Presentation based on Harvard Business School Case for Krispy Natural

1. KRISPY NATURAL Cracking The Product Management Code

2. Harvard Business School Case Krispy Natural
Team Players
Burt Spivey
Chief Operating
Officer
Brandon Fredrick
Marketing Director
Patricia Williams
President
Ashley Marne
Executive Vice-
President, Sales &
Marketing

3. Issues before Fredrick
1 Result Interpretation
2National Roll-out Risks
3 Realistic Expectations?
4
Harvard Business School Case Krispy Natural

4. Multinational Beverage &
Snack Goods Manufacturer
Candler Enterprises
Harvard Business School Case Krispy Natural

5. Majority Sales through Food Bars, Cookies & Sweet Baked Goods
Snack Food Division of Candler Enterprises
Pemberton Products
Beverage Division
Market Leading Brands – Softies Cookies, Homestyle Muffins & Doughnuts
Quick Service Restaurant
Pet Care Division
Market Leader in U.S. cookie & bakery snacks segment
World renowned product development labs
Direct Store Delivery (DSD)
Harvard Business School Case Krispy Natural

6. Distribution Strategy
Direct Store Delivery
1 Goods delivered directly to
retail stores
2 Skips retailer Warehouses and
Distributor Channels
3
Great relationships with trade
due to personalized visits by
DSD representatives
4
Used with Low Shelf life goods
like baked goods, soft drinks
and chips
Harvard Business School Case Krispy Natural

7. Advantages for the company
Direct Store Delivery
1 Maximized Sales & Profit
2 Greater control of shelf space
3 Accurate forecasting
4 Reduced Stock-outs
5 Quicker turnover of products
6 Costs ¢20 per $1 of sales
Harvard Business School Case Krispy Natural

8. Goods transport from Company Distribution Centers to Retail Stores
Functionalities
DSD Representatives
Executed Price Promotions
Manage Shelf Inventory
In-store Merchandizing
Did not directly perform Sales functions
Harvard Business School Case Krispy Natural

9. Worth $6.9 billion in 2011
The U.S. Cracker Industry
Harvard Business School Case Krispy Natural

10. Compound Annual Growth Rate (CAGR) of 2.2% from 2008 to 2010
Market Situation
The U.S. Cracker Industry
Top 3 Cracker Manufacturers had 75% Market Share
Volume Sales rose in 2010
Cracker consumption was frequent and regular
Crackers were top salty snack ahead of Potato Chips
50%+ people preferred cracker packages with portable quantities
53% considered healthiness as an important factor
74% people consumed snacks on a regular basis while it was a part of weekly
diet of 34% people
Harvard Business School Case Krispy Natural

11. $5.1 billion in 2011
6.2% over 2010
All Other Cracker Segment
Harvard Business School Case Krispy Natural

12. Market Situation
All Other Crackers
1 2.1% CAGR from 2008 to
2010
2
Growth driven by healthier,
premium priced options
3 Kellogg Co focused on
healthier up-scale options
4 Kraft Food Inc focussed on
healthier up-scale options
5
Pepperidge Farm focused on
flavour and healthiness
Harvard Business School Case Krispy Natural

13. $660 million in 2011
11% over 2010
Crackers with Fillings
Harvard Business School Case Krispy Natural

14. Market Situation
Crackers with Fillings
14%
Highest Segment
Growth in 2010
Kraft Food Inc
33% share in 2010
Kellogg & Lance also
competitors
Premium Alternative
With whole-grain
cracker & real
cheese
Harvard Business School Case Krispy Natural

15. Products
Krispy
Harvard Business School Case Krispy Natural

16. Pemberton bought
Krispy
2008 2
Competitor in ‘All other
crackers’ & ‘Crackers
with Fillings’ Segments
3
Production Plants
South Eastern U.S.
Regional Strong Presence
In Vending Machines &
Convenience Stores
Marketed As
Mobile: Grab & Go
Harvard Business School Case Krispy Natural

17. Repositioning Krispy in the
Cracker Market
Krispy Relaunch
Harvard Business School Case Krispy Natural

18. Repositioning in The Cracker Market
Krispy Re-launch
1
Marne was
disappointed at the
results
2
FELL SHORT OF MANAGEMENT
EXPECTATIONS IN 2009
Limited Product Line
Low Flavour Satisfaction Scores
REASONS

19. 3
Change of Product &
Marketing Strategy will
bring Success
4
BELIEF
Special R&D labs
IMPROVEMENT ON TASTE
& FLAVOUR
5 To ‘Krispy Natural’REBRANDING

20. 6
-Multiple serving packages
-More Flavours
In order to compete with
established brands
7OTHER IMPROVEMENTS
To Extend beyond
Single-Serve Offerings
PRODUCT LINE
Harvard Business School Case Krispy Natural

21. Krispy Natural
Marketing Strategy

22. Larger Package Sizes
Improvements
Product
Improving Taste
Multiple Servings
77% to 92% purchase intent for new flavors
High priority for White Cheddar flavour of Cracker with Filling than other Brands
Harvard Business School Case Krispy Natural

23. Heavy Advertising
Techniques Used
Marketing
Pull Spending & Trade Promotions
Promotion to end-customer & trade
Price Discounts
Pull Strategy in contrast to more widely used Push Strategy in the Market
Harvard Business School Case Krispy Natural

25. Operational Test in 2010 to analyse the Distribution Logistics
DSD as a Critical Component
Distribution
Optimize the system for Longer Shelf Life of Crackers versus Baked Goods &
Cookies
Trucks capable of accommodating Test Market Quantities
Harvard Business School Case Krispy Natural

26. Considering Product Superiority, price fixed to 155% of segment average
Premium Pricing Strategy
Pricing
Expected minimum sales of $500 million in 1 year of National Distribution
Visual Price: Price similar to competitors with lesser quantity
Expected a steady state pre-tax profit of 13%
Harvard Business School Case Krispy Natural

27. Distribution and Marketing in
New & Existing Markets
Test Market Plan
Harvard Business School Case Krispy Natural

28. OHIO
• Completely new in the Market
• ‘Krispy Force’ was set up to sell
the new product line with
assistance of regular DSDs
• Expectation of 9% share at the
end of the 16-week test period
COLUMBUS
SOUTH-EAST U.S.
THREE CITIES
• Repositioning to a Premium
Offering
• Test the receptiveness to
Higher Priced,
Reformulated Products
• Regular DSDs without the
‘Krispy Force’
• Similar Advertising as
Columbus
• 9% to 15% at the end of 16
week period
Harvard Business School Case Krispy Natural

29. Based on Figures Obtained
During the Test Period
Results
Harvard Business School Case Krispy Natural

30. OHIO
• 18% Market Share
• Category Volume rose by 30%
COLUMBUS
SOUTH-EAST U.S.
THREE CITIES
• 10% Market Share
• Little Category Expansion
Fredrick reasoned the poor results in South Eastern cities because of:
• Low Shelf Space & Display activity
• Low Introductory Discount of just 15%
Harvard Business School Case Krispy Natural

31. Clearly, Krispy Natural can be successful in newer markets using the
strategies used in Columbus
Result Interpretation
Issue 1
In markets where it is already present, it faces difficulty due to its originally
cheaper products
Average 82% 67%
Harvard Business School Case Krispy Natural

32. Average 81% 58%

33. Krispy Natural might get lower shelf space in markets across the nation
National Roll-out Risks
Issue 2
Introduction of Frito Lay in the National Market at the same time is a risk
Competitive responses from Kellogg, Kraft, Pepperidge etc
Promises for National Roll-out
More than 80% buyers have a positive purchase intent
About 60% of buyers preferred Krispy Natural over other brands
Harvard Business School Case Krispy Natural

34. Expectations are not as realistic because of the presence of biggies like Frito
Lay in the Market
Realistic Expectations
Issue 3
Reducing the price a little may help but that would reduce the premium value
of the brand
Harvard Business School Case Krispy Natural

35. Harvard Business School Case Krispy Natural