krispy natural

LAUNCHING KRISPY NATURAL

CRACKING PRODUCT MANAGEMENT CODE

WHO ARE THE PLAYERS??

PATRICIA WILLIAM Pemberton’s President

ASHLEY MARNE Executive Vice President Of

Sales And Marketing, PEMBERTON

BRANDON FREDRICK Marketing Director Pemberton

BURT SPIVEY Pemberton Chief Operating

Officer

WHAT IS THE PRESENT SITUATION ??

What is Krispy Natural????

In 2008 Pemberton took first step to enter Salty Snack Market with the Acquisition of Krispy Inc.

CANDLER ENTERPRISE (18 MILLION)

Pemberton Products

Beverage division

Quick service restaurant

Pet care division

PEMBERTON SALES WERE FROM ????

SOFTIES COOKIES

HOMESTYLE MUFFINS

DOUGHNUTS

PACKAGED FOOD BARSOTHER SWEET BAKED GOODS

Market leader in US in cookies and bakery products.Generated $5 billion revenue in 2011.CAGR (compounded annual growth rate) of 14% for revenue over past 5 years.Company owned DSD (direct store delivery) distribution system.

ABOUT PEMBERTON

WHY STUDY THIS CASE???

OBJECTIVES OF THIS CASE ???

Understanding the U.S Cracker Industry and Assessment of rivals.

Marketing plan of Krispy Natural. Analysis of Test Market results. Should Krispy Natural be rolled out

Nationally? What should be the National roll out

strategy?

SPECIFIC DIRECTION FOR PRODUCT DEVELOPMENTS OF PEMBERTON

BUILDING A COLLECTION OF ATTRACTIVE

DURABLE BRANDS

Leveraging leading marketing,sales and DSD SYSTEMS TO INCREASE REVENUE & PROFITS

BUILDING OR ACQUIRING CAPABILITIES IN SALTY SNACK CATEGORIES

-Patricia Williams

Why did Pemberton

acquire Krispy Inc.

Consumption of crackers was frequent and regular.

Consumers liked convenient and portable packages.

Emerging desire of healthy products.

A Mintel study of salty snacks

in the U.S reported that

74% of respondants consumed

crackers on a regular basis and 34% ate

them as part of regular weekly

diet.

50% of respondants

liked crackers that were

conveniently packaged in

easily portable quantities.

53% respondents considered overall healthfulness an important factor in cracker purchase decision.

US CRACKER INDUSTRY Retail cracker sales estimated 6.9

billion in 2011 CAGR(Compounded annual growth

rate) of 2.2% from 2008 – 10 Increased growth of 6.2% in

General(All other) in 2010 Annual growth forecasted between

10-14% for crackers with filling

75

99

6 1

Market Share

General(All Other)SaltinesCrackers with fillingsGraham crackersOthers

All figures are in %

Premium priced products were being introduced

Growth was driven by new flavour focussed product lines.

Cracker with fillings were gaining popularity

The segment was having flat sales from 2005

to 2009. It experienced the strongest growth of 14% approx in

2010. Annual growth forecast

was between 10-14% for the next

several years.

Kraft's Nabisco Wheat Thins

Flatbread( launched in 2009) and Kellogg's

Keebler Townhouse

Flatbread(launched in 2010)

were healthier and upscale

options.

Market share for

Pepperidge Farm

Goldfish grew from 13.9% to 14.2% by

focussing on new

flavours.

Competitors?Kraft Food Inc.( Nabisco Brands)Kellogg Co.(Sunshine ,Keebler,Carrs and

Austin brands)Pepperidge Farm(Goldfish brands)

These three large brands account for ¾ of the Cracker category.

MAJOR PRODUCT OF KRISPY SINGLE SERVE

Six round toasted cracker sandwiches with cheese filling in 3 flavour optionsFlat cracker sold in 1.5ounce bags with 2 flavour options

What Pemberton team expected from Krispy?

Sales in $millionsPLAN

Krispy Retail $97.5Krispy Vend. $23.4Total Krispy $120.9

UNEXPECTEDLYPLAN 2009 Actual

Krispy Retail $97.5 $50.8Krispy Vend. $23.4 $18.0Total Krispy $120.9 $68.8

The actual sales did not match the projected sales!! WHY?

KRISPY SINGLE-SERVE DRAWBACKSMarketed as ONLY “Grab and go” snacksStrong presence in vending machines and convenience storesRegional brand(mostly in southeastern US)Limited product lineFlavour satisfaction very lessOnly single serve offerings

Should Krispy relaunc

h again?

Why Pemberton Agreed For RelaunchAttractive Cracker market.Overall segment was large and expected growth of 10-14% per year. Reducing markets of other competitors(Eg Kraft losing its share to Pepperidge Farm)

Krispy RelaunchRebranding as ‘Krispy Natural’.

Targeting health conscious consumers.

R&D labs engaged in improving taste and quality.

Multi serving package sizes and more flavours to gain foothold in super markets.

Market Test Plan In Columbus, Ohio And Southeast US.

In Columbus Krispy Natural will achieve 9% market share of Cracker category.In Southeast Krispy Natural will increase market share from its current market share of 9% to 15%.

THIS TIME IT’S A SUCCESS

Krispy Natural is now a serious competition.

Columbus(2011) Southeast(2011)

Pretest Post %lost or gained

Pretest Post %lost or gained

Kraft 40% 33% -7% 34% 32% +1%Kellogg 25% 22% -3% 23% 22% +1%Pepperidge Farm

11% 10%

-1%

10% 10%

0%Krispy 0% 18% 18% 9% 10% +1%

How Krispy Natural managed to steal market share from competitors?

PRODUCT STRATEGY(1/2)

POSITIVE PURCHASE INTENT OF 77-92%

PRODUCT STRATEGY(2/2)Focused on increasing package size to multiple servings, improving taste and more flavour options.Health consciousness: Use of 100% whole wheat and other natural ingredients.

R&D working tirelessly reformulate theProduct.

Improving taste by introducing new flavors

National Distribution of Krispy Natural.Pre-tax profit contribution of at least 13%Minimum sales of $500 million

SALES OBJECTIVES

Products delivered directly to retail outlets,bypassing retailer’s warehouses and distribution centersCritical merchandising functions were undertakenINDIRECTLY PERFORMED SALES FUNCTIONS

MAXIMISED SALES

AND PROFIT

GREATER CONTROL OF SHELF

SPACE

REDUCED STOCKOUT

S

MORE ACCURATE FORECASTI

NG

DIRECT STORE DELIVERY (DSD) DISTRIBUTION SYSTEMS

MARKETING STRATEGY

REJECTED

ADOPTED

Advertising and mass media promotion

Sales promotions and discounts

Customer relationship

management

Columbus had no prior presence of Krispy. Here special Krispy forces were formed seperate from DSD route.

They doubled the share target achieving an 18% market share.

TEST MARKET RESULTS(1/2)

Here, Krispy was already established as single serve product at a lower cost.

So it was challenging to reposition at a premium range.

Actual shelf space and display was below expectations.

Only 10% increase in market share. It can be attributed to low introductory trade discount of 15%.

TEST MARKET RESULTS(2/2)

INTERPRETING MARKET RESULTS

1. Grabbed 18% market share in Columbus as a new entrant in salty snacks business.

2. Kraft,Kellogg and Pepperidge in total lost 10% of market share, despite of higher demands cracker products since 2010 . ( 6.2% for “All other crackers and 14% for chacker will fillings).

RECOMMENDED FOR A NATIONAL ROLLOUT

More Than 60% Tasters Preferred Taste Of Krispy Natural Over Other Leading Brands.

Positive Purchase Intent Of 81%.

Its Premiuim Pricing Was Greatly Successful In Columbus,ohio.

If an average is taken for poor performance national extended and good performance national extended sales of $ 775 million can be expected. However even in the worst case sales projection is $ 550 million,well above the expectation of $ 500 million. Thus, the product should be rolled out nationally.

RECOMMENDED FOR A NATIONAL ROLLOUT

Pull Strategy was proving to be effective and hence to be used to combat competitors response.

Since price discounts, coupons and sampling could not be sustained at a national level. It should be aggressive in places where it was previously positioned at a lower cost.

Continuous R&D to come up with newer and better flavours and strong brand building to go head to head with Frito-Lay.

NATIONAL ROLLOUT STRATEGY?

Launching more new product mix as per customer taste and keeping health as a priority concern.

Optimization of DSD system for Krispy natural product for cost reductions.

POSSIBLE COMPETITIVE RESPONSES TO NEW BRAND “FRITTO-LAY

Disclaimer

Prepared by PRABAL AGRAWAL, NIT JAIPURduring marketing internship by Prof. Sameer Mathur,IIM Lucknow