Once You Pop You Can’t Stop!

 

How true this statement is! Pringles chips (owned by Kellogg Company) best known for their shape, texture and tubed packaging have been a leading snack of choice on supermarket shelves internationally since 1991. These days Pringles are still as relevant as they were in the early 90’s when I first heard that slogan.
And why wouldn’t they be? Who doesn’t love dehydrated potatos stuck together with wheat starch and flour that has been seasoned (read covered) in salt? Barely anyone, that’s who. This has never been more apparent than right now as Mr. Pringle decided to try and pull the wool over Australian consumers’ eyes.

Increased Demand

According to the FAQ section of the Pringles website, an increased demand for Pringles in the Asia Pacific region led to the opening of a new manufacturing plant in Malaysia to ease the pressure on the American factory. Australia’s stores are being stocked with the Malaysian produced product instead of the Pringles manufactured in the good old U.S. of A. This normally wouldn’t be an issue, but it seems that Mr. Pringles has tweaked the ingredients and manufacturing process, and not only has the much loved flavour changed, but so has the size of the chips and the unique tubes they’re delivered in.

The Dilemma

This led Kellogg to a large dilemma – with the cost of manufacturing and running Pringles increasing, they had to either put the price of the product up or reduce overheads by reducing the cost of manufacturing and quantity that each tube contains.

Screen Shot 2016-07-25 at 8.53.31 PM

(Iacobucci, D (2014) Marketing Management (MM4), South-Western, Cengage Learning)

An increase in sales revenue from higher demand across the Asia Pacific region has almost been a double edged sword. With the increase in demand came the need for another manufacturing plant which would lead to more operational costs. According to Pringles Facebook page “Since 2012, we’ve kept the price of Pringles flat”. The lack of price increase during this period, the increase in sales volumes and an increase in operation costs, leaves  one stand-out option, decrease the amount of product in each pack.

Obviously this leads to some very unhappy customers voicing their opinions and concerns on Social Media in the hundreds and the company needing to address the issue. (Notice the 113 angry and crying faces)

Screen Shot 2016-07-25 at 5.53.48 PMScreen Shot 2016-07-25 at 9.07.59 PM

But What’s A Company To Do?

Pringles can’t exactly drop the volume and increase the price. With an already higher price point, they couldn’t alienate themselves on shelves even more, especially today with a price sensitive competitive market. With more consumer choice and a growing home brand presence from the likes of the big supermarket chains, a flat price is what had to remain and was the right choice.

Dollar values speak much louder than per unit pricing, with many Australian’s ignoring these labels according to consumer advocates in a news.com article.

With a large chunk of the snack food industry being eroded by healthier snack options, Kellogg understands it can’t afford to be making such drastic changes to one of its top earners. Sales for its snack food division in The United States fell 2.6% in the first quarter of 2016 according to a Fortune.com report.

So What Should Have Pringles Done You Ask?

The most obvious thing is not change the recipe. People don’t pay $4 because they like the sound the tube makes when you tap on the lid, they pay $4 because they love the taste of that starchy potato and the feeling of their arteries slowly closing over from the salt ingestion.

Coke tried to do it in 1985 by launching “New Coke”. In what is still seen as one of the biggest mistakes in corporate history (and is still reported on 30 years later). They quickly learnt how attached consumers are to a brand or taste (messing with peoples favourite junk food is a big no, no).

With the ‘healthier option’ more popular than ever, Pringles have to remain loyal to their customers. The only part of their plan they executed poorly was the operational part, changing the flavour. They have remained honest with their consumers and kept the price flat in an ever increasing cost laden industry for the last 4 years, it’s only fair that consumers have to suffer a loss of 16g of perfectly formed potato chips per pack. Only time will tell if their strategy pays off.

Posted by Luke O’Meara 216363618

 

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