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Submitted By bubbagump05
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Erica Frank
Kingsford Charcoal
Problem Statement Kingsford Charcoal as a brand needs to reevaluate its marketing strategy in order to rekindle consumer interest in charcoal grilling to combat increase in gas grilling trends because charcoal is in the mature stage of the product life cycle and there is little growth within the industry.

Performance Objectives Kingsford’s objectives are to maintain a 1-3% growth in sales and maintain market share. Kingsford is a cash cow in Clorox’s portfolio; therefore, it needs to maintain profits to support other brands and investments.

Strength
Kingsford Charcoal represents one of the largest product groups within Clorox’s portfolio, which means that it has the resources to spend on marketing the product. Represents approximately 9 percent of Clorox’s revenues and substantially higher percentage of its net income, indicating that it is essential for Kingsford to maintain its position within the charcoal market. (page 3)
Clorox sales team has years of experience working with key accounts, which gives the company an advantage in terms of building strategic relationships with retailers and wholesalers. (page 4)
Constancy in marketing and sales actions over time and consistency in message communicated to sales team and marketing, channel members, and final consumer. This has helped Kingsford not only create and sustain brand awareness, but also grow the business. (page 4)
Lab tests proved that Kingsford’s product is superior to Royal Oak and the private label brands, which means that Kingsford can charge a higher price to match the quality of the product. (page 5)
Consistent merchandising from 1999 to 2000, which has helped maintain positive relationship with retailers.
Increase in volume and market share for the first half of 2000. Kingsford market share= 59.5% and relative market share= 9.3 in relation to Royal Oak the largest competitor (59.5/6.4). The high relative market share and low growth in the industry make Kingsford a cash cow in Clorox’s portfolio, which means that it needs to be maintained because profits are used towards investments and other projects. (exhibit 8)
Kingsford gained a great deal of goodwill with Clorox’s channel partners, which means better relationships. (page 7)
Kingsford’s charcoal is price inelastic, which means that consumers are not sensitive to price changes. (See Exhibit 1 for analysis)

Weaknesses
Kingsford has a long track record of being heavily driven by sales and merchandising activities; however, this has prevented them from maintaing consumer interest in charcoal grilling because the company does not advertise. (page 1)
Absence of media advertising contributed to the category weakness because there were no charcoal messages in the public. Reduced media spending from over $6 million in 1998 to a little over $1 million in 2000. Not meeting sales goals for the year. (page 6)
Plants currently running at approximately 80% of total capacity; if there is an increase in volume of more than 5% for several years in a row, there would be supply issues. It is difficult and expensive to build additional capacity. If Kingsford was to run out of capacity, there are not many alternative sources for charcoal production. (page 10)
Clorox’s stock is at a three year low and sales growth would not be as high as predicted. Clorox relies on Kingsford for it profits to invest in other areas of the business; however, both Kingsford and Clorox are not performing as well as expected. (page 10)

Opportunities
Market Potential=$588.2 million, which was determined from Kingsford’s sales and market share $350M=0.595(x). (exhibit 8)
Typical grilling consumers and behaviors: By the late 1990s, three out of four US households owned a barbecue grill with over 80% of grill ownership being among younger, larger, higher income families. Just over half of grill owners were heavy/medium users. Over 60% of barbecuers were men and most popular occasions for grilling were: July 4th, Labor Day, Memorial Day, and special occasions (i.e. tailgating). Typical reasons for grilling include hanging out with family and friends, change of pace, easy clean-up and informality. Majority of the die hard grillers preferred charcoal grilling over gas. It is important to understand the typical grilling behaviors and patterns to create an effective marketing plan. (page 2)
The total number of barbecue events in the US has gone up to over 3 billion in 2000. (page 2)
Most popular foods for grilling include hamburgers, steak, hot dogs, chicken, pork chops, ribs, and sausage. (page 2)
Charcoal is a seasonal business with nearly 60% of consumer purchases occurring between May 1 and September 1. Holiday weekend purchases because of an increased amount of parties and barbecues. This is an opportunity because it can guide marketing promotions and schedules. (page 4)
Over one third of charcoal purchases are impulse purchases, which are an unplanned decision to make a purchase; therefore, trade promotion strategy needs to emphasize in-store displays. (page 4)
According to exhibit 6, 49% of households own a charcoal grill and 20% of households own both gas and charcoal indicating that there is still a need for consumers to purchase charcoal.
Three heavy user segments: regular exclusive that use charcoal, instant exclusive that use instant charcoal, and instant acceptors that are comfortable with both. (page 6)
Charcoal is considered a ‘happy product’ associated with family and fun, which gives more leeway with pricing changes. (page 7)

Threats
Low growth industry: growth in the charcoal category has slowed from 4% growth from 1998 to 1999 to 2% growth from the second half of 1999 to the first half of 2000. Declines are more pronounced in the food channel with a 5.7% decline. (page 5 and 14)
Direct Rivalry: Royal Oak and Private Label, which were manufactured and distributed by Royal Oak. Narrowing price gap across various charcoal brands as a result of private label price increases that the channel has passed along to the consumer. (page 5)
Substitutes: Gas grilling is becoming more popular because of the easier clean up, convenience, greater control over cooking temperature, and shorter cooking times. Gas grill shipments grew by 8% in 1999, while charcoal grilling shipments decreased by 3% showing a consumer trend toward gas grilling. According to exhibit 6, 54% of households own a gas grill. Grilling increased media spending during the same period from less than $4 million in 1998 to over $10 million in 2000. (page 2, 5, 6)
Buyer Power: Club stores, food stores, mass merchandisers, and drugstores. (page 4)
Weather patterns has contributed to category softening in 2000 because there was an increase in rainfall from October through December, as well as a major drop in temperatures. Fall and winter grilling were positively correlated with mild temperatures. Lower temperatures leads to less opportunities for grilling. (page 6)

Recommended Marketing Strategy
Target Market
Instant Acceptors because they account for 62% of total volume consumed and use both regular and instant charcoal products. This target market consists of adults, mainly males, that value family gatherings, informal occasions and fun in everyday experiences. Households with younger, larger and higher income of $50,000+ and look for quality in products. Value real barbecue tastes when grilling. Relatively heavy users of the product, on average 6 times per month. Aware of Kingsford as a brand and it falls into target market’s evoked set when making a purchase decision. Shop in food stores, mass merchandisers, and club stores.

Product (Positioning)
Product line: Charcoal briquettes packaged as-is in blue bags sold as Kingsford Charcoal and Kingsford lighter fluid sold as Kingsford Match Light in red bags (instant). Each sold in three sizes: 10-pound, 20-pound, 48-pound for regular and 8-pound, 15-pound, and 30-pound for instant.
Differentiation from direct competitors and gas grilling based on the quality of Kingsford Charcoal. The regular charcoal has high quality of lighting faster and burning longer, while the instant charcoal offers convenience. Kingsford is a mature product; therefore, a market modification strategy needs to be used to grow the market. Market modification can be achieved through a market penetration strategy of expanding the grilling season to increase consumption and purchases.
Positioning Statement: For instant acceptors, Kingsford Charcoal is the leader in the charcoal category among the competition, Royal Oak and Private Label, because it offers the quality of lighting faster and burning longer to create a real barbecue taste.

Price
Kingsford charcoal is a price inelastic product; therefore, the customers purchasing habits are not greatly affected by changes in the price. This allows Kingsford to have more flexibility with price setting.
Kingsford should increase Blue Bag (Regular) pricing by the minimum amount of 2.5%. Regular exclusives and Instant Acceptors make up the largest amount of consumer sales; therefore, just increasing the price of the Blue Bag products will have Some retailers may resist, but will not be surprised at price increase because competitors also increased prices over the last year. The price inelasticity of the product means that consumers will be affected by the price increase.
The strategy that Kingsford should use is competition based above market pricing. Kingsford wants to stay within a targeted percentage range of 25-50% above competitors. Also, Kingsford’s Charcoal is known for its quality; therefore, its prices should reflect the value that consumers believe they are receiving.
|Product |Weighted Average Base Price |
|Regular (10-pound) |$4.21 |
|Regular (20-pound) |$7.00 |
|Instant (8-pound) |$5.15 |
|Instant (15-pound) |$8.46 |

Promotion
Budget Allocation: Total of $45 million
The promotion budget was allocated using the task and objective technique. The objective that the promotions need to meet is market modification by increasing charcoal usage. As a result, the advertising budget was increased to be able to include more media outlets in order to produce more messages and awareness among consumers.
Advertising= $6 million
Schedule: Pulsing schedule with advertisements running mainly during between May1 through September 1 because charcoal purchases are seasonal due to grilling behaviors. However, advertisements are continued over the rest of the year at a lower rate to help aid extending of grilling season.
Message: The message for the advertisements will be focused around the real barbecue flavor that charcoal grilling gives food and demonstrating that grilling can be used outside the summer months. The message appeal will be humor to catch the attention of the target market and the executional framework will be a mix of dramatization and fantasy to encourage more usage. Each of the advertisements across outlets will be consistent with one another to eliminate confusion and reinforce the new brand positioning.
Media: Increase media advertising because there is currently no charcoal messages on the air and gas grilling has increased media spending to over $10 million in 2000. Kingsford needs to use media to implement market penetration strategy and new message.
TV= $3 million
Some of the advantages of using TV as a medium is that it can reach extremely large audiences, while also allowing for targeting specific audiences. The ads are effective because they use picture, sound and motion; however, there are high costs associated with producing ads and paying for spots. Half of the advertising budget is being spend on TV because it has the highest costs and the potential to be extremely effective. The ads will run during sports games, cooking shows, and home based shows to reach the target market.
The television ad will focus on one man grilling on his charcoal grill and each scene will be a different season. The commercial will start out with the man grilling in the spring, then move into summer, followed by fall and the last scene will be winter. It will be dramatized because he will be grilling in the middle of winter with snow on the ground in gloves and a hat. The slogan in the ad would be “Real barbecue taste, anytime of the year”.
Magazine= $1.5 million
Magazine ads can target a specific audience, have a long life, and offer high-quality color. However, it takes a long time for placement and there are relatively high costs associated. The amount spent on magazine ads is reflected by the high costs of production and potential high costs of placement. The ads would be placed in sports and food magazines to reach males and cooking enthusiasts.
The magazine advertisement will have a man grilling with gloves, a hat, and a winter jacket in the middle of winter with snow on the ground. The slogan will be “Real barbecue taste, anytime of the year”.
Outdoor= $500,000
Outdoor is a low cost advertising medium that offers the opportunity for repeat exposure in local outlets. The message needs to be short and simple and low segmentation possibilities. Place the advertisements on major highways leaving cities, such as New York, Boston, Miami, and Los Angeles, to reach commuters driving home from work. The smallest part of the advertising budget is being spent on outdoor because costs the lowest for producing and placement.
The billboard will have a picture of a Kingsford Charcoal package and a charcoal grill with the slogan “Real barbecue taste, anytime of the year”.
Sponsorship= $1 million
Sponsor NASCAR events during March, April, September, and October to help extend grilling season outside summer months. Use the sponsorships to help promote charcoal grilling at tailgating events in the spring and fall. Kingsford can have a station set up at the more popular races in order to demonstrate to consumers the benefits of using charcoal over gas, like the real barbecue flavor. In addition to showing users how charcoal differs from gas, it also shows that grilling is not only reserved for the summer months.
Consumer Sales Promotion= $8 million
Temporary price reductions during holiday weekends and before popular sporting events, such as the Daytona 500 in February, because those are the most popular occasions for grilling. Offering price reductions more times throughout the year, rather than just during the summer months, it will help to reinforce the new positioning of extending the grilling season. If people do end up extending the usage, then the price reductions will serve as another motivation for purchases.
Contest/Sweepstakes to win tickets to a NASCAR race.
Sampling program at sponsorship events offering people samples of food for them the experience the real barbecue flavor from charcoal grilling.
Trade Promotion= $31 million
Contribute trade money to help reduce prices during Memorial Day and July 4th holiday weekends. This will help maintain retailers after slight price increases.
In-store displays, especially end of aisle, to make Kingsford visible because charcoal purchases are mainly impulse purchases. Kingsford wants to be the brand that consumers purchase when walking by a display.
Feature the product in stores circulars that are mailed to local consumers. This will help maintain product and brand awareness for consumers each week and motivate purchases because charcoal is a low involvement purchase product, which means that little effort is put into making the decision.

Distribution
Intensive distribution to have Kingsford Charcoal in as many outlets as possible. Club stores for largest sizes of the two products such as Costco and Sam’s Club. Food stores (supermarkets), mass merchandisers (Target), and drug stores (Walgreens) carried mix of other sizes.
Emphasize food stores because they account for 66% of total charcoal sales.
It is critical to have enough products on the floor in a central location for holiday weekends. Displays combined with featured pricing and inclusion in store circulars is not only good for Kingsford, but also for the store.
Exhibit 1: Price Elasticity Analysis
|Pricing Scenarios |Change in Quantity |% Change in Quantity |
|COGS | |256,670,000 |
|Gross Margin | |110,000,000** |
|Less Marketing Fixed Costs: | | |
|Advertising |6,000,000 | |
|Consumer Sales Promotion |8,000,000 | |
|Trade Promotion |31,000,000 | |
|Total Marketing Expenses | |45,000,000*** |
|Net Profit after Marketing Fixed Costs | |65,000,000 |

*Sales Forecast: Kingsford experiences on average 1-3% growth each year, in addition the new marketing strategy uses market penetration and additional money spent on advertising to increase usage and purchases leading to an overall increase in sales of 5% from $350M to $364M. To come up with this forecast the lost-horse forecast method was used, starting with the sales given in the case and estimating the effect that the new marketing plan of market penetration will have on sales.
**Gross Profit: 30% margin
***Increase advertising from $1M to $6M to aid market penetration strategy by adding advertising media. MMA’s analysis of TV advertising estimated that in 1998 it drove a 7% volume increase. Maintain current spending on consumer sales promotion and trade promotion to ensure prime locations in the retail outlets to attract impulse purchasers.

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...FMCG NOVEMBER 2011 For updated information, please visit www.ibef.org 1 FMCG NOVEMBER 2011 Contents  Advantage India  Market overview and trends  Growth drivers  Success stories: Major players  Opportunities  Useful information For updated information, please visit www.ibef.org 2 FMCG NOVEMBER 2011 Advantage India Growing demand • Attractive opportunities • 2018E Market size: USD74 billion Rising disposable income of the young population has been a major growth driver for the sector Emergence of organised retail has boosted the distribution of FMCG sector Low penetration levels in rural market offer room for growth Consumers are highly adaptable to new and innovative products • • • Advantage India Increasing investments • There is a growing market for premium products Policy support • Industry saw heavy FDI inflows as they accounted for 2.1 per cent of the country’s total FDI 2000-10 Many players are pursuing inorganic growth by acquiring regional players Automatic investment approval of up to 100 per cent foreign equity is allowed Have improved on the infrastructure facilities which has increased access to the industry • • 2010 Market size: USD28 billion Notes: Market size estimates from Technopak 2018E – estimated figure for 2018 For updated information, please visit www.ibef.org ADVANTAGE INDIA 3 FMCG NOVEMBER 2011 Contents  Advantage India  Market overview and trends  Growth drivers  Success stories: Major players  Opportunities...

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Interantionalization

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