HistoryOfABrand_KitKat_AdvancedMarketing

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ADVANCED MARKETING ACADEMIC YEAR 2010-

HISTORY OF A BRANDKIT-KAT CHOCOLATES

AN ENDURINGPHENOMENON!

Submitted 12th January, 2011

Overview & Scope of PapThis paper takes a walk down the timelines associated with one of theloved and festive brands of all times Kit-Kat. Broadly, this paper is dividinto five major parts based on the funnel approach.

We start with a generalized view of the chocolate industry and the vasegments it has, then get down to a more specialized view of brand Kand the enduring phenomenon it has been over the years. Rarely h

brand, FMCG brand at that, managed to age as gracefully and yet retainedits appeal across all demographic groups as Kit-Kat has done. We thelook at pointing out poignant characteristics from both a generalized aas specialized view of the industry.

The origins of the 'Kit Kat' brand stem back to 1911, whenRowntree, aconfectionery company based in York in the United Kingdom, trademarthe terms 'Kit Cat' and 'Kit Kat'. Although the terms were not immediautilised, the first conception of the Kit Kat appeared in the 1920s, wRowntree launched a brand of boxed chocolates entitled 'Kit Cat'.

Table of Contents[1]

[2]

[3]

[4]

Overview & Scope of Paper

Chocolate Industry &Segments

Kit-Kat Chocolates AnEnduring Phenomenon

Recognition Matrix & Kit-Kat

How did Kit-Kat originate?

[5]

[6]

The Projected Kit-KatEffect

Conclusion

BY DIPRAJNANDI, MUKULGUPTA, SHEKHAR R AJ & VAIBHAVBERWAL
http://en.wikipedia.org/wiki/Rowntree%27shttp://en.wikipedia.org/wiki/Rowntree%27s


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The Kit-Kat packaging array...

We next move to a speciallydeveloped recognition matrixframework that seeks to explain andcategorize product life cycles based

on their emotional and functionalrecognition benefits.

The framework has been developedfor not just fitting brand-productcombinations into the quadrants but also to verify if the product lifecycles actually exhibit the sametrends as predicted by the matrix for each of these products.

Its timeless, its unrivalled and stands for good times!

The framework is based on two keyfactors that determine a productsperceived value its functionalrecognition and its emotional

recognition. The inferences derivedare validated in the respectivesection.

Finally, we take a peek into thefuture to predict the market horizonfor Kit-Kat. This section looks atthe industry and brand performancethus far and then seeks to predictthe road ahead for this legendary

brand that just refuses to give up!

To round it all off, we concluwith key points and approachdetailed in the paper while drawiinferences and conclusive lines brand Kit-Kat. A few pointstrivia and information are outlinwith picture arrays and boxthroughout this paper so as to ato the awareness factor with t

brands history.

Have a Break. Have a Kit-Kat. Since 1939.


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Spanish explorers introducedwestern world to chocolate around400 years ago, but the delights of chocolate had been long discovered by the Mayan Indians.

Not all countries are able to enjoythe sweet taste of chocolate equallyas there is a profound dichotomy between those nations that extractthe raw materials and those whoindulge in the finished product. Thetop twenty countries that consume

chocolate are considerably 'well-developed' or 'advanced', Brazil being an exception.

The processing and consumption of chocolate products is mainlyconcentrated in the Western World.The aforementioned regionaccounts for 70% of the profitsgenerated from chocolate products.

80% of the world chocolate market

is accounted for by just sixtransnational companies, includingNestle, Mars and Cadbury.European countries account for more than 40% of the total worldchocolate consumption.

Eighteen EU countries were amongthe worlds top 26 chocolateconfectioneries consumers in 2007,ranking from 11.85 kg eaten per

capita in Ireland, to 4.5 kg inFrance and 1.04 kg in Poland. TheEU 27 consumed in total 2.5million tons of chocolate productsthat year, which account for aroundhalf of the global consumptionworld-wide.

In 2005, the global confectionery

market was worth an estimatedUSD119.69bn, which is a 19%increase in value terms as comparedto the levels of 2001. Marketincreased by almost 13% in volumeterms during this time, reachingnearly 15.7 million tonnes.

In value terms, chocolateconfectionery is the largest sector,accounting for almost 60% of totalsales. By volume, however, sugar confectionery accounts for themajority of sales, with a share of just over half (51%).

The confectionery market inregions such as Western Europeand North America remains fairlymature now, and consumptionlevels have been largely static inrecent years. In contrast,developing regions have been

showing a stronger growth, notablycentral and Eastern Europe, Indiaand parts of the far-east such asChina.

Looking at Indian chocolateindustry, it is dominated by twocompanies, both multinationals.The market leader is Cadbury witha lion's share of 70 percent. Thecompany's brands (Five Star,Gems, Eclairs, Perk, Dairy Milk)are leaders in their segments. Nestlespoiled the party for Cadbury whenin 1990s it appeared on the scene.The latter has introduced itsinternational brands in the country(Kit Kat, Lions), and nowcommands approximately 15

percent market share.

Different types of chocoladepending on what is added removed from the chocolate liquwe have:

1. Unsweetened or Bakichocolate - which is simply coolhardened chocolate liquor. It used primarily as an ingredient recipes, or as a garnish.

2. Semi-sweet chocolate is also u

primarily in recipes. It has ex

cocoa butter and sugar added. Swcooking chocolate is basically same, with more sugar for taste.

3. Milk chocolate is chocolate liq

with extra cocoa butter, sugar, mand vanilla added.

This is the most popular form chocolate. It is primarily an eatchocolate.

One billion people atechocolate today!

Chocolate Industry & Segments


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Commercial Chocolates areavailable in the following forms:

1. Assorted chocolates

2. Bars or Moulded Chocolates

3. Counts

4. Panned Chocolates (Gems)

5. clairs

Bars or moulded chocolates (likeDairy Milk, Truffle, NestlePremium, and Nestle Milky Bar comprise the largest segment,accounting for 37% of the totalchocolate market in volume terms.Wafer chocolates such as Kit-Katand Perk also belong to thissegment.

Panned chocolates accounts for 10% of the total chocolate market.Wafer chocolates such as Kit-Katand Perk also belong to thissegment.

2002 World Consumption of all Chocolate Products

Countries Volume (in metric tons) Per capita consumption(Kg/head)

Austria 78,935 9.80

Australia 86,080 4.35Belgium 104,370 10.08Brazil 312,100 1.77Denmark 48,715 9.05Finland 26,036 5.01France 408,515 6.88Germany 587,229 10.39Greece 28.000 2.59Ireland 33,995 8.98Italy 220,180 3.83Japan 273,110 2.14

Netherlands 72,805 4.52Norway 37,650 8.27Portugal 19,340 1.94Spain 137,705 3.35Sweden 62,575 7.00Switzerland 79,790 10.92UK 547,940 9.29USA 1,518,035 5.26

Source: Manufacturing Confectioner, January 2004, p. 36.

Continued

With over three quarter of a centuryof presence, Kit Kat still continuesto delight the chocolate lovers andstill is running a marathon of success.

According to the statistics, there arearound 540 Kit Kat fingersconsumed every second worldwideand 17.6 billion fingers sold everyyear. With such phenomenalnumbers, Kit Kat celebrated its 75thanniversary in the year 2010.

Going back to the roots of Kit Kat,

the first four fingered wafer waslaunched in London and SouthEast of UK as Rowntreeschocolate crisp which within a spanof 18 months, re branded byRowntrees marketing director George Harris, as Kit KatChocolate Crisp. It was then, aniconic brand was born.

This marked the start of arevolution in confectionery. Thesnap of the chocolate coated wafer fingers became a household name

in its home market of UK and thquickly the phenomenon spread over the world.

Nestle bought Rowntree in 19which resulted in Kit Kat comiunder the clout of brand Nestcatalysing an expansion of t brand into central and EasEurope, emerging Asian markand Latin America. Thamalgamation of the respect brands was historic for boththem.

Kit-Kat Chocolates An Enduring Phenomenon


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Kit Kat was only available in twoand four finger formats during theinitial 64 years of its existence. But

Nestle came up with Kit KatChunky in 1999 to successfullyenter the hunger satisfying segmentof the confectionery following upwith further innovations like thelaunch of Kit Kat senses in 2008.

Nestle sells Kit Kat in 72 countriestoday, with strong fundamentals of providing the perfect balance of chocolate and wafer with a recipetailored to meet the fickle consumer needs. This is then combined withconsistent branding and greatcommunication to the customerswith the famous Have a Break,Have a Kit Kat advertising linewith recent focus on asking thepeople to take Kit Kat break to seelife from a different angle.Each Kit Kat bar consists of fingerscomposed of three layers of crme-

filled wafer, covered in an outer layer of chocolate. Each finger can be snapped from the bar one at atime.

Rowntree's Chocolate Crisp whichwas launched in 1930s, wasoriginally advertised as "the biggestlittle meal" and "the bestcompanion to a cup of tea". Duringthe Second World War, Kit Katwas depicted as a valuable wartimefoodstuff, with the slogan "whatactive people need".

1940s marked the arrival of 'Kittythe Kat' to emphasise the "rich fullcream milk" qualities of the bar. Italso highlighted the new andimproved 'snap' by responding to a biscuit being broken off screen. Thefirst Kit Kat poster appeared in

1951, and the first colour Tadvertisement appeared in 1969.

"Have a break... have a Kit Khas been the catch line fpromoting and marketing the KKat bars since 1957.

The year 2003 was a turning pofor the Kit Kat bar as well as confectionery industry in geneThe popularity of low carb diand the push to healthier eatistifled sales growth in many partthe world. In addition, fier

competition from Cadbury's newformed Dairy Milk super brand acontributed to sales of the Kit Kdecreasing considerably in its homarket of the UK, and threatento depose it from its #1 position.

The solution adopted by Nestle aothers was to increase dramaticathe number of new and uniqvariations of their confections amarket them as limited or spec

editions, whereby they wouusually only be available for a fmonths at a time so as not impact the sales of their permanedition counter parts. The strateinitially reversed the decline of Kit Kat and has been adoptworldwide by Nestle, HershMars and others with similsuccess.

ContinuedThe various Kit-Katofferings over the

years


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In order to assess why Kit-Katenjoys such an enduring demand inthe market, we have developed arecognition matrix wherein we look to fit products into four categories or quadrants depending upon their recognition indices on two counts emotional and functional.

Alongside is a representation of thematrix in its original form.

To truly understand the matrix, wemust first understand whatemotional and functional recognitionmean actually. Emotionalrecognition is easier to understand. Itis the emotional connection or customer pull a brand generates onthe basis of its brand equity/power alone. For instance, a Nike scarf would generate considerably morepull than a possibly better qualityscarf made by perhaps another leading industry label.

Functional recognition needs a littlemore detailing. By functionalrecognition we do not mean thefunctionalities the product serves.Rather, within the product categorythat we are considering, how muchfunctional utility do consumers seein a particular brand and itsassociated product. For instance, adigital camera need not be rated ashaving higher functional recognitionthan a chocolate bar it is likecomparing the clichd apples andoranges. We therefore need tocompare a chocolate bar withanother chocolate bar and comparethe functional advantages taste,price, quality etc. so as to fully assessits functional recognition index.

Let us take the example of Kit-Katchocolates and determine where itactually fits into the framework laid

out above.Kit-Kat operates in the wafer filledchocolate segment of the chocolateindustry. There have been very fewlong-living competitors in thissegment for it and even to this date,most competitors are only local intheir distribution reach operating ina particular geography or two. Kit-Kat however is a global brand andhas been so for decades now.

It has a very strong emotionalrecognition index which can beinferred from the popularity it enjoysacross all age groups and occasions.Kit-Kat is not just a leisure-time-indulgence product but is easily asymbol of feeling good and full.

As such, it would score highly oemotional recognition aspect therefore lie either in the Classics or

Infatuation category. Moving on to its functirecognition index, we find thatonly is Kit-Kat the most loved bin its segment, but in terms of quavailability and taste also it has superior to other competing brAs such, it also rates highly in tof functional recognition.

Having scored heavily in recognition indices, Kit-Kat enjoys a Classics status and

therefore, has continued to defystereotypical product life-cycle On the contrary, it has only gainestrength and without any sermakeovers or changes to its i brand personality and punch-line

Recognition Matrix & Kit-Kat


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The Projected Kit-Kat EffectKit-Kat, as we have observed, hasdefied the traditional product life-cycle curve or at least elongated it, if so the purists may speak. But withthe onslaught of ever-evolvingchocolates in the market how far do we see this going?

To be fair, far and why not, withthe Nestle think-tank behind thestrategies that will take Kit-Katprogressively rather thanaggressively to the next level.

We can divide the proposedstrategies into two aspects, short-term and long term; and then look athow Nestle could possibly be takingKit-Kat through the next few years.

Short-term strategies that we see being implemented already in somecases are mainly to combat thenovelty chocolate products enteringthe market. For instance, new milk chocolates from competitors are being tackled by introducinglimited-edition Kit-Kat chocolates by Nestle. There is a whole web of promotional campaigns that goabout disseminating the informationabout suchlimited-edition sales.

Another short-term strategy is to get

lapsed users to return to the product by providing differentflavors/variants of the product andat the same time coming up withpromotions that highlight multipleoccasions of consuming thechocolate no longer streamlining itto a have a break genre.

However, the crux of the battle lies inenvisaging long-term strategies tokeep a mature brand such as Kit-Katrevitalized and ever appealing to theconsumer.

There are four important ways of accomplishing this

1. Innovation At the core of anyproduct lies innovation and the sameholds for a product as basic aschocolate. Kit-Kat needs to deliver

consistently on this count to itsconsumer base and at the same timeretain its core likeness factors.

2. Increase user-base We do notneed to over-emphasize the fact thatthe consumer of today for thechocolate industry is no longer

limited to the youth and teenWith a plethora of products imarket, the user is basically spochoice. In such a scenario, Kwould have to continue to exitself as a product for all occand age groups.

3. Associations With the growtrend of brands equity leveraged in products other thacore ones, Nestle would neecarefully associate Kit-Kat with

products/services. It has alreadysuccessful to a degree with the label in this regard.

4. Health factor Nestle also nto make sure that Kit-Kat neverup with variants that may go athe health-conscious psyche.


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ConclusionTo conclude, we present some of the most important observations made during the course of preparing this pape

Kit-Kat has stood the test of time as a chocolate brand by keeping its core offering intact

The chocolate industry may have continued to grow in terms of volumes as well as variants but Kit-Katheld on to its share and on several occasions thwarted attacks by tactful promotion and offerings

The consumer base for chocolate products will only continue to broaden and this only augurs well for Kat, given it is able to successfully diversify its offerings

The short-term and long-term strategies detailed in the paper will apply not just to keep Kit-Kat gostrong but in fact to ensure the existence of the brand without compromising on its core aspects

Kit-Kat is one of the rareclassics in our framework from a product category as basic as chocolates. Thiin the truest sense is the magnanimity of the brand.

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