Launching Krispy Natural: Cracking the Product Management Code

Background of Pemberton• Snack food division of Candler Enterprises.• Market Leader in U.S cookies and bakery

snacks market.

Who are the Players?• Brandon Fredrick: Marketing Directer• Ashley Marne: Executive Vice President of

Sales and Marketing

Pemberton took the step to enter Salty Snack Market. It acquired Krispy Inc. and plans to tweak

its product and marketing strategy to succeed.

R&D of the product to improve quality. Product rebranded as Krispy Natural. Product line extended

for more options.

Launched the product in 2 test market regions of Columbus, Ohio and three cities in Southeast U.S.

Test results have been obtained to decide the strategy to roll out the product natinally(if at all).

Situation Analysis

Objectives of the Case(1/2)

• Analysis of product performance in test market and interpretation.•Decision to roll out the product nationally.

Objectives of the Case(2/2)

•Rationalization of future Projections.•Zeroing on a roll out strategy.•Plan to combat rivals.

We will focus on FOUR interrelated issues.

Four Issues• Understanding the U.S Cracker Industry and Assessment of

rivals.•Marketing plan of Krispy Natural.• Analysis of Test Market results.•What should be the National roll out strategy?

Cues from Cracker Industry(1/2)

Consumption of crackers was frequent and

regular.

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.

Consumers liked convenient and

portable packages.

50% of respondants liked crackers that were conveniently packaged in easily portable

quantities.

Emergind desire of healthy products.

53% respondents considered overall healthfulness an important factor in cracker

purchase decision.

Cues from Cracker Industry(2/2)Premium priced

products were being

introduced.

Kraft's Nabisco Wheat Thins Flatbread( launched in 2009) and Kellogg's Keebler Townhouse Flatbread(launched in 2010) were healthier and upscale options.

Growth was driven by new

flavour focussed product lines.

Market share for Pepperidge Farm Goldfish grew from 13.9% to 14.2% by focussing on new

flavours.

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.

Assessment of RivalsThe following players occupied 3/4th of market share in 2010 -• Kraft Food Inc• Kellogg's• Pepperidge Farm

Analysis of rivals- Some statistics• Kraft and Kellogg's market share

was declining.• Kraft appeared to be complacent

as they continued to lose share to Pepperidge and smaller brands.• Launch of Krispy Natural led to a

7% share decline of Kraft in Columbus.

Columbus Southeast

Pretest Post Pretest Post

Kraft 40% 33% 34% 32%

Kellogg 25% 22% 23% 22%

Pepperidge Farm

11% 10% 10% 10%

Krispy 0% 18% 9% 10%

Krispy Natural Marketing Strategy(1/2)

Product- The strategy focussed on increasing package sizes and introducing new and healthy filling options as per the industry's preference. Internal market research suggested consumer dissatisfaction with the flavor and taste experience of current cracker brands.However, the test summary shows, taste preference is less than purchase intent and the product pricing is not included in taste test.

Krispy Natural Marketing Strategy(2/2)

•Marketing- Focus on pull spending and trade promotion to help quickly establish the brand.•Distribution- Optimizing the DSD distribution would be a critical component for the overall Krispy Natural Program Strategy.• Pricing- Adopted a premium pricing strategy as per the market trends.

Test Market Results- Columbus

•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- Southeast Region

•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%.

National Rollout strategy?(1/2)

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.

National Rollout Strategy?(2/2)

• 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.

DISCLAIMER

Created by Yavantika Malani, St. Xaviers College Kolkata, during a marketing internship, by Prof. Sameer Mathur, IIM Lucknow.