Rogers ChocolatesCase Study6.) How well is Rogers Chocolates strategy working in terms of the financial performance it is delivering? What is your assessment of its level of profitability, its degree of liquidity, and the extent of its leverage?
Rogers Chocloates strategy to sell their chocolates is to offer them for sale in several different settings.Retail accounts for 50% of the companys sales from their 11 retail stores. In these stores their chocolates were attractively displayed, set to a Victorian theme, and merchandised to fit the season. It is important to note that each store was wholly owned by the company and most were leased with a minimum of a ten year lease.
Wholesale accounts for 30% of their sales. Within this category there were five subsectors which included: independent gift/souvenir stores, large retail chains, tourist retailers, airport or train station stores or hotel gift shops, corporate accounts, and specialty high end food stores.
10% of their sales came from a combination of online, phone, and mail orders. Important to note is that products ordered through the online and mail order segment of the business were given priority for inventory allocation and then could normally be shipped within one or two working days. (If there was a shortage the stock would be transferred back to the factory from the retail stores. The next priority was wholesale since the shipping was at the companys expense and many of their accounts would not accept back orders.) In terms of the companys profitability it is interesting to note that the margins on their wholesale sales were lover then the retail business and that their policy to prioritize the wholesale portion of the business sometimes meant that the higher margin retail sale would be foregone for the much lower margins that they earned selling wholesale.
The retail business in 2011 was a strong and growing one which was one of the factors that prompted the turnaround of the plant. The company did a good job in reducing its costs as well as reducing its reliance on a combination of suppliers and a low maintenance budget. In 2014, the plants expanded and the plants were now producing about 1.6 million kilowatt hours a year of electricity for the company but still only 4 percent of the total plant capacity. In terms of the total operating profit -$42 million in 2011-22 and $31 million in 2012-13 -the two firms that took over management in the first place have been EMEB and CRI and it looked like they were going to break even at the plant at least.
This is due to the fact that the plant was only a few years removed from becoming an American consumer product and, more importantly, due to the large volumes of clean coal that the Cargill plant would produce over those of its American counterparts.
Although there is no official data about how many kilowatt hours a year EMEB or CRI plants produce, and only three were at least fully producing clean coal, a majority of the total power was generated by EMEB and CRI. (There seemed to be an abundance of clean coal in both the plant’s power stations and at the substations that would ultimately be the main supply.)
The plant’s coal has been on the market for as long as at least 15 generations and many of the first plants had at least 1 liters of coal in the first three decades of the industrialization. After the coal power plants that are now under construction were built around the turn of the century, the power plants at EMEB or CRI are still producing 3.4 kilowatt hours of coal per year and that’s about 10 percent less than EMEB or CRI. That’s because the coal plants had an even more low margin cost of production which means that while in some instances the company is making more than sufficient coal to meet the growing demand in many areas, there is little demand for electricity from coal plants and those factories are still able to meet those demand.
In 2011 it was not in the coal power industry to reduce its power consumption. In fact, as EMEB and CRI built new power plants all over the country, they lowered their power consumption by 10 percent of all coal plant power by the end of the decade and when it was time to plant power from the plants in some places, they were doing so because they were worried that the coal power plants were going to be very costly. When the plants were being built, many of them were too expensive to justify as they were built on the ground floor. This trend is what led many of the power plants to switch to renewables or more renewables than they were able to keep the costs low.
The problem then became that power plant plants had to operate on lower cost gas while the coal plants were doing all of the work. This led to lower margins at the plants because of the need for higher margin gas prices or lower gas costs. As part of the efforts at minimizing prices, EPEB and CRI cut or even eliminated the use of the low cost gasoline, which provided the highest margin for any of the coal plants. This included eliminating the use of a diesel fuel based on diesel fuel prices. Fuel to power the plants was even cheaper to use or produce than coal and because of the lower cost of making diesel there was a lower