Godiva Chocolatier, Inc. Business Information, Profile, and History

Company Perspectives:

With approximately 250 boutiques in North America, and dozens more in sophisticated capitals such as Paris, London, Rome and Tokyo, Godiva has realized Joseph Draps' vision of introducing the world to Belgium's unique style of elegant, sophisticated chocolates capable of pleasing the most discerning palates. With production facilities in Belgium and the U.S., Godiva Chocolatier is recognized around the world as the leader in fine chocolates. From its famous truffles and shell-molded chocolate pieces to its European-style biscuits, gourmet coffees and hot cocoa, Godiva Chocolatier is dedicated to excellence and innovation in the Belgian tradition.

History of Godiva Chocolatier, Inc.

Godiva Chocolatier, Inc., is a leading manufacturer of premium-quality chocolates, cookies, ice cream, cocoa, and flavored coffees. Its products are sold at about 250 company-owned stores in North America and in major cities worldwide, as well at sales counters in several thousand upscale department and specialty stores like Marshall Field's and Barnes & Noble. Godiva also sells its chocolates through direct-mail catalogs and via the Internet. Founded in Belgium, the firm has been owned since the 1960s by Campbell Soup Company and is now headquartered in the United States.

Beginnings

Godiva Chocolatier traces its roots to 1926, when Pierre Draps started making chocolates in Brussels, Belgium, for sale to local shops. His son Joseph began working for the family business at the age of 14 and shortly after World War II took control of it. When he decided to open a shop of his own, he sought a distinctive name to give it and turned to his wife for ideas. She suggested Godiva, after the legendary countess who had protested high taxes by riding nude through Coventry, England, and Draps chose it for the new endeavor.

His shop in Brussels' Grande Place was a success, and over the next decade several other outlets were opened around Belgium. Joseph Draps was both a talented chocolate-maker and a skilled businessman, and under his guidance the firm built the Godiva brand into a leader in the super-premium chocolate category through the use of sophisticated advertising and elegant packaging, as well as by limiting distribution to select locations.

Godiva's signature offering was a creamy "ganache," or hazelnut praline filling, that was inserted into a molded shell of high quality chocolate. Over the years, Draps built up a repertoire of distinctive products, many of which had been introduced to commemorate specific events. His best-known creation was the Comtesse, which celebrated Lady Godiva herself and was made from dark or milk chocolate with a chocolate cream center. Another was the Autant, a hand-decorated chocolate leaf made from coffee and chocolate creams covered in milk chocolate, which had been made to commemorate the 1939 premiere of the film Gone With the Wind. Other popular offerings included the Fabiola, introduced in 1958 to celebrate the engagement of Queen Fabiola to King Baudouin I of Belgium, and the Golf Ball, which honored Draps' golf-playing friendship with Belgium's King Leopold III. Godiva would later be named the official purveyor of chocolate to the Belgian Royal Court.

In 1958, the first Godiva shop outside Belgium opened in Paris, and in 1966 the company's offerings reached America with distribution to select chains of luxury department stores. At the same time, the Draps family sold a two-thirds stake in the firm to Pepperidge Farm, a unit of Campbell Soup Company. Later, Campbell would acquire the remainder.

In 1972, the company opened its first American location on Fifth Avenue in New York City, near the shops of Tiffany and Cartier. As in its European boutiques, Godiva's products were displayed like jewels in refrigerated brass and glass cases.

Rapid Growth Beginning in the Late 1970s

In 1978, the company named a new president, Albert J. Pechenik, and under his leadership sales leapt from approximately $4 million to more than $22 million in four years. Godiva's profile was raised by advertising in tony publications such Gourmet magazine and Architectural Digest, along with such moves as partnering with designer Bill Blass, who created a signature line of chocolates for the firm. Marketing materials were improved as well, and department stores were encouraged to set up separate Godiva counters. During this period, the firm's chain of stores was also expanded, with shops opened in such countries as Japan for the first time.

The customer at a Godiva boutique, as the firm termed its outlets, was treated like a buyer at a fine jewelry store. Once a selection of chocolate pieces had been made from the display case and weighed, the candy was placed in a golden box, tied with imported golden string, and then put into a golden bag for transport. In addition to chocolates by the pound (then priced at $17.50), special items like chocolate-filled Limoges china bowls and Wedgwood dishes were also sold. Other extravagant offerings included model kits of Porsche, Rolls Royce, and Mercedes automobiles, which could be "glued" together by melting an included extra piece of chocolate. The company's products were frequently purchased for gifts, and 70 percent of Godiva's sales were made during the holiday season, which stretched from November to Valentine's Day.

The company had by now set up a second headquarters in New York and an American production facility in Reading, Pennsylvania, though European customers were still supplied by a plant in Belgium. Some debated the relative merits of Godiva chocolates from Belgium versus those made in the United States, but the company dismissed such concerns, noting that it used the same supplier for its raw chocolate but created unique recipes for different markets, factoring in regional preferences for sweetness and flavorings. Additionally, laws in some states limiting alcohol content required that American recipes omit certain liqueur-based flavoring agents that were preferred in Europe.

In the summer of 1982, Albert Pechenik resigned as president to form a chocolate company of his own, Gourmet Resources International, and his position was taken by Thomas H. Fey. A disgruntled Pechenik later charged that his former employer was trying to undermine his new operation, but Godiva countered that it was simply being competitive.

The company continued to grow during the mid-1980s by such actions as boosting its retail presence in the UK and adding a chocolate gift registry. By 1988, Godiva was operating 56 stores in the United States alone and taking in revenues of approximately $100 million worldwide, with the bulk of earnings continuing to be derived from sales to department stores and other specialty retailers. The company had also begun issuing catalogs for mail-order sales, though this made up only a small portion of its business. The price of Godiva's 50-plus varieties of solids, cremes, mints, caramels and cordials now stood at approximately $22 per pound, almost twice what lower-end competitors such as Fanny Farmer charged.

As the U.S. economy hit a serious downturn at the end of the 1980s and sales of luxury goods fell off, Godiva found its sales in decline. In May 1991, seasoned marketer David L. Albright was named to replace Thomas Fey as the company's president. Albright, formerly vice-president of Pepperidge Farm's biscuit division, refocused Godiva on its core product line of shell-molded chocolates, while also inaugurating a new $5 million advertising campaign. A primary goal of the ads was to increase sales beyond the holiday season by depicting the firm's chocolates as personal indulgences rather than primarily as gift items.

New Products in the 1990s

Brand-building efforts continued during 1993 with the introduction of the Café Godiva line of gourmet coffees and a chocolate liqueur made in conjunction with Seagram's, as well as a number of new single-serving chocolate treats and a line of biscotti cookies. To boost sales in department stores, Godiva also began offering them new refrigerated cases that better displayed the company's pre-packaged boxes of chocolates.

In 1994, following a successful test at its Chicago boutique, Godiva began a chain-wide redesign of its stores, which now numbered more than 110. Abandoning the jewelry-store look of pink marble and black lacquer, a new Art Nouveau-inspired combination of bleached wood floors, creamy white marble, and richly-finished cherry wood cabinets was introduced. At the same time, the shops were made more welcoming, with the layout changed to encourage browsing while prices were displayed in public view. New, affordable treat items were introduced including Bouches, single-serving chocolates priced below $3. In 1995, the company gained Kosher certification, with most of its chocolates now manufactured in accordance with Jewish dietary laws.

While these changes were taking place, Godiva also revamped its direct-marketing unit, which had never heretofore turned a profit. Catalogs were redesigned and other elements of the operation were restructured, which helped produce profits as well as a sales increase of 15 percent in 1995 and 20 percent in 1996. The mail-order division, which still accounted for less than 10 percent of the firm's total earnings, targeted both corporate accounts as well as the general public. A survey done via Godiva's Web site, which had been launched in 1995, found that a typical customer was a woman who earned $60,000 per year.

The year 1996 saw the company redesign its Web site and experiment with the idea of creating small retail kiosks in shopping malls. Over the next year, three such kiosks were opened, while Godiva's chain of U.S. stores, also located primarily in malls, grew to 131. A new line of coffee products was introduced for use by office service companies during the year as well.

In 1997, Godiva launched a new promotional campaign to boost sales for Valentine's Day. The company placed three certificates redeemable for one-carat diamond rings valued at $10,000 in boxes of its Love in Bloom chocolate collection, which retailed for $18 or more per box. The successful giveaway brought the company significant media attention, and it was reprised and expanded each year thereafter.

In the fall of 1998, president Craig Rydin, who had been running the company since 1996, was moved up in the Campbell organization, and his place taken by Archbold van Beuren. At this time Godiva was also introducing a new line of cookies (known in the industry as biscuits), which included such flavors as Hazelnut Belgique and Chocolate-Dipped Pirouette.

In 1999, Godiva introduced a line of ultra-premium ice cream in conjunction with Dreyer's/Edy's Grand Ice Cream, which initially consisted of six flavors. A 12.5 ounce container retailed for $3.19, making it more expensive than established premium brands such as Ben & Jerry's. Within six months of its introduction in March 1999, the line had come to account for 7 percent of the super-premium category's sales, with annual revenues projected to reach $20 million or more. The year had also seen the most lavish Chocolates & Diamonds Valentine's promotion to date, featuring prizes of 100 diamond earring sets and a 7.2 carat diamond ring valued at $125,000, courtesy of DeBeers.

During the late 1990s, the company experienced a drop in sales to Asia due to an economic downturn in that region, but its business in Japan and Hong Kong continued to grow, and distribution there was expanded despite the financial crisis. By the latter half of 2000, Godiva chocolates were being sold in 37 countries at 232 company-owned stores and at more than 2,500 counters in specialty and department stores such as Marshall Field's and Barnes & Noble. To help its customers find the nearest location, the company introduced a free service to users of cell phones and wireless handheld devices which offered downloadable maps.

2000 and Beyond

The fall of 2000 saw the firm introduce Palets D'Or, dark chocolate pieces whose smooth centers featured such flavors as tea, lemon, and red wine. Godiva also took advantage of the promotional opportunity afforded by Miramax Films' hit Chocolat, giving holders of tickets to the movie free samples and sponsoring a contest which offered the winner a trip for two to Brussels.

In January 2001, Godiva began its 75th anniversary year by announcing that the annual Valentine's Day giveaway would include a 7.5 carat diamond ring and 75 diamond bracelets worth $3,500 each. During the year, the company also introduced a number of new chocolates, including the Romaine, Noix Macadamia, Nippon, and Creole pieces, each of which contained a unique combination of chocolate, praline, and other flavors.

In 2003, the company's Valentine's Day promotion shifted away from diamonds to feature 50 five-day trips for two to a Marriott resort in Arizona, with a pair of "his and hers" BMW Z4 automobiles as the Grand Prize. That same year also saw the Starbucks coffee chain begin test-marketing Godiva products at 50 of its stores in New York, Chicago, and Seattle. In the fall, Godiva introduced new items for the holiday gift season, including the G Collection of hand-decorated chocolates created by pastry chef Norman Love, which retailed for close to $100 per pound. Other offerings included a new collection of deluxe caramels and a limited-edition music box filled with chocolates, which was produced in conjunction with Steinway & Sons.

More than three-quarters of a century after the Draps family first started making chocolates in Belgium, Godiva Chocolatier, Inc. had evolved into the preeminent luxury chocolate company in the world. The combination of innovative, high-quality products, finely tuned marketing, and the powerful backing of Campbell Soup had helped make the name Godiva synonymous with indulgence and pleasure.

Principal Subsidiaries: Godiva Brands, Inc.; Godiva Belgium N.V. QSA (Belgium); Godiva Chocolatier (Asia) Ltd. (Hong Kong); Godiva Chocolatier of Canada Ltd. (Canada); Godiva France S.A. (France); Godiva Japan Inc. (Japan); Godiva U.K. Ltd. (United Kingdom)

Principal Competitors: Russell Stover Candies, Inc.; The Ghirardelli Chocolate Company; Hershey Foods Corporation; Nestlé S.A.; Mars, Inc.; Cadbury Schweppes plc.

Chronology

• Key Dates:
• 1926: Draps family begins making chocolate in Brussels, Belgium.
• 1940s:Joseph Draps opens the first Godiva shop.
• 1958: Draps opens a Paris shop, his first outside of Belgium.
• 1966: A majority stake in Godiva is acquired by Campbell Soup Co.; U.S. sales begin.
• 1968: Godiva is named the official chocolatier to the Royal Court of Belgium.
• 1972: Godiva's first U.S. shop opens on Fifth Avenue in New York City.
• 1993: Coffees, cookies, liqueur are introduced.
• 1994: The company starts a chain-wide redesign of its stores.
• 1997: Valentine's Day Chocolate & Diamonds promotional giveaway debuts.
• 1999: Godiva ice cream is introduced.
• 2003: Norman Love's G Collection of chocolates is added.