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Kingsford Charcoal

Daniel Brockman

Breanne Klose

Elaine Ormonde-Hua

Gizem Ozdemir

Quyen Tran http://kingsford.com

Kingsford's History

• Ellsworth B. A. Zwoyer patented charcoal briquettes in 1897*

• Henry Ford made briquettes from wood scraps in 1920

• Ford's relative E.G. Kingsford built a briquette plant and commercialized the business in 1920

• Clorox bought Kingsford in 1973

• Kingsford had 59% market share in 2000

Henry Ford, 1919 (Library of Congress, http://en.wikipedia.org/wiki/File:Henry_ford_1919.jpg)* http://inventors.about.com/od/inventionsalphabet/a/barbecue.htm

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STRENGTHS 1. Market leader with 59% market share2. 40% profit margin3. 60% of consumers consider Kingsford a

quality product4. Strong brand recognition and recall5. Kingsford has influential relationship with

retailers6. 2-to-1 consumers prefer the taste of

charcoal-grilled food to gas-grilled food

WEAKNESSES1. Dependent on positive relationship with

retailers for generous store displays and promotions

2. Dependent on weather to encourage impulse buys, which account for 30% of sales

3. Majority of sales occur between May and September

4. Longer cooking time and messier than gas grilling

THREATS1. Gas grilling has become more popular due

to faster cooking time and ease of cleanup2. Competitor price increases and lack of

advertising have resulted in slower growth of charcoal sales

3. Production issues may hurt availability if growth occurs

4. Greater attention to human and environmental health

OPPORTUNITIES 1. Build brand equity by being the only

active advertiser in the charcoal market

2. Increase market size by expanding to untapped market segments

3. Expand to markets outside of the U.S. 4. Lead the market in product innovations

with flavored and environmentally-friendly lines

Kingsford’s SWOT

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Kingsford’s Questions

• How do we increase overall charcoal use?• How do we increase Kingsford’s sales? • Should we increase prices?• Should we address production issues?

BBQ Sweet Potatoes, John Dawson, http://www.patiodaddiobbq.com/2009/11/barbecued-sweet-potatoes.html

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Alternatives/Potential Actions

• Facilitate consumer interest in charcoal grilling

• Increase advertising• Expand beyond U.S.• Increase prices• Expand current product line• Do nothing

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http://instoresnow.walmart.com/uploadedImages/AmericanSummer/Articles/5051AAP_AS_art_pov_briquet.jpg

Criteria for Evaluating Alternatives

• Sales of charcoal• Sales of Kingsford• Brand cachet• Profitability

Tasmanian Salmon, http://www.huonaqua.com.au/grilling.php

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Analysis: Facilitate Consumer Interest in Charcoal Grilling

• Collaborate with grill manufacturers• Partner with retailers to offer point of purchase discounts on meat purchase with charcoal

purchase • Sponsor events where grilled foods are for sale• Feature charcoal grilling recipes and barbecue party ideas in lifestyle/cooking

magazines and television shows• Promote charcoal use outside of traditional grilling holidays and occasions

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http://kingsford.com

Pros:• Emulates Gillette's successful model: 

Give away the razor and sell the blades

• Addresses threat of gas grilling by strengthening awareness of charcoal grilling in minds of consumers

• Fosters positive associations of charcoal grilling

• Attracts new charcoal users who don't have a grill

Cons:• Will increased sales justify the cost?

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http://cdn.sheknows.com/articles/grilled-corn.jpg

Analysis: Facilitate Consumer Interest in Charcoal Grilling

Analysis: Increase Advertising• Increase volume and frequency of ads

o $7 million budget recommended during peak season

• Leverage consumer associations of charcoal grilling as an American pastime

• Celebrity endorsement • Target new segments: women and foodies

Pros:• Consumers receive greater exposure to charcoal• No active charcoal advertising competition• Low risk of saturation • Capture increased market share of targeted segments

Cons:• Stimulated demand may strain production capacity• Internal Clorox budget• Must take care to avoid alienating existing masculine clientele

http://kingsford.com

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• Target customers outside of the U.S.• Position product to correspond with local culture in new markets

Pros:•  Increases size of Kingsford's market

Cons:• Production currently limited to 5 U.S.-based 

plants• Environmental and health regulations of some regions• Clorox lacks experience outside North America• Insufficient information of international markets

Analysis: Expand Beyond the U.S.

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www.bbqbrethren.com/forum/showthread.php?t=63394

Analysis: Increase Prices

Maintain 25% to 30% price differential

Pros:• Higher prices improve profits per unit sold• Consistent with charcoal competitors' price increases• Enhances brand cachet

Cons:• When competitors raised prices and Kingsford's prices remained

static, sales of Kingsford increased  • Competitive advantage of discount brands is weakened when

their prices are closer to Kingsford's• Retailer might respond negatively and decrease Kingsford

promotions  11

http://dianasneighborhood.files.wordpress.com/2009/09/grilling-coals-robert-s-donovan-booleansplit.jpg

Analysis: Expand Current Product LineCreate flavored and environmentally friendly/healthier lines of charcoal

Pros:• Allows Kingsford to lead industry in innovation• Appeal to growing "green" and health conscious market segments• Enhances brand cachet

Cons:• Increased costs • Is there a demand for "green" or health conscious charcoal?• Brings attention to environmental and health concerns of existing

products • Cannibalization of regular charcoal sales

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http://abcnews.go.com/images/Health/nm_Grilled_Food_090515_main.jpg

• Leave prices unchanged while competitors' prices rise• Maintain $1 million budget for advertising and promotion• Do not expand into international markets or develop new

product lines

Pros:• No production constraints• Free and easy

 Cons:• Position of charcoal remains stagnant in consumers' minds• Slow growth of Kingsford sales• Shrinkage of overall charcoal market size

Analysis: Do Nothing

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Recommendations1. Focus on increasing overall charcoal market size

o Strengthen link of grilling and charcoal in consumers' minds

o What's good for charcoal is good for Kingsford

2. Increase advertising budget to $7 milliono Use increased budget to advertise

charcoal grilling during nontraditional occasions

o Present charcoal grilling as female-friendly and essential for premium flavor

3. Do not increase priceso Continue to reap benefit of increased competitor prices

4. Research international expansion opportunitieso Explore viability of expansion

http://img4.southernliving.com/i/2006/03/grill-with-the-girls/grilling-girls-l.jpg

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Recommendations5. In order to appropriately innovate, conduct market research to

determine why consumers have switched from charcoal grilling to gas grillingo If research determines that environmental and health concerns

were primary factors, initiate research and development into product lines to address these concerns

6. With production currently at 80% of capacity, forecast increased sales (given the success of each recommendation) and explore all possibilities for meeting demando Keeping in mind that building a new production facility requires

upwards of 5 years and $50 million

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http://www.masterbuilt.com/kingsford/images/kingsford_08.jpg

Sources

Except where noted, all information came from the case description, Narayandas and Wagonfeld, Kingsford Charcoal (2006), Boston, MA, USA: Harvard Business School Publishing. 

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Questions?

http://kingsford.com/

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Production constraints in 2000

• Current production from 5 U.S. plants• Kingsford's plants operate at 80% of capacity• Kingsford's market share is 60%• 100% = 80% * 1.25

Current plants could supply a 25% increase in Kingsford sales• Production manager estimates:

o New plant costs $50Mo Permitting takes 3 years

Recommendation:• Begin site selection and permitting• Next year, reconsider whether to build

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http://s.fatwallet.com/static/attachments/11967_0001_st070209_aap1_img_53827736

3.jpg

Hearth, Patio and Barbeque Association (HPBA), https//www.hpba.org/statistics/barbecue-statistics/bbq-grill-shipments 19

BBQ Grill Shipments, North America

Demand CurveWhen prices of competitors rose in 2000, Kingsford gained market share

For 1% increase in price relative to competition, Kingsford will lose approximately 4%-points to 8%-points of market share.

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Epilogue

• Market share: Kingsford sold 74% of charcoal in North America in 2009. (Clorox investors' overview (March 2010) Oakland, CA, USA: The Clorox Company.)

• Innovation: Kingsford introduced Surefire (R) Grooves enabling faster lighting, hotter and longer burning briquettes. (http://www.kingsford.com/faq/index.htm)

• Kingsford produces 8 varieties of charcoalo 2 "natural"o 2 instanto 2 regularo Specialty hickory and mesquite

(http://www.thecloroxcompany.com/products/msds)

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