The Chocolate Confectionery in the UK - Research Paper Example

Content Page Page Executive Summary 2 Background and Introduction 3 Objective 3 Methods 4 Findings 5Conclusion 8 Recommendations/implications 8 References 10 Executive Summary The PESTLE analysis was conducted in order to find out the opportunity of chocolate confectionery in the UK. There are four major factors identified to capsulate the different factors found from the different environmental influences. The first is about economic downturn which significantly creates a significant impact on the profit of chocolate manufacturing. The government has an important role to play on this by significantly creating policies to effectively come up with efficient regulation of the raw materials for the advantage of chocolate confectionery and consumers. However, such can lead only to further problems due to the problem in raw materials. Production of raw materials can significantly decrease due to the decrease of arable and horticulture land. The conservative stand of the UK on genetic modification may never solve the problem on the production of raw materials. Such decrease of supply of raw materials may only imply increase of price of product output which might not be essentially good for the consumers. Furthermore, the change of consumption trend may only capsulate the market segment for chocolate confectionery. This can contribute to a very tight competition that somehow will demand more innovative approaches among chocolate manufacturing companies. Overall, for as long as the problem and impacts of economic downturn continue and the lack of raw materials for chocolate manufacturing persists, chocolate manufacturing can be identified as a not-so-promising industry. Background and Introduction It seems the economic downturn becomes the best opportunity for chocolate confectionery as consumers wanted to treat themselves with products for them to unwind. The economic downturn led to high inflation rate creating a higher sales value for chocolate confectionery in 2007 and 2009 by a growth of 11.7% (Oxygen.mintel.com, 2010). In fact, this growth in sales was caused by the rising price for cocoa. Thus, eventually the chocolate confectionery is struggling for profit even though there remains to be a positive demand. Farmers were struggling to increase the high demand for cocoa and at the same time manufacturers were strongly in favour of the fair trade. The economy seems to be one of the major factors that could essentially affect the chocolate confectionery in the UK. However, there are other environmental factors that also have great impact on the industry. It is in this reason that this report is prepared to inform the general manager about the environmental factors affecting the whole Chocolate confectionery industry in the UK. Objective In line with the request of the general manager to look in detail the performance of chocolate confectionery in the UK, the proponent of this paper tries to identify the factors concerning political, economic, social, technological, legal and environmental. These factors are viewed to have significant impacts on the chocolate confectionery. Thus, the proponent tries to initiate an environmental analysis considering any relevant factors that have direct effect to the entire chocolate confectionery industry in the UK. Methods Findings of this paper are generated through primary and secondary research of information in the internet and online databases which were all assessed and evaluated. The information gathered are based on the model of Worthington and Britton (2009) showing the link between the firm and its environment. The model is shown in Table 1. With regards to this model, environmental influences that are viewed to affect the Chocolate confectionery industry are considered especially on the level of industry output and input, and consumers. It is important to find out how such these environmental influences create impact on the output and input of Chocolate confectionery and eventually on the level of demand among consumers. Table 1. The firm and its environment (Worthington and Britton, 2009). Findings Political Policy initiatives in the UK have great impact on the demand and supply dynamics because they are linked to sustainable consumption agenda, rural food production in rural area and farming environment (Socio-economic Research and Intelligence Observatory, 2008). This eventually has clear implications on the raw materials for chocolate manufacturing and even on the distribution of the final products. Economic In the second quarter of this year, the Office for National Statistics (2010) reported that the net rate of return for manufacturing companies is only about 7.4% equivalent to the average in 2009 which was noted as the lowest since 1991. This is elaborately shown in Table 1 below. As observed there is a relatively downward spiral growth for the profit of manufacturing companies. Chocolate manufacturing companies are essentially affected by this economic concern since the economic downturn is essentially an important issue among manufacturers. Table 2. Net rates of return of manufacturing and service companies in the UK (Office for National Statistics, 2010). Social Households have expenditure of £471 per week of which only 0.44 percent or £2.10 spent on chocolate and confectionery (Office for National Statistics, 2010). People are even becoming health conscious, thus obliging chocolate manufacturers to meet their needs. The Mars Chocolate UK for instance was able to reduce the level of saturated fats in their fast-moving chocolate brands (Food and Drink Federation, 2010). Technological The UK has never grown GM crops except only for the importation of soya for animal feed and to the less extent in some food products (Department for Environment Food and Rural Affairs, 2010). This only implies that other crops such as cacao cannot be technologically modified in order to increase its production. Environmental From 1998 to 2007 there was a remarkable decrease for about 9.1% for the arable and horticulture broad habitat in the UK (Office for National Statistics, 2008). Decrease of crop yields will be remarkable implying further that the UK must invest more on importation of raw materials for chocolate manufacturing. Legal The UK implemented Cocoa and Chocolate Products Regulations 2003. Underlying these regulations is to ensure the safety of consumers by giving them the right choice on which cocoa and chocolate products to buy based on the ingredients put on the label and as agreed by Medicine Acts (Department for Environment Food and Rural Affairs, 2010; Edwards, 2000). This implies ensuring quality and high standard for the raw materials. Conclusions There are various considerations that need to be taken into account in chocolate confectionery in the UK. The economic downturn remarkably created significant impact on the profit in chocolate manufacturing. This is due to the fact that the raw materials are highly regulated by the government. Furthermore, it is clear that there is shortage of supply of raw materials due to the decrease of arable and horticulture land in the UK. The technology is viewed to increase production of raw materials but the UK is very conservative on the idea of genetic modification. Implications/Recommendations Consumption is viewed to change into another level as the government’s concerns for its people are strengthened by legislations. Furthermore, consumers are becoming health conscious and this would imply creation of products that would meet their needs. In doing so, chocolate manufacturing companies will struggle to come up with the same product leading to a unified market segment. At the bottom line, this would make no good for the industry since consumers are to stick on their favorite brand, allowing very few chocolate manufacturing companies to survive. This demand more innovative approaches among chocolate manufacturing companies. Furthermore, profit in chocolate manufacturing will move into downward spiral due to economic downturn and scarcity of raw materials. In general, there is only a little good chance for the new entrants in chocolate confectionery considering the very tight constraints that the industry is faced at present. The good thing however is that there is still positive demand for chocolates, but such demand decreases over time as economic downturn continues and the problem on the supply of raw materials persists. References Department for Environment Food and Rural Affairs (2010) ‘Food standards – labeling and composition’ [Online] Available at: http://ww2.defra.gov.uk/food-farm/food/standards/ (Accessed: 30 Oct. 2010). Department for Environment Food and Rural Affairs. (2010) ‘Genetic modification’ [Online] Available at: http://ww2.defra.gov.uk/environment/quality/gm/ (Accessed: 30 Oct. 2010). Edwards, W. P. (2000) The science of sugar confectionery. UK: Royal Society of Chemistry Food and Drink Federation (2010) ‘Case Study: Mars Chocolate UK.’ [Online] Available at: http://www.fdf.org.uk/cpa10_health_well_mars.aspx (Accessed: 30 Oct. 2010). Office for National Statistics (2010) ‘Profitability of UK companies 2nd quarter 2010’ [Online] Available at: http://www.statistics.gov.uk/pdfdir/prof1010.pdf (Accessed: 30 Oct. 2010). Office for National Statistics (2010) ‘UK Snapshot: Economy.’ [Online] Available at: http://www.statistics.gov.uk/cci/nugget.asp?id=196 (Accessed: 30 Oct. 2010). Office for National Statistics. (2008) ‘UK Snapshot: Environment – Land cover 2007 statistics’ [Online] Available at: http://www.statistics.gov.uk/cci/nugget.asp?id=150 (Accessed: 30 Oct. 2010). Office for National Statistics. (2010) ‘UK Snapshot: Society - Family Spending 2009: Households spend £471 a week’ [Online] Available at: http://www.statistics.gov.uk/cci/nugget.asp?id=284 (Accessed: 30 Oct. 2010). Oxygen.mintel.com (2010) ‘Chocolate Confectionery – UK – April 2010’ [Online] Available at: http://oxygen.mintel.com/sinatra/oxygen/display/id=523351 (Accessed: 30 Oct. 2010). Socio-economic Research and Intelligence Observatory (2008) ‘Understanding of Consumer Attitudes and Actual Purchasing Behaviour with Reference to Local and Regional Foods’ [Online] Available at: http://randd.defra.gov.uk/Document.aspx?Document=FO0312_7367_FRA.pdf (Accessed: 30 Oct. 2010). Worthington, I. and Britton, C. (2009) The business environment. 6th ed. England: Pearson. Read More