Culinarian Cookware

Overview and Situation Analysis:

Culinarian Cookware is market leader in the growing premium segment of cookware. Culinarian’s core capabilities like its skilled personnel or strong retailer relationships have brought them to where they stand today. Those competences should further be strengthened to at least keep the market share and to benefit from upcoming trends like attractive market growth in the future. In the meantime, the weaknesses, such as low brand awareness cannot be neglected. To solve this problem, e.g. by increasing the costs for advertising, the low brand awareness can be improved. The main issues Culinarian Cookware is experiencing are: moderate brand awareness among households and potential disconnect between promotional strategy, Culinarian Cookware’s value proposition to consumers (brand’s overall strategy) and the dependency on the retailers based on the absence of other profitable distribution channels.

First, to increase brand awareness, Culinarian should leverage its strong relationships with retailers and encourage them to present attractive displays, since that is a major factor when consumers are deciding where to shop. A creative way to educate consumers about Culinary Cookware brand and superior quality, Culinarian Cookware could sponsor local cooking classes at boutique cooking stores. This would allow customers to try and experience the quality of Culinary’s  Cookware, which would induce them to purchase the products and talk to friends and family about their experience. Culinary Cookware may also want to reconsider its advertising campaigns featured in magazines, since only 10% of customers said they might respond to magazine or newspaper advertisements.

Given Culinarian is looking to maintain its premium quality product, it should consider a “pull strategy” focused on influencing the consumer’s decision-making in a manner that will make them go looking for their products. As with high end products like Le Creuset, used by avid “hobby cookers,” it is important that the social community know about the qualities of its cookware so that they can spread the word and create awareness. The cons to this method of advertising is that Culinarian would have little control on the messaging and would need to make sure that finding their products in market is easy.

Second, we believe Culinary Cookware is experiencing a potential disconnect between its promotional strategy and the brand’s value proposition to consumers (overall strategy). While promotions may have several benefits such as increase in sales, discounts should not compromise the company’s prestigious brand image. Discounting might be perceived as questionable move in the prestigious cookware space since the other two leading premium brands, Le Gourmand and Robusto, never ran price promotions while the mid-level and low-end brands, Star Chef and Kitchen Select, run them regularly. If Culinary Cookware offers more discounts, it might signal to customers that Culinary fits more with the mid-level and low-end brands than high-end brands. To mitigate the risk of deviating from its prestigious brand image, Culinary cookware should be be strategic when offering discounts. The best strategy might be to offer discounts on low-end lines, such as the CX1. This strategy will allow Culinary to increase penetration of consumers in the premium segment and increase sales without signaling to upscale customers that Culinary products are “cheap”.

It is also important to mention that in the June 2003 research study on households with income over $75,000 (which is 70% of their customer base) 30% cited price as the most important criterion, 30% said they would be motivated to buy new cookware because of a price discount, and price was the third most important criteria in cookware (behind quality and features). These findings lead us to believe that these consumers are most likely in the premium segment because quality and features are so important to them, and then within the premium segment, they are looking for the most affordable. Also, cookware is somewhat seasonal during holidays and wedding season-but past price promotions were in April and May. The 2005 promotion therefore gives customers what they are looking for; high quality lines with better features at a lower price. Hence, if Culinary Cookware focuses on timely and strategic discounts then customers who value product performance and durability will continue to perceive Culinary as a high quality brand while also benefiting from occasional discounts.

Another issue is the reliance on the retailers. Just 5 % of orders came from direct sales via the company’s website and catalogs sent out to existing customers. Culinarian Cookware has strong relationships with retailers but this is the only “real” sales market Culinarian has. If problems with the retailers were to occur – like not accepting lower margins during a promotion – the company could lose some of its most important customers. Retailers are the backbone of Culinarian’s distribution chain. Without the great amount of retailers, the company will not be able to survive as a big player in the market of premium cookware. In times of steadily advancing opportunities regarding the Web, this distribution channel is by far not exhausted. Via direct sales through homepage the distribution chain will be shortened and Culinarian could potentially grant online purchases. The widening of the distribution network is one of the strategic priorities established by the CEO.

Financial Analysis:

From the case, the retail sales of Culinarian from 2002 to 2006 have an average growth rate of over 15% each year, except 2004, which had a decline in sales of 2%. The VP of marketing Janus believes the 2004 price promotion had a negative impact on 2004 profit. However, senior sales manager Victoria Brown believes the analysis performed by the consultant group is flawed and that the promotion was in fact successful. The sales manager wants to implement the price promotion, because she believes that discounts can increase commitment and brand awareness. The point of contention lies in the contribution margin.

From the table 1 in appendix several differences between the two set of calculations can be identified. First, they have different variable cost. The consultant analysis has added various types of expenses to variable cost including administrative expenses, manufacturing overhead, selling expenses, advertising and promotion expenses, besides direct labor and raw materials. Whereas, Brown added only direct labor and raw materials to variable cost.  Second, they have different unit sales without promotion from March to May in 2004. Janus and his consultant found the sales of 119,504 units; while Brown got a result of 59,781 units sales by comparing the first two months sales of year 2003 and 2004. Janus and consultant conclude that with price promotion, there is a loss of 469,489 in contribution, but Brown identifies a gain of 2,397,994 in 2004.