KIT KAT BRAND AUDIT

Cécile TiphineAlexandre Gonfalonieri Bai Xue LachartreJuliana Trieu Mélanie Garcia

Sarah Khelfi

TABLE OF CONTENTS

INTRODUCTION

1. Brand audit objectives, scope, and approach2. History3. Background about the industry4. Consumer analysis

PART I   - BRAND INVENTORY (supply side)

1. History Ownership

2. Product related attributes (territory, identity& mantra) Brand elements& associations Supporting marketing programs

3. Brand portfolio Role of the brand within the portfolio

4. Market analysis Chocolate industry Competitive brands POPs and PODs

5. Strategies (4P) Product Strategy Place Strategy Pricing Strategy Promotion Strategy

PART II   - BRAND EXPLORATORY (demand side)

1. Brand positioning analysis Target market Anatomy of brand positioning

2. Consumer perception analysis Perceptual map Brand associations Customer based brand equity analysis and sources of KitKat’s brand equity Do the desired and perceived match? KitKat, a lovemark?

PART III   - CONCLUSION AND RECOMMENDATIONS

APENDIX

SOURCES

Introduction

Brand audit objective, scope and approachAs part of this brand audit, our goal is to assess the health of the KitKat brand within Nestlé’s portfolio by uncovering its sources of equity, its position on the market compared to its competitors and by suggesting ways to improve that equity. While keeping a consumer-focused approach, we will try to evaluate the strength of the brand through its marketing and brand strategies both in internal and external ways.

With 4million tons per year of cocoa consumed in the world1, cacao is the 3rd most demanded and exchanged raw material in the world.

France is ranked 6th in terms of chocolate consumption, with 400,000 tons of chocolate eaten by the French in 20132. Additionally, the same year, 80.4% of French people ate chocolate at least once a week3, and the demand for chocolate skyrocketed especially during Easter and Christmas (festive seasons). Because of its anti-depression virtues and comforting sweetness, chocolate is an ideal treat for many people.

HistoryKitKat was created in 1935 in England by Rowntree Mackintosh under the name “Rowntree’s Chocolate Crisp” and was commercialized as a 4-bars wafer made of milk chocolate. In 1937, as the name was considered too long and complicated, it was changed to: “KitKat Chocolate Crisp”. The packaging underwent a few changes too: in 1942, due to a milk shortage during World War II, the wafers had to be coated in dark chocolate, which resulted in a blue packaging (instead of a red one) in order to let people know that the recipe had changed. It was finally in 1949 that the brand name was shortened to “KitKat” and the packaging returned to its normal red, as we know it now.The famous slogan “Have a break, have a KitKat” was invented in 1958 by a British advertising agency called JWT and is still used nowadays. The agency gambled on the efficiency and simplicity of the tagline, which has proven successful since it has not been changed for half a century.

InternationalizationKitKat went international in 1970 with its commercialization in France. A few years later, in 1988, the brand was exported to Canada, South Africa, Ireland, Australia and New Zealand and was bought by Nestlé. It would not be wrong to assume that part of KitKat’s success is due to its British origins. In fact, as a British candy, KitKat was able to reach Europe, the US and Australia really soon, and above all before any of its competitors tried to export their products and build an influence there. Nowadays, KitKat is present in over 70 countries worldwide and is doing extremely well in Japan, where it has an enormous range of products and even dedicated stores.Industry

1http://www.consoglobe.com/penurie-de-chocolat-cacao-cg2http://www.rtl.fr/actu/economie/la-consommation-de-chocolat-en-france-a-augmente-de-17-en-cinq-ans-77747217753 http://www.lsa-conso.fr/les-francais-et-le-chocolat-etude-exclusive,204667

KitKat is competing in the confectionery industry and more particularly in the chocolate bar market. Recently, the industry has been facing a cocoa deficit, which resulted in overall increases in prices. This problem pushed the companies to change their products in order to reduce the production costs.The confectionery industry is a mature one, with many established competitors in it. It is currently growing (around $85 billion of global sales in 20124), and it is expected to keep on growing because of the counter-cyclical nature of this industry: indeed, in times of economic crises, consumers perceive candies as affordable luxuries.

Market Share of Chocolate Confection Sales by global region in $ billions (2011)

As a well-known brand, KitKat's main purpose is to bring joy to every chocolate lover between 10 and 50 years old. KitKat tends to reach everyone no matter the age, ethnical and demographical factors, and to enable people to treat themselves and relax with a snack during break time. The customers are not the only ones who benefit from KitKat, but also Nestlé. According to insiderermedia.com, in 2014 KitKat has reached a sales growth of

100 million pounds in the United Kingdom5.

The differentiation among chocolate brands is not obvious, but KitKat succeeded in reaching customers with an emotional appeal (joy and sharing), especially in Japan where it has become a real lifestyle (KitKat is associated with good luck there). There are more than 200 flavors of KitKat in Japan, such as blueberry cheesecake, green tea, peach etc.

Map of KitKat in Japan

6

Consumer analysis4http://www.pmmi.org/files/Research/PIB2013Confectionery.pdf5 http://www.insidermedia.com/insider/yorkshire/119598-nestle-uk-swings-back-profitability/6 http://www.lemanger.fr/index.php/la-folie-du-kit-kat/

7

The majority of chocolate consumption is in Western Countries, as87% of the total consumption concerns the European Union8. However the consumption per capita in Western countries is declining.In average, children consume more chocolate than adults. In France, the average consumption of children is around 11.9 grams per day compared to 5.7 grams per day for adults9. In general, females tend to eat more chocolate than males.

Consumer behaviorIn the minds of consumers, chocolate has always been considered as a luxury product, even if opinions are progressively changing to “even the most expensive chocolate is an affordable luxury”.Chocolate is seen as a product which provides pleasure. For this reason, in 40%of the cases, chocolate bars are bought on an impulse10. To experience a new kind of pleasure, consumers are willing to try new flavors. Those flavors can be original associations, like chocolate with blueberry, or exotic ones like chocolate with pepper or wasabi.In general chocolates are consumed between meals. For this reason, consumers are demanding more convenience concerning the packaging11: sometimes, they do not want to eat all their chocolate or their bar at once, so in order not to put chocolate everywhere it would be more convenient for them to have a packaging that can be refolded with the chocolate inside, like Mars’ Twist Wrap that enables customers to twist the wrapper

7http://www.lefigaro.fr/conso/2014/04/20/05007-20140420ARTFIG00029-le-chocolat-fait-toujours-fondre-les-francais.php and http://www.rtl.fr/actu/economie/la-consommation-de-chocolat-en-france-a-augmente-de-17-en-cinq-ans-77747217758http://www.lefigaro.fr/conso/2015/04/03/05007-20150403ARTFIG00002-chocolat-les-francais-ne-sont-pas-si-gourmands-que-ca.php9 http://www.syndicatduchocolat.fr/le-chocolat/chocolat-consommation/10http://www.google.fr/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0CDYQFjAC&url=http%3A%2F%2Fmarketing4innovation.ning.com%2Fforum%2Fattachment%2Fdownload%3Fid%3D6620432%253AUploadedFile%253A9630&ei=G0RCVf7pO8vnapz5gfgD&usg=AFQjCNEU5wm0V7FaaOoXu-B4SZBRyiTTCA&bvm=bv.92189499,d.d2s11http://www.kpmg.com/by/en/issuesandinsights/articlespublications/press-releases/pages/global-chocolate-market.aspx

closed, making it easier to save a piece for later. Moreover, due to obesity issues in some countries, health is becoming an important factor in the consumer behavior.

FutureIn the next few years the chocolate industry will have to face a shortage of cocoa. According to the International Cocoa Organization (ICCO), the shortage will happen in 2020 due to a demand higher than production12.In just one year, from 2013 to 2014, the price of cocoa increased from $2,100 per ton to $3,000. The 42% increase shows that there is already an imbalance between the demand and the production13. So why does the demand increase? Today almost 4 million tons of cocoa are consumed each year in the world, namely a third more than ten years ago. The reason behind it is the appearance of new consumers as China. According to Euromonitor, chocolate sales in China in 2013 increased by 7%14. This growth is due to the development of the middle class, which is influenced by the Western consumer behavior. In China, chocolate consumption is expected to grow between 5-6% until 201815.In addition to the increase in demand, the cocoa market will be facing another problem. Western Africa, mainly the Ivory Coast and Ghana, produce 70% of cocoa16 but these countries will be experiencing some issues with plant senescence. Political issues in Ivory Coast, plant illness and the drift from the land will also influence negatively the cocoa production.In order to face those problems, KitKat will have to increase the price of its products or find substitute components for its recipes or reduce cocoa use in the products.

12http://www.icco.org/about-cocoa/chocolate-industry.html13http://www.atabula.com/surchauffe-sur-le-marche-du-chocolat/14http://www.atabula.com/surchauffe-sur-le-marche-du-chocolat/15http://www.latribune.fr/entreprises-finance/industrie/agroalimentaire-biens-de-consommation-luxe/20140516trib000830430/comment-le-leader-mondial-du-chocolat-veut-eviter-une-penurie-de-cacao.html16 http://www.planetoscope.com/sucre-cacao/1442-production-mondiale-de-cacao.html

PART I   - BRAND INVENTORY (supply side)

1. History

Ownership

As it was previously said, KitKat was originally owned by Rowntree’s, a confectionary company based in York, in the United Kingdom. It was only in 1988, after KitKat was exported to Canada, South Africa, Ireland, Australia and New Zealand and its famous tagline was created (have a break, have a KitKat, 1958) that Nestlé purchased Rowntree’s and, as a consequence, became the owner of KitKat. It gave Nestlé global control over the brand, except in the US where Hershey controls the production and distribution of the chocolate bars.

Hershey is the largest producer of quality chocolate in North America, and since 1970 it has owned a license to produce KitKat bars in the US thanks to a licensing agreement made with Rowntree’s back in the early days of the brand. After having bought Rowntree’s, Nestlé had to honor the agreement, which allowed Hershey to retain the KitKat license as long as Hershey was not sold.

2. Product related attributes

Brand elements & associations

Kitkat’s brand name itself is part of the brand elements: the name is short, catchy, and is easy to be remembered by consumers.Kitkat’s logo is represented by two colors: white and red. Red color represents excitement, youth and energy. The logo is a slanted ellipse with the word mark within it. One of Kitkat’s powerful brand elements is its slogan: “Have a break, Have a KitKat”. With this tagline, KitKat wants to be strongly associated with break times, encouraging people to have a KitKat each time they are taking a break and want to relax. This tagline also inputs the idea of youthfulness and fun in the minds of the consumers. KitKat bars have 4 fingers, which is a distinctive shape that differentiates it from their competitors since their bars are usually composed with one single bar.Associations: Taking a Break, Sharing, Pleasure, Fun.

Supporting marketing programs

“Stress relief” marketing campaign17

Nestlé launched in Malta an interactive marketing campaign to help citizens relieve stress. In addition to the launch of posters in bus shelters with stress relief advice, KitKat provided pillows for commuters to rest against and bubble wrap for them to pop.The company also offered more than 10000 “Stress relief kits” to Maltese companies.The kits included a booklet with fun break ideas, bubble wrap and KitKat bars.The brand created a special area in Valletta city where passers-by could rest on some comfortable beanbags, and even get a free massage.This campaign was spread offline and online; on KitKat Malta Facebook page, the company launched a contest to win a 1000 Euros voucher for a travel to any destination. To win this competition, participants had to take a photo of them having a break. An application called “KitKat Break Prompter” was created with the purpose of reminding people when it’s time to take a break and also included several 5-minute activities.This marketing initiative was really efficient since it enabled the brand to interact with the consumers who were involved in the campaign. The consumers became real brand ambassadors.On social media, it generated positive comments and earned more than 5000 likes. This campaign helped increase brand awareness and develop positive brand equity.

Android KitKatIn 2013, Google in association with KitKat launched an operating system called Android 4.4 KitKat for smartphones and tablets18.To further enforce the promotion of this new operating system, the “Have a seat” campaign was launched in Amsterdam19. Special billboards with a seat were placed in the streets of the city, and people were invited to seat on it, and if the person was still there at the announced time, they could win a Nexus 7 tablet.Google has always named its operating system after confectionery names: “Android is the operating system that powers over 1 billion smartphones and tablets. Since these devices make our lives so sweet, each Android version is named after a dessert: Cupcake, Donut, Eclair, Froyo, Gingerbread, Honeycomb, Ice Cream Sandwich, and Jelly Bean. As everybody finds it difficult to stay away from chocolate we decided to name the next version of Android after one of our favorite chocolate treats, KitKat®”This campaign was well developed and generated a lot of interest. Company integration plays an important role in this success, the two companies seem to be in sync; winning a nexus the KitKat way (by taking a break), attracted a lot of participants. The benefits in such a co-branding project will be numerous and lie in the prospect of linking positive brand perception with different products. KITKAT is a global name that will be recognized by many people, and this recognition will be reflected on Google’s Android, creating further consumer awareness. Both brands also hope to increase sale numbers.

17http://jpadvertising.com/portfolio/kit-kat-stress-relief-marketing-campaign/18 http://marketingstories.net/kit-kat-equipe-ses-billboards-de-sieges-pour-un-concours-tres-special/19 https://www.jwt.com/en/amsterdam/work/haveaseat/

Brand Mantra

Brand function: SnackDescriptive modifier: FolksEmotional modifier: Fun

KitKat’s internal core values lie in those characteristics:Kit Kat puts an emphasis on being a fun brand, intended to give a break to every man and woman that needs it through a tasty snack that they will be able to break and share, anytime and anywhere.

3. Brand portfolio

Role of the brand within the portfolio – BCG matrix

Nestlé’s brand portfolio is very large and extensively covers all categories of food and beverages. KitKat is part of the chocolate and confectionery category, which includes: Aero, Butterfinger, Cailler, Crunch, KitKat, Orion, Smarties, Wonka.KitKat plays an important role within Nestlé portfolio. It generated 8.9% of organic growth in 201320 and is the N°1 Chocolate brand in Japan. According to the BCG matrix we can assume that KitKat is a Star, since it has a high market share and a high market growth. KitKat already has high market shares in western countries such as the USA or in Europe, but it also has huge growth opportunities thanks to the development of emergent markets, namely Brazil and Asia.

4. Market analysis

Chocolate industry

Figures of the industryIn 2014, the global chocolate industry represented US$200 billion21. This market is divided in five different segments: chocolate bars, tablet bars, chocolate balls, cocoa powder, and chocolate spreads.

Chocolate tablets are the most worldwide consumed product of the market with 129,500 tablets sold in 2014. Chocolate balls sales reached the amount of 92,100. Almost 52,100 chocolate powder products were sold against 70,900 chocolate spreads. Chocolate bars were the least sold product with a sales volume of 42,60022.

20http://www.nestle.co.uk/asset-library/documents/library/documents/annual_reports/2013-annual-report-en.pdf21http://www.euromonitor.com/global-confectionery-overview-key-categories-countries-and-trends-to-2019/report22http://www.lefigaro.fr/conso/2015/04/03/05007-20150403ARTFIG00002-chocolat-les-francais-ne-sont-pas-si-gourmands-que-ca.php

The segment of chocolate bars represents a market of 80 billion Euros, with 17,3 billion bars sold each year23. The chocolate bar segment is divided in different product categories:

. Tender chocolate (Mars, Bounty, Kinder, Dove, Snickers…)

. Chocolate with biscuit (Lion, KitKat, Twix, Kinder, Duplo)

. Chocolate with cereal (Kinder, Balisto, Sundy, Crunch)

. All chocolates (Milka, Côte d’Or, Lindt…)

. Ice-cream (Mars, Bounty, Twix, Snickers)

. Dietetics (Gerblé, Gerlinéa, Weight Watchers, Gayelord Hauser…)

. Bio (Kalibio, Bjorg, Valibio …)

. Gluten-free (Gerblé…)

CompaniesThe chocolate market is a highly competitive one due to the number of companies competing in it (which are mostly multinationals).The following table presents the ten biggest companies that sell chocolate24.

Companies Net sales 2014 (US$ million)Mars Inc. (USA) 18,480Mondelēz International (USA) 14,350Ferrero Group (Luxemburg/ Italy) 10,911Nestlé SA (Switzerland) 10,466Meiji Co Ltd (Japan) 9,818*Hershey FoodsCorp (USA) 7,485ChocoladenfabrikenLindt&Sprüngli AG (Switzerland)

4,022

Arcor (Argentina) 3,500*EzakiGlico Co Ltd (Japan) 3049 *August Storck KG (Germany) 2,272

* This includes production of non-confectionery items

Some of those companies, such as the Ferrero Group or Nestlé, own several chocolate brands and several product categories.The following ranking classified the TOP 10 of confectionery brands in the world in 201225:

. Snickers .Milka

. M&M’s .Catbury Dairy Milk

. Trident .Orbit

. Reeses’s .Extra

. Galaxy/ Dove .KitKat

In order to differentiate themselves to attract consumers and increase consumer loyalty, companies try to be more innovative. Those innovations can concern the packaging (like for example the “memory wrapper” from Mars), the product design (like the partnership between KitKat and Android), the size of the product (for example the mini format), the distribution channel (M&M’s which open a M&M’s store) and so on.

23 http://www.planetoscope.com/sucre-cacao/1590-barres-de-chocolat-vendues-dans-le-monde.html24 http://www.icco.org/about-cocoa/chocolate-industry.html25http://www.planetoscope.com/sucre-cacao/1590-barres-de-chocolat-vendues-dans-le-monde.html

Competitive brands

We can see on those two diagrams that Nestlé is number 2 in terms of world chocolate production with a market share of 13%, and number 3 in terms of world chocolate and confectionery production with a market share of 8%26.

In 2012 in France, Ferrero had the two highest market shares with Kinder Bueno and Kinder Maxi. KitKat is only in 3rd position27.

KitKat has two main competitors:-one of Ferrero’s main confectionery brands: Kinder Bueno, made of two individually wrapped chocolate wafer bars with creamy hazelnut centers in each packet, with four pre-portioned bites on every bar ;- and one of the main confectionery brands of Mars Incorporated: Twix, two bars made of crispy crunchy biscuits with smooth creamy chocolate and chewy caramel.The confectionary industry is highly competitive. Brands often introduce new lines of products that are similar to other competitors’ products. For instance, to emphasize the

26 http://www.unctad.info/en/Infocomm/Beverages/Cocoa2/Companies/27http://www.lefigaro.fr/societes/2012/04/19/20005-20120419ARTFIG00719-l-energie-du-marche-francais-des-barres-chocolatees.php

idea of sharing, the brands KitKat, Kinder Bueno and Twix sell different sizes like KitKat balls, KitKat mini or Kinder Bueno mini, Twix mini.

All these three chocolate bars can easily be shared because of their special shapes (like Kinder Bueno or KitKat), or because of their number (2 Twix in a package). These products are all affordable with a diverse range of sizes. These snacks result from impulsive purchases and are available to buy wherever and whenever the consumer wishes to purchase it. Indeed, we can easily find them not only in supermarkets and convenience stores, but also in vending machines, cinemas…These three chocolate bar brands use bright colors on their packaging, like gold, red or white. Moreover, these three brands have the same target: their core market is children, young adults and adults until 50 years old, which is basically mass market.

To sum up, these three chocolate confectionery brands are quite similar: they all have the same target, the same range of price, the same selling points, resembling packaging (red, white), and they launched approximately the same products at the same time.

But what differentiates KitKat is its shape: the four-fingered KitKat bar which many would consider synonymous with the brand. The chocolate bars allow consumers to be able to break off a finger at a time and to break easily the chocolate into proportioned bits.

Moreover, in Japan, KitKat encountered a great success with the KitKat Chocolatory store-in-store concept28, and its market shares have only been increasing over the 2009-2014 period thanks to this kind of marketing initiatives. Nestlé has also increasingly played the card of exclusivity through special editions and innovative flavors, or through products with regional flavors or adapted to various occasions throughout the year.It has also become a fascinating cultural good in Japan. And KitKat boxes are particularly popular as a gift to pupils and students29.

POPs and PODs

The benchmarking of KitKat’s competitors we’ve previously done gives us enough elements to evaluate the brand’s points of parity and points of difference compared to the other brands in the industry.

Points of parity-Affordability and accessibility: although all the brands in the chocolate bar market do not focus on price-competition, there is somehow a common agreement between them to charge quite low prices for their products. This is why KitKat, even as a strong brand

28 http://www.agro-media.fr/actualite/kitkat-developpe-son-concept-de-chocolaterie-bar-au-japon-17803.html29http://blog.euromonitor.com/2015/04/morinagas-flagship-dars-store-in-the-footsteps-of-nestl%C3%A9s-kitkat.html

with a fair degree of flexibility in its pricing strategy, has kept its prices remarkably stable over the last 100 years (a classic 4-bars snack costs around 2 Euros/2.5 dollars). This is the average price of all the standard-size chocolate snacks in the industry. The affordability of KitKat’s products also allows it to target a very wide range of customers.KitKat can also be found almost everywhere, just like its competitors: supermarkets, gas stations, vending machines etc…

- Use of different chocolates: as all the other brands in the industry, KitKat developed a variety of snacks made of different chocolates (white, dark, milk), which helps it target different segments of consumers. Ferrero Rocher also offers milk and dark chocolate variations, as well as M&M’s that sells dark or peanut butter sweets, or Kinder Bueno with its white chocolate bars.

- Packaging variations: KitKat’s two-stick and four-stick snack packaging can be found in many sizes and types. There is not only the classic square packet with 2 or 4 fingers in it, but also boxes containing12 or 24 sticks and long packets with 6 to 9 sticks in it. Of course, there are also numerous limited editions, such as the Chunky Peanut Butter snack or the Toffee Treat one. It is common in the chocolate confectionary industry to come up with new and innovative packages to meet all kinds of demands, which is why M&M’s offers columns and boxes along with the normal packets, or why Twix snacks come in packets of 2, 4 or 10 bars, boxes of 36 bars etc. Limited editions also allow the brands to increase their sales without cannibalizing the original product.

Points of difference- Format and size of the product itself: the fact that KitKat snacks can be found in many versions, such as single stick, two-stick, four-stick or chunk packets, enhances the peculiarity of the brand. This is the only brand that sells so many formats in this industry, and it enables its customers to find the perfect snack anytime and anywhere, fitted for every craving they might experience. Chunky bars, for example, were designed for people who look for a bigger hit of chocolate, sweeter, heavier and heartier than a simple finger. This kind of product line extension does not exist for Twix or Ferrero Rocher, which, on the contrary, only have one standard size for their snacks, or M&M’s and Kinder Bueno that only come in normal and mini sizes.

- Variety of flavors: In Canada and the US, KitKat snacks come in a large variety of flavors such as peanut butter, mint, coffee, hazelnut, caramel, mint etc. In Japan, the range of flavors is even bigger: chili pepper, raspberry, pear, green tea, wasabi, royal milk, even pizza or sandwich-flavored KitKats can be found there. This is the only brand in the chocolate bar market that offers so much possibilities in terms of taste.

- Wafer stick: the wafer is one of the key features associated with KitKat, although Kinder Bueno’s products are made of wafer too and M&M’s and Ferrero Rocher also started to include wafers in their products (not to the same extent as KitKat though). The fact that is comes in sticks is also a differentiating attribute since it enables consumers to break off a finger at a time and share them with their friends or their family, an emotional appeal that is strongly associated with KitKat. The simple action of breaking off a finger is what adds value to the product.

- Association with breaks: as opposed to the majority of its competitors, KitKat is often associated with the word “break”. This was achieved thanks to the famous “Have a break, have a KitKat” tagline that enabled KitKat to differentiate itself from its competitors, which are primarily seen as plain chocolaty snacks that are consumed whenever one is hungry or just craves for sweets, like Kinder Bueno, which defines itself as a “Small Hunger” product.

Brands

Points of parity

-Price and place strategy (affordability + accessibility)-Target market (female + male, between 15-50y.o)

-Packaging variations-Use of white/dark/milk chocolate

Points of difference

- Left bar/Right bar- Story telling

- Emotional appeal:childhood nostalgia-Association with “Small Hunger”-Lightness of theproduct (not too heavy)

-Format + size-Variety of flavors-Wafer stick- Association with“breaks” + the action of breaking a finger

5. Strategies (4P)

Product Strategy

What is a KitKat? KitKat is a hybrid product between a chocolate bar and a biscuit. It is made of three layers of chocolate-cream filled wafer and smooth milk chocolate coating30. It is known for his famous four-finger shape. This special shape makes it easy to share. Moreover, that shape increases the brand Knowledge and awareness.

What is the product strategy?KitKat’s strategy is targeting a wide global audience; therefore Kit Kat has to satisfy a lot of needs in order to sell a lot. The Brand according to this strategy exists in different sizes and flavors, in order to satisfy every customer, no matter the cultural differences between them. Adaptation is key for KitKat. Furthermore, the brand does a lot of

30 http://www.hersheys.com/kitkat/products.aspx#/KIT-KAT-Wafer-Bar

product line extensions such as caramel, tea or special flavors (for KitKat fans or prospects according to their cultural tendencies (tea in China)31. Those products are usually sold for a short period, because the goal is to prevent any cannibalization of the original product and extend the product life cycle (short for KitKat). Moreover, some products are only available in some countries.Likewise, these limited editions create uniqueness and an occasion to promote the brand. This innovation process is really important in a tough market where products remain the same. The different shapes are also here for convenient reasons and for special targets (ex: children); it’s all about segmentation and reaching everyone. In term of appearance, KitKat always release different edition for different holidays or occasions, with some special packaging related to the holiday or event32.

We also noticed that KitKat does some brand extension, showing that the brand is trying to use its reputation and reduce the risks of launching a new product and entering a new market thanks to the already established awareness and trust of the customers.

KitKat’s yoghurt

KitKat’s unique red and white are an important part of the brand attributes. The colors are also very important (it makes the brand more recognizable); the red is a powerful color that attracts the vision and shows power and passion and the white stands for something pure and clean. The only time the brand’s packaging ever changed from its traditional color was during World War II33.

When it comes to the product, we have to talk about the famous and universal slogan “Have a break, have a KitKat, indeed this slogan has two goals34:

31 http://www.buzzfeed.com/lydiah/35-kit-kat-varieties-from-around-the-world-18d732 http://www.latmultilingual.com/chinese-new-year-2014/33https://www.nestleprofessional.com/uk/en/SiteArticles/Pages/History_of_KitKat.aspx?34 http://imt.x10host.com/rachelbender/pdfs/researchproject.pdf

Every Kit Kat package includes Nestlé’s logo, like an endorsement, as well as information about the product, and KitKat’s well-known slogan of course, translated in some countries or not. Here the Nestle logo is intended to reassure the customer regarding the quality of the product and create a connection between the Nestlé Brand portfolios.

Key elements of the product: crisp wafer covered with milk chocolate portioned in several fingers size. Secondly, the authentic KitKat bar and some original flavors available for limited periods (for instance, KitKat Mint), plus the different formats of the snack (mini, ball …) and finally the packaging itself.

Place Strategy

KitKat is a fast moving consumer good35in a highly competitive market. Indeed, there are many other alternatives to KitKat products, which make the consumer likely to purchase a competing product if KitKat is unavailable rather than keep looking for it in other stores (impulse purchase), and also because the purchasing habits of customers can be different. Intensive distribution is required in order to ensure it is available where and when the consumer wishes to purchase it, which also means online and in KitKat’s own stores (Japan). Additionally, KitKat uses the powerful distribution network of Nestlé (warehouses, supply chain …)

Where can I find KitKat products?

35http://www.about-fmcg.com/What-is-FMCG

Action of breaking the KitKat apart

before eating it and supposedly

sharing it.

Suggests that KitKat is a relief action, part of taking a well-

deserved break from our

stressful lives, so we can basically

say that it answers to a

need

The brand is present in many countries (more than 70 countries)36. Most of the customers buy these products on impulse37. To use these impulsive purchases, most of the intermediaries place the product strategically (near the cash registers for instance). All this has to be approved by the two companies (here, Nestlé and for instance Carrefour, in this case the Power of negotiation of the two companies is high). Furthermore, according to their distribution strategy, KitKat uses a Pull strategy.

KitKat next to the checkout

These strategies allow KitKat to efficiently improve their target market coverage. Wherever somebody wants a KitKat, they will find it pretty easily.

Some large supermarket and hypermarket companies, Carrefour for instance, purchase KitKat and other Nestlé products in large quantities (bulk order) and distribute them to their stores in the entire country or area, on the other hand small stores uses wholesaler channel. By using both the wholesaler (like Metro in Europe or Nestlé own distribution centers) and retailer channel (plus the special channel such as Internet), Nestlé maximizes KitKat market coverage and maximum availability, making sure KitKat is available to consumers across France and other countries.

36http://www.nestle.com/media/newsandfeatures/happy-75th-birthday-kitkat37http://www.confectionerynews.com/Markets/Confectionery-still-top-for-impulse-buys-survey

Supermarkets and

Hypermarkets

Corner shops, convenience

store

Newsagents

Cafes, gas stations

Movie Theatre

Internet

Vending Machines

Pricing Strategy

KitKat’s price has remained more or less stable over the last years (despite the fluctuation of the Cacao market38) thanks to the power and initiatives of Nestlé (Cocoa Plan)39 among other things. However the pricing of KitKat snacks can vary, either because of the product itself or the place where it is sold. For instance, KitKat’s pricing increases as size varies: the bigger the size, the higher the price or because of the special flavors or quantity per packaging.

Price strategy of KitKat intermediaries

Convenience stores and independent gas stations

Special sellers such as vending machines and movies theatres,airports …

Discount stores Supermarket andhypermarket

Generally purchase small volumes and therefore tend to set their prices higher in order to make a benefit (except those who belong to retail stores); however their importance can change according to countries (Supermarket vs Convenience stores).

Set their own prices (schools, offices…), but with a small margin.40 Movie theatres or special places (airports) have a special pricing policy on the snacks available to their audience and can achieve high markups41 of two to three times the cost.Vending Machines: In France (through the vending machine company “SELECTA” Kit Kat (45g) is sold

Those companies often sell old products and only the regular version of the product (products withOutdated promotions on the packaging, for example).They are able to purchase the product at a reduced price and can offer it for less than other big retailers.

Generally purchase in large volumes (bulk order with other Nestle Products usually), allowing them to sell individual KitKat bars at a lower price compared to other types of stores and proposing more sales promotions.

38 http://www.bloomberg.com/news/articles/2014-10-05/nestle-bears-buy-ebola-cover-amid-spike-in-cocoa-prices39http://www.nestle.com.au/kitkat/cocoa-plan40«Les écoles ne prennent pas beaucoup de bénéfices, elles majorent de 20 centimes en moyenne le prix de la canette, ce qui leur permet de financer certaines dépensesextraordinaires»,http://ecolesdifferentes.free.fr/DISTRIBBXL.htm41 https://www.yahoo.com/movies/just-how-big-is-the-markup-on-movie-food-87128526582.html

Wholesaler Retail store

Discount store

Special Store

Intensive distribution and Multichannel

around 1.20€ and the competitors around 1.30-50 for the same size only.

Generally speaking, in most cases, KitKat keeps a close control of the prices of their products, even though these different points of sales almost never offer the same quantity per packaging. Some products are exclusive to some type of stores (small quantities for small stores usually). We noticed that the price varies depending on the country where it is sold. We noticed that competitors tend to propose different size to avoid price competition.

KitKat also uses discounts, for instance when the customers try to purchase the products in multi-packs from the supermarket instead of individual bars (8+1). Likewise, gas stations and convenience stores frequently offer quantity discounts by offering 2-for-1 sales of KitKat snacks. Retailers also make seasonal discounts, like during a few days before holidays or special events (Christmas, El Aid, Chinese New year) in order to increase the sales and benefit from the momentum created by the event.

All chocolate bars of the same size and quality are sold at more or less the same price. A regular KitKat bar is sold at the same price as other regular chocolate bars. Kit Kat Chunky is priced the same as other special bars. KitKat is therefore a competitor-based pricing company, except when the competitors propose different sizes to avoid direct comparison.Kit Kat tends to focus more on the small stores (through their communication) in order to use those impulse purchases.

Therefore, it is important for KitKat to develop brand loyalty and ensuring that customers will choose them over other brands by following the price strategy of Lion, Twix, Mars and other chocolate brands. So when price cannot be a competitive advantage, Kit Kat must have other ways to attract prospects such as sales promotions, more effective communication or better availability.

Price Comparison between KitKat and competitors in France through retail

stores

KitKat KinderBueno Lion Twix Snickers Bounty

450g (10x45):

3.85€270g(x6):

2.39€Chunky double

Caramel

250g (x6): 3.65€

420g (10x42): 4.02€

10x45: 3.84€ 10x40: 3.54€ 5x2 (285g): 2.98€

(168g): 3.04 €

4243

Carrefour (03/05/2015)

Monoprix (03/05/2015)

This chart shows a small price difference between retailers for a same product (margin). We noticed that to avoid direct competition, companies tend to propose different quantities, which explains the price differences. However, between two direct competitors with the same quantity per packaging, the price is the same (KitKat and Twix).

France: 3.85€ Sweden: 39.90KR = 4.14€44

Brazil: 29.90R$ = 8.85€45

→ This chart shows the price differences according to countries for KitKat products around the world. We based our analysis on the KitKat 10x45 Regular chocolate bars.

42 http://courses.monoprix.fr/searchresult/barres$0020chocolat$00e9es43http://www.ooshop.com/courses-en-ligne/WebForms/Catalogue/DetailUnivers.aspx?UNI=%C3%89PICERIE&REDIRECT=/WebForms/Catalogue/RechercheResult.aspx?MS=barre+chocolatees44 https://www.kaffekapslen.se/kitkat-10-pack.html45 http://www.americanas.com.br/produto/109905233/chocolate-kit-kat-45g-nestle-10-unidades-

7.53% Increase

111.42% Increase

Promotion Strategy

In such a competitive market, having an effective promotional mix is a necessity. Kit Kat obviously uses advertising, sales promotions, public relations, sponsorship and online marketing to attract, retain, interact with and engage loyal customers, through the enhancement of their CRM programs.

Advertising in generalKit Kat is a very active brand when it comes to advertisement. Indeed, through the modernization of their traditional “Have a Break” slogan, they were able to update the concept of people needing a break in today’s society and strengthen the company in the chocolate bars communication war. We noticed that the brand almost communicate around the price but always around the idea of having a break and they tend to use the latest trend around chocolate (new tastes, packaging shape)

KitKat’s advertising strategy is based on television, outdoor media (billboards, bus stops, etc.), street marketing, sales promotions and social media. Nowadays, the company runs several campaigns simultaneously around the world, adapted to each country and target. Here is one of them:

- Social Break Effect on Facebook (here they share the news but through a “KitKat analysis”46)

Today, KitKat seems to be shifting away47 from traditional advertising (TV, Radio), even though this argument depends on the country: in some of them, they are still present on TV (India, English speaking countries…) but in most countries they tend to focus less on TV and radio and more on the other ways of communication.

Sales PromotionsKitKat uses sales promotions to create interest and increase the sales of the products. These promotions are often in the form of contests aimed at the consumer (inside the store or online) or special discounts (2 for1). Throughout the year, they have run several major contests with cash and travel prizes. This year, to celebrate their 80 th anniversary, they created a game where you can win money. This kind of communication is usually available on KitKat’s Facebook page and receives many comments and interest from the 23,000,000 Facebook fan database48. However, we noticed that the brand is not using its heritage as a core advertising element. Perhaps, since the company wants to position itself as a fun and cheerful brand, advertising on heritage may be outdated.

46 http://www.kitkat.fr/#social-break-effect47http://imt.x10host.com/rachelbender/pdfs/researchproject.pdf48 https://www.facebook.com/kitkatfr?brand_redir=17452092075

Furthermore, the brand does a lot of communication inside the points of sale, mainly through events and special employees who entertain people and offer samples for example, again in order to raise awareness on their product range and increase sales, directly where the prospects are.

49

Sponsorship and partnershipKitKat does a bit of sponsorship, whether it’s for special events such as the world cup of football or directly in some football teams (see the image below). They also promote their products through partnerships with special cultural events such as movies (latest Fast and Furious Movie for instance). Furthermore, the company does some partnerships too; the most famous one is probably the one with Android, the Google system device50. This partnership offered a global visibility to the KitKat brand and the possibility to associate the brand with another powerful and growing brand.

Japanese football team: Jubilo Iwata 2006 Home shirt51

49 http://www.moodiereport.com/images2/android_kitkat_promo_geneva.jpg50 http://www.theverge.com/2013/9/3/4691040/android-kitkat-the-story-behind-a-delicious-partnership51 http://risingfootball.blogspot.fr/2009/09/jubilo-iwata.html

Online communicationKitKat is an active company online, indeed, the company uses online marketing to further involve its fans (through dialogues between customers and the company), as well as promote their various contests, events and new products or campaigns. KitKat uses Facebook, Twitter, Pinterest and its own website to keep consumers informed of product developments and upcoming events.

Online, the brand often asks questions to its community of followers, such as “Which is your favorite KitKat flavor?”, which gives consumers the opportunity to share their opinions about the brand and interact with it. They also ask other questions to their fans on various matters (almost always around the news and in a funny way).

The Kit Kat worldwide website allows users to choose their region and therefore languages for their whole visit on the website. It also displays real-time results of current Facebook polls and the number of KitKat sold around the world52.Furthermore, we noticed that the website proposes a lot of recipes around the usage of KitKat chocolate bars (cakes, candy, ice cream53…) but only in some countries. Moreover, the brand does a lot of riddles to generate comments and activity on their official Facebook page and others social networks.

Public RelationsToKitKat and especially Nestlé,public relations are a tool to improve customer perception and brand image of the company54. For instance, press releases informing and reminding the public of how The Cocoa Plan improves the lives of small farmer families in developing countries improve the company’s image, and are available on KitKat’s website55. This information was mentioned on every KitKat packaging. Nestlé also partnered up with organizations such as Fair-trade56, and by doing this, they were able to enhance the credibility of the group. It’s a win-win relationship, for both companies.

52 https://www.kitkat.com/53 http://www.hersheys.com/kitkat/recipes.aspx54http://imt.x10host.com/rachelbender/pdfs/researchproject.pdf55 http://www.nestlecocoaplan.com/56 http://www.confectionerynews.com/Markets/Nestle-UK-goes-Fairtrade-with-Kit-Kat-two-finger

ConclusionKitKat’s situation is complicated because of the similarity of its price and distribution strategies tothe ones of its competitors in the market. KitKat has to rely on product and promotion strategies to distinguish itself in the minds of customers since it is impossible to do so with the price. KitKat is one of the most popular chocolate snack brands around the world, and it partly owes to the marketing strategy it has put in place all over the years. Its trademark red and white colors and the distinct “KitKat” logo- makes it one─ of the most recognizable brands ever and one of the leaders in this segment of the market.

With today’s frenetic pace and issues, we can consider the slogan “Have a break, have a KitKat” as extremely relevant and coherent, as well as legitimate and powerful now more than ever. By adding an effective use of social media and appealing sales promotions in their promotional mix, KitKat has done an excellent job of positioning itself (in that “have a break” need) and appeal to the new generation.The marketing strategies of KitKat snacks are efficient, but like every other product, there is always room for improvement and it might become mandatory due to the constantly evolving competition. Product line extensions have expanded its appeal to new market segments and countries while sticking to the core purpose and target of the traditional red Kit Kat.

Partnership with FairTrade (on the

packaging)

PART II   - BRAND EXPLORATORY (demand side)

1. Brand positioning analysis

Target market

ConsumersKitKat targets consumers all around the world, and more precisely in the following countries: Australia, Brazil, Botswana, Bulgaria, Canada, Colombia, Ecuador, Egypt, France, Georgia, Germany, Indonesia, Italy, Japan, Lesotho, Libya, Malta, Mexico, Middle East, Namibia, New Zealand, Philippines, Poland, Portugal, Spain, South Africa, Sudan, Swaziland, The Nederland’s, the United Kingdom, and the United States57.KitKat’s target market is a mass audience, since the brand’s customers are both men and women. According to the product, the targeted age bracket changes: the four-finger KitKat is offered to men and women aged from 15 to 40 years old58. KitKat chunk is designed for teenagers and young adults, from 12 to 2459. KitKat mini is intended to children60 and KitKat Single to all adults.The customers are chocolate lovers and people who want to indulge themselves with a well-deserved treat, for example during a break at work, as the slogan suggests. We can observe that for some products consumers have specific characteristics: for KitKat Single, they are indulging themselves while watching their waistline61, and KitKat balls is for people who like to share things with their friends or family62.Concerning the consumer lifestyle, the main target is employed men and women.

Buying situation- Benefit soughtIn general, people buy KitKat for its taste and flavours. In the majority of the countries KitKat sells only three flavours: milk, black and white chocolate. However in some countries consumers are demanding more flavours. In UK there are mint, cookie and cream, toffee treat, and orange flavours, and in Japan there are more than 200 flavours, as mentioned previously. Other features that buyers take into account are the different formats of KitKat products. They will choose the format according to who will consume the product, adults or children.

- UsageIn the world, around 650 KitKat fingers are consumed every second63.

- Awareness and intention

57 https://www.kitkat.com/58http://businesscasestudies.co.uk/nestle/kit-kat-revitalising-a-brand-leader/why-kit-kat-needed-revitalising.html#axzz3YpsJ9yEV59 http://imt.x10host.com/rachelbender/pdfs/researchproject.pdf60http://businesscasestudies.co.uk/nestle/kit-kat-revitalising-a-brand-leader/why-kit-kat-needed-revitalising.html#axzz3YpsJ9yEV61 http://www.kitkat.fr/62 http://www.nestle.fr/nosmarques/chocolatconfiseries/kitkat63 http://www.nestle.com/media/newsandfeatures/japan-kitkat-boutique

The relationship between KitKat and customers is very special in Japan. The brand has created some features to its products, which makes Kit Kat the ultimate favourite brand of the Japanese since 201264. For instance, in the Japanese culture, the gift-giving process is very important, which is why Kit Kat included a blank space on the packaging where consumers can write messages to their friends or family and then offer it.

On a global level, in 2014, KitKat had around 23 million likes on its Facebook page and over 200 000 followers on Twitter65. It allows people to interact with the brand and post pictures of their Kit Kat experience, as well as complain about it.

Anatomy of brand positioning

Brand Domain Men and women of all ages between 15-40 years old66 at a worldwide level. Chocolate lovers more particularly.

Brand Heritage Dark chocolate, packaging being changed to blue during WWII, KitKat bar was called a Chocolate Crisp. Heritage is outdated for younger generations.

Brand Values Slogan in itself “have a break, have a KitKat”, fun, original, universal symbol of break, quirky spirit, sharing.

Brand Assets Packaging, red color, shape, message (specific one), many variants.

Brand Personality

If Kit Kat was a person, it would have a good sense of humor and it would be dynamic and fun.

Brand Reflection KitKat means coolness; break (relief) from whatever, tasty, easy to share and fun. A youthful brand and affordable.

Brand domainWhen it comes to Kit Kat’s regular product, the target is men and women between 15 and 40 years all around the world, with a core target aged between 18 and 24 years old, as said Magdalene Tan, Group Brand Manager at Nestle Singapore: “KitKat is constantly looking for innovative ways to reach out to our core target audience, which are youths aged between 18 – 24”. Moreover, as stated previously, Kit Kat’s other products target different segments of consumers, such as Kit Kat Chunky, which aims at tweens and young adults between 12 and 24 years old. Regarding the market place, the brand competes in the confectionary industry and more precisely in the chocolate bar market.

Brand heritage

64 http://www.nestle.com/media/newsandfeatures/japan-kitkat-boutique65 https://www.facebook.com/kitkatfr/likes + https://twitter.com/(KITKAT)66

KitKat’s history, as far as consumers can remember, is composed of two things: the packaging used to be blue during World War II and it was called “Rowntree’s Chocolate Crisp” instead of KitKat67. However, it seems that KitKat is not using his heritage at all (except for the know-how argument) in advertising, and is always striving to modernize itself instead of focusing on its past. We noticed that the heritage is something completely outdated for most generations of KitKat’s customers.

Brand valuesThe values of the brand are, first of all, the slogan in itself and above all, the idea behind it. The “break” is something that strongly defines the company and we can see it through their communication: the “break” concept has become a symbol for the brand, a timeless and universal symbol. The idea of fun also defines the brand; the company’s communication around their products is never too serious and that leads us to their quirky spirit, which is always present and goes along with the idea of break.We can also talk about the originality of the brand, always trying to create new products (new flavors) in their different market areas.

Brand assetsKitKat is different from many of its competitors for various reasons. First, the packaging and especially the color are pretty much unique and attract the eyes of customers. Then there is the shape, which is also unique (four bars) in the market, so unique that KitKat uses the shape of the product in its communication strategy very often. There is also the message: KitKat was the first brand to advertise around this idea of “having a break”, although they’ve recently been copied by Kinder Maxi68in their latest ads. This idea is still strongly associated with the KitKat brand though. KitKat is also defined as the company with many variations in its products (flavors), packaging or formats.

Brand personalityAccording to Aaker’s brand personality framework, if Kit Kat was a person, it would have the following characteristics: cheerful (sincerity), daring and spirited (excitement), and most of all it would have a fine sense of humor, as Nestlé’s Global Head of KitKat, Stewart Dryburgh, explains: “Part of our brand essence is having a sense of humor – an empathetic, laugh with you, not laugh at you, sense of humor.” In general, Kit Kat’s personality is a fun, dynamic and empathetic one, as their main purpose is to give consumers a break in their stressful lives, creating a feeling of thankfulness and complicity towards Kit Kat.

Brand reflectionThe customer, after having bought one of Kit Kat’s products, feels different things. The first one is a feeling of coolness, related to the communication used by the brand and also the values of the brand (fun, sharing aspects). Then there is the feeling of relief and satisfaction, created by the “have a break” tagline and marketing activities of Kit Kat, which has established itself as a break time food in consumer’s minds. Finally, there is the “youth” factor, Kit Kat being a positive and dynamic brand.

2. Consumer perception analysis

67https://www.nestleprofessional.com/uk/en/SiteArticles/Pages/History_of_KitKat.aspx68 https://www.youtube.com/watch?v=QOKWv7eJ2Qc

Perceptual map

Our perceptual map is composed of two attributes: price and quality. We noticed three groups in this market. The first one (lower left corner) is composed of our main competitors; the prices are more or less the same (the brands play on having different kilograms per packaging, 270g for one and 290g69 for another), from 10 to 40 cents of difference. The second one (upper left corner) is formed with fewer brands but the price and the quality are higher (0.50-2€ / per bar). Finally, the high end products, they are not numerous and usually have strong brand heritage (Swiss made, luxury products etc…). We noticed an empty space (few competitors) in the affordable and high quality square. The creation of such a product could be a threat to Nestlé but also might represent an opportunity if the company acknowledges this gap.

Brand associations

69 http://courses.monoprix.fr/searchresult/kit$0020kat

Questionnaire resultsIn order to understand how KitKat is perceived by its customers, we made a survey with 15 questions (see the annex).(Survey stopped on 1stMay 2015 at 11 a.m., 147 responses in total).

The survey started with three filters which were the gender, the age and the situation (student, worker, unemployed or other). The respondents were mostly students (86%) between 21 to 30 years old (79%).

After this, we asked them about the first chocolate snack brand that came to their minds and which chocolate brand is their favorite: the majority of respondents said that Kinder Bueno, Mars and Milka were the first brands that came to their mind.Their favorite chocolate snack brands were also Kinder Bueno and Mars.

We also wanted to know people’s perceptions of Kit Kat compared to their competitors in terms of satisfaction, so we made a comparison table between KitKat, Lion, Cadbury, Kinder Bueno, Hershey's, Mars, M&M's, Snickers, Nuts and Twix.

The results showed that Kinder Bueno was the most appreciated brand (with 70/147 responses saying it was “really satisfying”), followed by M&M’s with 62/147 answers. Kit Kat was judged as “satisfying” with 58/147 responses, and Nuts, Hershey’s and Twix were the least appreciated brands and were judged as either “average” or “unsatisfying”.

About Kit Kat’s brand awareness, to the question “do you know KitKat”, we obtained 100% of “yes” responses, which means that KitKat is a well-known brand with a high brand awareness.

We then asked people about the features of the KitKat: 56.5% of respondents judged KitKat's packaging as highly recognizable, especially thanks to its red color, its logo and the shape of the chocolate.

Furthermore, we put a brand association question in the questionnaire, asking respondents the first 3 words that came to their minds when they heard the word “KitKat”: most of them answered chocolate, red, bar, sharing, crunchy, and break.

We also wondered about what drove the consumers' purchase decision: the vast majority of responses showed that people bought or will buy KitKat for its taste (78,1%), followed by its format (39%).

Concerning the international penetration of the brand, 50% of the respondents had already eaten a Kit Kat snack abroad, but only 35,6% have already tried new flavors such as green tea, wasabi, peanuts or cookie cream.

The results of our questionnaire showed that Kit Kat had a high degree of awareness among consumers (assisted awareness), who mostly recognize it thanks to its packaging and its slogan (spontaneous awareness).

Customer based brand equity analysis and sources of KitKat’s brand equity

To evaluate Kit Kat’s sources of brand equity, we have conducted 3 types of researches:- Questionnaires to evaluate brand salience - In depth interviews by phone with 6 participants to evaluate Brand performance, imagery, judgments, feelings and resonance- Field research on social media and Internet pages

Brand salienceDepth of brand awareness:- Recall: top of mind: 10% (15/147)- Recognition: assisted awareness: 100% (147/147)

Breadth of brand awareness:- Association with break: 15,6% (23/147)

Performance1) Primary characteristics: ingredients’ quality is perceived as “good”. The four fingers format is very popular and consumers like the idea of sharing their snack.

2) Product reliability: KitKat is perceived as an average-quality chocolate bar.

3) Style and design: according to respondents, the packaging exudes a good quality product. The colors show energy, dynamism and vivacity. The four fingers format is for sharing with friends.

4) Price: the price is affordable to very affordable for most of the respondents.

Imagery1) User profile: the mental image of the typical consumer is a child or teen who needs energy to start the day and a student who needs a break (according to the respondents).

2) Purchase and Usage situations:-Purchase situations: it is very easy to purchase KitKat, it can be found in every supermarket and vending machine. In addition, consumers buy a lot on impulse; it’s a way to indulge themselves.-Usage situations: most of the consumers eat their KitKat in the afternoon, during breaks at school or work place. The idea of break is strongly associated with KitKat.

3) Personality and Values: we used Aakers brand personality test and found that the traits below best describe KitKat:- Sincerity (honest, wholesome, cheerful)- Excitement (daring, spirited, imaginative, up-to-date)

4) History, Heritage and Experiences.This year the brand is celebrating its 80-years anniversary and promotes its heritage and know how as a chocolate bar producer. In addition, the brand is also selling itself as a “break

re-inventor”: «Il y a 80 ans, Kit Kat voyait le jour et réinventait le break.» (KitKat Facebook page)

Judgements1) Credibility: we used 3 dimensions to evaluate Kit Kat’s brand credibility:

-Expertise: Competent, innovative, market leader-Trustworthiness: Dependable-Likeability: Fun, interestingWe found most respondents agreed on likeability and trustworthiness, as at least two of the three dimensions were chosen, we can assume that KitKat is a credible brand. The source of Kitkat’s brand credibility comes from its parent company Nestlé, seen as a very reliable and credible group.

2) Superiority: is the brand unique and better than the other brands? What are the brand’s unique associations?Kit Kat’s taste itself doesn’t differentiate it from its competitors; however, consumers love its four fingers size. They find it easy to eat, and like the idea that they can share it with their friends.

FeelingsUsing Kahle and colleagues’ six types of feelings, we found that consumers have feelings of warmth and fun towards the brand.Thanks to its numerous marketing efforts as a stress-reliever, consumers have a feeling of relief and peace when they think about KitKat.For some respondents, the feeling of warmth comes from childhood nostalgia. “It’s like coca cola, it’s my childhood and it’s deeply rooted in our minds”, said Gun Park. The feeling of fun is the result of the advertisements’ playful and lighthearted themes, starring animals or even mocking Apple products launching videos.(https://www.youtube.com/watch?v=OKOrkLxOBoY)

1) Warmth: the brand makes consumers feel peaceful, sentimental and affectionate2) Fun: upbeat, amusing, lighthearted, joyous, playful and cheerful3) Excitement: feeling energized, experiencing something special, “brand is cool or sexy”4) Security: safety, comfort, self-assurance,5) Social approval: feeling that others look favorably on the fact that they eat a KitKat,6) Self respect: consumers feel better about themselves, sense of fulfillment, accomplishment and pride after having eaten a KitKat

Resonance 1) Behavioral loyalty: according to our survey, 50% of consumers buy KitKat three or four times a month and 66.6% buy three or four individual packets a month.

2) Sense of community and Active engagement: KitKat is very active on social networks. For example, on KitKat’s Facebook page, “#Recettedumois”has a huge success. Every month, KitKat posts a picture of a dessert made

of Kit Kat bars and its recipe. Fans have 2 days to cook this desert and post their pictures. KitKat always comments the fans’ posts and answers to them. The brand does everything to be in a constant interaction with its fans in order to create a sense of community. These fans are in an active engagement; they invest time, energy and money, therefore we can assume they are real brand ambassadors.

Do the desired and perceived match?

Kit Kat wants to convey the image of a fun, trendy, stress-relieving brand that people can rely on and interact with. We found out, thanks to the multiple surveys we conducted, that isis exactly what people think about Kit Kat; they mostly associate it with breaks, warm and fun times and with childhood. They like to interact with it on social networks and play an important part in its marketing activities by being active and engaged customers. The desired and perceived positioning do match: in the eyes of customers, Kit Kat is exactly what is wants to be.

KitKat, a lovemark?

In order to evaluate whether KitKat is a Lovemark or not, we submitted the Lovemarker scale to a quite large number of people. We then divided the results by the number of respondents (147) to be able to have an exact figure.

KitKat obtained 38 points on the scale, which means that it is considered as a Brand rather than a Lovemark. To be considered as a Lovemark, a brand has to score at least 25 “respect” points, which Kit Kat did not get (21 points). However, the Lovemarker revealed that on “taste”, “sight”, “identity”, “innovation” and “openness” levels, KitKat got “hot” results, and many of the respondents gave it lots of points in the “leadership category”, meaning that KitKat is perceived as the (or one of the) leaders in its industry. Yet, KitKat apparently has to improve on telling great stories and on tapping into myths and icons (basically, KitKat’s Mystery appeal has to be focused on).

PART III   – CONCLUSION and RECOMMENDATIONS

1. Conclusion

This brand audit has allowed us to fully understand how KitKat operates in the chocolate confectionery industry and most importantly, how it is positioned on the market and what are its sources of equity. We discovered that it is one of the leaders in the market mostly thanks to the strength of the brand, which is highly appreciated by consumers, although not enough to be a Love Brand. Still, Kit Kat’s brand promise (offering a sweet break to every chocolate lover who needs it) is largely accomplished and consumers are aware of that, which is why they reward Kit Kat by becoming true ambassadors of the brand on social networks.Kit Kat managed and still manages to have a strong and clear position in the customers’ minds, and we can even say that it has created kind of a behavior pattern in their lifestyle thanks to a universal message, “Have a Break, Have a Kit Kat”.

2. Recommendations

For the recommendations, we focused on the French market. Thanks to the questionnaires, in-depth interviews and also our researches we’ve concluded that Kitkat has very strong brand recognition, but a weak brand recall. The brand has been successful in implementing the idea of “break” and “fun” in consumers’ minds, however Kitkat is mostly consumed during breaks and needs broader usage situations. The thing that makes it special is not the taste itself but its 4-finger format and convenience to eat.In France, Kitkat has launched different flavors, such as Kitkat chunky caramel, Kitkat ball white chocolate etc.. but the main problem lies in the communication strategy. A big part of the consumers are not even aware that those products exist.

In order to enhance customers’ brand equity we suggest:

Launch of new flavors In Japan, KitKat is having a huge success thanks to its diversity of flavors. We suggest that Kitkat launches new flavors tailored to French tastes. 57% of the French prefer dark chocolate better than milk chocolate70, so launching “KitKat Noir”

70 http://www.lsa-conso.fr/les-francais-et-le-chocolat-etude-exclusive,2046672http://www.tns-sofres.com/etudes-et-points-de-vue/les-desserts-preferes-des-francais

would be a smart move since it will also bring older age groups such as the 50 years old and more.

Co branding (ingredient co-branding)

The traditional “fondant au chocolat” had been elected as the favorite dessert among French people2, therefore we suggest to launch a new chocolate fondant filled KitKat. As KitKat doesn’t have the expertise of “Chocolate fondant”

making, we suggest to co brand this new product with GÜ Dessert. For KitKat the benefits will be reduced investment and operational costs. GÜ will give Kitkat the necessary know how of dessert making and bring customers to the dessert segment. This partnership is a way for KitKat to ensure that its new chocolate bar will have a genuine Chocolate fondant taste. This also will bring to KitKat broader usages situations; the consumers will not only see the brand as a snack but also as a dessert. In return, Gü will gain brand awareness and take advantages from KitKat’s large customers base.

Social media campaign

To further enforce its social media coverage, we suggest launching a Selfie campaign on Facebook. The rules of this game would be for participants to take a selfie during break times and the picture with the highest number of “likes” or “retweets” would win the contest. The prize could be break related and with a stress relief purpose, for instance, trips, concerts tickets, cinema tickets etc..

Communication strategy to enhance brand awareness of existing flavors

Campus promotion: We recommend Kitkat to promote its chocolate bars on campuses, the purpose of this campaign would be not only to increase brand recall but also increase its flavors awareness. As we said, the main problem is that consumers are mostly not aware of the flavors. The young are the segment that is the most sensitive and curious

about new tastes and flavors, that’s why we are choosing campus as a promotion vector.

Naturally, the theme of these campaigns will respect the theme of fun and break: in Brazil, Kitkat gave out “Pillow books” to students.

Appendix

SWOT

Strengths Weaknesses

. Strong parent company: Nestlé

. Low price

. 80 years old brand = authentic brand

. Good visibility and advertising

. Available in a variety of packaging

. Easily reachable (distribution)

. Nestlé’s highly efficient global supply chain

. Not enough flavors in some countries

. In some countries or rural areas in developing countries, the price is still too high

Opportunities Threats

. Emerging markets

. More flavors in European countries

. Growth of health consciousness= = creating gluten/palm oil free products. Cocoa Plan (enhancement ofproduct quality)71

. FairTrade and other partnerships(Android)

. Competition with other chocolate bars

. Rise in raw materials cost can impact the chocolate industry. Consumers’ increasing preferences for healthy food (palm oil awareness, calories). High buyer power (importance) due to a multiple choice of chocolateconfectionery brands. Many substitutes

Porter’s Five Forces

71 http://www.nestlecocoaplan.com/

Global chocolate confectionery industry – NESTLE

Conclusion: a moderately attractive industry because high entry barriers and very intense rivalry.

Industry analysis

New entrants = low threat

- Access to distribution channels + product differentiation not easy because of the competitors already in the industry- Economy of scale entry barrier because new companies would have to produce huge quantities at the same low price as already established companies =impossible

Supplier power

- Cocoa, milk and coffee producing countries (ex: Ivory Coast)- Selling cocoa accounts for a large part of their economy- Agricultural goods aren’t unique, Nestlé can choose to switch suppliers whenever they want (which they don’t do because seek to have long term relationships w/ them)

→ Low supplier power because they have to sell their raw materials to the few companies that hold the market

Rivalry

- Mars, Nestlé &Mondelez = 40% global market shares 2013- Ferrero, Cadbury, Hershey = 20,9% global market shares 2010

→ Oligopolistic, mature and saturated industry

→ Intense rivalry among the competitors

Buyer power

- The large variety of product offerings in this industry gives end consumers the possibility to switch brands endlessly- Companies have to invest a lot in marketing and CRM programs to retain the customer

→ High buyer power

Threat of substitutes

- Hundreds of products could be substitutes for Nestlé products (ice cream, candies, potato chips etc.)- BUT Nestlé strives to innovate and always be a step ahead + responded well to health and environmental concerns

→ Low threat of substitutes

Questionnaire

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