HARVARD BUSINESS CASE STUDY

Launching Krispy Natural : Cracking the Product Management Code

Candler Enterprises

Pemberton Products

Beverage Division

Restaurant Chain

Pet Care

Candler Enterprises –

A Multinational beverage and snack goods manufacturer. with the revenue figures of$18 Billion in 2011.

Pemberton Products-

• Snack food division : Packaged food bars, cookies, sweet baked goods• CAGR :14 % in last 5 yrs.• Market Leader in Sweet Snack Market of US• Unique DSD Distribution system

Income as a Percent of Sales 2011

Sales 100 %

COGS 78.8 %

Brand Advertising & Marketing 7.7 %

Pretax Contribution 13.5 %

Profit after Tax 7.7 %

Softies Cookies

Major Brands

Homestyle Muffins& Doughnuts

Ashley Marney

(Executive V.P.

Sales & Marketing)

Brandon Fredrick

(Marketing Director)

Burt Spivey

(Chief Operating Officer)

Patricia Williams (President)

Characters of Case at

Pemberton

1• Building a collection of attractive, durable brands.

2

• Leveraging leading marketing, sales and DSD systems to increase revenue and profits.

3

• Building or acquiring capabilities in salty snack categories.

Strategic Priorities of Pemberton Products

Pemberton entered Salty Snack Market with Acquisition of Krispy Incin 2008 but fell short of projections after its launch in 2009…

Pemberton

Krispy Inc

Plan In $Millions

2009 ActualIn $Millions

% toPlan

Krispy Retail 97.5 50.8 52.1

Krispy Vend 23.4 18 76.9

Total Krispy Single-Serve 120.9 68.8 56.9

This Failure was attributed to

• Limited Product Line• Taste Dissatisfaction

Past records in Salty Snack Market Segment

• Retail sales $6.9 billion in 2011

• Compounded Annual Growth rate - 2.2% for 2008-10

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

• Segments like crackers with filling expected to grow 10-

14% per year.

US Cracker Industry Figures & Projections

New Product Introduction : Krispy Natural

US Cracker Industry

Potential

Future Plans in view of strategic priorities

CrackerLineExtension

Krispy Natural :Product Management

Product Strategy

Package sizes increased to Multiple servings

High Nutritional content: 100% whole wheat, natural ingredients ,150 calories etc

New F lavors in both “Cracker with filling” & “F lat cracker” segments.

The Study shows varying Purchase intents for different flavors and their preference over other brands.

Marketing Strategy

Pull Strategy

• Focus on extensive Advertising & Merchandising

• Aggressive plans for Trade promotions

Projected Expenses

Year 3

$ in millions

Advertising 33

Merchandising 37

Other Brands

Promotional Plan in Columbus,Ohio

Distribution Strategy

Pricing Strategy

Approx 155% the category average cost per ounce, Visual Price same but quantity reduced

DSD distribution & Krispy Force team

Krispy Natural

Sales Objectives

• Minimum sales of $500 million during year one of national distribution

• Steady state pre tax profit contribution of at least 13%

Sales Projections

Test Market Plan &Results

• Sept,2011- launched in two test market regions: Columbus , Ohio, and a trio of cities in the Southeastern United States. For 16 week test period

• Sales share was double the projected value in Columbus • Share was 5% less than projected in Southeastern US due to low shelf space

Impact on Competitors

Short term responses

New product testing in process

Increase trade spending and

consumer promotions

Increase A & M

Long Term responses

Spend heavily to counter national roll-

out

Capitalize on pull Product line

improvements

Compete on quality and brand reputation

Potential Competitor Responses

National Roll Out

• The Test Market reports clearly suggest that Krispy Natural has a very promising future crossing sales and pretax profit contribution barriers

• Annualized National Projections are definite to cross the expected threshold of $500 million

• It damages the market share of other leading brands

• Frito Lay is rumored to be launching a similar product in second quarter which can hamper Marne’s expectations

• Measures against Frito Lay

Celebrity endorsements Ads projecting the product as a necessary element of a US Family diet Targeted schemes and Trade Promotions Incremental innovation Optimization of DSD &Krispy ForceMessage strategy with Family Health Benefits as the POD Creative strategy including Product Comparisons with routine snack options End of Aisle Displays and Point of Purchase marketing Online Campaigns based on recipe innovations with crackers

Strategy against Frito Lay

Intro to Candler Enterprises

(Pemberton Products)

Characters of Pemberton

Strategic PrioritiesPast Records in

Salty Snack Market

US Cracker Industry

Krispy Natural Product

ManagementSales Objectives

Test Market Plan ,Results

Impact on Competitors

National Roll OutStrategy against

Frito Lay

SUMMARY

Created by Shivam Agarwal ,KNIT Sultanpur during a Marketing Internship under

Dr Sameer Mathur, IIM Lucknow.

DISCLAIMER