A Harvard Business School Case Study on Marketing Management

1. Launching Krispy
Natural: Cracking
the Product
Management Code
HARVARD BUSINESS SCHOOL CASE STUDY

3. Pemberton Products
• Snack food division of Candler Enterprises
• 2011 revenue was $5 billion with 7.7% PAT
• Driving force - culture of innovation
• CAGR of 14% over past 5 years

4. Pemberton Products – Speciality
Wholly owned Direct Store Delivery (DSD) distribution system
Products delivered directly from distribution centres to retail
stores

5. Pemberton – Strategic Priorities
• Building a collection of attractive, durable brands
• Leveraging leading marketing, sales and DSD systems to
increase revenue and profits
• Acquiring capabilities in salty snack categories

6. US Cracker Industry
• Retail sales over $6.9 billion in 2011
• CAGR of 2.2% over past 3 years
• Salty crackers: 74% of consumers consumed crackers on a
regular basis and 34% as regular weekly diet

7. US Cracker Industry
‘All other’ crackers:
• CAGR 2.1%
• Retail sales over $5.1 billion in 2011
• Growth forecast at 6%-7% per year

8. US Cracker Industry

9. US Cracker Industry
Crackers with fillings:
• Retail sales of over $660 million in 2011
• CAGR of 14%
• Flat sales from 2005 to 2009, but picked up afterwards

10. US Cracker Industry

11. Krispy Single-Serve
• Pemberton acquires Krispy Inc.
• Regional brand, single-serve packages
• 3 flavours
• Pemberton hoped to increase volume through wider
distribution
• Disappointing results due to limited product line

12. Krispy Single-Serve

13. Krispy Relaunch
• Large market, expected to grow 10%-14% per year
• Internal market research showed consumer dissatisfaction
• Pemberton gives Krispy another try
• Rebranded as ‘Krispy Natural’

15. Product Strategy
• Multiple servings and increased package size
• Improving taste
• Newer flavours
• 100% whole wheat and natural ingredients

17. Results
• 77%-92% positive purchase intent (for new flavors)
• Four-to-one preference over leading competitor

18. Marketing Strategy
• Heavy advertising and promotion
• Focus on pull strategy by heavy discounts
Projected Year 3 expenses for advertising and merchandising

19. Distribution Strategy
• Effective DSD distribution critical
• To work upon optimization of system to account for longer
shelf life of crackers
• ‘Krispy Force’ representatives in Test Run

20. Pricing Strategy
• Premium pricing strategy
• Superior product compared to competitors
• Similar ‘visual price’ – less quantity in Krispy Natural
package offered for the same price

21. Brand Projections

22. Test Run
• Columbus, Ohio
• Southeastern United States
• Aim: To secure 15% of shelf space in each supermarket’s
cracker section

23. Test Run - Columbus
• No Krispy presence in region
• Five special ‘Krispy Force’ representatives
• Worked in conjunction with Pemberton regional and district
sales managers with sole focus on selling Krispy Natural

25. Test Run - Southeast
• Focus on repositioning of the product to premium offering
• Exploit existing Pemberton DSD route delivery channels
• Existing reps worked with managers, handling sales and
service of the new Krispy Natural line

26. Test Run – Result Highlights

27. Test Run – Result Highlights

28. Expectations
• Expected grab of 9% market
share in Columbus
• Rise of market share in
Southeast from 9% to 15%
• Primary objective of
occupying 15% shelf space
in all markets
• 18% market share in
Columbus, exceed
expectations by 100%
• Southeast: increase to 10%,
only 1% increase in market
share
• Little category expansion in
Southeast
Reality

29. Reasons for deviations
• Columbus: stealing share from competitors
• Southeast: as the product was priced as a premium offering,
15% discount was considered low for consumers to switch
from competitors

30. Sales and channel responses
• Pemberton sales managers pleased with the new product
• Buyers loved promotions and advertising
• Pull strategy created a buzz among consumers

31. Criticism
• Positive results were a result of discounts, couponing and
sampling - which was not sustainable in the long run
• Taste preference claims of Krispy Natural were inflated
• Product tasted no better than competitor brands

32. Competitive Analysis – Pre Launch
Top 3 cracker manufacturers (account for 75% of market, 2010)
• Kraft Food Inc.
• Kellogg Co.
• Pepperidge Farm
Frito-Lay might introduce new full line of crackers by the end of
second quarter

33. Competitive Analysis – Post Launch

34. National Rollout? YES.
• Positive Purchase Intent of 81%
• More than 60% (avg.) tasters preferred Krispy Natural over
other leading brands

35. Recommendations
• As product pricing was not included in taste test and dismal
results in Southeast, the company must focus on creating
products in the lower price range
• Exploit existing DSD distribution channels as much as
possible so as to gain market share

36. THANK YOU!

37. Disclaimer
Created by Sakansh Mittal, BITS Pilani,
during a Marketing Internship under
Prof. Sameer Mathur, IIM Lucknow