HARVARD BUSINESS SCHOOL

Launching Krispy Natural: Cracking the Product Management Code

Goals & Objectives

1 Pemberton: Introduction & Challenges

2 Market analysis

3 Krispy Natural market strategies

4 Result and conclusions

Pemberton: Introduction Pemberton was the snack food division of Candler Enterprises, a multinational

beverage and snack goods manufacturer. Had a revenue of 5 Billion USD with 7.7% Profit After Tax (PAT) It has experienced a compounded annual growth rate (CAGR) of 14% for

revenue over the past 5 years Pemberton was a market leader in the U.S. cookie and bakery snacks segments

of the sweet snack market. Company harnessed its owned Direct Store Delivery (DSD) distribution system

to deliver products directly from the distribution centers to the retail stores.

Pemberton: Introduction Key strategic priorities:

building a collection of attractive, durable brandsleveraging leading marketing, sales and DSD systems to increase revenue and

profitsbuilding or acquiring capabilities in salty snack categories.

Pemberton: Introduction

Pemberton: Introduction

Pemberton’s income statement (% of revenue):

CHALLENGES

HOW TO LAUNCH AND SUSTAIN THE GROWTH OF KRISPY NATURAL IN THE

SALTY SNACK MARKET ?

Market analysis

1 US Cracker industry overview

2 Product purchasing intent

3 Competitor’s analysis

US CRACKER INDUSTRY OVERVIEW

US CRACKER INDUSTRY OVERVIEWRetail cracker sales in the United States reached an estimated

$6.9 billion in 2011.The growth rate for the overall cracker industry from 2008 to

2010 was approximately 2.2% CAGRA Mintel study of salty snacks in the United States reported that

74% of respondents consumed crackers on a regular basis and 34% ate them as part of regular weekly diet.

US CRACKER INDUSTRY OVERVIEW

75%

9%

9%6%1%

Sales

"all other"

saltines

crackers with fillings

graham crackers

bread sticks and matzoh crackers

US CRACKER INDUSTRY OVERVIEW“All other” crackersExperienced a 2.1% CAGR from the period 2008-2010.Retail sales of 5.1 Billion USD in 2011 in USA Expected to grow by 6-7% per year

US CRACKER INDUSTRY OVERVIEW“All other ” crackers

US CRACKER INDUSTRY OVERVIEWCrackers with fillingsAlthough experienced flat sales during 2005-2009, but later

became the strongest segment Retail sales of 660 Million USD in 2011 in USA Had a growth rate of 14% in 2010

US CRACKER INDUSTRY OVERVIEWCrackers with fillings

PRODUCT PURCHASING INTENT

Product purchasing intent

Competitor’s analysis1. Top 3 cracker manufacturers

are: • Kraft Food Inc.• Kellogg Co.• Pepperfridge farm

2. They account for approx. 75% of the cracker market in 2010.

3. Frito-Lay is rumored to be introducing a new full line of crackers by the end of second quarters.

COMPETITORS ADVERTISEMENT SPENDING

MARKETING STRATEGY

Product Marketing

Distribution PriceStrategy

Krispy Natural marketing strategy

Product: Multiple-serving packagingFocused on improving tasteHealth conscious

Krispy Natural marketing strategy

Marketing: Emphasized on heavy advertising Promotion to the end customer and appealing

to the tradeAggressive plans for pull spending and trade

promotions

Krispy Natural marketing strategy

Distribution: Effective DSD (Direct-Store Delivery)

distribution systemProper management of shelf inventory and

in-store merchandisingOptimizing the system to account for longer

shell life of crackers

Krispy Natural marketing strategy

Price: Sought a premium strategy.Priced at 155% above the category average

cost per ounceSame retail price as that of competitors but

lesser quantity

PROMOTIONS

KRISPY NATURAL BRAND PROJECTIONS

KRISPY NATURAL BRAND INCOME STATEMENT

MARKET RESULT HIGHLIGHTS

MARKET RESULT HIGHLIGHTS

MARKET RESULT HIGHLIGHTS

MARKET PLAN - COLUMBUS5 special “Krispy Force” representatives were hired in Columbus

These “Krispy Force” reps worked with Pemberton regional and district sales managers and focused solely on selling the new Krispy Natural product line.

MARKET PLAN - SOUTHEASTIn Southeastern cities, the company was able to test its ability to reposition the product to a more premium offering

Here regular Pemberton DSD route delivery representatives worked with regional and district sales managers, handling sales and service of the new Krispy Natural line.

Expectations: Columbus would achieve

a market share of 9%Southeast’s market share

will rise from 9% to 15% The company hoped for

15% shelf space in both the markets

Reality:Columbus doubled the

share target, achieving 18% market share with 30% category expansion.

Southeast had a slight increase to just 10% with little category expansion.

Columbus was able to achieve an 18% market share by stealing share from other competitors.

However in Southeast the trade was generally receptive to the new Krispy Natural line due to the relatively low introductory trade case discount of 15%.

WHY?

The large chain headquarter buyers were impressed with the consumer research results and inventory turn estimates.

They also loved all the promotional activity and consumer advertising.

The pull marketing really created a buzz and customers were coming to the stores asking for Krispy Natural by name

Sales & channel responses

However one industry analyst thought that the positive test market results were driven by significant price discounts, couponing, and sampling, which were not sustainable.

Also, few felt the taste preference claims of Krispy Natural were inflated and the flavor was no better than current brand offerings.

Competitive response

Recommendations

Extensive marketing in Southeast cities Contemporize brand engagementTailor the Krispy Natural to different need

states

DISCLAIMERCREATED BY ABHISHEK PATHAK, IIT ROORKEE, DURING A MARKETING INTERNSHIP WITH PROF. SAMEER MATHUR, IIM LUCKNOW .