HARVARD BUSINESS SCHOOL CASE

Candler Enterprises:
A multinational beverage and snack
goods manufacturer

It was involved in mainly four sectors:

• Snacks food division, Pemberton
• Beverage Division
• Quick Service Restaurant Division
• Pet Care Division
• Ashley Marne
• Executive Vice President of Sales and
Marketing, Pemberton
• Brandon Fredrick
• Marketing Director, Pemberton
• Burt Spivey
• Chief Operating Officer, Pemberton
The present
Situation?
 Situation Analysis (1/3)
Pemberton is going to launch its new
product “Krispy Natural” in the market

Market tests have been

conducted in Columbus, Ohio and
three cities in Southeast
Summary analysis of the test
market results has to be done

Based on the analysis, plan

for introduction of Krispy
Natural has to be decided
Situation Analysis (2/3)
Competition with well-established brands in different varieties

The retailers which already had a foothold of Krispy Naturals might

be reluctant due to prior experience

Creating Brand Equity in snack food category all over again

 Situation Analysis (3/3)
Crackers Industry
• Consumption of crackers was frequent and
regular despite competition from other foods
alternatives
• Crackers that were conveniently packaged in
easily portable quantities are preferred
• Desire of healthy food was driving the cracker
industry
• Categories of the crackers were
– “All other” crackers
– Crackers with filling
• Summary analysis of the test market re
• Interpreting the performance
of the product from the test
market results
• To use the qualitative analysis and the marketing terms and
strategies to predict the performance of the product when
released in the market.

• Framing marketing plan for the introduction of the produc

and strategies for different situations that may arise.
Understanding Marketing Strategies

• Product
• Marketing
• Distribution
• Pricing
 Pemberton as a
market leader of
sweet snack market
 Direct Store Delivery (DSD)
• Products were delivered directly to retail
outlets, bypassing retailer’s warehouses and
distribution centers
• DSD representatives delivered products from
company distribution centers to the retail
stores and performed critical merchandising
functions
• DSD maximized sales and profit growth
through greater control of shelf space, more
accurate forecasting, reduced stock-outs, and
quicker turnover of products
 Company’s Driving Force –
Cultural Innovation
• Key strategic priorities for the
company:
– Building a collection of attractive,
durable brands
– Leveraging, leading, marketing, sales
and DSD systems to increase revenue
and profits
– Building or acquiring capabilities in
salty snack categories
 Present Status of US Cracker Industry
Manufacturer sales of "All Other" Crackers
2009% Share 2010%
Share
Kraft 37.8% 37.0%
Kellogg 28.9% 28.1%
Pepperidge Farm (Goldfish) 13.9% 14.2%
Private Label 4.6% 4.8%
Other 14.8% 16.0%

Manufacturer sales of Crackers with Filling Market Share

2009% Share 2010%
Share
Kraft 34.7% 32.7%
Lance 31.5% 29.9%
Kellogg 15.5% 21.0%
Private Label 8.0% 8.2%
Other 10.2% 8.1%
We will focus on
three inter-
related issues
1
Krispy 2009 Crisis

• Issue faced by the company

after Krispy was introduced
• Reasons for the crisis
• Decision of relaunching of
the product
2
• Marketing Plan for the testing
• Market Test Results
–Results from Columbus were double
than expected
–Results from South eastern cities
were not impressive
• Reasons for these contradicting results
• Summary analysis of the test results
3
Interpretation of the test results
&
Plan for introduction of Krispy Natural??!
 1

Krispy 2009
Crisis
 SURVEY RESULTS
2009 Krispy Single-Serve Sales Performance vs. Plan ($ millions)

Plan 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%

• In 2009, the product fell short of the management productions.

• From the surveys, many customers stood unsatisfied with the pro
 Causes of 2009 Crisis
• Limited product line, which made it difficult
to command any sort of presence in
supermarkets
• A taste survey showed the product did not
deliver the flavor satisfaction scores
• High competition in the same category of
products
• Unfulfilled brand promises regarding quality
• Launched a brand product which already had
well-established brands as competitors and
no differentiable quality
 Krispy Relaunch
• Prior experience of Krispy launch in the
salty snack industry hadn’t been good. Still
the company decided to do brand
revitalization and relaunch the product
with a changed name.
 Reasons for Relaunch Decision
• Cracker market fundamentals were
attractive
• Overall market was large and segments
like crackers-with-filling were expected to
grow 10-14 % per year
• Internet research suggested consumer
dissatisfaction with the flavor and taste
experience of current cracker brands
2
Marketing Plan
Specific changes were made in the marketing strategies for
the relaunch of the product. This was done to build a brand
equity of the product by enhancing its quality, extending
the product line beyond single-serve offerings and more
flavor options to compete with well-established brands.
 PRODUCT STRATEGY
• Increasing package sizes to multiple sizes
• Improving tastes and flavor
• Keeping proper proportion of calories
• Introducing more varieties in both
categories: flat crackers & crackers with
fillings
 MARKETING STRATEGY
• Pull spending and trade promotions
• Focus on manufacturer sales than the
retailer sales
• Pull strategy adopted rather than push
strategy adopted by many cracker
industries
DISTRIBUTION
• DSD Distribution – a critical component in
overall program strategy
• Distribution logistics optimization

PRICING
• Premium pricing strategy
• Retail price same as other brands
but with smaller quantity
• Brand positioning
In 2011, Krispy Natural was launched in two test
regions: Columbus and Ohio and three cities of
Southeastern United States.
Marketing Strategies in the two regions
Columbus (Krispy brand did not have a prior presence)
• Separate DSD representatives for Columbus other
than traditional DSD route delivery called “Krispy
Force”
• “Krispy Force” reps worked with Pemberton regional
and district sales managers and focused solely on
selling the new Krispy Natural product line

Southeast (Krispy already had a foothold in the market)

• Reposition the product to a more premium offering
• No separate representatives

Advertising and Promotion of the product was same in both the regions
 Product Testing Summary
Positive Purchase Intent % Test
at
preferred
ste of
(Definitely or Probably Would Buy) Krispy Na
ver
leadin
and
rackers with Filling
hite Cheddar 92% 78
moked Gouda 77% 65
hipotle Cheddar 78% 64
reamy Swiss 80% 72
omato Basil 85% 75
egetable Herb 77% 50

at Crackers
moked Cheddar 81% 61
undried Tomato 80% 58
racked Pepper & Olive Oil 80% 55
oasted Garlic 81% 59
 Krispy Natural Test Market Result Highlights

Store/Display Penetration
% Store Count(a) % of Stores with
% of Stores with
Gondola
Placement(b) End Aisle Display(c)

Columbus 94% 9%
14%
Southeast 85% 12%
10%

(a) Percent of total stores where product line found in distribution.

(b) Percent of stores that placed product on gondolas, which are merchandise
display shelves; Provides indication of shelf presence and impact.

(c) 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. A manufacturer can realize significant incremental volume from this
display activity.
 Estimated Dollar Shares of Market
Columbus Southeast
Pretest Market Post Pretest Market Post
Kraft 40% 33% 34% 32%
Kellogg 25% 22% 23% 22%
Pepperidge Farm 11% 10% 10% 10%
Krispy 0% 18% 9% 0%
 Results
Columbus
• Columbus achieved 18% share, doubling the share
target
• This was derived by stealing shares from the
competitors
• Category volume had increased by 30%

Southeast
• Result was not impressive showing only 1 %
increase in market share
• There was little category expansion
 Reasons for contradictory Results
• Actual shelf space and display activity was below what
the team expected due to low introductory trade
discount of 15%
• Krispy already had a foothold in Southeast which led to
a bad prior experience for the retailers leading to low
display activity
• The number of stores in which the product line was
found in distribution were less in Southeast due to bad
brand image of Krispy from the year 2009
• As seen from Exhibit 5, the end aisle display in the
stores was low that lead to low incremental volume
 Summary Analysis of test results
• According to the test results, it was clear that the
quality of the new product is being appreciated by
everyone as is seen from the market share results of
Columbus
• However, it also emphasizes on the difficulty of
reestablishing the product in a city which already had a
foothold of the brand
• Display activity of the stores plays a huge role in
increasing the market share of the product
• Trade promotions, allowances, discount are very
important for the display activity even if the trade is
receptive to the new product.
3
Interpretation of test results
Marne -
“Brandon, I looked over the preliminary test market data for
Krispy Natural and I see we have something really special.
I think we can blow the original forecasts of $500 million out
of the water. If we do it right, we should easily exceed those
projections—I see no reason why we can’t double them”

IS THE TEST MARKET DATA RELIABLE?

Sales and Channel Response

According to the Sales managers,

• They were pleased with the Krispy Natural
product and felt the trade was interested in the
new offering
• Large chain buyers were impressed by the
consumer research results and inventory turn
estimates for Krispy Natural
• The promotional activity and advertising was
loved by all
• Pull marketing created a buzz and people were
coming to the stores asking for Krispy Natural
VIEWS OF AN INDUSTRIALIST
• The positive test market results were driven
by significant price discounts, couponing and
sampling which were not sustainable on a
national level
• Taste preferences claims of Krispy Natural
were inflated
• Flavor was no better than the current brand
offerings
 1. Lower shelf space than expected
2. Original Krispy product had a
foothold in Southeast at lower
price
3. Low trade discount rate
1. Better quality product
2. Brand building ability of the product
3. Great consumer reception
4. Ability to challenge well-established
brands in the market

When launched on a national level, will the product experience the

fate as in Columbus or Southeast?
The fate of the product cannot be predicted
from the market results. The marketing strategy
when launching the product should be planned
to avoid all the possible situations.
PLAN FOR INTRODUCTION OF KRISPY
NATURAL
• Krispy Natural should appeal to the qualities pointed
out by the critics in their sales promotions and
advertising
• Product line display should be more in the retail stores
• Making the product easily and conveniently available
to the customers for example, in vending machines at
the airports, stations
• Brand positioning to the high-ended market to make
revenue for premium pricing of the product
• Using a catchy tagline to emphasize brand revitalization
catching attention towards the difference in quality,
flavor and varities in the old and new product
Partial Competitive Analysis
• Given in the previous page are the possible
short term and long term strategies of
competitive brands after launch of Krispy
natural.
• Krispy Natural will have to change the
marketing strategy accordingly to counter all
the short term strategies of the competitive
brands
 Marketing strategies to compete with
other brands
• Cover all the major retail stores’ display areas to
catch the maximum attention of the customers
• Emphasize more on pull strategy which is a
differentiating point from other brands
• Introduce more varieties and innovative products
• Develop strong brand equity till the time the
competitive brands can implement their long
term strategies
 Was Marne’s view of blockbuster
potential of Krispy Natural supported
by the data?
 NO
• The potential of the product didn’t work in Southeast,
the profit when national extended was equal to the
revenue earned by the company before the launch
• This was because the company already had a foothold
in the region, same is the case with rest of the nation
leaving some exceptions like Columbus
• The perception of the people regarding the quality and
the increased price might be different
• On a bigger scale, there is a possibility, the product
does not get as much support as in Columbus and
relying only on the quality of the product to get the
customers shouldn’t be an option
What was the best rollout strategy to
neutralize the competition?
 Krispy Natural has to appeal to the qualities
which differentiate it from other brands
• Appeal to the pull strategy
• Promotional activities emphasizing on the quality,
flavor and varieties to justify the premium price
of the product
• Easy availability of the product in convenient
form of for example, in vending machines at the
airports, railway stations etc.
• Keeping the brand promises and publicizing them
• Giving a tagline to the new product that
emphasizes the brand revitalization decision of
the company
 How should the rollout strategy
change if they were going to have to
go head to head with Frito-Lay?
• If head on competition with a successful brand
when launched, Krispy Natural will have to
introduce coupons and package deals to attract
the customers and get more retail stores to keep
the products in display
• Krispy Natural can make these discounts and
promotional deals available to only selected retail
stores like Walmart so that these stores take care
of the display of the brand products specially
• Increase the product line in the retail store to
improve the brand equity