Rogers chocolate

Rogers’ Chocolates |
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The Current Situation

Rogers’ Chocolates is a Victoria-based firm that produces high quality premium chocolate. In the last few years it underwent drastic changes. A new president, Parkhill, was appointed in consequence of Jim Ralph’s retirement after 18 years of presidency in 2007. After being notified of Ralph’s decision, theshareholders briefly considered selling the company but decided against it. Parkhill was given a goal of doubling or tripling the size of the company within the next 10 years. However, Rogers’ is currently facing some problems that hamper this expansion: The problems will be discussed in more details later.

Company Analysis and Corporate Strategy

Rogers’ Chocolates was founded in 1885 andit is Canada’s oldest chocolate company. It specializes in production of handmade premium chocolate, with a recent addition of ice cream novelties. Rogers’ is a privately held firm whose shareholders are two financial executives, an art dealer and private investor, and a former owner of Pacific Coach Lines. Parkhill closely collaborates with the senior management team comprised of three members: MsPhoenix, vice-president of Sales and Marketing, Mr. Wong, vice-president of Production, and Mr. Bjornson, vice-president of Finance and chief financial officer.
The company has 110 retail and production employees plus 20 more workers in the management, administration and sales department. More employees are hired during busy periods, such as the Christmas period. Rogers’ is competing forcustomers in the premium chocolate market that is growing at 20% per year, and it has a 6.4% market share in Canada.
Despite a slowdown in the sales of chocolate in the last few years, Rogers’ was able to achieve very good financial results as shown by the ROEs for the past two years1. This success was achieved through the company’s competitive advantage: production of high quality products, atraditional brand image people trust, and the uniqueness of the (labor-intensive) production process. Making and wrapping chocolates by hand are value added activities, along with the excellent relationships Rogers maintains with its retail chain and end customers through delivering a consistently high quality product and service.
Additional important elements are the employees’ strongadhesion to the company’s values, great work environment, excellent customer service, user friendly website, and a higher search engine ranking that attracts Web consumers. Despite these strengths, Rogers’ has not yet been able to improve its costly and inefficient production process. Rogers’ supply chain is also not as effective as it could be due to some issues with suppliers, the already mentionedproduction problems, and low familiarity of brand outside of B.C.

Financial Performance
Rogers’ is generating positive income, and is able to pay premiums to its shareholders. Its ROEs, even if decreasing, are still very high (10.6% for 2006 and 12.6% for 2005). Rogers’ also shows good and improving performance in terms of liquidity - it has increased its current ratio; however, thecompany has less free cash on hand, possibly because it had paid out part of its debt, as shown by the decrease in the D/E ratio. This might prevent the company from investing in short-term growth. Moreover, regardless of high profit margins, sales growth is slowing down, reducing the revenues, and therefore reducing profits.

Market Performance
The company’s share in the Canadian premiumchocolate market is 6.4%2. This might seem a low figure, but it should be noted that Rogers is primarily a local company that makes most of its sales in B.C., and specifically on Vancouver Island.

Industry Analysis
Industry Definition
Rogers’ Chocolates operates in the premium chocolate industry, which currently enjoys a growing market and high margins. It is very closely related to the...