Case Study- Taza Chocolate
Taza Chocolate, a small Massachusetts-based manufacturer of stoneground organic chocolate made in the classic Mexican tradition, sells most of its products to retailers, wholesalers, and distributors throughout the United States. Individual customers around the world can also buy Taza chocolate bars, baking squares, chocolate-covered nuts, and other specialty items directly from Taza at the company’s website. If they live in Somerville, Massachusetts, they might even find a Taza employee riding a “chococycle,” selling products and distributing samples at an upscale food truck festival or open market on a weekend.
With a staff of about 20 people, Taza sources all of its ingredients directly from certified organic growers with whom the company cultivates a personal relationship. “Because our process here at the factory is so minimal,” says the company’s director of sales, “it’s really important that we get a very high-quality ingredient. … The cocoa beans are the most important. … When we source those, we pay a premium above even fair trade prices. We call it direct trade. To make sure that we’re getting the absolute cream of the crop, we have a direct face-to-face human relationship between us and the actual farmer that’s producing those beans.”
The company believes that dealing directly with its suppliers is the best business model for Taza as a small firm not only because it allows the company to meet its social responsibility goals but also because it ensures quality, which commands a premium price. “We’re a premium brand,” says the director of sales, “and because of the way we do what we do, we have to charge more than your average chocolate bar. … There’s usually a 40 to 50 percent markup between wholesale sales and the price … on the retail store shelf. So, say we sell a chocolate bar for $4.50 … then the wholesale price is going to be somewhere around $2.70 for that unit. … The distributor price [is] even lower, maybe around $2.” Distributors buy in the largest quantities, which for Taza means a pallet load as opposed to a case that a wholesaler would buy. “But wholesale will always be our bread and butter, where we really move the volume and we have good margins. … It’s been challenging for us to work with distributors. They’re always squeezing you on price, or trying to give you charge backs, or run promotions or do sales … whereas the average wholesale customer is, in our industry at least, … much more used to accepting what we give them in terms of promotions or pricing.”
Taza does almost no advertising, relying instead on Facebook, Twitter, a company blog, e-mail, and events that create buzz like chocolate salons, food shows, in-store tastings, and especially frequent sampling in upscale and organic food stores in big metropolitan areas. The company tries to cultivate the same sort of personal relationships with members of its distribution channel as it does with its cocoa farmers. “When we send a shipment of chocolate,” says the sales director, “sometimes we’ll put in a little extra for the people who work there. That always helps because you’re building that kind of human relationship.”
A privately owned firm, Taza has just begun shipping its chocolate products internationally to Canada and a handful of European companies. Its marketing channel definitely plays a role in delivering products that are fresh. Shipping perishable products to customers in the summer, for instance, can be a problem. But “having a distributor … that has a couple of thousand dollars of inventory in their refrigerated warehouse all the time changes that equation. It means the store can just order from that distributor, pay about the same price that they would pay if they ordered directly from us, [and] get the product probably the next day, with much lower shipping cost.”
Sources: Company website http://www.tazachocolate.com (accessed August 30, 2010); Courtney Holland, “Sweet Batches of Local Flavor,” The Boston Globe, August 18, 2010, http://www.boston.com; Kerry J. Byrne, “Festival of Food Trucks,” The Boston Herald, August 6, 2010, http://www.bostonherald.com; interviews with company staff; and the video “Taza Cultivates Channel Relationships with Chocolate.”
What distribution channels does Taza Chocolate use, and what do they contribute to the company’s overall marketing efforts?
Taza Chocolate prices its products differently based on the channel that is used for distributing them. Does this approach make good managerial sense? Explain your answer.
How does the concept of integrated marketing channels apply to Taza Chocolate’s product distribution system?
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