Launching Krispy Natural HBS Case Study

Candler Enterprises

Pemberton

Restaurants

Pet Care

BeverageDivision

U.S Cracker Industry

• Revenue of nearly $7bn in 2011.

• Compounded annual growth rate of 2.2%

• Main Market Leaders 1.Kraft Foods 2.Kellogs Co 3.Pepperridge Farm 4.Pemberton Products

Saltli

nes

Cracke

rs with

fillings

Graham

Cracke

rs

Others

General

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Series 1

Series 1

Pemberton Products

• U.S market leader in snack food division.• Sales of $5 billion in 2011.• Performed Brand Extension by

acquiring Krispy Inc. in 2008• Achieved a growth rate of 14%.

Pemberton’s strategic priorities

• 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.

What is DSD?• Pemberton utilized a company-

owned direct store delivery (DSD) distribution system in which products were delivered directly to retail outlets, bypassing retailer’s warehouses and distribution centres.

• DSD maximized sales and profit growth through greater control of shelf space, more accurate forecasting, reduced stock-outs, and quicker turnover of products.

Pemberton’s income as a percent of sales in 2011

Mintel Study• 53% in the U.S considered health

as important.• 69% were trying to improve their

health.• 51% were trying to lose weight.

Krispy Product Line

• Krispy was a regional brand with distribution focused primarily in the Southeastern U.S

• Krispy’s underperformance was a result of the limited product line, which made it difficult to command any sort of presence in markets.

• A taste survey showed the product did not deliver the flavor satisfaction scores which were expected.

Krispy Natural would be made from 100% whole wheat andother all natural ingredients, with approximately 150 calories 6 grams of fiber and 3 grams of protein per serving.

Cracker with filling options would feature White Cheddar, Smoked Gouda, Chipotle Cheddar, Creamy Swiss, Tomato Basil, and Vegetable Herb. Flat cracker flavors would include Cracked & Olive Oil, Sundried Tomato, Smoked Cheddar, and Roasted Garlic.

Launching Krispy Natural

Marketing Strategy for Krispy Natural

• Effective DSD distribution would be a critical component in the overall Krispy Natural program strategy

• Krispy Natural sought a premium pricing strategy. Management felt pricing of 155% the category average cost per ounce was reasonable considering the product’s superiority.

Pemberton plans to spend $70 million on Advertising

Spending on Advertisements by other Firms

Promotional plan of Krispy Natural

Predicted Annual Income

Test Market Plan• Special “Krispy Force” representatives were hired,

which were separate from the traditional DSD route delivery representatives. These “Krispy Force” reps worked with Pemberton regional and district sales managers and focused solely on selling the new Krispy Natural product line.

• In the Southeast, Krispy was already established in the market as a single-serve product, and the company was able to test its ability to reposition the product to a more premium offering.

Product Testing Summary

What was the impact of the launch of Krispy Naturals on the competitors?

Conclusions• Pemberton’s Krispy Naturals was supported by the growth

trends within the industry as well as consumer demand. • The premium pricing strategy employed by Pemberton

was ideal for the product since its higher quality ingredients and distribution would be costly for the company.

• Although Krispy Naturals was already established in the market as a single-serve product in the Southeast perhaps its share could be improved by adding the special “Krispy Force” representatives to help the regular DSD route delivery representatives, regional, and sales managers handle the sales of the new product line.

Is Krispy Natural Ready for a national rollout?

• One of the main limitations facing Krispy Naturals is that it may not be cost-effective to hire more sales representatives to promote the product .

• It could face severe competition from Frito Lay company.

• There is also the chance that consumers will not be willing to pay the industry price for less quantity in a package than other competitors, regardless of the product’s quality.

Thank You

DisclaimerCreated by Kunal Sharma, IIT Roorkee ,during a Marketing Internshipunder Professor Sameer Mathur , IIM Lucknow.