People still eating chocolate despite financial crisis

Erwin Vondenhoff (photo), managing director of one of the largest chocolate makers in local marketplace, says the current poor economic context is no real threat to solid brands with a well-nurtured identity.

“It is not about cars or real estates, it is chocolate. People have eaten chocolate for hundreds of years, as a personal reward when they are happy, or as comfort food when they are depressed or stressed. In the midst of a financial crisis, you would wonder which brands are the most affected and which the least. Is it you have a solid brand, and consumers choose it, or you don’t, and consumers choose other products, sometimes cheaper. As a generalized trend at European level, for the middle-class products, without a well nurtured identity, the crisis will be imminent”, said Erwin Vondenhoff.

As he commented, in the midst of shaky economic conditions, people are no longer open to experiment new products as they were before, preferring the brand that offer safety. In light of this, foreign producers who plan to move into the local markets, will have to deal with major drawbacks resulted from the financial crisis.

“In times of crisis, emotionally speaking, people seek for safety. A brand should confer safety. I don’t think people are willing to experiment new things any longer. This is why it would be so difficult to foreign chocolate makers to make move into the local marketplace now, and this would allow us to grow stronger in the local landscape, by 5-6% this year,” said Vondenhoff.

Heidi products are for all ranges of clients, focusing on consumers aged 20-45 and a monthly income between 500-800 euros.

“We see people in Romania with a 400-500 lei monthly income. These consumers are price-sensitive, who would buy the price over quality. And we also see people with 1.000 euros of income who less use price as a cue to quality and buy products regardless to their price. As part of our strategy, we are not focusing on consumers with 400-500 lei of income, but rather on consumer whose monthly incomes exceed 500 euros. And this is what makes us immune to crisis. Even if people were in severe financial distress, I don’t think they would ever give up that habit of cuddling in bed and eating chocolate”, said the managing director of Heidi Chocolat.

Heidi to dig deeper in communication and technology

Heidi Chocolat earmarked 1 million euro annually for technology and another 100,000 euros for enlarging the depository in Pantelimon. The new establishment, which is to be completed in July, is set to boost the storage capacity by 25%.

“We have embraced a more aggressive investment strategy in technology over the last 2-3 years. This is why we were compelled to let 27 staff go in a bid to improve efficiency. We have introduced new machines that replaced manufacturing. On the other hand, we would likely bring back a part of the old employees as of August. We are in talks with some 2-3 companies that could offer them a summer job. We need staff in areas that could add value, and not where they can easily be replaced by machines”, said Erwin Vondenhoff.

“We have invested in people, communication, teambuildings, in a time when we are aware they have other priorities. We try to use more productively this increase of loyalty we see in our employees. Last year, we have experienced critical moments in production, when employees fled for a higher pay. We have no staff fluctuations at this point. People don’t want to leave anymore; they are actually satisfied with having a job. We invest in our human resources, but we also have expectations from them. We don’t want to see this loyalty as a result of the crisis”, Vondenhoff explained.

Nevertheless, Heidi Chocolate revised its communication strategy by relinquishing TV as promotion medium over other mediums likely to influence the buying decision. As part of the positioning strategy, the chocolate maker started to scale back from certain retail chains.

“We don’t want to be present in a small store in the rural area, because on one hand, is not reflecting the target of our strategy, and second of all, the marketing conditions don’t meet the requirements. In summer, the chocolate melts, and clients will not fully enjoy the taste of our products. This is the reason why we started to scale back from various retail chains over the past few years,” said the representative of Heidi Chocolat.

If until now, the primary medium used for promotion was TV, this year the chocolate maker has completely relinquished this communication medium, following to invest in the new wrappings, instore communication and online.

“We will use online medium more actively as this is part of our strategy. Within 3-4 months, we will rebuild our webpage”, said Vondenhoff.

Furthermore, the company plans to open a new presentation store, to be located in Pantelimon commune, near the production facility and head office.

“It will be something new, a possible alternative to current offers for spending leisure time together with your family. We aim at being more transparent to our audience, to add emotion to our relationship with the consumer. We hope to open this store by spring next year”, Erwin Vondenhoff said.

Light in sight for Heidi Chocolat

If last year, the company reported a 43 mln. lei turnover, for 2009, the chocolate maker expects 20% increase in business, on exports expansion and new products ready to storm the market.

“Heidi products will have a new look starting June, we will introduce new recipes that will contain natural ingredients, and new range of products”, said Erwin Vondenhoff.

In first three months this year, the company marked a 10% increase in sales, with a 20% growth reported in March.

“Even the Christmas sales were 10% up from 2007. We are «affected» by crisis as it forces us to adopt a more aggressive cost-control approach. It makes us be more considerate on the consumer psychology, on what is truly important for him when he decides to buy a product,” said Vondenhoff.