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Guayas Chocolate Bar

Heather Ososki

Emily Griffin

Roberto Mollison

Rachel Distler

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Table of Contents

Summary of the Product Concept …………………….…………….3 Background on the Chocolate Industry ………………………….4 How is Our Chocolate Made? ..………………………………………..5 Distribution and Marketing …………………………………………..7 Our Products

Marketing to Retailers Marketing to Direct Consumers Distribution Emotional Effects

Target Market ……………………………………………….....................9 Geographically Demographically Psychographically Consumer Purchasing Retail Target Segment Market Research ………………………………………………………….12 The Marketing Environment ………………………………..……...15 Competitive Environment SWOT Analysis Socio-Cultural Environment

Technological Environment Economic Environment Politico-Legal Environment

The Marketing Mix ……………………………………………………….19 Differentiation Product Promotion Place

Price Finances……………………………………………………………………….23 Conclusion …………………………………………………………………..26 Works Cited ……………………………………………….......................27 Appendix ……………………………………………………………………..28

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Summary of the Product Concept

Our product began as an idea surrounding our family-owned cocoa bean plantation along

the Guayas River in Ecuador. On this plantation, through the crossbreeding of two different

cocoa trees, grows a cocoa bean with a floral taste and aroma. By using these cocoa beans,

we are creating a line of chocolate bars that are to be sold and marketed to consumers who

like to indulge in premium chocolate made with high quality ingredients. Our chocolate

bars are 100% all natural, organic and non-GMO, which appeals to our target market, who

will purchase our chocolate as an indulgence product, along with the added benefits of our

label claims. Our responsibility in the supply chain of the chocolate making process is to

source the beans, ingredients and equipment to produce our chocolate bars, which will

then be distributed to the customers through retailers and orders through our website.

Our chocolate bar line, Guayas, is made from cocoa beans from Ecuador, cane sugar

sourced from the company Domino, and milk locally sourced in Pennsylvania. Our

chocolate is named after the Guayas River in Ecuador, where it is believed that the original

cocoa plantations were located near. Originally it was believed that cocoa beans were first

grown in what is today’s Venezuela, but a recent archeological study found remnants of

cocoa on clay pots that date back to 3300 BC. in Ecuador, further proving that cocoa beans

originated in Ecuador, along the Guayas River (Caselli, 2015). Our package will depict an

image of a cocoa bean plantation alongside a river, which is a reference to where the cocoa

bean plantations originated thousands of years ago. (Exhibit 1). This will show the

customer where their chocolate is coming from, just by looking at the package, which is

important to our customer segment. Our brand image will communicate that our product

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is an indulgent treat but is also made with natural, organic ingredients that make our brand

high quality.

Our processing plant will be located near Philadelphia, Pennsylvania with convenient

access to the Port of Philadelphia. This is where our imported cocoa beans will be taken by

an intermediary. Once in our possession, our processing plant will proceed to make our 3

types of chocolate bars. The plan is to make a milk chocolate bar, a 70% dark chocolate

bar, and a milk chocolate bar that will contain almonds from California (Azarra,

2015). Since our products are not known to the consumer, we will produce a sample pack

in which consumers can try all of our chocolates in one product. Along with our online

survey distributed to college students about our product, we will also conduct focus groups

based on tasting and participate in local chocolate expos, as explained later. Once the

chocolate bars are developed, our plan is to market directly to the consumer through our

website, and we will also market to retailers in the northeastern region of the United

States, in order to get our products on their shelves. When ordered on our website, we will

ship the chocolate nationally, but our retailers will be located in the Northeastern region on

the United States. We plan to have our chocolate bars priced at $7.35 per 100g bar.

Background on the Chocolate Industry

In the 2015, Mintel United States Chocolate Market report, there is research proving how

large the chocolate industry has become over the last few years. The United States

chocolate sales grew about 24% from the years of 2009-2014 to reach $21 billion. It is

expected that this industry will reach $25 billion by 2019. “Chocolate innovation has

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increased, with new product launches growing to 18% between 2013 and 2014” (Mintel’s

Chocolate Confectionery – US, 2015). This has made the chocolate industry attractive for

companies to enter especially with over 85% of U.S. consumers purchasing chocolate. In

addition to this, more than half of U.S. consumers, about 53%, eat chocolate once a week or

more. Chocolate is purchased more around holidays than any other time of the year, for

gifts as well as treating oneself. Marcia Mogelonsky, the director of Insight Mintel Food and

Drink said “New product development continues to be imaginative, with more exploration

of flavors and textures outside the sweet flavor tradition.” Consumers continue to look for

these different options of flavors and mix-ins when it comes to purchasing chocolate, which

correlates with the floral taste of the new cocoa bean for the Guayas chocolate bars.

How is Our Chocolate Made?

Making chocolate is a very lengthy and complicated process, but since its beginning this

process has become more routine. First, cacao pods are harvested from cacao trees, the

plantation workers know exactly when to harvest the pods for perfect ripeness. From

there the pods are opened by hand and the contents are removed. The contents are cocoa

beans and a white sticky pulp. The next step is fermentation, where the contents of the

cocoa pod is piled together and the pulp is converted to alcohol from the yeast in the

air. This alcohol eventually removes itself from the cocoa beans. The result of this process

is just the cocoa beans. At this point the cocoa beans are ready to be made into chocolate

(Exhibit 2). For our product, all of this happens on a cocoa bean plantation in Ecuador. The

cocoa beans are then packed and shipped to our processing facility where it is now our

responsibility to produce our chocolate bars.

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According to the article “How Chocolate is Made”, once the cocoa beans are at our

processing plant our special cocoa beans are thoroughly examined for overall physical

quality. We will look for any size and quality defects before we process the beans into our

chocolate liquor to ensure the best quality for our customer. After the beans have been

sorted and properly cleaned, we then roast them for approximately 20 minutes. During the

roasting process, the bean will then separate from the bean kernel and the beans are then

further crushed. This is typically known as the fanning or cracking process, although the

beans are not actually crushed but rather cracked when passing through serrated cones. At

this point, the beans now become cocoa nibs and are exposed to a current of air which

separates them from their dry, lightweight shells. At this stage in the process, the nibs

“contain approximately 53 percent cocoa butter” and will now be grinded in our melangeur

machine. This step liquefies the beans into what was previously mentioned as our

chocolate liquor. ("Lesson- How Chocolate Is Made", 2015).

The next step is the refining process where the chocolate liquor is rolled to reduce the

particle size even further. This allows us to add our cane sugar and milk, and then evenly

distribute the cocoa butter over the particles. The particle size for chocolate differs

between each manufacturer. Our Guayas Chocolate Bars’ particle size is rather fine because

of the type of cocoa beans we are using, as Dr. Azzara at Penn State has explained. He says

that the United States has acquired a taste preference for smoother chocolate with a

particle size close to 30 microns (“Basics of Chocolate”, 2015). So, our chocolate bars will

have a particle size of 30 microns which means that it is smoother than other chocolate on

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the market. Also, Dr. Azzara noted that chocolate with smaller particle sizes tend to pair

well with add-in ingredients such as almonds than those with larger particle sizes. To

further the flavor of the liquor, we will conch the chocolate which consists of rollers

continuously kneading the liquor and its ingredients for a little over a day. The finished

step of this process consists of the chocolate liquor being tempered and finally massed into

the chocolate bars that we will distribute to our retailers. In this step, some bars will have

almonds added to them and our tasting squares will be produced as well (“Lesson- How

Chocolate is Made”, 2015).

Distribution and Marketing

Our Products

Our product line will consist of 3 different types of chocolate bars. We will sell a

milk chocolate bar, a 70% dark chocolate bar and a milk chocolate bar with

almonds. We will also sell a variety pack of our flavors which will have smaller

pieces of all of our chocolate varieties. This is to give consumers the opportunity to

try all of our different varieties in one product.

Marketing to Retailers

In order to get brand recognition, we hope to market our product in a couple of

ways to lead us out of the trial stages of marketing. Firstly, we hope to promote

through chocolate expo’s, where major retailers, companies, movie theaters, etc.

attend the expo and try the chocolate and confectionary candies available. This will

hopefully get our foot in the door with our desired retailers Trader Joe’s and Whole

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Foods. We will also reach out to our target consumer over YouTube and Instagram

with information about our product and purchasing details. There will be chances

for our consumer to interact with our brand and give it familiarity through hashtags

such as #guayaschocolate and consumer testimonials. By doing so, this will bring

traffic to our website and hopefully increase our sales. The front page of our

website, containing “Our Story” is located in Exhibit 3 of the appendix. Since our

chocolate bars are rectangular shaped, it is easy to package and ship in larger

rectangular boxes. This eliminates the possibility of dead space.

Marketing to Direct Consumers

We will sell our chocolate bars directly to our customers on our website which will

again, be promoted through Instagram and YouTube. Those who order directly off of

our website will not have to pay for shipping. We will cover the cost because these

chocolate bars will have a larger profit margin than those sold by retailers. This is

because the bars sold at retailers include a 40% price markup.

Distribution

Since we are marketing to retailers, we will have to distribute our products to those

retail stores. The retail stores that will include our chocolate are Trader Joe’s and

Whole Foods. Both Trader Joe’s and Whole Foods do not require slotting fees, but

have a list of standards that new products must meet. Our products fulfill all these

standards such as USDA licensed, no synthetic or artificial flavors and validated

third party labels. We will distribute to these retailers through UPS as well and this

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cost will be included as a distribution cost in our cost-plus pricing strategy later

explained.

Emotional Effects

We hope our product brings a feeling of satisfaction and ensured quality to our

customers. We assume that our product will be purchased on an irregular basis,

mainly for the purpose of gift giving or as a high quality, indulgent treat. What

separates Guayas from a product such as Hershey’s is that it is not for the purpose of

a quick fix for those impulsive chocolate cravings. We are hopeful that our brand

will be thought of as premium and chosen for the consumer that is willing to spend

the extra money for a higher quality chocolate product. Guayas Chocolate should be

a thoughtful purchase, one that satisfies a chocolate craving and the desired craving

for a high quality experience.

Target Market

Geographically

Geographically, we are targeting consumers through retailers in the Northeastern

region of the United States due to the proximity to our processing plant and our

familiarity with the region. Specifically, we are familiar with the stores, types of

consumers, and their shopping habits. Since we will also sell our products on our

website, we are expanding our target region to the whole country. We think this will

provide the opportunity for the possibility for future expansion of our market

segment. This will allow those who hear of our chocolates through word of mouth

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and social media to buy our products. We can also use the data collected through

our online sales to determine where our products are most popular and expand our

retail target segment and product ideas to better target other regions of the country,

in the future.

Demographically

Demographically, we will be marketing to young adults who are recently out of

college, working their first professional job and buying their own groceries. We will

market to males and females and no specific ethnicity. We are marketing our

products to consumers who are well-educated, either living by themselves or with a

significant other. This consumer segment has new responsibilities and a steady

income in which they can buy more than the essentials. By targeting this market, we

hope to establish a devoted customer segment at a young adult age who will

continue to buy our products as they grow older. In America, chocolate is consumed

as a mood enhancement food mainly by people aged 18-24 which is 41% of United

States consumers (Mintel Chocolate Report, 2015). We chose to target this group

because they not only like to indulge in chocolate products, but they are more health

conscious and will appreciate the non-GMO and organic aspects of our product.

Psychographically

Psychographically, our target market will include those who keep up with trends,

but are not mainstream. This means that they are aware of the health trends such as

organic and natural, but they do not follow the mainstream trends of a vegan diet or

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a Paleo diet. Our target market will include those who value education and are

health focused. So, if this target market is craving something sweet, our chocolate

bars will fulfill that craving while being guilt-free. We hope to convey to our

consumers that our product is guilt-free because it is all natural and organic. Our

product is also non-GMO because the hybrid cacao plants that we use to obtain our

cocoa beans are developed through natural cross- breeding. Therefor the cocoa

beans are not genetically modified.

Consumer Purchasing

Our chocolate bars are premium, indulgent products and therefore the price will be

higher. Our typical consumers will not be purchasing our chocolate everyday, which

makes up for our higher price of $7.35 compared to generic chocolate brands, such

as Hershey's or Cadbury. Our product is high quality made with all natural

ingredients, which our company will use as a main marketing point.

Retail Target Segment

A large part of whom we target is based on where our product is sold. We predict

that retailers will sell the majority of our products, so we also have to include our

retailers in our target segment. We have to take into consideration that shops

where, when choosing our retailers. Once we have retailers in mind, we will market

our product to them. Included previously in this report, the best locations to sell our

chocolate bars are Whole Foods and Trader Joe’s. These stores were chosen because

the typical consumers of these places include individuals who are health conscious

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and have a disposable income. They also are conscientious of where the food

products they purchase come from. Therefore these two stores attract the types of

customers we are marketing to. By selling in these locations, we expect a large part

of our sales to come from consumers who go to the stores for other products.

Market Research

We surveyed a total of 53 people around the State College, PA area and collected

information based on consumer preferences for the quality, location, and pricing of our

chocolate. The results were very clear that our potential consumers in fact have a strong

preferences pertaining to the type of chocolate they look to purchase. The information we

provided the survey takers was our positioning statement: Our delectable chocolate is of

the highest quality for those craving a fruitier, exotic and flavorful experience among other

high-end chocolatiers, in the Northeastern region of the United States, because of our

unique Ecuadorian imported cocoa beans and the products that we will carry include our

milk chocolate bar, our 70% dark chocolate bar, and a milk chocolate bar with a yet to be

determined add-in. (Exhibit 4).

We then asked a series of questions that would determine at what price consumers would

buy our product, if they would purchase our product and where they would prefer to buy

our product. For the questions asked such as “Would you buy our product?” and

overwhelmingly number of respondents, approximately 81%, answered yes. (Exhibit 5).

The rest of the results are from those who answered yes. We then gathered information on

the pricing that consumers feel is appropriate to pay for our product and the majority, 81%

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of people said $5.50, suggesting majority of people would have chosen a lower number if it

was an option. (Exhibit 6). Naturally, we have to factor in costs associated with

manufacturing, processing, and distributing this product, and therefore have to price it a bit

higher to make a profit. It is promising that the next highest percentage of people, 12%,

agreed that $7.00 was an appropriate price for this product, as we plan to price it around

$7.49. Zero percent of people agreed that $8.00- $8.50 would be an appropriate price for

our chocolate bars, so it may be in our best interest to keep the pricing below $8.00.

We then focused on the ingredients and labels associated with our product and the effect

this had on consumer purchasing. After the results were collected, it is clear that over half

of our potential consumers, 58%, would prefer almonds over “salted caramel” and “dried

raspberry or mango”. (Exhibit 7). We then decided to make almonds the add-in for our

third line of chocolate bars and source them from California and our milk from

Pennsylvania. Consumers were very vocal about knowing where their products come from,

as 60% said yes to the question, “Do you feel organic labels/ knowing where the product

comes form is important when buying a product?” (Exhibit 8). This is important to keep in

mind when packing and labeling our product, as we want to be able to show our consumers

that we are mindful of exactly where each and every ingredient in our chocolate bars

originated. We can also incorporate our sourcing story in our website to inform our

consumers about the specific processes our company uses to produce our chocolate.

Also, we asked “How important is it to have a product that identifies as non-GMO?” and a

majority at 40% said they were indifferent along with the next greatest majority, at 26%,

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agreeing that is was very important (Exhibit 9). Non- GMO is an important label for our

brand because our target consumer is health conscious and aware of the latest health

trends. When considering labels such as organic and non-GMO, the similarity is the all

natural inputs in our chocolate, which our consumers care about. The rest of the

respondents seem rather indifferent about the labeling, indicating that it may not be that

important in the marketing strategy. Regardless, we recognize that we cannot please each

and every individual consumer and believe that our target market finds this label very

important, so we look to appease that 26% previously mentioned.

When buying chocolate, respondents mainly focus on the tasting, packaging, pricing, non-

GMO, the ingredients, high percentage of cocoa and organic, and overall quality. We take

these into mind when manufacturing our chocolate and make sure that we label our

products appropriately as well to inform the consumer of exactly everything that is added

into our chocolate bars. Lastly, we then asked our respondents “What retailer would be

most appropriate to buy this product from?” and the majority at 74% replied Whole Foods

and Trader Joe’s. The next most popular answer was convenience stores at 21% and lastly

our website at 5%. (Exhibit 10). We plan on Whole Foods and Trader Joe’s being our main

source of revenue for our product and will allocate most of our budget to accommodate the

demand that will come from this retailer opposed to the demands from our website. Even

though it is not a popular choice, our website will remain important for our consumers that

are not located in the northeast region of the United States and still desire our product.

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The Marketing Environment

Our product aims to bring a product with international ingredients to the United States,

starting specifically in the Northeastern region with the goal of expansion overtime. The

chocolate market is a competitive environment, so we are marketing our product to appeal

to a different group of consumers through the differentiated socio-cultural aspects. This

would include that our product is not genetically modified which many chocolate

companies are moving too, including Hershey’s. In addition to this, our chocolate is an

organic chocolate that is grown in a sustainable environment. It is an all natural product

where we will be able to communicate with consumers exactly where the product they are

purchasing came from. We participate in fair trade and can assure our customers that our

chocolate is made with premium ingredients. Our chocolate company is part of an oligopoly

because there are only a few companies that dominate the market. The top 4 firms in the

chocolate market account for about 70% of the market. Hershey’s is the largest producer

with 32% of the market. Mars has 20% of the market and both Nestle and Lindt have

around 9% of the market each (IBISWorld, 2015).

Competitive Environment

The chocolate market is very competitive because there are just a few brands that

own most of the different kinds of chocolates. According to Dr. Azzara, our main

direct competitor is Valrhona, a French gourmet chocolate company that sells their

chocolate bars for $7.49. The brand has been around since the 1920’s and will cause

the most competition for us because of its brand equity. Valhrona sources its

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aromatic cocoa beans from Venezuela and the Dominican Republic, which is very

similar to Guaya’s sourcing.

SWOT Analysis

When considering our companies SWOT analysis in the chocolate industry,

there are many attributes to consider. Our strengths as a company include

second mover’s advantage, as we plan to enter a market environment with a

lot of existing competitors. Through second mover’s advantage, we can learn

from our competitor’s mistakes and avoid these in the future. Another

advantage is the differentiation that Guayas has among its competitors when

considering its aromatic cocoa beans and “Our Story”. All of the ingredients

put into our product can be carefully traced to exactly where they were

produced with the assurance that every input is 100% organic and non-

GMO. With this in mind, there are many opportunities in this industry, as

previously stated, the chocolate industry is expected to boom within the next

5 years. Weaknesses to consider when launching our product are the higher

pricing and lack of brand identity. These weaknesses will increase our

threats to companies such as Valhrona, which has a well known brand name.

Socio-Cultural Environment

The socio-cultural aspects of our product include that our chocolate is non-GMO and

organic. We are really proud to have a product that promotes sustainability as well.

With more and more consumers caring more about where their food comes from,

our chocolate can be directly linked back to where the cocoa beans were grown

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which will help us in our marketing competition as well. In a study done by Dr.

David Lewis, of Mindlab, he explores the effect of chocolate on people in there 20’s

in comparison to kissing. He monitors their heart rates and brain activity while

doing so. This data showed that people had in increase in heart rate and brain

activity that last longer in comparison to a kiss (BBC Chocolate Better than Kissing,

2015). Psychologist Sue Wright said, "Chocolate contains phenylethylamine which

can raise levels of endorphins, the pleasure-giving substances, in the brain.” This

shows the physical effect of chocolate on people.

Technological Environment

The level of technological change in the chocolate industry is low. The basic

production processes have remained the same over the years. However, the small

changes that occur result in greater automation and control regarding product

quality. Chocolate is usually processed using machines that employ precision

instruments to regulate specific temperatures, humidity and time intervals of the

production process. One major development in technology is packing efficiency.

Machines are responsible for filling, wrapping and packaging the products. The

mechanized nature of the manufacturing process contributes with the industry high

standard levels of hygiene.

Economic Environment

The economic environment of the Chocolate industry is driven by many factors. One

key economic driver is per-capita disposable income. As a person’s ability to

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purchase goods and services increases they are more likely to purchase indulgence

products. Chocolate consumption has grown significantly over the last 15 years and

is expected to grow over the next few years. Based on the statistics over the last few

years, data shows that it is expected that the world will consume 8.5 million tons in

the year 2020 (Total Consumption of Chocolate Worldwide Statista, 2015). The

world price of cocoa is also a major economic driver for the chocolate industry. The

world daily price of cocoa represents the average quotations of the nearest three

active futures trading months on NYSE Liffe Futures. Sugar consumption and prices

also play an important role in the economy of the industry since sugar is a key

ingredient in all chocolate products. The cost of sugar increased in 2014, which

caused an increase in chocolate prices. 71% of consumers noticed the increases in

prices, but this only affected the spending habits of 3% of chocolate consumers

(Mintel Chocolate Report, 2015). Trading-weighted index is the last major economic

driver of the industry. It measures the strength of the U.S. dollar relative to the

currencies of its trading partners.

Politico-Legal Environment

The two major regulatory agencies in the chocolate industry are the Food and Drug

Administration (FDA) and The Environmental Protection Agency (EPA).

The FDA requires all food products to include nutritional content and for all health

claims to be regulated by FDA. The FDA includes other programs that regulate the

food products such as Ingredient Safety Program and The Fair Packaging and

Labeling Act, which requires manufacturers to disclose information about the

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product contents. These regulations apply especially to chocolate that is marketed

as organic and healthier because it allows firms to charge a premium price. The EPA

enforces environmental issues regarding food-processing industries. Federal

environmental regulations such as the Clean Water Act and Clean Air Act regulate

the how chocolate manufacturers handle their disposable waste.

The Marketing Mix

According to Sonal Rupani in the article “The Sweet Business of Gourmet Chocolate”, the

demand for and accessibility of premium chocolate will increase as consumer tastes

continue to grow with sophistication. Many large chocolate companies in this industry

such as Hershey’s, project that the demand will grow in organic sectors and look to acquire

such chocolate manufacturers in the process to gain traction in this segment (Rupani,

2015). With promising sale projections for the premium chocolate industry, it seemed to

be a good fit for our start-up company, which has a strong background and passion for

organically grown cocoa beans. These beans come from a plantation in Ecuador, where

they are handpicked and carefully watched throughout the entire fermentation process

until the day they are shipped off to the United States. The founders of Guayas Chocolate

Bars wait with anticipation for these beans to arrive to finally be able to share their secret

treasure with the rest of the United States.

Differentiation

With many well-known names in the market such as Hershey’s and Mars, it is

important that our product is differentiated. Guayas Chocolate Bars use a bean that

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stands out with its floral aroma and flavor that has not been introduced to or

produced further in the chocolate industry in North America. It is with this

particular bean and Guayas’ promise to its consumers that every ingredient added

into its chocolate bar to the last teaspoon is made 100% organically and grown with

FairTrade standards. As founders of Guayas, we not only care about the quality of

the product that lands into the hands of our consumers, but we care about the quality

of the working conditions that our farmers in Ecuador and the United States

face. Our story starts from the cocoa bean plantations of Ecuador along the Guayas

River and ends with the consumer and that last bite of chocolate left of the bar. We

care about our story and hope that it lives on with the reputation of our brand.

Product

Guayas Chocolate Bar carries three product lines that consist of a 100g (3.5 oz) bar of

chocolate in milk chocolate, 70% dark chocolate, and milk chocolate with almonds. In

the industry, usually artisan chocolate bars come in sizes of 100g (3.5 oz) and 70g

(2.46 oz). These bars will be wrapped in a paper covering with our logo on the front

and our design of cocoa bean trees along the Guayas River, where our cocoa bean

plantation is located (Exhibit 1). We will include only the name Guayas Chocolate

Bar on the front of the package along with the flavor of that particular bar and the

labels “organic, non-GMO and Fair Trade”. Our brand will also carry tasting squares

that consist of a mixture of our milk chocolate and 70% dark chocolate squares, with

15 per box. It is our plan to keep the packaging very simple, and uniform between all

bars and tasting boxes. The bars will be packaged in boxes that contain 7 bars with a

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net weight of 24.5 oz of chocolate and 7- 100g bars. The boxes will be a net weight of

12 oz. (310g).

Promotion

We aim to sell our chocolate bars through retailers Trader Joe’s and Whole Foods as

well as through our website. Promotion for our retailers and final consumer is

through our website, which gives in-depth information about the process from the

plantation in Ecuador to the production of our product in the Northeast region of the

United States. We will also set up an Instagram page for our brand that notifies our

consumers about where to find our product and any updates on changes in our

ingredient sourcing. It will create a brand image of the fresh and vibrant chocolate

company we aim to be, which correlates with the desires of our target market. In our

retailer’s facilities, we will do in store taste testing once the product has gained

traction and will offer special promotions to our retailers as well. We will offer a

discount to the retailers and our distributors. To deliver our product to the retailer

facilities around the Philadelphia area and to those who order from our online

website, we will work with UPS to fulfill orders.

Since we are building a company from its roots, our promotion strategy is very

important and must be successful without putting much money out. We believe that

social media and word of mouth will contribute greatly to our company’s success. In

Exhibit 3, we show our website's front page and in Exhibit 22, we show our

Instagram’s profile. The website and Instagram will be a main tool for our company

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to show consumers our product and a place where they can gather more information

of Guayas. But it is not that simple, we will not be a successful company with just

that. We will spend the majority of our energy and promotion money on marketing

in retail stores. We will do this by having special displays to draw in the

customer. Since our product is new, we will also have in store free samples. As our

company gains more success, we will offer special deals to retailers so that they will

feel more enticed to put our products on their shelves. In addition to this, we will

participate in food expos in the northeast region so that people can gain awareness

about our product. The specific expo we would like to participate in is the New York

City Chocolate Expo. At this expo, people pay a flat rate to attend and inside there are

booths set up with different vendors. Another promotion we will have once our

company grows is we will offer coupons to our customers through the retailer’s

circulars.

Place

To summarize what was said previously in this report, we are sourcing our cocoa

beans from a plantation in Ecuador. Through an intermediary, the cocoa beans will

arrive at our processing facility in the Philadelphia area, with convenient access to

the Port of Philadelphia. After our chocolate bars are made, they will be sold to

retailers such as Trader Joe’s and Whole Foods in the northeastern region of the

United States. We will also sell our product on our website to consumers anywhere

in the United States.

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Price

One 100g Guayas chocolate bar will cost $7.35. Explained in further detail later in

the report, you will find that we based this price on similar products from

competitors. Our chocolate bars will be considered to be of the highest quality and

best taste among all other chocolate. Due to this, our higher prices make sense. The

$7.35 price per bar closely matches the Competitive Price Strategy suggested by Dr.

Azzara, given that the price per bar of our major competitor Valrhona is $7.49.

Finances

One of the key aspects of our brand is that we want to position our product line as a

premium chocolate brand. Therefore, to instill our customers perception of a high quality

and differentiated product we are going to charge a higher price in comparison with

traditional chocolate products as those of Hershey’s and Mars and other major competitors.

We used two pricing strategies to determine the price of our chocolate bars. The first is the

Competitive Pricing Strategy, and was used to determine the prices of our comparable

competitors such as Valrhona, in order to have a sense of how current successful

companies in the industry are pricing and positioning their products. Second, the Cost-Plus

Pricing Strategy was used to measure our estimated costs of producing the chocolate bars

and the estimated percentage of profits we are expecting to obtain.

For the Cost-Plus Pricing Strategy we took into account the averages of the major costs

involved in chocolate manufacturing:

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The fixed costs of the manufacturing plant

The cost of cocoa beans and sugar, which are the two major ingredients in our

products

The cost of production

Marketing Costs

Transportation costs

The following was estimated for the cost of producing 80,000 chocolate bars.

Our Fixed Cost consists of the cost of a manufacturing plant and an estimated cost of rent

for the manufacturing facilities for a Total Fixed Cost of $150,000.

Our Variable Costs consist of the cost of buying the amount of cocoa beans from Ecuador

necessary to produce the 80,000 bars we took as reference and is described as follows:

According to the Hershey’s Company it takes 500 grains of cocoa to produce one pound of

chocolate.

From one pound of chocolate you can produce eight 70% dark chocolate bars of a similar

size as that of our bars.

The international system for measuring the weight of cocoa beans states that every 100

grains of EET-103 (the variety we are using for our chocolate) weighs an average of 135

grams.

Therefore the 500 grains we need to produce one pound of chocolate weighs 675 grams or

0.675 kilos. In other words we need 0.675 kilograms of cocoa beans to produce one pound

of chocolate.

If we need 1 pound of chocolate to produce 8 bars, that means that we need 10,000 pounds

of chocolate to produce the 80,000 bars we took as reference.

25

So the amount of cocoa beans we need to buy in order to produce the 10,000 pounds of

chocolate and consequently the 80,000 bars is 6,750 kilograms of cocoa beans.

The World Price of Cocoa is measured by ton and it changes every day. Historical data

shows us that in the past 8 years cocoa prices have fluctuate primarily between $2,700 and

$3,500 per ton. So for our Cost-Plus Pricing Strategy we used a referent price of $3,200.

However, we still have to add the premium price that is paid above market price for the

special floral flavor beans we use in our product and that on average is $600. Adding the

cost of the intermediary company that would make the purchase for us, and the paperwork

associated with exportation our final cost per ton of cocoa beans is around $4,100.

Since we need 6,750 kg or 6.75 ton of cocoa beans to produce the 80,000 bars our final cost

for cocoa beans would be 6.75x4100 = $27,675.

Another key input in our production process is sugar. A Dark chocolate bar contains

around 25 grams of sugar. So for our 80,000 bars we would need 2,000,000 grams or about

4,400 pounds of sugar. We took an average price of sugar of $0.69 pound. So our final cost

for sugar would be $3,036.

So our estimated Variable Cost of inputs to produce 80,000 bars is $30,000.

Other Variable costs we estimated consist of $70,000 for production and manufacturing

costs, $30,000 for marketing costs and $20,000 for transportation of the beans from

Ecuador and the distribution of our final product.

For the Cost-Plus Pricing formula we used a desired profit of 40% so the formula for our

pricing would be:

[(1+0.4)x($300,000 Average Total Cost)] / 80,000 bars = 5.25

26

Our selling price to retailers would be $5.25 a bar. In the chocolate industry, retailers sell

the chocolate bars about 40% higher than the price they pay. Therefore, the price

consumers would pay for our line of chocolate bars would be $7.35. This retail price

reflects our idea of selling at a higher price to position ourselves as a premium brand and

also reflects similar prices of those of our premium chocolate competitors.

Conclusion

By selling our line of chocolate bars on our website nationally, and at Trader Joe’s and

Whole Foods in the Northeast, we aim to gain a devoted customer segment. Assuming our

company gains popularity and chocolate is desired by many, we plan to extend our product

line. This extension will include new add-in flavors and doing so will enable us to add the

new flavors to our sample pack. Also by analyzing our data collected from our website

sales, we will determine which region of the United States we will extend our retail

segment to if applicable.

27

Works Cited

Azzara, Dan. (2015, October). Personal Interview.

"Basics of Chocolate." Cocoa Lab: Thinking about Artisan Chocolate. Word Press. Web. 18

Nov. 2015.

Caselli, Irene. "Is Ecuador Home to the World's Best Chocolate?" BBC News. BBC, 2015.

Web. 19 Nov. 2015.

"Chocolate Production." IBISWorld. 1 Oct. 2015. Web. 17 Nov. 2015.

Chow, Lorraine. "Hershey's Most Popular Chocolates Will Go GMO- Free by the End of the

Year." Ecowatch. Ecowatch, 2015. Web. 19 Nov. 2015.

"Chocolate 'better than Kissing'" BBC News. BBC, 16 Apr. 2007. Web. 11 Dec. 2015.

"Consumption of Chocolate Worldwide 1999-2020 | Statistic." Statista. N.p., n.d. Web. 11

Dec. 2015.

Khan, Lina. "Why So Little Candy Variety? Blame the Chocolate Oligopoly." Ideas.Time. Time

Inc., 2015. Web. 19 Nov. 2015.

"Lesson- How Chocolate Is Made." Ecolechocolat. Wilmor Publishing Corp., 2015. Web. 18

Nov. 2015.

McMahon, James. "Chocolate Math." Hershey Story. General Publishing Group, 1998.

Web. 17 Nov. 2015.

Rupani, Sonal. "The Sweet Business of Gourmet Chocolate." Bloomberg. Bloomberg,

L.P., 2015. Web. 18 Nov. 2015.

"US Chocolate Market on Track to Hit $25 Billion in 2019; Lags behind Europe in Product

Innovation." US Chocolate Market on Track to Hit $25 Billion in 2019; Lags behind

Europe in Product Innovation. N.p., n.d. Web. 11 Dec. 2015.

28

Appendix:

Exhibit 1: Our chocolate bar package

29

Exhibit 2: How chocolate is made

30

Exhibit 3: Our website main page

Exhibit 4: Guayas Premium Chocolate Survey

Our delectable chocolate is of the highest quality for those craving a fruitier, exotic and flavorful experience among other high-end chocolatiers, in the Northeastern region of the United States, because of our unique Ecuadorian imported cocoa beans.

Products: Milk chocolate bar, 70% dark chocolate bar, and a milk chocolate bar with a yet to be determined add- in

1. Would you buy our product?

Yes

No

Not sure

2. How much would you pay for this product?

$5.50 $7.00 $7.50 $8.00 $8.50

31

3. What add-in flavor would you like?

Salted caramel

Almonds

Dried Raspberries/ Dried mango

4. Do you feel organic/ knowing where the product comes from is important when buying a product?

Yes

No

Not sure

5. How important is it to have a product that identifies as non-GMO?

Very important Somewhat important

Indifferent Relatively important

Not important

6. What do you look for when you buy chocolate?

7. What retailer would be most appropriate to buy this product from?

On our website

Whole Foods/ Trader Joe's

Convenience store

32

Exhibit 5: Of the 53 people surveyed…

Exhibit 6: Of those who said yes (43) to the previous question…

Would you buy our product?

Yes

No

Not Sure

0 10 20 30 40

$5.50

$7.00

$7.50

$8.00

How much would you pay for our product?

33

Exhibit 7: Of those 43 people who said they would buy our product

Exhibit 8: Of those 43 people who said they would buy our product

What flavor add-in would you like best?

Salted Caramel

Almonds

Dried Raspberries orDried Mango

0 10 20 30

Yes

No

Not Sure

Do you feel organic/ knowing where the product comes from is

important when buying a product?

34

Exhibit 9: Of those 43 people who said they would buy our product

Exhibit 10: Of those 43 people who said they would buy our product

0

5

10

15

20

VeryImportant

SomewhatImportant

Indifferent RelativelyImportant

NotImportant

How important is it to have a product that identifies as non-

GMO?

0 10 20 30 40 50

Our Website

Whole Foods/ Trader…

Convenience Store

What retailer would be most appropriate to buy this product

from?

35

Exhibit 11: Our Instagram page

36

Appendix:

Exhibit 1: Our chocolate bar package

37

Exhibit 2: How chocolate is made

38

Exhibit 3: Our website main page

Exhibit 4: Guayas Premium Chocolate Survey

Our delectable chocolate is of the highest quality for those craving a fruitier, exotic and flavorful experience among other high-end chocolatiers, in the Northeastern region of the United States, because of our unique Ecuadorian imported cocoa beans.

Products: Milk chocolate bar, 70% dark chocolate bar, and a milk chocolate bar with a yet to be determined add- in

1. Would you buy our product?

Yes

No

Not sure

2. How much would you pay for this product?

$5.50 $7.00 $7.50 $8.00 $8.50

39

3. What add-in flavor would you like?

Salted caramel

Almonds

Dried Raspberries/ Dried mango

4. Do you feel organic/ knowing where the product comes from is important when buying a product?

Yes

No

Not sure

5. How important is it to have a product that identifies as non-GMO?

Very important Somewhat important

Indifferent Relatively important

Not important

6. What do you look for when you buy chocolate?

7. What retailer would be most appropriate to buy this product from?

On our website

Whole Foods/ Trader Joe's

Convenience store

40

Exhibit 5: Of the 53 people surveyed…

Exhibit 6: Of those who said yes (43) to the previous question…

Would you buy our product?

Yes

No

Not Sure

0 10 20 30 40

$5.50

$7.00

$7.50

$8.00

How much would you pay for our product?

41

Exhibit 7: Of those 43 people who said they would buy our product

Exhibit 8: Of those 43 people who said they would buy our product

What flavor add-in would you like best?

Salted Caramel

Almonds

Dried Raspberries orDried Mango

0 10 20 30

Yes

No

Not Sure

Do you feel organic/ knowing where the product comes from is

important when buying a product?

42

Exhibit 9: Of those 43 people who said they would buy our product

Exhibit 10: Of those 43 people who said they would buy our product

05

101520

VeryImportant

SomewhatImportant

Indifferent RelativelyImportant

NotImportant

How important is it to have a product that identifies as non-

GMO?

0 10 20 30 40 50

Our Website

Whole Foods/ Trader…

Convenience Store

What retailer would be most appropriate to buy this product

from?

43

Exhibit 11: Our Instagram page