Launching Krispy Natural case study of HBR

1. LAUNCHING KRISPY NATURAL:
CRACKING THE PRODUCT
MANAGEMENT CODE
Shivam Shekhar, IIT Roorkee

2. PEMBERTON’S OWNERSHIP &
OTHER SISTER CONCERNS
Candler
Enterprises
Revenue - $18bn
Snack Food
Division
(Pemberton
Products)
Beverage Division
Quick service
restaurant Division
Pet Care Divisions

3. PEMBERTON AT A GLANCE
• Market leader in cookie and bakery snacks segment
• Employs direct store delivery(DSD) distribution system which helps in
maximized knowledge of market, growth in revenue and profits
• Wide product line
• Cookie, baked goods, muffins, food bars
• Acquired Krispy Inc. in 2008 and forayed into the salty snack market
• Krispy’s failure in adhering to projections called for overhaul of entire product
line and marketing strategy

4. STRATEGIC PRIORITIES
• Building attractive and durable brands
• Leveraging leading marketing, sales and DSD systems to increase revenue
and profits
• Building/acquiring capabilities in salty snack segment

5. U.S. CRACKER INDUSTRY
• Revenue was nearly $ 7bn in 2011
• CAGR of 2.2% for the entire industry
during 2008-2010
• Mainly competed by 4 firms
• Kraft Foods
• Kellogg Co
• Pepperidge Farm
• Pemberton Products
76%
9%
9%
6%
Market Share
All other Saltines Cracker with fillings Graham crackers

6. • Ranked higher than Potato chips for the snacks in a survey
• Purchasing criterion
• Standalone flavour
• Easily portable & convenient packaging
• Desire for healthy products
• Kraft & Kellogg had lost market share to Pepperidge Farm in previous few
years owing to several factors

7. KRISPY RELAUNCH
Krispy Single-Serve
• 2 varieties in 5 flavours
• Not so natural ingredients
• Less suitable to health conscious
• Existing regional brand identity
• Single-serving packages only
Krispy Natural
• 2 varieties in 10 flavours
• Wholly natural ingredients
• More suitable to health conscious
• New brand identity
• Single-serving as well as multi-serve
packages options

8. STRATEGY FOR LAUNCH OF
KRISPY NATURAL
Product
• Offering various packaging sizes
• Wholly natural ingredients
• More market acceptance owing
to better taste
• Several flavours across the line
Marketing
• Aggressive plans for pull spending
and trade promotions
• Others believed on push strategy
but Pemberton went with pull
strategy
Distribution & Pricing
• DSD distribution is extremely
important
• Premium-point pricing strategy
• Approx 155% of average market
price per ounce

9. SWOT ANALYSIS
•Frito-Lay
entering cracker
market
•Attractive
market
•High
acceptance
rate in surveys
•Capacity
limitations of DSD
•R&D labs
•DSD distribution
•Product line
Strength Weakness
ThreatsOpportunities

10. PRODUCT TESTING SUMMARY
• 7/10 products had positive purchase intent greater than 80% and others
were in 70s
• 6/10 testers preferred taste of Krispy Natural over other leading brands
• White Cheddar filling cracker has taste preference of 78% and positive
purchase intent of 92%

11. MARKET SCENARIO CHANGE
In Columbus
Pretest Post-test
Kraft 40% 33%
Kellogg 25% 22%
Pepperidge Farm 11% 10%
Krispy 0% 18%
In Southeast
Pretest Post-test
Kraft 34% 32%
Kellogg 23% 22%
Pepperidge Farm 10% 10%
Krispy 9% 10%
Annual national projections
based on Columbus projections $ 1,000 mn
based on Southeast projections $ 550 mn

12. INTERESTING POINTS
• Pemberton acquired 18% market share in Columbus as a new entrant and
increased its share from 9% to 10% in Southeast market
• Other three big players lost 11% market share in Columbus and 3% in
Southeast market
• Projected nationwide sales figure may go in excess of a billion dollar if they
can repeat the feat they did in Columbus
• An approximate projection of at least $ 700-800 million can be achieved
believing that some areas they will get Columbus-like success and other
areas they do not perform at the same level
• Frito-Lay is launching into cracker market. Pemberton could increase its
product mix, optimize DSD, promote its premium price point and health-
friendly concerns