rmcf, rocky mountain chocolate factory, supply chain , premium chocolate , organic , procurement, strategy, store locations, competitions, strategic management, business strategies, growth strategies

1. Rocky Mountain Chocolate
Factory Inc.
http://www.youtube.com/watch?v=yDH5BdbPymw

2. Timeline
1981: Founded by Crail & 2 partners in Colorado.
1982: Franchised first store in Colorado Springs& Park City,Utah
1983: Co-founding partners left RMFC
1986: RMCF went public(NASDAQ)
1992: Franchise Development Agreement covering Canada with
Immaculate Confections Ltd. of Vancouver, BC.
1995:Store concept revised from Victorian décor

4. Procurement Chain
Cocoa beans from
Africa, Mexico
Chocolate from
Guittard Choco
Factory
Nuts beans from all
over the world
• Company owned store
• Franchised stores

5. RMCF’s products
•
•
•
•
•
Approximately 300 chocolate candies
Other confectionery products are premium ingredients and proprietary recipes
In products include nut clusters, caramels, butter creams, mints and truffles
Special designs packages for seasonal holidays such Christmas, Easter,…
“Finest, highest quality ingredients” with no artificial preservation
Products manufactured in RMCF's factory
Products made in-store
Ice-creams,coffee others
10%
40%
50%

6. •1400 centers in US
•Concerns of
expensive rent
structures, Regional centers
competing food and
beverage concepts
Outlet centers
•110
factory
outlets in
US
Store locations
Tourist areas
Street Fronts
Airport and other
entertainmentoriented shopping
centers

7. Competitors
1. Scharffen Berger and Joseph Schimidt
•-medium-sized gourmet chocolate companies
•-$46.6 million and $61.1million
2. Principal competitors
•Alpine Confection Inc., Godiva Chocolatier Inc., See’s Candies Inc., Chocoladefabriken Lindt &
Sprungli AG, Fannie May and Ethel M’s/ethel’s
3. Godiva Chololatier
•Annual sale - $500million
•Franchised retailed stores, company owned stores and distribution
•Part of UK group, which is largest consumer goods company in Turkish food industry
4. Chocoladefabriken Lindt & Sprungli
•Multiple brand names; Lindt, Ghirardelli, Caffarel, Hofbauer and Kufferle
•Lindt & Sprungli; recognized leader in premium chocolate in more than 80 countries
5. Alpine confection Inc
•Sale $125 million
•Owned many candies company; Maxfield Candy
•Produce confections under license for Hallmark and Mrs. Fields
6. See’s Candies
•Manufactured over 100varieties of candies and over 200 retail candy shops
7. Wayne Zink and Randy Deer (new competitors)
•Endangered Species Chocolate Company
•Sale &16million
•Natural food stores
•Ganic and healthy products made with fair-traded ingredients

8. Steep Analysis
P
S
•Political-legal
•Socio-cultural
E
T
•Ecological
•Technological
E
•Economic

9. Socio-cultural Factors
Changing lifestyle
• Trend of handmade chocolates
• Premium chocolate to account for 25% of US
market; sales predicted at $4.5 billion.
Status symbol and
consumption pattern
• Rise in demand for premium segment of
chocolates
• Focus on chemical and preservatives free
chocolates
Human rights
Health care
Localized marketing
• Concerns about exploitation of African
workers
• Unethical organizations and fair trade
practice
• Rising awareness about healthy benefits
of cocoa
• Demand for dark chocolate: reduces risk
of hypertension, improved sugar
metabolism
• Advertisements in regional and local
newspaper
• Customized in-store promotions
• Concerns for Arab and States laws

10. Technological Factors
Improvement in
telecommunication
infrastructure
Easy to provide
ongoing support
to franchises
Change in automated
machinery
Patent protection
Introduction of
NETZSCH’s
ChocoEasy
Transportation network
Propriety rights in
US and Canada
Improved
manufacturing
Application for
other expanding
markets
Aids in delivery

11. Economic Factors
Inflation
Price fluctuations
Unemployment
Rising prices
changes in price of raw
materials
Reduces income of people
Intra-company trade
Lowers demand for
premium-chocolates
Reduce purchasing power
Reduces Per Capita Income

12. Economic Factors
Economic
Integration
• Reduces trade
barriers
Currency
Convertibility
• Currency
conversion
between
company and
franchises
Credit availability
• Recessiondecrease in GDP
• Lowers loans

13. Ecological Factors
Global warming
Pollution
• Changing world temperature
might impact plantation
• The transportation services
as well as emission of waste
from chocolate factory.

14. Political Factors
Franchising
Regulations and
tax laws
Corporate tax and
repatriation tax
subject to change
Safety-health
Standards
Packaging laws,
food certificates
Regulation of
foreign ownership
Percentage of
ownership in
foreign country
subject to change
Trade regulations
Custom duties

15. External Factor Analysis Summary (EFAS Table)
External Factors
Opportunities
1) Growing demand in new markets
2) Low-fat healthier snacks and
health-related benefits of
chocolate
3) Growth remained for gourmet
(higher-priced premium segment)
4) Consumption of confectionary are
still high
5) Change in trend from massproduced to handmade chocolates
Threats
1) introduction of new
manufacturing process called
NETZSCH’s Chocó Easy
2) The supply and price of the
ingredients Coco bean subjects to
volatility
3) Competitors are stronger and
greater and high local
confectionary competition
4) Economic and consumer trends
5) Unethical Issue
Weight
0.15
0.05
Rating
3
3.5
Weighted
Score
0.45
0.175
Comments
1)
2)
0.15
2.5
0.375
3)
0.1
2.5
0.25
4)
0.05
4
0.2
5)
0.15
3.5
0.525
1)
0.1
3
0.15
2)
3)
0.1
2.5
0.375
4)
0.1
0.05
2
2
0.2
0.1
5)
Total Scores
1.00
2.8
increasing at a rate of 25% a year in the
Asia-Pacific region and 30% in China
Diabetes, heart-attacks, low blood
pressure , low cholesterol level
25% in market, Russia is key market for
European growth
Western Europe and North America;
market are most mature but consumption
is high
Premium chocolate to account for 25% of
US market; sales predicted at $4.5 billion
Smaller chocolate companies are no
longer dependent on large chocolate
manufacturers
monetary fluctuations, economic, political
and weather conditions
Greater name recognition, financial,
marketing, and resources both
domestically and globally
Consumer changing tastes and eating
habits and recessionary forces of U.S
economy
Exploitation of African workers and
preference of ethical firms

16. Internal Factor Analysis Summary (IFAS Table)
Internal Factors
Strengths
1) Product quality and freshness
2) Marketing advantage
3) Own trucking system
4) attractive stores sizes generate
strong name recognition
5) Packaging
Weight
Rating
Weighted
Score
0.1
0.15
0.05
0.15
3.5
3.5
4
4
0.35
0.525
0.2
0.6
0.05
3
Comments
1)
0.15
2)
3)
4)
5)
Weaknesses
1) Small store sizes and inventory
storage
2) No patent protection for recipe
3)
4)
Franchisees sell more store-made
products or products purchased
from third-party suppliers
Company owned only 5 stores
0.1
2.5
0.25
1)
0.15
3
0.45
2)
0.15
2.5
0.375
3)
4)
0.05
2
0.1
5)
5)
Little practice of mass production
Total Scores
0.05
1.00
2.5
0.125
3.125
Store personal making fudge from start
to finish
Unique in-store candy demonstrations
Deliver quickly and cost effectively
40 stores at tourist areas, 1400 regional
centers, 95 stores at the mall
won 3 National Paperbox Association
Gold Awards in 2002, copper package
1,000 square feet, approx. 650 of which
is selling space
Registration for trademarks, service
marks, symbols, slogans, logos and
emblems, but not for invention
Adversely affect total revenue and
operations of company
Company focus on franchising more
( more than 280 franchises stores )
large confectionary companies mostly
concentrated on mass production and
have cost effective.

17. SFAS Table
Strategic Factors
Weight
Rating
score
S
H
O
R
T
S2) Marketing advantage
0.1
3.5
0.35
X
S4) attractive stores sizes generate
strong name recognition
0.15
4
0.6
W2) No patent protection for recipe
0.1
3
0.3
X
W3) Franchisees sell more store-made
products or products purchased from
third-party suppliers
O1) Growing demand in new markets
0.15
2.5
0.375
X
0.1
3
0.3
O3) Growth remained for gourmet
(higher-priced premium segment)
T1) introduction of new
manufacturing process called
NETZSCH’s Chocó Easy
T3) Competitors are stronger and
greater and high local confectionary
competition
0.15
2.5
0.375
0.15
3.5
0.525
0.1
2.5
0.25
Total
1
3.075
Inte
r
Med
iAte
X
X
X
X
X
X
X
X
X
L
O
N
G
X
X
Comments
-Unique in-store candy
demonstrations
-40 stores at tourist areas, 1400
regional centers, 95 stores at the
mall
-Registration for trademarks,
service marks, symbols, slogans,
logos and emblems, but not for
invention
-Adversely affect total revenue and
operations of company
-increasing at a rate of 25% a year
in the Asia-Pacific region and 30%
in China
-25% in market, Russia is key
market for European growth
-Smaller chocolate companies are
no longer dependent on large
chocolate manufacturers
-Greater name recognition,
financial, marketing, and resources
both domestically and globally

18. 2004-2008
Time-series analysis to check
performance over the years.
Ratios covered:
1. Return on investment
2. Net profit margin
3. Fixed asset turnover
4. Inventory turnover
5. Current ratio
6. Debt to asset ratio

19. 1.Profitability Ratios: ROI
%
ROI
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
ROI
2004
12.91%
2005
17.23%
2006
21.33%
2007
25.71%
2008
30.73%
ROI = Net profit/ total assets
A measure of management’s efficiency, it shows the return on all the
assets under its control, regardless of source of financing.

20. 20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
-
2004
total Assets
2005
2006
year
2007
2008
Net profit after tax(NOPAT)
•Increased sales to
speciality markets.
•Decrease in
general and
administrative
costs.
•Lower depreciation
cost.

21. 2.Net profit margin
NPM
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
NPM
2004
2005
2006
2007
2008
Net Profit Margin = Net Profit / sales x 100
Masures after-tax profits are generated by each dollar of sales.

22. 40000000
30000000
20000000
NOPAT
Sales
10000000
0
2004
2005
2006
Increase in sales revenue
increase in royalty fees from
5% to 10%.
2007
2008

23. Activity Ratios
3. Fixed Asser Turnover
Fixed Asset turnover
6.00000
5.00000
4.00000
3.00000
Fixed Asset
turnover
2.00000
1.00000
0.00000
2004 2005 2006 2007 2008
Fixed asset turnover = Sales/Fixed assets
Measures the utilization of the company’s fixed assets (i.e., plant
and equipment)

24. 40000000
30000000
20000000
fixed Assets
10000000
Sales
0
2004 2005
2006 2007
2008
Fixed assets reduced due to lower
company owned stores.

25. 4.Inventory turnover
12
10
8
6
inventory
turnover
4
2
0
2004
2005
2006
2007
2008
Inventory turnover =Net sales/ inventory
Indicates the effectiveness of the inventory management
practices of the firm.

26. 40000000
30000000
20000000
Sales
10000000
inventory
0
2004 2005
2006 2007
2008
Decrease in inventory due to increase in instore products(product mix shift).

27. 5. Liquidity ratios: current ratio
Axis Title
current ratio
4
3.5
3
2.5
2
1.5
1
0.5
0
2004 2005 2006 2007 2008
current ratio 2.6669 3.5694 3.5905 3.3044 2.352
Current Ratio = Current
Assets : Current Liabilities
current ratio

28. 12000000
10000000
8000000
current assets
6000000
current liabilities
4000000
2000000
0
2004
2005
2006
Change in inventories
due to increase in instore production,
maturing of notes.
2007
2008
Lower incentive
compensation
cost.

29. Leverage Ratio
6. current liabilities to equity
40.00%
30.00%
20.00%
current liability to
equity
10.00%
0.00%
2004
2005
2006
2007
2008
Current liabilities to equity= current liability / equity x 100
Measures the short-term financing portion
versus that provided by owners.

30. 20000000
15000000
10000000
current liabilities
5000000
equity
0
2004
2005
2006
2007
2008
•New line of credit of $300,000.
•Increase in accounts payable.
•Repurchase of stock; undervalued.

31. Financial Summary
Ratio
Current ratio
Fixed asset
turnover
Analysis
Bad
Good
Inventory
turnover
Bad
Current liabilities
to equity
Bad
ROI
NPM
Good
Good
Firm is better with
long-term debt
management
rather than cash
management.

32. Strategic alliance- successful???
• RMCF was rated the
Number One Franchise
Opportunity in the candy
category by Entrepreneur
magazine.
• Ranked 60 in Forbes
annual listing of Americans
best 200 Small Companies.
“Operators are the
ones that really
make this company
a success.

33. Strategy
INTERNATIONAL
Franchising and licensing is recommended.
To gain access to distribution channels
To overcome financial ,political and regulation
barrier.

34. Business Level Strategy
Lower cost competitiveness strategy
• cost reduction from experiences,
tight cost, overhead control
• cost minimization in areas like
R&D, service, sales force,
advertising and so on

35. Cost leadership
 RMCF
sought
low-cost,
high-return
publicity
opportunities through participation in local and
regional events, sponsorship, and charitable causes
No engaging in national advertising
1% of monthly sale from each franchised store
Benefits
Risks
 RMCF sought low-cost, high-return
 Cost efficiency
 Negative perception of
 Cost minimizing in national advertising product value
 Defense against competitors
customers on
 Barrier for entrants sale from each franchised store
 Standardized products
 1% of monthly
 Above-average returns on
 Low attractiveness
investment
 Easily imitate by competitors
 Generate high market share
 Fast technology changing
 High bargaining power to its
suppliers

36. RMCF
matches with
the business
strategy
 Manufacturing
o new manufacturing
process called NETZSCH’s
Chocó Easy
o Speed & cost effective by
automated process
 Trucking
o Deliver quickly and cost
effectively
o fill products from 3rd parties
on return trip
Su Myat Naing 5318123

37. Recommendation
 Marketing
Strategies to focus on ethical
practices of the firm and emphasis on handmade chocolates to capture handmade
chocolates trend and use existing brand
recognition to next level.
 Do joint venture to increase global presence
and use firm’s quality chocolates as defense
against competitors as well as to satisfy
increasing demand.

38. Recommendation
• Expansion to countries such as Japan and china
would be advisable
• China have shown 30% of increasing consumption of
chocolates and 25% in Asia specific. Stores can be
open in a place such as Shanghai ,Hongkong and
Japan.

39. Expected Behaviour in China
 Chocolate confectionery is expected to experience
ongoing healthy constant value growth over the
forecast period.
 due to leading players further expanding into
lower-tier cities and the premium trend in China.
 A widening range of gift packs focused festivals will
be a strong driver for sales growth.
 manufacturers are seeking new sales areas in
wedding sales by offering wedding gift packs.
 Ferrero and Hershey’s are expected to continue to
dominate wedding gift sales
http://www.euromonitor.com/chocolateconfectionery-in-china/report

40. Japan
2008
2008
2008
The United States has been Japan's largest economic
partner, taking 31.5 percent of its exports, supplying 22.3
percent of its imports
Approximately-80,000 to 90,000 person per month of tourist
First Class- Five airport
No specific trade agreement with
United States.
Japan is a high Income
country
http://www.tourism.jp/en/statistics/

41. Confectionary Consumption in japan
Japanese Confectionery: Market Overview
© Her Majesty the Queen in Right of Canada, 2010
ISSN 1920-6593 Market Analysis Report
AAFC No. 11181E

42. Japanese Lifestyle
Indulgent foods such as premium chocolate, functional
chewing gum and candy have become popular among
Japanese office employees seeking a break from work stress.
According to a consumer survey conducted by Datamonitor:
• >77% of Japanese consumers believe it is very important
to find a way to escape from their stressful lives;
• 16% of Japanese workers snack at work in the morning at
least twice a week.
• 44% of surveyed consumers snack in the afternoon
during work hours more
Japanese Confectionery: Market Overview
© Her Majesty the Queen in Right of Canada, 2010
ISSN 1920-6593 Market Analysis Report
AAFC No. 11181E

43. Consumption pattern
Japanese chocolate consumption in 2008 was equal
to more than 6% of the world’s chocolate market
value. The Japanese chocolate market is expected
to reach $4.6 billion by 2013.
Japan’s chocolate market chracterised as:
 Premium ingredients and functional benefits;
 Product segmentation that targets very specific
consumer groups; and
 High-end packaging that provides convenience
and portion control.
Japanese Confectionery: Market Overview
© Her Majesty the Queen in Right of Canada, 2010
ISSN 1920-6593 Market Analysis Report
AAFC No. 11181E

44. Health Conscious
• Survey revealed that 49% of female and 40% of
male Japanese consumers find enhanced
nutrients in food and beverages very appealing.
Japanese consumers continue to be willing to pay
high prices for food products that are perceived
to be of high-quality and that offer dietary
supplements. Prefer dark and organic chocolate.
Japanese Confectionery: Market Overview
© Her Majesty the Queen in Right of Canada, 2010
ISSN 1920-6593 Market Analysis Report
AAFC No. 11181E

45. News article:
Fiat shares surge after deal to buy
remaining Chrysler stake
• Fiat is about to buy the remaining 41% shares of
Chrysler. It states that with this Fiat might be able
to widen Fiat global reach as well as help Fiat
lower its cost and compete more effectively with
bigger players like Volkswagen
• The new business strategy being used cost
leadership. As the firm will appeal to wider
market as well as reduce cost from technology
sharing.
• http://www.bbc.co.uk/news/business-25571200

46. News article:
Strategy change helps Washington glazing firm
grow 35%
• Fendor Ltd is a Washing based firm which specializes in
fire glazing. Due to saturated market of their core service
they have diversified their business to high security
environments like detention centres and mental health
facilities. This diversification has enabled them to achieve
growth by 35%.
• The strategy used by them is differentiation strategy
because they now reach beyond intended glazing market
to security and has differentiated their product from
others via products like CleanVent and CleanGuard.
• http://www.thejournal.co.uk/business/businessnews/strategy-change-helps-washington-glazing-6558097

47. Thank
You