Keggs case

Keggs is an American firm specialized in the cereals market.

Keggs has, over the years, built up some key core brand characteristics, emphasizing quality and nutritional
benefits that will apply to any Keggs product. Consumers can rely the Keggs brand name to fulfill these
requirements whichever type of cereal they choose. The elements of the individual brand personality are added
to these core brand values. Like members of a family, each brand will bear the same surname, but each
individual has its own characteristics and strengths.

Keggs major competitive advantage has always been its capacity of launching new products satisfying different
needs from the ones already served in the marketplace by the firm. This allowed the firm targeting different
segments of consumers and avoiding a high extent cannibalization

In 2007 Keggs developed a new cereal to be launched in two relevant markets for the firm (mkt A & B):
ChocoSlim. This product was considered a breakthrough since it merged taste with healthiness of the ingredients
thus overcoming the traditional trade-off between these two characteristics of the product.

At present, there is only one cereal directly comparable with ChocoSlim, which is SaniRal, offered by Kellog’s
competitor specialized in healthy cereals Sanitarium. Other competitors are considered as not relevant by these
two big players in this market segment.

At the moment of the launch, the management of Keggs was sure that ChocoSlim would have been a success.
Sales forecasting in 2007 were the following (cumulated values):

Year 2007 (2nd semester) 150,000 units

Year 2008 400,000 units
Year 2009 600,000 units
Year 2010 650,000 units

After more than three years from the launch, the data do not prove the expected success.
At the end of 2010, have been sold just 325,000 units; 140,000 units were the sales of 2010.

Keggs General Director asked to the Marketing Department a detailed relationship on the causes of this poor
performance of ChocoSlim. To this end, Keggs Marketing Director asked his team to analyze the data on the
product performance (Table 1). The data refer to the retail panel and compare ChocoSlim performance with that
of its main competitor, the leader SaniRal, and others minor competitors.

Table 1 – Retail panel performance data

Market A Market A Market B Market B
2009 2010 2009 2010
Market total sales 500,000 500,000 700,000 900,000
Total N° of customers in the mkt 10,000 10,000 25,000 25,000
ChocoSlim
ChocoSlim sales 67,500 50,000 85,000 90,000
Total purchases of ChocoSlim customers 380,000 400,000 175,000 180,000
N° of Chocoslim customers 5,500 6,000 15,000 20,000
SaniRal
Saniral sales 350,000 400,000 500,000 550,000
Total purchases of SaniRal customers 450,000 460,000 650,000 680,000
N° of SaniRal customers 8,000 8,500 20,000 23,000
Others
Others sales 82,500 50,000 115,000 260,000
Total purchases of Others customers 100,000 80,000 650,000 850,000
N° of Others customers 2,000 2,000 15,000 16,000