Kingsford Charcoal (Decision Case)

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Table of Contents

Decision case
Decision analysis
Criteria
Proof of recommendation
Opportunity
Critique of recommendations
Action Plan

Kingsford is one of the product groups in Clorox portfolio. It is a key part of Clorox since it was observed to contribute about 10% of the revenues at Clorox, in the year 2000. The operations at Kingsford plant began in 1920, with the manufacture of charcoal briquettes from leftover wood scraps, from Henry Ford’s automobile factories, and then it was purchased by Clorox in 1973.

The Clorox Company was founded in 1913. Its only product then was liquid bleach, but it has grown over the years to 50 products that are sold globally. The management of each of the product groups is assigned to brand team, which comprises of a manager and a few associates.

The role of the brand team is to formulate the business strategies, perceive the consumer trends, coming up with advertising strategies, generating short-term predictions and assisting in the promotion of sales.

Decision case

The grilling market share that had been dominated by Kingsford for several decades is under threat due to the gradual shift of consumers from charcoal to gas. This has put tremendous pressure upon Kingsford, and especially its brand team, headed by Marcilie Smith Boyle and Allison Warren.

It is the role of the brand team to come up with strategies that will allow the company to meet its financial targets, by addressing concerns pertaining to pricing, promotion, advertising and capacity.

In order for Kingsford to increase its success, it needs to investigate ways to increase overall charcoal use among consumers as well as the sales of Kingsford. Kingsford has a majority market share, which means that difficulties in the category are reflected on Kingsford. Kingsford should consider how to increase sales of its product. This is necessary in order to maintain and increase their market share.

Kingsford’s competitors, such as Royal Oak and private label brands increased their prices, and it is up to the brand team at Kingsford to determine whether they should follow the trend, and increase their prices as well. Another factor to be considered in order for Kingsford to achieve its financial targets pertains to production, in preparation for increased sales.

If sales continue to grow over the next few years, the company will need to figure out what should be done to increase capacity. There are a few options that need to be considered and weighed well in advance in order to set aside proper funding and have enough time to build a new plant if that is the option they choose.

Decision analysis

There are a few potential steps that Kingsford could consider in order to attain its financial targets. The first recommendation upon looking into the history of Kingsford is a 5% increase in the prices of its charcoal products, across all channels. Secondly, Kingsford should redirect its finances for promotion to media advertising, as opposed to temporary price reductions.

This will provide them with the opportunity to address the market shift to gas grilling. Thirdly, the management strategy in place, involving two brand managers co-sharing the responsibilities, may require re-assessment. Lastly, Kingsford should look into strategic growth by investing in research and development, in order to uncover methods to incorporate the advantages of charcoal with the convenience of gas grilling.

Criteria

In the consideration of the available options, Kingsford should bear in mind the various ways in which the sale of charcoal will be promoted by the action taken. In addition to this, the company should keep in mind how the actions will advance the brand’s standing, and how it will affect profitability.

Proof of recommendation

Kingsford has a strong position in the charcoal market; about 60% share of sales, which have led to its global recognition as the leading manufacturer of charcoal. This implies that an increase in their market prices is unlikely to reduce their sales, since the brand is well recognized, and there is an existing relationship between the company and charcoal consumers.

Kingsford has a weak relationship with its retailers, and this affects their reliance on the retailers for presentable store displays and promotions, despite appeasing them. Advertising via the media is likely to solve this problem, since Kingsford will be able to communicate with the customers directly, by informing them of the benefits of their product. This could also be helpful in their competition with gas grilling.

The use of two senior managers, with a single overlap, can limit the progress of Kingsford strategic plan to attain its financial targets. The brand managers should work together, so that are in sync, and can consult with each other in the running of the company.

An investment in research and development will allow Kingsford to come up with complementary products that can appeal to the market share that prefers gas grilling. This effort can be enhanced by partnering with grill manufacturers, in order to increase the breadth of charcoal grill product, and significantly boost the sale of Kingsford products.

Opportunity

An active advertising campaign will be beneficial for Kingsford by building brand equity, and ensuring that consumers are fully exposed to their products. These recommendations will also allow Kingsford to increase their market size by expanding to market segments that they aren’t currently targeting.

This can include international markets. An opportunity for Kingsford to remain ahead is through the innovation of charcoal brand lines, to include flavored or environmentally friendly lines.

Critique of recommendations

Increasing the interest of the population in charcoal grilling may require collaboration of several organizations, such as grill manufacturers, retailers and event organizers. The problem posed by the initiative is whether the benefit of increased sales of Kingsford charcoal justifies the cost of our co-partnering with retailers, grill manufacturers and event producers.

For Kingsford to increase its sales, it should increase its advertisements, from $1 million to about $7 million in the peak season. This will promote the awareness of the public to charcoal grilling, though the high costs of advertising may impact other departments of the company, due to shifting of funds.

Increased sales may also strain the company due to its limited production capacity. The advertisements will also require careful delivery of the message, in order to promote sales from both male and female consumers.

While expanding beyond the United States is a good opportunity for Kingsford, the company will need to identify the various markets in order to make the product compatible to them.

This is likely to strain the existing charcoal plants. In addition to this, Clorox lacks experience and infrastructure outside of North America. Also, the environmental and health regulations of some regions may prove too stringent for successful market development.

Kingsford’s action to increase prices would re-establish the competitive advantage of the competition due to their lower price, resulting in loss of clients. Also, charcoal would become more expensive, and that could somewhat increase the relative attractiveness of gas grilling, potentially leading to further shrinking of the charcoal market size.

In addition, an increase in Kingsford prices may reduce sales of the product in retail stores, which would reduce sales of other consumer packaged goods that are usually bought simultaneously with charcoal. With the potential of a decrease in sales, retailers might promote Kingsford less vigorously.

The flavored and environmentally friendly/healthier varieties of charcoal are likely to increase costs for Kingsford and introducing “natural” charcoal could bring undesirable attention to perceived environmental and health concerns of existing products. Along these lines, new varieties could also cannibalize regular charcoal sales.

Action Plan

Given the potential benefits and costs of each alternative presented, there are specific measures that Kingsford should take in order to increase the overall charcoal market size as well as maintain their dominant market share. Gas grilling is Kingsford’s most significant competitor. Significant data and social media chatter can easily confirm this.

Therefore, Kingsford’s main objective needs to center on winning back previous charcoal customers who have switched to gas grilling as well as attracting customers who have no history of charcoal grilling. The goal should be a strong and positive link between grilling and charcoal.

An increase in the advertising budget from $1 million to $7 million will result in increased exposure to charcoal grilling while highlighting the Kingsford brand. This will ensure that when consumers decide to grill with charcoal they will seek out Kingsford products that they remember from the advertisements.

Increasing prices is likely to benefit competitors since they will not purchase Kingsford products. The prices should therefore not be changed. This will also help to maintain a positive relationship with retailers because the benefit of increased sales that they receive from customers who purchase Kingsford should remain intact.

In order to use innovation as a means regain lost customers, Kingsford should conduct marketing research to determine why consumers switched from charcoal grilling to gas grilling. Increased production can be achieved by renting the manufacturing space instead of making new purchases, until a steady increase in demand is determined.

Before venturing into international markets, Kingsford needs to conduct extensive research on the current state of charcoal manufacturing and sales in key regions including the environmental and health regulations in these regions. This will help them to determine whether they need to change their product formula or manufacturing practices in order to do business in international markets.

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