Launching ‘Krispy

Natural’: Cracking

the ProductManagemen

t Code

Harvard business school case

What is Krispy Natural?

Candler Enterpri

se

Pemberton

products

Softies cookies

Home style

muffins and

doughnuts

Krispy

Natural

Beverage division

Quick service

restaurant

Pet care division

Krispy Natural is the salty snacks brand

About Pemberton

Market leader in US in cookies and bakery products.Generated $5 billion revenue in 2011.CAGR (compounded annual growth rate) of 14% for revenue over past 5 years.Company owned DSD (direct store delivery) system. Brandon Fredrick is the Marketing Director of Pemberton.

In 2008, Pemberton took first step to enter the salty snack

market by acquiring Krispy Inc.

WHY?

1. US growing Cracker Industry

Retail Cracker sale - $6.9 billion in 2011.2.2% increase in CAGR from 2008 to 2010.

2. Research of salty snacks in US.74% respondents consumed crackers on daily basis.

Crackers were the top salty snacks ahead than potato chips.Desire for healthy products was driving cracker industry.

Who are the Competitors?Kraft Food Inc.Kellogg Co.Pepperidge Farm

This three large brands account for ¾ of the Cracker category.

What Pemberton team expected from Krispy?

Sales in $millions

UnexpectedlySales in $millions

The actual sales did not match the projected sales. WHY

?Limited product line.

Lack of flavour satisfaction.

Should Krispy relaunch again?

Pemberton team didn’t gave up.Instead they decided to give Krispy another try.

Why another try?

Attractive Cracker market. Overall segment was large and expected growth of 10-14% per year. Reducing markets of other competitors.

Krispy Relaunch

Rebranding as ‘Krispy Natural’.

R&D engaged in improving taste and quality.Multi serving package sizes and more flavours to gain foothold in super markets.

Official market test in Columbus, Ohio and Southeast US.

In Columbus Krispy Natural will achieve 9% market share of Cracker category.

In Southeast Krispy Natural will increase market share from 9% to 15%.

This time it’s a Success

Krispy Natural is now a serious competition.

How Krispy Natural managed to steal market share from competitors?

Effective Marketing Strategy.

1. Product StrategyFocused on increasing package size to multiple servings, improving taste and more flavour options.Use of 100% whole wheat and natural ingredients.

R&D tirelessly reformulate theProduct.

1. Product Strategy

77% - 92% positive purchase intent for new Krispy Natural flavours.

2. Pricing Strategy

Premium price strategy.

Considering product’s superiority and on the basis of ‘Visual Price’, retail price was kept same as competitors but quantity was less.

3. Market Strategy

Adopted Pull Strategy

Aggressive plans for heavy advertising and promotions

$ in millions

4. Distribution StrategyCompany owned superior DSD system.

Hired representatives known as ‘Krispy Force’ for proper distribution.

Sales ObjectivesNational Distribution of Krispy Natural.Minimum sales of $500 million

Pre-tax profit contribution of at least 13%Salesobjectives

What were the competitive actions?Short term:New product testing in process.Increase A&M.Increase trade spending and consumer promotions.

Long term:Spend heavily to counter national roll-out.Capitalize on pull.Product line improvements.Compete on quality and brand reputation.

ConclusionStrengths:-Pemberton is already a market leader in US.-World renowned product development labs.-2:1 ratio in taste preference.-18% market share in a market with no previous presence.

Weakness:-Capacity constrains of DSD for Krispy Natural products.

ConclusionOpportunities:-Cracker market fundamentals are attractive.-Market research shows consumer dissatisfaction with flavour and taste of current brands.

Threats:-Fritto Lays entering into Cracker market.-Modest increase of 1% sale in Southeast.

Disclaimer

Prepared by Hinal Shah, NIRMA University, Ahmedabad during marketing internship by Prof. Sameer Mathur,IIM Lucknow