Kraft Foods Presentation

The product manager for chocolate maturation at kraft Canada must decide whether to introduce the confederations red-hot distinction of single-serve hot chocolate cods or require results from the United States. Key strategic decisions accept which target merchandise to focus on and what value proposition to signal. primal questions are also raised as to how the invigorated product should be soft touched, which flavors to offer, whether kraft paper should wasting disease traditional diffusion channels or direct-to-store delivery, and what forms of advertizing and promotion to use.The courtship provides a basis for discussing consumer decision making, and stresses the importance of providing a clear incremental benefit when introducing a new product in an established category. Decision Statement Should kraft have waited to lay out the burnt umber pod in Canada until the telephoner received results from the U. S.? Since they did a simultaneous launch, how quite a li ttle kraft paper foods alter their marketing organisation to increase gross r eventideue of the burnt umber pod? kraft Foods Kraft Foods was originally began as a tall mallow manufacturer in 1903 & has since evolved into North the Statess largest food and drinkable company Had previously been a division of Phillip Morris Companies but became a universe company in June 2001 Operations consist of Kraft Foods North America and Kraft Foods international Business is divided into five product categories beverages, gubbins meals, cheese, grocery, and snacks. One of the strongest brand portfolios of global consumer rabbleaged goods players textlist-item textlist-item whole distribution network and a fountainhead-earned reputation for developing innovative new products and food applications Mission to achieve drawship in the markets it served, which it pursued by fostering innovation, achieving high product quality, and keeping a close philia on profit margins. World leader i n hot chocolate gross gross revenue with 15% of the global market In Canada, Krafts maxwell signboard and Nabob brands account for 32% market take. The Launch of the chocolate Pod In July of 2004, Geoff Herzog (product manager for umber development at Kraft Foods Canada) found out that Kraft Foods North America was preparing an aggressive launch of coffee pods in the US. Herzog had less than a month to decide whether Kraft should proceed with a simultaneous launch in Canada, or await the U.S. results Herzog decided to go ahead with the launch ? This is where we believe the problem arose Created the Tassimo In order to Launch in Canada, Herzog had several decisions to make Kraft possess two major brands in Canada, maxwell House and Nabob, so the company would have to create a suitable branding strategy. Setting sell and sell prices for coffee pod Choose which flavors to offerDecide whether to use traditional distribution channels or direct-to-store delivery Develop an effic acious advertising and promotional strategy on a relatively particular budget Herzog would also contain to present a convincing case that his plan and recommendations would in fact help Kraft expand its share of the Canadian coffee market, season also generating a satisfactory lapse on the companys marketing investment. Marketing StrategyWith an yearbook budget of only $1 million for the launch, Herzog faced tight constraints on his ability to introduce Kraft coffee pods in Canada. He would need to identify a cost-effective way to convince consumers that Kraft pods delivered remedy value the competitors pods Goal 80% of SSP machine owners to try the product and 60% of those individuals to repeat purchase Herzog was expected to at least break even by the end of 2006 Target MarketIndividuals between 25-54, tended to be well educated and had a household income of $ 91,000 (Canadian household income was around $55,000) Three-quarters were married and 88% lived in single-detached h omes in urban areas, primarily in the population thick provinces of Ontario, Quebec, British Columbia, and Alberta. Consumers were characterized by high levels of consumption, and their interests included exercising, entertaining at home, bon vivant cooking, household decorating, gardening, and taking exotic vacations.Maxwell House and Nabob had standardized profiles to SSP machine owners, except that individuals were typically over the age of 45 purchaser Behavior Consumers typically purchased pods of the same brand as the machine they bought On the other hand, focus group research suggested that SSP machine owners valued flexibility of using different coffee brands in their brewers. Coffee quality was censorious since it defined the entire coffee experience Market Share Kraft expected that, of the 12. million households in Canada, SSP machines would be adopted by approx. 6% by the end of 2004 and 8% by the end of 2006. To maintain Maxwell House and Nabobs share of the Canadia n coffee market, Herzog estimated that Kraft would need to capture at least 35% of the coffee pod segment Product By proceeding with the launch, Herzog needed to decide on a flavor selection Variety of pod offerings would be overcritical for building market share and category growth.Krafts manufacturing rapidity also had the ability to offer the product in a resealable start with zip closure, keeping the product good Price The price of the coffee pod itself ranges from $130-$200. Kraft planned to sell pods under Maxwell House label at a lower point than rival brands, retail a pack of 18 pods for US$3. 99. Folgers charges $3. 99 for a pack of 16 This pricing would give retailers a 25% margin on Maxwell House, and at $0. 2 per cup, revenue that was more than four propagation the $0. 05 per cup from ground coffee Issues arose when deciding to follow the U. S. lead on pricing On one hand, low prices could serve to drive sales volume and establish Kraft as market leader, but this st rategy risks eroding brand image. Given the failure rate of new products in Canada, Herzog suspected that store would be willing to carry one or two brands of coffee pods Herzog was unsure of the best wholesale nd retail selling price to recommend Distribution Most products were delivered to retailers via warehouse distribution which essentially made Kraft responsible for delivering all merchandise to the customers warehouses. From there, retailers thence distributed the goods to individual stores Retailers were responsible for stocking products, refilling shelf spot, maintaining inventories, and maintaining displaysservices for which Kraft paid in excess of $200,000 for national listing fees.Their constitution eliminates the need for Kraft to constantly monitor and track inventories, distribution, and stock The alternative was to use direct-to-store-delivery (DSD). This system would require Kraft to be responsible for delivering merchandise to individual stores, attribute inven tories, and restocking shelves Kraft used this method for its Mr. Christie cookie products by creating a articulatio DSD program with Mr.Christie, it would enable Kraft to lower overall cost for coffee pod distribution to approximately $150,000 by reducing supply chemical chain expenses and minimizing inventory holding costs DSD would also allow Kraft to consider product displays, ensure superior product freshness, improve customer service, necessitate insight from retailers, and sidestep warehouse capacity restraints. 40% of all coffee makers were sold in November and December, DSD would also provide Kraft with speed to market during this period Herzog was not convinced that DSD was the way to go.He didnt tincture the company would be able to maintain the DSD approach if coffee sales increased significantly in the future due to limited space in its distribution center and a limited delivery motortruck fleet Company SWOT analysis Strengths North Americas largest food and bever age company and number two player in the world Operations in more than 155 countries One of the strongest brand portfolios among global consumer packaged goods players 50- $100-million brands 5- $1- one million million brandsStrong reputation for developing innovative new products and food applications 32% market share in Canadian coffee market The companys Maxwell House line was Canadas top retail brand of roast and ground coffee while Nabob was the leader in Western Canada and number two nationally. Resealable bags for fresher coffee Weaknesses Limited budget for launch of coffee pod Entered the Canadian market years after Senseo had already established themselves as the leader in coffee pod production selling three billion pods in the first three years. Price of coffee pod system Lack of proper advertising and promotions OpportunitiesThe company is already a steer producer of coffee in Canada, so they have a greater opportunity to appeal to loyal Kraft brand consumers with their product If the company would choose to target a market different than their competitors, they could gain potency on other markets such as college students. Switch to DSD distribution Threats accounting entry the Canadian market before receiving results from North American launch Canadian grocers enjoy margins of 20 to 30 percent, but Herzog believed margins of 35 percent would be needed as an incentive to list Krafts coffee pods Use of warehouse distribution