Charcoal Grill Market Analysis and Strategies for Competition

Charcoal category will continue to decline in competition to gas grills due to changes in consumer consumption pattern Grill shipments in 1996-2000- Charcoal and Gas (000s) Charcoal category has shown a declining trend: 4% decline from 1998-99 2% decline from 1999-2000 A forecasted 5.7% decline in the second quarter of 2000 The charcoal shipment has dropped by 3% in 2000 compared to 1999 In addition to this, the Gas grill shipment grew by 8% in 2000 compared to 1999 In 2000, approx. 54% of gas grills were in US HH s in comparison to 49% of charcoal grills BHAVANA DUTT 1

Charcoal grill users are similar to Gas grill users; but seek different experiences Common reasons for Barbequing: 1. Flavor 2. Desire to be outdoors 3. Spending time with family and friends 4. Change of pace 5. Easy cleanup 6. Informality Charcoal User Hands- on experience Real BBQ Flavor Gas Grill User Convenience and Ease of Cleanup Greater control over cooking temperature and time Charcoal users inevitably make up for the Die- Hard grillers who take pride in the art of grilling; whereas gas grill users prefer convenience over the real BBQ experience BHAVANA DUTT 2

Reduced advertising and promotions in the Charcoal industry has resulted in reduced demand and visibility Kingsford had kept their merchandising in 2000 consistent with that of 1999 strategy. Royal Oak had pulled back their funds for temporary price reductions, features and displays in 2000. Although, Private Labels had temporary price reductions, they had considerably reduced their features and promotions. MMA s analysis of Kingsford s 1998 spending indicated that TV advertising drove a volume increase of 7% in 1998; and a 3%- 4% in 1999 from the previous years residual impact. 2000 Promotional Activity Weeks of Promotion % Change vs. 1999 Kingsford Royal Oak Private Label 28.7 3.3 14.2 1.8% -51.0% -6.3% BHAVANA DUTT 3

Increase in prices will continue to shift our customer base to gas grill Criterion Enhance advertising and promotions Activities relating to building efforts to advertise more with ad campaigns, in- store promotions and using product display as a technique will increase Kingsford's awareness and visibility. Increase price To increase awareness and visibility A price increase will risk in decreasing merchandising support such as features and special displays. Handling gas grill competition Advertising routed towards true BBQ flavor can elicit customers in switching from gas to charcoal. Worst case scenario, can lead to charcoal customers switching to Royal Oak and PL brands and also gas grills. Increase charcoal usage Creating advertisements alongside promotions around new occasions and events will increase charcoal usage If the price increase, people will tend to switch to gas grillers. Since Kingsford s advertising efforts in the previous years ha, it is recommended to go ahead with the same strategy BHAVANA DUTT 4

Kingsford should maintain the same price and focus more on increasing visibility Estimated FY02 Volume (Msc)* Impact A constant price will:- Help customers switch from competitors to Kingsford Prevent existing charcoal users from moving to gas grillers Able to maintain good relationships with retailers; who can also provide us additional trade support Estimated FY02 Sales ($M) Impact Estimated FY02 Profit ($M) Impact Estimated Probability of Outcome Pricing Scenarios 1. Club/Home Center 4% Price Increase A. No merchandising loss* B. 300 MSC loss at Costco** C. -1,000 MSC loss at Costco** 60% 25% 15% 0 $1,300 -1,110 -7,200 $1,080 -300 -1,000 40 -2,500 2. Minimum (2.5%) Blue Bag Pricing Increase A. No merchandising loss B. 10% merch. loss in 10 lbs, 20 lbs bags 75% 25% -400 -580 -1,200 -3,090 560 -810 3. Higher (5%) Blue Bag Pricing Increase A. No merchandising loss B. 7% merch. loss in 10 lbs and 20 lbs bags 50% 50% -550 -740 -1,900 -4,140 1,060 -110 An increase in price will make Kingsford incur merchandising loss.(**see figure) 4. Total Line Pricing (5%) Increase A. No merchandising loss B. Combination of: 7% merch. loss in Blue 10lbs, 20lbs bags 3% merchandising loss in 8# Matchlight 5% merchandising loss in 15# Matchlight 30% -790 -2,820 1,870 70% -830 -4,020 1,720 Price Elasticity Data BHAVANA DUTT 5

A mix of advertising and sales promotions tactics are required to handle the changing consumption pattern Strategy Tactics Print Budget Increase grilling occasions by collaborating with Saxonville sausage, A1 steak sauce, beer manufacturers and aerated drink companies on music festivals, sports events, spring parties, summer concerts. Advertising $4-5 million Organizing food contests TV advertisements in peak season TV sponsorship for a cookery show Out-of-home advertising In-store heavy promotions during Labor Day, Memorial Day, July 1 and July 4th Put standee and display racks for stocking Kingsford charcoal exclusively Pamphlets and store circulars Sales Promotions $ 2 million BHAVANA DUTT 6