KRAFT FOODS The Coffee Pod Launch

Introduction

Geoff Hazorg, product manager coffee development at kraft foods Canada, had just learned that Kraft Food North America was planning an aggressive launch at single serve coffee pods in the United States. He need to decide wether kraft should proceed with a simultaneous launch in Canada, or wait the U.S. result. Kraft had launched a coffee brands Maxwell House and Nabob which is take 32 percent market share in Canada.

Kraft brand portofolio was among the strongest of the global consumer packaged good players. Kraft mission was to achieve leadership in the markets it served, which it pursued by fostering innovation, achieving high product quality, and keeping a close eye on profit margin.

Single serve Coffee Pod (SSP) machine was a new innovation to hit the coffee brewing industry. SSP used prepacked single servings to make high quality coffee in less than a minute and served a coffee similar quality to that available at café. Although the cost per cup with SSP machines was higher than a traditional drip coffee machines. SSP machines are easier to use and clean than drip coffee machines. SSP can make coffee in small batches, or cater to several different taste at the same time.

Retail sales of instant, ground, and whole bean coffee in Canada topped $600 million in 2003. The home-prepared coffee category was also becoming popularized between premium and mainstream brand. the Canadians was among the world’s leading drinker coffee. After water (69%), coffee (63%) was easily the most popular daily beverage of Canadian adults. By volume, more than two-thirds of the coffee consumed was prepared at home. Nearly 38% of all coffee in Canada was purchased in bulk or on Promotion. Canadian usually have a coffee time at breakfast (55%) and in the morning (17%).

SSP have three major competitor, Melitta One to One, Home Café, Bunn My Café, Senseo. Melitta one to one system was capable of brewing coffee in two sizes using a specially filtered system design to deliver coffee bar quality at home but the system use 9.7 grams javapods made it were all interchangeable across manufactures. Home café used a specialized pressured brewing technology to deliver single servings of fresh coffee in less than a minute while bringing out the full flavor. Senseo machine used balance portions of coffee and water, mild pressure, and a special spray head to produce an optimally balanced filtering process and a rich froth on the top of each cup. Bunn my café offer great taste coffee quickly, simply, and consistently.

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Kraft Foods North America should have wait the result of America advertising to know
the potential segment an make promotion more effectivea and spend lower costs.
Marketing Strategy
Kraft has budget $1,000,000 for potential launch in North America Kraft using a market strategy focus on mass media rather than an event.
	Target market			: - Coffe Lovers between the ages of 25 -54
				- Well Educated
				- High average Income more than $ 91,000 (Average income in Canada around $55,000) - Having an interest in excersing, entertaining, gourmet cooking, household decorating, gardening, and taking exotic vacations - Three quarter target market is married - Lived in single detached homes in urban area in provinces of Ontario, Quebec, British Columbia, and Alberta.
	Positioning			: make a coffee more than a coffee taste with family
				This positioning purpose to reach a high society who looking for the coffee taste and sensation rather than a price. The “family” word purpose to attractive a married people and to show the family atmosphere because more than 50% Canadians drink coffee at breakfast and in the morning when people gather with their family.
	Buyer Behavior			: SSP Owners valued the flexibility of using different coffee brands in their brewers
				Coffee quality was critical, coffee drinker looking for afresh, hot cup of coffee with peak flavor and aroma. Based on Europe experience consumers usually buy pods of the same brand as the machine they bought.
	Market Share			: the goals is to reach 45% market share at the end of 2006
				the expected 6% & 8% for the end of 2004 and 2006 of the roughly
				12.5 million house holds within consumption 7-14 pods per week
				Teo Years	total market share		total consumption (10 cup per week)
				2004	6%	750,000	405,000,000	pods per year
				2005	7%	875,000	472,500,000	pods per year
				2006	8%	1,000,000	540,000,000	pods per year
						Total	1,417,500,000
	Price			: - Production cost $0.02 per			pods.
				- Canadian Grocery takes margin 35 % /				$0.01	per pod
				- The price upper American Maxweel and Folgers price's, $0.22 &
				$3.99 for 18 pods and $3.99 for 16 pods				or $0.22 & 0.25 per pods
				So, Kraft should be give the premium price around $4.99 for 16 pods, the same price as Melitta One to One and Home Café. Kraft give a premium price for keep the image of high quality coffee for high society.
	Distribution			: Direct to store delivery (DSD). DSD is a system that kraft responsibility
				delivery to individual store. DSD cost is $ 150,000 lower than delivered
				to retailers via warehouse cost $200,000.
				Although this system can not handle if the coffee pods sale increase significantly, because of the limited amount of truck and limited space in distribution centre. But we assume that the result of selling SSP does not high, because the competitive environment will be tigh with Home Café, Bunn My Café and Senseo will be launch in September 2004, November 2004, and Early 2005.
Advertising and Promoting
Print Advertising
Print advertising through magazine.
	Category			Magazine		Total Cost ($)	Remarks
	English Language
	Woman Interest			Chateline		55,900	high household income, well educated
	Decorating			Syle at home		9,300	high household income, white collar proffessional
	Gardening			Gardening life		9,700	high household income, well educated
	Food			Food & Drink		14,100	SSP part of food and drink
	Travel			enRoute		42,000	high income and rank 1 publication in composition
	Regional/			Vancouver Magazine		15,500	high household income, well educated
	City			Toronto life		13,000	high household income, well educated
				Western Living		29,200	reader > 18 years, well educated
	French Language
	Woman Interest			Clin d'Oeil		14,100	high household income, well educated
					Total Cost	202,800
We choose all category for magazine that have potential customer to get a more customer.
With promote in almost all category magazine, we asssume that we will get a lot of viewer
and make an image of SSP or Kraft machine coffee more common for people in Canada.
TV Sponsorship
Kraft spend around $ 35,400 per weeks in Toronto, Vancouver and the province of Quebec
for TV sponsorship for reach more than 364,000 viewer.
TV sponsorship is important to do because through the television sponsorship will improve
an image and positioning at customer mind.
Kraft using TV sponsorship for 3 and half month launching. The cost Around $ 465,900.
Almost all promotion will be show in the morning, the time while Canadian drink coffee and gather with their family.
Total Promotion Cost per weeks:
			Promotion					Cost
	Production of a 30-second English-language contest spot							$10,000
	Airtime to run English language spot for one week							$ 15,000
	Giveaways							$ 5,400
	Promotional execution							$5,000
								$35,400
In Toronto and Vancouver area Kraft would be conducted in partnership with CityTV and include coverage on popular local program, such as breakfast television, City line, City Online. City TV would air a 30-second promotional spot encouraging viewers to qualify for giveaways. To generate additional interest, City TV offer small draw prizes via website and offer random product giveaways during its other programming. In Quebec, Kraft consisted of low-key effort to generate awareness and educated viewers through Cafeine (a morning talk) and La Roue Chanceuse (Wheel of Fortune in French version).
Direct Market
Because of the target market of SSP is a well educated person with an income higher than
average income, the e-mail campaign will be more efisien than direct mail. The data base is based on Maxweel and naboo database because they have same target market.
All of the target customer have an e-mail address and commonly a well educated always check their e-mail regularly. Through e-mail Kraft would invite costumer to link to website and the register to win a free year’s supply of coffee pods and get the information about SSP. The cost is $30,000.
Merchandising
Kraft will use the three various merchandising display. This action to support promote SSP and make a display more neat and attractive to customer .
Branded Off-shelf Bins offered the high household to buy per month.
Shelf-strips with coupon AdPad has a goals to attractive a retailer and a new customer who want
to try the product. The coupon will provide sufficient intentive for SSP machine owners to try Kraft’s coffee pods.On shelf rackins will ensure that the product will always be neatly and tidily presented.
The cost for merchandising and coupon market is $ 83,800.