Kingsford Case

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To improve its softening situation, I believe that Kingsford should increase prices and shift its spending from sales promotion to media marketing in order to improve Kingsford’s profit in the short term and invest more in R&D to create new products in the long term. Pricing strategy plays a key role for Kingsford’s profitability in 2001. Recent price increases for private label brands reduced its price gap with premium brands, which eroded the premium brand image of Kingsford (see exhibit 1). Among the four pricing scenarios (see exhibit 2), the option of increasing both regular (blue bags) and instant (red bags) charcoal products by 5% across all channels would deliver the highest profit prospect. Although raising price likely hurts volume, it will also significantly increase profits. Gas grilling market has grown faster than charcoal grilling market between 1997 and 2000 (see exhibit 3). In addition, there is a shift to gas grilling with increased gas grill penetration versus decreased charcoal grill penetration (see exhibit 4). This trend is largely driven by a combination of increasingly busy lifestyles, convenience of gas grilling and restrictions against charcoal grill due to both fire safety and environmental concerns. It is an unrealistic goal to reverse this. Kingsford can only slow the trend through increasing its media advertising with a focus on real taste of charcoal barbecue. Although the overall budget for marketing was increased $1 million from 1998 to 2000, the shifting spending from media expense to sales promotion adversely affected sale revenue (see exhibit 5) in two ways. First, frequent temporary price cuts ruined perceived differentiation of Kingsford from private label (see exhibit 6). Second, less spending on media weakened its competition with its real competitor, namely gas grilling. Also, the continued limited budget for media will be a problem for the team. However, reducing sales promotion to increase media expense should be...
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