Kingsford charcoal - Case study anaysis PDF

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CASE STUDY ANALYSIS 2 Kingsford Charcoal Word Count: 2020

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1. Case summary Kingsford Charcoal was the largest product category in the portfolio of Clorox Company, accounting for $350 million in sales and taking up to 9% of total sales. It is among the most profitable firms in the corporation, with a net income of nearly 9% in 2000. Since 1980, the brand has had consistent net income growth of from 1 to 3% every year. It all began in 1920 with Henry Ford's invention of a technology for converting wood wastes into charcoal briquettes that burned longer and were more efficient than normal wood. Charcoal by Kingsford was offered to customers in two distinct forms: instant (red bags) and regular (blue bags), each of which came in three distinct sizes. The firm sells a variety of charcoal in a variety of sizes for barbecuing. For a long period of time, significant quantities of charcoal were distributed through wholesalers such as Sam's Club and Costco. Other volumes were sold in grocery stores, while mass merchants accounted for roughly 15% and 66% of total revenue, respectively. The customer base of Kingsford Charcoal was separated into three segments. These segments included the instant exclusive segment, which consisted of customers who only use instant charcoal; the regular exclusive segment, which consisted of customers who use only regular charcoal and the instant acceptors segment, which consisted of customers who purchase both kinds on a regular basis. In the late 1990s, three out of every four families in the United States possessed a barbecue grill and more than a third of purchases were made on impulse, customers’ demand for gas and charcoal grilling was strong because they were the most often consumed. Consumption of charcoal was very seasonal, about 35% occurring between Memorial Day and July 4th and 60% of consumer purchases occurring between May 1st and September 1st. Royal Oak and a private label brands were the company's primary rivals while g as grilling is the industry's competitor. Kingsford was the market leader among competitors, taking up to 56.1% of the market, followed by Royal Oak with 7.7% and 34.9% for private brands. Because of a lack of advertising and unpredictable weather in 2000, the market had a general softening throughout those years, while the company fell short of its summer sales objective. Both Kingsford and its rivals did not make significant advertising efforts and even reduced their marketing budgets. Food shops, as the company's key distribution channel, experienced a 5.7% loss, due to the small price differential between brands, which prompted Royal Oak and other pg. 2

firms to increase their prices, while Kingsford maintained its pricing. Customers have shifted to using gas grills as a result of the pricing strategy. Since 1997, the demand for charcoal cooking has dropped, while gas grilling has increased. Although Kingsford's sales revenue and market share climbed toward the end of 2000, that was not a sustainable business model. To address the difficulties, the corporation needs to invest more in its marketing campaign, distribution channels, and pricing strategies.

2. Critical analysis Kingsford's business approach prioritized sales promotion above advertising initiatives. The corporation said that it was a sales-driven brand and investing in marketing campaigns was a waste of money. The brand increased its sales promotion expenditure from $6 million to $8 million while reducing expenditures on media from $6 million to only 1$ million from 1997 to 2001. Along with the two budgeting processes, the firm's income decreased year after year and its profit loss climbed from $25 million to $31 million during the same timeframe. As a seasonal and weather-dependent product, Kingsford worked with merchants to guarantee that their charcoals satisfied customer requirements during the grilling season. Additionally, the corporation would assist its retailer in launching promotions to increase product sales. According to the sales promotion concept (Low and Mohr, 2000), doing it may serve as a short-term incentive to increase sales volume, but consumers may become bored in the long run. Additionally, it jeopardizes firm revenue and profit margins. The study indicated that, despite an increase in sales volume, revenue did not rise. Furthermore, the charcoal industry's lack of advertising contributed directly to the softening phase. While the charcoal grilling sector reduced its marketing expenditure, the gas grilling sector expanded its advertising operations. Kingsford had enlisted the assistance of a third-party Marketing Management Analytics (MMA) firm in order to obtain a better understanding of advertising issues. MMA determined that television advertising enhanced overall performance in 1998; it increased sales volume by 7% in 1998 and continued to grow sales income by 3% to 4% in 1999. The MMA conducted a blind test in which 796 respondents were asked to choose between gas and charcoal cooking meals. The results indicated that half of the participants preferred charcoal cuisine over gas food. According to respondents, charcoal pg. 3

offered a smokey flavor that resembled authentic wood-fired cooking. As external price determinants, the large volume of sales advertising increased consumer buy intention, hence increasing the demand for charcoal. However, while Kingsford's existing capacity may generate 80% of charcoal, sales volume topped 5% every year. Therefore, the firm was unable to meet consumer demand, resulting in supply shortages. Customers perceive grilling as passionate, a chance to meet with close friends, and a pleasurable experience. However, it can be considered as a seasonal product with fluctuating demand in different time periods of the year. American homes grilled frequently; the section grilled largely on holidays, special events, and memorial days from May to September. Grilling events increased dramatically in the United States, up to over 3 billion in 2010. The distinction among charcoal and gas grilling is that the use of charcoal requires more time for preparation and cooking (Johnson, 2009). Nonetheless, it provides consumers with hands-on experiences and a more flavorful dinner that gas grilling cannot match (Warnes, 2008). While there were advantages to charcoal cooking that gas grilling could not match, the charcoal sector has been steadily declining since 1997. In comparison to 1999, 2000 had an 8% increase in petrol prices, while the charcoal business had a 3% decline. A possible reason for the market downturn was the weather (Chidumayo and Gumbo, 2013). December 2000 saw an increase in rainfall and a tendegree drop in temperature, reducing the chance for charcoal cooking. Another issue is the dependence on weather since rainfall has increased, restricting grilling possibilities. Allison Warren and Marcilie Smith Boyle Were assigned to the company's performance that were expected to fall short of expectations in 2000 and were tasked with determining the root reasons of the problem and proposing appropriate solutions. The issue was that the company had not changed their prices in numerous years and had not marketed in effective ways . Furthermore, they anticipated some manufacturing challenges. To maintain a balanced effort, Kingsford needed to invest more on rekindling customer interest in charcoal grilling than in advertising and retailing. During the period between 1998 and 1999, charcoal grew at a rate of 4%, but fell to 2% in the first half of 2000, projecting much worse growth in the second half of this year. The analysis indicated that costs have reduced across brands and that charcoal grill penetration has declined (49% of US households own one) while gas grill penetration has increased (51% of US households own one).

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In terms of external influences affecting pricing strategies, one of the primary concerns was rivals' price and promotions. Whether Kingsford should increase its pricing in response to its competitors' pricing increases. While increasing the price of its products may improve its shortterm profitability, there were possible difficulties such as offending supported shops and jeopardizing its brand, affecting consumers' buy purposes and the appropriate increase rate. From a marketing perspective, sales promotions may result in brand destruction (Mullin and Cummins, 2008). As previously stated, customers perceived Kingsford as a brand that offers high-quality products. Therefore, an abundance of promotional activities may have a negative impact on customers' perceptions of the brand. Because pricing is the most malleable component of the marketing mix, Kingsford could control its pace. To manage pricing, the corporation had planned four price increases: a 4% increase in Club prices, a 5% increase in Blue Bag minimum prices, a 5% increase in Blue Bag high prices, and a 5% increase in Total line pricing.

3. Remedies According to the article, Kingsford charcoal's financial method should be reversed, with a greater focus on marketing than on sales promotions. Sales promotion was lowering the company's profit margins and reducing revenue. Additionally, a lack of understanding and visibility contributed to the general decline of the charcoal business. Pitch advertising campaigns as a means of resolving the problem is one possibility. The company should have increased brand recognition and educated customers about the benefits of charcoal grilling that gas cannot replicate, such as the flavor of the charcoal meal and personal experiences and then created a marketing campaign to promote those advantages. The strategy may trigger the target customer's recollection of charcoal grilling, prompting them to purchase the company's items. Previously, Kingsford operated on a budget of around $1 million for advertising. Increased advertising volume and frequency are required to promote the usage of charcoal and the Kingsford brand. During peak season, an advertising expenditure of $8 million is recommended, higher than the rate at $6 million before. The messages conveyed by the increasing advertising are equally significant. It is critical to capitalize on consumer connections with charcoal grilling as an American activity. In this case, celebrity endorsements are the most appropriate way to advertise this product as they have huge impacts on the public and their images affect the way customers

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consider Kingsford charcoal (Khatri, 2006). As men are often the majority of barbecuers, which implies that many women, who presumably perform the majority of inside cooking, do not take on this position when it comes to outside grilling. Therefore, Kingsford has a chance to grow the market for charcoal grilling by presenting the barbecue process as friendly-for-women in advertising portraying female take over the barbecue as male. In the year 2000, gas grilling surpassed charcoal grilling in terms of revenue. In order to reclaim consumers, Kingsford might take proactive measures to reintroduce customers to the pleasures of charcoal grilling by creating opportunities for customers to rediscover this long-held American hobby. Kingsford may begin by collaborating with grill makers. When a buyer purchases the biggest bag of charcoal, he or she will receive a complimentary basic charcoal grill. Another joint initiative is to engage with stores to give point-of-purchase discounts on meat purchases when accompanied by a purchase of charcoal. Besides using celebrity endorsements as the first remedy, sponsored events are another excellent way to spread the word about charcoal. By partnering with event organizers to utilize Kingsford charcoal in the production of all grilled dishes (and promoting it with adequate signage), Kingsford has the power to build a favorable linkage between joyful events and grilled dishes by charcoal. However, it is essential to maintain good relationships with cooking shows or event planners that are related to the use of charcoal grilling. The collaboration with other partners also strengthened the position of Kingsford on the market, ensuring that its products are indirectly promoted by others. In order to overcome weather fluctuation, Kingsford Charcoal could consider extending their grilling season to allow consumers more time to cook and enjoy their goods during the excellent weather. The average grilling season runs from April to September, which is approximately six solid months of grilling, however this presents Kingsford Charcoal with the challenge of being relevant throughout the remaining six months, which are primarily comprised of the winter season. The corporation may offset this by extending the grilling season into late October or early November through promotion. The company might also increase their television advertising to allow consumers to see their items in action even during these months. However, customers may have to look at the advertisement twice because they are accustomed to seeing such kinds of advertisements only during the summer. Extending the grilling season may appeal to consumers who are missing the traditional grilling season and bracing for the upcoming lengthy winter months. pg. 6

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