Consumer Behaviour in the UK Chocolate Industry (Thorntons UK)

Executive Summary

Chocolate is one of the common sensational food man have grown to love from generation past. It is consumed by the young and old for different purposes; it could be used for baking (chocolate cake), chocolate drink and beverages (ice cream, milk shake etc). Gifts of chocolate fashioned into different shapes and sizes have also become customary on certain holidays/festive period, celebrations and merriments: chocolate bunnies and eggs are common on Easter, chocolate coins on Hanukkah, Santa Claus and other related symbols on Christmas, and chocolate hearts or chocolate in heart-shaped boxes on Valentine's Day. Chocolate has in no doubt been one of man’s favorite foods of all time.

As much as consumers love chocolate, the buyer behavior over time has proven to be elastic, in other words, consumers tend to demand  and consume  less at the instance there is any (supposed) increase in its cost (being assumed to be a luxury).

Following the recent recession, the chocolate market especially in the Uk has seen the market players having to fight and struggle to stay relevant in business. In this fight for survival and market share is the point where a firm’s strategy gets to be questioned. Thorntos, the UK’s largest chocolate maker (Theguardian, 2011) is not left out in the struggle, having to battle recession and competition, making emphasis on product, production and packaging, and bearing in mind that understanding the target market (offline and online) is paramount: being able to ascertain consumer want, the driving force as well as the future plans to making Thorntons a strong player in the UK chocolate industry and making its name outlast this age and generation.

Introduction

Chocolate products have been found by market researchers in their report that it is one of the Uk’s favorite purchase. According to the market analyst the chocolate market has increased by 7.5% growth in 2010, the market was valued at £5.41bn in 2011.The chocolate snack sector accounts for 74% of the market value which makes it the bulk/volume of the market and the sugar confectionery sector being only 26%. 

 Chocolate confectionery makes up the majority of the market, with countlines accounting for the bulk share within the sector. However, the subsector that has seen the most drastic growth in 2011 is the boxed chocolates and sharing bags. With consumers staying at home to save money because of the economic crisis, demand for this format has significantly increased. As a result, rather than introducing new products in an already flooded market, manufacturers are increasingly initiating sharing-format variations. (The Time, 2012)

Overall the Confectionery market, whose popularity in the UK is undeniable, is expected to have expanded well in value beyond 2012 with business analysts like the ‘keynote’ projecting the market to have hit £6.77bn by 2016. (KeyNote, 2012)

Thormtons.

Thorntons has been making delicious chocolates for a hundred years. The first shop was opened in Sheffield (England) by the confectioner Joseph William Thornton in October 1911 (Thorntons, 2011)with the vision ‘to be Britain’s best loved chocolate brand and to make chocolate lovers smile’ (Thorntons, 2011). Thorntons has since moved from deferent stages of growth and development. In 2011 it was reported that the company was worth £218m+ in turnover (Thorntons, 2011) with over 600 outlets, and products spread across a multi-channel network covering shops, franchisees, online and through different retail partners.

1.     THE THEORY OF BUYER BEHAVIOR

1.1 The production

 In pursuit of the mission ‘to deliver Chocolate Heaven to the world and deliver the best possible customer experience’ (ask, 2012), thorntons’ production has come a long way, from the range of handmade confectionary to the machine aided lines that make hundreds of thousands of kilograms of chocolate, thorntons operates a development kitchen, with a fully trained chocolatiers and chef. (Jennings, 2001)

Thorntons also pays a good and close attention to Packaging, knowing that it accounts for a huge part of the product’s perceived value. To maximize its effectiveness, Thorntons has continually modified its packaging to present new appearances for its products. (Jennings, 2001)

Thorntons operates hundreds of stores across the UK, as well as having an online presence management and in the big multiple stores, producing some of the country’s well known and best loved chocolates such as Continental, Thorntons fudge and toffee. The company is said to pride itself on producing the world best chocolate. (Yourfoodjob, 2012)

Overall there have been a maintained strong improvement and growth in Thorntons manufacturing operations. (Thorntons, 2011)

1.2 The product

Over the years Thorntons has produced a collection of milk, dark and white simply delicious classic chocolate. Some of the most successful hot sellers include caramel, fudge, fruit and nut, developed using the finest non-alcoholic recipes and the traditional art of confectionery-making: Classic assortments, something for everyone, in whatever occasion and celebration (BloomingKrackers, 2012). More so, the development of new and exciting products has always been instrumental to the success and vibrancy of the Thorntons brand. In recent time, Thorntons has successfully re-launched its two principal boxed chocolate brands (Continental and Classics) in Retail, as well as a refreshed Classic Collection in its (Thorntons) Commercial channel, the new Melts brand has also grown well over time and was joined by a new caramel variety which was created with an exclusive, two-tone shell produced through a new “triple-shot” technology.  Thorntons’ children’s favorites have also been re-launched and have seen some strong development in Thorntons’ strategic seasonal lines, such as the introduction of its Bramble Bunny range at Easter. (Thorntons, 2011). These put together has made Thorntons a premium brand and a house hold name in the UK chocolate industry.

1.3 The Strategy

A firm’s ability to achieve and sustain competitive advantage can be seen as dependent on the development of the organization’s value chain and linkage with other part of the value system (Porter, 1985, 1996).

Thorntons’ value chain

Thorntons had developed its value chain activities over time to follow basically an in-house pattern. It is reported that 80 % of Thorntons sales are made through the company’s own shop, with sales through franchises providing a further 7% of sales (Jennings, 2001). Meanwhile, anticipating the risk of this vertically integrated retail model, in 2006 Thorntons quickened the development of its Commercial sales to supermarkets as well as growing its internet sales through Thorntons Direct, a strategy that has proved highly profitable as the Commercial channel has grown strongly over recent years and in 2011, sales increased 25.9% to £78.8m (2010: £62.6m)  In its own statement, Thornton confirmed: ‘Its strategic aim is to rebalance the firm and capitalize on its brand strength through a more focused retail channel with a differentiated customer proposition, a renewed customer focus and a coercing commercial, franchise and online offering’. (Thorntons, 2011).  Through its Commercial channel Thorntons now lead the inlaid box chocolate market in terms of market share and, through its further actions, Thorntons also is the main driver of growth and development in the UK chocolate market. (Thorntons, 2011)

2. SEGMENTATION PROFILE

Thorntons operates in four customer-market segments. Thus, gifts, personal treat, family-share and children. (Studymode, 2005) Each with different customer needs.

Thorntons has got good collections of luxury chocolate suitable as gifts for friends and loved ones. The sweet hamper are the definitive gift solution for excellent party treats or as birthday gift, especially when family or friends celebrate the coming of a new baby, new jobs, marriage and engagement and other adventures.

At any point in time a lover of chocolaty goodness needs a delicious self-indulgent treat, either with no much sugar or alcohol-free recipe, thorntons’ special and unique toffee and fudge serve right. With different chocolate recipes like the fiery ginger, cool mint or the experimental chilli, there is a flavor for every mood.

Thorntons chocolate packs make the perfect family share at any time, ranging from the continental to the classic and premium packs in different sizes and weight, whether it is to celebrate Christmas or Easter, a birthday, a new home, anniversary and other merriments.
For the children segment specifically, Thornton fashioned different figures like Dinosaurs, Fossils and Dalmatians spots. (Studymode, 2005)

3. BUYER DECISION MAKING PROCESS

Literally, decision making can be referred to as the mental processes (cognitive process) resulting in the selection of a course of action among different thread. Buyer decision making process therefore is the event of actions undertaken by consumers in regard to a potential market transaction before, during and after the purchase of a product or service. This decision making process is in five steps, Thus, problem awareness or recognition, information search, evaluation, purchase and the post purchase (Evans, M.; Jamal, A.; & Foxall,G., 2009) 

3.1 Problem awareness

The purchase of any product starts with the actual realization of the need for such product. This is the stage where the consumer recognizes needs/wants to be satisfied, these unsatisfied needs/want at this stage is seen as the problem. Sometimes these wants could go as far as being a need for a roof over a consumer’s head, a need for a new car, a need for the service of a doctor, a plumber or a barber, it could be a need for chocolates and confessionary to present a friend or a loved one. As long as there is a desire to be satisfied, we say there is a problem. During problem awareness, the consumer recognizes that the good, service, organization, person, place or initiative may solve the problem of shortage or unfulfilled want (Bhasin, 2010).

3.2 Information Search.

This is the stage where the consumer searches for various alternatives available to solve his/her problems (the needs) and determines the uniqueness and distinctiveness of these alternatives. It could be a research for different house agencies, considerations whether to buy or rent an apartment, searching for the available cars that would satisfy a need, be it for luxury, quality and safety or fuel efficiency and within budget. It could also be a search for the best collections of chocolate within range.

This search can be internal and/or external which could be influenced by a past experience with a product/service or an influence from family and friends. As want and the intensity increase; the amount of information sought also increases. Once the information search is completed, it must be established whether the needs or unfulfilled wants can be satisfied by the available alternatives. (Bhasin, 2010)

3.3 Evaluation and selection

Product characteristics are relevant and significant only to the extent that they lead to a certain set of benefits.  Likewise, benefits are important only if they can address the problem and are instrumental to satisfying needs and wants .This is the stage where (after the search for necessary information) consumer tries to solve the problems and ultimately satisfying his/ her need. At this point he/she looks for the problem solving benefits from the product. The consumer, then, looks for products or services with the features that deliver the benefits. Thus, the consumer sees each product/ service as a bundle of elements with different levels of ability to deliver problem solving benefits to suit his/her need. (Matsuno, 1997)

3.4 Store Choice and Purchase

To actually implement the purchase decision, a consumer needs to select the specific items (product brands) and specific outlets (where to buy/store) to resolve the problems. The purchase act involves the exchange of money or a pledge to pay for a product or the performance of a specific service, and so on. Buy decisions remaining at this point center on the place of purchase, terms and ease of access. If the above elements are pleasing, a consumer will then make a payment for the product/service (Bhasin, 2010).

3.5 Post Purchase process                                                          

Here is where a consumer questions the rightness of the decision made. ‘did I make the right purchase? Would there have been a better brand?’ these are the common reaction after a long, complex decision making process (Matsuno, 1997). More so, buying a product may lead to the purchase of another. (Bhasin, 2010)  The post purchase behavior of a consumer is especially how a consumer relates the benefit of a product/service against the actual want or need (the problem). The result of this process determines if there should be a re- assessment or a call for more of such item the next time.

Ultimately, the buyer decision making process is principally influenced by the consumers’ product awareness. A consumer will make his/her decision based on the choices of products/services that come to mind at the time of making a buying decision (the evoked set). It is therefore the goal of a marketer to build his/her business brand firmly among these handfuls of choices of products considered by most target consumer when making a purchase decision. (Businessdictionary, 2012).

4. ONLINE BUYER BEHAVIOUR

The website is the gateway to the organization and a very important contact point to every business. Internet has modified the way consumers shop and buy goods or services, and has rapidly developed into a global trend. Many organisations use the Internet with the purpose of managing marketing costs, thereby cutting the price of their products and services with the goal to stay ahead in a very competitive market. They (organizations) also use the internet to explain, communicate and disseminate information, to sell products, to take feedback and also to conduct satisfaction surveys of consumers. Consumers on the other hand use the internet not only to purchase products online, but also to compare prices, product attributes and after sales facilities they could receive if they buy products from a particular store. In all, the success of an online/internet marketing effort of an organization is exclusively dependent on the offline relationship built otherwise outside the website. (Scribd.com, 2010)

For a company’s website to have an effective and positive contribution to marketing and the online presence, the internet marketer might have to make some research and answer certain questions.

The first and the major research an internet marketer needs to do is to identify the target market and be ascertain of the fact that this target market are internet users, in other words, do these people have access to computers, are they willing and able to use them in their shopping and purchases. By this research he can determine if there is actually a need for a website.

The second question companies/ internet marketers need to ask is: what kind of website appeals to these target markets. i.e describing the overall look and ‘feel’ of a website, which could be contemporary, traditional, corporate, elegant, relaxed, bright, funky and so on, to catch the attention of a target and potential consumer.

The third research towards an effective online presence management is for companies to ascertain the architectural layout of websites. A ‘sales purposed’ built website should be designed for a comfortable buying process, making out room for easy navigation and a secured online payment pages.

Other researches toward an efficient website are to establish an effective interactive digital diary, and (where necessary) create online chatting facilities as well as effective feedback avenues. Moreso, companies/ internet marketers also need to establish a good search engine optimization for easy search from search engine user, thereby generating quality traffic flow to the website.

The thorntons online sale platform (Thorntons direct) has so far been a success, as it has continued to grow in its internet traffic flow and incessantly increasing online sale. In 2011, overall Thorntons Direct sales grew 4.3% to 9.6 million pounds as compared to the 9.2 million pounds sales in 2010. (Thorntons, 2011)

5. THE TREND

As earlier concluded Chocolate has become the most popular food types and flavors in the world and one of the most popular recipe and taste across all age groups and social classes; different collections of chocolate in different sizes and shapes have become one of the major gifts defining our celebrations and festivities: chocolate bunnies and eggs are popular on Easter, chocolate coins on Hanukkah, Santa Claus and other related symbols on Christmas, and chocolate hearts or chocolate in heart-shaped boxes on Valentine's Day. Chocolate is also used in cold and hot beverages, to produce chocolate milk and hot chocolate.

The chocolate industry though have had to battle the global recession, still remains resilient and has over time seen a relatively steady growth, recording $50 billion-a-year worldwide business transaction (Chocolatesource.com, 2001)

Many chocolate manufacturers have created products from chocolate bars to fudge, hoping to attract more consumers with each creation, knowing well that Consumers will continue to stay loyal to the chocolatier and brand that will not stop in the act of providing the definitive customer want.

5.1 What consumers want

The believe behind chocolate suggests that consumers see it as a ‘naughty but nice’ impulse treat (KPMG, 2012) but in utmost; every chocolate consumer is always in search of one or all of these points:

Convenience

Chocolate may be seen as an impulse purchase, but it’s becoming increasingly everyday among consumers. Convenience is a major driver for chocolate lovers, who want to grasp a bar from any store or throw a multi-pack into the trolley during a snap shop.

As convenience becomes more important to time-poor consumers, sales of tablet bars are growing (up by 37% in the UK in 2011) as consumers grab and go. Ace chocolate-makers such as Godiva are reconsidering their tactics to get a bite of this profitable market, by introducing smaller bar formats.

Value

Value-mindful shoppers prefer a new generation of outlets. Discount stores are thriving, which is forcing supermarkets to think more like discounters to fascinate fussy customers, including increasing their private label array. Small grocery stores may be short of the economies of scale to vie on price, while ‘specialist’ formats are being crowded out. In emerging markets, ‘one-stop’ retail locations are becoming popular due to low prices and greater variety. (KPMG, 2012)

Luxury

The luxury chocolate market persists to accept the mainstream –and not just in developed economies. “The believe is that even expensive chocolate is an affordable luxury,” says Marcia Mogelonsky, Global Food Analyst at researcher Mintel. Chocolate is becoming more and more premiumized, and as such makes producers as Godiva and Lindt become virtually mass market as consumers develop a taste for everyday glamour (KPMG, 2012)

5.2 Driving growth:

Sustainability

The survival of any company is in its aptitude to sustain itself. In other words ability of an organization to integrate its environment, economics and social facet will determine whether such organization will survive and eventually make a future.

Innovation

Innovation is basically finding new ways of pleasing the increasing ever more demanding customers. Personalization could be an example of this, with indication to what Nestlé is already doing in Switzerland, the world’s largest per capita chocolate market, where it lets its customer personalize taster packs based on their preferences. Its Spanish brand Diselo con Chocolate also of late launched an e-commerce platform where customers can design their own assortments. (KPMG, 2012)

Health

KPMG reports, although many consumers regard chocolate as an occasional treat and don’t obsess over its consequence on health, fat is becoming a major concern for manufacturers. So-called ‘fat taxes’ are pressurized in a number of major economies, including the UK, while European countries such as Denmark and Hungary have already introduced excess taxes on unhealthy food.

To combat this, the industry will have to ponder the potential health benefits and facilitate chocolate to be amongst the next generation of functional foods, pushing the antioxidant effects of dark chocolate or exploring the energy boosting features of bars with oats, nuts or ‘super fruits’. Latvian brand laci is using ‘super berry’ sea buckthorn in its products. Smaller bars can encourage awareness of portion sizes. (Mars has capped its bars at 250 calories in the UK and Australia) (KPMG, 2012)

5.3 Looking to the future

Health Benefits

Chocolate should ride the fad for ‘nutraceuticals’. Nestlé has already revealed plans to invest US$510m in “initiating a new industry between food and pharma”. Medicinal basils could be used as an ingredient, or even aspirin. Additional better-for-you recipes like super-fruits, nuts and oats may become more common. Preservative-free chocolate will become the norm in developed economies. Dark chocolate could increase in popularity as consumers become more informed of its health benefits (KPMG, 2012)

Innovative Packaging

To be prominent on the shelves and reduce costs, packaging could undergo reforms. Manufacturers will invent new ways to ensure chocolate doesn’t melt in the extreme heat of many evolving markets, as well as initiating new bar sizes. (KPMG, 2012)

Attracting youth

Marketing to the youthful populaces of evolving markets (particularly India and Latin America) will be essential. Use of popular and acceptable culture, including bands and TV shows, in marketing campaigns should increase, as will viral marketing and social media communication, as young people widen their channels. While children fancy sweeter chocolate, concerned parents will seek for chocolate with added health value. (KPMG, 2012)

The Personal Touch

Customized bars may be common. One artisan chocolate maker says he envisions smaller shops offering people the chance to make their own bar. As consumer appetite and taste grow more sophisticated, unusual flavors may become the model; with chocolate-lovers decide on their own combinations. Consumers may also be able to fashion their own packaging. (KPMG, 2012)

New distribution channels

Chocolate should/will be available from a broader variety of outlets, from coffee shops to health food stores, to satisfy convenience buyers. Supermarkets and discount stores will continue to dominate sales, particularly among value-seeking consumers. Premium chocolate could become available in mainstream stores as luxury buyers increase. Brands might pursue to move up the value chain by creating their own flagship stores, as Thorntons, Hershey and Mars (through its M&M’s brand) have already done successfully. (KPMG, 2012)

A new recipe

Milk chocolate should/will have a lower cocoa content to reduce cost due to rising prices, and manufacturers will be forced to use cocoa more frugally. Demand for cocoa could get out of control: one Latin American manufacturer forecasts that China and India increasing average per capita consumption by just 1kg could make most manufacturers’ current models unsustainable. In such scenario, artificial cocoa could become the next available alternative. (KPMG, 2012)

Middle class rule

Manufacturers are most likely to propose more chocolate from ethical sources to satisfy aspirational buyers’ needs. Middle class consumers will also do more of premium chocolate for gifting purposes, and seasonal launches, which increased 6% during 2011, will continue to grow. (KPMG, 2012)

Price vs Size

In emerging markets, chocolate takes a heavy bite from the household budget. As input price volatility continues, manufacturers may have to keep value in mind or risk losing customers. Price per gram is rising fast in developed markets, but research shows consumers feel cheated if bars get smaller but price is static. Mainstream manufacturers could be forced to choose between containing cost, at the expense of size, and moving further up the value chain. (KPMG, 2012)

           

 

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