Krispy Natural

KRISPY NATURAL Cracking The Product Management Code

Harvard Bus iness Schoo l Case Kr ispy Natura l

Team Players

Burt Spivey

Chief Operating

Officer

Brandon Fredrick

Marketing Director

Patricia Williams

President

Ashley Marne Executive Vice-

President, Sales &

Marketing

Issues before Fredrick

1 Result Interpretation

2 National Roll-out Risks

3 Realistic Expectations?

4


Multinational Beverage &

Snack Goods Manufacturer

Candler Enterprises


Majority Sales through Food Bars, Cookies & Sweet Baked Goods

Snack Food Division of Candler Enterprises

Pemberton Products

Beverage Division

Market Leading Brands – Softies Cookies, Homestyle Muffins & Doughnuts

Quick Service Restaurant

Pet Care Division

Market Leader in U.S. cookie & bakery snacks segment

World renowned product development labs

Direct Store Delivery (DSD)


Distribution Strategy

Direct Store Delivery

1 Goods delivered directly to

retail stores

2 Skips retailer Warehouses and

Distributor Channels

3 Great relationships with trade

due to personalized visits by

DSD representatives

4 Used with Low Shelf life goods

like baked goods, soft drinks

and chips


Advantages for the company

Direct Store Delivery

1 Maximized Sales & Profit

2 Greater control of shelf space

3 Accurate forecasting

4 Reduced Stock-outs

5 Quicker turnover of products

6 Costs ¢20 per $1 of sales


Goods transport from Company Distribution Centers to Retail Stores

Functionalities

DSD Representatives

Executed Price Promotions

Manage Shelf Inventory

In-store Merchandizing

Did not directly perform Sales functions


Worth $6.9 billion in 2011

The U.S. Cracker Industry


Compound Annual Growth Rate (CAGR) of 2.2% from 2008 to 2010

Market Situation

The U.S. Cracker Industry

Top 3 Cracker Manufacturers had 75% Market Share

Volume Sales rose in 2010

Cracker consumption was frequent and regular

Crackers were top salty snack ahead of Potato Chips

50%+ people preferred cracker packages with portable quantities

53% considered healthiness as an important factor

74% people consumed snacks on a regular basis while it was a part of weekly

diet of 34% people


$5.1 billion in 2011

6.2% over 2010

All Other Cracker Segment


Market Situation

All Other Crackers

1 2.1% CAGR from 2008 to

2010

2 Growth driven by healthier,

premium priced options

3 Kellogg Co focused on

healthier up-scale options

4 Kraft Food Inc focussed on

healthier up-scale options

5 Pepperidge Farm focused on

flavour and healthiness


$660 million in 2011

11% over 2010

Crackers with Fillings


Market Situation

Crackers with Fillings

14%

Highest Segment

Growth in 2010

Kraft Food Inc

33% share in 2010

Kellogg & Lance also

competitors

Premium Alternative

With whole-grain

cracker & real

cheese


Products

Krispy


Pemberton bought

Krispy

2008 2

Competitor in ‘All other

crackers’ & ‘Crackers

with Fillings’ Segments

3

Production Plants

South Eastern U.S.

Regional Strong Presence

In Vending Machines &

Convenience Stores

Marketed As

Mobile: Grab & Go


Repositioning Krispy in the

Cracker Market

Krispy Relaunch


Repositioning in The Cracker Market

Krispy Re-launch

1 Marne was

disappointed at the

results

2

FELL SHORT OF MANAGEMENT

EXPECTATIONS IN 2009

Limited Product Line

Low Flavour Satisfaction Scores REASONS

3 Change of Product &

Marketing Strategy will

bring Success

4

BELIEF

Special R&D labs IMPROVEMENT ON TASTE

& FLAVOUR

5 To ‘Krispy Natural’ REBRANDING

6

-Multiple serving packages

-More Flavours

In order to compete with

established brands

7 OTHER IMPROVEMENTS

To Extend beyond

Single-Serve Offerings PRODUCT LINE


Krispy Natural Marketing Strategy

Larger Package Sizes

Improvements

Product

Improving Taste

Multiple Servings

77% to 92% purchase intent for new flavors

High priority for White Cheddar flavour of Cracker with Filling than other Brands


Heavy Advertising

Techniques Used

Marketing

Pull Spending & Trade Promotions

Promotion to end-customer & trade

Price Discounts

Pull Strategy in contrast to more widely used Push Strategy in the Market


Operational Test in 2010 to analyse the Distribution Logistics

DSD as a Critical Component

Distribution

Optimize the system for Longer Shelf Life of Crackers versus Baked Goods &

Cookies

Trucks capable of accommodating Test Market Quantities


Considering Product Superiority, price fixed to 155% of segment average

Premium Pricing Strategy

Pricing

Expected minimum sales of $500 million in 1 year of National Distribution

Visual Price: Price similar to competitors with lesser quantity

Expected a steady state pre-tax profit of 13%


Distribution and Marketing in

New & Existing Markets

Test Market Plan


OHIO

• Completely new in the Market

• ‘Krispy Force’ was set up to sell

the new product line with

assistance of regular DSDs

• Expectation of 9% share at the

end of the 16-week test period

COLUMBUS SOUTH-EAST U.S.

THREE CITIES

• Repositioning to a Premium

Offering

• Test the receptiveness to

Higher Priced,

Reformulated Products

• Regular DSDs without the

‘Krispy Force’

• Similar Advertising as

Columbus

• 9% to 15% at the end of 16

week period


Based on Figures Obtained

During the Test Period

Results


OHIO

• 18% Market Share

• Category Volume rose by 30%

COLUMBUS SOUTH-EAST U.S.

THREE CITIES

• 10% Market Share

• Little Category Expansion

Fredrick reasoned the poor results in South Eastern cities because of:

• Low Shelf Space & Display activity

• Low Introductory Discount of just 15%


Clearly, Krispy Natural can be successful in newer markets using the

strategies used in Columbus

Result Interpretation

Issue 1

In markets where it is already present, it faces difficulty due to its originally

cheaper products

Average 82% 67%


Average 81% 58%

Krispy Natural might get lower shelf space in markets across the nation

National Roll-out Risks

Issue 2

Introduction of Frito Lay in the National Market at the same time is a risk

Competitive responses from Kellogg, Kraft, Pepperidge etc

Promises for National Roll-out

More than 80% buyers have a positive purchase intent

About 60% of buyers preferred Krispy Natural over other brands


Expectations are not as realistic because of the presence of biggies like Frito

Lay in the Market

Realistic Expectations

Issue 3

Reducing the price a little may help but that would reduce the premium value

of the brand


Krispy Natural

Marketing

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