USA Marketing Strategy Alice Walker
Contents -Intro...1 -Methodology...2
UK Brand Audit
-Brand History...4/5 -Brand Values...6 -Brand Health Check...7 -UK Positioning...8 -Target Market...9
Macro Environment -PESTLE (UK)...11 -PESTLE (USA)...12 -Trends...14/15
UK Micro Environment -Market health...16/17 -Competition...18
Brand Opportunities -SWOT...19 -Ansoff Matrix...20
USA Brand Audit
-Brand positioning...22 -Consumer...23
USA Micro Environment -Market Health...25/26 -Competition...27
Optimising USA Potential
-The Marketing P’s...29/30/31 -Promotional Plan...32/33 -Recommendations...34/35 -Time Line...36/37 -Conclusion...38
Word Count: 3283
Introduction After closing US branches 18 months after debuting in 2009, Hotel Chocolat are ready for another business venture into the US. Angus Thirlwell (founder of Hotel Chocolat) said that “while the stores had traded well and the retailer had learnt from the pilot, the cost of shipping to just two stores made them uneconomical to retain for long.” However, the retailer still trades online there and 70% of visitors to its Boucan hotel in St Lucia are Americans. Hotel Chocolat announced a 12% increase in sales to £92.6 million in June 2016, with online sales growing by 20%. (Mintel, 2016) With the brand doing so well, the time is right for another try at launching in America to grow the business even more. This report will be giving an insight into the US market including why Hotel Chocolat would benefit from the launch and how it can be a success. Key recommendations will be advised in order for the brand to adjust to the new market.
“When we analyse British fashion, there’s lots of brands – Burberry, Mulberry, Paul Smith and Ted Baker – all making a good move internationally and we have an aspiration to be in that group.” (Thirwell 2012)
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Methodology Research Objectives
• Measure brand perception, usage and awareness in the UK and USA • Find out who Hotel Chocolat’s customers are • How can they use their UK positioning to maximise their success in the USA
Primary Research
• Quantitive: Online survey • Qualitative: face to face in store interview • Qualitative: questionnaire for potential American consumer • Qualitative: UK and USA store observation
Method
The online survey was conducted to provide a broad range of answers and information that can easily be communicated. A list of questions were read to an employee at the Nottingham Hotel Chocolat store in order to gain better understanding of the company as well as a visit to their York store which attracts many tourists. The questions aimed at a potential American consumer was carried out over the internet to determine the differences between British and American consumers and finally store observations of Hotel Chocolat was carried out in Nottingham as well as a store visit to the Hershey’s Time Square store in New York to gain insight into the retail environment of both places.
Sample
• Online survey: 70 • Face to face in store interview: 1 • Questionnaire for potential American consumer: 1
Secondary Research
Online resources such as Mintel and Euromonitor were used to give trustworthy business information and literature research was conducted to support primary research.
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UK Brand Audit
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1993 Hotel Chocolat starts selling chocolates online, becoming one of the UK’s earliest ever ‘e-tailers,’ predating Amazon and eBay.
2010 Hotel Chocolat’s first cafe opens in London’s Borough Market.
2004 The first ever Hotel Chocolat shop opens in North London.
1998 Their Chocolate Tasting club is created- chocolate lovers who receive unique selections each month.
2006 Entrepreneurs, Angus and Peter buy a 250 year old cocoa plantation in Saint Lucia.
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Brand History 2011 Boucan, a luxury hotel, restaurant and spa, opens on their cocoa plantation in St Lucia.
2017 They are short-listed for “SME of the year�, London Evening Standard Business Award 2017 and currently have 92 shops and 11 cafes, a number that will continue to grow.
2013
2015 Their cookbook, A New Way of Cooking, is published.
London and Leeds are chosen homes for their two new restaurants.
2014 The School of Chocolate at Cocoa Vaults opens in Covent Garden, offering a world of chocolate adventures and experiences.
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Brand Essence
Originality, authenticity, ethical and luxury.
Mission
The brand go by the mantra ‘More cocoa, less sugar, for a healthier and more satisfying cocoa hit.’ (Thirwell, 2015, The Guardian) They aim to provide top quality chocolate with a higher cocoa percentage than other chocolates on the market. They want to offer high quality products and services to every possible consumer, starting at small affordable lollipops to a luxury treatment in the hotel in St. Lucia.
Vision
For future generations, they are committed to reducing waste, using every part of the cacao bean and not throwing out chocolates just because they don’t look quite right. Misshapen chocolates that are still made with their premium ingredients go into their ugly but good bags and they strive for bringing customers new and original ways to experience cocoa.
Values
Their core values include embracing new technologies and ideas, using only real, natural ingredients and fairness to their farmers. Nothing artificial is ever used as they say “nature supplies all we need.” They also believe cocoa farmers deserve respect and a fair deal.
Personality
Authentic, unique, creative, desirable, fancy and fair.
Functional benefits
High quality, natural and ethical.
Emotional benefits
Special, stimulating, indulgent and luxurious.
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Brand Health Check An online survey was undertaken to collect responses on the awareness and perceptions Hotel Chocolat currently have. When being asked to describe the brand in 3 words, people responded by characterising the luxuriousness of the products and their strong flavour “tasty, expensive, and rich” (Online Survey, 2017)
. (Online Survey, 2017)
However when asked if they would recommend Hotel Chocolat to anyone the majority of 56% did say yes but a big 44% of people said no. These figures could be seen as damaging to Hotel Chocolat so the brand will need to focus on appealing to new customers, not only keeping their current ones happy, in order to spread a positive brand image. Although, it is more of an exclusive brand, not something you would regularly buy in the supermarket, so these responses are supporting the exclusivity of their products.
. (Online Survey, 2017)
In terms of sales figures, Hotel Chocolat are doing very well announcing a “12% increase in sales to £92.6 million in the 52 weeks to 26 June 2016, with online sales growing by 20% in its first trading update since its flotation in May.” (Mintel, 2016) 7
UK Brand Positioning
UK Positioning
Hotel Chocolat position themselves as being tastier and healthier than other brands. It has its own cocoa plantation on St Lucia, which is also home to a luxury hotel, an extension of their high end, luxury appeal. Thirlwell said, “Innovation for us means British design creativity and British sense of humour. It’s fresh, it’s new, it’s creative, it’s what Brits do really well, we’re great designers.” Something the brand does well is packing and design unlike its main competitor, Thornton’s, whose designs are quite outdated and unfashionable. Because of the growing sugar awareness in the UK, Hotel Chocolat has more to offer customers with its “less sugar, more cocoa” approach. Experimental
Mid market
Luxury
Classic Despite Hotel Chocolat’s clear positioning at the luxury end of the market, the company have no desire to make the brand elitist. Prices start at £1.75 for a chocolate lolly and rise to £10,000 for that two-week stay in St Lucia. While its products are not stocked in supermarkets, it does have concessions at John Lewis reflecting the uniqueness of the brand. Some of Hotel Chocolat’s competitors include Thornton’s, Lindt, M&S and Green and Blacks. All these chocolate manufacturers’ products are considered a luxury however Hotel Chocolat have a competitive edge as they are not dependent on another company delivering the cocoa beans with having their own plantation in St Lucia, which saves them many transaction costs. 8
Target Market Primary Consumer • • • • • • • • • • •
Women age 30-50 High disposable income Well educated Enjoys treating herself Has an appeal towards the luxury market Prefers quality over quantity Enjoys trying new things Can appreciate good designs Has environmental awareness and is eager to do what she can to help Likes giving well thought out gifts to family and friends Very social
Secondary Consumer • Male age 25-40 • Enjoys experimenting with food • Likes being in a relationship and treating his other half • Is willing to spend a lot on gifts • Enjoys the interactive side of Hotel Chocolat with tasters and helpful sales assistants • Interested in unique foods • Very active on social media • Comes from a big family that loves celebrations e.g. birthdays, Christmas etc 9
Macro Environment 10
PESTLE Analysis UK P
The general election in June is dividing the country and the public are feeling like their voices aren’t being heard meaning buying behavior’s are effected by political uncertainty. The question looming over Brexit will place strains on relations with new markets. Also a lot of terrorist uncertainty can also affect buying habits when consumers feel on edge. (McKinsey, 2016, The State Of Fashion 2017)
E
Persistent unemployment and stagnant economic growth is seen in developed markets. Eurozone debt crisis and a lack of political consensus on how to resolve it, raising concerns over future of the euro. Big ticket items and luxuries will suffer most, and consumers will be wary of using credit. (Euromonitor international, 2015)
S
Population is ageing due to a combination of low birth rates and longer life expectancies in developed markets. Longer lives provide a growing market for consumer health products, health foods, beauty products, leisure services, tourism and other products adapted to an ageing market. Consumers are increasingly making their purchase decision based on a brand‘s reputation, with 50% having chosen a product or service because of a company‘s reputation for responsibility and 48% having avoided a product or service because of a poor reputation (Ethical Consumer, 2014)
T
Consumers are now expecting an engaging and personalised experience when online as well as in store. Creating a unique experience with new technology for the consumer is a good way of grabbing their attention. Webrooming is where consumers conduct in-depth research online to inform a purchase decision before finally buying from physical retail stores. A March 2014 study by the Baymard Institute showed that more than half of all online purchase journeys end in cart abandonment caused by shipping costs that are higher than expected.
L
Employment law and child labour are becoming more regulated with extensive legal checks in different countries. The General Food Law Regulation (EC) 178/2002 provides the general principles of food safety which include “the requirement on food businesses to place safe food on the market, for traceability of food, for presentation of food, for the withdrawal or recall of unsafe food placed on the market and that food and feed imported into, and exported from, the EU shall comply with food law.” (Food.gov.uk, 2002)
E
Flooding is becoming more frequent and damaging due to more intense rainfall events. Floods can contaminate water resources and bring disease. Devastation of crops used for human and livestock consumption will lead to higher food prices. Countries relying heavily on imports will be most severely hit. manufacturers will have to focus on reducing carbon output and producing energy and water-saving devices as consumers will become increasingly aware of their carbon footprint and will adopt a more environmentally-friendly approach to their purchasing habits.
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PESTLE Analysis USA P E
It may be difficult for Hotel Chocolat to trade with the US because of Brexit as �Regulatory divergence would increase over time, affecting trade volumes and reducing the attractiveness of the UK for investment. This would impact on European businesses invested or trading in the UK and supply chains involving UK firms� (Global Counsel, 2016) Although, America holds the opportunity for new markets as the EU is uncertain. The new presidential election, electing Donal Trump has put a lot of the public on edge and therefore has affected their buying behviours. In March 2017, disposable personal income increased 0.5 percent and Retail trade increased 5.7 percent, after increasing 2.6 percent in 2016. (Bea.gov, 2017) Therefore, the American economy is doing well, increasing the likelihood of success for companies launching in the USA. However exchange rates will have to be taken into consideration.
S
The US has the highest level of inequality among the major developed markets, while Europe tends to benefit from more generous welfare systems. Baby Boomers hold much of the wealth in markets in the US, producing a growing market for high-end products and services that appeal to the more mature consumer.
T
On average, American consumers are much more active online than compared to the UK with 87 percent of internet users having a social media account in the UK, and 92 percent in the US. (Seymour, 2016) Brands will have to focus a lot more on being strong on every social media platform in order to compete and stay attractive to the very demanding US consumer.
L E
In the United States a variety of laws at both the federal and state levels regulate consumer affairs. An example of this is the Federal Trade Commission Act that created the Federal Trade Commission (FTC) to prevent unfair competition, deceptive acts, regulate trade, etc. Donald Trump has recently abandoned the Paris climate change agreement which has created a spark in protests amongst the US because of his decision. Many American consumers feel passionately about climate change so by Donald doing this, it has brought the issue into the spotlight so consumers will be more inclined to support environmentally friendly brands to feel like they are doing something to help.
Impact on Hotel Chocolat Social factors such as an ageing population and Baby Boomers holding a lot of spending power in the US will be one of the brands biggest opportunity but also challenge. The more mature consumer is what Hotel Chocolat target and they have the highest disposable income so will be more willing to spend a lot on a luxury chocolate brand. However, longer lives provide a growing market for consumer health foods which could be a threat for Hotel Chocolat’s indulgent treats. Important Legal rules and economic understanding will need to be highlighted when in planning stages of the launch for example getting the correct exchange rates and complying with the Federal Trade Commission act. 12
Trends
Macro Trends
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Impact Savoury Foods Moving increasingly away from sugary sweetness, a new wave of savoury experimental food is becoming popular. In 2016 Dan Barber, founder of the iconic Blue Hill restaurant in New York, launched a range of savoury yogurts including beetroot, squash, carrot, and sweet-potato flavours. (The Future 100, 2016)
Impact Chef, Jamie Oliver, is promoting the sugar tax. Therefore he could be the new face of the brand to promote their mantra “more cocoa, less sugar.” This keeps the brand current and socially aware of the problems in today’s culture.
Hotel Chocolat have already embraced this trend by producing products like cocoa pesto but to expand on this they should be even more experimental with savoury flavours and feature them as their testers in store.
Chefs as Leaders As food and issues relating to feeding the planet sustainably take center stage, chefs are taking on the role of thought leaders. Food is becoming increasingly central to culture It’s also an increasingly hot political point such as addressing the rising obesity problem. (The Future 100, 2016)
Impact
Worlds Apart Trump, Brexit, Le Pen. 2016 saw the economic, social and cultural impacts of globalization. 2016 saw Starbucks launch Upstanders: an original series of short stories and videos that highlights individuals across the US that work to make a difference in their communities. Topics such as homelessness, food waste and the role of police feature in the series, aiming to unite Americans during election season. (TrendWatching, 2017) 14
This trend is about positive action. Displays of fake patriotism won’t fool consumers for long so Hotel Chocolat have to reflect what the brand truly stand for and focus on promoting their fairness to farmers that is mentioned in their core values.
Ancient Ingredients Ancient superfoods with superhealth benefits and mystic promises are the hot new ingredients in chocolate promising healing, metabolism-boosting and enriching properties. Curiosity around superfoods and a willingness to try new ingredients is increasing among consumers who are taking a holistic approach to their health. (The Future 100, 2016)
Impact
Hotel Chocolat can incorporate these ancient ingredients to appeal to their consumer such as adding turmeric, an ancient spice used for inflammation and digestion. It is a root just like ginger that provides many different forms of relief in the body.
Beauty Foods The lines between beauty and food continue to blur. New luxury brands are turning to ingredients that are usually eaten and using them to create beauty products—a trend that sits within the holistic way consumers now see wellbeing. 60% of US millennials say they use food ingredients to make homemade beauty treatments because they are more natural than the products they find in stores (The Future 100, 2016)
Impact Hotel Chocolat already do a limited range of beauty products like their cocoa body scrub but they should extend this range by including other treatments like natural facial masks or body butter.
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UK Market Health Outlook
Volume sales of chocolate have seen little change since 2013. The supermarket price wars meanwhile kept prices in check, seeing value sales stagnate in 2016 at £4.24 billion. Despite challenging conditions that include the negative coverage about sugar, it hasn’t had that much of a damaging effect on the overall market. (Mintel, 2017)
. (Mntel, 2017)
Challenges
The chocolate market faces various challenges ahead, such as the PHE (Public Health England) sugar-reduction target and the projected decline in the number of 15-24-year-olds who are core users. Healthy eating is also high on consumers’ agenda, with 63% reporting to try to eat healthily at least most of the time. A focus on moderation has helped treats like chocolate, however, many people are scrutinising their sugar intake. The Pound has weakened dramatically since the UK’s EU referendum, putting upward pressure on the cost of imports. (Mintel, 2017)
Consumer
An ageing population, with the number of over-55s will increase by 10% over the next five years, meaning 1.9 million more people in this age bracket by 2020. This will hinder the confectionery market as only 24% of over-55s eat chocolate four times a week or more compared with 40% of 16-24-year-olds. (Mintel, 2016)
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Buying Behaviour
The biggest reason for buying chocolate is to treat oneself, cited by nearly six in 10 people in 2016. The second biggest reason for buying chocolate is for an evening in at home (35%), emphasising the importance to brands of linking chocolate to a good night in. Unsurprisingly, consumers are prepared to spend more when buying chocolate as a gift than when they are buying it for themselves. This shows a strong financial incentive for companies to tap into the gifting market which Hotel Chocolat does very well. A premium positioning is important, with being a luxury brand (44%), coming from a specialist chocolate store (30%) and luxurious packaging (29%) most likely to encourage people to spend more for chocolate as a gift. (Mintel, 2016)
. (Mntel, 2017)
Impact
Premium products such as Hotel Chocolat can benefit from consumer interest in healthy eating and portion control through promoting self-treating with small amounts of luxury chocolate as part of a balanced diet. The majority of people are willing to trade up for chocolate, particularly when buying as a gift. Gifting is a key element of Hotel Chocolat, with being seen as a luxury brand and having specialist stores it encourages people to pay more when buying chocolate as a gift.
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UK Competition Hotel Chocolat’s key competitor, Lindt, is being seen as the most indulgent brand, reflecting its emphasis on being ‘the perfect blissful treat’ which is a threat for Hotel Chocolat. However their unique selling point (USP) is being very innovative with their products. “Brands need to use innovation to encourage trading up, both when buying chocolate as a treat for oneself and when gift purchasing. With the majority of people thinking it is OK to eat small amounts of chocolate every day as part of a balanced diet, an increased emphasis can be placed on eating smaller amounts of more premium or luxury products as a daily treat.” (Richard Caines, Senior Food & Drink Analyst, 2016) When conducting the primary research of the online survey, the question: “which of the following brands have you heard of?” showed a worrying awareness of the brand. Hotel Chocolat only got 45% whereas Lindt got 98% and Thorntons got 46%, both being more recognisable brands when in comparison to Hotel Chocolat. Although, this will be due to the fact that those brands are sold in supermarkets so it is not a surprise that they are more well known.
. (Online Survey, 2017)
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SWOT Analysis Strengths:
Weakness:
• USP of using a healthier way of producing chocolate • Growing their own cocoa beans in St Lucia it means that they are not dependent on various suppliers • Innovation in products e.g. producing milkfree chocolate and replacing it with almond milk to target vegans • Have a range of products available, not just chocolate to give customers more of an engaging experience with the brand
• Still a new brand compared to its main competitor, Thornton’s, which was established in 1911, so don’t have a lot of heritage • Not selling their products in supermarkets, making it inconvenient for customers to go to a specific shop • Has a high price range
Opportunities:
Threats:
• Celebrity chef endorsements • Can focus its appeal to the healthy consumer that is popular now being organic, antioxidant, vegan, gluten free. • Expand into the USA market • Can market to lots of gifting seasons like Christmas or mother’s day because of it being a luxury brand • Focusing on travel retail, based in airports and train stations
• Not selling in supermarkets so customers are more inclined to pick something up from their own supermarket like Waitrose own brand chocolate or M&S • At the top of the price range compared to its competitors • Behind in terms of social media • Not Fairtrade like green and blacks
This SWOT analysis identifies the four areas Hotel Chocolat must consider in their strategic planning. In terms of likelihood of success for the opportunities, focusing its appeal to the healthy consumer is relatively easy for the brand as they already do this. Focusing on travel retail is new for the brand with them already supplying British Airways Club passengers with complimentary inflight chocolates but this would be a big opportunity for the brand to focus on in the future. The likelihood of the brand achieving celebrity chef endorsement and launching in the US is low however with the right planning, it can be done successfully. The highest probability of occurrence in threats would be them being at the top of the price range and consumers thinking the brand is overpriced. Not selling in supermarkets isn’t as serious as it gives the brand an exclusivity to its products. Even though they are an ethical brand, not having the mark of Fairtrade is a threat as consumers trust that mark and have reassurance when buying.
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Ansoff Matrix This Ansoff Matrix will help Hotel Chocolat consider how to grow in the UK market and discover new ones in the US by allowing brand extension.
Existing Market
Existing Product
• Secure dominance in luxury gifting mar- • Satisfy consumers’ needs by tapping more ket into the beauty market, release new choco• Drive out competitors by promotional late face masks to beat the competition campaign around seasonal celebrations • Development and innovation of new prod(father’s day, Christmas, Valentine’s day) ucts made by “ancient ingredients” to • Promote the Hotel Chocolat loyalty card appeal to new consumer trends of having on every social media extra health benefits • Decrease cost to be a bigger threat for competition and improve customer value
New Market
• New geographical market- the USA • Expand from their hotel in St Lucia into the hospitality market by opening more hotels across the world
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New Product
• Expand into the luxury home wear market including kitchen equipment and minimalist decoration • Release new ice cream tub products to compete with brands like Waitrose and M&S
USA Brand Audit
USA Brand Audit
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US Brand Positioning Chocolate brands in the US on a whole include a lot more sugar in their recipes and UK chocolate is known for being much more rich. According to UK rules, a product must contain no less than 25% cocoa solids to be considered “milk chocolate.” The US stipulates that milk chocolate must contain no less than 10% chocolate liquor. (businessinsider.com, 2015) Hershey’s recently struck a deal with an importer of British products to prevent Cadbury chocolates made in Britain from entering the US which American consumers weren’t happy about. A petition on MoveOn.org to end the Hershey ban has nearly 15,000 signatures so the gap in the market for more higher percentage cocoa and less sugar is prominent in the US.
As Americans seek to reduce sugar in their diets the demand for chocolate has increased as customers have begun to prefer sugar-free, premium and dark chocolates, benefiting Hotel Chocolat. However, the market is largely controlled by two dominant companies – The Hershey Co and Mars Inc. “In 2016, these two companies accounted for a combined value share of 64%.” (Euromonitor, 2016) Although these companies wouldn’t be direct competition for Hotel Chocolate as they are at the other end of the market, it is important to mention that they are the two main chocolate brands in America so Hotel Chocolate can position themselves in the higher end of the market in order to bring the American consumer a different product offering from the main brands. In the US market, premium chocolate sales continue to grow faster than everyday chocolate. For example, US sales are up 12% for the premium-focused Lindt, according to IRI mass-market sales tracking for the 52 weeks ending April 20, 2014, compared with only 4% growth for the overall U.S. chocolate candy market, according to Packaged Facts. Therefore, Hotel Chocolat should position themselves in the premium range, close to brands like Ghirardelli and Godiva. 22
UK vs US Consumer There are important differences between American consumers and British consumers, therefore Hotel Chocolat must understand these different psychological behaviours in order to market their brand correctly in the US market. These differences include:
UK
USA
• The British are three times more likely to be careful spenders than those in America, with an index of +3.14. (VisualDNA, 2016) • VisualDNA business development director Ed Weatherall says: “Brits like to think they are being more careful with their money. In the back of their minds they have to be convinced a little bit more about why they should make that purchase.” • Despite recent emotional Christmas campaigns in the UK from the likes of John Lewis and Sainsbury’s, the study reveals Americans as more caring and likely to show outward concern than the British. For marketers, this means US consumers are more affected by emotive advertising.
• “Americans have always been more comfortable spending money and, for the most part, money they don’t have. Their credit economy is proportionally a lot larger than ours and a lot more tolerated by their credit agencies and government bodies than ours.”(Lecaros-Aquise, 2016) • The study also reveals that Americans are more than five times more likely to be self-confident than Brits, and more likely to believe in themselves, which, while not surprising, affects consumer spending behaviour. • American are a lot more active on social media than compared to the UK. “American check their social media accounts 17 times a day” (King, 2017)
US target Market • Woman aged 30-50 • Lives on the West Coast • Successful business woman, travels a lot with work • Takes pride in her appearance • Has older children who she likes to spoil • Goes on weekend trips with her husband • Is conscious about the foods she eats • Enjoys trying new things • Likes to pamper herself
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USA Micro Environment
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Market Health Outlook
Chocolate confectionery sales grew 24% over a five year period from 2009 to 2014 to reach $21 billion in the US, the world’s largest chocolate market. However, growth slowed in 2014, following a pattern that has evolved over the past few years. Chocolate innovation has increased, with new product launches growing 18% between 2013 and 2014. (Mintel, 2014) Innovation within the US has been focused on seasonal products. 42% of new product launches were classified as seasonal. A look at flavour activity among chocolate confectionery launches finds that plain/unflavoured varieties are seeing steep declines, while products featuring nuts and nut flavours are on the increase. While chocolate confectionery remains popular in the US with 85% of adults buying chocolate, an intensifying spotlight on health, rising costs, and competing chocolate-flavoured offerings across food and drink, strains its hold. Mintel predicts steady growth through 2019, with the US chocolate market reaching $25 billion.
. (Euromonitor, 2016)
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Consumers
More than half (53%) of US consumers eat chocolate once a week or more. Among chocolate eaters, nearly three quarters (72%) consume the confectionery as a treat. Further, 32% of chocolate buyers purchase more chocolate around the holidays, including Easter, to have on hand for personal consumption. In addition to treating oneself, mood enhancement is a popular reason Americans reach for chocolate (29%). The majority of chocolate buyers (71%) are looking for options with mix-ins as oppose to plain/unflavoured varieties (Mintel, 2015)
Challenges
The price of sugar was higher in the US in 2014, with domestic growers selling sugar at prices 50100% higher than in global markets. As a result, 71% of respondents are noticing price increases in chocolate confectionery. While the category is not considered cost prohibitive, and only 3% of consumers have stopped buying chocolate altogether due to price increases, price awareness is evident in the US market. Cocoa prices are increasing which places pressure on unit prices as shown in Fig. . “The challenges facing the global market in 2014 have been related in part to supply, as the price of cocoa increased 9% in the first 10 months of the year, driven up by a number of factors including increased demand, climate change, and crop disease (Mogelonsky, 2015)
. (Euromonitor, 2016)
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Competition
. (Euromonitor, 2016)
The US chocolate market has always attracted European chocolatiers. European brands benefit from Old World prestige and a sort of history in chocolate, particularly for premium companies. Based on the success of marketers such as Lindt, Ferrero, and Godiva in the US market, the opportunities for European chocolatiers in the US market is likely to continue gaining momentum. “With regulatory approval of its acquisition by Lindt, Russell Stover will account for about 40% of Lindt’s total North American business of $1.5 billion” (Mintel, 2015). In the US market, the combined Lindt/Russell Stover business would be one of Hotel Chocolat’s main competitors. Lindt have a lower price point which could be a threat to Hotel Chocolat so in order to combat this, Hotel Chocolate should market their products to be more luxurious and worth the money. The Lindt brand was also founded in 1845, so they bring a lot of heritage to the US giving consumers confidence to trust their products which will be a challenge for Hotel Chocolat, being new to the market so they must focus on the fact that they are a modern, innovative and exciting new brand to the American consumers.
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Optimising USA Potential Objectives
• To increase brand awareness making Hotel Chocolat a recognisable brand for luxury chocolate • Aim to be consumer’s first choice in terms of premium chocolate and experiences • Create a community for the brand in a new market • Expand the company and grow into a global brand
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The Marketing P’s Product
Present: A broad range of innovative chocolate products as well as alcohol, gifts, beauty products, food, tea and gift experiences. USA: The products must reflect the Britishness of the brand, with modern, sleek designs at a high quality and this specification of excellence will resonate with American consumers wanting premium British chocolates. American consumers are wanting a lower percentage sugar content in chocolates so this should be focused on when marketing the products, making it clear that they are different from the main brands like Hershey’s and Mars in terms of cocoa content.
People
Present: Hotel Chocolat has created a large community in Europe that admire the brand, their main target market being 30-50 year olds, mostly woman, however many children enjoy the fun aspects of the products and older males appreciate the quality and luxuriousness of the brand. USA: The American consumer is known for being more self confident and less strict with what they spend their money on so therefore they could potentially have more spending power than the UK market. Also, they are more active on social media so Hotel Chocolat will need to cater to this different lifestyle in order to target the American consumer effectively.
Price
Present: Hotel Chocolat are currently in the top price range but aren’t too exclusive to customers, ranging from £2 “milk tiddly pots” to £155 “bliss chocolate hamper”. Also, their cafes are at a very high price point, offering £25 per person for afternoon tea and an average main meal costing around £20. USA: Exchange rates in the US will have to be considered in order for the company to be successful. The products should remain a similar price to show consistency and that the products are worth the money. As it stands the “milk tiddly pots” will convert to being $2.60 and the “bliss chocolate hamper” will be $200.
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Place
Present: Hotel Chocolat does ship their products to America on their websites as well as offering British Airways Club passengers complimentary inflight chocolates, so the American consumer has already had a slight taste of the brands products. USA: By already focusing on travel retail, with their success of Copenhagen’s Airport store, Hotel chocolate should continue to base pop up stores in American airports and railway stations in order to target premium business travellers. The items sold by the brand fit into the largest selling product categories found in airport shops such as alcohol, gifts, confectionary and beauty. Concessions in coastal states in Nordstrom will mimic the strategy that is current in the UK, of concession in John Lewis. The Nordstrom places would be situated in coastal areas like New York, Florida and California as these places are engaging more with the health and wellbeing trend that will benefit Hotel Chocolat by offering a “healthy option chocolate” with less sugar. Concessions are also lower risk than compared to actual stores, and it will have a higher percentage of reaching the consumer as most people go to Nordstrom to browse so will be open to trying new products. A flagship store in New York, Times Square, will raise the brands awareness and this can be marketed in a strong way to reach as many tourist/American consumers as much as possible. The store should include modern aesthetics, free tasters and a café. The café will offer a whole new experience for the consumer rather than just a product in order to connect with the brand on another level.
Process
Present: Free tasters in store, advanced website that ships globally, club membership cards and seasonal campaigns. USA: The American consumer likes to celebrate seasonal holidays so this will be a main focus when marketing in the USA. The processes at which the brand will launch has been mentioned in the place category, for example, pop up stores in airports, concessions in Nordstrom and a flagship store in New York. The process in which this will happen will be slow and controlled, continuously monitoring sales and engagement with the brand to check the brands health and profit, as well as constant online and offline marketing to raise awareness and start a talking point among consumers.
Present: The Hotel Chocolat stores are modern, sleek and classy. The relationship Physical Enviroment between employees and customers is very welcoming and helpful. They focus on attracting the senses by including free tasters available in store and the layout is very spacious with lots of products on display to tempt the customer into any flavour imaginable.
USA: The USA flag ship store and pop up shops should be very engaging to customers, including free tasters, welcoming employees who are willing to give customers information on the new brand. It should reflect the modernist aesthetics that is seen in the UK stores to support the high quality of the products and the cafe part of the store should give the customer a special experience that will leave them with a lasting impression of the brand. 30
Promotion Present: The recent online Easter egg hunt was a big success with UK consumers.
A Hotel Chocolat Facebook group was also created as part of the overall campaign – which quickly grew in volume over a short period. Hotel Chocolat web analytics showed that over 50% of all members of the group made visits to the Hotel Chocolat site as a result of the campaign. They also do promotional emails to their members and frequent visitors, advertising their latest products and seasonal offerings. The brand is also always releasing innovative new products and publishing them on their website on social media accounts. USA: Promotion must touch the American consumer emotionally as they are more effected by emotive advertising and also social media has to play a big part in the promotion of the launch as Americans are a lot more active on social media. This will include a social media marketing campaign, creating an emotional engagement between the brand and its audience. A personal connection that causes consumers to assign a personality to a company, product or service. This will include an online golden ticket hunt, launching at the same time as their flagship store in order to create a buzz around the company. An emotive advertising campaign, targeting those travelling to see loved ones which will be based in their pop up stores in airports and train stations as well as a celebrity chef endorsement to give the brand a higher profile and raise awareness.
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Promotional Plan Social Media • Launched at the same time as New York flagship store. • Facebook messenger scanning concept, as most 30-50 year olds use Facebook the most. • All packaged pot lids contain a Facebook code that can be scanned on the Facebook messenger app. • A short 10 second clip will be sent to the customer as a reply on the message showing either a golden or green bauble hanging from the Christmas tree. • If a golden bauble is shown the customer will be entered in a prize draw of possibly winning a week’s trip to the luxury Boucan Hotel in St Lucia for the competition winner and one friend. • Creates a buzz for the opening of the new store and a fun way to engage the new consumers.
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Celebrity Chef Endorsement • Racheal Ray (American television personality and celebrity cook) would give the brand a higher profile and raise awareness in a market that they’re new to • She is very popular in America, so using her in the promotion would spark a talking point for the brand amongst US consumers. • She also fits the brand, by being a more mature, sophisticated woman, relating to the target market, and being an acclaimed chef to reflect the excellence of the products they offer • The power of her name backing the company will give new US consumers the confidence to buy into the brand • She will be used in online and offline advertising as well as being at the opening of the New York Flagship store.
Emotive Advertising • Chocolate is frequently purchased as a gift for loved ones or as a personal treat, chocolate strikes emotional resonance in ways many other products cannot. • Print advertising will feature in the pop up shops in both American airports and railway stations, playing on the emotive story of offering a gift when seeing loved ones for the first time in a while • These print promotions will also feature on their website and social media accounts • It will include a business traveller, heading home from spending time away with work and bring back gifts to his loved ones • Also another story of a long distance couple who have been away from each other for a long time to finally meeting at the airport to exchange gifts. 33
Recommendations Incorporate ancient ingredients into products to reflect the trend of customers taking a holistic approach to their health and wanting extra health benefits when indulging in chocolate.
Racheal Ray celebrity chef endorsement, at opening of New York store and cafe.
Focus on seasonal campaigns in American as, on average, they celebrate each holidays more intensely than UK consumers.
Social media campaign, Christmas Facebook messenger code scanner.
Pop up shops in airports and train stations-including emotive advertising.
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Concession in Nordstrom in coastal areas.
Launch new beauty products, in particular face masks, to incorporate the Macro trend of beauty foods into their range.
Because they don’t have much heritage compared to competition in America, marketing should be focused on being an innovative, modern and exciting luxury brand.
Promote the fact that the brand uses less sugar in its chocolate than most competition as the spotlight is on the affect sugar has on the populations health.
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March 2018 Launch US twitter, Instagram and Facebook to give constant updates on the new openings.
May 2018
Create pop up stores in Los Angeles International Airport, New York Grand Central Station, John F. Kennedy International Airport, Orlando International Airport and Union Station, Chicago, whilst incorporating emotive print advertising and free tasters.
April 2018 Emotive advertising used for the airport and train station pop up stores are shot and in development, ready for launch in May.
October 2018 Concessions in Nordstrom Rack Union Square (New York) Nordstrom Santa Monica (California) and Nordstrom Aventura (Florida). The concessions will also focus on Halloween themed, innovative products.
= Nordstrom concessions
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Time Line Early November 2018
March 2019
Social media campaign for Christmas competition is launched.
December 2018 The winner of the Facebook is announced, a Christmas gift from Hotel Chocolat to the customer, a week’s stay in the luxury Boucan hotel in St Lucia.
Reflection on progress and new situational analysis since start-up of USA social media accounts from a year ago.
Late November 2018 New York, Time Square, flagship store and café is open to the public. Gordon Ramsey is present at the opening and it is advertised on every social media account. The store is decorated for Christmas and the on going social media competition is marketing as a possible early Christmas present.
January 2019 The New Year brings a step up on the marketing of their “less sugar, more cocoa” mantra to appeal to the healthy mind set consumers have in January.
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Conclusion Hotel Chocolat is at a key tipping point in their business and growth potential. Now is the perfect time for the brand to re-launch in the US as their profits are on the rise, online sales have grown, 70% of visitors to its hotel are Americans and uncertainty over Brexit has left lots of potential for UK investment into the US market because of low price points. Also, the rise in deeper understanding of healthy foods and awareness of sugar intake has resulted in Hotel Chocolat offering one of the most healthiest chocolates on the market. This report has covered an in depth analysis of where the brand is currently situated and how it can make that jump into the US market successfully. Key recommendations and promotional plans have been highlighted and a strategic timeline of events has been conducted in order for the launch to be embraced by the US consumer. The focus of these recommendations will allow the British brand to make a smooth transition into launching and marketing in a new environment. Hotel Chocolat should undergo continuous monitoring of sales, usage, engagement, perceptions and awareness to prevent another failed entry.
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Appendix Survey Monkey