Examination Case study
Marilyn Lysohir founded Cowgirl Chocolates in 1997 and has won a total of 21 awards over the years. Located in Moscow, Idaho, USA, the brand has been featured on the Food Network on “Unwrapped” and “Extreme Cuisine” and on CNBC “On the Money”. They have also been written up in the New York Times, InStyle, and the Toronto Star among many others.
The product was the first chocolate to be offered with strong spicy flavours, and has gathered something of a cult following. The spices include paprika and various chillies, as well as flavourings – so flavours include orange espresso, lime tequila and plain espresso ‘double hot’, and over the years the range has expanded to now include, in the spicy range, 11 truffle bars, and 7 solid bars, with ten non-spiced solid bars. All are very smartly packaged with bright foil wrappers and paper sleeves. Apart from bars, there are gift boxes and buckets, mugs and baskets, all containing a mix of bars and small shapes, some offered all year-round, others only in promotional periods (see below).
However, the business has struggled and is only now getting into some sort of permanency and profits. In 2000, Cowgirl revenues were only $30,046 (£178,800) and the business made a loss of $23,023 (£14,400); by 2008, sales had risen to around $540,000 and profits of $54,000 (£338,000 and £34,000 respectively).
John Unwin, a successful British business man first came across Cowgirl Chocolates when holidaying in Southwest America, in 2008. Since then he, his wife and young teenage daughter, have become Cowgirl addicts, and while on a business trip, he persuaded Marilyn to extend her internet ordering business outside of the USA and Canada, to include at least Germany, Switzerland and the UK (these three countries eat the largest amounts of chocolate per capita in the world – the UK gets through 10.3 kilos per person per annum [in the USA this is only 5.1 kg]) – mainly so that his family could get their regular ‘fix’. This move proved very successful, as by 2010 annual Cowgirl sales had hit $1 million, largely due to new internet sales. Profits, though, had only risen to $74,000 – largely because, John thought, the best-selling truffle bars were under-priced and so dragged down overall profitability. In early 2011, John gave Marilyn lots to think about when he made her a formal offer, to become her official UK distributing partner. John had put a lot of work into his idea.
The confectionery market in both the USA and the UK is large and mature: in 2008 it was worth about £19.3 billion in the USA and in the UK about £3.7 bn. It grows in both countries at around 1% per annum. In the USA two American brands, Hershey and Mars, control about 75% of sales; in the UK, three brands - Cadburys (now owned by the US firm Kraft Foods), Mars and Nestle (a Swiss company) - control about 80% of all sales.
About 68% of sales in both markets are non-seasonal – that is, sales come from the regular sale of bars like Cadburys Dairy Milk, Kit-Kat, etc., sold every day to millions of consumers. Remaining sales are seasonal (Easter, Valentine’s Day, Christmas), and at these times the sales of boxed, small piece chocolates, gift packs, and so on, make up the bulk of sales – in the 4 weeks run up to Christmas, typically about 20% of annual sales are made.
In the UK the main consumer groups for chocolate are the under 20s and the over 55s, but Cowgirl is a specialist niche product: experience shows that only about 15% of US chocolate consumers like the spicy flavour. John has only anecdotal evidence about the British liking for curry, but he believes that in the UK as many as 25% of consumers may like it.
The flavours, price and packaging style for Cowgirl means that it appeals especially to two consumer groups: the 48-67 year-olds known generally as the ‘baby-boomers’ and the 20-32 year-olds known variously as ‘Generation Y’ or ‘The Millenials’ or the MTV…