Clare’s Chocolates Marketing

Outcomes covered 1 and 2

Assessment instructions

This is an open-book assessment. Your task is to provide an extended response to

all the questions given below. In preparing your responses, you should first read the

accompanying case study (Clare’s Chocolates) which provides background

information about the organisation.

NB: In your responses you are expected to explain marketing theory and, with the

exception of question 1, relate it to the organisation in Clare’s Chocolates case

study.

Case study — Clare’s Chocolates

Clare’s Chocolates began life in Edinburgh’s George Street in 1992. The company

was founded by a pioneering lady called Clare Wilson who named her luxury

chocolate creations ‘Chez Clare Chocolates’. Clare established the company in the

heart of fashionable Georgian Edinburgh, making her delicious confections by hand

using only natural and premium quality ingredients. Customers were able to select

their own chocolates which were then gift wrapped. She also offered a range of prepackaged

assorted chocolates in a variety of sizes from small sample packs to large

stylish gift boxes. The Clare’s Chocolate Shop concept was a resounding success

with locals and tourists and soon she had opened two more shops in Scotland.

Clare continued to make and sell her delicious chocolates from her shops until 2005,

when the company was bought by James Gordon from Edinburgh. James recognised

early on that there was a growing café culture in the UK and saw an opportunity to

exploit this in order to expand the business.

Under the guidance of James, the company expanded by developing the original

shops into ‘Clare’s Chocolate Cafés’. In addition to selling their hand-made

chocolates, the new cafés offed a range of delicious chocolate drinks and other

chocolate based products. The luxurious range of hot chocolate drinks are made

from liquid chocolate which is freshly prepared each day in the company’s chocolate

factory. This includes White Hot Chocolate, Dark Hot Chocolate, Mocha, Praline Hot

Chocolate, Chilli Hot Chocolate, Almond Hot Chocolate, Peppermint Hot Chocolate,

Coconut Hot Chocolate, Marshmallow Hot Chocolate, and Cookie Hot Chocolate.

As well as their own specialty hot and cold chocolate drinks, Clare’s chocolate cafés

offer a range of beverages and snacks in order to appeal to the broader café market

— particularly high quality coffees and teas, ethically sourced from many regions of

the world.

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Scottish Qualifications Authority 7

Assessment Support Pack/F7BX 34/003 (Second Edition)

Marketing: An Introduction March 2017

Clare’s chocolate cafés offer an up-market experience which is not matched by the

coffee shops chains such as Costa and Starbucks.

On the chocolate café menu, James states:

Our aim is to create a luxurious haven for chocolate, coffee and tea lovers

alike; a place where customers can enjoy the highest quality chocolate, coffee

and tea beverages in stylish, welcoming and characterful surroundings.

A free Clare’s chocolate of choice is offered with every hot beverage

purchased.

James saw his move into cafés not just as an additional way to increase the

company’s turnover, but also as a means to increase café/shop visitors in order to

promote chocolate sales. While his café prices for his chocolate products reflected

the high quality of its products, he had always priced his coffee and teas at a level

which was competitive with Costas and Starbucks, in order to attract customers into

his premises. That, together with the offer of a free hand-made chocolate with every

hot beverage, was one of his key promotional tools.

Over the years, the café sales have gradually overtaken the sales of hand-made

chocolates and now account for 55% of the company’s income. However, chocolate

products account for 70% of company profits. Sales of the chocolates fluctuate

significantly throughout the year, peaking on special days of the year such as

Christmas, St Valentines and Mother’s Day.

Café sales are less volatile, although they do rise in the summer during the tourist

season. Lunch times are always the busiest time. The majority of chocolate café

customers are women in the 25–50 age group; whereas purchases of the hand-made

chocolates are split fairly evenly between men and women.

There are now eight Clare’s Chocolate Cafés in Scotland and last year the factory

moved to larger premises in order to meet the increase in demand. James is aware

that he will have to increase sales of chocolate products in order to utilise the

increased production capacity at his new factory. The chocolates are priced to reflect

their uniqueness and high quality natural ingredients — with boxed chocolate prices

ranging from £9.99 for sample packs to £59.99 for their most luxurious gift box.

Although themed as ‘chocolate cafés’, more than 75% of customers order coffee or

tea rather than chocolate. However many of these customers buy his chocolate

products during their visit. His aim is to increase the sales of chocolate drinks and

chocolate-based snacks as these have a much higher profit margin than other more

traditional café products.

He had been worried that recent price rises — caused by increasing raw material

costs, together with the recession — would have badly affected his sales. Indeed at

one point he considered producing a range of ‘lower priced/medium quality’

chocolates in order to keep his factory running. However the decline in sales had not

materialised — and much to his surprise, sales have continued to grow by 6% in the

past two years.

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Scottish Qualifications Authority 8

Assessment Support Pack/F7BX 34/003 (Second Edition)

Marketing: An Introduction March 2017

After taking over the business, James had watched the growth of internet retailing,

and in 2000 he commissioned the creation of a website for the company. He saw this

as a major opportunity to develop online sales of chocolates by widening his

geographical market which was mainly dependent on his cafes/shops. In the early

years, sales through the website had been buoyant, but in the past two years they

had slowed considerably. James now realised that he had invested little in improving

the website since it had been developed and had done little to adopt new digital

technologies, apart from the use of promotional e-mail to keep in contact with regular

customers. In particular, he had failed to respond to the rapid growth and popularity

of social media and use of mobile phone apps by customers. He now needed to

consider how he should adapt his marketing communications in order to make sure

they were up-to-date and user friendly.

Apart from the company website, the company has never advertised in any media —

instead depending entirely on product quality; shop/café location; word-of-mouth; and

careful maintenance of customer goodwill to build customer loyalty. To date, all sales

of chocolate products have been made from the company’s shops and cafés, but

recently he received an order from a five star Edinburgh hotel who intended to serve

quality chocolates with coffee in their restaurant. This hotel had also purchased a

selection of the company’s gift boxes to sell from the hotel shop. In addition, James

has also had some enquiries from gift shops in a number of tourist areas in Scotland.

James has recently come across some information about the UK market for drinking

chocolate which he thinks could be useful. The main findings were:

 Hot chocolate drinks suffer from a perception of being an ‘occasional’ drink -

often seen as heavier and more calorific than regularly-drunk alternatives, such

as tea and coffee.

 Drinking chocolate is highly seasonal. Research shows that 17 million people

drink them primarily in the winter or when the weather is cold, in contrast, to the 7

million consumers who drink them all year-round.

 It was also found that some consumers use heavier beverages such as chocolate

to avoid unnecessary snacking.

Additionally two articles from the magazine ‘Caffe Culture Weekly News’ have given

James additional food for thought.

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