Case Analysis HBS Senior Lecturer Frank V. Cespedes and writer Heather Beckham prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. Although based on real events and despite occasional references to actual companies, this case is fictitious and any resemblance to actual persons or entities is coincidental.

1. KRISPY NATURALS
LAUNCHING
CRACKING THE
PRODUCT
MANAGEMENT CODE

3. A REGIONAL
BRAND ACQUIRED
BY PEMBERTON IN
2008 IN ORDER TO
ENTER THE SALTY
SNACKS MARKET

4. CANDLER
ENTERPRISES
BEVERAGE
DIVISION
RESTAURANT
DIVISION
PET CARE
DIVISION
SNACK FOOD DIVISION
PEMBERTON
PRODUCTS
MULTINATIONAL COMPANY
CONTRIBUTING $5 BILLION TO
THE $18 BILLION REVENUE OF
CANDLER.
LEADER IN U.S. COOKIES AND
BAKERY SNACKS SEGMENT
SWEET SNACK MARKET.

5. ?

6. • WORLD RENOWNED PRODUCT
DEVELOPMENT LABS
• CONSTANT INNOVATION
• DIRECT STORE DELIVERY ( DSD)

7. ACCORDING TO PEMBERTON’S PRESIDENT,
PATRICIA WILLIAMS, THE KEY STRATEGIC
PRIORITIES FOR THE COMPANY ARE
BUILDING A COLLECTION OF ATTRACTIVE, DURABLE BRANDS
LEVERAGING LEADING MARKETING, SALES AND DSD SYSTEMS TO INCREASE REVENUE AND PROFITS
BUILDING OR ACQUIRING CAPABILITIES IN SALTY SNACK CATEGORIES

8. NOW LET’S GET IN
THE SHOES OF THE
PROTAGONIST
BRANDON
FREDRICK
(MARKETING
DIRECTOR)

11. DUE TO ITS UNDERPERFORMANCE AND HIGH
POTENTIAL KRISPY IS BEING RELAUNCHED AS
KRISPY NATURALS
VARIOUS TESTS HAVE BEEN CONDUCTED AND
YOU HAVE THE RESULTS
THE EXECUTIVE VICE PRESIDENT OF
MARKETING AND SALES, ASHLEY MARNE, HAS
ASKED YOU TO SUMMARIZE THE RESULTS AND
GIVE RECOMMENDATIONS FOR NATIONAL
ROLL-OUT

12. LET’S ANALYSE THE U.S.
CRACKER MARKET

13. A GROWING INDUSTRY WORTH $ 6.9 BILLION
SEGMENTED INTO:
• “ALL OTHER” CRACKERS – 75%
• SALTLINES – 9%
• CRACKERS WITH FILLING – 9%
• GRAHAM CRACKERS – 6%
• BREADSTICKS AND MATZOH CRACKERS – 1%

14. CRACKERS – TOP SALTY SNACK
ACCORDING TO A MINTEL STUDY
74% OF RESPONDENTS CONSUMED
CRACKERS ON A REGULAR BASIS
34% ATE THEM AS A PART OF
REGULAR WEEKLY DIET

15. TRENDS DRIVING THE
CRACKER INDUSTRY
• STANDALONE FLAVOR
• CONVENIENT PACKING
• HEALTHY CONTENTS

16. TOP 3
MANUFACTURERS:
• KRAFT FOOD INC
• KELLOGG CO
• PEPPERIDGE FARM

17. ALL OTHER CRACKERS
$ 5.1 BILLION INDUSRTY
6-7 % ESTIMATED GROWTH
DRIVEN BY HEALTHIER, PREMIUM PRICED PRODUCTS
SEGMENT LED BY KRAFT

18. CRACKERS WITH FILLING
$ 660 MILLION INDUSTRY
10-14% ESTIMATED GROWTH
SEGMENT LED BY KRAFT

19. KRISPY
BACKGROUND
CHECK

20. KRISPY WAS A REGIONAL COMPANY
WITH 3 PRODUCTION UNITS AND
MAINLY FOCUSED IN THE SOUTHEAST
REGION
COMPETED IN “ALL OTHER” AND
FILLING SEGMENT
VERY LIMITED FLAVOR OPTIONS
PRODUCTS MARKETED AS “GRAB
AND GO”

21. PEMBERTON ACQUIRED
KRISPY IN 2008
2009 RESULTS WERE
DISAPPOINTING

23. KRISPY GETS ANOTHER
CHANCE AS KRISPY NATURALS
CHANGES INTRODUCED:
• IMPROVED TASTE
• MULTIPLE SERVING
PACKAGE SIZES
• MADE FROM 100%
WHOLE WHEAT MAKING
IT HEALTHIER

24. POSITIVE RESPONSE ON IMPROVED FLAVORS

25. MARKETING
THOUGH MOST OF THE
COMPANIES IN CRACKER
INDUSTRY FAVOUR PUSH
STRATEGY KRISPY EMPHASIZED
ON PULL MARKETING
SPENDING AROUND $70
MILLION ON MARKETING AND
ADVERTISING

27. PRICING
HIGHER COST PER OUNCE BUT ON
A VISUAL BASIS THE PRICE IS ON
PAR WITH COMPETITORS AS THE
PACKAGE CONTAINS LESS AMOUNT
OF THE PRODUCT

28. DISTRIBUTION
EFFECTIVE DSD DISTRIBUTION
WOULD BE A CRITICAL
COMPONENT IN THE OVERALL
KRISPY NATURAL PROGRAM
STRATEGY
THUS DSD WAS BEING OPTIMIZED

29. EXPECTED PERFORMANCE
AND A STEADY-STATE PRE-TAX PROFIT CONTRIBUTION OF AT LEAST 13%

30. ADVANTAGE:
DECLINE IN
SHARES OF
MARKET
LEADERS

32. THE TEST MARKET REGIONS
WERE COLUMBUS,OHIO, AND
A TRIO OF CITIES IN THE
SOUTHEAST

34. COLUMBUS
IN COLUMBUS, THE KRISPY BRAND DID NOT HAVE
ANY PRIOR PRESENCE
FIVE SPECIAL “KRISPY FORCE” REPRESENTATIVES
WERE HIRED FOR THIS REGION
IT WAS ESTIMATED THAT COLUMBUS WOULD
ACHIEVE 9% MARKET SHARE
RESULTS WERE QUITE IMPRESSIVE AS COLUMBUS
MANAGED TO DOUBLE THE ESTIMATE TO 18%

35. SOUTHEAST
IN THE SOUTHEAST, KRISPY WAS ALREADY ESTABLISHED
IN THE MARKET AS A SINGLE-SERVE PRODUCT
IN THE SOUTH-EASTERN CITIES, REGULAR PEMBERTON
DSD ROUTE DELIVERY REPRESENTATIVES WORKED WITH
REGIONAL AND DISTRICT SALES MANAGERS
KRISPY HOPED TO INCREASE SHARES FROM 9% TO 15%
RESULTS WERE A BIT DISAPPOINTING DUE TO THE MERE
INCREASE OF 1%

37. NOW WE HAVE 2 SCENARIOS
ONE IMPRESSIVE
BEYOND EXPECTATIONS
OTHER DISAPPOINTING
BELOW EXPECTATIONS

39. LET’S TAKE AN AVERAGE OF THESE SCENARIOS
THUS THE COMPANY HAD SALES WORTH $ 775 MILLION
FROM BRAND EXPECTED PERFORMANCE WE SEE THAT GROSS PROFIT IS 23%
OF SALES
THUS GROSS PROFIT = 0.23 * 775
= $ 178.25 MILLION
AMOUNT SPENT ON ADVERTISING AND MARKETING = 33 + 37
= $ 70 MILLION
THUS NET PRETAX PROFIT = 178.25 – 70
= $ 108.25 MILLION
WHICH IS 108.25/775*100 = 13.97% OF TOTAL SALES > 13% ( EXPECTED)
THUS MINIMUM EXPECTATIONS ARE FULFILLED

40. SOME CRITICS HAD A POSITIVE RESPONSE
“THE PULL MARKETING REALLY CREATED A BUZZ AND
CUSTOMERS WERE COMING TO THE STORES ASKING FOR
KRISPY NATURAL BY NAME”
WHILE SOME SAID
“THE POSITIVE TEST MARKET RESULTS WERE DRIVEN BY
SIGNIFICANT PRICE DISCOUNTS, COUPONING, AND
SAMPLING, WHICH WERE NOT SUSTAINABLE ON A
NATIONAL LEVEL”
IF YOU ASK ME THE RESPONSE WAS GREAT AND THE
NATIONAL SCENARIO WILL BE INCLINED TOWARDS THE
ONE IN COLUMBUS ( SIMILAR FACTORS – COMPLETELY
NEW BRAND)

41. FROM TEST RESULTS ONE CAN SEE THAT
MANY PEOPLE SHOW POSITIVE INTENT
TOWARDS BUYING THE PRODUCT ( MORE
THAN 80%)
AND QUITE A LOT PREFER IT OVER THE
EXISTING BRANDS ( MORE THAN 50%)

43. RECOMMENDATIONS
IF A COMPETITOR SHOWS UP ( FRITO LAYS), KRISPY NATURALS SHOULD TAKE
SUPPORT OF THE SUCCESS OF OTHER SEGMENTS OF PEMBERTON – SELL
PRODUCTS WHICH COMPLEMENT CRACKERS ALONG WITH KRISPY’S
PRODUCTS IN ONE PACK WITH SOME DISCOUNT ( CO – BRANDING)
CONTINUE WITH THE PULL STRATEGY – MAKE CONSUMER REALISE THE
SUPERIOR PRODUCT QUALITY
EXPAND PRODUCT LINE IN ORDER TO CAUSE TROUBLE TO THE MAIN
PRODUCTS OF THE COMPETITOR SO AS TO STOP THEIR STEPS IN CRACKER
MARKET
IMPROVE THE DSD SYSTEM IN ORDER TO MAKE IT COMPATIBLE WITH KRISPY
SO AS TO REDUCE COST

44. THANK YOU
CREATED BY CHAITANYA MAHALE