As Geoff Herzog, evaluate the Canadian opportunity for coffee pods. Use figures/numbers from the case (on page 163, market share, and price) to estimate sales in the first three years.

 
 

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E MARKETING STRATEGY With an annual budget of only $1 million for a potential launch, Herzog faced tight con- straints on his ability to introduce Kraft coffee pods in Canada. If he proceeded with the launch, he would need to identify a cost-effective way to convince consumers that Kraft's pods delivered better value than competitors' pods. The goal was for 80 percent of SSP machine owners to try the product, and for 60 percent of those individuals to repeat purchase. Herzog was expected to at least break even by the end of 2006. Target Market Although SSP machines had only recently been introduced to Canada, Herzog had access to market research on current Canadian coffee pod users. These individuals were typically coffee lovers between the ages of 25 and 54, tended to be well educated, and had an average household income of $91,000 (the Canadian average houschold income was $55,000). Nearly three-quarters were married, and 88 percent lived in single-detached homes in urban areas, primarily in the population-rich provinces of Ontario, Quebec, British Columbia, and Alberta. They were characterized by high levels of consumption, and their interests included exercising, entertaining at home, gourmet cooking, household decorating, gardening, and taking exotic vacations. Maxwell House and Nabob buyers had similar profiles to SSP machine owners, except that they were typically over the age of 45. They also tended to be a mix of maturing, established families and single professionals. Buyer Behavior Although most SSP machines used standard-sized coffee pods, experience in Europe had shown that consumers usually purchased pods of the same brand as the machine they bought (i.e., Folgers pods with Home Café machines, Sensco pods with Sensco machines, and Javapods with Melitta Onc-to-One machines). At the same time, focus group research suggested that SSP machine owners valued the flexibility of using KRAFT FOODS 163 different coffee brands in their brewers. Coffee quality was also critical, since it defined the entire coffee experience. Coffee drinkers were looking for a fresh, hot cup of coffee with peak flavor and aroma, Market Share Kraft expected that, of the roughly 12.5 million households in Canada, SSP machines would be adopted by 6 percent by the end of 2004, and 8 percent by the end of 2006. Average household consuinption of coffee pods among SSP inachine owners varied from 7 to 14 pods per week. To maintain Maxwelf House and Nabob's share of the Canadian coffee market, Herzog estimated that Kraft would need to capture at least 35 percent of the coffee pod segment. His actual goal was to obtain a 45 percent mar- ket share by the end of 2006. Herzog knew this would require significant advertising and promotion to generate the necessary awareness and sales. He was uncertain whether he would be able to achieve his target and still break even. Product If he went ahead with the launch, Herzog would also need to decide on a flavor seleç- tion for Maxwell House and/or Nabob coffee pods. He felt that a varicty of pod offerings would be critical for building market share and category growth. Kraft's manufacturing facility also had the ability to offer the product in a resealable bag with zip closure, which would help keep the product fresh. E MARKETING STRATEGY With an annual budget of only $1 million for a potential launch, Herzog faced tight con- straints on his ability to introduce Kraft coffee pods in Canada. If he proceeded with the launch, he would need to identify a cost-effective way to convince consumers that Kraft's pods delivered better value than competitors' pods. The goal was for 80 percent of SSP machine owners to try the product, and for 60 percent of those individuals to repeat purchase. Herzog was expected to at least break even by the end of 2006. Target Market Although SSP machines had only recently been introduced to Canada, Herzog had access to market research on current Canadian coffee pod users. These individuals were typically coffee lovers between the ages of 25 and 54, tended to be well educated, and had an average household income of $91,000 (the Canadian average houschold income was $55,000). Nearly three-quarters were married, and 88 percent lived in single-detached homes in urban areas, primarily in the population-rich provinces of Ontario, Quebec, British Columbia, and Alberta. They were characterized by high levels of consumption, and their interests included exercising, entertaining at home, gourmet cooking, household decorating, gardening, and taking exotic vacations. Maxwell House and Nabob buyers had similar profiles to SSP machine owners, except that they were typically over the age of 45. They also tended to be a mix of maturing, established families and single professionals. Buyer Behavior Although most SSP machines used standard-sized coffee pods, experience in Europe had shown that consumers usually purchased pods of the same brand as the machine they bought (i.e., Folgers pods with Home Café machines, Sensco pods with Sensco machines, and Javapods with Melitta Onc-to-One machines). At the same time, focus group research suggested that SSP machine owners valued the flexibility of using KRAFT FOODS 163 different coffee brands in their brewers. Coffee quality was also critical, since it defined the entire coffee experience. Coffee drinkers were looking for a fresh, hot cup of coffee with peak flavor and aroma, Market Share Kraft expected that, of the roughly 12.5 million households in Canada, SSP machines would be adopted by 6 percent by the end of 2004, and 8 percent by the end of 2006. Average household consuinption of coffee pods among SSP inachine owners varied from 7 to 14 pods per week. To maintain Maxwelf House and Nabob's share of the Canadian coffee market, Herzog estimated that Kraft would need to capture at least 35 percent of the coffee pod segment. His actual goal was to obtain a 45 percent mar- ket share by the end of 2006. Herzog knew this would require significant advertising and promotion to generate the necessary awareness and sales. He was uncertain whether he would be able to achieve his target and still break even. Product If he went ahead with the launch, Herzog would also need to decide on a flavor seleç- tion for Maxwell House and/or Nabob coffee pods. He felt that a varicty of pod offerings would be critical for building market share and category growth. Kraft's manufacturing facility also had the ability to offer the product in a resealable bag with zip closure, which would help keep the product fresh.