Kingsford Charcoal

Kingsford Charcoal

        The Clorox Company, a leading company that was tried to be bought by Procter & Gamble back in 1957, pursued an aggressive growth strategy that led them to have over 50 products marketed around the world in 2000. By this year, Clorox had three main categories and $4.1 billion annual sales. The biggest one in terms of sales was U.S Specialty Products, and within this category, Kingsford Charcoal was one of the largest products with 9% of Clorox´s revenues. Since the first briquette plant and business was bought by Clorox in the early 70s and they stabilized in the 80s, Kingsford and the charcoal category had been enjoying a constant growth. However, in 2000 this tendency stopped, and something had to be done to counter this issue.

        The product was commercialized in club stores, mass merchandisers, Wal-Mart and food stores, being the latter the one with the most sales (66%) and at the same time with the most pronounced decrease in sales. Possible reasons for this decline were various. For instance, narrowing price gap across charcoal brands provoked by prices increases of private label brands and Royal Oak. In reaction, Kingsford´s channel partners also increased Kingsford prices in their stores which could have led to a reduced in sales, even though Kingsford had not raised priced in several years, nor spent significantly in advertising since 1998.

        The brand management thought that increased priced motivated consumers to switch to gas grilling. Unlike charcoal grilling, gas grilling was a rapidly growing segment. In 2000, more U.S. household owns a gas grill than a charcoal grill and 20% owned both. This trend can be explained by price-sensitive customers that valued convenience, greater control, shorter cooking times and ease of clean-up, all characteristics of the gas grill. This, according to what Boyle and Warren believed was also intensified by the absence of advertisement and the increased media spending made by the gas grilling category.

        Furthermore, a reduction in promotional activity made by Kingsford´s competitors could also have exacerbated this trend. And finally, a weather factor was also a potential reason for the negative situation. In 2000, the temperature was colder and was rainier than 1999. And as explained in the case, charcoal purchases were impulse purchases caused by good weather, holiday, etc.

Although Kingsford´s sales rose, and its market share had increased principally due to the competitors’ price increases, their success was tied to the overall success of the category. Hence, a radical marketing action plan had to be carried out.  Possible action plans included pricing, advertising, promotions, and production.

        Profitability of the brand was a major concern for Clorox executives. Continued growth was also important and therefore both should be the mains goals of the marketing mix.

Regarding profitability, increasing prices seemed to be a plausible alternative, however, at the expense of sales volume. The elasticity studies performed by the brand team indicated that the best strategy to boost profits in the short term was a total line increase of 5% (see appendix 1 for details). This is considering the probability of losing merchandising momentum with Kingsford´s retail partners. Nevertheless, since the competitor had increased their prices recently, this move might be expected and understood by retailers and would not cause a negative reaction. They would probably relate the change in prices with something inherent in the industry. On the other side, customers would likely absorb the price increase without switching to other competitors or to gas grilling. Mainly because customers were used to paying 25-30% more for Kingsford`s quality, Kingsford market share had been constantly increasing, the use of charcoal is associated with holidays and happy days, and the strong customer loyalty that makes them less price-sensitive. The above was confirmed by the survey of heavy Kingsford users.