This many products is a detriment to supply chain, product forecasting and overall company cost containment and growth.
Opportunities
Despite a growing level of consolidation in the market among chocolate and confectionary vendors, the heterogeneity of demand across Canada is sustaining the large number of smaller enterprises in this industry. Approximately 70% of companies in this industry have 20 employees or less for an example. The market then is diverse enough to sustain the unique value of GBL; the question however is at what level of sales it can sustain itself in a slowly growing to declining market.
American companies with multinational experience are acquiring smaller, more niche-oriented vendors throughout Canada to both extend their globally-recognized brands and to also create a more stratified product strategy within Canada as well. The company has a 30% market share in Valentines' boxed chocolates for example.
Growth of specialty retail channels shows potential for higher margin, niche-oriented products for this emerging distribution channel.
Threats
Canada is the only nation that has four major multinational chocolate bar companies all equal in size, all competing in the same market.
Canadian demand domestically for confectionary products has been steadily decreasing due to the higher levels of health consciousness in the nation in addition to the lower proportion of the Canadian children as part of the total national population.
Multinationals looking to use merger & acquisition (M&a) activities in Canada to offset erosion of domestic market share in their headquartered nations. The use of Canadian M&a activity to counter-balance the loss of market share domestically has the potential to lead to price wars in Canada as well.
This would entail a new sales force to sell into companies who want private-label goods and is quite successful for companies mentioned in the case.
Moving the factory to a major centralized location in Ontario is another option,
Consolidating manufacturing with other companies in an attempt to gain economies of scale and decrease production costs is another option.
Recommended Solution
As GBL has a consistently high level of production capacity available and has a consistently high quality products, David Ganong needs to create an aggressive program to penetrate the contract manufacturing market, and another to go after private label business throughout Canada and globally. Third, the company needs to do profitability analysis on a per-brand basis and discontinue those brands that are no longer contributing to profitability. By concentrating on new markets with potentially new products for the contract manufacturing and private label customers, GBL stands the best chance of achieving its revenue targets quickly.
