Kraft Foods Presentation

1483 Words6 Pages
The product manager for coffee development at Kraft Canada must decide whether to introduce the company's new line of single-serve coffee pods or await results from the United States. Key strategic decisions include which target market to focus on and what value proposition to signal. Important questions are also raised as to how the new product should 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 to use. The case provides a basis for discussing consumer decision making, and stresses the importance of providing a clear incremental benefit when introducing a new product in an established category.

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Kraft planned to sell pods under Maxwell House label at a lower point than rival brands, retailing a pack of 18 pods for US$3.99. Folgers charges $3.99 for a pack of 16 This pricing would give retailers a 25% margin on Maxwell House, and at $0.22 per cup, revenue that was more than four times the $0.05 per cup from ground coffee Issues arose when deciding to follow the U.S. lead on pricing: On one hand, low prices could serve to drive sales volume and establish Kraft as market leader, but this strategy risks eroding brand image. Given the failure rate of new products in Canada, Herzog suspected that store would be willing to carry one or two brands of coffee pods Herzog was unsure of the best wholesale and retail selling price to recommend Distribution: Most products were delivered to retailers via warehouse distribution; which essentially made Kraft responsible for delivering all merchandise to the customers’ warehouses. From there, retailers then distributed the goods to individual stores Retailers were responsible for stocking products, refilling shelf space, maintaining inventories, and maintaining displays—services for which Kraft paid in excess of $200,000 for national listing fees. Their system eliminates the need for Kraft to constantly monitor and track inventories, distribution, and stock The alternative was to use direct-to-store-delivery

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