Retail Management 12th Edition by Barry Berman ,Joel Evans

Exercise 16

Case 2: Manufacturer-Retailer Relations in the Chocolate Business
Eric Heinbockel and his two friends, Fabian Kaempfer and Nick LaCava, launched Chocomize (www.chocomize.com), a mass-customized chocolate company in late 2009. The partners launched the company with an investment of $80,000 in capital, mostly from friends and family members. Under mass customization, a consumer is able to choose the combination of ingredients and toppings (such as marshmallows, raisins, and coconut pieces) that they desire to be mixed into their candy bars. A similar mass customization strategy has been successfully used by Chocri (www.chocri.co.uk), a Berlin-based European chocolate maker.
During summer 2010, a European luxury retailer contacted Chocomize's partners with an offer to purchase 15,000 chocolate bars. This retailer planned to sell Chocomize's mass-customized products in its New York City, Miami, and Los Angeles stores during the Christmas holiday season. Chocomize carefully evaluated this proposal since it occurred during a time period when it was selling less than 150 chocolate bars daily.
Even though the potential order seemed very appealing, the owners of Chocomize had some major concerns. One, the retailer wanted to buy the chocolate at cost, arguing that this purchase would have tremendous publicity value to the small firm. Two, Chocomize's three chocolate machines and 1,500-square-foot facility would only be able to produce 10,000 customized bars-not the 15,000 desired by the retailer. Third, the order was so large that it could affect Chocomize's ability to fulfill the orders from its loyal Web-based customers. Four, Chocomize's reputation could be irreparably damaged if its product quality were compromised as a result of taking this large order.
One way of properly filling the order was to find a subcontractor to help Chocomize produce the required quantity. Unfortunately, Chocomize's partners could not find a suitable contractor experienced in the kind of melted toppings that Chocomize used.
In October 2010, two of the partners presented their dilemma to two classes at the Harvard Business School. Many of the Harvard students believed that accepting the offer would be a mistake for the same reasons the partners were concerned. In addition, two potential subcontractors that were contacted based on a student's recommendation also did not work out. One required a minimum order of 50,000 bars. The other could not use the same imported Belgium chocolate that Chocomize utilized. This second subcontractor also had difficulties with reproducing Chocomize's packaging. As a result, Chocomize's partners decided to decline the retailer's order.
Things are now looking up for Chocomize. In November 2010, the partners appeared on three morning network television programs. Chocomize's products were also described in articles that appeared in New York Times and USA Today. The company sales in the time period from Thanksgiving to New Years accounted for almost 40 percent of the company's annual $400,000 revenue.
The European retailer then again expressed interest in placing a large order, this time for the 2011 holiday season. By then, Chocomize had worked out arrangements with a contract manufacturer to supply the required purchase quantities for these bulk order sales.
1. Under what circumstances should Chocomize have accepted the European retailer's initial offer
2. Comment on the conflicting goals of the European luxury retailer and Chocomize.
3. Discuss the concept of value and the value chain for Chocomize.
4. How can the European retailer utilize relationship retailing for its chocolate products