Godiva Chocolatier Inc.

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Godiva Chocolatier Inc.

founded: 1929

Contact Information:

headquarters: 355 lexington ave. new york, ny 10017 phone: (212)984-5900 fax: (212)984-5901 toll free: (800)9godiva url: http://www.godiva.com

OVERVIEW

Godiva Chocolatier is a manufacturer and retailer of ultra-premium chocolates in the United States and abroad. The company has boutiques in more than 100 locations and more than 1,000 additional outlets in department stores and specialty shops.

COMPANY FINANCES

Since Godiva Chocolatier is a wholly owned subsidiary, financial statements are not published, and Campbell Soup Company does not release financial information for the company. According to the Campbell Soup Company 1997 annual report, "Godiva contributed double-digit sales growth through strong retail sales in the United States and continued expansion in Japan."

ANALYSTS' OPINIONS

According to an analysis of the Campbell Soup Company, published by Deutsche Morgan Grenfell Inc. on February 19, 1997, "Godiva has become a powerful global brand of premium chocolates. Year-to-date sales have increased 20 percent on top of an 11 percent increase in fiscal year 1996 and a 16 percent increase in fiscal year 1995. This growth has stemmed from new products, new stores, and new geographic locations, including Japan and Russia. Management foresees double-digit growth on the top line and in earnings for the foreseeable future."

HISTORY

The Draps family began crafting elegant chocolates in Brussels, Belgium, in 1929. When he opened the first retail shop, Joseph Draps, a son of the founding family, is said to have named the company after the legendary Lady Godiva, who is commonly found depicted in European art.

The Draps worked to create a smooth and rich chocolate. "Through the years," according to company literature, "these standards have been maintained as assiduously as Draps' recipes have been guarded. The finest ingredients in the world have been aggressively sought out, making artificial colors and flavors unnecessary. As a result of this adherence to Draps' heritage, Godiva Chocolates evoke the greatest in confectionery excellence."

Campbell Soup acquired Godiva about 30 years ago, during the 1960s. It started producing chocolates for the American market in 1966 in Pennsylvania. Albert J. Pechenik, formerly head of the subsidiary, is credited with taking Godiva "out of the red into solid profitability." He took the company "from a few boutiques in the East to department stores across the country" in the late 1970s and early 1980s. At that time chocolates sold for about $5 a pound, compared to $16 per pound in the late 1990s. Under Pechenik's direction, Godiva sales reportedly "climbed from $4 million to well over $20 million in less than four years," according to Forbes magazine. Godiva was yielding $2,388 per square foot per year in the top 10 department stores, according to Pechenik.

Thomas Fey, who succeeded Pechenik as Godiva president, told Working Woman that the company began automating its sales operations in 1987 and equipped its field force with laptop computers "to enhance the existing corporate culture." Fey claimed, "Godiva could have maintained its lead easily for several years without investing in computers," but "wants to keep Godiva on the leading edge."

The company spent approximately $3,000 for each laptop, in addition to software, development, training, and other expenses. "The paramount goal initially," said Fey, "was to reduce paperwork for the sales representatives. If we have cut that load and given them time to do something else—whether it be other work or free time to be with their families—part of our objective has been realized."

In 1994 Godiva undertook a new marketing program under president David Albright. Godiva sales declined in the late 1980s following the recession. In the early 1990s the company sought ways to improve its profits. Its goal was to improve store traffic. The redesign of its stores was the new marketing program's main focus. Godiva changed the decor of its stores from marble floors and black lacquer to creamy white walls, bleached wood floors, and delicate wooden displays. Prior to the redesign, customers had to look through glass showcases and rely on the help of a salesperson to make purchases. The purpose of the redesign was to make the chocolates more accessible, with printed price lists and open shelving so that customers could serve themselves. The result was an upturn in worldwide profits and double-digit growth in the new stores.

One of the key elements in Godiva's new marketing program was the inclusion of new, less-expensive products customers could easily purchase on impulse. In 1994 it was estimated at being a $6-million market, which Godiva had "historically ignored," according to author Fara Warner in Brandweek magazine. The first new products were coffee, then cocoa and biscotti. Two-piece packages of chocolates for $3.50 were introduced. Then came the Dessert Chocolat in 1996. Godiva's new introductions were an attempt to find a price point and a niche for all its potential customers.

FAST FACTS: About Godiva Chocolatier Inc.

Ownership: Godiva Chocolatier Inc. is a privately owned company.

Officers: Craig W. Rydin, Pres.

Principal Subsidiary Companies: Godiva Chocolatier Inc. is a wholly owned subsidiary of the Campbell Soup Company.

Chief Competitors: Some chocolate makers competing with Godiva Chocolatier Inc. are: Scharffen Berger Chocolate Maker; Guittard; and Kron Chocolatier.

STRATEGY

Very little information is available outside the company about Godiva's business and corporate life. However, the company does disclose that its sales strategy encompasses wholesale, retail (company-owned boutiques), institutional, and direct mail sales. Godiva wholesale accounts include fine department or specialty stores located in major metropolitan areas throughout the country. Examples of wholesale accounts are Bloomingdales, Lord & Taylor, Saks Fifth Avenue, Neiman-Marcus, Jordan Marsh, Hecht's, Macy's, Dayton-Hudson, and Wanamaker's. The company-owned boutiques are located in upscale malls in major metropolitan areas of the United States. The company's Institutional Sales Program makes Godiva available as an amenity in many luxury hotels as part of their turn-down service, in-room mini bars, or catering service.

A bit more information is available about Godiva's direct mail programs. According to a 1996 article in Direct magazine, Craig W. Rydin, president of Godiva Worldwide, said that 6 percent of Godiva's total North American sales and profits came from direct marketing in 1996. "For the 70-year-old company, direct has typically meant the six consumer and two corporate catalogs it mails out each year," according to Rydin. Godiva's six consumer catalogs are mailed in the fall, Christmas, Valentine's Day, spring/Easter, Mother's Day, and summer.

According to the company, Godiva chocolates are positioned to appeal to consumers who buy them for three reasons—for the buyers themselves, for home entertainment, and for "gifting," which accounts for 70 percent of direct marketing sales. Product strategy, catalog design, list management, and customer service make up the four crucial aspects of direct marketing, according to David L. Albright, former president of Godiva Worldwide.

Since the mid-1990s, interactive marketing has taken on greater importance in the company's direct marketing area. In 1994 Godiva was the first Campbell Soup Company to launch a web site. According to Susan M. Dingwall, head of direct marketing for Godiva, the company hoped the web site would bring in 15 percent of its direct mail business in 1996. The Godiva web site includes online ordering, recipes, a list of new Godiva products, a store locator, and an ongoing soap opera entitled, "Murder and Fine Chocolates." Godiva senior marketing manager Adam Rockmore explained in Direct, "although women make up only a third of Web surfers, the 8,000 online surveys that customers have completed show that 65 percent to 70 percent are female. Godiva's catalog list is mostly women in the 25 to 65 age bracket with incomes of $50,000 on average."

Godiva has maintained an upscale, golden image for its product. The company has created this image through its advertising, packaging, and distribution. Godiva calls its advertising campaign "silhouettes." This campaign has been designed to "reflect a more approachable, warmer, friendly mood," according to Godiva literature. It is intended to project "a Godiva whose premium image is more generically perceived." Godiva advertises its chocolates in "upper tier" magazines including Bon Appetit, Forbes, Food & Wine, Travel & Leisure, and Gourmet.

Godiva's chocolates are packaged elegantly and sophisticatedly. Gold boxes, grosgrain ribbon, silk flowers, gilded leaves and berries, collectors' tins, and colorful wrapping paper are offered in a variety of ways on the chocolate assortments. The chocolates are never sold in discount stores or at a reduced price. They are only distributed through upscale department stores and specialty shops.

CURRENT TRENDS

Changing tastes in chocolates is one trend that the Godiva Chocolatier is facing as it plans to modify the way it makes and packages its product. These changes are a result of studies conducted by Godiva and of consumer comments the company received. According to an October 1997 article in The New York Times, when Godiva started making chocolates in the United States 30 years ago, the company decided to alter its product slightly from its European chocolates, to reflect a difference in the American palate. "Americans have tended to like their chocolates sweeter, with less intensity, and they have not preferred some favorite European flavors like hazelnut," explained the article. As American tastes are changing, Godiva is adjusting its line of chocolates and including more European-style items, notably four chocolates with hazelnut filling. Godiva is also changing its most popular candy, truffles, by making the hard chocolate coating thinner. New specialized assortments including all-chocolate or caramel and nuts will be made available.

As the American palate has changed, so has the realization that Godiva chocolates sold in the United States and those in Europe are not the same. Americans are becoming more aware of the differences between the chocolates sold here and abroad. These changes will not affect prices.

PRODUCTS

Godiva makes premium chocolates in a myriad of flavors, shapes, and assortments. The Godiva catalog lists approximately 40 different products including chocolates, cocoa, coffee, and biscotti. The Godiva signature assortment is its Gold Ballotin, offered in seven sizes. The Ballotin is a gold box embossed with the Godiva logo and wrapped with a gold tie. The word "ballotin" comes from the French diminutive "ballot," which means small package of wares for sale. There are ballotins to mark every occasion including birthdays, weddings, births, and all holidays. Truffles are another famous Godiva assortment.

Most Godiva products are Kosher and the company's on-line ordering service lists 34 different Kosher items. Coffee, cocoa, and biscotti are recent additions to the Godiva line-up. Dessert Chocolat was introduced by Godiva in 1996 and features three different pieces, which combine two different fillings to make a dessert-like taste—strawberry cheesecake, creme brulee, and machaccino mousse.

GLOBAL PRESENCE

Godiva Chocolatier is expanding globally. In 1998 Godiva had plans to open 30 more retail stores in the United States. Perhaps Godiva's biggest focus is on its expansion efforts in Japan where Godiva has more than 100 distribution points. Additionally, Russia is a new market for Godiva chocolates.