Launching Krispy Natural: Cracking the Product Management Code

Based on a Harvard Business Case
Made by : Tamanna Pahooja, a student of BITS Pilani K.K. Birla, Goa Campus under the guidance of Prof Sameer Mathur during a marketing internship.

1. LAUNCHING CRISPY NATURAL : Cracking the Product Management Code Harvard Business Case

2. Executive Vice President, Sales and Marketing : Ashley Marne Marketing Director : Brandon Fredrick Midwest Division Sales manger : Wanda Fitzgerald President : Patricia Williams Pamberton product team

3. Snack Food Division of Candler Enterprises Candler : Multinational Beverage and snack g oods manufacturer,quick service restaurant & pet care division Candler 2011 revenue: $18 million Pamberton’s Share : $5 million Pamberton : Market leader of the sweet snack market Company owned Direct Store Delivery (DSD) distribution system CAGR : 14% About Pamberton

4. U.S. Cracker industry

5. US Cracker Sales: $6.9 billion Manufacturer sales of "All Other” Crackers 2009% Share 2010%Share Kraft 37.8% 37.0 % Kellogg 28.9% 28.1 % Pepperidge Farm 13.9% 14.2 % Private Label 4.6% 4.8 % Other 14.8 % 16.0%

6. Krispy product line

7. Krispy single serve 2008: Acquisition of Krispy Inc. 3 Production Plants Focused on Southeastern United States Flagship Product : 6 round toasted cracker sandwiches with cheese filling, 3 flavors available Mobile “Grab and Go” snacks Underperformance was a result of limited product line

8. Krispy relaunched Large Market, Crackers-with-Filling expected to grow 10-14% per year Changes to Marketing Strategy: Pemberton R&D labs engaged to improve product taste and quality Rebranding of product to Krispy Natural

9. Krispy marketing strategy

10. Krispy marketing strategy

11. Product strategy objectives Increasing Package Sizes to multiple-servings Improving Taste 100% Whole Wheat and all natural ingredients 150 calories,6g of fiber, 3g of protein per serving Consumer taste test 77-92% positive purchase intent for Krispy Naturals 4:1 preference over the leading competitive cracker

12. Product testing summary Positive Purchase Intent (Definitely or Probably Would Buy) % Testers that preferred taste of Krispy Natural over leading brand Crackers with Filling White Cheddar 92% 78% Smoked Gouda 77% 65% Chipotle Cheddar 78% 64% Creamy Swiss 80% 72% Tomato Basil 85% 75% Vegetable Herb 77% 50% Flat Crackers Smoked Cheddar 81% 61% Sundried Tomato 80% 58% Cracked Pepper & Olive Oil 80% 55% Roasted Garlic 81% 59%

13. Softie Cookies Heavy Advertising and Promotion Appealing to trade Price discounts :10-20% of sales Year 3 Estimate ($ in millions) Advertising $33 Merchandising $37 Total = $70 Marketing strategy

14. Advertising Spending for leading Cracker Brands ($ millions) Nabisco Ritz Crackers $27.1 $34.6 Sunshine Cheez -It Crackers $27.4 $32.9 Nabisco Wheat Thins Crackers $14.1 $15.8 Goldfish Crackers $12.8 $10.5 Pepperidge Farm Keebler Town House Crackers $11.5 $10.2 Nabisco Triscuit Crackers $13.5 $9.5

15. distribution DSD Distribution Most trucks had capacity to accomodatetest market quantities Optimizing the system for longer shelf life of crackers versus baked goods and cookies

16. Premium pricing strategy Minimum sales of $500 million during year one of national distribution Steady state pre-tax profit contribution of at least 13% ($ in millions) Year 1 Year 2 Year 3 Dollar Sales $500 $580 $700 Growth 16% 21% Dollar Share 9% 10% 11% Pricing of 155% the category average cost per ounce Expectations :

17. Krispy natural brand income statement ($millions) Year 3 Manufacturer Sales $700 COGS $ 539 Gross profit = $ 161 Advertising $ 33 Merchandising $ 37 Pretax contribution $ 91

18. Test market plan Launched :September 2011 Two test market regions : Columbus, Ohio Trio of cities in Southeastern United States Objective : To secure 15% of shelf space in each supermarket’s cracker section

19. Columbus Did not have prior presence 5 special “ Krispy Force” representatives Projection (16 week test period): 9% share of cracker category

20. 2011 promotional plan- Columbus, ohio

21. southeast Already Established Test Receptiveness of Trade and Consumers to higher priced Hope to increase share from 9% to 15% Regular Pemberton DSD route delivery representatives

22. 16 week test results Both test results showed Krispy Natural to be a serious competitor Columbus : Double share target = 18% share Category Volume = 30% Southeast : Share = 10% Little Category Exapansion Actual Shelf Space & Display Activity was below expected Case discount = 15%

23. Store/Display penetration % Store Count % of Stores with Gondola Placement % of Stores with End Aisle Display Columbus 94% 9% 14% Southeast 12% 12% 10% 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% 10% Estimated dollar shares of market

24. Annualized national projection Year 1 Sales (millions) Columbus Scenario (national extended) $ 1,000 Year 1 Sales (millions) Southeast Scenario (national extended) $ 550

25. Positive test results based on : Price discounts Couponing Sampling Not sustainable on a national level Taste Preference claims of Krispy Naturals inflated Flavor similar to current offerings

26. partial COMPETITIVE ANALYSIS Company Post- Krispy Natural trends in Columbus Potential Competitive Response Kraft Lost 7% share Short term: New product testing in process Increase trade spending and consumer promotions Long term: Spend heavily to counter national roll-out Kellogg Lost 3% share Short term: Increase A&M Long term: Capitalize on pull Product line improvements Pepperidge Farm Lost 1% share Short term: Increase trade spending Long term: Compete on quality and brand reputation

27. Problems to think about Lower than expected southeast results (although achieved with low shelf life Southeast results were lower than Columbus’ (lower price in Southeast) Total cracker sales estimate in 1 year = Average of approx share in each test market * size of total market / size of test market *sale price Frito- Lay introducing a new full line of crackers by the end of second quarter Also, rollout strategy would change if Frito-Lay introduces new products as Krispy’s market share would decrease.

28. Disclaimer Created by Tamanna Pahooja , BITS PILANI, Goa Campus Under the guidance of Prof Sameer Mathur , IIM Lucknow during a Marketing Internship