A small Melbourne lolly maker has beaten international confectioners by researching what consumers wanted – and giving it to them.
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Entrepreneur: Ken Klooger
Company: Sunrise Confectioners
Business type: Confectionary manufacture
Founded: 1957
Turnover: $10M - $50M
Contact details: +61 3 9529 3344
The Sunrise Confectioners Story
When Ken Klooger took over the family business in 1987 he had little experience of running a company. He was 42 and had been a lawyer in a city firm in Melbourne. But Klooger’s father-in-law wanted to retire from the family confectionery business, Sunrise Confectioners, which had been making lollies such as spearmint leaves, jubes, and hundreds and thousands for nearly fifty years. Klooger says: “At the time, I was a bit restless. I thought I don’t want to die wondering if I could make a success of business.”
When Klooger took over, turnover had been steady at $4 million a year for a decade. Klooger did several things. He added to the company’s Prahran factory by starting another one at Notting Hill. He introduced a new product range: lollies such as jelly babies and jelly snakes made with natural colorings. A brand name, suggested by an advertising agency, was Binka’s.
But the jellies were expensive to make and plagued by quality problems such as a short shelf life. It took five years to get the products right and sales of the Binka’s brand rose to $1.8 million, taking turnover in 1996-1997 year to $5.8 million.
However, big companies such as Allen’s (a division of the multinational Nestle), Cadbury Schweppes and Mars increasingly dominated the confectionery market. Binka’s had just 2% of market share compared with Allen’s with 25%. Klooger says: “Persuading the large supermarket chains to keep our jelly babies and snakes on the shelf was proving very difficult as sales were not large enough and our market share of jellies was sinking.”
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Key learning points:
- Consumer research - Find out what consumers think of your product. Then ask consumers what they really want when they use or consume that type of product: natural content? Convenience? Environmentally safe? Then determine how much consumers will pay for those product attributes.
- Value proposition - Choose one strong message that fits the brand name with the desired product attribute. In the case of Klooger’s sweets, the name “Natural Confectionary Co” was chosen. All other messages were secondary.
- Rebranding - Make sure the product stands out from other products on the supermarket shelves and that its message is immediately obvious to the consumer. In this case, packaging the sweets in white distinguished them from the lolly-red and green colors of the other makers’ packets - and reinforced the natural-contents image.
- Consistency - Stay with the message. Repeat the same theme on packaging, advertising and anywhere else it can be used.
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During 1996 and 1997, Klooger used three different advertising agencies but sales of Binka’s did not improve. In late 1997, Klooger’s accountant recommended Ian Ross, from a Melbourne advertising agency, The Ross Partnership, which has done the positioning for brands such as Porsche and Bang & Olufsen. Klooger says: “At this stage, we were asking does the brand Binka’s have a future?”
Ross recommended a market research program to be done in two stages over four weeks at a cost of $20,000. The research reported that female grocery buyers buy on taste and that they liked the taste and texture of Binka’s products. However, awareness of the Binka’s brand and the natural contents of the product were low. None of the jellies stood out on shelves dominated by lolly red and green packaging. The female grocery shoppers said a change in packaging would have a positive effect – and they would pay 10% more for an all-natural product.
Ross says: “We told Ken a rebranding, repackaging and repositioning was necessary and that it was necessary to be number one in your category or find a different category.”
Ross says that a valued proposition and a primary message were established that stressed the product had no artificial colors and flavors. All other attributes such as taste and texture were to be kept secondary. The name Binka's was to be reduced and ‘The Natural Confectionery Co’ was to be used in a bold logo that incorporated the words ‘no artificial colors and flavors’. Fun designs were incorporated on a white packet.
Ross says: “The white background and special design differentiated the products from the red and green packets that make mothers think of children going ‘ga-ga’ from artificial coloring.” Ingredients were to be rewritten to educate the consumer further about the natural confectionary products. Klooger says: “I agreed to the big changes as I was impressed with the research.”
In early 1998, the company started TV advertising, which showed a little girl with an apple and jesting “You can try, but you can’t stop kids from eating lollies” and suggesting the healthy alternative. The background to the advertisement was white reinforcing the white of the package. Klooger says: “Within three months, there was a 21% increase in sales from $1.9 million to $2.3 million.”
During the next four years, the company spent $3.8 million on its TV advertising, running ads in all the major cities. In 2000, Olympian runner, Lauren Hewitt, was paid to advertise the products. This year, the company sponsored the TV show, ‘Big Brother’. Ross says: “That’s when we realised that females from 16 to 35 were buying it, not just for kids but to eat themselves.”
In the four years since the rebranding, sales of the jellies have grown from about $1.8 million in 1996-97 to $15 million in the 2000-2001 year. Klooger says he is now one of the two main participants in the jelly confectionery market with a market share of 25%; Allen’s has 20%. Klooger owns a third of the business; two co-directors, Michael and Andrew Eger, own the rest.
Klooger expects increase turnover to $40 million in 2004-2005 by introducing new jelly products and expanding market share. He says: “Running a business has gone from being interesting to exciting.” Allen’s has fought back by introducing its own range of natural jelly lollies.