MGMT 522: NEW PRODUCT DESIGN

Team Project: The New Coffee Flavored Jell-O

Feb. 23, 2012

Table of Contents

1. 2.

Executive Summary ------------------------------------------------------------------------------ 1 Product analysis 2.1 2.2 2.3 2.4 Idea Generation & Screening ----------------------------------------------------------Product Offering --------------------------------------------------------------------------Pros & Cons of New Product Launch ------------------------------------------------ Competition & Substitution -------------------------------------------------------------

3.

Marketing Strategy 3.1 3.2 3.3 3.4 3.5 3.6 Objective ------------------------------------------------------------------------------------Market Selection --------------------------------------------------------------------------Positioning ----------------------------------------------------------------------------------Marketing Mix -----------------------------------------------------------------------------Market Research Methods/Survey Facts ---------------------------------------------Sales Forecast -------------------------------------------------------------------------------

4. Engineering & Manufacturing Plan ------------------------------------------------------------- 9 5. Business Plan --------------------------------------------------------------------------------------- 10

Exhibits --------------------------------------------------------------------------------------------- 11-17 Reference ----------------------------------------------------------------------------------------------- 18

1. Executive Summary With Jell-O's brand concept and slogan, "JELL-O gelatin snacks are a good way to add fun and flavor to your day", we developed a whole new coffee flavored Jell-O to offer our customers another choice to enjoy both coffee and Jell-O. From our research, half American people are coffee fans and they consume most coffee in the world, which means fun and flavor of coffee are desirable for American. Jell-O gelatin dessert is known as Americas Most Famous Dessert. People believe that Jell-O can turn a childhood treat into adult indulgence. We propose Jell-O to launch the new coffee flavor targeted at young adults, ranging from 20 to 34 years old. Base on survey results, this new product has a purchase intension of 33% and the financial forecast indicates approximately 94 million in sales revenue. 2. Product Analysis The coffee flavored Jell-O is a brand new Jell-O which has the color and flavor of black coffee. It can be served as a dessert after meal or as a snack for fun for people who are interested in jelly and coffee. Our current ideal product is serving as a refrigerated gel cup which is ready to eat. 2.1 Idea generation All our team members are Asians and had good experience in coffee flavored Jell-O (See Exhibit 1) which is originally from Japan. We found that Jell-O, the gelatin dessert monopoly

in the United States, provides various items but lack of coffee flavor. According to our survey, interviewees think combining coffee and Jell-O is creative and unique. For coffee consumers, they have a brand new way to enjoy coffee and to obtain caffeine. Therefore, developing a coffee flavored Jell-O has become our best option. Idea Screening As shown in Exhibit 2, we inspected our idea through three basic screens: consumer and product screening, company screening and financial screening. First of all, Jell-O is well known and even called as Americas most famous dessert and the brand name has a great reputation and stable market share. In addition, after researching, we found out that American loves coffee deeply. Exhibit 3A, 3B and 3C show some facts of coffee consumption in the United States. For example, the U.S. is the country which consumes most coffee in the world and on a per-capita basis, the U.S. is listed as the eighth greatest coffee consumer. According to coffee statistics, 50% of American, equivalent to 150 million people, drink coffee. That means, the U.S. has an enormous coffee market and coffee is definitely one of the most popular drink in America. Hence, we believe the coffee flavored Jell-O has a potential market. Regarding the product, coffee flavored jelly is an existing product in Asia and it is an product extension for Jell-O, which means the new product is practical and feasible. Second, the product has great competitive advantage since the cost is low because Jell-O can utilize current facilities to produce coffee flavored Jell-O. Additionally, Jell-O is a brand lasted over

100 years and the company has great experience, prominent reputation and dominant market share, resulting in great competitive. Lastly, the product extension reduces our risk and cost, which makes the coffee flavored Jell-O worth doing. 2.2 Product Offering Our team members have all tasted coffee flavored gelatin desserts before; therefore we sought out to recreate the flavor from memory and will improvise along the way. We purchased the necessary ingredients and started experimenting. There are primarily three primary features in our product offering: 1. Consistency/texture. 2. Coffee flavor. 3. Sweetness. Many batches of different combination of factors listed above were created, tasted, preserved/discarded (if it fails to satisfy the taste buds of the testers), readjusted, and then produced again by keeping to the combination of elements that worked best. We were able to finalize an preliminary prototype of our product that we think would field test well within our targeted customers (young adults 20 to 34). From our field taste test, we derived that 81% of people enjoyed our offering, 9% of people found it too firm, 10% of people found it too soft; in terms of sweetness, 79% think it was just right and 7% think it was too sweet, and 14% think its not sweet enough. All these suggestions gave us good instructions to improve our product and finalize a best one. In addition to directly consume our coffee dessert, our consumers have a variety of creative ways to enjoy it. For example, pouring creamer or condensed milk, garnishing the ice cream, adding into milkshake or milk tea are all tasty ways to experience

coffee flavored Jell-O. 2.3 Pros and Cons of New Product Launch We are confident that our coffee flavored Jell-O can bring abundant advantages for Jell-O. However, it is also inevitable to face some hurdles when launch a new product. Exhibit 4 indicates the pros and cons of launching coffee flavored Jell-O. Jell-O will benefit from this new product because it is able to extend its market from children, Jell-Os original target customers, to young adult and adult who enjoy more coffee. However, it is slightly inconvenient with the original brand image. Moreover, a product line extension can save some costs since Jell-O can utilize the existing resources, processes, distribution network and facilities to produce coffee flavored Jell-O, which also reduce the risks. 2.4 Competition and substitution As of 2008, Jell-O sells over 158 products and had a dominant market share. Our competition will be some unnamed generic brands which offer low price products. In terms of substitution, other flavors are undoubtedly substitutions for coffee flavored Jell-O. Furthermore, is coffee flavored Jell-O is positioned as a dessert and a snack, thus, other desserts and snacks, like pudding, cakes, yogurt, fruits and ice creams are all coffee Jell-Os substitutions. 3. Marketing Strategy 3.1 Objective The objective is to launch a new coffee flavored Jell-O to the U.S. market as the next top

selling gelatin desert product targeted at young adult consumers (age 25-34) with a goal to expand the current existing Jell-O market and further grow its brand image. We propose the following objectives for the first and second years of coffee Jell-O market entry: First-year objectives 1. Build scale in selected cities 2. Test market phase 3. Achieve 50% awareness 4. Achieve 50% ACV 5. Achieve retail sales revenue of 94 M (See Exhibit 7) 3.2 Market Selection Because of the distinct coffee aroma and flavor, this product offering will not be targeted at kids; instead, we aim to offer this product to young adults living in urban metropolitan areas. Kids in general do not drink coffee, let alone enjoying coffee flavored food products. Parents will also be hesitant to buy something for their childrens consumption if the food itself contains caffeine because of health concerns. From these points we can detract that the traditional demography of Jell-O customers are not ones we are looking for with our new coffee flavored Jell-O. Jell-O in general has an image appeal that it is a kids dessert with Second-year objectives 1. Build scale nationally. 2. Achieve above 50% awareness 3. Retain 50% ACV 4. Achieve a 2-3% sales growth

the exception of Jell-O consumption in young adults in the general form of Jell-O shots by mixing alcohol into the recipe and served at parties. To tag along with this idea is the fact that adults enjoy a spiced up recipe of Jell-O more for its functional purpose and the departure away from fruity flavors that has more appeal to kids. But due to branding and regulation

issues, we will not be adding alcohol into our products anytime soon, if ever. Hence we aim

to cater to young adults with coffee flavored Jell-O, which has similar effects of drinking coffee but also is fun in the form of eating dessert. Generally speaking anyone within the

age range from 20 to 34 who drinks coffee and enjoy Jell-O desserts (with the exception of a few non-drinkers but Jell-O consumers) will be our target market. With this offering, we could also target a proportion of people who does not drink coffee regularly but enjoy eating coffee flavored desserts. We obtained the demographic information in the United States for

Young Adults age 20-34 living in urban metropolitan areas (urbanization rate of 86.7%), which totals to roughly 51 million households. We then conducted a field survey within the Krannert community as a sample to our target segments and tested for both purchase intention and product response. The total effective sample size was 70, and we were then

able to extract the data and come up with a market estimate of 3.81 million households using awareness rate of 45% and ACV of 50%. The income range does not seem relevant because at a priced of $2.75 per pack of six cups, it is as casual a purchase as buying a case of soda. 3.3 Positioning Jell-O has long established the image of childhood dessert for Americans, the continuation success of Jell-O will rely not only on the existing market segments targeting at kids but also the transition of Jell-O into something that adults also enjoy. Thus by introducing the coffee

flavored Jell-O, we can build on the adults nostalgic feeling of eating Jell-O dessert as a kid with a more matured flavor such as coffee.

3.4 Marketing Mix Product The current offering of coffee flavored Jell-O will be offered in the form of ready-to-eat retail pack of six cups. Plans for introductory stage will bundle coffee flavor with current best sellers such as strawberry. If market responds favorably, we will proceed to roll out the powder-mix retail box for deeper market penetration. Price Based on our survey results, which indicates that 71.4% of people showed purchase intention at the current Jell-O price of $2.75 per pack of six. We do not want to create consumer aversive reaction by pricing above, nor do we want to cannibalize the sales of existing products by pricing below this level, hence we will proceed with the existing pricing strategy. Promotion Jell-O will plan budget for new coffee flavored Jell-O advertising campaign, at the same time issue retail coupons to offer consumers incentive to try the new product. Place The coffee flavored Jell-O will initially be introduced at selected major U.S. metropolitan cities using the existing sales channels such as supermarkets and wholesalers. 3.5 Market Research Methods/ Survey facts In order to understand the reactions from potential customers toward our coffee Jell-O, we

conducted a survey in Rawls Hall in Purdue University campus on March 13th, 2012. The survey is a face to face interview (See Exhibit 5 for the survey form) and the participants were served with coffee Jell-O. The goal of this survey is to understand the purchase indentation and some specific issues or topics for the product development (e.g. sweetness, texture and coffee flavor). Our survey has 70 participants who are mostly graduate students with approximately age range 25 to 35 which match our target segment. The overall results of the survey are favorable to the coffee Jell-O (See Exhibit 6). 72% of participants indicated that they are interested in the coffee Jell-O (23% definitely buy; 49% probably buy) and 76% of participants like the current product tastes. The repeat purchase has a result of 11.8 packs (pack of 6) per year. We believe the participants in the survey fairly represent our target young adult market segment and we are confident that the coffee Jell-O will have high potential to become a successful product in the future. The major concern of the coffee Jell-O is that 37% of participants in our survey actually do not drink coffee, thus they will not buy any coffee flavor products. 3.6 Sales Forecast The sales forecast (See Exhibit 7) of coffee Jell-O is based on the assumption that Jell-O will launch new coffee flavored product as product line extension. Moreover, the Jell-O will use current distribution channels and allocate proper advertising budgets to promote this new product. According to our survey, the purchase intention results a 33.1% trial rate (assume

80% who definitely buy will actually buy; 30% probably buy will actually buy). Our target segment are young adults (age 20 to 34) who live in cities area and the target market is U.S. Base on the statistic data, there are 59 million people who are 20 to 34 and 86.7% people live in the urban area. The total target households are 51.2 million. Since the Jell-O is a well-known brand in the U.S., we assume a 75% awareness of existing products and 45% of awareness of the new coffee Jell-O and the ACV distribution of 50% given that the Jelly-O is available in most of distributors (e.g. Wal-Mart, Target, and Payless). With all the above information, the total trial household is 3.81 million. Our survey shows that the repeat purchase would be 11.8 per year. Given that the current 6 pack Jell-O sales at $2.75, we would set price equal to the current price to hold the current customers. In conclusion, we expect that the new coffee Jell-O will generate 93.87 million in revenue for Jell-O. Since the new coffee Jell-O does not need additional capital investment and other new technology, we consider that the new product will have positive NPV for the Jell-O. The coffee Jell-O would have different customer segment which targeted at young adults, we expect the new product would bring in new customers for Jell-O and a minor cannibalization effect might happen. 4. Engineering & Manufacturing Plan The Jell-O plant in Mason City, Iowa is responsible for producing the entire supply of ready-to-eat Jell-O gelatin products. Assuming Jell-O currently has sufficient or extra capacity at its manufacturing plant, to launch a new coffee flavor would require minimal

capital expenditure. There would be no need to purchase new equipment, to expand production facilities, or to acquire new technologies. The only new raw material would be required is coffee. Since Jell-O is owned by Kraft Foods Inc., the world's third largest food and beverage company which also owns Maxwell House, the supply of coffee should be easy to establish. Also, since this is a line extension, Jell-O should be able to deliver this new flavor to existing distributors, whole seller, and retailers through its current supply chain system without additional cost. 5. Business Plan Jell-O gelatin dessert is known as Americas Most Famous Dessert and has a campaign slogan "There's Always Room for Jell-O." Jell-Os continuing marketing and product research is the key to build up its brand image; its constant and consistent tweaks are the reasons why Jell-O is always fun and fresh. As usual, before launching this new coffee flavor to the market, Jell-O should complete a thorough concept, product, and market testing for Coffee Jell-O to determine consumers responsiveness and their willingness to buy. We also propose Jell-O to test sell Coffee Jell-O in selected U.S. metropolitan cities in order to gather real data, further modify the product, and develop more suitable strategy along with more accurate sales forecast. We believe Jell-O can turn a childhood treat into adult indulgence, and Coffee Jell-O could be the next Jell-O top seller!

Reference: 1. International Coffee Organization (ICO) - http://www.ico.org/index.asp 2. Tool kit Is it real? Can we win? Is it worth doing? (Harvard Business Review - Dec. 2007) 3. http://www.e-importz.com/Support/specialty_coffee.htm 4. http://www.transad.pop.upenn.edu/downloads/Rumbaut%20Komaie%20-%20Young%2 0Adults%20in%20US.pdf 5. http://www.census.gov/cps/ 6. http://esa.un.org/unpd/wup/index.htm 7. http://www.jellogallery.org/ 8. http://www.polarismr.com/POV/bid/78786/Marketing-Research-Turns-Childhood-Treat-I nto-Adult-Indulgence