Ken Davis Products, Inc.: Finding Success in Retail Channels

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Ken Davis Products, Inc.: Finding Success in Retail Channels

Question 1: Describe and compare the distribution channel for (a) Ken Davis Products and (b) Kraft, which offers products in both the base and premium categories. What distribution advantages and drawbacks does each type of channel have?

a) Ken Davis Products, Inc. is a regional developer and marketer of barbecue sauces. It uses food brokers and distributors to place its products in grocery stores. This is an example of an indirect distribution channel (Kerin, 2011, p. 283). An advantage that the intermediaries (food brokers and distributors) bring to local and regional companies like Ken Davis Products is they (intermediaries) allow smaller companies like Ken Davis to focus on developing and marketing quality products for the regional barbecue tastes of its consumers. This eliminates the need to expand organizational size and volume to compete with national companies with in-house distribution departments like Kraft. The disadvantage in using these middlemen is that the costs can be high to have a product carried by a distributor. The estimate is $40,000 for each SKU (stock keeping unit) to be carried on the shelf of a distributor such as Supervalu (Kerin, 2011, p. 639). A company that is expanding its product line would face these extra fees, in addition to the fees for distributing the products.

b) Kraft foods is a major consumer-packaged goods company that markets multiple products nationally. Through its indirect distribution channel, Kraft employs sales people to call on grocers and institutional accounts to place and sell it’s goods, in addition to the large grocery-distributors (such as Supervalu etc.) who buy directly from Kraft itself. Therefore large companies like Kraft, who can sell directly to grocers, don’t always incur the distributor SKU fees or the cost of using the distributor. This is advantageous for Kraft because eliminating intermediaries in the supply-chain reduces...