CH04-EX01. Vegan Bean-to-Bar Chocolate D2C Case

• Related Chapter: CH04. How Channel and Customer Relationship Reshape Price Structure
• Related MN/KM: MN06 / KM048

Think it through

This is a B2C case of vegan bean-to-bar chocolate sold online. Manufacturing cost was 56% of actual selling price, and SG&A was around 15%.

1. To secure adequate margin on a product with such a high cost ratio, which channel would be a good core channel? Why?
2. Where could the gap between consumer price and actual selling price be put to use?

Show answer and walkthrough

• What this case illustrates: A B2C product with a high cost ratio secures margin by cutting distribution steps through a direct channel (D2C), and uses the gap between consumer price and actual selling price for Customer Relationship management (discounts and gifts).

Content

In the vegan bean-to-bar chocolate case, manufacturing cost was 56% of actual selling price, and SG&A was around 15%. To secure adequate margin within this high-cost structure, the company chose online direct sales (D2C) — a channel with fewer distribution steps — as its core channel, and used part of the gap between consumer price and actual selling price for Customer Relationship management such as discounts and gifts.

Source: Pricing Is Strategy, pp. 196–201.