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Rocky Mountain Chocolate Factory (RMCF)Stock (Confectioners Industry, Food & Beverage Industry)
 However, the company's focus on chocolate means it has missed out on the boom in chewing gum that some of its competitors have profited from. For example, Cadbury plc (CBY) had gum sales increase 26% from 2006 to 2007, boosting its total revenue 7%.[3] RMCF is also different from other confectionery companies in that its sales are evenly spread across the year, because its products are often given as gifts year-round.[4] No quarter in 2007 had sales higher than 27% of annual revenue[5], while other confectionery companies rely on the period from Halloween through Christmas for most of their sales.[6] Increased sugar, corn, and milk prices cause increased costs for confectionery companies. RMCF has responded to these rising costs by implementing software systems to boost production efficiency, leading to operating margins increasing from 23.01% to 23.95%.[7]
[edit] Business Financials [edit] Franchising (24.1% of sales, 32.3% of gross profit)The franchising segment markets and sells RMCF products to distributors. RMCF distributes its candies to five company-owned stores, 280 domestic stores, 18 domestic kiosks, and 41 international stores.[8] In Q1 2008, royalty and marketing fees rose 11.3% and franchise fees more than doubled from prior-year levels.[2] Also, RMCF will open ten airport stores in the next two years.[9] From fiscal 2007 to fiscal 2008, franchising sales decreased 8.4%, however due to decreased store sales.[10] [edit] Manufacturing (75.9% of sales, 67.7% of gross profit)RMCF manufactures 300 chocolate candies and other confectionery products such as hot cocoa. Products are sold as boxed chocolates, gift baskets, and special assortments.[11] Manufacturing generates revenue by selling these products from the factory and to vendors. From fiscal 2007 to fiscal 2008, manufacturing sales increased 3.4%.[12]
[edit] Trends and Forces[edit] To compete in the confectioners industry, RMCF produces niche gourmet chocolates. [edit] Producing niche gourmet chocolates allow RMCF to focus on franchising.By producing a niche product, RMCF can focus solely on gourmet chocolate production and marketing. Franchising helps RMCF create a company identity based on its niche product. For example, when consumers shop for gourmet chocolates to give as Valentine's Day or Mother's Day gifts, they recognize RMCF as a specialty store that makes gourmet chocolate sets.[17] Also, producing a niche product allows RMCF to apply more energy to franchising. In Q1 2008, royalty and marketing fees rose 11.3% and franchise fees more than doubled from prior-year levels.[18] Furthermore, RMCF will open ten airport stores in the next two years.[19] [edit] Niche gourmet chocolates deny RMCF benefits of balanced candy portfolio.Having a balanced product line is a growing trend in the confectioners industry. In April 2008, chocolate-bar company Mars acquired gum company Wrigley to sell other candy products. From 2006 to 2007, Cadbury plc (CBY) had gum sales increase 26%, boosting its total revenue 7%.[20] By producing a niche product, RMCF cannot gain from booms in other confectionery products such as gum and candy.
[edit] RMCF responds to increasing corn, cocoa, sugar, and milk prices by installing software systems to increase efficiency.Cocoa is RMCF's highest volume commodity, as cocoa is the key ingredient in chocolate production.[21] Milk is an ingredient in RMCF milk chocolates. Corn for corn syrup and sugar are used as base ingredients for chocolates. Unfortunately for all confectionery companies, corn, sugar, and milk prices have increased in the last decade. Confectionery companies that also make chocolates are also affected by cocoa prices that have risen dramatically recently. Since RMCF only produces chocolates, it suffers more than other confectionery companies when cocoa prices rise. From June 2007 to June 2008, cocoa prices increased 37.5%.[22] From 2006 to 2007, corn prices increased approximately 52%,[23] milk prices increased over 50%,[24] and sugar prices increased 20.7%.[25] In that time range, RMCF's operating margins increased from 23.01% to 23.95%, or $29,965.32.[26] RMCF has improved its operating margins by improving manufacturing efficiency with new software. RMCF implemented the Advanced Planning and Scheduling (APS) software and IBM's Point-of-Sale (POS) system. APS electronically allocates the correct amount of raw materials to precisely meet demand.[27] The POS system gives employees easy access to sales data and identifies inventory trends.[28] [edit] RMCF attains balanced quarterly sales by adjusting to the holiday season.Candy is in the highest demand during the holiday season. RMCF offers chocolates that are appropriate for any holiday -- including Easter and Mother's Day. For Mother's Day, RMCF produces niche boxed chocolates and chocolate assortments. During the Christmas, Easter and Valentine's Day holiday seasons, RMCF makes as many as 100 additional items, including many candies offered in packages specially designed for the holidays. During these three holidays, RMCF doubles its product line to compete with the large-cap companies.[29] RMCF develops special packaging for the Christmas, Valentine's Day and Easter holidays, and customers can have their purchases packaged in decorative boxes and fancy tins throughout the year. [29] RMCF has a balanced quarterly income statement, as no quarter has sales above 27% of annual sales.[5] Boxed chocolate sets are popular gifts for Mother's Day and Valentine's Day, so RMCF's franchising efforts have made its products popular choices.[30]
[edit] Competition[edit] Confectioners
[edit] Market Share[39]
[edit] References
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