Pemberton reviewed test market results for its new cracker product Krispy Natural. The product exceeded projections in Columbus, Ohio but fell below expectations in the Southeast US. Management developed a strategic plan focusing on product reformulation, premium pricing, aggressive advertising spending, and effective distribution to establish the brand nationally. Test markets in Columbus used dedicated sales representatives and promotional activities. The results were positive but interpreting the mixed results to determine a national rollout strategy would be challenging.
3. Harvard Business School Case
Snack Food Division
Food Bars and
Cookies
Softies
Cookies
Doughnuts
5 Billion
Sales
Using Direct
Store
Delivery
Pemberton
6. Who are the Players?
Ashley Marne:
executive vice president of sales and
marketing at Pemberton.
Fredrick:
a marketing director for Pemberton.
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7. S
I
T
U
T
A
T
I
O
N
ANALYSIS
Pemberton, was reviewing test
market results for a new cracker
product, Krispy Natural.
Pemberton had just concluded
market tests in Columbus, Ohio as
well as three cities in the
Southeast.
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11. Columbus market share
results were double what the
company had projected.
However, the Southeast
results fell well below
management’s expectations.
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12. Key Strategic Priorities of Pemberton?
Building a collection of
attractive and durable
brands.
Leveraging leading Marketing ,sales
and DSD systems to increase revenue
and profits.
Building or acquiring capabilities in salty
industries.
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14. Harvard Business School Case
Reasons For the above Discrepancy:
-Limited Product line offering in the target segment.
-Limited Flavor offering in the target segment.
-Lack of flavor satisfaction.
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Other Brands:
Dropped or
remained same
increased
All other brands fell in market share
25. The product strategy was to focused on increasing package sizes to
multiple-servings .
Improving taste so that consumers would prefer Krispy Natural to
competitor.
The Pemberton R&D lab worked tirelessly to reformulate the
product. The latest consumer taste.
Test showed a 77%–92% positive purchase intent for new Krispy Natural
flavors.
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26. Harvard Business School Case
Setting effective product strategy and R&D of flavors to high positive purchase intent
32. The company wanted to extend this strategy to crackers with aggressive
plans for pull spending and trade promotions.
Discounts were pervasive in the industry with trade spending often
representing 10–20% of sales.
Many companies in the cracker market favored a push strategy to
promote products, but Marne believed a focus on pull efforts would help
quickly establish the Krispy Natural brand .
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33. Harvard Business School Case
Spending on Advertisement by other firms:
Pemberton’s plan was to spent $70 million on
Advertising
35. Management believed effective DSD distribution would be a critical
component in the overall Krispy Natural program strategy
An operational test was completed in 2010 to analyze
the distribution logistics of the new product mix of crackers and
cookies/sweet baked goods
The company found most trucks had capacity to accommodate test
market quantities.
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36. Harvard Business School Case
Management believed effective DSD distribution would be a
critical component in the overall Krispy Natural program
strategy.
38. Krispy Natural sought a premium pricing strategy. Management felt pricing
of approximately 155% the category average cost per ounce was
reasonable considering the product’s superiority.
the retail price for each package would be similar to competitors in
the category, but there would be less quantity or weight in the Krispy
Natural package.
Krispy Natural sales objectives were based on expectations of minimum
sales of $500 million during year one of national distribution.
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41. In Columbus, the Krispy brand did not have any prior presence, so the
company was able to assess its ability to sell a completely new line of
cracker products.
Five special “Krispy Force” representatives were hired for this
region, which were separate from the traditional DSD route
delivery representatives. These “Krispy Force” reps worked with
Pemberton regional and district sale managers and focused
solely on selling the new Krispy Natural product line
Pemberton projected by the end of the 16-week test period,
Columbus would achieve a 9% share of the cracker category in the
test market.
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44. -Fredrick knew interpreting the Krispy Natural test market
results and deciding how to roll out the product nationally (if
at all would be no easy task.
-He knew these figures were achieved with lower shelf space
than projected. Fredrick also felt it was understandable that
the Southeast results were lower than Columbus .
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