Transcript Daniel Brockman

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Kingsford Charcoal
Daniel Brockman
Breanne Klose
Elaine Ormonde-Hua
Gizem Ozdemir
http://kingsford.com
Quyen Tran
Kingsford's History
• Ellsworth B. A. Zwoyer
patented charcoal briquettes
in 1897*
• Henry Ford made briquettes
from wood scraps in 1920
• Ford's relative E.G.
Kingsford built a briquette
plant and commercialized
the business in 1920
• Clorox bought Kingsford in
1973
• Kingsford had 59% market
share in 2000
Henry Ford, 1919 (Library of Congress, http://en.wikipedia.org/wiki/File:Henry_ford_1919.jpg)
* http://inventors.about.com/od/inventionsalphabet/a/barbecue.htm
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Kingsford’s SWOT
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STRENGTHS
Market leader with 59% market share
40% profit margin
60% of consumers consider Kingsford a
quality product
Strong brand recognition and recall
Kingsford has influential relationship with
retailers
2-to-1 consumers prefer the taste of
charcoal-grilled food to gas-grilled food
OPPORTUNITIES
Build brand equity by being the only
active advertiser in the charcoal
market
Increase market size by expanding to
untapped market segments
Expand to markets outside of the U.S.
Lead the market in product innovations
with flavored and environmentallyfriendly lines
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WEAKNESSES
Dependent on positive relationship with
retailers for generous store displays and
promotions
Dependent on weather to encourage
impulse buys, which account for 30% of
sales
Majority of sales occur between May and
September
Longer cooking time and messier than
gas grilling
THREATS
Gas grilling has become more popular due
to faster cooking time and ease of cleanup
Competitor price increases and lack of
advertising have resulted in slower growth
of charcoal sales
Production issues may hurt availability if
growth occurs
Greater attention to human and
environmental health
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Kingsford’s Questions
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How do we increase overall charcoal use?
How do we increase Kingsford’s sales?
Should we increase prices?
Should we address production issues?
BBQ Sweet Potatoes, John
Dawson, http://www.patiodaddiobbq.com/2009/11/barbecuedsweet-potatoes.html
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Alternatives/Potential Actions
• Facilitate consumer interest in
charcoal grilling
• Increase advertising
• Expand beyond U.S.
• Increase prices
• Expand current product line
• Do nothing
http://instoresnow.walmart.com/uploadedImages/AmericanSum
mer/Articles/5051AAP_AS_art_pov_briquet.jpg
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Criteria for Evaluating Alternatives
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Sales of charcoal
Sales of Kingsford
Brand cachet
Profitability
Tasmanian Salmon, http://www.huonaqua.com.au/grilling.php
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Analysis: Facilitate Consumer Interest in
Charcoal Grilling
• Collaborate with grill manufacturers
• Partner with retailers to offer point of purchase
discounts on meat purchase with charcoal
purchase
• Sponsor events where grilled foods
are for sale
• Feature charcoal grilling recipes and
barbecue party ideas in lifestyle/cooking
magazines and television shows
• Promote charcoal use outside of
traditional grilling holidays and occasions
http://kingsford.com
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Analysis: Facilitate Consumer Interest in
Charcoal Grilling
Pros:
• Emulates Gillette's successful model:
Give away the razor and sell the
blades
• Addresses threat of gas grilling by
strengthening awareness of charcoal
grilling in minds of consumers
• Fosters positive associations of
charcoal grilling
• Attracts new charcoal users who don't
have a grill
http://cdn.sheknows.com/articles/grilled-corn.jpg
Cons:
• Will increased sales justify the cost?
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Analysis: Increase Advertising
• Increase volume and frequency of ads
o $7 million budget recommended during peak
season
• Leverage consumer associations of charcoal
grilling as an American pastime
• Celebrity endorsement
• Target new segments: women and foodies
Pros:
• Consumers receive greater exposure to charcoal
• No active charcoal advertising competition
• Low risk of saturation
• Capture increased market share of targeted segments
http://kingsford.com
Cons:
• Stimulated demand may strain production capacity
• Internal Clorox budget
• Must take care to avoid alienating existing masculine clientele
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Analysis: Expand Beyond the U.S.
• Target customers outside of the U.S.
• Position product to correspond with local culture in new markets
Pros:
•
Increases size of Kingsford's market
Cons:
• Production currently limited to 5 U.S.-based
plants
• Environmental and health regulations
www.bbqbrethren.com/forum/showthread.php?t=63394
of some regions
• Clorox lacks experience outside North America
• Insufficient information of international markets
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Analysis: Increase Prices
Maintain 25% to 30% price differential
Pros:
• Higher prices improve profits per
unit sold
• Consistent with charcoal competitors'
price increases
• Enhances brand cachet
http://dianasneighborhood.files.wordpress.com/
Cons:
2009/09/grilling-coals-robert-s-donovan-booleansplit.jpg
• When competitors raised prices and Kingsford's prices remained
static, sales of Kingsford increased
• Competitive advantage of discount brands is weakened when
their prices are closer to Kingsford's
• Retailer might respond negatively and decrease Kingsford
promotions
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Analysis: Expand Current Product Line
Create flavored and environmentally friendly/healthier
lines of charcoal
Pros:
• Allows Kingsford to lead industry
in innovation
• Appeal to growing "green" and
health conscious market segments
• Enhances brand cachet
http://abcnews.go.com/images/Health/nm
_Grilled_Food_090515_main.jpg
Cons:
• Increased costs
• Is there a demand for "green" or health conscious charcoal?
• Brings attention to environmental and health concerns of existing
products
• Cannibalization of regular charcoal sales
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Analysis: Do Nothing
• Leave prices unchanged while competitors' prices rise
• Maintain $1 million budget for advertising and promotion
• Do not expand into international markets or develop new
product lines
Pros:
• No production constraints
• Free and easy
Cons:
• Position of charcoal remains stagnant
in consumers' minds
• Slow growth of Kingsford sales
• Shrinkage of overall charcoal market size
http://farm3.static.flickr.com/2187/2512252584
_e2d9036049.jpg
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Recommendations
1. Focus on increasing overall charcoal market size
o Strengthen link of grilling and charcoal in
consumers' minds
o What's good for charcoal is good for
Kingsford
2. Increase advertising budget to $7 million
o Use increased budget to advertise
charcoal grilling during nontraditional
occasions
o Present charcoal grilling as femalehttp://img4.southernliving.com/i/2006/03/grillfriendly and essential for premium flavor
with-the-girls/grilling-girls-l.jpg
3. Do not increase prices
o Continue to reap benefit of increased competitor prices
4. Research international expansion opportunities
o Explore viability of expansion
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Recommendations
5. In order to appropriately innovate, conduct market research to
determine why consumers have switched from charcoal grilling to gas
grilling
o If research determines that environmental and health concerns
were primary factors, initiate research and development into
product lines to address these concerns
6. With production currently at 80% of capacity, forecast increased
sales (given the success of each recommendation) and explore all
possibilities for meeting demand
o Keeping in mind that building a new production facility requires
upwards of 5 years and $50 million
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http://www.masterbuilt.com/kingsford/images/kingsford_08.jpg
Sources
Except where noted, all information came from the case
description, Narayandas and Wagonfeld, Kingsford Charcoal
(2006), Boston, MA, USA: Harvard Business School Publishing.
http://www.soudersstudios.com/photos/22_1.jpg
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Questions?
http://kingsford.com/
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Production constraints in 2000
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Current production from 5 U.S. plants
Kingsford's plants operate at 80% of capacity
Kingsford's market share is 60%
100% = 80% * 1.25
Current plants could supply a 25% increase in Kingsford sales
• Production manager estimates:
o New plant costs $50M
o Permitting takes 3 years
Recommendation:
• Begin site selection and permitting
• Next year, reconsider whether to build
http://s.fatwallet.com/static/attachments/11967
_0001_st070209_aap1_img_538277363.jpg
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BBQ Grill Shipments, North America
Hearth, Patio and Barbeque Association (HPBA), https//www.hpba.org/statistics/barbecue-statistics/bbq-grill-shipments
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Demand Curve
When prices of competitors rose in 2000, Kingsford gained market share
For 1% increase in price relative to competition, Kingsford will lose
approximately 4%-points to 8%-points of market share.
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Epilogue
• Market share: Kingsford sold 74% of charcoal in North America in
2009. (Clorox investors' overview (March 2010) Oakland, CA, USA:
The Clorox Company.)
• Innovation: Kingsford introduced Surefire (R) Grooves enabling faster
lighting, hotter and longer burning briquettes.
(http://www.kingsford.com/faq/index.htm)
• Kingsford produces 8 varieties of charcoal
o 2 "natural"
o 2 instant
o 2 regular
o Specialty hickory and mesquite
(http://www.thecloroxcompany.com/products/msds)
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