Kingsford Charcoal: Overcoming The Softening In The Charcoal Category

Casework

Kingsford Charcoal: overcoming the softening in the charcoal category

PROBLEM STATEMENT

Taking into account the slowdown in the overall charcoal category, the main problem of Kingsford Charcoal (KC) is how to determine the right strategy in order to improve its sales and profits and ensure future growth of the company. This strategy has the following issues:

1. How to overcome the penetration of gas grill usage?

2. Increasing advertising - will it help the company to improve the sales?

3. How to extend the seasonality of business?

4. How to choose the right pricing strategy?

RECOMMENDATIONS:

• In order to overcome gas grill penetration, the KC should organize an advertising campaign on and emphasis on charcoal market advantages versus gas market with an aim to increase total charcoal grill market, using results of blind taste test of food grilled on charcoal comparing to grilled on gas.

• The holiday weekends, e.g. the 4th of July celebration should be specially marketed, using media advertising, including different store promotional activities with an aim to increase higher percentage of Kingsford’s annual sales.

• To extend the seasonality span of charcoal business, on which KC success is based on, the company would need to organize campaigns with emphasis on family values, friendship, free time spending and most importantly stimulate early spring and late fall open-door barbecue events, like concerts, sports events and other leisure activities both in local neighborhood and in other states. Compared to previous years, such outdoors events are becoming more and more popular and they have a tendency to grow.

Pros. (1) By increasing the total coal-grilling category, the sales and profits of Kingston Charcoal will increase too, as at the present it has the largest market share. By addressing current category ad vacuum KC will more appropriately counter gas grilling which has been heavily advertised. (2) The cooperation with grocery, mass retailers, and distributors as the sales on charcoals increases growth of not only Kingsford’s, but also private label brands. That вЂ" on the other hand вЂ" gives bargaining power for KC on display placements, promotions and other retail-oriented issues.

Cons. (1) Expenses will definitely increase and will extend the budget. (2) Competitors will benefit from the campaigns too, especially cheaper private label brands. There is a risk that competitor’s market share may grow on KC expense in both вЂ" financial and market share terms.

ALTERNATIVES

1.To increase prices according to 4th scenario (total line price increase by 5%) and from short-term revenues income use resources for advertising. The option seems to be reasonable from financial point of view since total market has raised the prices.

Pros of the alternative would be additional profit.

Cons here are the high possibility to lose merchandise since too high prices may force retailers to look for cheaper suppliers. Another one is that it is not appropriate moment for price increase as total market is stagnating and even shrinking. Finally, it could lead to loss of market share (e.g. for the benefit of Royal Oak), since customers may start to switch for cheaper products.

2. To enter gas-cooking area вЂ" produce coal required for gas grills, produce gas grills under the brand of Kingsford in order to cover expanding market opportunities.

Pros of this alternative would be additional income form the products launched in grooving market. Diversifying business risk would be another benefit for launching gas-grilling line.

Cons - it would require high expenses and time for developing the new business. There is also high possibility of a failure what will lead to damage of brand value and loss of traditional KC customers.

3. Label licensing to introduce supplementary products (grill, smokers and grilling accessories, skewers etc.) under Kingsford brand.

Pros - this option will increases sales and profits as well as support the promotion of charcoal in general.

Cons вЂ" In case of quality problems with additional products, the brand name could be damaged. Moreover, it would require additional