Burger flipping is a deeply ingrained habit in the American culture. 4th of July, birthdays, engagement parties, a sunny weekend afternoon; any occasion is good enough to fire up the barbecue.
As the market leader, Kingsford Charcoal was comfortably holding 57% of the charcoal market share. Two main product lines - the regular "blue bag" and the instant "red bag" - were sold in different sizes: 10 lbs, 20 lbs, and 48 lbs for the first, and 8 lbs, 15 lbs, and 30 lbs for the latter. Market research and lab tests found the product to be of superior quality than the competition, which justified the price premium commanded.
In 2001, Clorox's Kingsford Charcoal realized that some things had changed in consumers' habits. The most significant change was that they were now increasingly turning to gas as a substitute for coal. Gas grilling was increasing at a faster rate than coal grilling: between 1996 and 2000, shipments of gas grills increased by 46%, while shipments of coal grills increased by 20%. While grilling on charcoal provided a hands-on experience and greater flavors, grilling on gas presented many more advantages for the consumers:
- Convenience: switching on the gas grill was cleaner and faster than firing up the coal
- Control over cooking temperature
- Shorter cooking times
- Easy to clean up
The switch from coal to gas was also supported by several elements. The first was a general price increase in the charcoal market: between 1999 and 2000, the prices of Kingsford's competitors jumped by 10%. With a steady and almost stagnant price increase, Kingsford was being threatened by competitors' price alignment.
Secondly, companies in the coal market seemed to have strayed from advertising. Kingsford's Media Expense had actually decreased by 33% in 3 years. This meant that consumers' awareness, interest, desire and actions were at the mercy of in-store promotions and activities.
Another elements related to advertising is in-store promotions: the general price increase left retailers and distributors with a bigger bargaining clout. The temporary price reductions and merchandising decisions were beyond the scope of Kingsford and their competitors.
The final element was truly uncontrollable for the market: the weather. Cold temperatures coupled with rain and snow were not optimal grilling/barbecuing conditions.
While the current state of the market is the result of the interaction of several factors, Kingsford Charcoal needed to figure out which of the above-mentioned elements contributed the most to the market slowdown. From this analysis, they would be able to develop a strategy, and plan tactical actions. I see several ways that Kingsford could have approached their issue:
- Kingsford Charcoal could have invested in some market research to better define and delimit their product category: are they in the food industry? In the outdoor activities? In the seasonal products? Understanding consumers' perceptions would have helped them better cater to their needs.
- Kingsford Charcoal should could have increased the advertising expenditure and focused the message on the advantages of grilling with coal. As the market leader, this would have been instrumental in strengthening brand leadership. With Clorox's reserve in increasing the current advertising budget, Kingsford Charcoal would have had to ensure that higher sales volumes would absorb and amortize advertising expenditures.
- Kingsford Charcoal had better increase their prices to sustain their market leadership and perceived product superiority. The most profitable way to increase prices is in fact a total line pricing increase of 5%. This means that consumers shopping at different retailers would encounter similar prices. This 5% price increase would result in the highest projected profits: $1.765 billion.
Works Cited:
Narayandas, D. & Berkley Wagonfeld, A. (2006). Kingsford Charcoal. Boston: Harvard Business Publishing.
Hot Smoke Barbecue Weather Forecast. Retrieved 02/09/2013, from: http://www.hotsmokebbq.com/001profile/weather_forecast.php
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