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Cowgirl Chocolates

Anderson University
Gregory Livingston
Friday April 17th

ANDERSON UNIVERSITY -CERTIFICATE OF AUTHORSHIP


I certify that I am the author of this paper and that any assistance received in its
preparation is fully acknowledged and disclosed in the paper. I have cited any source
from which data, words, or ideas, either quoted directly or paraphrased, has been
used.

(Student Name and Signature)

COMPANY BACKGROUND
The case shares how, Cowgirl Chocolates began in Moscow, Idaho in 1997 and was
started by Marilyn Lysohir and her husband Ross Coates. Together this couple had
already stated publishing a once-a-year arts magazine called High Ground. With
Marilyns past of working at a candy shop in Pennsylvania, and being allowed to make
sculptures out of chocolate she knew first-hand this enriched treats power over people.
It was her brother though, that said she should combine spicy peppers with the
chocolates. After experimenting and observing tryouts from her own home with
neighbors, family, friends, and acquaintances, Marilyn had found 3 different creations of
this hot and spicy chocolate she thought would sell: Individually Wrapped Truffles,
Chocolate Bars, and Hot Caramel Dessert Sauce. The case shows how Marilyn developed
a logo of a turn of the century, pistol-packing cowgirl named May Lillie, a motto
stating Sissies Stay Away, to attempt to intense a certain market segment. And this hot
and spicy candy was alone something to make this product stand out. Though, with
Marilyn being the artist that she is felt that the packaging design had to be a work of art
on its own and believed packaging made them more than a candy- they become an idea,
an experience, a gift. Cowgirl Chocolates products had won 11 awards in annual Fiery
Food Challenges and the distinctive packaging itself had won several awards for
Excellence for Package Design. Despite these awards, Cowgirl Chocolates has not been
the profitable success that Ross and Marilyn hoped they could use to help fund High
Ground. They still had problems in the future to deal with to potentially fund High
Ground.

I.

EXECUTIVE SUMMARY

Marilyn, having very little training in the business field, has been the one to really take
charge of the now 4 year company. In attempts to try to promote and raise sales of
Cowgirl Chocolates products Marilyn had failures along the way some of those being
costly. To name a few of these setbacks or failures: two years ago Marilyn pursued, with
significant effort and expense, to get any company/anyone in Great Britain to carry her
product, but was turned away, then last year she invested $5,000 worth of product to a
small regional distributor where she never got paid and was only able to get half of her
product back that was no longer able to be sold due to expiration date. This is where it is
evident that she has lack of business knowledge to handle these various situations. Along
with these expenses, Marilyn has had her products turned down from many types of
stores because of them being too hot or spicy, which hurts the overall brand due to its
awareness it is losing and not reaching potential markets. Cowgirl Chocolates has
recently been running off of debt, for example, as of last year Cowgirl Chocolates had
expenses of $53,447 with revenues of only $30,046. This debt was with Marilyn not
paying herself a salary. There needs to be a solution to fix the debt problem. Marilyn
would make multiple efforts to attempt to save the company. Marilyn had found a local
candy company called Seattle Chocolates to take on Cowgirl Chocolates as a private
label customer and produce all of Cowgirls Chocolates chocolate products. Seattle
Chocolates specialized in producing European-style chocolate confections wrapped in
elegant packages. This candy company producer was least relative to Cowgirl Chocolates
being that Seattle Chocolates was a large business with annual sales beyond $5 million.
Such as attempting to push an ad that would cost her $3000. With limited resources to
work with if this ad were to be a failure also, Marilyn is left questioning what to do next.

She wonders if she should focus attention towards Cowgirl Chocolates online retail or
expanding her wholesale business to include more retailers. Where should she put her
efforts? Potentially invest into a cookbook, or is it worth pursuing? How should she
manage her company and what steps need to be taken in order to reach profitability.

II.

SWOT ANALYSIS
A. Strengths
i. Unique product and product package
1. Brings product differentiation
ii. Produced by Seattle Chocolates
1. Is a large company with 5 million dollars in annual sales
iii. Awards in chocolate products as well as packaging
iv. Website
1. Generates 1/3 of sales,
2. Able to interact with customers get feedback
v. Marilyns passion and drive
vi. Flexible return policy
B. Weaknesses
i. Consumers and Retailers refuse to purchase or sell because products are
too spicy
ii. No measurement/tracking system or database research leaves questions:
1. Who is making purchases?
a. Is it repeat customers or new?
2. Where did they become knowledgeable of product?
iii. No strong distributor and or distribution channel
iv. Lack of focus
v. Overload of inventory
vi. High production cost
C. Opportunities
i. New Mild Mannered flavor
1. Could attract new customers
2. Retailers who before said product was too spicy may reevaluate
and decide to carry product
ii. Growth of gourmet chocolate market
iii. Potentially loyal customers
D. Threats
i. Low buyer and supplier power
ii. The product can easily be imitated

III.

COMPETITIVE ANALYSIS
A. Rivalry Among Existing Competitors
i. When it comes to the competition of Cowgirl Chocolates there are many
that in fact compete indirectly, brands such as heresys, Butterfinger, and
snickers.
B. Bargaining Power of Suppliers High
C. Bargaining Power of Buyer High
D. Threat of New Entrants Mod
i. not many other people or companies are looking to enter into the market
of hot and spicy gourmet chocolate
E. Threat of Substitute Products
i. High- There are multiple candies, sweets, and hot and spicy foods
available for consumers.
F. External Environment
i. Low theres not many external or environmental situations that would
affect sales besides holiday seasons.

IV.

CONSUMER ANALYSIS
A. Target Market
i. The target market is high to middle class consumers
ii. Only 15% of American consumers were currently eating hot and spicy
foods
iii. Men are more inclined to eat spicy foods than women
B. Marketing Mix
i. Product and Price
Prices vary from wholesale to retail price
1. Individually Wrapped Truffles2. 1-4 pound Draw String Muslin Bag 16%
a. 13 truffles
3. 1/2 pound Tin 12%
4. Hot Caramel Dessert Sauce 10%
5. Spicy Chocolate Truffle Bars 50%
i. Orange Espresso
ii. Lime Tequila Crunch
6. Sampler Bag 7%
a. 4 assorted hot truffles in a small drawstring muslin bag
7. 1/4 pound Gift Box 1%
a. Assorted hot truffles or mild-mannered truffles in a fancy
gift box with gift card

8. 1 pound Gift Box 1%


a. Assorted hot truffles or mild-mannered truffles in a fancy
gift box with gift card
9. Gift Bucket 1%
a. Tin bucket containing 1/4 pound gift box, 2 truffle bars, and
1 jar of caramel sauce
10. Gift Basket 1%
a. Made of wire and branches and containing 1/2 pound tin, 2
truffle bars, 1 jar of caramel sauce, and a T-Shirt with
company motto on the back.
11. Nothing Fancy 1%
a. 1-pound assorted hot truffles or mild mannered truffles in a
plastic bag available only online.
ii. Promotion
1. Ad in Chile Pepper Magazine
2. Trade Shows
3. Various Newspapers including the New York Times
4. Word of Mouth
5. Website ads
iii. Place
1. Co-ops
2. Website
3. Gourmet Markets
4. Hot & Spicy specialty stores
5. Fine art/ Museum gift stores
C. Marketing Strategy
i. Marylin is not currently running one direct strategy, she has been
attempting to just do whatever works. She has been attempting to adapt to
find out what works. If one were to pin one strategy to Cowgirl, it would
be leadership with Marylin showing her passion to move the company
around.

V.

FINANCIAL ANALYSIS

There was a 40% revenue comes from the truffles, 50% comes from the chocolate bar, and 10%
the dessert sauce.
A. Total Revenue (Product Sales+ Revenue from Shipping) = $30,046
B. Total Expenses (Including Leftover Inventory)= $53,447

C.
D.
E.
F.

Total Net Sales= $30,046


Gross Margin= $15,849
Profit before Interest & Taxes= ($6,175)
Break Even Analysis= 22,024 units

BEP for the Spicy chocolate truffle bars


P=2.99 v= 1.69 FC=22,024

=12,034 units in terms of dollars its $35,984.56

Looking over the finances for Cowgirl Chocolates, it is clear that they need to be
charging higher prices and cut some of their product lines in an effort to save money. This
product alone can almost cover over half of the cost of the expenses. After looking to
their largest contributor the Spicy chocolate truffle bars, if more efforts were placed into
increasing sales for this product than the company to potentially profit in the long-term.
Leaving the average price at 18.70 and the average cost at 6.53. Chart shows that Marilyn
should get rid of all of the Gift type products. They cost way too much to make and
they only account for 1% of the overall revenues. This will drop costs down, then allow
efforts to be placed either toward the cookbook/ internet/ or getting into major retailers.
That being said I feel that Cowgirl Chocolates should give up on the Wholesale market, it
is just not profitable for them.

Cowgirl Chocolates Pricing and Cost per item.


Product
Pound Muslin Bag
pound Tin
Hot Carmel Dessert
Sampler Bag
pound Gift Box
Gift Box
Gift Bucket
Gift Basket
Nothing Fancy

Price
$6.95
$14.95
$5.95
$2.95
$8.95
$24.95
$39.95
$59.95
$19.50

Cost
$2.35
$4.78 (Includes T-shirt)
$2.50
$. 97
$2.95
$9.05
$11.02
$23.06
$7.42

VI.

DECISION/PROBLEM STATEMENT
A. Central Management Issues

When looking at the various central management issues the first to note is that the company does
not have any clue of what type of consumer is purchasing the product. Along the same lines, they
are unable to view their website traffic to gain more information on how to adapt to the market or
consumer habits. When compared to other chocolates, consumers do not feel that it is worth the
price or why they should pay for it. The other problem that management is dealing with is how
to go about expanding, with their current inventory problems.
B. Constraints
Having a product that is so detailed, there is no real knowledge of the niche market. There is
little training to be offered. The main constraint is that there is a limit of financial resources.
C. Decisions
She needs to first of choose a segment to focus on; for example Internet or retail. How to go
about successfully selling the product. Which retail stores would best fit the Cowgirl Chocolate
brand.

VII.

CRITICAL ISSUES
One of the biggest critical issues is their inventory, it is currently costing them far to much
money. Along with that the company is struggling to deal with their current finances. Also,
there is no true strategy; it is really hard for a consumer to buy into a product that lacks
strategy

VIII.

ALTERNATIVES
A.
B.
C.
D.

IX.

Go as only sold online product.


Stay away from all wholesale or stay away from all retail choose one or the other
Sell only truffles and bars
Stop the business all together

RECOMMENDATION
If Marilyn decides to keep Cowgirl Chocolates going she needs to focus her sales effort
on her Website and Retail. She should partner with those retailers and get sales/revenue/

and customer research data from them to be able to track what type of consumer wants
and or uses her product. She needs to focus on a specific market and attempt to get more
repeat customers. With that being said her expanding her product line will only help her
cause. Marilyn needs to bring her retail price and wholesale price in down, until she can
reach a direct audience. Once, the audience is reached see how change in price will affect
the sales and increase profits. Also she needs to take this new data and evaluate her
product line, she is currently investing in some products that are only accounting for
about 1 percent of her sales. Also, she needs to make sure that there is a control on the
inventory, if a product is not working than pull the product and sell what is selling.
Lastly, she needs to implement a marketing strategy, one that shows the desired target
market, such as the high to middle class. A strategy that shows how Cowgirl Chocolates
is a different product, with that said there is a need to utilized social media. Make sure
that there is involvement with the consumer and people can become more connected with
the brand.

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