Competing In Turbulent Times: Thorntons Plc Case Study

Published: 2023/07/05 Number of words: 2123

1 Introduction

Thorntons PLC is the UK’s largest producer and seller of specialist chocolates. In its early days, the company sustained a brand image of in-house manufacturing of chocolates and selling via a chain of proprietary shops. The aim of the business was to underline its premium qualities and exclusivity of product freshness and assortment.

The company has gone under significant transformation over the past decades which required organisational restructuring and new product development. The company is facing external pressure from new product substitutes and market rivalry. As the industry has grown in substantial dynamics, the company’s competitive advantages of customised approach and fresh tastes are no longer relevant to the industrial environment and customers’ needs.

The present assignment explores Thorntons transformation strategy specifically with respect to the company’s brand and marketing positioning. For this purposes, Porter’s Five Forces is used to provide an overview of the competitive forces faced by the company. In addition, the changes of consumer buying behaviour which are taking place due to the Covid19 pandemic and looming economic recession are also used for the purposes of the analysis.

2 Competitive Positioning

The competitive positioning of Thorntons will be explored by the use of Porter’s Five Forces model. This model has been the ‘golden standard’ in management and strategy research which is comprised of the market dynamics which influence the performance of a business organisation and its competitive positioning. The following figure offers an overview of the different elements which Porter’s Five Forces is comprised of such as: Bargaining Power of Suppliers; Bargaining Power of Buyers; Threat of New Entrants; Threat of Substitute Products; and Rivalry Among Existing Competitors.



Figure 1: Porter’s Five Forces

Figure 1: Porter’s Five Forces

2.1 Bargaining Power of Buyers

The bargaining power of buyers in this industry can be proposed to be significant. This is stimulated by the diversity of product alternatives which exist in the market. For example, the large availability of high street retailers, wholesalers and specialist shops provide customers with a range of options and therefore building customer loyalty in the consumer space is often hard to achieve. Moreover, there are a range of niche product brands of organic, vegan and artisan chocolate products which further saturate the market and gives customers a power to choose freely between brands.

2.2 Bargaining Power of Suppliers

Although the bargaining power of chocolate brands is hard to be defined, it can be proposed that large brands generally have greater bargaining power over their suppliers (Meza and Sudhir, 2010). For Thorntons the bargaining power of suppliers has become an increasingly important consideration due to the fact that the company has become reliant on external suppliers of ingredients (Thomson and Barratt, 2017). It is also important to be underline that the manufacturers are only one of the stakeholders which could put pressure on brands such as Thorntons. The retail channels and also e-commerce platforms are growing of importance and seen as having solid bargaining power in supply chain management (Crook and Combs, 2007).

Furthermore, there are growing pressures from retailers and consumers on the ingredients used by chocolate brands. Pressures over producers to use vegetable oil than cocoa butter in the products to extend shelf life are seen as having a negative impact on the brand image of consumer products. The choice of retailer is another important consideration which the brand needs to make, and which can impact the market forces which they are influence by (Collins, 2002).

2.3 Threat of Product Substitutes

In this industry, the threat of product substitutes is significant. One the one hand, products from rival brands have the market positioning and financial resources to gain further competitive advantage and market share (Squicciarini and Swinnen, 2016). On the other hand, there are other dessert alternatives which compete with chocolates and therefore these further increases the pressures which the company could experience (Sondhi and Chawla, 2021).

Moreover, rival brands are continuously diversifying which would further increase the threat of new product substitutes. In the case of Thornton, the company should also be careful with the likely cannibalising of its existing range of products. For example, overlapping with existing product ranges to address buyers’ diversification may result in overcrowding its own portfolio (Guide and Li, 2010).

There is also an increasing interest across customer segments for healthier desserts and snack options. This trend is likely to persist in the future and it would undermine the market share ambitions of many high-calories chocolate producers (Cha and Li, 2020). Furthermore, Thorntons is branding its products as a gift purchase and therefore it is entering in direct competition with sellers of gift products, which further extends the pressures from competitors outside their immediate rivalry.

2.4 Threat of New Entrants

The market chocolates and desserts is large and dominated by a number of large players. In this sense, it can be proposed that the market has an oligopolistic nature – several big brands are holding the majority of the market share, as it can be seen in Figure 2 (Ramli, 2017).

Figure 2: Chocolate Brands Market Share (Ramli, 2017)

An oligopolistic market structure creates natural high barriers for new entrants and limits their penetration into the market (Mazzeo, 2002). Some of the barriers which large competitors create come from the fact that they have gained certain customer loyalty. However, the costs of switching form one brand to another are not high.

Moreover, customers would also try, test and experiment with new brands and chocolate tastes. Although large brands in this market have significant marketing and advertising resources to gain popularity and market share, they are rivalled by small niche brands which offer unique positioning and a brand story (Lundqvist et al., 2013).

2.5 Competitive Rivalry

As it can be concluded based on the analysis of the different forces, Thorntons is facing an increasing pressures and threats from new entrants. The company has a solid market share and brand positioning, as well as a loyal customer base. However, there is a growing number of brands which offer a distinctively new ingredients, recipes and combinations which attract more customers to experiment.

Although Thorntons is positioned as a luxury brand which targets a specific segment of customers, it also faces growing competition from other luxury brands such as Lind and Godiva. This is particular the case during holidays and festive periods when these brands are seen as gifts, which further intensifies the competition in the market. In this respect, the following section explores Thorntons’ competitive advantages over its market rivals.

3 Competitive Advantages

The competitive advantage of Thorntons has been evolving over the years. One of the key competitive advantages of the company is its focus on in-house chocolate development and manufacturing. This has contributed to retaining the quality of the brand consistently. The company has been persistently focusing on the freshness of their chocolates to ensure the ultimate tasting indulgence for their customers.

Thorntons has been also gaining competitive advantage via its franchising network which contributed to gaining market share internationally (Lin and Chen, 2007). In addition, the company is known for the great diversity of products it provides. By catering for different tastes and occasions, the company is able to expand its revenue generating bandwidth across different segment and markets. However, as already discussed in the Porter’s Five Forces analysis, it is important for Thorntons to avoid product cannibalisation by overcrowding its portfolio range.

The key competitive advantage of the company related to the gift segments and the fact that it can cater for festive seasons, this can also be proposed to be one of the challenges faced by Thorntons (Chrystal, 2013). Product seasonality has been affecting the business and has also resulted in cashflow fluctuations. For example, the company has been generating more than 50% of its revenue during the Christmas and Easter period (Kolay et al., 2019).

4 Consumer Behaviour Shifts

Consumers have been increasingly interested in trying and tasting new brands and products. The growing availability of dessert alternatives has been attracting new customers to emerging brands. This is causing pressure on established brands in the market such as Thorntons which are expected to continue innovating and address the shifts in consumer behaviours. Continuous innovating, however, is a process which requires financial, resource and human capital commitment (Laursen and Foss, 2014).

Another significant factor which has impacted global consumer behaviour is e-commerce. Online shopping has become a primary ‘go to’ channel for consumers due to the convenience and affordability it offers (Babenko et al., 2019). Companies such as Amazon have gained substantial market share among online shoppers, as well as other grocery shopping brands such as Ocado (Sadq et al., 2018).

This shift of consumers’ buying preference to online shopping has been further intensified during the Covid19 pandemic (Bhatti et al., 2020). It has further solidified the habit of purchasing products online and therefore has presented an opportunity but also a challenge for brands such as Thorntons to gain a similarly successful online positioning.

5 Conclusion and Recommendations

Thorntons is a company which has gone under some substantial transformation of its structure, operations, products and market presence in recent years. The company diversified its product lines and expanded its supply-chain partners to focus on third-party manufacturing rather than in house production. This can also contribute to the optimisation of operational costs of the company and create greater potential for the development and introduction of automated processes.

One of the recommendations which can be provided to Thornton is to further explore online selling channels as a source of revenue and market share generation. In an online environment, the company can provide customers with the opportunity to customise their products and create personalised gift boxes. Although product personalisation and customisation is often associated with higher manufacturing costs, it would lead to higher margins as customers can be charged with premium pricing.


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