Q1) What are the key issues and challenges Torres faces, with specific reference to the

new product development process?

Ans. The key issues Torres faces with respect to the new product development process are:

 Taste vs. Health Benefits – The Company has to either make a trade-off or find
middle-ground between two important product features – taste (balancing bitterness)
and health benefits. This would also depend on the level of cocoa in the chocolate. A
decision has to be taken on which would best suit customers’ preferences. The options
that are currently being looked at are 70% cocoa and 90% cocoa.
 Choice of fruit flavours – The line optimization analysis is being used to understand
the best combination of fruit flavours to incorporate into the dark chocolate.
Montreaux must make sure that the flavours identified (blueberry, pomegranate and
cranberry) match the taste preferences of the target customer. The reduction of the
initial 45 possible dark chocolate offerings to 4 in the end must be done after diligent
analysis on which ones would be most in demand and sell.
 Accurate product viability testing vs. late entry – In order to accurately gauge the
product viability in ‘close to market’ conditions, a full-scale in-test market execution
would be required in a few nationally representative American cities. However, this
would be expensive (estimated at over $3 million), time-consuming (1-year) and the
risk of competitors knowing what the product is like. Additionally, it is also difficult
to find American cities that are representative of national customer preferences.
Parallelly, a competitor brand is developing a similar product for the same market.
Not acting quickly could lead to loss of first mover advantage.
 Pricing and Positioning Decision – Analysing and deciding on the appropriate price
that customers are willing to pay and also be in line with the product quality is also a
challenge. This would highly depend on the decision of which segment and sub-
segment to position the brand in. This decision would also have an impact on the
distribution channels.
 Production - There is a clear need for a manufacturing plant. However, Apollo has
only identified and not yet purchased a manufacturing facility since it was decided
upon that the launch strategy and the timeline should be finalized first.
 Brand Architecture - The Montreaux brand is not very popularly known in America.
A decision has to be taken on whether to use the Apollo brand or the Montreaux
 chocolate brand itself or a sub-brand (e.g. Healthy Cravings) of one of the two. This
would also depend on whether the positioning of the product is going to be as a
healthy snack or whether the company would try to leverage the European brand
equity instead.

Q2) What are the variables affecting demand for chocolate-based products?

Ans. Chocolate was the most lucrative segment of the confectionery market accounting for
52.6% of its total market value. Apollo foods thus wanted to expand in the chocolate segment
further in the US. Variables affecting the demand of chocolate-based products were as
follows:

1. Perceived health benefits – People perceived higher concentration of cocoa in dark

chocolates as healthy with flavanols-antioxidants helping in lowering of cholesterol
and other cardiovascular benefits. Over the past three decades, there was a sharp rise
in awareness regarding fitness and health in the US
2. Positive experience/personal reward/mood enhancer – Women associated
chocolates with a positive experience and were more likely to eat chocolate as
compared to men (94% vs 90%). Women in the 45-64 age group bought expensive
premium dark chocolate as a gift for themselves treating it as a personal luxury item
with a higher quality of taste, greater and variety
3. Convenience and affordability – Chocolate was widely available at supermarkets
and in the candy aisle at checkout. Thus three-fourth of the customers purchased these
affordably priced chocolates from these easy access locations. Premium chocolates
were now sold at grocery stores, drug stores, convenience stores and Walmart and not
only select retail stores for wider reach
4. Size of the chocolate bars – It was also noticed that close to 40% adults preferred
small snack-sized chocolate bars, typically 0.25-0.6 oz, with increase in awareness for
health and fitness for better portion control. Thus, customers were able to indulge
themselves in guilty pleasures without feeling guilty as consumption was easy to
control
5. Appealed to a wider segment – While a large box or stand up pouches appealed the
economically conscious, Premium chocolates appealed to the “everyday
sophisticates”. Customers also reacted positively to different variety and flavours of
chocolates. Men liked chocolates for attributes such as quick, easy, energy booster
 and affordable, while women preferred chocolates as more of a luxury and self-
indulgence. Chocolates could be gifted or purchased for holidays

Q3) How effective and efficient are the research methods employed to understand the
market for chocolates?
Ans. Torres partnered with Nielsen BASES to quantitatively assess and optimize the new
dark chocolate initiative.
BASES was a division of the Nielsen involved into large multifaceted marketing consultancy,
offering services that span across the entire new product development process, right from
conceptualisation and ideation of the product to the release of the product.
The Research methodology implied by BASES was quite robust and extensive in nature and
thus provided effective and efficient results to the NDP group throughout the process.

BASES IDEA Screening Test

• This test incorporated the four most important success factors for a product, Distinct
Proposition (POD), Attention Catching, Need/Desire (Market Gap or Demand for a new
product) & Advantage
• This helped the team to narrow down the ideas to a list of 12 ideas, which can be
accelerated for concept development

Two-Stage BASES Snapshot Concept Test

• The agency conducted two-stage Snapshot Concept test to extensively evaluate the
consumer perception regarding the product composition, packaging, positioning and pricing
• One of the most credible aspect of BASES methodology was that it incorporated the
perception of the end-user (Consumer) right from the beginning of the NPD process
• 200 consumers were asked to evaluate the given conceptualised ideas to assess the early
optimisation opportunities and price estimates
• The agency refrained from product tasting/trial to first assess the potential on the basis of
consumer perception. This helped them to narrow down the concepts and save costs on
testing multiple concepts
• This helped them to thoroughly understand the US chocolate market and consumer
preferences
BASES 2 Testing
• After finalising the composition and size of the product, this was the most robust concept
provided by BASES to evaluate the market readiness for the new product
• It also provided one-year revenue forecast by creating a simulated national-scale test
market to evaluate different marketing scenarios, to asses e impact of different inputs on
trial rates, repeat rates, sales volume & profitability
• This model analysed and evaluated various factors that affected the sensitivity of purchase
behaviour in different product scenarios

Shortcomings of the Method

• The research method does not take into account the geographical and demographical
aspect in their testing process. The preferred composition of the chocolate might vary for
consumers from different region and different demographics
• They planned to conduct the final test of the product in two or three major cities. But with
their given distribution channels, testing can be conducted on a small scale in different Tier
2 & 3 cities to get a clearer picture of the consumer response

In conclusion, the methodology adopted by BASES extensively covers most of the aspects
for developing a new product. Its effectiveness and efficiency can be evaluated from the fact
that the whole process took 15 months to finalise on the product and its positioning strategy
and also proved to be a cost-friendly research method.
The method was so detailed and robust that it could provide up to two years of projections for
sales volumes with the given expediency and budget constraints.

Q4) Estimate sales volumes under different scenarios given in the case study.

Ans. The Sales Volumes under different scenarios are as follows:

Product Consumer ACV Sales Volume Sales Value
Quality Awareness (Distribution) ($ million) *
Mediocre Low Low 5976649.7 26.8
Mediocre Medium Medium 7862140.4 35.3
Mediocre High High 11241793.5 50.5
Average Low Low 6540484.6 29.3
Average Medium Medium 8603851.7 38.6
 Average High High 12302340.1 55.2
Excellent Low Low 7104319.5 31.8
Excellent Medium Medium 9345563.1 41.9
Excellent High High 13362886.6 59.9
* Retail Sales Value (Considering price to be $4.49)

Purchase Rate Product

Definitely would buy 0.23 Mediocre 0.28
Probably would buy 0.4 Average 0.33
US Households 120 m Excellent 0.38
Penetration 0.92 Repeat purchase occasions 4

Consumer Awareness ACV (Distribution)

Low 0.14 Low 0.6
Medium 0.17 Medium 0.65
High 0.2 High 0.79
Pricing 4.49 65% MSRP 0.65

Mediocre, Med awareness, Med Mediocre, High awareness, High

(Worst case scenario)Mediocre product, Low awareness, Low ACV
ACV ACV
Trial Rate 0.304 0.304 0.304
Marketing adjusted Trial Rate 0.02349312 0.03090464 0.04418944
Trial Households 28,19,174.40 37,08,556.80 53,02,732.80
Repeat Volume 31,57,475.33 41,53,583.62 59,39,060.74
Total Purchases 59,76,649.73 78,62,140.42 1,12,41,793.54
Retail Sales Value 26.84 m 35.30 m 50.48 m
Sales Volume with .65 MSRP 38,84,822.32 51,10,391.27 73,07,165.80
Sales Value with .65 MSRP 17.44 m 22.95 m 32.81 m

Average product, Med Average product, High

(Better scenario)Average product, Low awareness, Low ACV
awareness, Med ACV awareness, High ACV
Trial Rate 0.304 0.304 0.304
Marketing adjusted Trial Rate 0.02349312 0.03090464 0.04418944
Trial Households 2819174.4 3708556.8 5302732.8
Repeat Volume 3721310.208 4895294.976 6999607.296
Total Purchases 6540484.608 8603851.776 12302340.1
Retail Sales Value 29.37 m 38.63 m 55.24 m
Sales Volume with .65 MSRP 42,51,315.00 5592503.654 7996521.062
Sales Value with .65 MSRP 19.09 m 25.11 m 35.90 m

Excellent product, Med Excellent product, High

Excellent product, Low awareness, Low ACV
awareness, Med ACV awareness, High ACV
Trial Rate 0.304 0.304 0.304
Marketing adjusted Trial Rate 0.02349312 0.03090464 0.04418944
Trial Households 2819174.4 3708556.8 5302732.8
Repeat Volume 4285145.088 5637006.336 8060153.856
Total Purchases 7104319.488 9345563.136 13362886.66
Retail Sales Value 31.90 m 41.96 m 60.00 m
Sales Volume with .65 MSRP 4617807.667 6074616.038 8685876.326
Sales Value with .65 MSRP 20.73 m 27.28 m 39.00 m

In all the nine scenarios, the company crossed the hurdle rate of 30 million only when there
was a high level of ACV (distribution) coupled with high awareness irrespective of the
product quality.

Montreaux Sales
Estimate.xlsx
The workings are shown in the attached Excel sheet.