“Introducing Euphoria

Pomegranate by

Healthy Cravings –

Reward yourself with

happiness and good

health”

Situation

Big Questions

Ideal Corporate Targets

Thought Framework

Recommendation

Supporting Evidence› Qualitative and quantitative

Revisiting Corporate Goals

Summary

Supplementary Information

Apollo acquires rights to Montreaux for

America on June 2011

Consumer Food Group (CFG), a

subsidiary, forms Montreaux USA

Andrea Torres, director of new

development, is faced with multiple

decisions

Next steps for Montreaux

USA?

› How are we launching the

product

Time to upgrade logistics?

› Pennsylvania factory

American or European branding?

› Heritage

› New product line

Brand

Sub-brand

New product name?

National distribution of Montreaux

product line

$115 million in annual sales by 2015

0.60% market share

› Top 25 in revenue

Acceptable hurdle rate of $30MM

› Needed for full national rollout

Support each decision with evidence

Calculate projections

Pros and cons matrix

Nielsen’s 12 Product Success Factors

Name› Euphoria by Healthy Cravings

Branding› Apollo sub-brand

Features› 70% Cocoa

› Pouch Bag Format

› Premium chocolate

› Health positioning Slogan

Flavours› Pomegranate

› Blueberry

› Cranberry

Price› $4.49 MSRP

Acquire Pennsylvania factory

“Introducing Euphoria

Pomegranate by

Healthy Cravings –

Reward yourself with

happiness and good

health”

Further Testing The

Market

Launch in Selected Test

MarketsStage a Regional Rollout National Launch

Pros • Fine-Tune Consumer Insight• Gather Additional Consumer

Insight

• Middle-Of-The-Road

Approach

• Display Commitment to

Retailers

• Most Limited Liability and Risks• Most Representative of Market

Condition• Average Expenditures

• Biggest Opportunity to

Increase Market Share

• Discover New Opportunities • Limited Liability and Risks• Greatest Revenue

Opportunity

• Begin Market Share

Dominance

Cons • Possibly Redundant Data• Long Result Reading Time (1

Year)• Conservative Strategy • Very Expensive

• Delaying Market Entrance • Delaying Market Entrance • Potential Lost Opportunity • Requires New Factory

• Difficulty In Finding Suitable Test

Markets

• Less than 100% Commitment

to Market

• Greatest Resource

Commitment

• Convincing Retailers for Limited

Batch Purchases• Requires New Factory

• Most Expensive ($3 MM) • Poor Regional Selection

• Limited Production Capabilities SELECTED LAUNCH PLAN

Market Trends

Product Choices

Capturing the Market

› The Ideal Customer

Mainstream Distribution Channels

Low-calorie options such as reduced fat and aerated chocolate

Premium chocolate products moving to mainstream channels (i.e., supermarkets, mass merchandisers)

Dark chocolate popularity rise

Packaging transition to stand-up pouches and biggersizes

New labeling with terminology emphasizing shareability, portion control, and saving a piece for later

Increases in pricing attributable to rising commodity costs

70% Cocoa concentration› Preferred taste versus 90% in

qualitative testing

› Emphasize health positioning

Bold Flavours› Blueberry, pomegranate, cranberry

Narrowed from top five ‘winners’

Pouch format› Shareability, portion control,

economical

› 3.5oz – less unique, less revenue generation

Healthy Cravings – Apollo sub-brand

Confusion in European credibility

“Introducing Euphoria

Pomegranate by

Healthy Cravings –

Reward yourself with

happiness and good

health”

Socioeconomic Status

Consumer Type

Gender Differences

Age

Cater to as many

demographics as

possible› 45-64 Age group

› Everyday

sophisticates

› Brand loyalists

› Women

Older aged upper-middle class female

45-64 age group

Motivations

› Personal health considerations

› Luxurious reward

› Mood enhancement

› Enjoys trying out new flavours

Purpose

› Identifying ideal launch path

Calculating Sales Projections

Chocolate Market’s Future

› Relation to Corporate Goals

Explaining the details

Further Testing The

Market

Launch in Selected Test

MarketsStage a Regional Rollout National Launch

Pros • Fine-Tune Consumer Insight• Gather Additional Consumer

Insight

• Middle-Of-The-Road

Approach

• Display Commitment to

Retailers

• Most Limited Liability and Risks• Most Representative of Market

Condition• Average Expenditures

• Biggest Opportunity to

Increase Market Share

• Discover New Opportunities • Limited Liability and Risks• Greatest Revenue

Opportunity

• Begin Market Share

Dominance

Cons • Possibly Redundant Data• Long Result Reading Time (1

Year)• Conservative Strategy • Very Expensive

• Delaying Market Entrance • Delaying Market Entrance • Potential Lost Opportunity • Requires New Factory

• Difficulty In Finding Suitable Test

Markets

• Less than 100% Commitment

to Market

• Greatest Resource

Commitment

• Convincing Retailers for Limited

Batch Purchases• Requires New Factory

• Most Expensive ($3 MM) • Poor Regional Selection

• Limited Production Capabilities SELECTED LAUNCH PLAN

Calculated all possible sales volumes scenarios using methodology formulas› Market-adjusted trial rates, repeat volume, etc.

› 3^3 = 27 Possible Scenarios

› Determined sales volumes

Combination of three factors › Awareness type

Marketing campaign effectiveness

› ACV type Market reach effectiveness

› Product quality Repeat rate of consumer

Calculating repeat volume

Type Awareness Type ACV# of Trial

Households (MM)Quality of Product

% of Households Repurchasing

Repeat Purchase Occasions

Repeat Volume (MM)

Low

Low

2.82 Mediocre 28% 4 3.16

2.82 Average 33% 4 3.72

2.82 Excellent 38% 4 4.29

Medium

3.05 Mediocre 28% 4 3.42

3.05 Average 33% 4 4.03

3.05 Excellent 38% 4 4.64

High

3.71 Mediocre 28% 4 4.16

3.71 Average 33% 4 4.90

3.71 Excellent 38% 4 5.64

Medium

Low

2.82 Mediocre 28% 4 3.16

2.82 Average 33% 4 3.72

2.82 Excellent 38% 4 4.29

Medium

3.71 Mediocre 28% 4 4.15

3.71 Average 33% 4 4.90

3.71 Excellent 38% 4 5.64

High

4.51 Mediocre 28% 4 5.05

4.51 Average 33% 4 5.95

4.51 Excellent 38% 4 6.85

High

Low

3.42 Mediocre 28% 4 3.83

3.42 Average 33% 4 4.52

3.42 Excellent 38% 4 5.20

Medium

4.36 Mediocre 28% 4 4.89

4.36 Average 33% 4 5.76

4.36 Excellent 38% 4 6.63

High

5.30 Mediocre 28% 4 5.94

5.30 Average 33% 4 7.00

5.30 Excellent 38% 4 8.06

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

5.9

8

7.1

0

7.0

9

7.8

7

9.3

5

6.5

4

7.8

6

9.3

5

10

.46

7.2

6

8.6

3

10

.12

11

.24

13

.36

Sa

les

in $

MM

Number of Purchases in MM

Retail Sales Value

($ MM)

Montreaux Sales

Volume ($ MM)

Acceptable

Hurdle Rate

Band range

of ACV,

Quality and

Awareness

Corporate 2015

goals overly

aggressive

› Despite double

annual market

adoption rate

Accomplished

national rollout

2012 Market 2015 EstimateAggressive

2015

Chocolate Market Size

(BN)

$ 17.664

$ 19.120

$19.120

Annual Growth Rate

2% 4%

Average Montreaux Sales (MM)

$ 39.02

$ 42.24

$45.65

Market Share 0.22% 0.22% 0.24%

Acceptable downsides› Taste

Findability› ACV focus

Product delivery and loyalty› New factory

› Perpetual improvement

Market goals› Nielsen’s 12 Success Factors

› Accomplished national rollout

Expand manufacturing capabilities› Pennsylvania

Montreaux USA marketing plan› Target demographics

› Focus on supermarkets

Product specifications› Euphoria by Healthy Cravings

› Pouch

› 70% Premium Cocoa

American credibility› Sub-brand of Apollo

“Introducing Euphoria Pomegranate by

Healthy Cravings –Reward yourself with happiness and good

health”

Opportunities

› Partnering with other firm than the Big Two

› Develop better infrastructure Perhaps more factories

and manufacturing centers

› Product specifically targeted to men

› Virtual integration with Suppliers Mexico

Risks

› Introduction of superior rival product

› Product not well-tested

› Manufacturing capabilities not up to par

› Ability to Scale

Competitive Rivalry Within

Industry

Bargaining Power of

Buyers

Threat of New

Entrants

Bargaining Power of Suppliers

Threat of Substitutes

Bargaining Power of Buyers› Low to moderate

› Large volume orders

› Lack of threat of backward

integration

› Reliance on industry product

Threat of Substitutes› High

› Alternate

confectionery

available

› Competition

during holidays

Threat of New Entrants› Low

› Very expensive manufacturing

costs

› Lack of distribution channels

› Regulatory restrictions

› Confectionery and chocolate

market relatively saturated

Bargaining Power of Suppliers› Moderate to high

› Supplier group is concentrated

› No threat of forward integration

› Industry is important customer to

supplier

Source: http://jmfrrell.blogspot.ca/2011/06/chapter-4-industry-analysisporters-five.html

Competitive Rivalry Within Industry› High› Equally capable

competitors

› Slow growing

› High storage and fixed costs

› High exit barriers

Go through retail channels

› Supermarkets

and grocery

focus

Premium

chocolate

moving into this

distribution

channel

15.8%

11.7%

9.0%

8.8%

54.7%

Distribution Channels Breakdown

Supermarkets/Gr

ocery

Convenience

Stores

Drugs Stores

Big-Box

Supercenters

Other

Bar/Bag/Box

(>3.5 oz),

7.149

Seasonal

Chocolate,

4.407

Bar/Bag/Box(

<3.5 oz), 3.479

Snack-size

Chocolate,

2.522

Market Share Revenue ($ in MM)

Bar/Bag/Box (>3.5 oz)

Seasonal Chocolate

Bar/Bag/Box(<3.5 oz)

Snack-size Chocolate