From around 1980 up to 2000, the charcoal industry has experienced a steady growth of revenues. Kingsford Charcoal had this same positive experience as well. However, in 2000, the charcoal industry took a downward plunge insofar as revenues are concerned. Kingsford Charcoal must find out the factors which cause these sales drops and must come up with the appropriate solution to such problem.
Das Narayandas; Alison Berkley Wagonfeld
Harvard Business Review (506020-PDF-ENG)
September 19, 2005
Case questions answered:
- What is your action plan? What should brand managers Marcilie Smith Boyle and Allison Warren propose to their managers, Gordon and LaMontagne?
- How did Clorox get itself into its present situation? Of what relevant trends should the Kingsford brand managers be aware?
- Why do people grill? Profile a frequent griller. Why do people use charcoal versus gas when grilling?
- How does your action plan agent Kingsford’s business objectives, including market share, profit, and franchise?
- What is the relevant category definition here? What marketing objectives do you recommend for the Kingsford brand?
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Kingsford Charcoal Case Answers
Kingsford Charcoal’s Problem
The Charcoal industry’s growth is slowing down, and Kingsford’s results are below the forecast. Kingsford Charcoal is trying to determine the causes of the drops in sales in order to find solutions to survive and increase its growth.
Situational Analysis
The 4 P’s:
SWOT Analysis
Factors that decreased sales:
- Gas Grillers entering the industry becoming a competitor (Exhibit #5):
- It offers convenience, better temperature, shorter cooking time, and easier-to-clean
- Sales depend on the weather, and it hasn’t been consistent
- Lack of media advertisements (Exhibit #11)
Options + Recommendation for Kingsford Charcoal (Proposal)
There are several strategy alternatives, and they are the following:
1. Extend Grilling Season: Increase advertisements and exposure via television cooking shows, slogans/messages that resonate with consumers to be delivered via
advertisements
2. Acquire Prominent End-cap Displays: In order to increase brand exposure, they need to place Kingsford’s charcoal next to grillers’ display for consumers to see and associate
3. Promotions: They need to do two things during peak season: promote and build partnerships
a. Advertising plays an important role, according to the MMA analysis in the case.
b. The need to take advantage of the off-peak season to deliver a message bringing media attention
c. During peak season, they should allocate their budget by cutting down media exposure and emphasizing price support
4. Production and Capacity:
a. Short-run: Collaborate with grill manufacturers
b. Long-run: Extend product lines, plan on using merge and acquisitions for their business, and build new plants if it’s feasible
c. Strategy to use: Contract with commercial users:
i. Offer discounted prices at campsites for consumers’ usage
ii. Expand to restaurants, hotels, and nomad businesses, as their sales don’t necessarily depend on the weather or gas grilling
5. Price Increase: Kingsford Charcoal has maintained its price as opposed to its competitors, increasing by 10% in one year. They should implement a price increase strategy in 2 ways (Exhibit 10):
a. Between 4-5% price increase in total product line
i. 70% merchandise loss. However, the overall net profit will increase
b. A small scaled increase will help maintain the supplier-retailer relationship
c. Superior quality = higher price; therefore, they should increase both short-term profit and investment opportunity, providing low price elasticity
Exhibits:
Exhibit 2 – 2000 Sales by Week
Exhibit 5 – Grill Shipments in 1996-2000 – Charcoal and Gas (in ‘000s)
Exhibit 9 – Select Results of the Survey of Heavy Kingsford Charcoal Users
Exhibit 10 – Price Elasticity Data
Exhibit 11 – Kingsford Charcoal Media and Merchandising Spending Trends
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