Godiva
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Case 4: Godiva Europe
Current Situation
Godiva International is a luxury chocolate producer in three countries throughout the world; United States, Japan and Europe. Chocolates are produced for individual consumption, either as a gift or for self-indulgence. The company has 3 decision centers, which all fall under the Godiva International brand. The company operates under the Campbells Soup Europe and Asia region. Godiva Europe is headquartered in Brussels, Belgium which is known as the birthplace of chocolate. The main production factory is in Belgium and in 1990, Godiva produced 3000 tons of chocolate for over $27.2 million USD in sales for the region of Europe. 75% of European production is either under the Godiva name or under the brand name Corne Toison dOr. The remaining 25% of European production is for the United States and Japan, where the price of chocolate is sold for $59 USD and $118 USD/kilogram respectively. This compares to a sales price of $31.76 USD/kilogram in Europe.
The chocolate market in Europe is primarily dominated by the praline which is where Godivas market position lies. Demand in Belgium indicates that pralines comprise 44% of all chocolate consumption in Belgium. Overall, the European market has reached a plateau as demand has remained fairly steady throughout the 1980s. Godivas international marketing mix focuses on the image of luxurious, refined chocolate wrapped in an immaculate hand-crafted presentation. This concept has proven successful internationally, where in Japan and the U.S. consumption has increased 54% and 30% respectively, over the 1980s. Yet, recent market studies conducted by the company indicate that the luxury image of Godiva in Europe has waned. Other competitors in the European segment, such as market leader Leonidas have maintained success by concentrating on mass producing great-tasting chocolate at an affordable price. Godiva in Europe has become known as something of an antiquated, pricey offering. Godivas market position in Europe has been further hampered by their retail distribution which consists of run-down franchised stores that fail to convey the image of decadence. This pales in comparison to Godivas international presence in fine department stores and independent boutiques as a luxury chocolatier.
Problem
Godiva International wants to standardize the advertising campaign across the Triad Countries of U.S., Japan and Europe. The President of Godiva Europe, Charles van der Veken has been asked to prepare his campaign within 5 weeks in order to meet the Christmas season. Through marketing studies Mr. van der Veken is aware of the vast differences in chocolate perception between the European countries and internationally. As such, he realizes that a standardized positioning strategy may not be a good fit for Godiva Europe.
Case Relevant Facts:
Belgium is the Birthplace of chocolate where annual consumption is strongest in Europe
43.5% of Chocolate consumed in Belgium is in the Godiva category
Godiva has a 10.3% market share; Corne Toison DOr has 2.7%
Total population in Belgium consists of 3.88 million households; average household consumption is $25.07 USD in 1988
Godiva Belgium Price level is $31.76 USD/kilogram; Corne TO Price level is $25.58 USD/kilo; the Belgium average market price is $13.2 USD/kilogram; Leonidas is the market low-price leader at $10.59 USD/kilo
Estimated demand for chocolate in Belgium in 1991 is 8800 tons; 906.4 tons for Godiva
Godiva products are sold through franchised dealers in Europe; the franchisees purchase Godiva Chocolate in their country of operation at a company-contracted price; this price varies country to country. Beginning 1993, the Euro will become standard currency; the franchisees will soon be able to purchase directly from the Belgian factory at reduced prices. Therefore, management recently felt compelled to impose a 10% price increase across the franchisee system.
A Perceptual mapping Brand Image study showed that in 1992 Brussels, Godiva is known as:
The queen of chocolate
A refined chocolate
Beautiful boutique
Expensive chocolate
Godiva is behind market leader Leonidas in the categories of:
Belgian Chocolate
Offering a product for the Self-Indulgent
Offering an attractive Price
Godiva packaging is not as important to the Belgium consumer; pre-selected chocolates are not appealing to Belgians who prefer choice in the assortments; beautiful fabric boxes are too expensive for Belgium ($34 USD) and are often used for store displays as opposed to sales
Loss of Brand Recognition –
20% of respondents in a Brussels (Belgium) survey claimed they have only heard of Godiva through name only
31% of respondents also said they have never heard of Corne Toison DOr
Regarding production:
Handmade chocolates cost 7 times more to produce than machine automation
70% of pralines are machine-made; 30% are hand-made
60% of the machine-made product must be decorated by hand
The Belgian factory has significant (yet unspecified) un-used available capacity
Alternatives to Current Strategy (Options)
Differentiated Positioning – Modify the marketing mix to differentiate Godivas European identity from the international advertising strategy. This option consists of a “downward” market-penetration strategy for Europe vs. an “upward” strategy for the International segment. Key elements of the penetration strategy will include:
Lower Pricing to gain market share – recently the 10% price increase has lowered sales volumes by 7%
Reducing units of labor and increasing units of capital to de-bottleneck capacity through mass-production
Reduce