Launching Krispy Natural: Cracking the Product Management Code

Harvard Business School Case

Harvard Business School

What is Krispy Natural?

KRISPY NATURAL(A Salty Snack)

New Product

PEMBERTON INSIGHTSMarket Leader in U.S Cookie and Sweet Snack Market.

5 Billion in Sales (2011)

Owns And Uses Direct Store Delivery (DSD)

First step in

Salty Snack Market In 2008

KRISPY Inc.

PEMBERTON DREAM TEAM

PATRICIA WILLIAMS -PRESIDENT

The three key strategic priorities for the company:

1. Building a collection of attractive, durable brands.

2. Leveraging leading marketing, sales and DSD systems to increase revenue and profit.

3. Building or acquiring capabilities in salty snack categories.

PEMBERTON DREAM TEAM

ASHLEY MARNEExecutive Vice President of Sales and Marketing.

KRISPY NATURAL will provide Pemberton with its next generation blockbuster product and provide the foothold we need to dominate the salty snack market. I am counting on you to make sure our roll-out is a success

PEMBERTON DREAM TEAM

BURT SPIVEY Chief Operating Officer

“One of our most distinct competencies is our ability to create products that provide a superior taste experience.”

“Our DSD System is the major factor in the company’s growth and leading market share position, providing us with a significant advantage over the competition.”

PEMBERTON DREAM TEAM

BRANDON FREDRICKMarketing Director

U.S CRACKER INDUSTRY

Est. $6.9 Billion in 2011

Types of Crackers

Flat Crackers Crackers With Filling Graham Crackers

6% Market Share 9% Market Share 85% Market Share

U.S CRACKER INDUSTRY INSIGHTS

Growth Rate for Overall Cracker Industry from 2008 to 2010 was approximately 2.2% CAGR (Compound Annual Growth Rate).

Crackers With Fillings Sector is Expected to Grow10-14% in next few years.

Mintel Study Of Salty Snacks U.S

74% Consumer

consume Crackers on

Regular Basis

34% eat them as Regular Weekly Diet

53% consumer consider healthfulness in their Cracker Purchase

COMPETITORS COMPETITOR

2009% Share 2010% Share

KRAFT

37.8% 37.0%

KELLOGG 28.9% 28.1%

PEPPERIDGE FARM 13.9% 14.2%

PRIVATE LABEL 4.6% 4.8%

OTHERS 14.8% 16.0%

2009 KRISPY Single Serve Sales

PLAN PERFORMANCE V/SPLAN 2009 ACTUAL % TO PLAN

KRISPY RETAIL $97.5 $50.8 52.1%

KRISPY VEND $23.4 $18.0 76.9%

TOTAL KRISPY SINGLE SERVE

$120.9 $68.8 56.9%

KRISPY RELAUNCH IMPROVED PRODUCT TASTE

IMPROVED PRODUCT QUALITY

100% NATURAL INGREDIENTS

KRISPY NATURAL

KRISPY NATURAL MARKETING STRATEGY

1. HEAVY ADVERTISING KRISPY NATURAL YEAR 3 ESTIMATE ($ in millions)

ADVERTISING $33

MERCHANDISING $37

TOTAL $70

CRACKERS 2008 2009

NABISCO RITZ $27.1 $34.6

SUNSHINE CHEEZ-IT $27.4 $32.9

NABSICO WHEAT THIN $14.1 $15.8

PEPPERIDGE FARM GOLDFISH

$12.8 $10.5

KEEBLER TOWN HOUSE $11.5 $10.2

NABSICO TRISCUIT $13.5 $9.5

2. ADVERTISING SPENDING FOR LEADING CRACKER BRANDS

($ millions)

3. PRODUCT TESTING SUMMARY

Positive Purchase Intent % Testers Preferred KRISPY NATURAL Over Leading Brand

CRACKERS WITH FILLING White Cheddar 92% 78%

Smoked Gouda 77% 65%

Chipotle Cheddar 78% 64%

Creamy Swiss 80% 72%

Tomato Basil 85% 75%

Vegetable Herb 77% 50%

FLAT CRACKERS Smoked Cheddar 81% 61%

Sundried Tomato 80% 58%

Cracked Pepper & Olive Oil 80% 55%

Roasted Garlic 81% 59%

4. DISTRIBUTION Operation Test was completed in 2010 to analyze the Distribution Logistics

Most Trucks have the capacity to Accommodate test Market Quantities.

Found

5. PRICING

KRISPY NATURAL sought a Premium Price strategy.

Management felt pricing of approximately 155% the category average cost per ounce was reasonable considering the Product’s Superiority.

KRISPY NATURAL SALES OBJECTIVES

($ in millions) Year 1 Year 2 Year 3

Dollar Sales $500 $580 $700

Growth 16% 21%

Dollar Share* 9% 10% 11 %

* Based on total cracker sales @ manufactures prices, which is ~76% of retail dollar sales (estimates)

• No Prior Presence.

• Five Special “KRISPY FORCE“ were hired.

• 16 weeks Test Period.

• Prior Presence as a Single Serve Product.

• Repositioned the product to a more Premium offering.

• 16 weeks Test Period.

Officially Launch in Two Test Market Regions.

KRISPY TEST MARKET PLAN

COLUMBUS SOUTHEAST

16 WEEKS PROMOTIONAL PLAN MONTH 1

2

3

4

5

6

AdvertisingTelevision Online Blitz

Flighted Television and Online Advertising

Social Media

Facebook Like Us Campaign

Trade 15% discount per case

12% Discount per case 8% Discount per case

Sampling In-Store Sampling with Coupon

Newspaper Sampling: Trial size with Coupon

Couponing Newspaper 80¢ week 3

Shelf Pad 2× 60¢ week 2

Electronic 40¢ Week 3

Newspaper 50¢ Week 2

Shelf Pad Buy 2 get 1 Free Week 3

TEST MARKET PLAN RESULTS

STATE % Store Count % of Stores with

Gondola Placement % of Stores with End Aisle Display

COLOMBUS 94% 9%

14%

SOUTHEAST

85%

12% 10%

Store/Display Penetration

% store count is Percent of total stores where product line found in distribution.% of stores with Gondola Placement is Percent of stores that placed product on gondolas, which are merchandise display shelves; Provides indication of shelf presence and impact,.% of stores with End Aisle Display is Percent of stores that placed product on end aisle displays, which are point-of-purchase displays located at the end of a row of shelving.

TEST MARKET PLAN RESULTS Estimated Dollar Shares of Market

COMPANIES COLOMBUS SOUTHEAST

Pretest Market Post Pretest Market Post

KRAFT 40% 33% 34% 32%`

KELLOGG 25% 22% 23% 22%

PEPPERIDGE 11% 10% 10% 10%

KRISPY 0% 18% 9% 10%

PARTIAL COMPETITIVE ANALYSIS COMPANY

Post KRISPY NATURAL trends in COLUMBUS

Potential Competitive Response

KRAFT Lost 7% share Short Term:• New product testing in progress.• Increase trade spending and consumer promotions. Long Term:• Spend heavily to counter national roll-out.

KELLOGG Lost 3% share Short Term:• Increase A&M Long Term:• Capitalize on pull.• Product line improvements.

PEPPERIDGE FARM

Lost 1% share Short Term:• Increase trade spending.Long Term:• Compete on quality and Brand Reputation.

GO NATIONAL ROLLOUT

• Positive Purchase Intent.

• Over 2:1 ratio in Taste Preference in Crackers with Fillings, this segment will grow between 10-14% in next several years.

• 18% market share in a market with no previous presence.

• More than 60% tasters preferred taste of KRISPY NATURAL over other Leading Brands.

• Positive Purchase intent of 81%

PROS

GO NATIONAL ROLLOUT

CONS• Flat Crackers taste preference fell below 2:1 ratio compared to competitors, this segment accounts the largest part of Cracker Market.

• Modest Increase of 1% in Southeast.

• Uncertainty of Frito-Lay entering the Market.

Created By: Suraj Rajak, Nizam College Hyderabad during a Marketing Internship with Prof. Sameer Mathur, IIM Lucknow

DISCLAIMER

Prof. Sameer Mathur

IIM Lucknow

Suraj Rajak