A U.S. Retail cracker sale is an industry with the volume of $7 billion, consisting of 3 main brands: Kraft Food Inc., Kellogg Co and Pepperidge Farm, which cover almost 75% of the market. Pemberton, the snack food division of Candler Enterprises competes with these brands and offers the customers packaged food bars, cookies, muffin and doughnuts with superior experience of taste. On this goal, they aim to create better products: Their recipes are being improved and new products; new flavors are continuously being put in the market.
Pemberton is strong on their innovative side. They utilized direct store delivery (DSD) distribution system allowing them to directly deliver to retail outlets. This system maximized sales and profit growth. In order to meet their long-term objectives, their three key strategic priorities include benefiting from this system – making their marketing and sales a leverage; as well as building a collection of attractive, durable brands and acquiring capabilities in salty snack categories. (Cespedes & Beckham, 2013)
The recent reports show that the shares of the top three brands are declining. This drift is the direct effect of the consumers’ desire to purchase more of the healthier products in the market. As the recent surveys state, in a population which 70% of the consumers’ are working to improve their physical health, such an effect on the market is inevitable. (Cespedes & Beckham, 2013)
The crackers-with-filling has been the strongest segment growth in the market in 2010 with 14%. Seeing this as an opportunity, Krispy made 3 available flavor options for the consumers and marketed their products as mobile with strong presence in vending machines and convenience stores. Pemberton hoped to increase volume with wider distribution on supermarkets with better visuals / displays was necessary however, they were 30% behind of the projected sales performance. Limited product line, low flavor dissatisfaction made it difficult for Pemberton to show presence in the market.
The overall market was large, top competitors were losing market share, crackers-with-filling segment is a gold mine with the expected growth of average 12% per year and the customers are not well satisfied with the taste of the current crackers in the market. In order to change this around, compete with the top three brands and acquire more market share, Pemberton engaged research and development labs to get better taste and quality from their product, as well as introducing multiple serving package sizes and more flavors into the market.
In 2008, Pemberton decided to enter partnership with Krispy Inc. for production of salty snacks. Krispy was a regional brand with distribution focused primarily in Southeastern US. Krispy snacks were also predominantly in vending machines and convenience stores. The Krispy Natural marketed its products as “Grab and Go”. Pemberton hoped to increase their volume through wider distribution of goods such as supermarkets, and more popular places rather just convenience stores and vending machines. The Krispy product fell short of management projections and the whole team in Krispy Inc. was frustrated and disappointed. In addition, the consumers took a survey and said that the product didn’t deliver the results and taste of crackers as expected. Eventually, Krispy suggested another marketing strategy.
They wanted to improve product taste and quality. The re-branded Krispy Natural and gave the company a new look. The team also felt multiple serving packages sizes and more flavor would add leverage to its company and they would be able to compete with other markets and brands. After the text of consumers’ reflection to the new flavor and a series plan of marketing strategy, (Exhibit1 and Exhibit 2). In September of 2011, Krispy Natural had officially launched in Columbus, Ohio and a trio of cities in the Southeastern US. Pemberton was a market leader in the U.S cookie and bakery snacks, which allowed the company, operate dozens of plants and had world-renowned product development labs. One of the strategies of Pemberton is ability to create products that provide a superior taste experience. The company is constantly changes it’s recopies to come up with new products and flavors for increased customer satisfaction. Pemberton strategic priorities include mostly product improvement and customer satisfaction. This is one of the most valuable aspects of the company so it can grow further and have high customer loyalty.
Pemberton used a company-owned store delivery where the products were directly delivered to retailer’s warehouses and distribution centers. According to Pemberton’s president, Patricia Williams, the company had an advantage due to culture of innovation. Due to its culture, Pemberton had achieved an annual growth rate of 14% over the last 5 years. Williams summarized the most three strategic plans for the company: 1) building a collection of attractive, durable brands; 2) leveraging leading markets, sales and DSD systems to increase revenue and profits; 3) building or acquiring capabilities in salty snack categories.
On other hand, Krispy Natural Crackers wouldn’t fit with these priorities. Although these crackers faced lots of competition from other snacks, the demand for the crackers never went down. These crackers were also concentrating on health benefits of its consumers. Krispy Natural Crackers are trying to promote healthier snacks to its consumers. They are taking a slightly different approach compared to Pemberton snack division. A packaged facts survey illustrated that 69% of consumers of these crackers were on a diet and trying to lose weight. These consumers also emphasized on the fact that their priority was to improve physical health and lose weight. Aside from Krispy natural Crackers, “other” crackers such as Pepperidge Farm Goldfish products grew from 13.9% to 14% in 2010. They were also concentration on health benefits of its consumers.
6 or more exhibits were given to show what this plan is going on, the 200 Krispy Single-serve sales Performance (Exhibit 1), both the rental and vend, the actual performance is less than the plan. The reason be concluded limited product line and the flavor, so based on the data the product and marketing strategy is plan to tweak. One of the things the Krispy change is testing the new flavor, the Product Testing Summary (Exhibit 2) shows obviously the new flavor attracted by consumers and has some overwhelming advantages than other brands. As this is a great product strategy, what other things left is marketing things.
Two regional areas as the text place to sale the products. The Columbus and Southeast have the some strategy in advertising and promotion ways, however, It has different sales result. The data indicate, the Columbus doubled the sales plan but the Southeast only slight up to 10%. However, these do not show everything, cause the Columbus had no prior presentation before, and the Krispy is totally a New line here, Consumers are easy to receive the high price and premium style as the Krispy is; however, the original Krispy product had a foothold in the Southeast before. And compare to other competitors, the new Krispy had robbed some market share.
The Krispy Nature should go national, we need to set up business phases and use a strategic plan based on the previous outcome from the southeast as well as Columbus results (exhibit 5). Fair prediction would be one depending the advertising as well as the consumer feedback. I believe Krispy Natural should push advertisement; Krispy reputation should be targeted toward a healthier market. As stated Pembertons COO Burt Spivey said, “one of our most distinct competencies s our ability to create products that provide a superior taste experience”. They should increase their variety as well as packaging In order to generate higher revenue. Krispy should set up their launch in phases in order to first have (consumers) customers become aware of the new health line and then factor in the discount rate in certain areas in which the consumers are discount shoppers. This should increase Krispy numbers, Krispy pricing felt pricing of 155% of average cost per ounce was considered reasonable because of the products superiority.
If Krispy’s targeted market remains for the healthier snack people would tend to pay even if the quantity is less. Krispy may implement points of difference POD along with points of parity POP to see a outgrowth in the national results. The results of the Columbus can show a 18% share of the cracker category in the test market. These results were based on a 16 week test period. The plan in the southeast was of similar marketing techniques when it came to advertising and promotion .the results of the southeast however was only at a 10% share and little category expansion in the market. Krispy seems to be making great marketing decisions trying to improve Krispy natural. Implementations of a higher consumer feedback will make Krispy natural improve its test market results in the future. By Improving the flavor and variety and perhaps changing how people perceive Krispy natural might improve marketing results. I believe that people associate natural with healthy and therefore Krispy Brand mantra I believe is set up for success.
With the hopes of securing 15% of shelf space in each supermarket; Krispy Natural was set to launch in Columbus, Ohio and a trio of cities in the Southeastern US as the two test market regions. Teams of representatives were built under the name “Krispy Force”, with the sole mission of improving the sales performance of the new Krispy product line. After 16-week of test period, we can conclude that the results were accurate and the indicators are correct. We can assess that the numbers are accurate due to the results derived from Columbus, as well as the Southeast results. The results from 2008-2009 on the manufacturer sales of all other crackers provide us with the markets shares. The loyalty in this market seems to be difficult to maintain when the health factor seems to be a major roll when it comes to choosing the cracker product. The indicators in which we see a change from 2008-2009 (exhibit 3), leads us to see a clear indication of the advertising, which was increased in many cases drastically due to competition.
Accordingly, we can see that people’s preference towards packaging as well as variety is a major factor on testing feedback. The indicator allows Krispy to set up their strategic plan in order to improve their overall results in the market. The expectations seem to be well over 500 million during year one based on a national distribution with the dollar share of 9%. Steadily increasingly year by year jumping 16% by year 2.
The next step that awaits Krispy is going national by setting up business phases and use a strategic plan based on the previous outcome from the southeast as well as Columbus results (exhibit 5). Fair prediction would be one depending the advertising as well as the consumer feedback. Krispy reputation should be targeted toward a healthier market and Krispy Natural should push advertisement. As stated by Pemberton’s COO Burt Spivey, “one of our most distinct competencies s our ability to create products that provide a superior taste experience”; they should increase their variety as well as packaging in order to generate higher revenue.
Krispy should set up their launch in phases in order to first have (consumers) customers become aware of the new health line and then factor in the discount rate in certain areas in which the consumers are discount shoppers; so that Krispy’s numbers would increase in return. Krispy’s pricing of 155% of average cost per ounce was considered reasonable because of the products superiority. If Krispy’s targeted market remains for the healthier, snack people would tend to pay the same if the quantity is less. Krispy may implement points of difference (POD) along with points of parity (POP) to see an outgrowth in the national results. The results of the Columbus can show an 18% share of the cracker category in the test market. These results were based on a 16-week test period. The plan in the southeast was of similar marketing techniques when it came to advertising and promotion. However, the results of the southeast were only at a 10% share and little category expansion in the market. Considering the test results in Columbus, Pemberton seems to be making great marketing decisions trying to improve Krispy Natural.
Implementations of a higher consumer feedback will make Krispy Natural improve its test market results in the future. By Improving the flavor and variety and perhaps changing how people perceive Krispy Natural might improve marketing results. People associate natural with healthy and therefore Krispy’s Brand Mantra is set up for success. Based on the test results of Columbus, Krispy claimed % 18 market shares whilst the top 3 brands lost 11%. The majority of this number is the loss of Kraft with a total of 7%, which can be commented as a victory for Krispy, stealing the customers of Kraft.
Even though the sales performance is below expectations for Southeast, it is accepted as a fact of the low-marketing effort. The stores that place Krispy on end aisle displays make the highest sales performance. Unfortunately, compared to Columbus, percentage of stores with end-aisle displays in Southeast was 4% less. Also, the total number of stores, which Krispy Natural is being sold, was 9% less in Southeast. As much as these factors played a role in low sales performance, considering Krispy went national by
their aggressive advertising strategy, the market share of Krispy would increase to the range of 18% to 25%. In the 3-year period, considering the advertising expenses for Krispy Natural is in top three; if the end aisle displays & gondola placements in the stores were increased, as derived from the Columbus test’s results, reaching to 94% of the total stores would bring at least 18% of the market share to Krispy. Seeing how Kraft lost its share in Columbus, from that data we can say Krispy is expected to be a brand in the top three and the competitors will have to react quickly.
In the short term, competitors are likely to release their funds to invest more on advertising in order to gain back their market shares and leave Krispy behind once again. By doing that, they aim to gain back their brand reputation; overcome Pemberton’s investments during its quest of going national and improve their product lines on quality purposes.
References:
Cespedes, Frank V. & Beckham, Heather. (May 2013) Launching Krispy Natural: Cracking the Product Management Code. Spreadsheet Supplement 913-576. Harvard Business School. Allston, MA.
