1. What brand development strategy is Kellogg's undertaking?
2. Assume the company expects to sell 5 million packages of Pop-Tarts Gone Nutty! in the first year after introduction but expects that 80 percent of those sales will come from buyers who would normally purchase existing Pop-Tart flavors (that is, cannibalized sales). Assuming the sales of regular Pop-Tarts are normally 300 million packages per year and that the company will incur an increase in fixed costs of $500,000 during the first year to launch Gone Nutty!, will the new product be profitable for the company? Refer to the discussion of cannibalization in Appendix 3: Marketing by the Numbers for an explanation regarding how to conduct this analysis.
Kellogg's, maker of Pop-Tarts, recently introduced Pop-Tarts Gone Nutty! The new product includes flavors such as peanut butter and chocolate peanut butter. Although the new Gone Nutty! product will reap a higher wholesale price for the company ($1.20 per eight-count package of the new product versus $1.00 per package for the original product), it also comes
with higher variable costs ($0.55 per eight-count package for the new product versus $0.30 per eight-count package for the original product).