Case study 1: FROM BEANS TO PRALINES: THE GLOBAL CHOCOLATE MARKET (Chapters 1 and 3) Three and a half million tons is a lotmore than most people can really understand. Perhaps a more comprehensible number is 11.5 pounds. But from a different perspective, that second number might be even more remarkable than the first one. The 3.5 million tons refer to how many cocoa beansthe raw material that represents the first step in the making of chocolate are farmed, processed, shipped, and consumed worldwide every year. But that notable 11.5- pound figure indicates how much of the finished chocolate product, on average, a single consumer in the United States or Europe eats every year. Thats a lot of chocolate, making for an expansive, massive market. The members of the market are diverse and varied, from the international farmers who produce the cocoa beans to the processing plants that transform the beans into edible treats to the well-known brands that design and produce the bars or candies to consumers who gobble up the finished product. Each transaction in the process involves some form of marketing, adding value along the way so that chocoholics never have to go without their favorite treat. Chocolate consumers are demanding organic and fair traded products. Q-Images/Alamy The earliest cocoa beans were grown in the Amazon basin, and farmers in Brazil and Ecuador still provide much of the worlds supply. But the value and constantly increasing desire for chocolate products encouraged the expansion of the cocoa farming industry, spreading into Asia and West Africa. The quality of the beans clearly affects the quality of the final product, leading many farmers and manufacturers to agree to follow Fair Trade or organic standards. For example, Fair Trade labels guarantee fair treatment of the farmers, most of whom work for minimal wages and live in underdeveloped nations. It also requires responsible farming practices. As a result of the benefits that these guarantees offer, farmers receive higher prices for their produce; currently, Fair Trade producers earn about $150 more per ton of beans than conventional growers would. Organic farmers, who adopt the various national-level standards for organic farming (e.g., no pesticides), also earn more on the beans they sellanywhere from $100 to $300 more per ton. The rationale behind both these initiatives is that consumers ultimately will pay more for Fair Trade and organic chocolate, though each of these forms still account for tiny shares of the overall market. Still, estimates predict substantial growth in the organic chocolate market However, they choose to farm their beans, farmers then must sell their harvest to processors. Those processors are located all over the world. The processors take the beans, add in sugar and dairy, and arrive at edible food products that they can sell under various brands. The number of these processors has grown remarkably in recent years in response to growing demand. In Page 1 of 3 particular, less developed nations have sought to combine their farming with processing capabilities, such that factories have been popping up in various West African and Asian nations. As a result, in just five years, global processing capacity has grown by more than 400,000 metric tons. Although the growth in the chocolate processing segment is a response to increased demand sales of chocolate increased by 13 percent in the same five-year periodthe capacity increases have been so massive that processing supply now outpaces demand. In turn, many processing plants, whether newly opened or decades old, are struggling to earn a profit. Today, Hersheys and Mars make a range of chocolates and candies. Hersheys Chocolate candies include Almond Joy, Cadbury, Reeses, and more. Furthermore, Hersheys sugar confectionery products range from Jolly Rancher to Twizzlers, its owns Ice Breakers Bubble Yum Gum, a line of Hersheys chocolate and Reeses peanut butter baking goods, and snacks such as Mauna Loa mixed nuts. Mars chocolate line of products includes 3 Musketeers, Milky Way, Snickers, and M&Ms. However, Mars is not just in the chocolate business. It also owns Uncle Bens; Wrigley products that include Double Mint and 5 gum; Life Savers; Altoids; drinks such as Dove hot chocolate; and even pet food, including Iams and Pedigree. All these shifts in supply mean that the prices that branded chocolate companies pay for their products are variable, and different companies have different needs. Whereas Godiva, demands the highest quality, other companies like Mars or Hersheys seek a level of quality that is sufficient but not overly expensive. These mass-market brands sell far more chocolate than their luxury competitors do; for example, in 2015, Mars sales surpassed $18,400 million, and Nestl brought in $11,041 million. These companies constantly compete for market share with their various brands, flavors, sizes, and product options. At the same time, luxury brands are engaging in their own competition, such that Lindt has announced its goal to unseat Godiva as the top-selling premium chocolate brand. But thats not to suggest that mass-market brands compete with themselves or that premium brands do either. Almost regardless of their exact positioning and pricing, each chocolate brand seeks to be the one that appeals most to customers by finding just the right balance of quality, availability, and price. As a result, customers face more choices than ever before when it comes to their chocolate fix. Thats fortunate too, because even as health concerns and global obesity crises continue to be prominent news stories, people all over the world are eating more and more chocolate, possibly because chocolate, especially dark chocolate, is good for you. For example, in Brazilremember, one of the leading sources of cocoa beansconsumers used to eat about 10.5 ounces each year. Today, that amount has increased to 90 ounces on average. In China, estimates suggest that international chocolate companies will sell $4.4 billion worth of candy by end of 2020. However, they were challenged by the COVID-19 and Global economic recission. As this section reveals, everybody markets and everybody is subjected to the effects of marketing. Farmers try to market their beans as better by embracing Fair Trade or organic standards. Processors struggle to balance demand and supply and seek ways to earn enough profits to continue manufacturing. Chocolate brands aim to define their position in the market and appeal more to customers through the ways they combine the four Ps. And customers keep buying, faced with a wealth of choices, available only because marketing throughout the world makes sure they have access to just the kinds of treats they most desire. Page 2 of 3 Questions Visit Mondelez and Godiva websites and check their products then answer the following questions: a. Describe the value do these chocolatiers provide customers? Are they string enough? Comment on that. b. If you recommend that both of these companies shift to selling concept, advise as a marketing consultant, if this concept is the right one or should they shift to societal concept? (hint: taking into consideration the current market situation and challenges) 2. Describe the market for chocolates in Egypt. In your discussion: a. Choose one of the Chocolate companies/brands mentioned on the case (Other than ones mentioned on question 1) and discuss one main microenvironment actors (either the Competitors or the suppliers) that affect the companys ability to serve its community globally and on Egypt in particular? Justify your answer and show evidence of research. b. Discuss the impact of the two Macroenvironment: Economic and Demographics forces in Egypt that can have an influence on the company (mentioned in 2a.) in general to serve its community? Suggest how can the company face these forces? Show evidence of research.