KIT KAT Case Study

Agenda

BRAND - KIT KAT A case study on long term Kit Kats brand name maintenance strategies It is about how a once number 1 brand, fallen to number 8, got back to the top.

Agenda
Group Details Company Profile Current Problems PEST Analysis SWOT Recommendations Conclusion

Situational Analysis

Situation Analysis Company Profile

Brand - KIT KAT Nestl's flagship chocolate bar Product Line

Kit Kat 4 Finger, KitKat Caramac , KitKat 4 Finger Fine Dark, 2 Finger Kit Kat, Kit Kat Chunky, KitKat Chunky Peanut Butter

Image in Market
Kit Kat is a brand leader over sixty years One of the best selling chocolate bars and has acquired an instantly recognizable brand name and identity.

In 1997, British sales of Kit Kat amounted to some 227 million. Forty four Kit Kats are consumed every second in the UK!
The UK confectionery market : is worth over 5 billion per annum and is highly competitive.

Technology and Experience

technically superior products, following international quality and safety norms

Primary Objective
To maintain its position as the UKs number one selling confectionary brand
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Situation Analysis Company Profile

Quantitative Objectives
achieve 90distribution in all sectors of the confectionery market within the first four weeks after the launch sell 50 million units (ie 2,750 tonnes of product) in 1999, the year of the launch increase sales in subsequent years.

Qualitative Objectives
broaden the number of occasions on which people consume Kit Kat, with the vision that Kit Kat would be the natural choice for all breaks increase Kit Kat's market penetration by enticing new consumers to the brand, and by persuading lapsed users to return to the product, with particular emphasis on the 12-20 year old segment create real innovation in the countline market.

Marketing Strategy
Broad in appeal, young in feel and big in stature

Collaborators Dealers, Exclusive Outlets, Confectionary market

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Situation Analysis - Customers

Customers
Product
Cream, Caramel.

Market Size/Growth In 1997, British sales of Kit Kat amounted to some 227 million. Forty four Kit Kats are consumed every second in the UK! Market Segments 12 20 years old -> Single Finger 25 50 years old -> Four Finger Kit Kat Benefits Customer seeking Seek Novelty and Change Seek Excitement
Decision Maker Children Parents / Relatives

Situation Analysis - Customers

Motivation Impulse something that gives excitement Status Look for Brands Good Quality, technically superior product adhere to international safety norms

Consumer Information source Audio Visual media, Print Media

Buying Process Habit Quantity Purchased Forty four Kit Kats are consumed every second in the UK Trends 1 finger younger generation 4 finger - adults

Situational Analysis - Competition

Competitors
Products Reeses, Caramilk, and M&Ms. Oh Henry was a big eat. It was consistently well supported, and targeted a younger audience than Kit Kat Original.

Situational Analysis - Competition

Strengths of Competitors
Unlike Kit Kat, these were heavily supported with advertising. Unaided brand awareness of Kit Kat dipped from 24% in 1997 to 20% in1999. in the 90s, as a result of inconsistent and spotty communications support, the brand hovered in 4th to 6th place. In 1999, after 3 years of no advertising support at all, it reached an alltime low 8th place.

Situational Analysis - Competition

Weaknesses of Competitors
Unlike Kit Kat, these were heavily supported with advertising. in the 90s, as a result of inconsistent and spotty communications support, the Kit Kat brand hovered in 4th to 6th place. In 1999, after 3 years of no advertising support at all, it reached an alltime low 8th place.

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PEST Analysis
Climate or Context
Political and regulatory environment Deregulation to create free market force to open for tense competition. The feeling of acceptable goods is directly affected the distribution channel for product. Economic Environment As economic grows, disposable income are expected to increase which has droved the expense on functional food products. Inflation-moderate Social and Cultural Environment

habit

Technological environment Technical manufacturing quality has to be of high standards Safety norms need to be considered

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SWOT Analysis
STRENGTHS

Strong team work.

The business is well-established; company has enough financial strength to keep up with the advertisement and promotions of the product. Its company is working on the brand image and its brand will maintain clear position in order to prevent cannibalization. The company has been positioned of number one brand in 1999 in UK. The company believes long-term brand which means it will bring competitive advantage to KitKat over their competitors. Widely known slogan. Different from competitors range of product, packaging and taste.
WEAKNESSES

OPPORTUNITY
Expansion - It has the potential to expand to smaller towns and other geographies. Modifying products to satisfy customer seeking novelty and change 4 fingers, 2 fingers, Caramac, chunky, Peanut Butter

Global hub - Since manufacturing of some products is cheaper in India, India could become an export hub for it.

THREATS
Competition - It faces immense competition from the organised as well as the unorganised sectors. The Indian Government has reduced the import duty of food segments thus intensifying the battle. Changing consumer trends Sectoral woes - Rising prices of raw materials and fuels, and inturn, increasing packaging and manufacturing costs

Still spending a big amount on the advertisement. Dont have a strong special feature of its product. Can not deliver better benefit than its competitors. Sales profit was not very impressive. They have reverse marketing relationship with their supply-packaging suppliers. High operating cost and slight price

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Current Problems/ Issues

In 1999 was a watershed year for Kit Kat as it dropped to its lowest share ranking in decades, at number 8 in the highly competitive confectionery category. Revitalizing a Brand Leader was felt Marketing departments are expected to ensure that products do not go into decline Mature products need new life injected into them, to keep the buying public interested and aware of the product's benefits.

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Recommended Course of Action

Two Pronged Strategy
Nestl had to reinvest in advertising.
Kit Kat needed a line extension for teens. They prefer big eat bars like Oh Henry!

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Three Phase Journey back to Number 1

First Phase Started in 2000
with the return to advertising, and the launch of Chunkya single Kit Kat finger, 22% bigger than 4-fingered Kit Kat Original.
Advertising for the overall brand (there was no specific advertising for Chunky) was a modernized version of Kit Kats long-running Have a Break campaign. This brand effort worked,and by the end of 2001, Kit Kat overall was at #3. Original was selling more than it did in 1999, and Chunky had a good foothold.

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Three Phase Journey back to Number 1

Phase Two Started in 2002
Nestl wanted to push Chunky higher, and shifted all advertising to it. Kit Kat overall got to number 2. However, Kit Kat Original had flattened out, which would be a problem if Kit Kat was ever to get back to number1.

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Three Phase Journey back to Number 1

Phase Three Started in 2003
the team wrestled with how keep Chunky growing, and reenergize Original, without a significant media increase. The two bars appeal to very different audiences. The solution was individual advertising, but with the common platform: If he deserves a break, you certainly do. This spawned the Cannes-winning Male Model for Original, and Josh & Jason for Chunky. By mid-year, Chunky and Original were both growing. This propelled Kit Kat to number1with all-time high dollar shares.

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Strategy and Insights

Phase One (2000 2001) This phase was based on a threefold strategy: Strategy 1: Reinvest in advertising at levels in line with competitors. Insight: Kit Kat had to re-establish itself top-of-mind to regain market share. Kit Kat had been supported in line with competitors in 1993, but this had dropped to zero. Competitorssupported by advertisingtook the opportunity to pass Kit Kat in sales.

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Strategy and Insights

Phase One (2000 2001) This phase was based on a threefold strategy: Strategy 2: Launch a line extension that offers young people a big eat. Insight: To get to #1, Kit Kat needed to appeal to teens.

Teens eat more bars per capita than any other group. They are looking for a big eat, and are willing to pay a higher unit price along the way. But teens, especially boys, were not interested in Kit Kat. They saw it as a brand Moms share with their kids, not a gut-fill bar like Oh Henry! A Kit Kat for teens (Chunky) would have to be created.

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Strategy and Insights

Phase One (2000 2001) This phase was based on a threefold strategy: Strategy 3: Contemporize the Have A Break idea. Insight: The campaign had potential, but in its old form was not motivating enough to todays consumers, especially teens. the ways we take breaks have changed over 40 years. Todays consumers need an emotional release in a stress filled day. Traditional breaks have become less acceptable.

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Execution : Phase 1
Advertising
In March 2000, an outdoor campaign launched, and ran through July. In 2001, outdoor and magazine advertising ran throughout the year. The new campaign updated the break idea, with a more contemporary and youthful feel. Over the two years,there were 37 outdoor and 27 magazine executions .

Chunky:

In June 2000, Chunky was launched.

The Brand Advertising Decision:

It was decided to launch Chunky without dedicated advertising support --to put it on-shelf next to Kit Kat Original, and rely on the halo effect of the newly developed brand advertising.

Media Levels were as follows:

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Business Results : Phase 1

Kit Kat vaulted from #8 in 1999 to #3 in 2001. Over the two years, total brand volume grew 29%. Chunky was well established, and Original was ahead of 1999 levels, with little apparent cannibalization from Chunky.

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Cause and Effect : Phase 1

Chunky contributed to the brands growth. Advertising was also seen as a strong driver given the brand approach and Originals growth. Original saw some distribution gains in Grocery, but otherwise had retail conditions that remained relatively flat:

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Strategy and Insights

Phase Two (2002) Strategy : Develop teen-dedicated Chunky advertising, and run this exclusively. Insight: Chunky is a significantly different product, but many teens (especially those who had not tried it) still saw it as much the same as Kit Kat Original. The brand advertising in 2000 - 2001 had helped get strong Chunky growth, with reasonable distribution levels, and total awareness around 20%. However, Chunkys four-week share never exceeded 2.8%. In the absence of its own advertising, a baseline pattern had been set. Many teens who had not tried Chunky still believed it was just another light snack. The challenge was to have them realize that it was way better than the Kit Kat their mothers and little sisters ate, and expand awareness beyond 20%.

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Execution : Phase 2
Exclusive Chunky Advertising:
Outdoor advertising modified the previous years campaign, reinforcing Chunkys big eat in teen languagewith headlines like Choc-o-lot, Kit Kong, Beat hunger with a big stick and Katlossal.

Exclusive Teen Media:

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Business Results : Phase 2

Kit Kat overall reached #2 with Chunky up 58% and Original basically flat. There was no cannibalization of Kit Kat Original, but equally, it was hardly growing.

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Cause & Effect : Phase 2

The Chunky advertising was noticed: Six months after Chunky advertising was launched, its brand awareness doubled .This correlated with increased trial. Other variables were flat, or consistent with advertising-driven growth:
The table shows Original in a hold pattern. Chunky has increased distribution and display, but this is a consequence of Chunkys growth, not a cause.

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Strategy and Insights

Phase Three (2003 on) Strategy 1: Run separate advertising for Chunky and Original, because they have very different audiences. Insight: With support only on Chunky, Kit Kat Original had stopped growing. Kit Kat Chunky advertising had little to no impact on Kit Kat Original sales because: 1) the big eat message is not relevant to the controlled eat consumer. 2) it was in teen language. 3) the media plan was teen directed.

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Strategy and Insights

Phase Three (2003 on) Strategy 2: Even though they are to be advertised individually, find a common Have A Break platform for Chunky and Original.

Insight: Kit Kats financial plan would not support the media increase needed to support different positionings for Chunky and Original. Kit Kat needed a common theme, to avoid fragmenting its message.
It was clear that Have a Break still had pulling power. For 2003, the key was to find the break positioning that big eat Chunky and controlled eat Original could share.

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Strategy and Insights

Phase Three (2003 on) Strategy 3: Create advertising that embraces break insights in an entertaining, uplifting and humorous way to engage both consumersteens and adults. Insight: The Have A Break platform needed to be contemporized once again. While teens and adults see breaks very differently, they are still relevant to both. Teens tend to relax and chill, even when they have nothing to relax from. Adult breaks are more forced or planned, because they face more daily pressures.

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Execution : Phase 3

Kit Kat Original Advertising:

Instead of the problem-solution break advertising of the past, Male Model captured the universal need to take a break in a more motivating way.

Kit Kat Chunky Advertising:

It brought the same message to life with a teen storyline.

Spending Levels:
These continued to be competitive, though by no means excessive.

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Business Results : Phase 3

For the first time in over a decade Kit Kat broke back to # 1, as both Kit Kat Original and Chunky grew. Overall Kit Kat volume grew 10% in 2003 (tonnage), while the category was flat.

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Cause and Effect : Phase 3

it was clear that the advertising was breaking through and motivating people to buy. Furthermore, over the 3 year Results Period, there was no innovation on the brand beyond the launch of Chunky.

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Conclusion

If Kit Kat is to maintain its brand leadership, it should be aware of and adapt to these changes. The market never forgives complacency.

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Conclusion

Kit Kat's success can be attributed to consistency in its marketing, whilst allowing for minor changes to maintain a modern image.
Above all, the brand has enjoyed continuous backing with investment in marketing to both the trade and consumer sectors, enabling it to compete successfully with both established and new products. Continuous reinforcement of the brand message through advertising and promotions has enabled Kit Kat to sustain its popularity over a long period of time in the face of rapidly changing consumer attitudes and tastes and consumption patterns.

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