M600 Case Report
Kingsford Charcoal: Rekindling the Grilling Business
(February 2001)
Executive Summary
Kingsford Charcoal is one of the major players in the charcoal grilling industry. As a $350 million business, it represents one of the largest product groups of Clorox company portfolio. It accounts for approximately 9% of its revenue and a significantly higher percentage of its net income. After enjoying a period of moderate but steady revenue growth of 1%-3% that extended for nearly 20 years, Kingsford Charcoal is now facing a possible declining growth trend and difficulty in achieving its forecasted sales due to a softening in the overall charcoal category. Although Kingsford holds more than half of the industry market share, it is operating in a price sensitive market that is slowly shifting towards gas grilling. Faced with such a situation and with a lack of advertising, critical strategic decisions need to be made regarding whether to increase prices, revise the marketing strategy, and consequently provide an answer to potential production capacity issues. After careful analysis, it is recommended that the company implements a strategy that constitutes a hybrid of a small 2.5% price increase combined with an aggressive advertising and promotion strategy. The company should also begin the process of planning to increase capacity through the development of a new facility.
Introduction
As one of the largest product groups within Clorox’s portfolio, Kingsford charcoal contributes about 9 percent of Clorox’s revenues and a much higher percentage of the its net income. The results of the summer of 2000 were below forecast. Meanwhile, compared with the gas grilling segment, the entire charcoal category is showing a softening in terms of sales growth. Based on these facts, it is necessary for Kingsford to come up with a solution to rebound and further expand its business.
Key Issues
Four main issues are identified as following:
1. Profit
(February 2001)
Executive Summary
Kingsford Charcoal is one of the major players in the charcoal grilling industry. As a $350 million business, it represents one of the largest product groups of Clorox company portfolio. It accounts for approximately 9% of its revenue and a significantly higher percentage of its net income. After enjoying a period of moderate but steady revenue growth of 1%-3% that extended for nearly 20 years, Kingsford Charcoal is now facing a possible declining growth trend and difficulty in achieving its forecasted sales due to a softening in the overall charcoal category. Although Kingsford holds more than half of the industry market share, it is operating in a price sensitive market that is slowly shifting towards gas grilling. Faced with such a situation and with a lack of advertising, critical strategic decisions need to be made regarding whether to increase prices, revise the marketing strategy, and consequently provide an answer to potential production capacity issues. After careful analysis, it is recommended that the company implements a strategy that constitutes a hybrid of a small 2.5% price increase combined with an aggressive advertising and promotion strategy. The company should also begin the process of planning to increase capacity through the development of a new facility.
Introduction
As one of the largest product groups within Clorox’s portfolio, Kingsford charcoal contributes about 9 percent of Clorox’s revenues and a much higher percentage of the its net income. The results of the summer of 2000 were below forecast. Meanwhile, compared with the gas grilling segment, the entire charcoal category is showing a softening in terms of sales growth. Based on these facts, it is necessary for Kingsford to come up with a solution to rebound and further expand its business.
Key Issues
Four main issues are identified as following:
1. Profit