Case study analysis of Krispy Natural, its SWOT analysis and marketing strength and weakness.

1. HBR Case study analysis

2. 1.Pemberton: Introduction &
Challenges
2.Market analysis
3.Krispy Natural market
strategies
4.Result and conclusions

3. Introduction
• Pemberton was the snack food division of
Candler Enterprises, a multinational
beverage and snack goods manufacturer.
• Had a revenue of 5 Billion USD with 7.7%
Profit After Tax (PAT)
• Pemberton was a market leader in the U.S.
cookie and bakery snacks segments of the
sweet snack market.
• Company harnessed its owned Direct Store
Delivery (DSD) distribution system to deliver
products directly from the distribution
centers to the retail stores.
Candler
Enterprises
($ 18
Billion)
Beverage
Division
A Quick
service
restaurant
division
Pet care
division
Pemberton
(snack food
division)

4. Pemberton’s income as a percent of sales for 2011 :
Category % of sales
COGS (cost of goods and services) 78.8%
Brand Advertising and Marketing 7.7%
Taxes 5.8%
Profit after tax 7.7%
TOTAL 100%

5.  Key strategic
priorities:
1.Leveraging leading
marketing, sales and
DSD systems to
increase revenue and
profits
2.Building a
collection of
attractive, durable
brands
Current situation

6. To launch and sustain
the growth of krispy
natural , We have to
perform market
analysis

7. The U.S. Cracker Industry
• Retail cracker sales in the United States reached an
estimated $6.9 billion in 2011.
The growth rate for the overall cracker industry
from 2008 to 2010 was approximately 2.2%
CAGR

8. Mintel study
74%
respondents
consumed
crackers on
regular basis.
34% ate them as a
part of regular
diet.
53%
considered
overall
healthfulness.
The U.S. Cracker Industry

9. “All Other” Crackers segment experienced a 2.1% CAGR for period
from 2008 to 2010
The U.S. Cracker Industry
2009 share 2010 share
Kraft 37.8% 37.0%
Kellogg 28.9% 28.1%
Pepperidge Farm (Goldfish) 13.9% 14.2%
Private Label 4.6% 4.8%
Other 14.8% 16.0%

10. After flat sales from 2005 through 2009, the crackers with fillings
segment experienced strongest growth ~14% in 2010
The U.S. Cracker Industry
2009 share 2010 share
Kraft 34.7% 32.7%
lance 31.5% 29.9%
Kellogg 15.5% 21.0%
Private Label 8.0% 8.2%
Other 10.2% 8.1%

11. Krispy Single line: Launch
Single serve sales : Plan vs Actual
In 2008, Pemberton took first step to enter the salty snack market with the acquisition of Krispy
Inc., Krispy products were marketed as mobile, “ Grab and Go” snacks with a strong presence in
vending machines and convenience stores.
Plan 2009 Actual % to plan
Krispy Retail $97.5 $50.8 52.1%
Krispy Vend $23.4 $18.0 76.9%
Total Krispy Single-Serve $120.9 $68.8 56.9%

12. Krispy Relaunch
After a huge failure (~50% achieve), company introspected and planned
accordingly:-
• Pemberton R&D labs were engaged to improve the product taste
and quality.
• Rebranding as Krispy Natural, to attract health conscious
customers.
• Extending product line beyond single serve and introducing more
flavors.

13. • After many trials - The test result showed 77%-92% positive purchase
intent for new Krispy Natural Flavors.
Now, Krispy naturals expected a minimum sales of $500 million during
year one of national distribution and a steady-state pre-tax profit
contribution of at least 13%
($ in millions) Year 1 Year 2 Year 3
Dollar Sales $500 $580 $700
Growth 16% 21%
Dollar Share 9% 10% 11%
Krispy Relaunch : forward
Projections

14. Krispy natural
Brand income

15. Krispy
Relaunch
Evolution from krispy single serve

16. Competition analysis
• Top 3 competitors are :- Kraft
Food Inc, Kellogg Co. and
Pepperfridge farm accounting
for total of 75% market share
• Also, Frito-Lay is rumored to
be introducing a new full line
of crackers

17. Competitors advertisement spending

18. Post Krispy
natural lauch
Location: Columbus

19. STRENGTHS
1. World renowned product
development labs.
2. Product mix.
3. Company owned DSD
WEAKNESSES
1. Capacity constraints of
DSD for Krispy natural
products.
OPPORTUNITIES
1. Market research shows
consumer dissatisfaction
with favour and taste
experience of current
cracker brands.
2. Cracker market
fundamentals were
attractive
THREATS
1. Fritto-lays entering the
cracker market.
2. Modest increase of 1%
sale in southeast.

20. Marketing strategy
•Product
•Marketing
•Distribution
•Price

21. Marketing
strategy
• 1.Product:
• Multiple-serving packaging
• Focused on improving
taste
• Aim for Health conscious
segment

22. 2.Marketing
• Emphasized on heavy advertising
• Promotion to the end customer and appealing to the trade
• Aggressive plans for pull spending and trade promotions

23. 3. Distribution:
• Effective DSD (Direct-Store Delivery) distribution system
• Proper management of shelf inventory and in-store
merchandising. The distribution logistics of the new product mix
of crackers and cookies/sweet baked goods
• Optimizing the system to account for longer shell life of crackers
4. Price:
• Sought a premium strategy.
• Priced at 155% above the category average cost per ounce
• Same retail price as that of competitors but lesser quantity
Marketing strategy

24. Market result Highlights

26. Dollar share post launch and
annual projection ->>>

27. Marketing plans
• Marteking Plan for Columbus
Sell completely new line of
products and special crispy force
representatives hired
These “Krispy Force” reps.
worked with Pemberton regional
and district sales managers and
focused solely on selling the new
Krispy Natural product line.
• Marketing Plan for SouthEast
ability to reposition the product to
offer a more premium offering
The Pemberton DSD route
delivery representatives worked
with regional and district sales
managers, handling sales and
service of the new Krispy Natural
line.

28. Why Krispy’s market share in Southwest
didn’t increase significantly ?
Columbus was able to achieve an 18% market share by stealing share
from other competitors.
However in Southeast the trade was generally receptive to the new
Krispy Natural line due to the relatively low introductory trade case
discount of 15%.

29. Sales and Channel responses
The channel played a key role .
Midwest division sales manager Wanda Fitzgerald explained “We have great
relationships with the trade:
1) Our DSD reps are in the stores every week and the store managers respect our
knowledge of the business.
2) The large chain headquarter buyers were particularly impressed with the consumer
research results and inventory turn estimates for Krispy Natural.
3) The pull marketing really created a buzz and customers were coming to the stores
asking for Krispy Natural by name.
4) They also loved all the promotional activity and consumer advertising.

30. Need more…………..
Extensive marketing in Southeast cities
Contemporize brand engagement
Tailor the Krispy Natural to different need
states

31. DISCLAIMER
• Created by Shubhayu Khedia, The LNMIIT Jaipur, during a marketing
internship by Prof. Sameer Mathur, IIM-Lucknow.