Considering the new strategic investment in branding by its parent company, what channel strategies you would suggest to Thorntons, and why?

 

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improve its store merchandising, displays and customer service. As its CEO, Jonathan Hart, said at the time, 'our goal is to refocus the business across all channels and seek to deliver industry competitive returns over the next three to five years'. Competition from Hotel Chocolat However, Thorntons faced some new challenges. The biggest one came from its closest competitor: Hotel Chocolat. The com- petition between the two has long been intense. For exam- ple, back in 2007, Thorntons' then top chocolate maker was forced to resign after being caught squashing truffles in one of Hotel Chocolat's stores. Unlike Thorntons' retrenching, Hotel Chocolat has been experiencing rapid growth over the recent years. One of the major marketing strategies of Hotel Chocolat is the focus on emotional experience. According to its CEO, 'it was aspirational. I was trying to come up with something that expressed the power that chocolate has to lift you out of your current mood and take you to a better place. It's an emotionally charged food product that people are buying for the taste and the way it makes them feel.' It wants to make it an emotional experience for people to shop for and eat chocolate, and make people feel good about eating it. To achieve this aspiration, its products need a high cocoa content, and the store needs to feel like a 'sanctuary' providing 'escapism' for customers. In terms of distribution strategy, Hotel Chocolat has also been careful and selective by selling through its own stores or selected premium channel partners, such as John Lewis and Waitrose, to match its brand values. This distribution strategy aims to 'make people feel good about buying chocolate, so not in a commoditised way....if they become too widely available there's a risk that could diminish', according to its CEO, Angus Thirlwell. This strategy has paid off nicely for Hotel Chocolat. With the first shop being opened in 2004, in just over a decade Hotel Chocolat now has 103 shops as well as cafs and restaurants. And Hotel Chocolat has been much more profitable than Thorn- tons. For example, for the second half of 2014, Hotel Chocolat reported a 6.6 million pre-tax profit, beating Thorntons' 6.5 million, having just 81 stores at the time compared with Thorn- tons' 242 stores. To the contrary, Thorntons' products have been widely availa- ble through mass distribution channels. According to some critics, many of its stores appear more akin to a discounter and a place for bargain hunting, due to the various sales promotions and dis- counts it offers. Hence, its own shops offer no obvious added value for shoppers as compared to buying its products in super- markets. This has resulted in a positioning problem for Thorntons' products: appearing mass-market but with premium pricing. New era In June 2015, Italian company Ferrero SpA, the second-largest chocolate and confectionery company in the world, bought Thorntons for 112 million with the aim to broaden its roots and to continue its previous success in the UK market. Ferrero SpA owns some iconic brands, such as Ferrero Rocher, Nutella, Kinder Eggs, Tic Tac and Rafaello. The deal enables Ferrero to become the fourth-largest chocolate brand in the UK with a near 7 per cent UK market share. However, Ferrero had some important decisions to make regarding Thorntons' future strategy. The key one was positioning. According to some analysts, it was a decision between continuing the existing strategy (i.e., reducing the number of shops with stronger focus on wholesale sales through other retailers) or trying to move it more upmarket. Or in the words of an independent analyst, it was a choice between 'Motel Chocolate' or Hotel Chocolat. Meanwhile the whole industry is facing some thorny issues. The biggest threat is the shrinking of the market size in the UK, particularly over the recent years. The market size in terms of sales monetary amount has stagnated with some decrease in amount of chocolate being sold. Due to growing awareness of the health concerns associated with eating sugar and ris- ing child obesity, people are eating less chocolate, particularly those with more sugar. This has helped boosts the sales of pre- mium dark chocolate, such as those made by Lindt Excellence and Hotel Chocolat. At the same time, the costs of core ingre- dients of chocolate (e.g., cocoa and palm oil) have increased, which put manufacturers under pressure to either cut costs or increase prices. This has an important implication for the tar- geting and positioning of the chocolate brands: targeting the hungry impulse buyers or more health-conscious buyers who buy chocolates as luxury treats. Effort to revitalise the brand In 2016, a year after acquiring Thorntons, Ferrero decided to invest 4.9 million in media spend, including its first TV advert for six years to promote the relaunch of Thorntons. The pur- pose of this campaign was to change people's perception of the brand being too 'commoditised' and characterised by 'frequent deep-cut promotions', to build an emotional connection with customers through a refocus on craftsmanship and to appeal to younger consumers. It also invested in experiential marketing with the hope of building stronger brand loyalty by means of free sampling of Thorntons brands and other Ferrero brands in the run-up to Christmas 2016. Meanwhile according to some analysts, because Thorntons has too many stores in the wrong locations, and it is expen- sive to run and maintain them, Thorntons has to slim down its estate and needs to consolidate its wholesale arm by focusing on building the supermarket channel. Meanwhile online sales, particularly for gift purchases, have increased both for Thorn- tons and its closest rival, Hotel Chocolat. improve its store merchandising, displays and customer service. As its CEO, Jonathan Hart, said at the time, 'our goal is to refocus the business across all channels and seek to deliver industry competitive returns over the next three to five years'. Competition from Hotel Chocolat However, Thorntons faced some new challenges. The biggest one came from its closest competitor: Hotel Chocolat. The com- petition between the two has long been intense. For exam- ple, back in 2007, Thorntons' then top chocolate maker was forced to resign after being caught squashing truffles in one of Hotel Chocolat's stores. Unlike Thorntons' retrenching, Hotel Chocolat has been experiencing rapid growth over the recent years. One of the major marketing strategies of Hotel Chocolat is the focus on emotional experience. According to its CEO, 'it was aspirational. I was trying to come up with something that expressed the power that chocolate has to lift you out of your current mood and take you to a better place. It's an emotionally charged food product that people are buying for the taste and the way it makes them feel.' It wants to make it an emotional experience for people to shop for and eat chocolate, and make people feel good about eating it. To achieve this aspiration, its products need a high cocoa content, and the store needs to feel like a 'sanctuary' providing 'escapism' for customers. In terms of distribution strategy, Hotel Chocolat has also been careful and selective by selling through its own stores or selected premium channel partners, such as John Lewis and Waitrose, to match its brand values. This distribution strategy aims to 'make people feel good about buying chocolate, so not in a commoditised way....if they become too widely available there's a risk that could diminish', according to its CEO, Angus Thirlwell. This strategy has paid off nicely for Hotel Chocolat. With the first shop being opened in 2004, in just over a decade Hotel Chocolat now has 103 shops as well as cafs and restaurants. And Hotel Chocolat has been much more profitable than Thorn- tons. For example, for the second half of 2014, Hotel Chocolat reported a 6.6 million pre-tax profit, beating Thorntons' 6.5 million, having just 81 stores at the time compared with Thorn- tons' 242 stores. To the contrary, Thorntons' products have been widely availa- ble through mass distribution channels. According to some critics, many of its stores appear more akin to a discounter and a place for bargain hunting, due to the various sales promotions and dis- counts it offers. Hence, its own shops offer no obvious added value for shoppers as compared to buying its products in super- markets. This has resulted in a positioning problem for Thorntons' products: appearing mass-market but with premium pricing. New era In June 2015, Italian company Ferrero SpA, the second-largest chocolate and confectionery company in the world, bought Thorntons for 112 million with the aim to broaden its roots and to continue its previous success in the UK market. Ferrero SpA owns some iconic brands, such as Ferrero Rocher, Nutella, Kinder Eggs, Tic Tac and Rafaello. The deal enables Ferrero to become the fourth-largest chocolate brand in the UK with a near 7 per cent UK market share. However, Ferrero had some important decisions to make regarding Thorntons' future strategy. The key one was positioning. According to some analysts, it was a decision between continuing the existing strategy (i.e., reducing the number of shops with stronger focus on wholesale sales through other retailers) or trying to move it more upmarket. Or in the words of an independent analyst, it was a choice between 'Motel Chocolate' or Hotel Chocolat. Meanwhile the whole industry is facing some thorny issues. The biggest threat is the shrinking of the market size in the UK, particularly over the recent years. The market size in terms of sales monetary amount has stagnated with some decrease in amount of chocolate being sold. Due to growing awareness of the health concerns associated with eating sugar and ris- ing child obesity, people are eating less chocolate, particularly those with more sugar. This has helped boosts the sales of pre- mium dark chocolate, such as those made by Lindt Excellence and Hotel Chocolat. At the same time, the costs of core ingre- dients of chocolate (e.g., cocoa and palm oil) have increased, which put manufacturers under pressure to either cut costs or increase prices. This has an important implication for the tar- geting and positioning of the chocolate brands: targeting the hungry impulse buyers or more health-conscious buyers who buy chocolates as luxury treats. Effort to revitalise the brand In 2016, a year after acquiring Thorntons, Ferrero decided to invest 4.9 million in media spend, including its first TV advert for six years to promote the relaunch of Thorntons. The pur- pose of this campaign was to change people's perception of the brand being too 'commoditised' and characterised by 'frequent deep-cut promotions', to build an emotional connection with customers through a refocus on craftsmanship and to appeal to younger consumers. It also invested in experiential marketing with the hope of building stronger brand loyalty by means of free sampling of Thorntons brands and other Ferrero brands in the run-up to Christmas 2016. Meanwhile according to some analysts, because Thorntons has too many stores in the wrong locations, and it is expen- sive to run and maintain them, Thorntons has to slim down its estate and needs to consolidate its wholesale arm by focusing on building the supermarket channel. Meanwhile online sales, particularly for gift purchases, have increased both for Thorn- tons and its closest rival, Hotel Chocolat.