Marketing Strategy Analysis of the Chocolate Manufacturing Industry
...d. These include rising sales of premium-priced chocolates and the growing concern about the health risks associated with eating such high-fat foods as chocolate. The recession in the early ‘90s also caused problems for the industry. Companies in North America to experience layoffs, mergers and consolidations, plant closings, shift cutbacks, advertising slashes, and operational streamlining that reflected poor sales figures. U.S. manufacturers must import all of their cocoa beans because this nation’s climate cannot support cocoa trees, which need tropical conditions to survive. The low price of cocoa is a global concern for the industry because low prices mean less incentive for farmers to invest time and money into the crop. These trees have recently developed a fungal disease that is killing the tree. This could put additional pressure on the crop in terms of disease and pest management. There are high production costs involved in manufacturing cocoa from the beans. Manufactures have to roast, shell, and grind the beans to produce unsweetened chocolate, the chocolate liquor that is the basic ingredient of all chocolate products. However, the cost of this process has decreased over the past few years. This is due to the use of computer-integrated manufacturing system by most manufacturers around the world Industry Structure/Competition and Stage of Life Cycle The chocolate manufacturing industry is a highly competitive industry with most of the concentration of power placed with three companies. In the U.S. market Hershey holds 30% of the market share with M&M/Mars at 17% in second (Frank and Ellison, 2002). Hershey Corp. is owned and operated by a board of trust, M&M/Mars on the other hand is still a family owned company. These two companies are the highest competitors in the industry, and although Hershey is first in market share, M&M/Mars is the highest promoter of their product. The industry is in the maturity level of the product life cycle, but chocolate is a timeless product and will be around for a very long time. Marketing Strategy of Industry Leaders M&M/Mars is the biggest promoter in the chocolate industry. Their heavy and constant promotion of M&Ms candy has given them brand recognition that no other company has been able to achieve. M&Ms where first introduced to the public in 1941 and they became a favorite of American GIs serving in World War II. As America entered the 50s, M&Ms were becoming a household name, particularly with the growth of television. In 1954 the world known M&Ms Brand Characters and the famous slogan, “The milk chocolate that melts in your mouth, not your hand,” debuted in the TV advertising. It was 1972 before the first appearance was made by the characters on packaging, reinforcing brand awareness. But nothing could have given better recognition for M&Ms than when, in 1981, they were the first chocolate candies sent into space as part of the astronaut’s food supply. M&Ms are now on permanent display at the space food exhibit of the National Air & Space Museum in Washington, D.C. It was also in the 80s when the special holiday lines of M&Ms were launched for Christmas and Easter. With all of this new marketing by M&M/Mars the brand was accelerating into international expansion, primarily entering the European market. In 1995 a major marketing campaign help write a new chapter in the history of the brand. M&M/Mars allowed consumers to vote for a new color M&M that would appear with the traditional M&Ms. More than 10 million votes where casts and the color blue was chosen by consumers as the new color. M&M Minis were introduced in 1996, packaged in closable plastic tubes. M&M’s went online in the same year, offering a star-studded and glamorous world of the characters. The next big advertising campaign that M&M/Mars had for the bite size candy was the debut of Green, in 1997, the first female character. Since then M&M/Mars has opened an M&M’s retail store, and changed the name from “Plain Chocolate Candies” to “Milk Chocolate Candies” in 2000. M&Ms candies are the biggest seller for M&M/Mars, this is a direct affect of the amount of brand recognition the product has. This is, and will be in the future, the biggest strength for Mars. Financially, Hershey’s is the largest chocolate manufacturing company in the U.S. with 30% of the market share (Frank and Ellison, 2002). Marketing strategies are based on customer value and product quality, unlike M&M/Mars which uses heavy advertising. Hershey does use television, magazines, and radio to advertise its products. Like M&M/Mars, Hershey also has their product embedded in history, movie history. When Steven Spielberg asked Mars to use the M&M product in movie, Mars turned him down. Hershey on the other hand didn’t, and Reese’s Pieces ended up the very popular movie E.T. They also recently participated in a Christmas promotion, which fared very well, with the release of the movie Dr. Seuss’s How the Grinch Stole Christmas. Hers...