Report on Cheney Chocolate.

5.1 Management and Organisation / Operations………………………………………9

5.2 Finance………………………………………………………………………….....9

5.3 Marketing………………………………………………………………………...10

6. Appendices………………………………………………..……….….11

        6.1 Chocolate confectionary market in 2000…………………………………11

        6.2 PDI and consumer expenditure, at constant 1995 prices, 1990-2000....…12

        6.3 Sales in luxury chocolate for Cheney Chocolate…………………………13

        6.4 Pre-tax profit in luxury chocolate for Cheney Chocolate…………..…….13

        6.5 Sales in unbranded fudge for Cheney Chocolate………….……….…….14

        6.6 Pre-tax profit in unbranded fudge for Cheney Chocolate………………..14

        6.7 Total sales for Cheney Chocolate………………………………………...15

        6.8 Total Pre-tax profit for Cheney Chocolate……………………………….15

        6.9 Sales turn-over and pre-tax profit for Cheney Chocolate, 1998-2000…...16

7. Bibliography………………………………………………………..…17

1. Introduction

This report will analysis Cheney Chocolate’s internal and external operations, therefore being able to make sound recommendations to Richard Cheney about his company’s future.

        

2. External Analysis

2.1 The UK chocolate industry

2.1.1 Industry Size: Various Mintel reports show that both the boxed, and luxury markets make up a large percentage of the overall total chocolate confectionery. Both the luxury, and Boxed markets have increased over the past few years, with luxury increasing 14% since 1996 (Mintel luxury chocolate 2001), and Boxed 16% since 1995 (Mintel boxed chocolate 2000). Appendix 1 shows the table below in a bar chart.

(Mintel reports, boxed 2000, luxury 2001, and chocolate confectionary2000)

2.1.2 Industry Structure: The structure of the Chocolate confectionary industry is very complicated. Mainly because the market has a number of segments, which include:-

• Chocolate blocks (solid blocks of chocolate);
• Countlines (products which are primarily chocolate but are not formatted as moulded blocks and also have other ingredients);
• CBCLs (chocolate biscuit countlines (CBCLs) are a sub-sector of countlines, being products which have a biscuit ingredient but are merchandised as confectionery countlines);
• Selflines (bags, boxes and tubes of sweets where all items are the same);
• Boxed chocolates, and Assortments (mixed or single variety chocolates packed in boxes or tins);
• Seasonal (chocolate novelties which are available for a short period of the year and are packed in seasonal wrapping);

The above definitions are defined by (Mintel chocolate confectionary 2000) 

For a segment to be included in this market it has to have chocolate as its main ingredient. (Mintel chocolate confectionary 2000)

For this report I will concentrate on the Boxed and Luxury confectionary. Because these markets are the most appropriate to Cheney Chocolate.

2.1.3 Competition: The competition among businesses within the chocolate industry is very intense. A company like Cheney chocolates would have to be aware of its competitors both locally and internationally.

                                                                     (www.yell.co.uk & Mintel reports)

2.2 PEST Analysis

2.2.1 Political and Legal Factors: (Mintel chocolate confectionary 2000) stats, in the past the confectionery industry has been kept from the EU, because of accusations that UK chocolate is not officially chocolate because of its high vegetable fat content.

This dispute was resolved in 2000 by amendments to the current directive relating to chocolate products.  

2.2.2 Economic Factors: Chocolate confectionery is seen as a luxury item, because it has little food value. The Sales of Cheney chocolate depend upon the levels of disposable income that adults, and children may have. (Mintel chocolate confectionary 2000). Appendix 2 shows the Personal Disposable Income (PDI) and the consumer expenditure since 1990.

2.2.3 Social Factors: There have always been health issues where chocolate is concerned, high in fat and low in sugar lead to obesity and tooth decay and more. A way around this problem would be for Cheney Chocolates to create a low calorie bar or a light version which some of the larger multinational companies have already done. (Mintel chocolate confectionary 2000).

The main buyers of Chocolate are 15-34 year olds with 27.4%, and 65+ with 15.6% of the population. Also both of these segments are predicted to increase until the year 2004. (Mintel chocolate confectionary 2000).

2.2.4 Technology/innovation: TGI data from BMRB shows that 51% of adults like to try out new food products. (Mintel chocolate confectionary 2000). This is a good reason for small companies like Cheney chocolate to invest heavily on technology and innovation, e.g. new packaging, shape and even creating a company website could boost company profile to a wider audience.

2.3 Opportunities and Threats for small chocolate manufacturers

2.3.1 Opportunities: The opportunities for a small chocolate manufacture are: -

• Invest heavily exploring new markets: A company like Cheney Chocolate could invest heavily on trying to get a ‘foot hold’ in new markets like the twisted rapper chocolates, within the family sharing market. Because Family sharing has the largest market share and the fastest growing segment in the boxed chocolate market. (Mintel boxed chocolate 2000)
• Invest in innovation: Winning firms are those that recognise the possibilities presented by new ideas and apply them both quickly and in imaginative ways. (Naylor 1999). If Cheney Chocolate wants to expand it will have to come up with some ideas to captivate the market.
• Form alliances with other small chocolate manufactures within the region: This could benefit Cheney Chocolate because they could share ideas, markets, etc.
• High valuation price: It gives the company the possibility of moving to a different location.

2.3.2 Threats: The threats for a small chocolate manufacture are: -

• The threat of being wiped out of the market by larger multinational company: There is always the possibility of the larger multinational companies forming an alliance to gain enough market share between them to force out the smaller businesses.
• The public becoming health conscious. Because the public are aware of the high levels of fat and sugar content within chocolate.

3. Internal Analysis

3.1 Organisational Structure: The organisation structure within Cheney chocolate is set out in functional form.

Cheney Chocolate’s organisational Structure:

Richard Cheney

Managing Director

                                                                                                               James Long

Business Administrator

                                Anne Cheney                                  Cecile Cheney

                           Operations Director                          Marketing Director

Pierre Herroux

   Chocolatier

                   Factory Staff                                   Shop Staff

(Cheney Chocolate Case Study)

The structure of this organisation is relevant to a small chocolate company because it enhancing co-ordination between staff with similar skills (Naylor 1999). But still could be improved. Which I will explain further in my recommendation.

3.2 Financial Overview: Cheney Chocolate’s performance over the past three years has been steady. Increasing slightly in the luxury market, but decreasing in unbranded fudge. I have included appendix 3 - 9 showing the figures below in graph format.

3.3 Strengths and Weaknesses in the UK chocolate industry

3.3.1 Strengths: The Strengths within Cheney Chocolate are: -

•  Pierre Herrous: Came up with the idea of producing luxury boxed chocolates (which as you can se from appendix 3-4, has been where the majority of the business’s profit came from over the last three years), he also gave Cheney Chocolates a good local reputation.
• High valuation price: The property is valued at 3.5 million, mainly because the real estate in Bath had taken off over the last decade.
• Well established local business: The Cheney family have owned and managed the business for nearly 50 yearly, and maintained excellent quality and service.
• Good reputation with customers: Cecile Cheney the Marketing Director liked chatting with local customers and tourists, helping them make their selection.
• Luxury Chocolates: This part of the business for Cheney Chocolate has been on the increase since 1998, and the market doesn’t show any reason to be slowing down. Mainly because over the period 1998-2000, the sector is estimated to have grown by 14.5%. (Mintel Luxury chocolates 2001)
• Anne Cheney: Anne Cheney has good vision of where she sees the business going in the future, and in time to come I believe she could become an extremely good Managing Director because of this.
• Good relationship with local bank: It’s always a vital asset to have a good relationship with your bank, you never know when you business will suddenly need there help.

3.3.2 Weaknesses: The Weaknesses within Cheney Chocolate are: -

• Richard Cheney: His weakness is that he finds it difficult to delegate. This is a serious problem for Cheney Chocolate as James Long his assistant might find another job if he doesn’t get delegated more responsibilities.
• Falling profits in Unbranded Fudge: Within the last three years the pre-tax profit for unbranded fudge has fallen consecutively. This could be a problem for Cheney Chocolate if they do not do anything about it now.
• Planning regulations:  No room to expand and introduce a second shift.
• Factory running at full capacity: If there was a sudden increase in the popularity of Cheney Chocolate, the business would not be able to capitalise, as the firm is already running at full capacity.
• Staff doesn’t know what’s happening: Keeping the staff in the dark about any future change is not good for morale, and could effect production and quality.
• Anne Cheney: Her lack of business experience would keep me from giving her complete charge of the business at the moment; I feel she needs more life experience before being able to run a well established business like Cheney Chocolate.

4. Conclusion

To conclude this report I can say that the Chocolate confectionary market as a whole is on the increase, with the markets relevant to Cheney Chocolate increasing by at least 14% in the past few years (boxed and luxury). The Opportunities and Strengths out way the threats and weaknesses for Cheney Chocolate which means even though their total sales have decreased over the last year, there still is hope for small chocolate manufactures, especially for Cheney Chocolate within the premium luxury boxed chocolate market, as this is where the majority of there income seems to come from, and is also on the increase since 1998.

5. Recommendations

After doing research and completing a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) for Cheney Chocolate I would make the following recommendations to Richard Cheney about his company.

5.1 Management and Organisation / Operations: I would recommend that Anne Cheney stays as operations director for the next two years. But each month Richard should delegate more important tasks to Anne to give her some experience of the job before completely taking over.

I would also make the following changes to the Organisational Chart:

Richard Cheney

Managing Director

                                                                         

 James Long

Business Administrator

       Pierre Herroux                      Anne Cheney                                 Cecile Cheney

       Chocolatier                       Operations Director                         Marketing Director

   

                   Factory Staff                                 Shop Staff

The changes I have made to the organisational chart are promoting Pierre Herroux to the same level as the directors; this will show him that he is important and hopefully give him some job satisfaction. Also James Long only has contact with one member of the entire business (Richard Cheney). I believe by giving him the change to interact with other members of the staff and Richard delegated more tasks to him it would increase his morale. Lastly I would give Anne and Cecile the chance to communicate more as operations and marketing could and give each other ideas.

5.2 Finance: Even though I would appoint Anne Managing Director in about two year’s time, I disagree with her idea on expanding to a different location, because of the disruption it would cause.

I believe if Cheney Chocolate form an alliance with another local company this would increase there innovation, research and development which is key to running a successful chocolate business.

5.3 Marketing: I feel Cheney Chocolates should increase awareness of their unbranded fudge as this product is lacking in profit compared to the premium chocolate. Another way of marketing and creating awareness of Cheney Chocolate’s products would be to create a website selling chocolate over the internet, and possibly expand that way instead of moving to a different location.

6. Appendices

6.1 This Chart shows how much of the overall market boxed and luxury chocolate have.

6.2 This chart shows that the Personal disposal Income (PDI), and consumer expenditure has increased each year since 1990, which means people will be able to afford luxury items like chocolate.

6.3 This line graph shows the increased sales in luxury chocolates for Cheney Chocolate over the past few years.

6.4 This line graph shows that pre-tax profit has increased rapidly since 1998, and this is the market where Cheney chocolate has earned the majority of its profit.

6.5 This line graph clearly shows that after an increase in sales from 98-99, Cheney Chocolate lost sales within 99-00. This could have just been a bad year for Cheney Chocolate with its unbranded fudge, but its something that the company has to keep a close eye on in case of any sudden changes.

6.6 This line graph shows that the pre-tax profits of unbranded fudge has fallen each year since 1998, even though in 1999 the sales increased from 250,000 to 270,000.

6.7 The Line chart below shows that the total sales within Cheney Chocolate did increase in 1999, but decreased slightly in the year 2000. This could have just been a bad year but again it is something that Cheney Chocolate has to keep a close eye on before the problem gets out of control.

6.8 The curve on this line graph is very similar to the total sales for Cheney chocolate, increasing in 1999, and decreasing slightly in 2000.

6.9 I chose this bar chart to show appendix 6.3 – 6.8 on the same chart. To make it easier when analysising the financial history.

7. Bibliography

• Mintel (2000) Boxed Chocolate, Mintel Marketing Intelligence,                     15th December.
• Mintel (2001) Luxury Chocolate, Mintel Marketing Intelligence, 1st August.
• Mintel (2000) Chocolate Confectionary, Mintel Marketing Intelligence,     17th November
• www.yell.co.uk, accessed on the 21st November 2001, at 6pm.
• John Naylor (1999) ‘Management’ published by the Financial Times.