Culinarian Cookware Case Discussion

Group No. 3

Q. 1. Describe consumer behavior in the cookware market. How is cookware bought? How is it sold? What are the implications for Culinarians marketing strategy?

Consumer Behavior in Cookware Market

The Cookware Market
Witnessed attractive growth from 2002-06 ($3.36 billion market) Cookware classified by: Price, Quality and Material Manufacturers can be distinguished based on the product portfolio they offered: Low-end/mid-level products or Premium Products Aluminum cookware formed a major chunk of the cookware sales followed by Stainless Steel and Copper, POI, Cast Iron

Consumer Behaviour in Cookware Market

The Buying Pattern
Consumers either purchased by the piece or as boxed set The buying pattern was seasonal in nature with peaks seen during May-July (Wedding Season) and NovemberDecember (Holiday Season) A huge chunk of cookware that was bought was gifted Quality and Features ranked higher than price and brand name when it came to buying cookware Brand awareness played a vital role when consumers went to purchase cookware

Consumer Behaviour in Cookware Market

The Selling Pattern
Cookware was sold in either of: Kitchen specialty stores (24%) Department stores (29%) Mass Merchandisers (32%) Others: Local Specialty stores, Grocery Stores, Direct TV sales, internet and catalogs (15%) Manufactures divided on the basis of their product offerings Premium manufacturers rarely launched price promotions but offered regular gift promotions Low/Mid level manufacturers introduced plenty of price promotions especially during peak seasons

Consumer Behaviour in Cookware Market

The Premium Cookware Consumer
Consumers of premium cookware were now moving towards colored designer offerings that matched their kitchen dcor Consumer behaviour was also positively influenced by endorsements by celebrity chefs Majority of the consumers were from the households having income of more than $75,000 Women naturally formed the biggest buyers of premium cookware

Consumer Behaviour in Cookware Market

Implications for Culinarians Marketing Strategy
Culinarian is a premium performance cookware manufacturer, focused on advanced performance technology CEOs Strategic priorities: 1) widen its distribution network, 2) increase market share in premium cookware segment, 3) preserve its prestigious image, and 4) continue to capture revenue growth of at least 15%, while preserving pre-tax earnings margins of 12%.

Consumer Behaviour in Cookware Market

Implications for Culinarians Marketing Strategy
Given the consumer behaviour and Culinarians strategic intent of being the premium brand, its target group is largely the households with more than $75,000 annual income Due to its intent on maintaining a prestigious image, its distribution channel needed to have some kind of exclusivity Due to the advanced technology that it used, the sales force had to be trained enough to put forth the value proposition To maintain the brand image, it had to use the forms of media which reached its TG (Cookery shows, elite newspapers and magazines) Price promotions always was a tricky game given the premium nature of its offerings However, a fine balance was also expected so that neither retailers nor consumers felt left out

Q. 2. What are Culinarians strengths and weaknesses? Why has the company been successful?

Strengths
Market Leader in Premium Segment
With a 6.5% overall market share, Culinarian was the market leader in the premium segment

Strong Revenue Growth

Company already on track to achieve a 21% y-o-y growth in 2006

Strong Brand Equity

Culinarian enjoyed a strong brand awareness of providing unparalleled quality with highly advanced performance technology Company was leader in metallurgy innovation and as the first manufacturer to provide the benefits of copper cookware with effortless cleaning and maintenance

Extremely Robust Sales Force

Culinary provided comprehensive training programs to its retail clerks Sales force included 8 experienced account managers who visited major accounts once every month, more than any other cookware company

Weaknesses
Retailers Demands
Although, Culinarian enjoyed strong relationships with its retailers, most of the trade channels demanded price promotions which wasnt handled well by the company

The Distribution Network

Although the companys aim was to increase its distribution network, it did not make concrete efforts to address this aim

Failed Price Promotions

Culinarians price promotions so far remain debatable when we look at its market share

Flawed Advertising Expenditure

Trade was hardly supported through its advertising expenses and celebrity chefs which are a major influencer while buying premium products remained untapped

Reasons for Success

Strong Brand Equity
Culinarian enjoyed a strong brand awareness of providing unparalleled quality with highly advanced performance technology Company was leader in metallurgy innovation and as the first manufacturer to provide the benefits of copper cookware with effortless cleaning and maintenance

Extremely Robust Sales Force

Culinary provided comprehensive training programs to its retail clerks Sales force included 8 experienced account managers who visited major accounts once every month, more than any other cookware company

Strong Retailer Relationships

Culinarians distribution channels were limited giving it exclusivity which helped its premium brand image, moreover it was made available largely at high end stores Company enjoyed strong relationships with the dealers and each of them carried all of its product lines, moreover the profit margin that Culinarian provided (52%) was unmatched by its competitors (48%)

Advertising and promotions

10% revenue spent on Advertising with focus only on the Target Group of high income audience The gifting promotion every year also helped boost the sales of the targeted product

Q. 3. Was the 2004 promotion profitable? Calculate the profitability using Browns logic and then calculate profitability using the consultants model. How would you calculate profitability?

Calculation of Profitability
Category

Consultants view
Forecasted sales for 2004 should have been 119504 units using the computer generated model Variable costs includes labor, raw materials, manufacturing overhead, 5% advertisement, 7% selling expenses Products in DX1 line were cannibalized and loss was calculated to be $99,332 and Culinarian saved $39,540 in inventory costs

Victoria Browns view

Forecasted sales for 2004 should have been 24% below the 2003 sales which would have been 59871 Variable costs must include only labor and raw materials which totaled 38.64

Sales Forecast

Variable Cost

Cannibalization Loss

Cannibalization calculations are erroneous and so are unreliable

Calculation of Profitability
The consultants sales projection was based on 10 years forecast model, which seemed more reliable than a simple comparison of first two months sales by Brown. The Variable cost should include only raw materials and labor. Advertising cost should be treated as a fixed cost. Hence, variable cost estimated by Brown (which is $38.64) is correct.

Regarding cannibalization of DX1, we cannot say that the decrease of sales in DX1 are not completely because of the promotions on CX1. Hence, we should not use these costs.

Calculation of Costs
Consultant No 20% Promotion Promotion 119504 184987 72 62.4 8604288 11543188.8 52.05 52.05 6220183.2 2384104.8 9628573.35 1914615.45 Victoria Brown No 20% Promotion Promotion 59871 184987 72 62.4 4310712 11543188.8 38.64 38.64 2313415.44 1997296.56 7147897.68 4395291.12 Actual Estimate No 20% Promotion Promotion 119504 184987 72 62.4 8604288 11543188.8 38.64 38.64 4617634.56 3986653.44 7147897.68 4395291.12

Units Price Total Revenue Variable Cost Total Variable Costs Contribution Generated Profit/Loss

-469489.35

2397994.56

408637.68

Hence, 2004 promotion was profitable for Culinarian Cookware.

Pros and Cons of 2004 Promotion

Pros 80% is from existing owners, which meant that there were about 20% from new customers. 70% felt price was important, which meant that the pricing promotion stimulates purchase. 15% would consider upgrading to higher series for the next purchase. The trade should be happy by generating more profits Boost overall brand awareness Helps Retailers preserve floor space Advertising was through retailers

Cons The trade would always look for promotion. Limited advertisement may constrain the scope of target audience. Promotion was just before time of historical peak seasons, if the program was during the peak seasons, it might be even more effective. Some retailers put the discount in their pocket. May Have negative brand effect on premium products PROX1 and SX1

Q. 4. Should Culinarian run a 2007 price promotion? If so, what should be the specifics of such a promotion (e.g., product scope, discount rate, timing, communication)? If a price promotion is not suitable, think about another type of sales promotion (e.g., manufacturer rebate program, gift with purchase, sweepstakes, product placement, etc.) to recommend.

2007 Promotion
o Limit price promotion to low end product lines (CX1, DX1) in order to preserve the premium image of the Brand o Reduce Trade Margins from 52% to 48% only on fast moving product lines(SX1 and PROX1) where trade can be assured of volumes. Volume will compensate for their reduced margins o Keep the promotions in the months just before the peak sales ( April, May, October, November) o Communication should not only target high income audience but look at communicating to mid level income audience for low end product lines

Other Promotion Strategies

o Since 55% of the respondents buy/receive cookware as gift items, increase the point of sales to gift shops and online gifting portals o Make low end product lines available in mass merchandise outlets since 32% purchase cookware from there o Run volume discounts where a customer purchasing more than 5 pieces will get a discount. This will ensure capturing larger market share o Associate with the cooking show to increase awareness about brand and influence the purchasing decision o Conduct a contest where best recipe will win o Run a bundled promotional offer where in fast moving and slow moving product lines can be clubbed together o Offer rebates on high end product lines rather than discounts o Have attractive in-store promotions and displays to influence buying

Group No. 3
o Prashant Bankar (A007) o Mahesh Kollipara (A033) o Meera Malekandathil (A035) o Bhagyashree Sathe (A048) o Vinodini C (B013) o Anurag Choudhary (B014) o Ninad Karandikar (B030) o Priyanka Garg (C019)