Answering the four questions.

Description







Write only a two-page, please.

Here are the questions:

1. Why do people grill–take a deep dive into this activity?

2. What should Marcillie’s action plan be?

3. Should Kingsford raise prices? Why Why not?

4. How do the 4 ps strategically fit together in this case?


I have attached the case. Thanks in advance.



For the exclusive use of D. Daniel, 2018.
9-506-020
REV: JULY 20, 2006
DAS NARAYANDAS
ALISON BERKLEY WAGONFELD
Kingsford Charcoal
Brand managers Marcilie Smith Boyle (HBS MBA Class of 1996) and Allison Warren were getting
together for their weekly Kingsford Charcoal (“Kingsford”) debriefing meeting in February 2001 at
Clorox’s corporate offices in Oakland, CA. As the job-sharing brand managers for the $350 million
charcoal business, Smith Boyle and Warren had a lot to discuss during their Wednesday “overlap”
day. Both women were assigned to the brand in July 2000, just as it became apparent that the
summer results were going to come in below forecast. Since the 1980s, Kingsford had continued to
enjoy steady, moderate growth of 1-3 percent in revenues each year. During this time, the charcoal
category as a whole had been growing as well. However, the summer of 2000 represented the first
softening in the overall charcoal category in several years, and Smith Boyle and Warren were tasked
with determining the causes and coming up with recommendations.
As the team analyzed various trends relating to competition, pricing, advertising, promotion and
production, Smith Boyle and Warren were faced with a series of critical strategic decisions that would
impact the future trajectory of the Kingsford brand. Kingsford had not raised prices in several years,
nor had it advertised in any significant way since 1998—options that now required consideration.
With Kingsford’s long track record of being heavily driven by sales and merchandising activities,
Smith Boyle and Warren wondered whether there was an opportunity to balance this effort and
invest more in rekindling consumer interest in charcoal grilling. They realized that this initiative
could significantly impact the brand image and the advertising message. There were also some
production issues looming in the horizon – if Clorox did invest in building the Kingsford business,
would the existing capacity be adequate? Smith Boyle and Warren were scheduled to meet with their
marketing director, Derek Gordon, the following week and they were eager to get his feedback on
their recommendations before Kingsford’s annual business review later in the month.
Grilling in America
People cook over an open flame the world around, but Americans do it more often and better.
Grilling is the essential American culinary art, a glorious birthright celebrated everyday from coast to
coast. It’s a passion, a party, a way to cook that won’t let you call it a chore. It’s about playing with fire
under an open sky, wielding a mean spatula in one hand, a cool drink in the other. Most of all it’s a
surefire means to get yourself from here to a decent meal, having loads of fun. Make that a great meal….
Excerpt from the front flap of the book titled Born to Grill: An
American Celebration (1998) by Cheryl Alters Jamison and Bill Jamison
________________________________________________________________________________________________________________
Professor Das Narayandas and Alison Berkley Wagonfeld prepared the original version of this case, “Kingsford Charcoal,” HBS No. 505-076
which is being replaced by this version prepared by the same authors. Select data have been disguised for the purpose of confidentiality. HBS
cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or
illustrations of effective or ineffective management.
Copyright © 2005 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,
photocopying, recording, or otherwise—without the permission of Harvard Business School.
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Kingsford Charcoal
By the late 1990s, three out of four US households owned a barbecue grill with over 80% of grill
ownership being among younger, larger, higher income families. The total number of barbecue
events in the US had gone up from 1.4 billion in 1987 to 2.7 billion in 1995 and over 3 billion in 2000.1
Just over half of grill owners were heavy/medium users but they did the vast majority of the
barbecuing (more than 85% of all occasions). Over 60% of barbecuers were men and the most
popular occasions cited for grilling were: July 4th, Labor Day, Memorial Day, and special occasions
such as tailgating.2 Common reasons for barbecuing included great flavor, desire to be outdoors,
hanging out with family and friends, change of pace, easy clean-up and informality. Although
barbecuers had greatly expanded their cookout repertoire over time, the foods that typically topped
the “cooked frequently” list had not changed much. The most popular foods for the grill included
hamburgers, steak, hot dogs, chicken breasts, pork chops, ribs and sausages. Roasted potatoes,
steamed vegetables and marinated vegetables were the side dishes grilled most frequently.3
Charcoal and gas grilling were the two most commonly used grilling methods. Although charcoal
grilling took longer to set up and cook, most die-hard grillers preferred charcoal grilling over gas
grilling for its hands-on experience and the flavor imparted to the food. Gas grilling, on the other
hand, was preferred by those that were looking for convenience, greater control over cooking
temperature, short cooking times, and ease of clean-up.
Clorox Company History
The Clorox Company (“Clorox”) was founded in 1913 as The Electro-Alkaline Company. Its first
product was industrial strength liquid bleach made from a combination of chlorine and sodium
hydroxide. The bleach was originally made in Oakland, California and sold in the Bay Area. In 1922,
the company changed its name to the Clorox Chemical Company, and soon expanded its distribution
to the rest of the United States. By 1957, Clorox was the leading producer of bleach in the U.S. and it
changed its name to The Clorox Company.
Procter & Gamble was attracted to Clorox’s category leadership and offered to buy the company
in 1957. Although the sale was completed, the U.S. Federal Trade Commission challenged the
acquisition on the grounds that the combined company could create a monopoly in household liquid
bleach. After ten years of litigation, the U.S. Supreme Court forced P&G to divest Clorox, and in
1969, Clorox became an autonomous company listed on the New York Stock Exchange. After
obtaining its independence, Clorox pursued an aggressive growth strategy driven by acquisition and
internal research and development. By 2000, the company had over 50 products that were marketed
to consumers around the world.4
1 There is no definitive history about how the word “barbecue” originated – or why it is sometimes used as a noun, a verb or an
adjective. Some say the Spaniards get the credit for the word, derived from their “barbacoa,” which is an American-Indian
word for the framework of green wood on which foods were placed for cooking over hot coals. Others think the French were
responsible, offering the explanation that when the Caribbean pirates arrived on the Southern shores of the United States, they
cooked animals on a spit-like device that ran from “whiskers to tail,” or “de barbe à queue.” Source: Hearth, Patio, and
Barbecue Association website – web address http://www.hpba.org/consumer/bbq/bbqTrivia.shtml.
2 Tailgating literally means to participate in a picnic that is served from the tailgate of a vehicle, as before a sports event.
3 Source: Hearth, Patio, and Barbecue Association website – web address http://www.hpba.org/consumer/bbq/bbq
Trivia.shtml.
4 Based on company history available at www.clorox.com/company/history, accessed on August 30, 2004.
2
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Kingsford Charcoal
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As of June 30, 2000, Clorox had annual sales of $4.1 billion and net earnings of $394 million. For
reporting purposes, the company split its results into three major categories: U.S. Household
Products and Canada (40 percent of sales), U.S. Specialty Products (45 percent of sales) and
International (15 percent of sales). (See Exhibit 1 for Clorox company financials.) In addition to
Clorox Bleach, household products included Glad, water filters (Brita), and cleaning products such as
Formula 409, Pine Sol, Soft Scrub, Liquid Plumr, Tilex, and Ready Mop. Specialty products consisted
of cat litter (Fresh Step, Scoop Away); auto care (Armor All, STP); charcoal and lighter fluid
(Kingsford, MatchLight); and dressings and sauces (Hidden Valley, KC Masterpiece).5 Nearly all of
Clorox’s products were among the leaders in their respective categories.
Each product group was managed by a brand team that typically consisted of a brand manager
and several associate brand managers. The brand organization was generally responsible for setting
the business strategy, understanding the consumer, developing advertising, creating short-term
forecasts and helping with sales promotions. As a result, the brand team had to work closely with
other functions, particularly sales, product supply and finance. Gordon explained, “One of the key
functions of the brand team is to understand the consumer and apply that learning.”
Clorox sold the majority of its products to grocery retailers and distributors, worldwide military
installations, mass merchandisers, warehouse clubs and drug, discount, hardware and variety stores.
The company relied on its own sales force as well as a combination of brokers/distributors. Clorox
also sold products to professional/institutional customers through a network of brokers and
manufacturer reps. As of June 2000, Clorox had approximately 11,000 employees worldwide.
Kingsford Charcoal
Kingsford represented one of the largest product groups within Clorox’s portfolio. In 2000,
charcoal represented approximately 9 percent of Clorox’s revenues, and a substantially higher
percentage of its net income. The business was started in the 1920s when Henry Ford developed a
process for turning wood scraps into charcoal briquettes that burned longer and hotter than regular
wood. E.G. Kingsford, a lumberman and relative of Ford’s, helped build the first briquette plant and
commercialized the business. The plant was later bought by an investment group and then purchased
by Clorox in 1973.
Product and Pricing
Kingsford Charcoal was manufactured from wood, minerals, limestone, starch, borax, sodium
nitrate and sawdust in a two-part procedure. The process began with transforming waste wood (e.g.,
scrap from furniture plants) into wood char in a $15-$20 million retort facility that heated wood in an
oxygen-controlled atmosphere. The wood char was then combined with the other ingredients in a
$20-$30 million facility that converted the materials into pillow shaped briquettes. As of June 2000,
Kingsford had five plants in the U.S., each of which housed both parts of the operation.
Some of the charcoal briquettes were packaged as-is in blue bags and sold as Kingsford Charcoal
(“regular” or “blue bag”), while others were treated with Kingsford lighter fluid and sold as
Kingsford Match Light in red bags (“instant” or “red bag”). The bulk of the volume for both types
was sold in three sizes: 10-pound, 20-pound and 48-pound (two 24-pound bags) for regular, and 8-
5 Clorox had acquired several of these brands (e.g., Glad, STP, Scoop Away) through its 1999 acquisition of First Brands Corp.
for $2 billion.
3
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506-020
Kingsford Charcoal
pound, 15-pound and 30-pound (two 15-pound bags) for instant. The largest size was typically
available only in club stores such as Costco and Sam’s Club, while food stores (e.g., supermarkets),
mass merchandisers (e.g., Target, K-Mart) and drugstores (e.g., Walgreens) and Wal-Mart carried a
mix of the other sizes.
In 2000, food stores accounted for 66 percent of total charcoal sales; mass merchandisers and WalMart for just over 15 percent; drug stores for 2 percent; and club stores and other non-tracked
channels accounted for the remaining 16 percent. Regular charcoal represented approximately 75
percent of total shipments, with the 20-pound size comprising approximately 60 percent of sales.
Pricing varied based on the product and the size. In January 2001, the average price to consumers
for the regular 10-pound bag was $4.25 and the regular 20-pound bag was $6.78. The average
consumer prices for the instant bags were $5.20 for the 8-pound and $ 8.07 for the 15-pound bag.6 In
most channels, Kingsford competed with Royal Oak and private label brands. The private label
brands typically sold at a 25-30 percent discount to Kingsford with Royal Oak being typically priced
between the two. Virtually all of the private label products were manufactured and distributed by
Royal Oak.
Key Success Drivers
Kingsford’s business was seasonal, with nearly 60 percent of consumer purchases occurring
between May 1 and September 1. (See Exhibit 2 for 2000 sales by week.) The Memorial Day and July
4th holiday weekends represented 35 percent of Kingsford’s annual sales, fueled in large part by storebased promotions organized by the Kingsford team. Smith Boyle explained, “Our sales team makes a
big impact by working with retailers to ensure that there always are at least 7,500 pounds on the floor
during the primary grilling months. Summer holidays are particularly important and Kingsford
often contributes trade money to help reduce prices for our products during those key weekends.”
The Clorox sales team had years of experience in working with key accounts and many of the
senior sales executives at the company such as Grant LaMontagne, vice president of sales, had sold
charcoal earlier in their careers. LaMontagne believed that Clorox really understood the category.
He explained:
Our success in the charcoal category is “discipline.” This has led to a constancy of
marketing and sales actions over time, and a consistency in the message communicated within
our own sales and marketing organization, to the channel, and to the end consumer. I have
found that successful brands can get derailed over time when the firm begins to tinker with the
brand. In their effort to grow the business, it is common for marketers to change the brand
image as they go after new market segments. Over time, such actions create enormous
confusion within the firm and in the marketplace. The net result is that the various sales and
marketing efforts begin to operate at odds with one another.
When Warren took over the brand manager position in July 2000, she recalled hearing from the
sales team at least five times in her first week:
With Kingsford, the key is display — you need to pile it high and watch it fly. Display drives
sales since over a third of charcoal purchases are impulse purchases. When the weather is
good, shoppers bump into charcoal displays in the store and think, ‘Today would be a great
day to barbeque.’ Our job is to make the charcoal visible and let the weather do the work.
6 Based on 2001 Information Resources Inc (IRI) data, as supplied by Clorox.
4
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Kingsford Charcoal
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In terms of product quality, Kingsford’s lab tests showed that its product was superior to Royal
Oak and the private label brands. Consumer studies also showed that Kingsford was perceived as a
better product with approximately 60 percent of surveyed consumers indicating that Kingsford “is a
high quality brand,” relative to 13 percent for private label.7
Kingsford Business in 1999-2000
When Smith Boyle and Warren started with the group, Gordon had warned the two brand
managers that it would be difficult to achieve the forecasts created earlier in the year, as business was
starting off at a slower pace. Warren recalled:
Derek said to me on my first day with the brand, ‘Welcome to Kingsford. Based on how
July 4th is shaping up, you are already in the hole and there is no additional money to spend.
Kingsford didn’t do as well as we had hoped in fiscal 2000 [ending June 30], and we are
concerned that fiscal 2001 doesn’t look much better. We’re hoping you and Marcilie can figure
out what to do.’
Smith Boyle added, “We felt the pressure right away. Kingsford is such an important part of
Clorox’s overall performance that when Kingsford misses its number, there is a good chance that
Clorox will miss.”
Smith Boyle and Warren started with an in-depth analysis as to why the category appeared softer
than it had in previous years. The charcoal category had slowed from 4 percent growth from 1998 to
1999 to 2 percent growth from the first half of 1999 to the first half of 2000. The forecasted growth for
the second half of 2000 looked even worse, and by the end of 2000 the entire category was down
relative to 1999. The declines were most pronounced in the food channel, with a 5.7 percent decline
during the second half of 2000. (See Exhibit 3 for volume growth by channel.)
With the help of two associate brand managers, the team ran numbers on all of the different
factors that could have led to a softening in the category. The analysis revealed some interesting
trends. The team was surprised to find a narrowing of the price gap across the various charcoal
brands as a result of a series of private label price increases that the channel had passed along to
consumers. By the end of 2000, the prices of private label bags were nearly 10 percent higher than
they were in 1999 across all channels, the biggest price jump in years. (See Exhibit 4 for pricing
trends.) Smith Boyle explained,
In prior years, prices rarely moved more than 5 percent over the course of the year. We
found that stores had recently increased the price of their private label brands. We also found
that Royal Oak had increased prices during this period. Finally, although we had kept the
Kingsford prices constant, several of our channel partners had chosen to increase Kingsford
prices as well to consumers during this period.
The Kingsford team believed that gas grilling could have captured some of the consumers that
had negatively reacted to the charcoal price increases. In 2000, gas grill shipments grew 8 percent
relative to 1999 with 9.3 million new gas grills being shipped, while charcoal grill shipments dropped
3 percent year over year with just under 6 million new charcoal grills shipped (see Exhibit 5 for grill
shipments from 1996-2000). Overall, charcoal grill penetration had trended down since 1997, while
gas grill penetration had trended up. In 2000, approximately 54 percent of U.S. households owned a
7 Based on Clorox Usage & Awareness testing in 2000.
5
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506-020
Kingsford Charcoal
gas grill, relative to 49 percent that owned a charcoal grill, and approximately 20 percent of U.S.
households owned both grill types (see Exhibit 6 for grill penetration trends).
Smith Boyle and Warren also believed that Kingsford’s absence of media advertising further
contributed to the category weakness. Neither Royal Oak nor the private label brands did any
advertising, so when Kingsford did not advertise, there was no charcoal message on the air. This was
compounded by the fact that while Kingsford had reduced its media spending from over $6 million
in 1998 to a little over $1 million in 2000, gas grilling had increased its media spending during the
same time period from less than $4 million in 1998 to over $10 million in 2000. Warren explained,
“The charcoal category was now paying the price for several years of reduced advertising.”
This trend was further exacerbated by a reduction in promotional activity across the category. In
past years, Royal Oak had contributed substantial funds towards merchandising opportunities at
retailers such as temporary price reductions, features and displays. However, these efforts were
pulled back during 2000. In addition, the Kingsford team speculated that retailers might have been
inclined to do fewer major promotions for Royal Oak after the price increases.8 The private label
brands had fewer feature and display promotions during 2000, but stores did continue with
temporary price reductions (see Exhibit 7 for category merchandising in 2000.) Kingsford’s
merchandising in 2000 was consistent with that in 1999.
A final factor that contributed to category softening was traced to weather patterns in 2000.
Precipitation and temperature comparisons with 1999 showed a slight increase in rainfall in October
through December 2000, coupled with a major drop in temperatures. Average U.S. temperatures in
November and December 2000 were nearly 10 degrees lower than temperatures during the same
period in 1999. Fall and winter grilling were positively correlated with mild temperatures, so the
cold weather reduced opportunities for grilling occasions.
Although the overall category sales volume dropped in 2000, Kingsford’s volume rose slightly
and its market share had increased.9 For the first half of 2000, Kingsford had a 56.1 percent market
share, relative to 7.7 percent for Royal Oak and 34.9 percent for private label. For the second half of
2000, Kingsford rose to a 59.5 percent market share while Royal Oak dropped to 6.4 percent and
private label shifted to 32.7 percent (see Exhibit 8 for market share trends). According to Smith
Boyle, “The price increases drove more consumers to Kingsford, so we benefited to a large degree.
But given our large market share, our success is tied in to the overall success of the category, so we
couldn’t be complacent.”
In addition to the data on market trends, Smith-Boyle and Warren had access to a detailed internal
segmentation study of over 300 heavy Kingsford users (that grilled at least 6 times a month) that
uncovered three heavy charcoal user segments: Regular Exclusive users that grilled exclusively with
regular charcoal; Instant Exclusive users that used only instant charcoal; Instant Acceptors that were
comfortable and committed to both charcoal types. The three segments accounted for roughly 30, 10
and 60 percent of all heavy Kingsford users, and 28, 11, and 62 percent of the total volume consumed
by these users respectively. Exhibit 9 summarizes the findings of the segmentation study.
8 Although companies often give merchandising dollars to retailers with recommendations as to how those dollars could be
used to help that company’s product, retailers have ultimate control over how merchandising dollars are applied.
9 Market share data is based on IRI numbers in food (e.g., Safeway), drug (e.g., Walgreens) and mass (e.g., Target) channels.
Data does not reflect sales at Wal-Mart and club stores such as Costco.
6
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Kingsford Charcoal
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2001 Business Decisions
With all the analysis and consumer segmentation information in hand, Smith Boyle and Warren
started to think about an action plan to present at their business review meeting with senior Clorox
executives. They knew profitability was critical, and they believed continued growth was important
as well. After a series of meetings with Gordon and others at the company, they focused on four
areas: pricing, advertising, promotion and production.
Pricing
The price increases by both private label and Royal Oak raised a number of key questions: Should
Kingsford increase prices as well? If so, how big a price increase should they consider? Should they
raise prices for both regular and instant and for all channels? If they did raise prices, would retailers
pull back on the merchandising support (e.g., features and special displays) they have been giving to
Kingsford over the last several years? Would a price increase drive consumers to purchase other
brands? Or worse yet, to gas grills? In order to help answer these questions, the brand team did price
elasticity studies for several different scenarios to estimate the volume and profitability impact from
potential price increases. The scenarios included: (1) a moderate price increase (~4.0 percent) only for
club stores, (2) a small (~2.5 percent) blue bag price increase across all channels, (3) a moderate (~5.0
percent) blue bag increase across all channels and (4) increasing both blue bag and red bag by 5
percent across all channels. For each scenario, the Kingsford team estimated the impact on volume,
sales and profit, while also accounting for potential withdrawal of merchandising support (see
Exhibit 10 for information from the elasticity studies).
Gordon believed that raising prices was a great way to increase short-term profits and would
provide some money that could be reinvested in Kingsford and other businesses in Clorox’ specialty
division. In addition, it ensured that Kingsford would stay within the targeted 25-30 percent price
gap relative to private label. There were, however, some potential drawbacks. Sales director Nick
Vlahos believed that Kingsford had gained a great deal of goodwill with Clorox’ channel partners
over the last year that could translate into increased opportunities for Clorox. He explained:
We’ve been working with our retail partners over the last several years to increase
promotion of Kingsford, particularly at the expense of Royal Oak. If we hold off on any price
increases for another year, we might be able to convince more chains to focus distribution and
merchandising support on Kingsford and private label. We’ve been advocating this ‘twobrand’ strategy for some time, and this could be our year to see it happen. If we do raise
prices, we may lose all the merchandising momentum we have gained. In fact, a price increase
might cause us to lose some big accounts altogether, particularly because we don’t have a clear
justification for the higher price point.
Smith Boyle and Warren agreed with Vlahos’s assessment, but Smith Boyle explained that:
Taking price increases is particularly challenging for sales people: retailers inevitably resist,
and we all knew that the sales team was being compensated based on volume. In reality, there
is never a good time for a price increase; it’s a matter of finding the best of the bad times. The
retailers almost certainly wouldn’t be surprised with a price increase given what our
competitors have done over the last year. As for the consumers that buy Kingsford, charcoal is
considered a ‘happy product’ – it’s associated with family and fun—so that sometimes gives us
more leeway with pricing changes.
7
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Kingsford Charcoal
Advertising
Smith Boyle and Warren believed that anticipated volume losses from a potential price increase
could be restored through increased advertising. Kingsford had gradually decreased its advertising
since 1996, as more money was spent on sales promotions, “reduced revenue” spending, and
dropping to profit. As of February 2001, the forecasted advertising spending for Kingsford was
under $1 million. (See Exhibit 11 for Kingsford marketing spending from FY 97 through forecasted
FY 01.) According to Warren, “The prevalent belief around the company was that Kingsford was a
‘sales-driven business’ and that advertising would be a waste of money.”
The brand team disagreed and looked for ways to build their case. They started by hiring a third
party, Marketing Management Analytics (“MMA”), to analyze the effects of advertising on Kingsford
sales in past years. MMA’s analysis of 1998 spending indicated that TV advertising drove a 7 percent
incremental volume increase in targeted markets in 1998, and the benefits accrued in 1999 as well
with an estimated 3-4 percent volume increase from the residual impact of advertising.10 Based on
the data provided by MMA’s marketing mix analysis, Smith Boyle and Warren believed that
Kingsford should be spending at least $7 million on advertising during the peak grilling season of
April-September. They knew it would be difficult to get those funds, but they believed that “base
volume would continue to erode if Kingsford didn’t start advertising again.”
Gordon offered to help them apply for $5-7 million of mid-year funds from a corporate “kitty,”
but he wanted the team to first think through their intended advertising message. In past years, the
brand team had worked with agencies to develop separate messages for regular charcoal and instant.
From 1991 through 1998, the message for regular was based around product quality relative to other
charcoal: “Lights twice as fast as other coals” and “Lights faster, burns longer.” Nearly all of the
MMA effectiveness studies were based on these advertising campaigns. Match Light advertising was
based on a different message targeting higher end customers seeking convenience. In 1996-1998,
Match Light advertising centered on a “Ready in 15 minutes” message and in 1999 the team had
reverted to a 1991 spot claiming “You need just one match.”
Smith Boyle and Warren wondered if they should go back to the 1998 advertising that had proven
results, or if should they try a different message. In past years, Kingsford had viewed other charcoal
brands as its biggest competition; it now appeared that gas grills might be the product to beat. They
debated if they should be advertising to grow the number of grilling occasions overall, to focus on
growing the charcoal category or to focus on growing Kingsford’s share within the charcoal category.
They thought about incorporating data from a blind taste test performed with 796 men and women
ages 18-54 in Sacramento, Dallas, Tampa and Chicago in June 2000 that had asked consumers to
compare chicken, steak or hamburgers cooked over Kingsford Charcoal to those same foods cooked
over gas. Across all meat types, 2-to-1 participants preferred the taste of charcoal-grilled food to gas.
Tasters commented that meat grilled over charcoal “has a real barbecue flavor,” “has a smoky flavor”
and “tastes like it was grilled over a real wood fire.” The brand team wondered if there were specific
advertising executions that could leverage this data in a meaningful way.
Promotion
As the brand team focused on pricing and advertising, the sales group took the lead on thinking
through Kingsford’s promotional strategy. Clorox worked to optimize four sales levers at each
distribution outlet: Merchandising, Assortment, Pricing and Shelving (“MAPS”).
10 MMA used a customized regression tool that blended several data sources to quantify the specific impact of media.
8
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Kingsford Charcoal
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Within merchandising, the Kingsford sales team worked with stores to feature the product in
circulars that were mailed to local consumers and to get Kingsford displayed on prominent end of
aisle displays (end-caps). Assortment reflected the different Kingsford stock keeping units (“SKUs”)
that were carried by each store. Here, the team focused on making sure that the individual stores
were stocking the appropriate mix of SKUs that maximized sales volume. The Kingsford marketing
team used scanner data to develop detailed quantitative models for each local market that the sales
team used to educate the management of the individual stores on these issues. Pricing represented
the various everyday prices of each SKU and the target numbers for temporary price reductions. The
Kingsford sales team helped the channel partners plan the frequency and depth of price reductions
since the volume spikes from price promotions were very significant. Shelving related to where
Kingsford products were located, both in terms of aisles and exactly on which shelf each SKU was
located. It was important that Kingsford products were treated consistently across stores, so
members of the sales team spent a great deal of time visiting store managers and working on the
execution details.
Kingsford also worked with customers to capitalize on big holidays with targeted Memorial Day,
4th of July and Labor Day promotions. According to LaMontagne:
On a sunny July 4th weekend a Wal-Mart store could sell 5,000 pounds of charcoal in one
day. It is critical that each store keep enough product on the floor in a central location. This
not only serves a reminder but generates the impulse to purchase. Ideally, we want each
person who walks into a store to see pallets of Kingsford charcoal and we push to get our
charcoal in two different locations. When the displays are combined with featured pricing and
inclusion in store circulars, Kingsford does particularly well—which is good for us and good
for the store overall. Our research has shown that consumers who buy Kingsford charcoal
tend to spend 30 percent more during their store visit than consumers who do not buy
charcoal. We do our best to show this data to stores so that they can see the benefits of
promoting Kingsford.
The Kingsford team was also working on plans to extend the grilling season outside of the peak
summer months by creating NASCAR promotions for March, April, September and October as well
as by encouraging fall tailgating events. Dawn Willoughby, sales merchandising manager, explained,
“We have put together a 12-month plan to increase charcoal consumption. The goal is to increase
grilling occasions and we want stores to help reinforce this objective.” The sales team pursued comarketing opportunities with other brands such as Pepsi and Budweiser to help pay for increased
promotions throughout the year.
As the sales team worked with stores on the various promotions, they also continued to push the
stores to focus primary support on two brands—Kingsford and private label. LaMontagne explained:
We see ourselves as custodians of the charcoal category. Our research shows that
supporting too many brands of charcoal hurts the channels’ revenues and profits. For
example, with too many SKUs to manage, the channel would routinely face stock-outs of the
popular products that could lead to lost sales, or even worse, lost customers if the consumers
switched stores altogether. Armed with compelling evidence on lost revenues and margins,
we are going to the channel with a message of ‘less is more’. We are telling them that brands in
the middle such as Royal Oak are driving consumers away from the premium brand that was
sought out by brand-loyal consumers or away from the stores’ profitable private label brand.
9
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For the exclusive use of D. Daniel, 2018.
506-020
Kingsford Charcoal
Production and Capacity
The Kingsford team hoped to increase growth through a combination of advertising and
promotion and therefore was working with the Clorox product supply group to ensure adequate
supply. Based on the numbers run by the product supply team, it looked as if the plants were
currently running at approximately 80 percent of total capacity. As a result, there would only be
supply issues if volume grew more than 5 percent for several years in a row.
It was difficult and expensive to build additional capacity. Bill Lynch, vice president of product
supply, explained:
A new plant can cost $30–$50 million to build and it could take at least five years once
Clorox started the permitting process. It could take two to three years just to acquire all of the
necessary regulatory approvals. If we want to expand one of our current plants, we still need
to go through a two-year permitting process. In addition, some of our plants are not
expandable—often for environmental reasons.
If Kingsford did run out of capacity, there were not many alternative sources for charcoal
production. The business could try approaching a competitor in the U.S. or looking at several
offshore options. If those turned out to be prohibitively expensive, the Kingsford team ran the risk of
running out of product towards the end of the summer season.11 A shortfall in supply would mean
that Kingsford would have to pacify its customers by moving pallets around the country to wherever
demand was greatest, a very expensive proposition.
Conclusion
Smith Boyle and Warren were interested in getting Gordon’s perspective on how Kingsford’s
growth objectives fit into the broader context of the overall company growth targets. Clorox’s stock
price in December 2000 was at a three-year low when Clorox had warned Wall Street that its sales
growth would not be as high as it had predicted earlier in the year. On January 31, 2001, Clorox had
announced its second quarter earnings, which included a 6 percent decline in sales for the company.
Clorox Chairman and CEO Craig Sullivan said, “While these results are in line with the estimates we
announced on December 14, we are obviously disappointed with our performance this quarter. Over
the past 45 days we have heightened our focus on those activities that are most critical to securing a
solid foundation for future growth. We are taking action, first and foremost, to regain momentum on
our core businesses in the United States.”12
Smith Boyle and Warren felt Clorox was relying on Kingsford to improve sales and profits, and
they didn’t want to let the company down. They knew their recommendations about pricing,
advertising, promotion and capacity could make a big difference for both Kingsford and Clorox as a
whole. Armed with all the research data, they were eager to develop a strategy for taking the
Kingsford brand to a new level of growth and profitability. With this in mind, Smith Boyle and
Warren walked out of the building on Wednesday evening, planning to talk more the following
week. They waved goodbye with their usual parting message, “See you next Wednesday!”
11 Kingsford’s plants ran 24/7 all year-round, but all of the stockpiled quantities started to run out by the fall.
12 “Clorox Reports Second-Quarter Results,” press release issued by Clorox on January 31, 2001.
10
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For the exclusive use of D. Daniel, 2018.
Kingsford Charcoal
Exhibit 1
506-020
Clorox Company Financials
Condensed Consolidated Statements of Earnings – Annual Data
Years ended June 30 (in millions, except share
and per-share amounts)
Net Sales
2000
1999
1998
$4,083
$4,003
$3,898
Costs and Expenses
Cost of products sold
2,250
2,181
2,124
Selling and administration
525
554
548
Advertising
465
474
491
Research and development
63
63
62
Merger, restructuring and asset impairment
36
180
3
Interest expense
98
97
104
Other expense—Net
24
24
10
3,461
3,573
3,342
Earnings before income taxes and cumulative effect of change
in accounting principle
622
430
556
Income Taxes
228
184
206
Earnings before cumulative effect of change in accounting principle
394
236
350


(7)
$ 394
$ 246
$ 343
$ 1.67
$ 1.05
$ 1.49


(0.03)
$ 1.67
$ 1.05
$ 1.46
$ 1.64
$ 1.03
$ 1.46


(0.03)
$ 1.64
$ 1.03
$ 1.43
Total Costs and Expenses
Cumulative effect of change in accounting principle
Net Earnings
Earnings per Common Share
Basic
Earnings before cumulative effect of change in accounting
principle
Cumulative effect of change in accounting principle
Net Earnings
Diluted
Earnings before cumulative effect of change in accounting
principle
Cumulative effect of change in accounting principle
Net Earnings
Source:
Clorox 2000 Annual Report.
11
This document is authorized for use only by Diamont Daniel in Marketing Management taught by James Munch, Wright State University from January 2018 to July 2018.
For the exclusive use of D. Daniel, 2018.
506-020
Kingsford Charcoal
Exhibit 1 (continued)
Condensed Consolidated Statements of Earnings – Quarterly and Six Months Data
Years ended December 31
(in millions, except share and per-share amounts)
Three Months
Ended
Six Months
Ended
12/31/00
12/31/99
12/31/00
12/31/99
$899
$954
$1,884
$1,896
Cost of products sold
Selling and administration
525
535
1,074
1,052
128
135
251
Advertising
262
100
110
210
226
17
15
31
29
4
6
4
8
23
23
49
46
3
10
11
16
800
834
1,630
1,639
Earnings before income taxes and cumulative effect of change
in accounting principle
99
120
254
257
Income Taxes
35
44
90
94
Earnings before cumulative effect of change in accounting principle
64
76
164
163


$ 64
$ 76
$162
$163
$0.27
$0.32
$0.69
$0.69
Net Sales
Costs and Expenses
Research and development
Restructuring and asset impairment
Interest expense
Other expense–net
Total Costs and Expenses
Cumulative effect of change in accounting principle
Net Earnings
(2)

Earnings per Common Share
Net Earnings per Share (basic)
Source:
Clorox December 31, 2001 Form 10-Q.
12
This document is authorized for use only by Diamont Daniel in Marketing Management taught by James Munch, Wright State University from January 2018 to July 2018.
For the exclusive use of D. Daniel, 2018.
Kingsford Charcoal
506-020
2000 Sales by Week
Exhibit 2
Weekly Charcoal Consumption CY 2000
1400
Consumption
1200
1000
800
600
400
200
Category
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
0
Kingsford
Season
Dates
Early
March 1 to May 1
Easter
17%
45%
Peak
May 1 to August 1
Mother’s Day, Father’s Day, Memorial Day, July 4th
46%
28%
Late
August 1 to October 1
Labor Day
18%
10%
Off-Season
October 1 to March 1
Thanksgiving, Christmas, Superbowl Sunday
19%
17%
Source:
Holidays
CY00
ConsumpShipped
tion (%)
(%)
IRI Consumption Data, OLAP Wired Shipment Data: CY00.
13
This document is authorized for use only by Diamont Daniel in Marketing Management taught by James Munch, Wright State University from January 2018 to July 2018.
For the exclusive use of D. Daniel, 2018.
506-020
Kingsford Charcoal
Exhibit 3
Volume Growth
Channel
First Half
Growth
CY00
Food
Mass
FDM
Source:
Second Half
Growth/ (Decline)
CY00
2.0%
6.7%
2.4%
(5.7)%
0.2%
(4.7)%
Total Year
Growth/(Decline)
CY00
(1.9)%
3.5%
(1.1)%
IRI Consumption Data, F/M Total Charcoal, 2000 data, as supplied by Clorox.
Exhibit 4
Charcoal Category Pricing Trends
Weighted Average
Base Pricea
CY00
CY99
% Chg
Average Price per
Unitb
CY00
CY99
% Chg
Regular: 10#
Kingsford
$4.11
$4.03
2.0%
$3.94
$3.91
0.8%
Royal Oak
3.71
3.59
3.5%

3.39
3.05
11.1%
Private Label
2.85
2.62
8.5%
2.65
2.41
9.9%
GAP KFD VS. PL
1.25
1.40
-10.4%
1.29
1.50
-13.9%
Kingsford
$6.83
$6.72
1.7%
$6.30
$6.19
$1.8%
Royal Oak
$6.56
$6.41
2.2%
$6.39
$6.00
6.6%
Private Label
$5.05
$4.68
7.9%
$4.87
$4.50
8.0%
GAP KFD VS. PL
$1.78
$2.03
-12.5%
$1.43
$1.69
-15.0%
Kingsford
$5.15
$5.01
2.9%
$4.97
$4.86
2.2%
Royal Oak
$4.30
$4.06
5.8%
$4.19
$4.01
4.4%
Private Label
$3.87
$3.70
4.7%
$3.80
$3.60
5.6%
GAP KFD VS. PL
$1.28
$1.31
-2.1%
$1.17
$1.26
-7.4%
Kingsford
$8.46
$8.20
3.2%
$8.12
$8.01
1.4%
Private Label
$6.37
$6.49
-1.8%
$6.25
$6.25
0.0%
GAP KFD VS. PL
$2.09
$1.71
22.1%
$1.87
$1.76
6.2%
Regular: 20#
Instant: 8#
Instant: 15#
Source:
IRI, January–December 2000, F/D/M, as supplied by Clorox.
aWeighted average reflects “everyday price” without promotional pricing.
promotional pricing.
bAverage price to consumers, including
14
This document is authorized for use only by Diamont Daniel in Marketing Management taught by James Munch, Wright State University from January 2018 to July 2018.
For the exclusive use of D. Daniel, 2018.
Kingsford Charcoal
Exhibit 5
506-020
Grill Shipments in 1996-2000 – Charcoal and Gas (in ‘000s)
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1996
1997
1998
Gas
Source:
1999
2000
Charcoal
Barbecue Industry Association, 2001, as supplied by Clorox.
Exhibit 6
Grill Penetration Trends – (read data as percentage of households that own grills).
60
52
54
52
55
52
54
50
49
50
% HHs
That 40
Own
30
20
21
19
20
20
10
0
1997
1998
Gas
Source:
Charcoal
1999
2000
Dual
Charcoal U&A 2000, as supplied by Clorox.
15
This document is authorized for use only by Diamont Daniel in Marketing Management taught by James Munch, Wright State University from January 2018 to July 2018.
For the exclusive use of D. Daniel, 2018.
506-020
Kingsford Charcoal
Exhibit 7
Category Merchandising in 2000
2000 Promotional Activity
Weeks of
Promotion
% Change
vs. 1999
Incremental
Volume from
Promo
% Change
vs. 1999
Volume
Promoted
% Change
vs. 1999
Kingsford
28.7
1.8%
22.5%
-0.1%
45.6%
0.3%
Royal Oak
3.3
-51.0%
14.7%
-14.5%
31.4%
-20.2%
Private Label
14.2
-6.3%
18.0%
-3.4%
42.5%
-4.0%
Types of Promotions—Weeks of Each*
Kingsford
Royal Oak
Private Label
Feature
Index
vs. 1999
4.6
0.4
2.7
107
50
77
Display
Index
vs. 1999
Temporary
Price
Reduction
Index
vs. 1999
13.1
0.9
7.5
98
45
66
8.4
2.5
5.5
108
79
102
* Numbers are disguised for confidentiality.
Note: It was common for the different types of promotion to be run simultaneously.
Source: Company records.
Exhibit 8
Competitive Market Share in the Charcoal Category (1997–2000)
Share of Overall
Charcoal Category
Kingsford
Royal Oak
Private Label
Source:
st
CY97
CY98
CY99
1 Half
CY00
50.4
14.2
34.0
51.3
13.7
33.7
52.4
13.0
33.3
56.1
7.7
34.9
nd
2 Half
CY00
CY00
59.5
6.4
32.7
57.7
7.1
33.9
IRI, January–December, 2000, F/D/M, as supplied by Clorox.
16
This document is authorized for use only by Diamont Daniel in Marketing Management taught by James Munch, Wright State University from January 2018 to July 2018.
For the exclusive use of D. Daniel, 2018.
Kingsford Charcoal
506-020
Exhibit 9 Select Results of the Survey of Heavy Kingsford Users
Instant Acceptor
Regular Exclusive
Instant Exclusive
Segment Description
Perfecting life skills reflects
on who I am, my personal
integrity and masculinity.
Providing for family, lighting
a fire, and grilling with real
charcoal, these are skills
worth doing right and
perfecting.
Segment Description
I look for fun in everyday
experiences. I want a no
hassle, easy meal for the
family, and grilling is a
flexible, easy way to
have a no hassle meal
everyday.
Segment Description
Life can be hectic, the
weekdays tiring, and family
demands can be stressful; I
need chores to be over quickly
and easily. Grilling is a great
way to get out of the kitchen,
and have a fun meal with the
family, so I need a minimum
fuss charcoal that is the fastest
and easiest way to get a
grilling experience.
Typical Verbatim
I believe in an honorable
”Right Way” to Grill, a
structured routine to grilling,
perfected over time, which is
both personally satisfying
and provides recognition as
a leader and provider.
Typical Verbatim
I’ll provide the
environment to have fun
– the more formal the
occasion the less fun it
is. I know how to spend
quality time with my
family.
Typical Verbatim
Its not the process for me, it’s
the outcome. I’m often rushed
and pressured, so I feel smart
when I can use a product that
helps me get chores done and
I feel like a caring parent
when I can find ways to free up
time.
Grilling Attitudes
Total
Regular
Exclusive
Instant
Acceptors
Instant
Exclusive
When I grill, I want the fire to last
so I can feed all of my guests
57%
49%
60%
64%
Grilling is a relaxing way to cook
55%
55%
57%
51%
49%
61%
50%
30%
41%
35%
38%
57%
34%
35%
39%
26%
Grilling is a hobby of mine
33%
29%
39%
32%
There is only one brand of charcoal
that I would use
27%
31%
16%
34%
20%
11%
18%
35%
15%
8%
13%
26%
11%
6%
13%
22%
I think making a fire with regular
charcoal is easy
When I grill, I want to get the fire
started fast so I can focus on other
things
I consider myself to be an expert
griller
I’m comfortable making a fire with
regular charcoal, but I rarely have the
time
I don’t like the hassle of getting a
charcoal fire started
Grilling for large groups makes me
nervous
Note: Read as percentage of consumers in each segment (in the sample) that agreed with the statement
Note: Underlined and Boxed numbers are statistically different from overall sample average at 95 percent CI
Source:
Company documents.
17
This document is authorized for use only by Diamont Daniel in Marketing Management taught by James Munch, Wright State University from January 2018 to July 2018.
For the exclusive use of D. Daniel, 2018.
506-020
Kingsford Charcoal
Exhibit 10
Price Elasticity Data
Pricing Scenarios
Estimated
Probability
of Outcome
Estimated
FY02
Volume
(Msc)*
Impact
Estimated
FY02 Sales
($000)
Impact
Estimated
FY02 Profit
($000)
Impact
1. Club/Home Center 4% Price Increase
A. No merchandising loss*
B. 300 MSC loss at Costco**
C. -1,000 MSC loss at Costco**
60%
25%
15%
0
-300
-1,000
$1,300
-1,110
-7,200
$1,080
40
-2,500
2. Minimum (2.5%) Blue Bag Pricing Increase
A. No merchandising loss
B. 10% merch. loss in 10 lbs, 20 lbs bags
75%
25%
-400
-580
-1,200
-3,090
560
-810
3. Higher (5%) Blue Bag Pricing Increase
A. No merchandising loss
B. 7% merch. loss in 10 lbs and 20 lbs bags
50%
50%
-550
-740
-1,900
-4,140
1,060
-110
30%
-790
-2,820
1,870
70%
-830
-4,020
1,720
4. Total Line Pricing (5%) Increase
A. No merchandising loss
B. Combination of:
7% merch. loss in Blue 10lbs, 20lbs bags
3% merchandising loss in 8# Matchlight
5% merchandising loss in 15# Matchlight
Source:
Casewriter estimates. Data does not reflect actual company data.
* Merchandising loss reflects reduced promotional activity (e.g., feature, displays) at stores.
**MSC= thousands of statistical cases. MSC represents a unit used within Clorox to allow comparisons among different types
of products.
18
This document is authorized for use only by Diamont Daniel in Marketing Management taught by James Munch, Wright State University from January 2018 to July 2018.
For the exclusive use of D. Daniel, 2018.
Kingsford Charcoal
Exhibit 11
506-020
Kingsford Media and Merchandising Spending Trends
FY 97
FY98
FY99
FY00
FY01 (est.)
Volume (Msc)
16,000
17,000
18,000
19,000
20,000
Media Expense ($MMs)
( $ per Sc)
$6.00
$0.38
$6.00
$0.35
$5.00
$0.28
$4.00
$0.21
$1.00
$0.05
Reduced Revenue ($MMs)
( $ per Sc)
$25.00
$1.56
$26.00
$1.53
$27.00
$1.50
$29.00
$1.53
$31.00
$1.55
Sales Promotion ($MMs)
( $ per Sc)
$6.00
$0.38
$6.00
$0.35
$8.00
$0.44
$9.00
$0.47
$8.00
$0.40
Source:
Casewriter estimates.
Notes:
Msc: thousands of statistical cases. Msc represents a unit used within Clorox to allow comparisons among different
types of products. Reduced Revenue captured all trade spending13 and promotional spending14 that in effect
reduced the gross price of the Kingsford products to customers. In the Brand P&L, Gross Revenue – Reduced
Revenue = Net Customer Sales (NCS). As a result, NCS was made up of the standard components of a P&L
including COGS, SG&A, Advertising and Equity building expenses, etc.
13 Trade Spending included money that Kingsford paid retailers to “buy” space on their shelves (slotting fees), participate in
their promotional programs (merchandising menu fees), and the money that Kingsford provided retailers as an incentive for
growth (for example, any retailer-specific promotions or price reductions offered at that retailer’s stores). Kingsford’s sales
teams worked with retailers to determine the best way to spend this money.
14 An example would be coupon redemption costs (since for every coupon that was redeemed by a consumer, the Kingsford
revenue was “reduced” by the same amount). As a result, couponing (like other price-reducing promotions) was considered
“reduced revenue” rather than an “investment” or “expense” in the P&L.
19
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