Kraft Foods: The Coffee Pod Launch (A) Harvard Case Solution & Analysis

Problem Statement

The coffee development manager Geoff Herzog needs to make a decision regarding the launch of its coffee pod product. The company wants to decide if they simultaneously want to launch the coffee pod system in Canada and as well as in the United States, or the company wants to wait on the results of the United States test market and then be able to launch it in Canada. While considering the problems faced by the company regarding its marketing strategy and 4 P’s, Herzog has to provide a comprehensive promotional plan with a limited budget along with deciding the suitable distribution strategy and to set a competitive wholesale and a retail price.

Situation Analysis

SWOT Analysis

Strengths

Kraft Food is the second largest foods and beverages company in the world, while it is the largest player in the North American region. The company has an impressive brand portfolio with 50 brands exceeding $100 million in revenues, whereas, five of the products of the company are exceeding $1 billion landmark. Kraft Foods have captured nearly one third of the Canadian market and has a strong hold of distribution network.

Weaknesses

Kraft Foods have focused on a narrow target market which is highly dependent upon the age and the income level. A sleek target market can eventually lead up to create little impression on the total revenues of the market. Using a closed system while marketing its existing coffee brand further narrows the target market. A close competition from Nestle can exploit the market gap and increase its potential in the market. The company has a very limited budget for marketing its new pod product which may dent the successful launching of the product. The company is also relatively newer in the pod market in Canada and may experience problems.

Opportunities

A large potential growth is present in the Canadian market for coffee pod product. Strategic alliance with Mr. Christie’s line could potentially decrease the distribution cost of the company and increase its overall value. Kraft Publications can aid the consumers in encouraging them to perform trial of its new pod product. Attracting the youth segment which has lower age demographics could be handy in capturing the market.

Threats

A price war awaits the company in the Canadian market where different competitors have different expertise in catering well to the market. It is a disadvantage for the company in the Canadian market as it has underperformed in the United States market. Another threat for the company includes the differentiation of the product which has become difficult because of being a homogenous product.

Porter’s Five Forces Model

Threat of a New Entrant

The threat of a new entrant is moderate as the industry has presence of many major competitors. The increase in the spending of investments in positioning of the product, maintaining the quality of their brand, and to increase customer loyalty has enticed customers to embrace brand equity which cannot be easily maintained by a new entrant. The largest chunk of the market share are held by the major competitors which would make it difficult for the new companies to sustain in the particular environment unless backed by good financial investment.

Threat of a Substitute

Since the coffee prod product is a new innovation in the Canadian market, hence an absence of a clear substitute is not present in the market. However, a lot depends on behavior of the consumer in making their coffee either by the traditional machines or through the use of SSP machines. Tea could be referred to as a prominent substitute of coffee, however the research shows the trends of the consumer behavior that Canadians prefer coffee over tea as 64% consumers prefer consuming coffee in a typical day over 34% of consumers preferring tea. The threat of the substitute is low as it aims to cater a slightly different market.

Bargaining Power of a Buyer

The bargaining power of buyers is relevantly high because of the presence of many competitors and the substitute which increases the chances of switching from one product to another if a company fails to satisfy the needs of the customers. However, it is a natural occurring if the needs of the consumers change overtime with respect to the latest trends and offerings, which also increases the chance of consumers switching to different products or even changing a completely different product line. Kraft Foods pays an extra $200,000 for strengthening its distribution network in order to retain its consumers...................

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Crafton Industries, Inc Case Solution

Product Development Manager at Coffee Kraft Canada must decide whether to introduce a new line of the company's single-serve coffee pods, or wait for the results from the United States. Major strategic decisions, which include the target market to focus on and what the value proposition for signaling. Important questions also raised the question of whether a new product is to be branded, which flavors to offer, whether Kraft should use traditional distribution channels or direct to store delivery, and what forms of advertising and promotion of use. "Hide
by Robin Ritchie, Aleem Visram Source: Richard Ivey School of Business Foundation 22 pages. Publication Date: November 3, 2006. Prod. # 906A19-PDF-ENG

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