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Kingsford Charcoal

…. Kingsford Charcoal. Daniel Brockman Breanne Klose Elaine Ormonde-Hua Gizem Ozdemir Quyen Tran. http://kingsford.com. Ellsworth B. A. Zwoyer patented charcoal briquettes in 1897* Henry Ford made briquettes from wood scraps in 1920

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Kingsford Charcoal

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  1. …

  2. Kingsford Charcoal Daniel Brockman Breanne Klose Elaine Ormonde-Hua Gizem Ozdemir Quyen Tran http://kingsford.com

  3. 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 Kingsford's History 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 2

  4. 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 • 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 Kingsford’s SWOT • 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 environmentally-friendly lines • 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 3

  5. How do we increase overall charcoal use? • How do we increase Kingsford’s sales? • Should we increase prices? • Should we address production issues? Kingsford’s Questions 4 BBQ Sweet Potatoes, John Dawson, http://www.patiodaddiobbq.com/2009/11/barbecued-sweet-potatoes.html

  6. 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/AmericanSummer/Articles/5051AAP_AS_art_pov_briquet.jpg 5

  7. Sales of charcoal • Sales of Kingsford • Brand cachet • Profitability Criteria for Evaluating Alternatives Tasmanian Salmon, http://www.huonaqua.com.au/grilling.php 6

  8. 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 Analysis: Facilitate Consumer Interest in Charcoal Grilling http://kingsford.com 7

  9. 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 • Cons: • Will increased sales justify the cost? http://cdn.sheknows.com/articles/grilled-corn.jpg 8

  10. Increase volume and frequency of ads • $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 • Cons: • Stimulated demand may strain production capacity • Internal Clorox budget • Must take care to avoid alienating existing masculine clientele Analysis: Increase Advertising http://kingsford.com 9

  11. 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 of some regions Clorox lacks experience outside North America Insufficient information of international markets www.bbqbrethren.com/forum/showthread.php?t=63394 10

  12. Maintain 25% to 30% price differential • Pros: • Higher prices improve profits per • unit sold • Consistent with charcoal competitors' • price increases • Enhances brand cachet • Cons: • 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  Analysis: Increase Prices http://dianasneighborhood.files.wordpress.com/ 2009/09/grilling-coals-robert-s-donovan-booleansplit.jpg 11

  13. 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 • 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 Analysis: Expand Current Product Line http://abcnews.go.com/images/Health/nm _Grilled_Food_090515_main.jpg 12

  14. 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 Analysis: Do Nothing http://farm3.static.flickr.com/2187/2512252584 _e2d9036049.jpg 13

  15. Focus on increasing overall charcoal market size • Strengthen link of grilling and charcoal in consumers' minds • What's good for charcoal is good for Kingsford • Increase advertising budget to $7 million • Use increased budget to advertise charcoal grilling during nontraditional occasions • Present charcoal grilling as female-friendly and essential for premium flavor • Do not increase prices • Continue to reap benefit of increased competitor prices • Research international expansion opportunities • Explore viability of expansion Recommendations http://img4.southernliving.com/i/2006/03/grill- with-the-girls/grilling-girls-l.jpg 14

  16. 5. In order to appropriately innovate, conduct market research to determine why consumers have switched from charcoal grilling to gas grilling • 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 • Keeping in mind that building a new production facility requires upwards of 5 years and $50 million Recommendations 15 http://www.masterbuilt.com/kingsford/images/kingsford_08.jpg

  17. 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 16

  18. Questions? http://kingsford.com/ 17

  19. Production constraints in 2000 Current production from 5 U.S. plants Kingsford's plants operate at 80% of capacity Kingsford's market share is 60% 100% = 80% * 1.25Current plants could supply a 25% increase in Kingsford sales Production manager estimates: New plant costs $50M 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 18

  20. BBQ Grill Shipments, North America 19 Hearth, Patio and Barbeque Association (HPBA), https//www.hpba.org/statistics/barbecue-statistics/bbq-grill-shipments

  21. 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. 20

  22. 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 • 2 "natural" • 2 instant • 2 regular • Specialty hickory and mesquite (http://www.thecloroxcompany.com/products/msds) Epilogue 21

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