CASE ANALYSIS:

CULINARIAN COOKWARE

MKT4413 – Section A2
Nguyen Quang Huy (A0133302B)
 STRATEGIC GOALS FOR CULINARIAN

• Widen its distribution network

• Increase its market share of the premium cookware segment
• Preserve its prestigious image
• Continue to capture revenue growth of at least 15%, while maintaining pre-tax
earnings of $12.5 million

PROBLEMS FACED

• The successful achievement of these initiatives is subject to Culinarian’s marketing strategy.

• There are many limitations that could
prevent Culinarian from using a price promotion to reach its strategic priorities.
• The preservation of its prestigious image and brand equity is a major initiative for Culinarian,
and it is quite possible that a price promotion may cheapen their products’ image.
• Secondly, the company is very selective in how its merchandise is
distributed, which limits how and where its products are sold.
• The perceived impacts of the 2004 price promotion are heavily influencing the current decision.
 STRENGTHS
- Superior product quality and
performance technology
-Strong dealer support due to high
margins
- Desired brand perception of being a
high quality product
- Favoured and endorsed by experts
- Favourable market trends: Copper
cookware, premium cookware matching
kitchen décor
- Advertising and marketing spend focused
and lean due to selective marketing
channels
WEAKNESSES
- Constant pressure of promotions from
other manufacturers
- Low penetration in low to middle income
customers due to premium image and
selective channel distribution
- Low brand awareness in lower income
households and low advertisement recall
- Cannibalization amongst brands due to
price difference
- Control over advertising mediums:
Culinarian products and promotions
seldom advertised by the trade
- Owned manufacturing unit; inadequate
inventory control during promotion
 WEAKNESSES: QUICK ANALYSIS

There is a conflict of goals here for Culinarian. While it’s important to be focused on
maintaining brand equity; meeting fundamental retailer and consumer desires is
important to attain sales figures. The report by Orion Marketing has shown that 30% of
consumers would be motivated by a price discount and their own retailers have expressed
frustration. If anything, they have to make more price promotions during those times,
around November and December, where many people (55% according to the market study)
are giving cookware as gifts.

A failure to develop a strong direct mail/online presence is also a major weakness.

To do so would be the equivalent of ignoring a major potential market (and a rapidly
growing one) and subsequently missing a major growth opportunity. The perception on
Culinarian’s part would be that make a large portion of its sales online would be similar to
selling in a Walmart of sorts and they would ultimately loose the ability to regulate the
prices. However, they would in fact be able to regulate prices to their liking and may even
be able to eliminate the trickery that retailers have employed (overstocking during a
promotional period then selling items bought during the promotion at a regular price) by
bypassing them. Plenty of companies have successfully brought their products to the
online market through reputable retailers like Amazon during the same year while
maintaining their brand’s image (LL Bean, Allen Edmonds etc.)
 SHOULD CULINARIAN RUN 2007 PROMOTION?

No, Culinarian should not adopt price promotion. The general growing trend in the
industry is observed in the segment in which Culinarian operates - higher middle class
segment. Customers from this segment prefer quality and features over price as shown by
the Orion Market Research.

Moreover the competitors of Culinarian in this segment were not offering any discount.
The price discount in this situation to garner untapped market would weaken the
positioning of Culinarian

The price discounts would directly affect the revenue and distributor margin which would
result in falling short of achieving 15% YOY increase in growth and also offset the advantage
of ‘a high margin supplier’ image among distributors (a current strength)

The capacity of the plant to handle the surge due to increase in sales when prices
were discounted was questionable. From the past experience (in 2005) Culinarian was not
able to handle the surge in sales. Hence Culinarian should not go for price discounts unless
it was prepared to handle the demand. Also the price discount given by Culinarian may not
reach the customers. It was known that most of the distributors did not pass the benefits of
price discounts to the customers during 2004 promotion.
SHOULD CULINARIAN RUN 2007 PROMOTION?

Comparison between Consultant vs Brown:

profit calculation for promotion period (2004)
 SHOULD CULINARIAN RUN 2007 PROMOTION?

If we see compare the profitability calculations of the consultant’s analysis and that of Brown,
we can find how the assumptions of Brown showed the flawed image of the
price promotions.

The difference in profitability due to promotions according to the calculations done by the
consultant and Brown are because of the total sales volume which are considered
erroneously by Brown as 24% YOY growth directly from the previous year’s monthly
numbers. Also in Brown’s calculation, variable costs include only labor and raw materials
which totalled $38.64M. Brown also did not consider Cannibalization as costs and Inventory
Savings.

Considering the normal sales projection for the months of Mar – May 2004 as 64834, based
on the 17% decline in sales of aluminium cookware from 2003. Also taking into account
cannibalization costs and inventory savings, profit due to the 2004 promotion should be
$2172637

Comparison between Consultant vs Brown:

profit calculation for promotion period (2004)
 WHAT ARE OTHER ALTERNATIVES?

Find untapped opportunities to

1
expand market share

Culinarian Cookware has an opportunity to find untapped target markets to create

new demand for their current products. Culinarian Cookware has an opportunity
to cross over into a more commercial market. Currently, they target a more
private/public consumer market.

Possible customers consist of school cafeterias, small restaurants/catering

companies, or small hotel restaurants, those currently have a need for high quality
cookware. Having such customers also play into Culinarian Cookware’s high quality
specialty brand image. Culinarian Cookware could further position their products
as favoured by commercial F&B customers.
 WHAT ARE OTHER ALTERNATIVES?

Creating a sub-brand/Multibranding
2

Culinarian Cookware can consider creating of a new level of cookware brand

(targeting at Medium or lower income segments). Offerings under this sub-brand
can meet the new untapped demand from those consumers while ensuring that
premium image of parent brand is not hurt. This multi-branding method has been
adapted by other companies such as GAP to introduce different products under
different brands. In line with this strategy Culinarian Cookware could introduce a
new line of cookware of a mid/lower level quality to offer consumers under a new
brand name. Pricing promotions for this sub-brand would be extremely important
to capture new customers.
 WHAT ARE OTHER ALTERNATIVES?

3 Brand Extension

Culinarian could tap into the culinary needs market and begin to offer premium
cookware items/accessories that complement their premium cookware (i.e. Knives,
cutlery, and measuring bowls). This brand extension strategy would allow
Culinarian Cookware to expand upon their premium brand name and break into a
larger market to compete in.

Consumers will be more likely to purchase complementary products under the

same premium brand, than a complementary item to go with premium cookware.
This brand extension would allow for Culinarian Cookware to market themselves
as a complete culinary solution.