy chocolates because they were too spicy
The packaging of the chocolates was expensive because of the high cost of the muslin bags. Also, Kate was concerned that few truffles ended up in the bags and tins during packaging
The products of the company are far from being export quality
Kate failed to introduce innovative and designer chocolates that suit the festive season
The firm lacked new technology methods to produce fine chocolates
Opportunities
The demand for healthy food products is on the rise, and this presents a ready market for Kate’s Kickin’ chocolates.
Kate’s Kickin’ is affianced in partnerships with a number of organizations, such as Seattle Chocolates, Moscow Food Co-op, and several others, that promotes the position of the company in the market
Threats
The main competitors and suppliers of chocolate like Cadbury, Kit Kat, and Nestle are well placed in the market
The company does not have highly qualified employees like their rivals
Other brands are using huge investments to advertize their products and services
Chocolate Industry Analysis
The main customers of Kate’s Kickin’ Chocolate include youngsters and adults. The industry involves the individuals, retailers and wholesalers such as Kitchen Markets in the New York City, gourmet food markets, online market, and hot and spicy food market. The Kitchen market was the outstanding market that provided the steadiest wholesale consumer. However, in the case of the hot and spicy food market, the target audience are male customers who are more inclined to such products than female consumers are. Due to Kates reputation as an artist, her products are also in fine art museum located in different places such as Boise, Missoula, Portland, Oregon, Columbus, Montana, and Ohio among others. Despite stiff competition from her main competitors such as Seattle Chocolates, Kate have thrived in the market. For instance, she has received 11 awards from the two main fiery foods competition in the U.S. although Kate’s products have successfully penetrated into the local market in both retailers stores and wholesaler, Kate has experienced harder time penetrating the market outside Moscow.
Consumer Analysis
The Chocolate Buyers had different preferences. The company introduced “mild-mannered” truffles so that it could accommodate the consumers who loved the chocolates that had no spice. A section of the buyers looked for chocolates without spice, and the Kate had to introduce the product. Although the move did not reflect the Motto, Sissies Stay Away, the target population for the chocolates without spice deserved excellent chocolate. The mild-mannered chocolate aimed the outlets that had rejected the hot and spicy chocolates. Most of the consumers loved the hot and spicy chocolates, but there was need also to cater for the demands of the population that felt that the company failed to produce products of their preferences. Kate’s Kickin’ realized that men preferred the hotter truffles than the women. 15% of the American consumers preferred the hot and spicy products and men led in the frontline in purchasing the product. The well-packaged chocolates excite the consumers, but there were others who desired for products without the packaging.
Product Line Analysis (of Kate’s offerings)
Kate offers a variety of products that are related to chocolate. The products include Spicy Chocolate Bars, ¼ Pound Muslin Bag, ½ Pound Tin, Hot Caramel Dessert Source, Sampler Bag, ¼ Pound Gift Box, 1 Pound Gift Box, Gift Bucket, Gift Basket, and others. The Spicy Chocolate, ¼ Pound Muslin Bag, ½ Pound Tin, Hot Caramel Dessert Source are the most profitable products contributing to the revenue of 50%, 16%, 12%, and 10% respectively. Of all the products, the Simpler Bar, and the Spicy Chocolate Bars have the relatively lower cost of $0.97 and $1.16 per unit respectively. This indicates that Kate has significantly reduced the price of Spicy Chocolate Bars in order to earn substantial revenue from the product. The most expensive product is the Gift Basket retailing at $59.95 per unit. However, the product contributes to approximately 1 percent of Kate’s revenue. This indicates that such products need to be sold at relatively lower prices in order to attract more consumers.
Financial Analysis & Marketing Cost Analysis
According to the financial analysis, Kate’s Kickin’ Chocolate is operating with more expenses than the revenue. The 2007 financial statements indicate that the total revenue of the company was $30,046 compares with the total expenses of $53, 447. It is clear Kate need to adopt strategies that are cost effective in order to reduce the high expenses incurred by the company. The expected income statement indicates that Kate is willing to reduce total expenses to $36,524. However, more efforts are required in order to improve the financial performance of the company because it is anticipated to incur a loss of $6,478.
Breakeven Analysis
The breakeven analysis of Kate’s Kickin Chocolate analyzes whether the company will be able to generate substantial revenue that that can offset all its expenses in order to make a profit. In order to do this, the break-even point is calculated as follows;-
Breakeven point = fixed costs / gross profit margin
Gross Profit margin = (Revenue – Cost of Goods Sold) / Revenue
Gross Profit Margin = (30,046 -31,423)/ 30,046 = -0.046
Therefore, Breakeven Point = $22,024 /-0.046
-480,561.44
The negative sign implies that the breakeven point of Kate’s Kickin’ Chocolate is increasing over time. In other words, the company will experience more difficult time to reach a point where the revenue equals to revenue. The value indicates that Kate has to sell 580,561.44 units of her products in order to generate substantial revenue that offsets variable and fixed cost (Total expenses).
Analysis of Current Distribution Channels/Outlets (of Kate’s offerings)
The Moscow Food Co-op has remained the leading distribution channel for Kate’s Kickin’ since it directly contributes about 15% of the annual sales. The Co-op places the chocolate products in visible shelves and offers a lower price to attract the customers. Moreover, Seattle Chocolates is another distribution channel that is helping the company although its success has been questionable. The distributions channel placed outside Moscow experienced difficulties making it hard to record higher sales. Boise Food Co-op was situated at Idaho and the products sold well compared to other distribution outlets. The Boise Museum of Fine Arts gift shop was another outlet for the products, but it dropped them after noticing that the sales were not impressive enough.
The Kitchen Market is another successful distribution channel apart from the Moscow Food Co-op. It is situated in the New York City and has been an outlet for wholesale products. There are still other outlets that are recording high sales, and this includes Rainbow Groceries in Seattle and the Culinary Institute in San Francisco. Salmon River Specialty Foods and Sam McGee’s Hot Foods are online companies used as outlets by Kate’s Kickin’ Chocolates, but they have failed to succeed as expected. The Moscow Food Co-op and The Kitchen Market are the successful outlets that have helped the company to reach out its consumers.
Recommendations
Marketing Goals/Objectives
Kate’s Kickin’ Chocolates should be ready to listen to its customers to learn the products of their preferences. After listening, the company should analyze the situation and create products or add value to the current products to increase market penetration.
The company should focus on ventures that are highly profitable. For instance, it should introduce innovative and designer chocolates that suit the festive season. Currently, these products are yet to be developed, and its introduction in the market will attract more customers to the firm. Also, the company must develop policies that will guide them to expand on the international market and reach an extended market.
The adoption of technology in production, packaging and distribution will automatically result in increased sales and market share. Creativity and innovation will impose better solutions to the staggering status of the company. The company will be in a position to fiercely compete with the rivals and emerge as the best chocolate firm. Innovative skills will also help the company to realize the new opportunities in the market.
Target Market(s) Selection and Description
In the local market, Kate has shown a successful progress from the retailers and wholesalers. The main wholesaler is the Moscow Food Co-op that has contributed to 15 percent of Kate’s sales. Other locations in the local market are the Wild Women Traders, Northwest Showcase, and Book People. However, the Kate is experiencing stiff competition from some competitor who is selling their chocolate products at relatively lower prices. Therefore, Kate needs to reduce the price of her products in order to thrive over her competitors and attract more customers. In the market outside, Moscow, the company has been experiencing challenges because consumers are not willing to pay premium prices. Therefore, in order to expand her market and acquire a large consumer base, the Kate need to develop penetrating pricing that is below the other competitors. Kate also needs to invest heavily in the online market and develop lean principles that allow her to acquire suggestion from then clients and professional acquaintance through the web. This can help the company to improve the value of their customers.
Product Offerings, including positioning & packaging
Kate’s Kickin’ need to ensure that the products offered delivers an impressive, exhilarating and a great day out. Apart from chocolate products, it will be healthy to introduce candy, gum brands, and other drinking chocolate products.
The positioning of the products must be improved. The firm must ensure that its products are available to most outlets to increase accessibility to the target market. Currently, the outlets are not enough to market the products.
Kate’s Kickin’ has always used excellent packaging that has gone ahead to win awards in the market. Despite the fancy and appealing packaging, there are customers that are not concerned with packaging and their needs must be taken care of.
Market Mix
Pricing
The analysis indicates that Kate’s prices are relatively higher compared to some of her competitors. Some customers in specialty food stores were not willing to pay the premium prices of Kate’s products. Therefore, Kate should develop cost-effective strategies such as customer relationship management. Through interaction with the potential and existing customers, Kate can be able to improve the value of the products. In addition, Kate needs to utilize cheaper raw chocolate like the case of her competitor and maintain value. Consequently, this can help him reduce cost and hence reduce the price of her products.
Distribution Channel/Outlets
The main distributions of Kate’s Kickin Chocolate are manufacturers, retailers, and online market. Although the distribution channels are contributing significant revenue to the company, Kate should develop track performance and measurement. Through the use of tracking an order, revenue, and volumes at each point, the company can improve on the underperforming partners and maintain on the top performers. Kate should also improve communication among her distributors.
Promotion Plan
The company needs to improve on its promotion plan. It must set a realistic budget to ensure that the advertisements are successful. At first, Kate was in a tight fix and $6,000 was much for the company. Moreover, the trade shows and promotions fees must be increased to ensure that the products penetrate in the market.
Works Cited
Kate’s Kickin’ Chocolates (2008)
