Harvard Business School Case study
- 1. HARVARD BUSINESS SCHOOL CASE Launching Krispy Natural: Cracking the Product Management Code
- 2. Candler Enterprises: A multinational beverage and snack goods manufacturer •Four divisions Snacks food division – Pemberton Beverage Division Quick Service Restaurant Division Pet Care Division
- 3. Ashley Marne • Ashley Marne •Executive Vice President of Sales and Marketing, Pemberton • Brandon Fredrick •Marketing Director, Pemberton • Burt Spivey •Chief Operating Officer, Pemberton
- 4. What is the present situation?
- 5. Situation Analysis (1/3) Pemberton is going to launch its new product “Krispy Natural” in the market Summary analysis of the test market results has to be done Market tests have been conducted in Columbus, Ohio and three cities in Southeast Based on the analysis, plan for introduction of Krispy Natural has to be decided
- 6. Competition with well-established brands in different varieties The retailers which already had a foothold of Krispy Naturals might be reluctant due to prior experience Creating Brand Equity in snack food category all over again Situation Analysis (1/3)
- 7. Situation Analysis (3/3) • Consumption of crackers was frequent and regular despite competition from other foods alternatives • Crackers that were conveniently packaged in easily portable quantities are preferred • Desire of healthy food was driving the cracker industry • Categories of the crackers were • “All other” crackers • Crackers with filling Crackers Industry
- 9. Objectives (1/3) Summary analysis of the test market results Interpreting the performance of the product from the test market results
- 10. To use the qualitative analysis and the marketing terms and strategies to predict the performance of the product when released in the market Framing marketing plan for the introduction of the product and strategies for different situations that may arise Objectives (2/3)
- 12. Pemberton as a market leader of sweet snack market
- 13. Direct Store Delivery (DSD) • Products were delivered directly to retail outlets, bypassing retailer’s warehouses and distribution centers • DSD representatives delivered products from company distribution centers to the retail stores and performed critical merchandising functions • DSD maximized sales and profit growth through greater control of shelf space, more accurate forecasting, reduced stock-outs, and quicker turnover of products
- 14. Company’s Driving Force – Cultural Innovation •Key strategic priorities for the company: •Building a collection of attractive, durable brands • Leveraging, leading, marketing, sales and DSD systems to increase revenue and profits •Building or acquiring capabilities in salty snack categories
- 15. Present Status of US Cracker Industry Manufacturer sales of "All Other" Crackers 2009% Share 2010% Share Kraft 37.8% 37.0% Kellogg 28.9% 28.1% Pepperidge Farm (Goldfish) 13.9% 14.2% Private Label 4.6% 4.8% Other 14.8% 16.0% Manufacturer sales of Crackers with Filling Market Share 2009% Share 2010% Share Kraft 34.7% 32.7% Lance 31.5% 29.9% Kellogg 15.5% 21.0% Private Label 8.0% 8.2% Other 10.2% 8.1%
- 16. We will focus on three inter-related issues
- 17. Three Issues Krispy 2009 Crisis • Issue faced by the company after Krispy was introduced • Reasons for the crisis • Decision of relaunching of the product 1
- 18. Three Issues 2 •Marketing Plan for the testing •Market Test Results •Results from Columbus were double than expected •Results from South eastern cities were not impressive •Reasons for these contradicting results •Summary analysis of the test results
- 19. Interpretation of the test results Plan for introduction of Krispy Natural? 3 Three Issues
- 20. Krispy 2009 Crisis • Issue faced by the company after Krispy was introduced • Causes of the crisis • Decision of relaunching of the product 1 Three Issues
- 22. SURVEY RESULTS 2009 Krispy Single-Serve Sales Performance vs. Plan ($ millions) Plan 2009 Actual % to Plan Krispy Retail $97.5 $50.8 52.1% Krispy Vend $23.4 $18.0 76.9% Total Krispy Single-Serve $120.9 $68.8 56.9% In 2009, the product fell short of the management productions From the surveys, many customers stood unsatisfied with the product
- 23. Causes of 2009 Crisis • Limited product line, which made it difficult to command any sort of presence in supermarkets • A taste survey showed the product did not deliver the flavor satisfaction scores • High competition in the same category of products • Unfulfilled brand promises regarding quality • Launched a brand product which already had well-established brands as competitors and no differentiable quality
- 24. Krispy Relaunch Prior experience of Krispy launch in the salty snack industry hadn’t been good. Still the company decided to do brand revitalization and relaunch the product with a changed name.
- 25. Reasons for Relaunch Decision • Cracker market fundamentals were attractive • Overall market was large and segments like crackers- with-filling were expected to grow 10-14 % per year • Internet research suggested consumer dissatisfaction with the flavor and taste experience of current cracker brands
- 26. •Marketing Plan for the testing •Market Test Results •Results from Columbus were double than expected •Results from South eastern cities were not impressive •Reasons for these contradicting results •Summary analysis of the test results 2 Three Issues
- 27. Marketing Plan Specific changes were made in the marketing strategies for the relaunch of the product. This was done to build a brand equity of the product by enhancing its quality, extending the product line beyond single-serve offerings and more flavor options to compete with well- established brands PRODUCT MARKETING DISTRIBUTION PRICING Krispy Natural Marketing Strategy
- 28. PRODUCT STRATEGY • Increasing package sizes to multiple sizes • Improving tastes and flavor • Keeping proper proportion of calories • Introducing more varieties in both categories: flat crackers & crackers with fillings
- 29. MARKETING STRATEGY • Pull spending and trade promotions • Focus on manufacturer sales than the retailer sales • Pull strategy adopted rather than push strategy adopted by many cracker industries
- 30. DISTRIBUTION • DSD Distribution – a critical component in overall program strategy • Distribution logistics optimization PRICING •Premium pricing strategy •Retail price same as other brands but with smaller quantity •Brand positioning
- 31. In 2011, Krispy Natural was launched in two test regions: Columbus, Ohio & three cities of Southeastern United States
- 32. Marketing Strategies in the two regions Columbus (Krispy brand did not have a prior presence) • Separate DSD representatives for Columbus other than traditional DSD route delivery called “Krispy Force” • “Krispy Force” reps worked with Pemberton regional and district sales managers and focused solely on selling the new Krispy Natural product line Southeast (Krispy already had a foothold in the market) • Reposition the product to a more premium offering • No separate representatives Advertising and Promotion of the product was same in both the regions
- 33. 2011 Promotional Plan—Columbus, Ohio Month 1 2 3 4 5 6 Advertising Television Online Flighted Television and Online Advertising Blitz Social Media Facebook Like Us Campaign Trade 15% Discount 12% Discount per case 8% Discount per case per case Sampling In-Store Sampling with Coupon Newspaper Sampling: Trial Size with Coupon Couponing Newspaper Shelf Pad Electronic Newspaper Shelf Pad 80¢ 2 x 60¢ 40¢ 50¢ Buy 2 get 1 Free
- 35. Product Testing Summary Positive Purchase Intent % Testers that preferred taste of (Definitely or Probably Would Buy) Krispy Natural over leading brand Crackers with Filling White Cheddar 92% 78% Smoked Gouda 77% 65% Chipotle Cheddar 78% 64% Creamy Swiss 80% 72% Tomato Basil 85% 75% Vegetable Herb 77% 50% Flat Crackers Smoked Cheddar 81% 61% Sundried Tomato 80% 58% Cracked Pepper & Olive Oil 80% 55% Roasted Garlic 81% 59% Note: Product pricing was not included in taste test
- 36. Krispy Natural Test Market Result Highlights Store/Display Penetration % Store Count(a) % of Stores with % of Stores with Gondola Placement(b) End Aisle Display(c) Columbus 94% 9% 14% Southeast 85% 12% 10% (a) Percent of total stores where product line found in distribution. (b) Percent of stores that placed product on gondolas, which are merchandise display shelves; Provides indication of shelf presence and impact. (c) Percent of stores that placed product on end aisle displays, which are point-of-purchase displays located at the end of a row of shelving. A manufacturer can realize significant incremental volume from this display activity.
- 37. Estimated Dollar Shares of Market Columbus Southeast Pretest Market Post Pretest Market Post Kraft 40% 33% 34% 32% Kellogg 25% 22% 23% 22% Pepperidge Farm 11% 10% 10% 10% Krispy 0% 18% 9% 10% Annualized National Projection (a) Year 1 Sales (millions) Columbus Scenario (national extended) $ 1,000 Year 1 Sales (millions) Southeast Scenario (national extended) $ 550 Sales scenarios based on approximate share achieved in each test market multiplied by total cracker sales estimates at manufacturer prices for year 1
- 38. Results Columbus • Columbus achieved 18% share, doubling the share target • This was derived by stealing shares from the competitors • Category volume had increased by 30% Southeast • Result was not impressive showing only 1 % increase in market share • There was little category expansion
- 39. Reasons for contradictory Results • Actual shelf space and display activity was below what the team expected due to low introductory trade discount of 15% • Krispy already had a foothold in Southeast which led to a bad prior experience for the retailers leading to low display activity • The number of stores in which the product line was found in distribution were less in Southeast due to bad brand image of Krispy from the year 2009 • As seen from Exhibit 5, the end aisle display in the stores was low that lead to low incremental volume
- 40. Summary Analysis of test results • According to the test results, it was clear that the quality of the new product is being appreciated by everyone as is seen from the market share results of Columbus • However, it also emphasizes on the difficulty of reestablishing the product in a city which already had a foothold of the brand • Display activity of the stores plays a huge role in increasing the market share of the product • Trade promotions, allowances, discount are very important for the display activity even if the trade is receptive to the new product.
- 41. Interpretation of the test results Plan for introduction of Krispy Natural? 3 Three Issues
- 42. Interpretation of test results
- 43. IS THE TEST MARKET DATA RELIABLE? Marne - “Brandon, I looked over the preliminary test market data for Krispy Natural and I see we have something really special. I think we can blow the original forecasts of $500 million out of the water. If we do it right, we should easily exceed those projections—I see no reason why we can’t double them”
- 44. INSIGHTS FROM SALES MANAGERS INTERVIEWS
- 45. Sales and Channel Response According to the Sales managers, • They were pleased with the Krispy Natural product and felt the trade was interested in the new offering • Large chain buyers were impressed by the consumer research results and inventory turn estimates for Krispy Natural • The promotional activity and advertising was loved by all • Pull marketing created a buzz and people were coming to the stores asking for Krispy Natural
- 47. • The positive test market results were driven by significant price discounts, couponing and sampling which were not sustainable on a national level • Taste preferences claims of Krispy Natural were inflated • Flavor was no better than the current brand offerings
- 48. KRISPY NATURAL MARKET TESTS COLUMBUSSOUTHEAST UNIMPRESSIVE PERFORMANCE DOUBLED MARKET SHARE Reasons 1. Lower shelf space than expected 2. Original Krispy product had a foothold in Southeast at lower price 3. Low trade discount rate 1. Better quality product 2. Brand building ability of the product 3. Great consumer reception 4. Ability to challenge well-established brands in the market Inferences When launched on a national level, will the product experience the fate as in Columbus or Southeast?
- 49. The fate of the product cannot be predicted from the market results. The marketing strategy when launching the product should be planned to avoid all the possible situations
- 50. PLAN FOR INTRODUCTION OF KRISPY NATURAL
- 51. • Krispy Natural should appeal to the qualities pointed out by the critics in their sales promotions and advertising • Product line display should be more in the retail stores • Making the product easily and conveniently available to the customers for example, in vending machines at the airports, stations • Brand positioning to the high-ended market to make revenue for premium pricing of the product • Using a catchy tagline to emphasize brand revitalization catching attention towards the difference in quality, flavor and varities in the old and new product
- 52. Company Post-Krispy Natural trends in Columbus Potential Competitive Response Kraft Lost 7% share Short term: New product testing in process Increase trade spending and consumer promotions Long term: Spend heavily to counter national roll-out Kellogg Lost 3% share Short term: Increase A&M Long term: Capitalize on pull Product line improvements Pepperidge Farm Lost 1% share Short term: Increase trade spending Long term: Compete on quality and brand reputation Partial Competitive Analysis
- 53. Given in the previous page are the possible short term and long term strategies of competitive brands after launch of Krispy natural. Krispy Natural will have to change the marketing strategy accordingly to counter all the short term strategies of the competitive brands
- 54. Marketing strategies to compete with other brands • Cover all the major retail stores’ display areas to catch the maximum attention of the customers • Emphasize more on pull strategy which is a differentiating point from other brands • Introduce more varieties and innovative products • Develop strong brand equity till the time the competitive brands can implement their long term strategies
- 55. Was Marne’s view of blockbuster potential of Krispy Natural supported by the data?
- 56. NO • The potential of the product didn’t work in Southeast, the profit when national extended was equal to the revenue earned by the company before the launch • This was because the company already had a foothold in the region, same is the case with rest of the nation leaving some exceptions like Columbus • The perception of the people regarding the quality and the increased price might be different • On a bigger scale, there is a possibility, the product does not get as much support as in Columbus and relying only on the quality of the product to get the customers shouldn’t be an option
- 57. What was the best rollout strategy to neutralize the competition?
- 58. Krispy Natural has to appeal to the qualities which differentiate it from other brands • Appeal to the pull strategy • Promotional activities emphasizing on the quality, flavor and varieties to justify the premium price of the product • Easy availability of the product in convenient form of for example, in vending machines at the airports, railway stations etc. • Keeping the brand promises and publicizing them • Giving a tagline to the new product that emphasizes the brand revitalization decision of the company
- 59. How should the rollout strategy change if they were going to have to go head to head with Frito-Lay?
- 60. If head on competition with a successful brand when launched, Krispy Natural will have to introduce coupons and package deals to attract the customers and get more retail stores to keep the products in display Krispy Natural can make these discounts and promotional deals available to only selected retail stores like Walmart so that these stores take care of the display of the brand products specially Increase the product line in the retail store to improve the brand equity