Kit Kat'S Competitive Analysis

KIT KAT COMPETITIVE ANALYSIS

Kevin Daury Henry Garcia Clint Geddes Krista Whittaker

Executive Summary The following report is an outline on the state of Nestle’s Kit Kat brand of chocolate bars. The report will observe three main areas of said brand, including: the market in which the brand operates, the brand itself, and the competition. The main findings of such research are that Kit Kat and the chocolate industry in general are experiencing continuous growth, while at the same time experiencing a boost in sales due to the economic situation in North America. The recession that hit North Americans has made a negative impact in many industries, but the chocolate industry has seen an increase in consumption due to the nature of the products. In other words, they are considered comfort food. Due to the nature of the products (, various kinds of products, universal availability, year-round seasonality, and at a fairly low price), the confectionery industry is very competitive. Tthe Hershey Bar, and Reeses’ Cups have been identified as the main competitors to the Kit Kat brand. Market share shows Nestle to have the largest market share, but at the same time, in need of a new message because trends point towards a turn towards healthy or smaller portions of confectionery. The implications of the research in regards to future advertising are that the Kit Kat brand needs to establish itself as a brand that will provide some sort of comfort or enjoyment, while at the same time ensuring consumers that everyone needs to indulge.

Contents Market Situation Analysis ............................................................................................................................. 1 Market Analysis......................................................................................................................................... 1 Trend Analysis ........................................................................................................................................... 3 Seasonal Analysis ...................................................................................................................................... 4 Brand Analysis ............................................................................................................................................... 5 Brand Image .............................................................................................................................................. 5 Previous Campaigns .................................................................................................................................. 6 Something New to USP or Competitive Advantage .................................................................................. 6 Specific Implications to Advertising .......................................................................................................... 6 Competitive Analysis ..................................................................................................................................... 7 Share of Voice & Main Advertising Competitors ...................................................................................... 7 Market Share, Sales, Reputation, USP ...................................................................................................... 8 & Competitive Advantages ....................................................................................................................... 8 Of Competing brands ................................................................................................................................ 8 Reese’s Strengths: ................................................................................................................................. 9 Reeses’ Weaknesses: ............................................................................................................................ 9 Hershey Bar Strengths: ....................................................................................................................... 10 Hershey Bar Weaknesses: ................................................................................................................... 10 Message of Promotional Activities ......................................................................................................... 11 Specific Implications to Advertising ........................................................................................................ 11 Conclusion ................................................................................................................................................... 12

Market Situation Analysis Market Analysis The Confectionery – Chocolate Bars market is currently experiencing a steady growth. It has grown 3% since 2009 to reach C$2.5 Billion in sales. 1 Nestle leads the market with a 16% share of overall sales, which means that they record a profit of C$400Million a year.2

Top Chocolate Companies 2.8%

Nestle Canada Inc. Hershey Canada Inc.

4.2% 4.2%

16.1%

5.9%

13.0%

13.7%

Cadbury Adams Canada Inc. Lindt & Sprungli Canada Inc. Mars Canada Inc. Laura Secord Canada Ferrero Canada Ltd.

1

"Chocolate Confectionery in Canada." Euromonitor International Reports. Aug. 2010. Web. 27 Jan. 2011. . 2

"Chocolate Confectionery in Canada." Euromonitor International Reports. Aug. 2010. Web. 27 Jan. 2011. .

1

Top Chocolate Bar Brands

2.7% 3.6%

Kit Kat Reese's Hershey's

2.8%

The industry is expected to continue growing at an estimated rate of 2% annually to C$2.8 Billion by 2015.3 Kit Kat is available in 70 countries.

3

"Chocolate Confectionery in Canada." Euromonitor International Reports. Aug. 2010. Web. 27 Jan. 2011. .

2

Trend Analysis Consumers have increased the purchase of chocolate bars and confectionery due to the recent economic downturn. This is because in a weak economy they don’t have as much disposable income to spend for hobbies, entertainment, or leisure, and in order to treat themselves, confectionery is a cost-effective alternative. Because they are not spending as much money on the aforementioned leisure activities, they feel less guilty spending the money on chocolate bars. Over time, and with the economy recovering from the recession, there is also a rising sense of optimism, and chocolate is influenced by this because it’s an indulgence that people are starting to feel they deserve.4 The health craze that has taken hold of society has also made dark chocolate a desirable product because it contains antioxidants and flavonoids (anti-carcinogens) that make it a healthy product.5 This health fad however does not mean that consumers have traded healthy options for sugar-free snacks. Slases for sugar-free snacks have been in decline since 2004.6 Because of the heightened health awareness that consumers now possess, competitors are taking advantage and introducing products that offer a healthy choice, like health bars, and these now compete with chocolate bars and confectionery. Other trends include:7    

More competition because the category is growing. Some previously-considered seasonal items (i.e. Cadbury Eggs) are now available all year. Bite size is becoming more popular. Premium brands and image of the product equaled to increase in sales.

4

"Chocolate Confectionery in Canada." Euromonitor International Reports. Aug. 2010. Web. 27 Jan. 2011. . 5 Nursing Standard, comp. "Cocoa in Diet Could Have Positive Benefits for the Heart: Eating Chocolate Can Lower Blood Pressure, and May Reduce Risk of Cardiovascular Illness." Academic OneFile. Gale. Web. . 6 "U.S. Chocolate Sales Up, Volume Down." Candy Industry [Northbrook] Sept. 2010, Vol. 175, Iss. 9 ed., News & Analysis sec.: 10-13. ProQuest 5000. Web. 27 Jan. 2011. . 7 "Chocolate Confectionery in Canada." Euromonitor International Reports. Aug. 2010. Web. 27 Jan. 2011. .

3

Seasonal Analysis Chocolate bars are available year-round, but peak times during the year include Valentine’s Day, Easter, Halloween and Christmas holidays. Some products are packaged specifically to match the holiday or season (Halloween packaging for Reeses’ Cups).8

Kit Kat Seasonal Sales Month Sales %

J 7

F 10

M 7

A 11

M 7

J 7

J 7

A 7

S 7

O 11

N 7

D 12

Specific Implications to Advertising Market is growing and Nestle is #1, thus it must keep advertising to maintain that position, and stopping competition from eroding their market share. Competition is heavy and communicating with the target in a way that they can connect with the product is paramount. This is especially important because Nestle produces various brands of confectionery that compete directly with Kit Kat aside from the products that are produced by other companies.

8

"Confectionery Innovation Thrives, despite Recession - General News - Candy Industry." Home - Candy Industry. June 2009. Web. 27 Jan. 2011. .

4

Brand Analysis Brand Image Kit Kat has been positioned as a chocolate bar to have as a relaxation tool, or as a treat that consumers can share with others. The message also invites consumers to enjoy Kit Kat during down-time, such as while on a break from work.9 The packaging features the red-white scheme that it has had since the product’s inception, and the oval logo is ever-present. The name of the brand is well known, and it reinforces the relaxed feel that the brand has cultivated. Kit Kat has become one of the world’s best selling confections: Every second, 418 fingers are consumed worldwide.10

9

"About Kit Kat." KIT KAT Worldwide. Web. 27 Jan. 2011. . "About Kit Kat." KIT KAT Worldwide. Web. 27 Jan. 2011. .

10

5

Previous Campaigns11 Nestle spent $1.7M in advertising in 2006, and the medium of choice has been Television. Previous campaign titles include:  “Give me a break”.  “Have a break. Have a Kit Kat bar” (current campaign). Previous Objectives have included the following goals:  To position Kit Kat as a chocolate bar that targets adults who think they deserve some time off. Results from previous campaigns:  Kit Kat has remained constant as the #1 chocolate bar in Canada from 2006-2010 (from 3.5%-3.6% brand share).

Something New to USP or Competitive Advantage Kit Kat Chunky was introduced to target to a younger demographic, but emphasizing the fact that it is still made the same way that a Kit Kat bar is made. 12 Nestle’s status as the #1 company in confectionery market share gives Kit Kat an advantage over other brands that must advertise to try and catch up. Kit Kat’s advertising is done to keep it as the #1 choice of consumers. It’s made in a way that makes it easy to break apart to share or to eat piece by piece.

Specific Implications to Advertising Kit Kat advertising budgets are smaller than those of the competition, and yet the positioning of the brand and its reputation has made it the chocolate bar of choice for consumers. The “break” aspect of its USP has made the brand the choice of consumers and should be considered for future campaigns.13 11

Conway, Jes. "Creative Planning Awards, 1999." Warc. Web. 27 Jan. 2011. "Kit Kat: Revitalizing a Brand Leader." The Times 100: Nestle. The Times 100. Web. 27 Jan. 2011. . 12

13

Charles, G.. (2009, March). Kit Kat. Marketing,19. Retrieved January 27, 2011, from ABI/INFORM Global. (Document ID: 1669525331).

6

Competitive Analysis Share of Voice & Main Advertising Competitors14

Spending by Medium (%) 120

100

80 Kit Kat

60

Reeses Cups Hershey 40

20

0 Newspaper

Magazine

OOH

Radio

Total TV

The top three advertising brands in Canada are: Hershey Bars, Reeses’ Cups, and Kit Kat. Hershey Bars have the most varied of the top three advertisers: the brand is advertised in TV, magazines, newspapers & radio. Reeses’ Cups advertises on TV and Out Of Home. Kit Kat advertises solely on TV.

14

Nielsen Annual Summary

7

Share Of Voice Kit Kat

Reeses Cups

Hershey

13%

29%

58%

Market Share, Sales, Reputation, USP & Competitive Advantages Of Competing brands Sales 2009:

Reeses’ $78.4M Hershey $75.6M Kit Kat $103.6M

8

Reese’s Strengths: High brand recognition: Created in 1928 (83 years since launch), is now looking to expand into a larger product market by introducing products such as Reese’s Sweet and Salty Granola Bars and Reese’s Crispy Crunchy Bar. Cups are packaged in fifteen different size/varieties/packaging.15 Reeses’ Cups have a unique product combining peanut butter and chocolate, with the signature ridges decorating the edges. Comes from a trusted brand: Hershey. Reeses’ Weaknesses: Anyone with a peanut allergy cannot consume the product. Households that contain even one member with a peanut allergy may be more cautious about purchasing peanut butter products. Peanut butter is often banned from classrooms, daycares and other various areas in which a considerable volume of children can be expected. Highest calorie content .16

15

"HERSHEY'S | Nutrition Information: REESE'S Peanut Butter Cups." HERSHEY'S | HERSHEY'S Chocolate Products, Recipes, Nutrition. Web. 27 Jan. 2011. . 16 "HERSHEY'S | Nutrition Information: REESE'S Peanut Butter Cups." HERSHEY'S | HERSHEY'S Chocolate Products, Recipes, Nutrition. Web. 27 Jan. 2011. .

9

Hershey Bar Strengths:17 Very recognizable packaging and trusted company behind it. Available in different varieties. Lowest calorie content of top 3 competitors (180 per bar). Gluten-free. Versatile in baking.

Hershey Bar Weaknesses: Potential for cross-contamination with peanuts. Still advertises to children, while the rest of the industry has stopped doing such practice. Advertising budget is fairly small.

17

"HERSHEY'S | The Hershey Story: History, Timeline, Past Products, Milton." HERSHEY'S | HERSHEY'S Chocolate Products, Recipes, Nutrition. Web. 27 Jan. 2011. .

10

Message of Promotional Activities Reeses’s campaigns focus on the USP of containing peanut butter. Their campaigns have focused on the balance between the peanut butter content and the chocolate content, which has given rise to the “Two great tastes that taste great together”, “There’s no wrong way to eat a Reeses’s” and “Perfect” taglines. 18 Hershey’s campaigns have focused on family and the enjoyment that eating a Hershey’s Bar brings to the family.19

Specific Implications to Advertising The competition brands have used the same approached for many years, and are very different to the Kit Kat approach. Kit Kat’s implications to the competition’s advertising are that its physical traits need to be displayed, just like Hershey and Reese’s does. This entices the concumer, but also shows the product and displays visually its USP.

18

"HERSHEY'S | Nutrition Information: REESE'S Peanut Butter Cups." HERSHEY'S | HERSHEY'S Chocolate Products, Recipes, Nutrition. Web. 27 Jan. 2011. . 19 "HERSHEY'S | The Hershey Story: History, Timeline, Past Products, Milton." HERSHEY'S | HERSHEY'S Chocolate Products, Recipes, Nutrition. Web. 27 Jan. 2011. .

11

Conclusion In conclusion, the findings of this are that the chocolate industry is growing, and Kit Kat needs to advertise to maintain its #1 status, while communicating with consumers in a way that will make it stand out from this very competitive category. Kit Kat’s main competition has been identified as the Hershey Bar, and Reeses’ Cups, who use larger budgets when advertising, and have USP’s that include a healthy approach (Hershey Bar), and a fusion of flavours (Reeses’ Cups); Kit Kat’s USP of it being easy to break apart continues to be a strong point that should be kept for future campaigns. The main issues to keep in mind for future planning include the intense competition and saturation in the market, and in order to cut through the clutter with a message that engages the consumer, the Kit Kat brand has to continue its traditional “break” approach, while developing an engaging way to communicate the message.

12