Santiago Corredoira JackIESE- GEMBA 2011

MARKETING MANAGEMENT II Prof. Julián Villanueva

What now?

How?...

growth!

Increase sales 25% profits 20%

Y’02 1) media spending(with charcoal grills manufacturers)

2) promotional activities (with charcoal grill manufacturers and sales channel)

3) change packaging and price(replace regular 20pounds blue bag by 17p, line price

raise 5%)

4) plan b: long term R&D project (briquette that gives smoky flavor to gas BBQs)

Where are we?

An even more so as time goes by…

So what are they and for whom?

outdoors, summer time event

A social and traditional entertainment

for young family menabout

tasteful food

Where should we go?

25%

Increase

20% in Y ‘02

How do we go?

Forces of the market (and their interests)

Value proposition

OK, step by

step…

Bricks of our foundation

Partners

Well perceived high quality product, well distributed (Clorox sales force has a great relationship with sales

channel representing brand leaders on product categories)

Product

Old reputable brand (80 years old associated with high quality product ). Brand is key in a market dominated by conservative heavy users: brand loyalty is relevant. Do

not touch the brand!

Brand

Kingsford total line prices should raise 5%: profit plus $ 1.7 m and sales $ -3,7 m (see exhibit 4)

Price

IncentivesIn promotions, Kingsford should reduced time and leave

volume to keep selling 22,5% more (see exhibit 5): target impulsive sales Communicatio

nsKey message to consumers: benefits of the charcoal grill vs. gas grills (see exhibit 1, side products analysis)

Kingsford biggest decrease (5,7%) are in food stores (66% sales): marketing action must tackle this issue (see

exhibit 5)

Distribution

Let’s get

into it!

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

50.000

100.000

150.000

200.000

250.000

300.000

Q1, Q2 2001 Q3, Q4 2001 Q1, Q2 2002 Q3, Q4 2002

Total Kingsford sales Total Kingsford net earnings Kingsford profitability

One thing at a

time…

ATL: TV Campaign

A Contact partners (charcoal manufacturers)

A.1 Brief agencies and execute creative ADDs

A.2 Brief media planning agency

A.3 Plan campaign

A.4 Air, monitor, analyze results and amend campaign

accordingly

A.5 BTL: Promotional activity food shops across the country

B Contact partners: food channel and charcoal grill

manufacturers

B.1 Brief events marketing agency

B.2 Start national “road show”

B.3 Monitor, analyze results and amend accordingly

B.4 Repackaging 20p bags:

C Brief production department

C.1 Monitor, analyze results and amend accordingly

C.2

Schedule Implemen

ting Marketing

Actions

March 01 Augu 02Sept 01 Nov 01 April 02Dece 01May 01 June 02 Oct 02July 01 Feb 02

GOLIVEB.2B.1Promo Activity

Promotional activity: food shops across the country

TV CAMPAIGN

GOLIVE

A.2A.3A.1TV Campaign

Repackaging

C.2GOLIVE

C.1Repackaging

B.4

A.5A.4

B.3

Control

Monitoring Marketing Actions

1

2

3

4

5

Feedback

Conclusions3

Amendment measures

4

Data analysis2

Data gathering

1

Implementations & actions

5

Exhibits

Thanks Exhibits!You never get much attention,

but without you this report could not have been

produced

EXHIBIT 1: SITUATION ANALYSIS I: Environment

• About BBQs: – There are aprox. 75 mm grilles in the US (in 2000 there were 100 mm estimated

households in US, and 3 out of 4 owned a grill,)– 80% users: young, large and high income families– US BBQs ‘87-’00 increasing a lot: from 1.4 billion to over 3 billion– Most of them heavy users: 1/2 users did 85% of the BBQs– Majority (over 60%) are men– BBQs cook meat and side veggies or potatoes

• Seasonality: – summer time events (peaks in national celebration days in that period)– 60% purchases between May 1st and Sept 1st – 4th of July weekends: 35% of total sales

• Side products: gas Vs. charcoal – Charcoal: the real thing (price, experience and flavor)– Charcoal growth slowed down to an annual rate of 2% in 2000 (however, gas grill

grew by 8%): gas is winning by far!: Kingsford future depends on a side product! – Gas advantages: easiness, cleanness, control over fire (might be more important

for woman’s segment), faster, regulatory (fire regulations ban BBQing anywhere nowadays)

– Charcoal advantages: taste (smoky flavor), real thing (might be for men showing leadership), portable (tailgating) and cheaper.

EXHIBIT 2: SITUATION ANALYSIS II: Target market I

• Customers: – Men majority (60%), middle to high income level, traditional (celebrate national holidays),

conservative (have large families being young), family men, wealthy (high income), meat-eaters, love sports (Nascar tailgating) and compulsive purchasers (1/3 of sales).

• Collaborators: – Distributors, sales channel (% of charcoal sales):

• Food stores (66%), drugstores (2%), mass merchandisers and Wallmart (15%), Club Stores (and others) (16%)

– Distributors look for bigger sales of product (each charcoal client spends 30% more shopping than the others)

– Charcoal grill manufacturers (vs. gas grill). They are interested on fighting back gas grills as they are wining the market

• Company: – Clorox a $4.1 bn rev, and $394 net profit company with 11,000 employees WW,

manufacturing brand leaders on households product categories– Clorox decreased its Q2 sales in 6% (sales volume is key!)– Kingsford is key in Clorox: 9% of total revenues and bigger % of net income– Kingsford increasing market share yoy (at the cost of the 2nd brand, Royal Oak) in a

shrinking market (see charcoal vs. gas considerations)– Employees: 2 brand managers, woman highly educated (HBS) in their early 30’s with 6

months experience on the brand, senior (Sales VP) very experienced on the brand

EXHIBIT 3: SITUATION ANALYSIS III: Target market II

• Competitors: – Kingsford is market leader of an oligopolistic market:

• Kingsford prime brand and quality (58%), Royal Oak 2nd in-the-middle brand (7%) and Private Labels cheap and profitable for the channel (34%)

• Price gaps (around 25%-30% difference) are narrowing down (10% last year)

– Charcoal competes against gas grills, and is loosing the battle! • Gas grills have almost 55% of the grill markets • Gas are increasing (8%) vs charcoal grills (-3% yoy)

– Kingsford’s problem (and solution) is not about increasing market share, but about fighting gas grills!

• Context: – People tend to spend more time dedicated to leisure activities. A BBQ is a leisure, family

and social event and as such, should be an increasing event in the population– With the global warming, and regardless yoy weather changes, the conditions and

appropriate period for it should also be better over the time

EXHIBIT 4: PRICE ELASTICITY ANALYSIS

• All price raise decreases sales• Kingsford is 9% of Clorox rev. and “substantially higher” % of profits• Market (channel, consumers) are prepared for a price increase due to competitors behavior• Best price increase is a 5% in the line: biggest profit increase 3,2% (assuming Kingsford has 15% profit)• 5% price increase is still less than 25% Kingsford Vs. private labels price difference • Clorox issue: 6% sales decrease • Kingsford’s goals: increase sales and profits• Kingsford total line prices should raise 5%: profit + 1.7 m and sales -3,7 m

price raise Probability volume sales profit4% in club home no loss 60% 0 1.300 1.080300 MSC loss 25% -300 -1.110 40c. -1000 MSc loss 15% -1.000 -7.200 -2.500RESULT -225 -578 283VS KINGSFORD -0,16% 0,51%2,5% in blue bagno loss 75% -400 -1.200 56010% loss in 10 and 20 bags 25% -580 -3.090 -810RESULT -445 -1.673 218VS KINGSFORD -0,46% 0,39%5% in blue bagsno loss 50% -550 -1.900 1.0607% loss in 10 and 20 bag 50% -740 -4.140 -110RESULT -645 -3.020 475VS KINGSFORD -0,82% 0,86%5% all lineno loss 30% -790 -2.820 1.870loss 70% -830 -4.020 1.720RESULT -818 -3.660 1.765VS KINGSFORD -1,00% 3,20%TOTAL CLOROX REV 4.083.000 394TOTAL KINGSFORD REV 367.470KINGSFORD 15% ASSUMED PROFIT 15% 55.121

IN $ US ,000

DATA (in blue calculations from case data, in red assumptions done)

ANALYSIS

EXHIBIT 5: PROMO ANALYSIS

• Kingsford has reached its saturation level of promotional activity: with a slight increase in promo time (1,8%) and volume (0,3%) it has actually slightly reduced its incremental promotional volume (-0,1%)• Promotional incremental volume is driven more by the volume promoted than by the promotional time (i.e.: Royal Oak decreased 51% promo time and 20,2% promo volume and only decreased 14,7% incremental promo volume)• Kingsford is 9% of Clorox rev. and “substantially higher” % of profits• Kingsford should reduced its promo time (for instance to 14 weeks) and leave its promo volume (around 45%) steady to keep the incremental volume from promo at its maximum level of 22,5%

Kingsford 28,7 1,8% 22,5% -0,1% 45,6% 0,3%Royal Oak 3,3 -51,0% 14,7% -14,5% 31,4% -20,2%Private Label 14,2 -6,3% 18,0% -3,4% 42,5% -4,0%

Promo Weeks

Change vs '99

Incremental volume

from promoChange vs '99

Volume Promoted

Change vs '99

DATA

ANALYSIS

EXHIBIT 6: CHANNEL ANALYSIS

• Kingsford desperately needs to change the -5,7% (2nd half ’00) sales decrease in food shops (that is 3,8% Kingsford sales decrease)• Possible reasons for that:

• Following Exhibit 5, gas vs charcoal grills difference has been increasing over year 2000 (k units): Jan: 8.7 vs 6,2; Jun: 9 vs 6.1, Dec 9.2 vs 6•We can assume that gas grills might be more appropriate for woman (see exhibit 1 above) and that woman might purchase more in food channels (more personal food shopping places where people behind the desk offer you different products, while in mass channels food is more standardized, pre-packaged and men feel more comfortable with a lower selection choice)

• Marketing actions must counter fight the decrease sales in food shops

DATA (in blue calculations from case data)

ANALYSIS

% sales

Channel Food 2,0% -5,7% -1,9% 66,0% -1,3% 243 -3,04Mass (and WalMart) 6,7% 0,2% 3,5% 15,0% 0,5% 55 0,29FDM 2,4% -4,7% -1,1% 18,0% -0,2% 66 -0,13TOTAL -0,9% 367 -3,41

1st 1/2 CY00

2nd 1/2 CY00

CY00

Sales volume growth (or decline) Total sales growth or decline %

Sales growth or decline (US $ m)

sales (US $ m)

EXHIBIT 7: BUSINESS CASE

• Sales increase in Y ‘01 Vs Y ‘00 26,1%, which is above 25% sales increase• Net revenue also increases significantly by 22%, above the 20% profit increase • Still, Y ‘01 profitability is almost 14% because ROI from the TV campaign accounts only for the 2nd half. • Thus 2003 should through even better results and ratios, but it falls outside the scope of the marketing plan.

DATA

ANALYSIS

Q1, Q2 2001 Q3, Q4 2001 Q1, Q2 2002 % YOY Q3, Q4 2002 % YOY Y 2001 Y 2002 % YOYKingsford Sales previous period 183.735 183.735 206.342 228.949 367.470 435.290TV Campaing incremetal sales 11.575 11.575Promo incremental sales 12.861 12.861 12.861 12.861 25.723Repackaging incremental sales 11.575 11.575 11.575 11.575 23.151Price rise sales decrease -1.830 -1.830 -1.830 -1.830 -3.660Total Kingsford sales 183.735 206.342 228.949 24,6% 263.131 27,5% 390.077 492.079 26,1%TV Campaign costs -3.500 -3.500 -3.500 -3.500 -7.000Promo costs -500 -500 -500 -500 -1.000Repackaging costs 0 0 0 0 015% Kinsgford profitability 27.560 30.951 34.342 39.470 58.512 73.812Price rise incremental profit 883 883 883 883 1.765Total Kingsford net earnings 27.560 27.834 31.225 13,3% 36.352 30,6% 55.394 67.577 22,0%

IN US $ ,000

EXHIBIT 8: PRODUCTION CONSEQUENCES

• TV Campaign will only start increasing sales (and affect production) 1 year after it started, in 2nd half of 2002• Promos have an immediate effect (promote impulsive sales) so they have an immediate effect on production since the day they are applied• Price rising actually decreases production because it lowers sales (see exhibit 4) • Same with packaging reduction, as we reduced 6,3% the amounts sold• % of production consequences are calculated at the bottom of each slide where the marketing action is analyzed (see slides

DATA

ANALYSIS

TV Campaign 6,30% 6,30%Promos 7% 7% 7% 7%Rising price -1% -1% -1% -1%Packaging reduction (20p to 17p) -6,30% -6,30% -6,30% -6,30%TOTAL PRODUCTION LEVEL 80% 79,76% 79,52% 84,29%

Marketing Actions Production consequences

1st half 2001

2nd half 2001

1st half 2002

2nd half 2002

PRODUCTION CONSEQUENCES IN %

EXHIBIT 9: ASSUMPTIONS

• Assumptions have been that Kingsford profits in 2001 are 15% of the sales.• Also that Clorox was as interested in profits as it was in sales, even if the CEO highlighted the 6% sales decrease in Q2.• Thus we concluded that a 5% price increase is beneficial • Production issues were analyzed in previous exhibit 8, having no impact on production expenses since do not raise it more than 84.29%• No incremental sales on a year on year basis have been taken into account when doing the business plan • We have assumed that women are more gas grills consumers based on their benefits and also that they purchase more in food shops than men, targeting our TV campaign to them

ANALYSIS

Santiago Corredoira JackIESE- GEMBA 2011

MARKETING MANAGEMENT II Prof. Julián Villanueva

ThankYOU