Godiva

Case 4: Godiva Europe

Current Situation

Godiva International is a luxury chocolate producer in three countries throughout the world; United States, Japan and Europe. Chocolates are produced for individual consumption, either as a gift or for self-indulgence. The company has 3 decision centers, which all fall under the Godiva International brand. The company operates under the Campbell's Soup Europe and Asia region. Godiva Europe is headquartered in Brussels, Belgium which is known as the birthplace of chocolate. The main production factory is in Belgium and in 1990, Godiva produced 3000 tons of chocolate for over $27.2 million USD in sales for the region of Europe. 75% of European production is either under the Godiva name or under the brand name Corne' Toison d'Or. The remaining 25% of European production is for the United States and Japan, where the price of chocolate is sold for $59 USD and $118 USD/kilogram respectively. This compares to a sales price of $31.76 USD/kilogram in Europe.

The chocolate market in Europe is primarily dominated by the praline which is where Godiva's market position lies. Demand in Belgium indicates that pralines comprise 44% of all chocolate consumption in Belgium. Overall, the European market has reached a plateau as demand has remained fairly steady throughout the 1980's. Godiva's international marketing mix focuses on the image of luxurious, refined chocolate wrapped in an immaculate hand-crafted presentation. This concept has proven successful internationally, where in Japan and the U.S. consumption has increased 54% and 30% respectively, over the 1980s. Yet, recent market studies conducted by the company indicate that the luxury image of Godiva in Europe has waned. Other competitors in the European segment, such as market leader Leonidas have maintained success by concentrating on mass producing great-tasting chocolate at an affordable price. Godiva in Europe has become known as something of an antiquated, pricey offering. Godiva's market position in Europe has been further hampered by their retail distribution which consists of run-down franchised stores that fail to convey the image of decadence. This pales in comparison to Godiva's international presence in fine department stores and independent boutiques as a luxury chocolatier.

Problem

Godiva International wants to standardize the advertising campaign across the Triad Countries of U.S., Japan and Europe. The President of Godiva Europe, Charles van der Veken has been asked to prepare his campaign within 5 weeks in order to meet the Christmas season. Through marketing studies Mr. van der Veken is aware of the vast differences in chocolate perception between the European countries and internationally. As such, he realizes that a standardized positioning strategy may not be a good fit for Godiva Europe.

Case Relevant Facts:

1. Belgium is the Birthplace of chocolate where annual consumption is strongest in Europe

a. 43.5% of Chocolate consumed in Belgium is in the Godiva category

b. Godiva has a 10.3% market share; Corne' Toison D'Or has 2.7%

c. Total population in Belgium consists of 3.88 million households; average household consumption is $25.07 USD in 1988

d. Godiva Belgium Price level is $31.76 USD/kilogram; Corne' TO Price level is $25.58 USD/kilo; the Belgium average market price is $13.2 USD/kilogram; Leonidas is the market low-price leader at $10.59 USD/kilo

e. Estimated demand for chocolate in Belgium in 1991 is 8800 tons; 906.4 tons for Godiva

2. Godiva products are sold through franchised dealers in Europe; the franchisees purchase Godiva Chocolate in their country of operation at a company-contracted price; this price varies country to country. Beginning 1993, the Euro will become standard currency; the franchisees will soon be able to purchase directly from the Belgian factory at reduced prices. Therefore, management recently felt compelled to impose a 10% price increase across the franchisee system.

3. A Perceptual mapping Brand Image study showed that in 1992 Brussels, Godiva is known as:

a. The queen of chocolate

b. A refined chocolate

c. Beautiful boutique

d. Expensive chocolate

Godiva is behind market leader Leonidas in the categories of:

a. Belgian Chocolate

b. Offering a product for the Self-Indulgent

c. Offering an attractive Price

4. Godiva packaging is not as important to the Belgium consumer; pre-selected chocolates are not appealing to Belgians who prefer choice in the assortments; beautiful fabric boxes are too expensive for Belgium ($34 USD) and are often used for store displays as opposed to sales

5. Loss of Brand Recognition -

a. 20% of respondents in a Brussels (Belgium) survey claimed they have only heard of Godiva through name only

b. 31% of respondents also said they have never heard of Corne' Toison D'Or

6. Regarding production:

a. Handmade chocolates cost 7 times more to produce than machine automation

b. 70% of pralines are machine-made; 30% are hand-made

c. 60% of the machine-made product must be decorated by hand

d. The Belgian factory has significant (yet unspecified) un-used available capacity

Alternatives to Current Strategy (Options)

1. Differentiated Positioning - Modify the marketing mix to differentiate Godiva's European identity from the international advertising strategy. This option consists of a "downward" market-penetration strategy for Europe vs. an "upward" strategy for the International segment. Key elements of the penetration strategy will include:

a. Lower Pricing to gain market share - recently the 10% price increase has lowered sales volumes by 7%

b. Reducing units of labor and increasing units of capital to de-bottleneck capacity through mass-production

c. Reduce