Chocolate maker ahead of cost savings schedule as it slashes inventory

Chocolate maker ahead of cost savings schedule as it slashes inventory

July 26, 2023

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Dive Brief:

  • Rocky Mountain Chocolate Factory is ahead of schedule in its cost-savings push involving warehousing, manufacturing, transportation and other facets of its business, Director and CEO Rob Sarlls said in a statement.
  • Improved inventory management and demand planning allowed the company to eliminate two third-party warehouses and reduce inventory by 46% YoY for the quarter that ended May 31. Its store delivery logistics now uses cross-docking providers to reduce trips and maximize volume on its own trucks.
  • “These initiatives have combined for over $700,000 in annual cost savings, which is more than 60% of our $1.2 million annual cost saving target introduced last quarter,” Sarlls said. “This is ahead of our original expectations in terms of both magnitude and timing.”

Dive Insight:

Rocky Mountain Chocolate Factory’s transformation is about simplifying and focusing its operations, allowing the chocolate maker and franchisor to do more with less and improve its standing versus competitors, Sarlls said on a July 13 earnings call with analysts.

“We are well on our way in positioning Rocky Mountain Chocolate to gain market share in what is a highly fragmented U.S. chocolate confectionery market,” Sarlls said.

The company still has a ways to go to meet that goal.

For the quarter ending May 31, operating expenses increased due mainly to new leadership hires. Meanwhile, total factory and retail gross profit fell from $900,000 to $300,000 YoY. Rocky Mountain Chocolate Factory attributed the decrease in part to trimming SKUs — it’s midway through its plan to reduce its SKU count by 25%, with a focus on cutting underperforming chocolate products.

One initiative to help Rocky Mountain Chocolate Factory improve its standing is a strategic partnership with an unnamed cold chain logistics company. This will allow the chocolate maker to provide more efficient nationwide two-day delivery for online orders and is expected to boost sales volumes. The partnership’s rollout will continue over the next 12 weeks.

“In addition to faster delivery, online customers will begin to experience significantly reduced shipping costs,” Sarlls said.

Rocky Mountain Chocolate Factory will see its inventory levels increase again as the company prepares for the holiday season, Sarlls said, but it expects they will remain lower than the previous fiscal year.

“We will be doing some pre-positioning of inventory with our third-party logistics partner, and that’s again to make sure that the product can get to consumers within 48 hours,” Sarlls said. “But you can expect with this team tighter inventory management going forward, all things being equal.”

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