case study IIM Lucknow

1. Launching Krispy Natural
HBS Case Study

2. Candler
Enterprises
Pemberton
Restaurants
Pet Care
Beverage
Division

3. U.S Cracker Industry
• Revenue of nearly $7bn
in 2011.
• Compounded annual
growth rate of 2.2%
• Main Market Leaders
1.Kraft Foods
2.Kellogs Co
3.Pepperridge Farm
4.Pemberton Products
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Series 1
Series 1

4. Pemberton Products
• U.S market leader in snack food
division.
• Sales of $5 billion in 2011.
• Performed Brand Extension by
acquiring Krispy Inc. in 2008
• Achieved a growth rate of 14%.

5. Pemberton’s strategic priorities
• 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.

6. What is DSD?
• Pemberton utilized a
company-owned direct store
delivery (DSD) distribution
system in which products
were delivered directly to
retail outlets, bypassing
retailer’s warehouses and
distribution centres.
• DSD maximized sales and
profit growth through greater
control of shelf space, more
accurate forecasting, reduced
stock-outs, and quicker
turnover of products.

7. Pemberton’s income as a percent of
sales in 2011

8. Mintel Study
• 53% in the U.S considered health
as important.
• 69% were trying to improve their
health.
• 51% were trying to lose weight.

9. Krispy Product Line
• Krispy was a regional brand with distribution
focused primarily in the Southeastern U.S
• Krispy’s underperformance was a result of
the limited product line, which made it
difficult to command any sort of presence in
markets.
• A taste survey showed the product did not
deliver the flavor satisfaction scores which
were expected.

10. Krispy Natural would be made from 100% whole wheat and
other all natural ingredients, with approximately 150 calories
6 grams of fiber and 3 grams of protein per serving.
Cracker with filling options would feature White Cheddar,
Smoked Gouda, Chipotle Cheddar, Creamy Swiss, Tomato Basil,
and Vegetable Herb. Flat cracker flavors would include Cracked
& Olive Oil, Sundried Tomato, Smoked Cheddar, and Roasted Garlic.
Launching Krispy Natural

11. Marketing Strategy for Krispy Natural
• Effective DSD distribution would be a critical
component in the overall Krispy Natural
program strategy
• Krispy Natural sought a premium pricing
strategy. Management felt pricing of 155% the
category average cost per ounce was
reasonable considering the product’s
superiority.

12. Pemberton plans to spend $70 million
on Advertising
Spending on Advertisements by other Firms

13. Promotional plan of Krispy Natural

14. Predicted Annual Income

15. Test Market Plan
• Special “Krispy Force” representatives were
hired, which were separate from the traditional
DSD route delivery representatives. These
“Krispy Force” reps worked with Pemberton
regional and district sales managers and focused
solely on selling the new Krispy Natural product
line.
• In the Southeast, Krispy was already established
in the market as a single-serve product, and the
company was able to test its ability to reposition
the product to a more premium offering.

16. Product Testing Summary

17. What was the impact of the launch of
Krispy Naturals on the competitors?

19. Conclusions
• Pemberton’s Krispy Naturals was supported by the growth
trends within the industry as well as consumer demand.
• The premium pricing strategy employed by Pemberton
was ideal for the product since its higher quality
ingredients and distribution would be costly for the
company.
• Although Krispy Naturals was already established in the
market as a single-serve product in the Southeast perhaps
its share could be improved by adding the special “Krispy
Force” representatives to help the regular DSD route
delivery representatives, regional, and sales managers
handle the sales of the new product line.

20. Is Krispy Natural Ready
for a national rollout?

21. • One of the main limitations facing Krispy
Naturals is that it may not be cost-effective to
hire more sales representatives to promote
the product .
• It could face severe competition from Frito
Lay company.
• There is also the chance that consumers will
not be willing to pay the industry price for
less quantity in a package than other
competitors, regardless of the product’s
quality.

22. Thank You

23. Disclaimer
Created by Kunal Sharma, IIT Roorkee ,during a
Marketing Internship
under Professor Sameer Mathur , IIM Lucknow.