Comprehensive Overview Of Tony’s Chocolonely Company

Company Background

Tony’s Chocolonely started its business in 2003 when the Dutch reporter and journalist Teun van de Keuken discovered ‘the hard truth’ about the chocolate industry. During a film production for the TV program “Keuringsdienst van Waarde” he found out, that almost 60% of the worldwide chocolate production was connected to slavery and child labor. Since then the company is trying to change the chocolate industry and has already had a huge success in creating a 100% slave free and fair trade chocolate bar.

Mission

More than the half of the worldwide cocoa production comes from Ivory and Ghana in West Africa. Circa 2.5 million farms in these regions work every day to produce chocolate (1) and there are even more chocolate lovers eating tons of chocolate everyday (2). The problem in the supply chain is, that only some multinationals calculate the salary they want to pay to the African farmers (3). And that’s where Tony’s Chocolonely wants to do the change. The mission is to create a chocolate bar, which is 100% free of slavery and child labor. If this works out Tony’s Chocolonely aims to change the whole chocolate industry into a slave free industry.

Tony’s has some main principles to create a 100% slave free chocolate bar. Their chocolate bar production is 100% transparent to everyone. They charge higher prices for a chocolate bar than other companies and can pay farmers enough money and through this build long-term relationships. All this leads to a higher value and a better productivity of the workers.

Vision

Tony’s Chocolonely has the vision to change the whole chocolate industry. In their annual fair report they present ideas of how they want to achieve their goal. For instance Tony’s Chocolonely is producing on purpose in countries that suffer under child slavery. They use “the Child Labor Monitoring and Remidiation System (CLMRS)” to get to know everything that is related to child labor to change it within their own company.

Activity

Many big chocolate companies come from the USA and they regulate approximately 35% of the cocoa production. Tony’s Chocolonely started to extend not only to European countries such as Belgium, Germany and Sweden but now also to global destinations like the United States of America. Since two years they are part of the American market and that’s why the American chocolate industry started to notice Tony’s Chocolonely. With a bigger influence in the States, Tony’s hopes to become a global leader in the chocolate industry and to get closer to their aim of a 100% slavery free chocolate production.

DESTEP Analysis

Demographics

The population of the Netherlands is still the most important market for Tony’s Chocolonely. This population is rather small compared to neighbor countries like Germany. In addition the population is ageing. The Netherlands is a wealthy country with an average modal income. The ageing of the population is neither a threat nor an opportunity for Tony’s Chocolonely. However, being focused on the Netherlands as their main market could be a threat, because international competition might take advantage of economies of scale by competing with a more diversified international marketing strategy.

Economical

Economic conditions in the Netherlands are good for a company like Tony’s Chocolonely. The government supports domestic organizations and gives them a high level of economic freedom at the same time. Food is one of the most important import and export trade factors of the Netherlands. In 2016 The Netherlands was the largest food exporter in the EU and the second largest in the world. These economic conditions may be seen as opportunities, since Tony’s Chocolonely could take advantage of the largely operating Food sector and the comparatively advanced economic conditions in the Netherlands. On the other hand the food export from The Netherlands may cause for a lot of competition and could be seen as a possible threat. Technological The Netherlands are known for high innovation levels and belong to the top of the world in terms of technological capabilities and performance. These capabilities could be supportive for the innovation and producement of machines necessary for the making of chocolate. Also, advanced machines could foresee in a higher quality of the chocolate.

Ecological

The ecological importance increases in the Netherlands and many other western countries. People tend to support corporate social responsible and environmental friendly products. Tony Chocolonely only produces fair trade chocolate. Furthermore, the Dutch government strongly supports CSR initiatives. Also the Dutch population is getting more and more aware of the consequences of their consumption. This forms another opportunity for Tony Chocolonely considering they only sell slave free chocolate. Their slogan is highly related to CSR. The fairtrade market is getting more popular, but still has many opportunities for companies like Tony Chocolonely to earn sustainable profit in the future.

Political

The Netherlands is a stable country and is characterized by democracy. The political situation of the country can therefore be described as safe. A safe environment is needed for sustainable success of the organization, in other words, the Netherlands has a great basis for a CSR based organization to develop. The Dutch government also supports innovative domestic companies and helps them grow in a number of ways. One of these is for example helping them build solid networks. These networks could be used by Tony’s Chocolonely for efficient supply chain and retail activity.

Porter’s Five Forces

Buyers

The bargaining power of the buyers in this industry is really high, since the chocolate industry has a big market with a lot of competition. This provides the company with a lot of opportunities but at the same time they face a lot of threats. Consumers are a considerable force in the industry. The buyers’ interests in customized products are increasing. Opportunity: Personal customization and diversification of products is a customer benefit that has not been met with a product provided feature and therefore remains an idea Tony Chocolonely could implement - an opportunity. Another opportunity is the growing middle class in emerging economies. The demand for chocolate in countries like China and India has grown. This might be due to higher national income, which causes the population to invest in more luxury products like chocolate. Also, the Chinese population -like western countries- has been more interested lately in CSR organizations. Creating an advantage for Tony’s Chocolonely in competing with other chocolate fabricants on this market.

Suppliers

Obviously the most important product for Tony’s Chocolonely in order to be able to produce chocolate is cacao. They obtain all their cacao directly from the farmers. Most of the farmers are a member of the ABOCFA, which is a relatively young corporation in Ghana that produces high quality organic and fair trade cacao beans. A remarkable fact is that Tony’s Chocolonely is actually helping the Ghanaian organization to grow a bigger market and becoming a more professional organization. They try to achieve this by offering them management trainings and writing a policy plan for the future. At this moment the bargaining power of the suppliers is really low. This is mainly caused by the fact that there’s a lot of cacao on the market and farmers are forced to produce according to the market prices. Another reason is because the suppliers -in this case- are depending on Tony’s Chocolonely to help them develop into a more professional organization. There’s not a threat related to the bargaining power of the suppliers. But there is a threat in the fact that the farmers could harm Tony’s Chocolonely mission. This might be caused by the fact that farmers will make use of unethical ways of production -like child labor- in order to keep up with the low market prices.

Competitors

There is a lot of competition on the chocolate market as well as on the fair trade (chocolate) market. This rising popularity of the fair trade market is mainly caused by the trend of CSR, this sort of organizations are getting more and more attractive due to cultural factors of buyers. The popularity of the market forms a threat to Tony’s Chocolonely.

Substitutes

The past few years there’s been a shift in food pattern, people are trying to be more healthy. Consequently people prefer sugar free and nonfat food. This forms a threat to the industry in which Tony’s Chocolonely operates, since they can’t provide a product meeting this conditions. There might a small opportunity for Tony’s Chocolonely in this changing food pattern as well. Studies have shown that dark chocolate could foresee in a health benefits like lower blood pressure and reducing the risk of heart problems. Based on this knowledge Tony’s Chocolonely could bring a darker and sugar free variant on the market.

New Entrants

The high level of competition in the chocolate industry is a barrier of entry for new organizations. A few of the bigger existing organizations on the market have a really strong brand and loyal customers, which make it hard for new entrants to establish a place on the market. Another barrier of entry could be the strict regulations in het food industry. Based on these reasons it could be stated that new entrants may not form a threat to Tony’s Chocolonely.

Path of internationalization

The first chocolate bar

In 2003 Teun, after investigating the chocolate sector for one year, noticed that more than 70% of cocoa farmers were involved in slavery practices. The people involved were both adults and children, who worked in non-safety conditions and for low wages.

Anyway in 2001, an international agreement, the Harkin-Engel protocol, was signed by several chocolate producers, trying to contrast this kind of practices. Nonetheless even the biggest chocolate producers were reluctant to take action.

So, Teun decided to intervene personally, and with the help of Maurice Dekkers and Eveline Raymans, they produced the first chocolate bar in 2005: Tony’s Chocolonely was born.

Tony’s mission

His message was heard among customers, which started to gain awareness about improper practices in the chocolate industry; by 2009 Tony’s Chocolonely counted revenues for €1 million in the Netherlands.

The main mission of Tony’s was to spread its message worldwide to push all the big players to adopt a 100% slave free chocolate. Then, after consolidating its position in the Dutch market, earning net revenue for €17.600.000 in 2014, Tony started to think about taking several operations abroad.

Different opportunities

The management classified the international market in 3 categories which has a different impact for the spreading of their mission and for their sales.

The bronze category contains all the opportunities which could be exploit in the future; the silver one is seen as a volume generator; and the golden one has the crucial aim on supporting Tony’s mission and then strategic market for the firm.

The first two operations were aimed in both a silver and golden category, Belgium and USA. Belgium, classified as silver, seemed perfect as a generator of revenue, considering the proximity to the Netherlands and its high rate of chocolate consumption.

On the other side, If Tony’s Chocolonely wanted to shock the chocolate giants’ market and spread its message to the biggest players of the world, (Hershey, Mars and Mondelez, which together controlled the 35% of the worldwide chocolate market) the chocolate bars had to be brought in the USA.

The issue and success abroad

Although the plan was to enter in both markets during the year 2014, Tony encountered an issue. The rising demand in the Netherlands but most of all the forecasted need of chocolate in the USA brought up a problem: finding enough cocoa following their strict rules. This brought Tony’s to engage new farmers both in Ghana and Ivory Coast. In 2015 they counted more than 6000 farmers, distributed in 5 cooperatives.

In 2015, after establishing a long-term relationship with the new partners, the first Tony’s chocolate bar was introduced in the USA and Belgium. The success in the USA was immediate and in the last two years the revenues increased sharply, passing from $ 550.000 to $ 2,4 million. After the success in the two new countries, Tony’s spread continued, reaching Sweden in 2016.

Transparency and commitment for a price

In November 2016, Tony’s started the Bean-to-Bar project: a strategic partnership with Barry Callebaut which allowed Tony’s to keep the traceability of the cocoa beans from the harvest till the sale. This allowed the company to increase its transparency.

In order to perform efficiently the latter activity and ensure a decent quality life for their workers, the customers had to and must pay a premium price for the chocolate.

Global expansion

After huge progress in the Netherlands, Tony’s Chocolonely decided to expand the global market and .Since 2005 Barry Callebaut and Tony’s Chocolonely have cooperated when Barry Callebaut started to produce their Fairtrade cocoa liquor. As of 2013 Barry Callebaut produced chocolate for Tony’s Chocolonely that included traceable sustainable cocoa liquor. Under the new partnership agreement, also the cocoa butter used in the recipes will become fully traceable, and sourced from Tony’s Chocolonely partner cooperatives. And in 2016, Barry Callebaut and Tony’s Chocolonely sign strategic partnership agreement to produce chocolate from fully traceable sustainable cocoa.

Tony’s Chocolonely keeps its mission and strategy – against slavery, It was hard to set up a chocolate company while simultaneously changing a mature industry; Crazy about chocolate, Tony’s commits to making the most delicious chocolate without any bitter aftertaste; Serious about people, to Tony’s, what matters most is people: Tony’s team, famers, consumers, customers and suppliers — meanwhile exploits its competitive advantage — chocolate bar — and American market to expand influence in America and the whole world.

In addition, Tony’s Chocolonely also got into Belgium, Sweden, Germany, Finland, and France. With its original product — chocolate bar, Tony’s Chocolonely gained a significant progress. Tony's Chocolonely is growing fast. In 2018, they have sold 28,756,133 bars. And in 2019, Tony’s Chocolonely has a big plan to construct operation in the U.K. to open British market.

Adaptation Strategy With the expansion of the other states, Tony’s Chocolonely not only focus on global integration, enlarging the global influence, but also think highly of the local markets and to fit local preferences. This is an important point to expand operation while keep it work well. On the base of CSA and FSA, Tony’s chocolate create different types of products and use certain product to open foreign market in terms of the differences of local market demand.

The example in Swedish is Tony’s Chocolonely have set up a special type of chocolate. The product is to design a thin chocolate plate designed to put on bread, normally eaten for breakfast or as a sweet treat for Fika. Moreover, in order to stand out in the shelves, the differentiation strategy involves designing a circular plate which differs from the competitors who mainly produce rectangular shapes. The plates is divided into unequal pieces and the pattern can bring Tony’s message about unfairness in the chocolate industry to a new audience by introducing the product on the breakfast table. By breaking the chocolate plate into small pieces, people can decorate their bread with fun experience. It is a natural transition towards sprinkles in near future. As in Germany, Tony was considering to launch Sprinkles in Germany as they did in The Netherlands. However, after a focus group with Germans citizens complemented with quantitative research, they discovered that sprinkles in Germany are used as a topping for desserts, making it difficult for consumers to accept the product as a used in a Dutch context (bread spread) and generating less value for the company. Consequently, In order for Tony’s to have a successful entry to the German market, Tony’s Chocolonely chooser to start by launching its strongest product: chocolate bars.

Marketing strategy

One interview of Tony’s founder gave us this information. The founder said “We don’t do any paid advertising. We have our chocolate bars — when they’re on store shelves, they look so different from anything else. People pick them up, and they love the packaging. There’s information on the bar, and when you open the bar they just look completely different from any other chocolate bar because they’re unequally divided. We’ve done that to sort of showcase that things are not shared fairly in the chocolate industry.”

Recently, in Portland, Tony’s Chocolonely in the store a lot. They do what we call “Tony Talks,” where they go to companies or organizations or schools and basically talk about what they are trying to do, creating more awareness from that way.

And the same situation happened to Germany. Chocolate bars (180gr) are the main product. However, Tony's delivers 'Tiny Tony's' for Horeca. And chocolate milk and several other seasonal chocolate delights such as: Sinterklaas, and Eastern eggs.

Tony’s chocolate can be bought at generic, organic supermarkets, and their website. Prices can vary between places. Tony’s doesn't have a marketing budget, therefore, promotion is mainly online, reinforced with some offline activities. And also in their home market — the Netherlands, they have a pretty large social media following, but it all basically happened organically. People get excited about it. It’s just amazing to see the response that you get.

In Swedish, The team started to pay their attention on a significant proportion who is “most likely to be attracted to the benefits offered” — children. Moreover, the involvement of the customers, which is a consequence of both of the contests, can turn them into ambassadors of the brand and specially of their values. In the plan, the three principles are guiding the strategies: ‘Fairness’ is actively engaged during the first contest and in the educational package. ‘Fun’ is in every strategy. By presenting to the consumer the possibility to participate on the promotion in a creative way rather than presenting one-way directional promotion that focus only in the communication of the product qualities which does not involve the user in an active way. At last, ‘Sharedness’ is the main topic of the Christmas contest, as well as the driver that brought us to create the XL plate. We also share the power to select the winners of the contests so the people can identify themselves in a better way with the results.

Location strategy

On the one hand, when choosing the foreign market to take the first step, Tony’s Chocolonely chose the market which has the similar background with its home market, such as Belgium, Sweden and Germany which all have a huge chocolate market and demand. On the other hand, according to the choice of where to locate shops. The team suggests two different directions to promote Tony’s Chocolonely products. One is to sell chocolate bars and Tiny Tony’s in bio/eco shops, fair trade stores, coffee bars, candy shops and vending machines by short indirect distribution channel which is transferring products from producer to Tony’s Chocolonely wholesalers and to retailers. Another is to sell chocolate plates in supermarkets by long indirect distribution channel which is transferring products from producer to Tony’s wholesalers to food wholesalers and to retailers. With the sales and distribution support, Tony’s Chocolonely will build a positive brand image in consumers’ mind in the future.