Kingsford Charcoal Case
Through the years, the firm was purchased by an investment group and later acquired by Clorox in 1973, which owns 50 other products that it distributes. Kingsford had one of the largest products groups within Clorox’s portfolio and in 2000; Kingsford represented 9% of Clorox’s annual revenue and a larger percentage of their net income. In 2000, Kingsford had five facilities which housed both plants which produced regular charcoal (the blue bag) and instant charcoal (the red bag). ProblemDue to slow growth in the charcoal industry and projected decline in sales, Kingsford managers are posed with rejuvenating the brand during an industry shift, which should account for the impact of Kingsford advertising, pricing, promotion and production in regards to increasing the capital investment and new income of the Clorox Company. SWOT Strengths Kingsford is considered the top brand in charcoal and consumer studies show that Kingsford is perceived as a better product (60%) whereas only 13% for private labels.
This is a benefit to Kingsford in value building of the organization and beneficial information that can be used to increase their value communication in advertisements, prices, promotion and production. With the largest market share in charcoal sales, Kingsford’s market share in the first half of 2000 was 56. 1% and in the second half of 2000 market share was 59. 1% due in part to price increases by its competitors Royal Oak and private label brand charcoal manufactures. The promotion of “better taste” is also a benefit to the Kingsford Brand, as there is intensive growth in the gas grilling market.The production of the regular charcoal (blue bag) and match light instant charcoal (red bag), keeps Kingsford distinguished as a brand and will continue the growth of product distinction. Weaknesses Since 1998, Kingsford has not adjusted their prices while competitors have raised their prices and have also allowed their advertising budget to decrease over a span of 5 years to about $1 million per year.
Kingsford Charcoal Case Essay Example
Kingsford is also not taking their association to Clorox Company to their advantage by partnering with other sub-brands, and has not effectively responded to the increase of gas grill customers.The lack of control of vendor and retail pricing is also a weakness for Kingsford sales are less predictable for their various markets. Opportunities Kingsford has many opportunities to increase its market share in the charcoal and gas grilling industries through a strategic marketing strategy that will connect gas grill consumers to the Kingsford brand. Through the use of marketing information systems, information can be provided to show how advertising can be effective for targeted, available and potential markets.The information gathered would also provide measures that would determine market demand and give insight into how Kingsford should price their products to appeal to each market group to develop customer relationships through promotional events, brand placement advertisements and the production of new products. Finally, Kingsford can tap into global markets to expand their market demand. Threats Kingsford’s lack of advertising within the industry while gas grill advertising has increased is a detriment to their brand recognition.
Kingsford also has limited production capacity and affect its supply of charcoal if demand increases by 5%, so it is important to monitor production to avoid capacity shortages. While Kingsford has not raised its prices in recent years, distributors have slightly increased Kingsford’s prices to consumers (approximately 5%), and Kingsford needs to narrow the price gap between private label brands. Weather patterns have also impacted the grilling season and can potentially affect overall sales. AlternativesIn a response to the strengths, weaknesses, opportunities and threats to the organization, several alternatives should be considered in strategizing the best way to increase the wealth of the organization. Expand Product Line: Kingsford has the option to set the pace for charcoal innovation by expanding product lines to generate additional interest in charcoal grilling. Engineering more environmentally friendly, flavor imparting and scented charcoals such as vanilla or mint flavored charcoal may do this.In response to the trending up of gas grill usage from previous years, Kingsford could consider entering into wood chips production for gas grills.
Additionally, to prevent seeing charcoal as a seasonal product, awareness could be drawn to other uses of charcoal, such as an odor remover in the home or a type of soil amendment by gardeners to improve crop growth. Education on these other uses will increase demand for charcoal all year round and not just during the warm months when grilling is prevalent.Increase advertising: An increase in advertising focusing on brand quality, affordability, and flavor adding benefit, as a way to counter the growth of gas grilling is another alternative considered. Integrated marketing whereby Kingsford would form partnerships with other brands and distributors to increase brand association with other industries could be employed such as working with food companies that promote grilling to cultivate relationships with customers. Increase Price: Kingsford could consider increasing prices like its competitors, although this would only generate short-term profits.The right time to launch a price increase is crucial and Kingsford could decide to hold off on any price increases until such a time that the market has been clearly defined and it is safe to do so. Although a price increase will re-emphasize Kingsford’s brand quality, there exists the danger that its current market share will decline once the prices go up.
Penetrate Global Markets: Another alternative is for Kingsford charcoal to penetrate global markets. As the US market gets saturated, untapped markets such as Europe and Asia could potentially become the ‘moneymakers’ for Kingsford and Clorox as a whole.Do nothing: A final alternative is for Kingsford to do nothing in the hopes of marinating its current business strategy on advertising and limiting the opportunity for increased growth. Recommendations The proposed strategic plan should consider advertising, pricing, promotion and production. Advertising needs can be met through the use of customer information; it is best to focus on the penetrated markets and targeted markets because they are most likely to remain loyal customers despite the rowth of the gas grilling industry. In a built-in effort to provide future growth to the Kingsford brand, a suggestion of researching global markets in order to expand consumer market should be considered. A decision to maintain current prices should be made to maintain differentiation of Kingsford in the market.
A second step to guarantee price differentiation is to consider a price control from within the organization to limit the pricing flexibility of retailers and vendors.Through the growing use of the World Wide Web, an effort to create product loyalty is suggested on creating promotional features that will make the Kingsford brand unique in the services that are offered. Considerations should be made for a cookbook, grilling cook-off during off peak grilling periods (which will create an opportunity for penetrated and targeted consumers to learn more about the products as well as to maintain interest), customer testimonials (to bring a face to the brand) and grilling tips. Finally, production should be maintained for the “red” and “blue” bags to continue product recognition.A new aspect of Kingsford that should be considered is expanding into the gas grilling industry, in order to have a market share and customer base in both industries. In conclusion, the primary objective of Kingsford should be to balance the needs of its advertising, pricing, promotion and production features to ensure that the brand remains a leader in the grilling industry, resulting in market share growth for the Clorox organization Exhibit A SWOT A SWOT analysis will formulate a strategy to determine the best alternatives and recommendations in regards to advertising, pricing, promotion and production for Kingsford.Strengths Kingsford is considered the top brand in charcoal and consumer studies show that Kingsford is perceived as a better product (60%) whereas only 13% said the same for private labels.
This is a benefit to Kingsford as they are not required to spend funds on the value building. The increased operating funds can be used to develop new-offering realization process or customer relationship management process, since one-third of charcoal purchases are impulse buys. This is beneficial information for Kingsford because they can utilize this to increase their value communication in advertisements, prices, promotion and roduction. With the largest market share in charcoal sales, Kingsford’s market share in the first half of 2000 was 56. 1% and in the second half of 2000 market share was 59. 1% due in part to price increases by its competitors Royal Oak and private label brand charcoal manufactures. These price increases had consumers turning to Kingsford due to its lower price in the marketplace which will continue to solidify Kingsford’s control of the market.
The promotion of “better taste” is also a benefit to the Kingsford Brand, as there is intensive growth in the gas grilling market.The continued positive relationship that Kingsford has with vendors and retails will be sustained through promotional alliances, pricing collaborations and logistical placement. The production of the regular charcoal (blue bag) and match light instant charcoal (red bag), which are distributed through food stores (66% of total sales), mass merchandisers and Wal-Mart (15%) and drug stores (2%), club stores and other non-traditional outlets (16%), keeps Kingsford distinguished as a brand and will continue the growth of product distinction.Weaknesses Since 1998, Kingsford has not adjusted their prices while competitors of private label brands and Royal Oak continually have raised their prices. Kingsford has also completed limited measures of market productivity, because they have allowed their advertising budget to decrease over a span of 5 years to about $1 million per year on the internal notion that Kingsford was a ‘sales-driven business’. Kingsford is also not taking their association to Clorox Company to their advantage by partnering with other sub-brands to promote their products through joint advertisement.The company also fears that the loss of some customers is a result of the increasing gas grilling industry and the increased charcoal prices has led to customer dissatisfaction.
The lack of control of vendor and retail pricing is also a weakness for Kingsford, because they have not taken corrective action, sales are less predictable for their various markets. Kingsford needs to access their current vendor relations and strategically determine what marketing tools they can use to market charcoal in off peak seasons and with more strategic placement within stores.Opportunities Kingsford has many opportunities to increase its market share in the charcoal and gas grilling industries through a strategic plan that uses innovative approaches to bridge a connection to consumers that are using gas grills as well as using a marketing strategy that will appeal to Kingsford’s penetrated markets. Through the use of marketing information systems in Kingsford and through secondary sources on the gas grilling market a market intelligence system can be used to monitor purchasing habits of both charcoal and gas grillers.This information can provide insight as to how Kingsford should advertise to show brand quality in targeted, available and potential markets. The information gathered would also provide measures that would determine market demand and give insight into how Kingsford should price their products to appeal to each market group. The perception of Kingsford being a superior brand is something that can be used to develop customer relationships through promotional events, brand placement advertisements and the production of new products.
Several things that Kingsford should consider are using grill-offs to promote the brand during off-peak grilling periods. Sparking interest at strategic times and encourage customers to purchase items and contribute the Kingsford market-buildup method. A cookbook, grilling tools ( added flavor briquettes, spatulas, grill brushes) and new gas friendly products (gas flavorings, eco-friendly propane) can be produced for market research, through the use of survey research or focus groups prior to determine what products are desired by consumers.Finally, Kingsford can tap into global markets to expand their market demand. Threats Kingsford’s lack of advertising within the industry while gas grill advertising has increased their media spending from less than $4 million in 1998 to over $10 million in 2000 is a huge advertising budget in comparison with Kingsford’s current $1 million budget. Any planned promotions to increase market share can have a negative effect on Kingsford’s bottom-line, with limited production capacity of some of Kingsford’s manufacturing sites (approximately 80%) will affect its supply of charcoal if demand increases by 5%.With the high cost of expansion $30-$50 million to build a new plant and at least five years for the permitting process, Kingsford needs to keep an eye on its capacity to avoid the pitfalls of not meeting demand due to capacity shortages.
Pricing strategy; Kingsford pricing varies based on product type and size. The price of Kingsford regular (blue bag) and Match Light (red bag) products range from $4. 25 for A 10 pound bag of regular charcoal to $8. 07 for a 15 pound bag of Match Light.While Kingsford has not raised its prices in recent years, distributors have slightly increased Kingsford’s prices to consumers (approximately 5%). Even with unplanned price increases to consumers, Kingsford has increased its market share in the industry category. A critical pricing issue is the narrowing of the price gap between Kingsford and private label brands.
Kingsford should seek to maintain a moderate gap between its quality product and private label brands.