SBN Columbus asked local business experts to analyze the plans for Chocolate Works. Using the company’s two-page executive summary given to investors, David Bittner, president of Growth Management Solutions Inc. and chairman of the Columbus Investment Interest Group, and Beatrice Wolper, partner with Chester, Willcox & Saxbe LLP and board member for the Family Business Center of Central Ohio, took the time to provide some feedback.
By David Bittner
Something that immediately caught my attention about Chocolate Works is the owners’ willingness, and even desire, to place equity with directors and partners.
Partnering with Gerald Stevens seems like a smart move. Chocolate Works will gain wide distribution while aligning with a complementary product having a parallel brand image.
Borrowing from the real estate adage, most folks in the venture community agree the three most important factors affecting the success of a new venture are: 1) management, 2) management, 3) management. A strength of Chocolate Works is that Barry and his team have been there, done that. As their venture unfolds, they’ll know which opportunities to pursue and where the pitfalls lie.
Chocolate Works appears to have researched its market thoroughly and has a well-thought-out marketing strategy. The varied arsenal of distribution weapons is powerful so long as the company can steer clear of channel conflict.
One clear weakness is that the company has no proprietary products or technologies, resulting in low barriers to competitive entry and downward pressure on margins.
In addition, new ventures in vogue with investors today are business-to-business plays. Chocolate Works, on the other hand, is a business-to-consumer play. Consumers are less attractive customers because of the expense of locating and keeping them and the limited purchasing power they have.
Another fashionable business concept is dot-com. However, Chocolate Works is not com. Though the company does intend to use the Web as a promotional tool, sales of impulse, sensory-driven food products aren’t likely to benefit as much from the e-commerce wave as planned, nonfood products like books or collectibles.
Be that as it may, Chocolate Works may be able to take advantage of its low-tech nature by appealing to investors who have experience in traditional businesses and are wary of the volatility and the reality of all things “e.”
All companies ought to espouse a certain method of producing a return for their founders and investors. If not, they risk never achieving their financial objectives. They should pursue an exit strategy for which there is industry precedent for attractive returns. I suspect the return to the owners of Chocolate Works might most readily and productively occur as a result of a sale to a strategic buyer like Godiva or a channel partner like Gerald Stevens.
The company might do well to consider adopting a more specific intent for its use of capital. More thorough financial planning up front leads to more effective deployment of resources later.
I suspect there are a number of companies in this market that offer similar products. If not now, there will be more competition when and if Chocolate Works is successful. The owners should differentiate their product from competitors’ as much as possible while they’re in the formative stages so the distinction is clear when the stakes are higher.
Many investors shy away from family-run businesses due to the domestic pressures that compound the professional challenges. Barry and his team may have to convince investors that he can turn this into an advantage.
Rapid growth of more than 300 percent between 2000 and 2001 is quite steep. There’s the obvious issue of generating enough volume to accomplish that goal, but there’s also danger that the management and fulfillment infrastructure may not be able to keep pace.
By Beatrice E. Wolper
Chocolate Works’ plan incorporates both a solid history and the chance for exciting growth.
When going to the market, it may be beneficial for Chocolate Works to emphasize that several members of the family work at the company; therefore, it is a “family-owned business” — which translates into strong values, ethics and loyalty. Family-owned businesses have done well in the marketplace.
In order to reach the desired growth outlined in the summary, the company may wish to focus on how to strengthen the family business relationships by having a family business plan. This should assist the company in expanding on the national level, since the plan should incorporate the concepts derived from scenario planning, which is often necessary for such growth.
What will the company be like in three years, five years, 10 years and 25 years? Will people still be eating chocolate? (I will!) Will the family be involved? Cousins? Grandchildren? Will people only be buying through the Internet? The scenarios would analyze the company’s strengths, weaknesses, opportunities and threats for each alternative.
It appears that to grow to the national level expressed in the summary, a clearer definition of who the customer is needs to be established. The list of corporate customers is extremely impressive. After stating all the great name customers of the company, it is surprising to read that the target customer is a female purchasing from a retail store.
It appears that the main customers for the corporate sales department should be similar to those listed, and the target customer for the retail sales department would be such a female. There needs to be two distinct marketing strategies — selling different concepts to different entities.
Development of why the chocolates are unique may facilitate the desired national growth. What makes the company’s products unique? Why are these chocolates and private label gourmet boxes different than those of competitors?
Teaming with a national partner is a positive move toward aggressive growth. The company’s financials should be detailed enough to account for many outcomes: worst and best case. Since Gerald Stevens is new to the market, the financials need to reflect what happens if it takes longer than planned for the Gerald Stevens expansion. All in all, a tremendous opportunity, but one that needs to consider various timetables.
In conclusion, the company sounds very solid, with excellent growth opportunities. And, who wouldn’t like chocolate?
