Kingsford Charcoal Daniel Brockman Breanne Klose Elaine OrmondeHua

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

Kingsford's History • 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 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

Kingsford’s SWOT 1. 2. 3. 4. 5. 6. 1. 2. 3. 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 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 environmentallyfriendly lines 1. 2. 3. 4. 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 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

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

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/uploaded. Images/American. Sum mer/Articles/5051 AAP_AS_art_pov_briquet. jpg 5

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

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

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

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

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

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

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

Analysis: Do Nothing • 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 http: //farm 3. static. flickr. com/2187/2512252584 _e 2 d 9036049. jpg 13

Recommendations 1. Focus on increasing overall charcoal market size o Strengthen link of grilling and charcoal in consumers' minds o What's good for charcoal is good for Kingsford 2. Increase advertising budget to $7 million o Use increased budget to advertise charcoal grilling during nontraditional occasions o Present charcoal grilling as femalehttp: //img 4. southernliving. com/i/2006/03/grillfriendly and essential for premium flavor with-the-girls/grilling-girls-l. jpg 3. Do not increase prices o Continue to reap benefit of increased competitor prices 4. Research international expansion opportunities o Explore viability of expansion 14

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

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

Questions? http: //kingsford. com/ 17

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. 25 Current plants could supply a 25% increase in Kingsford sales • Production manager estimates: o New plant costs $50 M o Permitting takes 3 years Recommendation: • Begin site selection and permitting • Next year, reconsider whether to build http: //s. fatwallet. com/static/attachments/1196 7_0001_st 070209_aap 1_img_538277363. jpg 18

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

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

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