Kraft Coffee Pods

Kraft Foods is the largest food and beverage manufacturer in North America and the second largest in the world. Kraft, founded in 1903 as a cheese manufacturer, has now expanded its business into five different product categories with operations in more than 155 countries. Geoff Herzog is the product manager for coffee development at Kraft Foods Canada and he is faced with tough decisions regarding coffee pods. The coffee pods are used in single-serve coffee pod (SSP) machines; SSP machines use pre-packaged single servings of coffee to make high-quality coffee in a minute or less. Herzog must decide whether Kraft should proceed with a simultaneous launch of coffee pods in Canada and the United States, or wait the U.S. results before proceeding.

Competitors include Nestlé and Proctor and Gamble along with private labels and small brands. They are also faced with increasing competition from stores like Tim Hortons and small Cafés. Additionally, there are already competitors in the SSP market in Canada that have their own machines only compatible with their own coffee pods. Kraft risks waiting too long to enter the market or not having a large selection of compatible machines. Kraft also risks not having strong consumer reception to the single serve coffee, by waiting for the U.S. results first Herzog minimizes his risk. Kraft also faces threats in its distribution method, if it chooses direct-to-store-delivery (DSD) and sales increased in the future it might not be able to sustain this method due to distribution space and truck fleet

Nabob is Canada’s leading premium coffee, offering a variety of different types and flavours, initially they should offer their highest volume products in pods before adding more selections later on. They should follow their U.S. price points for Maxwell House, and undercut rival brands to gain consumers. Kraft can afford to offer lower prices due to their low production costs. The lower price than competitors would not significantly affect brand image, consumers know the quality that they are getting. Kraft should choose its traditional distribution method to deliver its product to retailers. The two options are the traditional system and direct-to-store-delivery, where Kraft would deliver the coffee directly to individual retailers. Although the DSD method has its advantages in reducing distribution costs, controlling its displays, ensuring superior freshness, and improved customer service, it is not as effective due to capacity constraints in the warehouse and truck fleet size. In addition, retailers are spread out all over the place and there is uncertainty if Kraft had the resources to adequately restock shelves and maintain inventory on a store-level basis. There are several different promotional vehicles to generate interest, print advertising, TV sponsorship, consumer shows, direct marketing, and merchandising.