Facing mounting pressure to boost sliding sales and recalibrate his company, P&G CEO Robert McDonald is stepping up the hunt for acquisition and divestiture candidates, people close to the company said.
Since assuming the chief executive role in July, Mr. McDonald has been trying to shake-up P&G's slow, process-heavy culture. He has increased scrutiny of P&G brands including Braun small appliances, Iams pet food, Duracell batteries and Pringles potato snacks. While those businesses have long been considered extraneous to P&G's focus on beauty, health and nonfood household staples, Mr. McDonald now is presenting an ultimatum: The leaders of those businesses are on heightened notice to prove their brands' prospects or face a sale.
The division heads have been "pushed to perform better and make the case for more investment," according to one of these people, who said the implication was that those divisions could be divested "if they don't improve results soon."
Meanwhile, P&G has looked at the consumer-products portfolio of Schering-Plough, which is merging with Merck & Co., as well as that of Wyeth, which was just acquired by Pfizer Inc. Another possibility: Beauty-products maker Alberto-Culver Co. It's unclear, however, whether those companies would choose to sell.
P&G is getting closer to a deal to acquire Sara Lee Corp.'s international household-products unit, particularly its Ambi Pur air fresheners, which are popular in Europe, people familiar with the matter said.
Pfizer, Alberto-Culver and Sara Lee all declined to comment.
A P&G spokesman said, "We will continue to closely monitor our brand portfolio."
A deal with Sara Lee could be just the first of many acquisitions under consideration as Mr. McDonald seeks to "aggressively recalibrate and enhance" a company he knows is under-performing, said one of these people.
The world's biggest consumer-products company has struggled more than many of its competitors during this recession. Penny-pinching shoppers increasingly have forgone P&G's premium-priced staples, which can cost more than twice as much as competing brands, especially retailers' private-label goods. Many of P&G's high-end brands, including Tide detergent, Downy fabric softener and Dawn dish soap, have lost market share, pulling down P&G's overall sales and profits.
The Cincinnati-based company is expected to report another quarter of disappointing results on Thursday. Year-to-date, Procter shares are off 7.4%, compared to an 11% gain for the Dow Jones Industrial Average.
Acquiring faster-growing businesses, especially for its household-cleaning and beauty divisions, would allow P&G to buy its way back to sales gains, people close to the company say.
Some analysts insist that improving P&G's mega brands is the only way to turn around overall results. The company has 23 brands that each garner more than $1 billion in annual sales. They account for 69% of P&G's total sales and about 75% of profits, according to estimates by Deutsche Bank analyst Bill Schmitz.
"The health of these brands is crucial to the success of the company overall," hewrote
Last month, Mr. McDonald assured investors that the company was "in touch with reality," and detailed for investors his plans to reignite growth, including price cuts, overseas expansion and creating more low-cost products.
"We know that in fact you punish us for size," Mr. McDonald told investors at a presentation last month. "We're focused on turning that scale into a growth and cost advantage."
Instead of spending several months evaluating where to make changes, as would be the norm at P&G, Mr. McDonald aims to "get more aggressive and do deals that will enhance what the company has," said one person familiar with the matter.
A more aggressive deal-making stance from P&G could shake up the entire consumer-products segment, which is grasping for ways to improve profitability beyond cost cutting. With consumers pulling back on spending, a growing number of these companies are contemplating mergers, say consumer-product bankers.
Duracell—which P&G acquired when it bought Gillette in 2005—has been considered a questionable fit in P&G's cupboard because of its exposure to cheap private-label batteries and fluctuating commodity costs.
P&G has shopped Duracell to potential buyers, but so far no deal has emerged, according to a person close to the matter. Duracell will post about $2.5 billion in sales for the fiscal year ending June 30, according to Sanford Bernstein analyst Ali Dibadj.
Iams, with an estimated $1.8 billion in sales according to Mr. Dibadj, has struggled to improve its profit margins amid fluctuating commodity costs. As one of the most expensive brands in the pet-food aisle, Iams has been a tougher sell in the recession and its market share has slipped.
Braun, with annual sales estimated at $1.3 billion, is also deemed outside of P&G's core businesses. Like Duracell, the brand came along with the acquisition of Gillette.
P&G executives have been examining Braun's small-appliance technologies used in its electric shavers and power toothbrushes to determine whether they can be applied to other products like beauty devices, such as facial cleansers or depilatories.
Cocktails and exotically flavored drinks with functional properties will be key beverage category influences in the years ahead, as consumers' love affair with nutritional offerings that can satisfy their demand for taste combined with health and wellness benefits continues, according to a new Culinary Trend Mapping Report from the Center for Culinary Development (CCD) and Packaged Facts.
Cocktails will continue to experience a renaissance as interest in artisan liquors, as well as retro drinks, gathers momentum. "The same consumers who value local foods, artisan products and traditional food preparation methods are finding those values expressed in the new cocktail movement, with its glorification of pre-Prohibition libations, micro-batch spirits and culinary inspiration," sum up CCD's analysts.
CCD expects cocktails to inspire a wave of ready-to-drink, non-alcoholic beverages as this trend continues to mature.
On the exotic functionals front, pomegranate and blueberry have been overshadowed by goji berry, mangosteen and açaí, and these, in turn, will be overshadowed by aronia, yumberry and other next-wave flavors within the next year or two, according to the beverage trends report, which notes that 53% of U.S. consumers said that they purchased a product specifically for its antioxidant content last year.
Other RTD beverage trends identified and examined in the report include RTD drinks offering a convenient way to ingest traditional ingredients from Eastern cuisines believed to contribute to health and longevity; coconut water (rich in potassium, calcium, magnesium and electrolytes, as well as refreshing); "21st Century sodas" offering sugar cane sugar, natural ingredients and exotic flavors as replacements for high-fructose corn syrup and artificial ingredients; kids' functionals that make ingesting probiotics, antioxidants and vitamins fun; and stevia-sweetened drinks.
CCD believes that major beverage manufacturers betting on stevia's ability to revive the soft drink category will be far from alone in launching beverages that take advantage of stevia's versatility.
In her new book Supercorp, Rosabeth Moss Kanter argues that capitalism is near a crossroads. The old ways of doing business no longer work. Traditional leadership roles are breaking down. And the public is fed up with greedy executives and their institutions that feast on their surrounding communities like leeches.
The time is ripe for a new corporate model, driven by a new type of business leader, where creating business value also means creating value for society.
Surprisingly, Kanter finds models for these so-called vanguard companies in very established, very large corporate titans including IBM, Procter & Gamble, Banco Real, Omrom, and Cemex. "I could have included Cisco, Avon products, Novartis, Toyota, and others," she says in her Harvard Business School office on a recent rainy afternoon.
Rosabeth Moss Kanter: Vanguard means ahead of the pack, the leaders, the ones who show the way. In this case they are leading the parade toward being values-based, led by principles and a sense of purpose at the heart of the enterprise. They are dealing with the crisis of capitalism by offering a new and different model.
Q: Why do we need a new corporate model?
A: There have been signs for the last 10 or more years that the companies that were going to succeed and prosper needed to manage risks better, have a stronger sense of purpose to motivate their employees, and satisfy a public already agitated about scandals such as Enron in the corporate world.
What I didn't see until I did the research was how companies with a very strong sense of purpose could use that to guide innovation. One of the exciting parts of Supercorp and the rise of this company model is that it's actually a way to develop products and services faster, to get more innovation, and to showcase innovation to the world in a faster way. So it should be at the heart of the enterprise.
And that's what I found. For companies like IBM and Procter & Gamble, this is definitely at the heart of the enterprise. The Japanese company Omron has sustained itself since its founding on principles and on a mission about sensing society: What does society need? They ask: Can we use our capabilities in the electronic sensor business to deal with these problems and issues? For example, one of the things they are working on is biosensors that can be attached to the food chain, so that the freshness of food can be immediately identified. That's potentially a big market as well as something with enormous social value because a lot of food goes to waste.
Q: Can you give us other examples of how this works in practice?
A: In Brazil, Banco Real has grown in 10 years from a small behind-the-pack bank to the second largest and probably the most highly admired bank. They differentiated themseves in the marketplace by centering their strategy around social and environmental responsibility. They said, they don't want to be a "green" bank—they are a for-profit endeavor—but they want to do the right things right. That was their strategy and it brought in customers even though they screened out clients with environmentaly shaky projects.
So despite having stringent standards for potential borrowers to meet, and stringent standards for employees, Banco Real has flourished. Its competitors are now adopting that strategy and advertising themselves as banks that are more responsible socially and environmentally.
Q: How prevalent are vanguard companies? A small parade?
A: It's a growing parade, but it's not clear yet whether they are the exception or the rule—that's true of every change. And of course I was looking at certain very large companies. But here's what makes me think the parade is growing: Companies that do not operate this way will not only lose the advantages of innovation, motivation, and public support, they will also have trouble being coherent and finding business opportunities.
So Banco Real definitely led a parade. Banco Real has created change, and that's why I think the parade will grow. As companies gain marketplace benefits by doing the right thing right, others will follow.
Q: It's interesting that Supercorp was published on the first-year anniversary of the fall of Lehman Brothers. How have the companies you profiled performed during the recession?
A: All the companies I studied, with one exception, outperformed their peers. Their share price declined less at a time when everyone else's declined greatly, and now they're prospering again. They outperformed their markets often, and in some cases they stunningly outperformed the market. The one exception was a company that got caught with a lot of debt because of acquisitions, as well as being in an industry, construction, that was the first to be hit.
Now, there are critics of each of these companies, and the companies must still make a lot of changes. IBM has moved many jobs to other countries. They are not perfect. But they aspire to meet higher standards, and in their operations around the world they also try to raise the standards.
Q: A critical point for you is that a company needs an underlying set of core principles out of which strategy develops. But how do companies embed these principles throughout the organization such that decisions are based upon them?
A: It's not the words; it's the conversations. Leaders must engage employees broadly in discussions of what these principles should be and how they apply.
Sam Palmisano, as a fairly new CEO at IBM, led a conversation in which all 400,000 employees could participate on a Web chat over three days about what the company's values should be for the 21st century, a "values jam." People were in a conversation. That doesn't mean there is total consensus, that doesn't mean that they've eliminated cynicism, but it means employees know "Top management thinks this is important, so I better think so, too."
A.G. Laffley, the chairman of Procter & Gamble, and Bob McDonald, now the CEO, would go around the world and talk about P&G's "PVP," or Purpose, Values, and Principles. Bob McDonald announced in August that P&G's growth strategy for the future is "purpose-inspired growth." So P&G makes it a conversation. Decisions get made in the company that can be tied back to the purpose—that is, you can see that the company makes decisions that would not have made been made on purely financial grounds.
It's like P&G's Children's Safe Drinking Water program. When P&G could not make a commercial market out of water purification powder, it created a nonprofit and gave it away. That told P&G employees that their company is serious about serving society.
Q: How important are mission statements or guiding principles in helping a company focus on core values?
A: Many companies have a mission statement or statement of principles. The words sound pretty much the same. They have something about customers. Something about employees. Something about shareholders. But the words (in vanguard companies) are a little different; they don't just talk about creating great value.
The statement of values will address looking broadly outside the company to the needs of society. One of IBM's values from its Values Jam chat was "Innovation that matters for our company and the world." The addition of those words "and the world" opened the walls of the company. There are IBM employees I've interviewed all over the world who actually invoke that phrase in conversations. They say, "I look at what my community or state or country needs, and ask how the capabilities of the company can contribute to that."
P&G's statement of purpose says they "improve the lives of the world's consumers." More recently they added "now and for generations to come." Adding these words focused people on the long-term impact, so disposable products need to be more environmentally friendly.
Again, it's not the words, it's the conversation. It's the actions of top leaders and the fact that they get successes out of innovations that are tied to the principles and that people are able to make that connection. And then it's part of the selection of people. People who do not really want to live by these values may not want to come to work for the company. It's also a conversation that is often held with companies being acquired, which makes them feel they are in good hands.
Q: What are the roles of CEOs and leadership in vanguard companies?
A: Leadership matters even more when you have to symbolize purpose and values as well as look to the future. People look at what leaders do, not just what they say. So leaders have to model the values. They have to put their investments behind the sense of purpose. If P&G had let the Children's Safe Water program wither just on financial grounds, employees would have looked at top management and said, "You don't mean those words."
Leaders also need two additional characteristics beyond the things we've always said they need. They need to be great systems thinkers. They've always needed that, but they need it even more as they look beyond the walls of the company. They manage their purpose through networks of partners. In fact, one of the values of these companies is end-to-end responsibility, the idea that you are responsible for your supplier's supplier and your customer's customer.
We also need leaders who are relationship-oriented, willing to have partners sit at the table, willing to sometimes put their own ego in check. Leaders need to feel they are safeguarding the future of the institution, not just managing a current portfolio of assets. These leaders have a sense of now and of generations to come.
Sam Palmisano said in one of the quotes I like best in the book: "Managers come and go, the business portfolio changes, so the only thing that endures is our culture."
Q: From the perspective of a worker bee, what's it like to show up to work each day in one of these companies?
A: Here is what I think characterizes these workplaces. They are much more dynamic and flexible, and people exercise much more control about when and where they work. Now, there are still factory jobs and sit-at-the-desk jobs where the hours matter, but an increasing number of jobs are run by self-managed work teams, in essence, where employees join virtual teams working from anywhere. IBM has done surveys that show that on any given day 40 percent of the work force is not working in an IBM office.
That's very striking. It shows the trust and respect these companies have for their people. By giving staff certain goals they need to meet, as well as work on teams that may cut across many parts of the business, employees are motivated very strongly to do the work because they care about achieving the goal, not because their boss is telling them to do it.
This is a new way of working that is very promising, but also very difficult to do. That's where leadership matters. Goals have to be very clear. People have to be coached in collaboration. The networks have to be strong. But if you can do that the benefits in speed of execution are remarkable.
Q: What do you mean by bringing society in the organization?
A: "Bringing society in" is the thinking of people who say, "We have a purpose beyond today's markets and products, and we should think about that. How is society changing? What are the big problem areas? What are our capabilities so that maybe we can find a commercial opportunity that also does good?"
That's a way of thinking that is part of the purpose guiding everyday life. They're always thinking about an opportunity to serve. At the same time their customers get very inspired by this work, so they are solidifying their partner networks and motivating their employees.
People like going to work every day with the idea that they have two jobs. One job is "do my job" and the second is "change the world." That motivation has driven a lot of entrepreneurs.
That's what "bringing society in" means. It's more than thinking that the organization should be customer oriented. It means, "Let's think about our community."
Q: President Obama: vanguard leader?
A: President Obama is subject to Kanter's Law, which says everything can look like a failure in the middle. President Obama has been in office less than a year, has tackled big problems—big problems are always controversial—and yet he is strong, steady, and focused on purpose. Therefore I bet that despite the controversy he will get a health-care bill passed and make progress on these issues.
One reason is that he keeps reminding Americans of our higher moral purpose. He doesn't get dragged down into the mud when people attack him on all sides. That kind of leadership is necessary to deal with volatility. If you don't stay centered in a set of moral principles, a sense of purpose, then it is very difficult to see beyond today's controversy. CEOs of vanguard companies know this sense of purpose helps them even when the stock price is down. They have a longer-term vision that keeps them focused and helps them weather storms.
A leader who has a strong sense of purpose and is willing to seek collaboration is likely to solve problems.
Q: What are you working on now?
A: My colleagues and I are "bringing society in" to Harvard by continuing to develop the Harvard Advanced Leadership Initiative, a workforce of experienced leaders who now have time and want to make a difference on some of the world's big problems. We're close to finishing the first year and getting ready for the second year of fellows.
I'm also working on "Smarter Cities, Smarter Communities," a project about how people build the connections and networks that reach beyond a single building. Education is bigger than schools; health is bigger than hospitals. Communities need to provide the context and the interconnections across parts of the system so that all institutions of a city see the role they play in improving the quality of life and the quality of the environment, in having better health outcomes, and in having a more educated population, all of which attracts jobs.
All of this new work is a continuation of what I learned from SuperCorp. It is important to channel the clout of successful companies and successful universities like Harvard to see problems ripe for innovations that can make a difference in the world. It is a privilege to work with enlightened SuperCorps to create partnerships across sectors combining capabilities for the greater good. That has the potential to solve enormous social and environmental problems and, as a by-product, restore confidence in business. I hope that is the 21st-century model for the future of capitalism.
NEW YORK (AdAge.com) -- The beleaguered media business is still marching aggressively on at least one front: store shelves at a big retailer near you.
More and more media-branded consumer goods are squaring off against similar products from rival media brands. Earlier this month Martha Stewart Living Omnimedia announced a major home and outdoor line due exclusively in Home Depot next January, when its contract with Kmart officially ends. Kmart and Sears stores began selling more than 700 home products from Hearst Magazines' Country Living. And Meredith Corp.'s Better Homes and Gardens line at Walmart continues to grow, now numbering about 1,000 products after starting last year with half that number; Meredith said its total brand-licensing revenue grew 15% during the 12 months ending in June.
The recession is battering retail just like everything else, of course. But that's only making exclusive, established brand names more desirable to retailers and a diversified revenue stream more appealing to media brands. Rumors have even circulated that the top-to-bottom business review at Condé Nast could also foster a new openness to activities like licensing.
"When revenues tighten up, all of a sudden things you may have never considered before start to look more possible," said Martin Brochstein, senior VP at the International Licensing Industry Merchandisers' Association. "Licensing is definitely an area than can generate significant revenue, particularly in a time when magazines are under a lot of pressure on the revenue and advertising side."
And media brands actually have a renewed opportunity to earn shelf space right now, said Glen Ellen Brown, VP of Hearst Group brand development. "Three-plus years ago, retailers were thinking 'My goodness,' particularly in the home space, 'I need to be much more economical and build my own brands.'" Ms. Brown said. But the recession has made the costs and effort required to grow those brands look a lot less attractive, she said. "The cycle is turning a bit so the retailers are going back to developed brands that have real consumer loyalty and resonance."
Besting Kmart deal Martha Stewart Living Omnimedia, for its part, needed to fill the void left by the expiring Kmart deal, which generated $1.6 billion in retail sales at its peak in 2002. It did that partly by getting into Macy's, but the Home Depot deal represented an important next step. "Between Home Depot and Macy's it's my view that we have the potential to have a much bigger business than Kmart in our heyday," said Charles Koppelman, executive chairman.
Wall Street will be watching: A J.P. Morgan analyst downgraded Martha Stewart stock after the deal was announced, partly because the Home Depot deal's "great potential" still didn't include minimum income guarantees like the Kmart deal did.
Home Depot has high expectations for the line, which is a departure of sorts because the retailer hasn't traditionally turned to celebrity or media brand partnerships. "We believe it will translate to additional top line sales," said Jean Niemi, a spokeswoman for Home Depot. "There's a level of credibility [Martha Stewart] brings." Ms. Niemi said a "robust" marketing campaign to introduce the line is in the works.
Perhaps retailers are hoping the tie in with trusted media brands will help. Sales of home goods were particularly lackluster for 2008, the latest figures available from The NPD Group. The bedding category sold $9.8 million, but that was down 10% compared to 2007; Bath sales were $4.2 million, off 9.5%; Bakeware sales were $211 million and cookware equaled $736 million, both down 4%; Dinnerware sales fell 12% to $488 million; and flatware brought in $199 million, down 11%. So far the first half of this year has been equally tough, with sales flat or down across many of the categories.
The deals can also be fruitful for media companies, which don't have to bear the cost of manufacturing products or operating a national retail chain. That means high margins when it's working right. Last year, for example, Martha Stewart Living Omnimedia collected $163.5 million in publishing revenue and just $57.9 million in merchandising revenue. But merchandising delivered almost $33 million in operating income, compared with just $6 million from publishing.
Pitfalls While there can be significant rewards, though, licensing is hardly foolproof. Time Inc.'s Real Simple has been successfully selling home office products in Target since 2006 and is introducing calendars to Target, Borders and Barnes & Noble stores in the fourth quarter.
But it discontinued its home cleaning products at the end of last year, said Gary Ryan, VP-brand development and strategy at Real Simple. "We were up against some stiff competition from Swiffer and Clorox," said Ms. Ryan. " It was also a much more price-sensitive category than we were anticipating."
Licensing deals can be risky for retailers too, especially if the personality that once helped move product starts going negative. In an interview with CNBC, Martha Stewart seemed to blame Kmart parent Sears Holdings for the end of her company's partnership with Kmart.
Sears Holdings let the Martha Stewart Everyday collection lose its luster, Ms. Stewart alleged. "I would say it has been diminished," she said. "The quality is not what I am proud of."
Sears said she ought to blame herself for any problems. "Given that the product is designed by Martha Stewart Living Omnimedia, manufactured to their specifications and subject to approval by the Martha Stewart team, we think that Ms. Stewart should accept responsibility for her product," said Chris Brathwaite, a Sears spokesman.
Would you like to steer the ship?" is a question I used to hear in the Merchant Marine.
The helmsman on duty would tell the neophyte, "Just take the wheel and keep the compass reading at 180," or whatever the course called for.
Steering a ship is not like driving a car. The ship drifts to the left, so the neophyte turns the wheel to the right to try to correct the course. But the ship keeps turning left, so the neophyte figures maybe he needs to do the opposite, so he turns the wheel to the left ... and the ship turns to the right. Now he's convinced that he's got the hang of it, until the ship turns left again. After a while, the poor soul is convinced the wheel isn't connected to the rudder at all.
It takes time to turn a ship and it takes time to build a brand. If you want to turn a ship to the left, you turn the wheel to the left ... and then you wait and you wait and you wait. Finally the ship turns to the left.
Marketing is like steering a ship. If you don't wait long enough for a marketing effect to run its course, you can draw exactly the wrong conclusion.
Take the 1981 introduction of Bud Light by Anheuser-Busch, virtually the last major brewer to introduce a light version of its regular beer.
I asked management, "Won't that hurt sales of Budweiser regular? Instead, why don't you introduce a totally new brand?"
"Oh, no," came the reply. "We're not positioning Bud Light against Budweiser. We're going to take business from Miller Lite, Coors Light, Schlitz Light and all those other light beers out there.""
Sure enough, the 1981 introduction of Bud Light did not hurt the regular Budweiser brand. Year after year, sales of regular Budweiser went up.
1982 ... Budweiser was up 4.1% 1983 ... Budweiser was up 6% 1984 ... Budweiser was up 3.9% 1985 ... Budweiser regular was up 4.2% 1986 ... Budweiser regular was up 3% 1987 ... Budweiser regular was up 3.1% 1988 ... Budweiser regular was up 2%
Seven years of sales increases seemed to prove me wrong. "And you thought that Bud Light would hurt our regular Budweiser brand? Are you crazy?"
Then came 1989, which saw regular Budweiser down one-fifth of 1%, the start of the deluge.
As of today, Budweiser volume has fallen every year for 20 years in a row, to 23.5 million barrels in 2008 from 50.6 million barrels in 1988.
Does anyone have any doubt that regular Budweiser will someday become a marginal brand in the U.S. market? We call line extension the "hockey-stick effect." Short term, you get the blade and score a few goals. Long term, you get the shaft.
Oddly enough, what gave Anheuser-Busch confidence in its line-extension strategy was the track record of Miller Lite. Introduced nationally in 1975, Miller Lite also did not hurt sales in the short term of Miller High Life, the company's regular beer.
Year after year, Miller High Life climbed up the beer ladder, from 5 million barrels in 1971 to 20.8 million barrels in 1978, the most explosive growth ever recorded by a beer brand. That was the year Advertising Age named John Murphy, Miller president and CEO, "Adman of the Year."
What drove the brand to such heights?
"Miller Time," in my opinion the most effective advertising strategy ever developed for a beer brand.
The target market: cowboys in hard hats. The psychological hot button: a reward at the end of the day for blue-collar men doing rugged jobs in outdoor occupations. (What Miller Time did for men, McDonald's was doing for women with "You deserve a break today," a campaign which coincidentally was also launched in 1971, the same year as Miller Time.)
By 1979, the combination of Miller High Life and Miller Lite (34.8 million barrels) outsold Budweiser (30.0 million barrels) by a significant margin. No wonder Anheuser-Busch pushed the panic button.
Too bad. If they had had a little more patience they would have realized that line extensions are inherently unstable. A successful line extension almost always damages the core brand ... over the long haul.
It's like a teeter-totter. When one side goes up, the other side goes down.
For Miller Brewing, 1979 was a year of high hopes. That was the year Miller broke ground on a new $411 million brewery in Trenton, Ohio.
That was also the year Miller High Life started its long decline, from 23.6 million barrels in 1979 to 5 million barrels in 1992, where it remains today.
The Trenton brewery? It sat idle for almost a decade and didn't open until 1991.
We kept forgetting the teeter-totter principle. When Bud Light declined this year, its first decline in 27 years, all hell broke loose. There were stories in all the major media.
"Anheuser-Busch InBev NW plans to tweak its marketing campaign for Bud Light and ratchet up spending," reported The Wall Street Journal, "in the hopes of reviving a brand that is facing a rare slump."
What slump? Bud Light is up 5% this year, not down 2.5% as reported in the media.
How can that be when everybody else is reporting a decline? The difference is that we included Budweiser's lime extension in Bud Light's volume. Bud Light Lime is the fastest-growing beer in America, with 1.2% of the market, and naturally that success came at the expense of Bud Light.
Budweiser, Bud Light and Bud Light Lime are not three brands with three different marketing strategies. They're one brand with three different flavors and three different marketing strategies that often cause confusion.
Line extension is a loser's game. It doesn't usually work, but even if it does, it almost always damage the core brand.
On the other hand, there's the well-documented evidence that a line extension doesn't hurt a leading brand as much as it does an also-ran. Why is this so?
A leading brand has a very strong position. It's the leader. And nothing works as well in marketing as leadership. Google in search. Hertz in rent-a-cars. Hellmann's in mayonnaise. Heinz in ketchup. Campbell's in soup. Thomas' in English muffins.
Many No. 2 or No. 3 brands become successful by narrowing their focus to segment the market, either demographically or in some other way. Miller High Life targeted the blue-collar segment.
Bud Light didn't destroy Budweiser's leadership perception. But Miller Lite definitely undermined Miller High Life's blue-collar perception.
What's a Miller? Over time, Miller became known as a light beer. And the cowboys in hard hats weren't about to drink a light beer.
What's a Budweiser? It's still perceived as the leading beer, but now available in a number of different flavors.
In the years that followed the fall of High Life, Miller Brewing tried to inject new life into its Miller brand with a raft of line extensions including: Miller Genuine Draft, Miller Genuine Draft Light, Miller Genuine Draft 64, Miller Lite Ice, Miller Lite Ultra, Miller High Life Light, Miller Chill, Miller Genuine Red, Miller Reserve, Miller Reserve Light, Miller Reserve Amber Ale and Miller Clear.
They even spent $60 million introducing Miller "regular" beer.
All for naught. Today, Miller sells considerably less beer under the Miller name than they did in the glory days of 1979.
So it is in many marketing situations: What works in the short term often doesn't work in the long term.
Well, you might be thinking, what about the trend towards light beer? It's true that light beer is now the largest segment of the market, but regular beer still accounts for 44%.
Why not have your beer and drink it, too? Why not try to dominate both segments with two separate brand names? Like Toyota and Lexus. Or Black & Decker and DeWalt.
Or Hanes and L'eggs.
Marketing people are often sheep when it comes to categories. Once a line extension becomes a big success, all the competitors get in line and say, me too.
Without giving a second thought to the possibility of launching a new brand that could clearly define the new market as a separate category.
It happened in light beer. It happened in diet cola. It happened in lithium batteries. It has happened in many other categories.
In 1995, to pick one year at random, the top 40 brands of light beer all used "light" in their names -- even Amstel Light, a brand that didn't have a "regular" version.
Line extension is a teeter-totter, but not necessarily in the short term. In the short term, both sides often go up. It takes time to turn a ship. It takes time to kill a brand.
You can't know whether a marketing move is effective or not until enough time has passed. Yet many companies are driven by short-term thinking -- promotions, coupons, special offers and discounts. And line extensions.
If it took Bud Light seven years to damage the regular Budweiser brand, how long are you taking to measure the success of your programs?
A month? Three months? Six months? A year?
Marketing is messing with minds. Getting into minds and changing them is not for the faint-hearted or for the impatient. You need to launch a marketing program and then have the patience to wait and wait and wait.
Which reminds me.
Maybe my misspent youth will start to pay a dividend. The House of Representatives has just passed a bill providing a monthly stipend to those who served in the U.S. Merchant Marine.
Many consumers are opting to save time in lieu of money these days, according to new research from marketing firms The Integer Group and M/A/R/C.
"The Checkout" report found that 28 percent of June 2009 shoppers describe themselves as "preferring to spend more if it saves them time." This was up from 23 percent in May. Additionally, the number of customers (28 percent) who responded that "saving money by shopping around" was their top preference fell from 33 percent the month prior. This shift in consumer shopping habits may be good news for convenience stores, said Randy Wahl, executive vice president of M/A/R/C. "Convenience stores have an opportunity to draw a larger number of shoppers if they focus on a few of the fundamental factors." These include providing a clean store and improving the overall shopping experience. The monthly report, which surveyed 1,200 adults, also found that consumers are now more comfortable with using credit cards than in recent months. Twenty-six percent preferred to buy on credit instead of waiting to purchase later, up from 23 percent in May. When asked about their top criteria for selecting a store, "accepts my credit or bank cards" increased 4 percent compared to the previous month. Other criteria related to convenience, such as "is easy for me to find the things I need" and "checkout is quick" saw notable increases when compared to earlier results. High price remains the top reason for shoppers not to make purchases at 60 percent, but shopper concerns about finding exactly what they are looking for has almost matched it, at 59 percent. "The majority of shoppers surveyed want to get in and out of the store as quickly as possible," said Craig Elston, svp of Integer, in a statement. "Convenience stores often give time back to the consumer to do other things."
Aug. 20 (Bloomberg) -- Chief Executive Officer Paul Polman gave Unilever’s margarine managers 30 days to devise a plan to restore growth in Germany. They made Homa Gold a discount brand, following Polman’s strategy to overtake rivals whose premium products are stumbling.
Unilever slashed Homa Gold’s price by almost half and changed the packaging to woo penny-pinching shoppers. Since July 1, the company has sold more of the spread, according to Alexander Pess, who develops Unilever margarines globally.
“We thought about how we could turn the threat of losing a brand into an opportunity in this crisis,” Pess said in an interview. The aim is “to keep volume in the portfolio, even if this means making less money on it.”
The Homa Gold program is one of 15 fix-it plans Polman, 53, is running to win back shoppers seeking cheaper goods since he took over in January. Unilever this month unexpectedly posted volume growth in western Europe in the second quarter and is now set to outpace sales at Polman’s former employers, Nestle SA and Procter & Gamble Co.
Unilever may pass Nestle for the first time since at least 2001, and may sell more items annually than P&G for the first time in at least five years as the Dutch-born Polman brings some prices in line with store brands. Homa Gold now sells for 75 cents a tub at a Metro AG Real hypermarket in Dusseldorf, the same price as the chain’s private label.
“It’s really impressive how Polman turned around a huge vessel like Unilever in such a short time,” said Christian Vondenbusch, a fund manager at Robeco Asset Management in Rotterdam, which oversees 115 billion euros ($163 billion), including Unilever shares. “This man achieved what others couldn’t.”
Maintaining Profitability
Unilever’s stock has outperformed P&G and Nestle since June 30, rising more than 12 percent in London and Amsterdam. Nestle and P&G have gained about 4 percent in that time.
The executive’s next task will be to maintain profitability at the London- and Rotterdam-based company as he slashes prices and lifts spending on new products. Polman scrapped Unilever’s operating margin target of at least 15 percent by 2010 in February, one month into his new job, and said giving an outlook would be inappropriate amid declining economic growth.
“Margins will fall this year,” said Richard Withagen, an analyst at SNS Securities in Amsterdam. Unilever’s “growth comes at a greater expense to margins than at rivals like Nestle,” he says.
Withagen recommends investors reduce their holdings of Unilever, where he expects profitability excluding one-time items, acquisitions and disposals to be 14.3 percent of sales this year, down from 14.5 percent in 2008.
Raw Materials
Polman plans to boost operating profit as a percentage of sales in the second half amid cheaper prices for raw materials like palm oil, which is used in margarine, sauces and ice cream.
Withagen says falling commodity costs are no panacea, with any benefit likely eaten up by increased marketing costs to propel the volume growth Polman seeks.
Polman was unavailable to comment for this story because he’s traveling outside Europe, a spokeswoman said.
Unilever is taking “quicker actions where we’re feeling that our brands are out-positioned or at a disadvantage, where we’re losing share,” Polman said in May. He said he’s fighting an “inherited assumption that the company will not grow.”
Stubble-Free
Polman, who worked at P&G for 25 years, may find himself a tough act to follow after increasing expectations in the second quarter, analysts said. He headed western Europe for P&G from 2001 to 2005, cutting prices and lifting sales while economic growth in the region stagnated. P&G was then led by Alan Lafley, who relinquished his role as CEO this year, remaining chairman.
“Polman’s biggest challenge is to live up to those expectations while the market is still deteriorating,” said Fernand de Boer, an analyst at Petercam in Amsterdam who recommends investors hold the shares. “Innovation is important. He’s got to introduce new products, supported by spending on advertising and promotions.”
So far this year, Unilever has introduced Dove HairMinimising deodorant, which pledges to leave users feeling “stubble-free” for longer, and Lipton Sparkling Green tea in a venture with PepsiCo Inc.
P&G spent $2 billion over the last year developing new products, including its Venus Embrace five-blade women’s razor. Polman in May said that Unilever is spending 1 billion euros on developing new products, without giving a time frame for that expenditure.
Marathon Runner
Polman worked at Nestle for two years as chief financial officer. After being passed over for the top job, Polman became the first outsider to lead Unilever. Outside the office, Polman is a long-distance runner, rising at 6 a.m. to hit the treadmill in his London office and completing this year’s Unilever- sponsored London Marathon in just over 4 hours and 12 minutes.
Vevey, Switzerland-based Nestle on Aug. 12 withdrew its revenue forecast and posted sales below analysts’ estimates, as consumers shunned premium products including bottled water and vitamin-enriched powdered milk. P&G predicted on Aug. 5 that sales excluding currency swings will slide as much as 3 percent in the current quarter as consumers switch to cheaper alternatives to Tide detergent and Olay face cream.
Under other 30-day plans, Unilever added more chocolate to Klondike ice-cream bars in the U.S. and made Indian packages of Rin Advanced detergent bigger while maintaining the price.
Nestle ‘Wake-Up Call’
Polman linked managers’ bonuses to volume growth and sent salesmen to stock shelves in supermarkets. He also boosted Unilever’s advertising and promotion spending and pledged more to develop new products and accelerate their introduction.
In the second quarter, Unilever sold 2 percent more goods by volume, and Nestle’s volume rose by 0.7 percent. P&G’s volume dropped 4 percent over the same three months, according to Bloomberg calculations. Unilever’s underlying sales growth of 4.4 percent in the first half also outpaced Nestle’s 3.5 percent gain in sales on that basis, while P&G’s sales on that basis in those months was flat, calculations show.
“It’s a wake-up call,” said Jon Cox, an analyst at Kepler Capital Markets in Zurich. “P&G and Nestle are, to a certain extent, caught with their pants down. It’s going to be hard for them to catch up in terms of volume.”
Cescau vs. Polman
Polman isn’t responsible for all the change. Since the fourth quarter of 2008, Unilever’s volume declines have been less steep than at Cincinnati-based P&G. Polman’s predecessor, Patrick Cescau cut jobs, sold assets and closed plants in his four years at the helm of Unilever. Cescau took over in 2005 after a plan to restore growth failed and investors criticized the company for being too slow to respond to consumer trends.
“Cescau looked at the organization and the production; Polman looks at how to sell the goods,” said Robeco’s Vondenbusch. “He will continue to look at the costs, but his focus will be on marketing.”
As a result of Unilever managers’ in-store experiences, Unilever is tweaking products to shoppers’ demands. In the Netherlands, the company is selling miniature versions of its Twister ice pops at the C1000 chain after noticing more families shopped there. By contrast, Unilever sells a multi-pack of its pricier Magnum Temptation bars only at Royal Ahold NV’s Albert Heijn stores, which cater more to double-income Dutch households.
“Polman basically fixed the imbalance between volume and pricing,” said James Amoroso, a food industry consultant based in Walchwil, Switzerland. “That’s nothing magical. The thing I’d say ‘wow’ to is the speed. This is a smart guy who thinks quickly and moves quickly.”
Aug. 13 (Bloomberg) -- Sales at U.S. retailers unexpectedly fell in July, raising the risk that a lack of consumer spending will temper a recovery from the worst recession since the 1930s.
Purchases decreased 0.1 percent, the first drop in three months, as shrinking demand at department stores such as Macy’s Inc. and Wal-Mart Stores Inc. overshadowed a boost from the cash-for-clunkers automobile incentive program, Commerce Department figures showed today in Washington.
A separate government report today showed more Americans than forecast filed claims for unemployment insurance last week, underscoring the threat to spending from the continued deterioration in the job market. Treasury securities jumped and the dollar fell after the reports, and some economists lowered estimates for growth this quarter.
“Until we start seeing job growth, consumers are still going to be very cautious,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, which accurately forecast the drop in purchases excluding automobiles. “It’s premature to talk about the sustainability of a recovery,” he said, until there’s “follow-through on the demand side.”
The gain in Treasuries sent the yield on the benchmark 10- year note down to 3.60 percent at 5:15 p.m. in New York from 3.72 percent late yesterday. The dollar dropped against the Japanese currency to 95.48 yen from 96.07 yesterday. Stocks rose, with the Standard & Poor’s 500 Index increasing 0.7 percent to a 10-month high of 1,012.73.
More Claims
The Labor Department said today that 558,000 people filed first-time claims for jobless benefits last week, up from 554,000 the week before.
Retail sales were projected to rise 0.8 percent, according to the median estimate of 76 economists in a Bloomberg News survey. Forecasts ranged from a decline of 0.9 percent to a gain of 2 percent. Commerce revised June sales up to show a gain of 0.8 percent from the 0.6 percent increase previously reported.
Excluding automobiles, sales fell 0.6 percent, also worse than anticipated and the biggest drop since March. They were forecast to increase 0.1 percent, according to the survey.
Americans cut back on furniture, electronics, building materials, groceries and sporting goods in July, according to the report. The drop in sales at department stores, at 1.6 percent, was the biggest this year.
‘In the Tank’
“It’s hard to find anything encouraging in this report,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “For the most part, discretionary spending is in the tank.”
Walmart, the world’s largest retailer, today reported profit that exceeded some analysts’ estimates after managing inventory to lower costs. Comparable-store sales trailed the company’s forecast.
The drop in sales was attributable to consumers being “more selective” in buying discretionary items and to larger declines in grocery prices than anticipated, Eduardo Castro- Wright, Walmart’s U.S. stores chief, said on a recorded call.
Macy’s, the second-biggest U.S. department store chain, said yesterday it cut inventories 7.5 percent in the second quarter from a year ago as sales dropped.
Other reports today showed companies trimmed inventories in June for a 10th consecutive month, and prices of imported goods dropped in July for the first time in six months as the cost of commodities such as petroleum and chemicals decreased.
Cash for Clunkers
Figures from the retail sales report showed the government’s cash-for-clunkers plan did boost auto purchases, confirming industry data released earlier this month. Sales at dealerships and parts stores climbed 2.4 percent last month, the biggest gain since January.
The government is offering credits of up to $4,500 to trade in gas-guzzlers for more fuel-efficient vehicles. President Barack Obama last week signed into law an emergency measure giving an additional $2 billion to the program after the original $1 billion ran out three months earlier than projected. The infusion of funds was meant to extend the program through August.
Excluding autos, gasoline and building materials -- the retail group the government uses to calculate gross domestic product figures for consumer spending -- sales dropped 0.2 percent after no change in June. The government uses data from other sources to calculate the contribution from the three categories excluded.
Forecasts Trimmed
After the report, economists at Morgan Stanley in New York projected the economy will expand at a 3.7 percent annual pace this quarter, down from a prior estimate of 4.2 percent.
The economy has lost about 6.7 million jobs since the recession started in December 2007, the worst of any downturn since World War II. GDP contracted at a 1 percent annual rate in the second quarter, the fourth consecutive drop.
Federal Reserve policy makers yesterday said they will hold the benchmark interest rate “exceptionally low” for an “extended period” to help sustain a recovery. They also added “sluggish income growth” to the list of reasons why household spending is likely to be slow to rebound. Headwinds previously mentioned included job losses, tight credit and falling home values.
Unilever, which sells more tubs of soft margarine spread than anyone, will unveil Monday plans to remove all partially hydrogenated oils — artificial trans fats — from its soft-spread brands, including I Can't Believe It's Not Butter and Shedd's Spread Country Crock.
The change, to begin next month and be done by the second quarter of 2010, signals how serious the marketing and technology battle about trans fats in foods has become. Shoppers have increasingly demanded that foods they buy — from baked goods to snacks to margarine — no longer carry artery-clogging trans fats that can lead to heart disease.
"I call this the death knell for trans fats," says Marion Nestle, professor of nutrition at New York University.
The elimination of trans fats from the U.S. diet "should be written up as a business school case and studied," says Michael Jacobson, director of advocacy group Center for Science in the Public Interest, which has pushed for it. Trans fats have been reduced more than 70% in three years, he says.
Unilever (UN)(UL), which makes half the spreads sold in the U.S., already can claim "zero grams" of trans fat in its spreads, which also include Brummel & Brown and Imperial.
Food and Drug Administration rules let foods with less than 0.5 grams of trans fat per serving be labeled "0 grams of trans fat."
But consumer demand and pointed marketing by Smart Balance, Unilever's closest rival in soft spreads, nudged Unilever to go lower. It will no longer mix in even tiny amounts, which added texture and shelf life. The new label, for the first time, will boast: No hydrogenated oils.
Unilever will replace the partially hydrogenated oils with a mixture of palm oil and interesterified fat (plant oil). All four of its spread brands will then have only 0.05 grams per serving of trans fat, the minute amount that occurs naturally in vegetable oils.
The change could kill a very effective ad campaign by Smart Balance that relentlessly needled Unilever's spreads, and others, for adding partially hydrogenated oil.
Terry Lundgren is the guy who took away your local department store, turning it into another link in the Macy's chain. Now the company CEO wants to give it back with a program he calls My Macy's.
After a pilot program to match merchandise to local shoppers' preferences in 20 Northern markets, Macy's Inc. is introducing the strategy to the rest of its 69 markets, including those in Texas. This summer, all 808 Macy's stores received the local treatment.
A store that's opening next week in Fairview, north of Dallas, is one of three 120,000-square-foot stores built from the My Macy's perspective. There's no fine china department, but women's accessories, sportswear and cosmetics have been bumped up. Without a bridal registry department, more space is given to bed and bath and to kitchen utensils.
In San Tan, a suburb of Phoenix, another new Macy's doesn't have a dress department. The third store, opening next week in the Kansas City suburb of Lee's Summit, has a "brow bar" in cosmetics, where customers can get their eyebrows professionally shaped.
The Fairview Macy's also has a Starbucks with seating, Wi-Fi and three computers available for customers to check e-mail or place orders on macys.com. It also has dressing rooms with interior lounge areas so mothers and daughters can consult outside of a tiny room.
The new stores are the culmination of 18 months of research by 30 people in operations, design and merchandising to create "a store from the customer's point of view," said Karen A. Meskey, Macy's senior vice president for store planning and design. She said the building design, which the three stores share, is "prototypical instead of a prototype," because it allows the space to be allocated differently. Higher ceilings in center areas are intended to convey the grand hall feel of traditional department stores built in earlier eras. Macy's new box comes with a new corporate structure that looks to the past for answers, back before department stores began shedding shoppers, locations and familiar names in the 1980s.
The recession has been especially challenging, as shoppers look to discounters to stretch their dollars. But at some point, the recession will end, said Lundgren, who lived in Dallas in the early 1990s when he was CEO of Neiman Marcus.
"Companies like Macy's will emerge even stronger," he said. "This is the time it pays to take risk. There's no resistance to trying new things; everyone is anxious to stimulate sales and get the customer shopping again."
Lundgren took heat from local markets when he led the creation of a national department store chain of more than 800 stores with the Macy's brand in 2005 and 2006, assembled from romanticized regional names such as Marshall Field's in Chicago, Rich's in Atlanta, Burdine's in Florida, Foley's in Houston and Meier & Frank in Portland, Ore. Macy's acquired 11 regional brands in its 2005 merger with May Department Stores.
The result was a redundant mishmash. Thirteen divisions were consolidated first into seven, then into four huge divisions, with buyers in Atlanta, for example, deciding what to put in Pittsburgh. It wasn't working.
So Macy's management started with "a blank sheet of paper," Lundgren said. In February, Macy's began consolidating into one central organization. The Cincinnati- and New York-based company cut 7,000 jobs, or 4 percent of its workforce, and reassigned 1,600 merchants to live where customers shop.
Lundgren said the talent was all there; the merchants just had to be moved to be "national as well as locally responsive."
Macy's now has a team of 20 district merchants and planners in each of its 69 markets. Each team is responsible for 10 stores.
The people they report to are in eight new regions, based in Chicago, Houston, Miami, Los Angeles, New York, Pittsburgh, San Francisco and Washington, D.C. Lundgren told them to follow one general rule: "When in doubt, just say yes."
Local empowerment of the My Macy's teams creates a "sustainable competitive advantage," Lundgren said. "Having 10 stores per district, there's continuity, with merchants in the stores every day talking to the customer. The power behind that is unbelievable."
In the fourth quarter of 2008, sales in My Macy's pilot stores were 1.5 percentage points higher than those of the other stores, Lundgren has told Wall Street. In the first quarter of 2009, that gap widened to 2.1 percentage points.
Investors are reserving their opinions, as it's hard to judge much of anything while the recession handcuffs the consumer.
Citigroup analyst Deborah L. Weinswig has a "hold" rating on Macy's shares and said in a recent report that "an undertaking of this scale has significant execution risk."
But she said the effort could be a long-term positive, along with customer insights from dunnhumbyUSA, a consumer research firm that Macy's hired a year ago.
There's "no other logical reason" for My Macy's test stores in Chicago, Detroit, Pittsburgh and Columbus, Ohio, to perform better than the rest of the company, Lundgren said.
Gerry Frank is a Macy's convert. His family founded the Oregon stores that operated for almost 150 years as Meier & Frank, and he initially tried to fight off Macy's. But Lundgren won him over then and with the local strategy now.
"This is the proper thing to do at this time. The Dallas customer and the Portland customer are very different," Frank said. "They've come full circle."
Upscale U.S. Consumers Adjusting Food Demands During Recession July 14, 2009 In the midst of an economic downturn, even more affluent U.S. shoppers are reconsidering grocery and foodservice purchases, according to “Premium Consumers in the New Economy: Food and Foodservice, a recent report from New York-based market research publisher Packaged Facts.A more adventurous taste in food, higher health and nutrition consciousness, firmer preferences for organic and natural foods, a heightened sense of ethical consumerism, and a greater propensity for Internet and coupon use are the attributes for an increasing number of premium U.S. consumers. Such psychographic responses to financial change have reshaped -- and will continue to alter -- consumer spending on food, the report found.“The economic turmoil that reached crisis level in fall 2008 has been a bull in the china shop of American consumer behavior, even for a market as fundamental as food,” noted report author David Sprinkle. “Consumers who have been set back or thrust forward financially are more likely to be rethinking what they need, what they want, and how and where best to find it.”The report found that the direction of financial change matters less than the fact of financial change in molding consumer mindsets. Therefore, upscale consumers who have taken a financial hit often align in attitudes and behavior with those on the financial upswing, as opposed to those whose finances have remained stable.Packaged Facts defines premium consumers as either single-person households with an income of at least $75,000, or multiple person households with an income of $100,000 or higher. The premium designation accounts for the top 28 percent of adults, or about 61 million out of 222 million adults. As of first quarter 2009, over twice as many adults in the premium group thought they were worse off (vs. the year before) than thought they were better off.Economic hardship is leveling the shopping playing field, according to the report. Upscale consumers, although still less likely than other consumers to shop at Walmart Supercenters, are, however, switching to Walmart at above-average rates. Specific segments of premium consumers (such as Gen Xers) are opting for less expensive fast food, particularly the better-for-you varieties. And premium consumers use coupons more, not less, than the rest of the population.“Premium Consumers in the New Economy: Food and Foodservice” is the latest installment in Packaged Facts’ ongoing examination of consumer responses to the shifting economy. For further information, visit http://www.packagedfacts.com/Premium-Consumers-Economy-2291282/.
LONDON - PepsiCo has appointed Microsoft for the first time to produce its biggest online campaign.
The deal, brokered by Claudia Lagunas, head of international marketing for PepsiCo, is Pepsi's largest online commercial partnership to date. The campaign will run for nine months and will initially include a Pepsi Max microsite in the UK, Norway and Australia targeting 18 to 25-year-old men. The Pepsi Max's "Club" microsite has been built and is being hosted using Microsoft technology. Fronted by Australian soap Neighbours pin-up Holly Valance, it aims to engage users with the brand by allowing them to share comments, games and photo galleries with friends on social networking sites such as Facebook and Twitter, encouraging them to join Pepsi Max's Club. Microsoft's portal MSN will host specially created editorial content, which Microsoft has guaranteed will drive at least one million people to the microsite. Microsoft Advertising will also drive consumers to the microsite through ads around its MSN Messenger service. Bruno Gruwez, marketing director UK Beverages at PepsiCo, said: "We wanted to make sure we were in the digital space as that's where our consumers are and we will continue to increase investment in the digital space. "The deal with Microsoft is a way of adding value and we will continue to expand our partnership with them."
7-Up. The famous positioning of 7-UP as the “Uncola” perfectly positioned that product for those who did not want to consume cola drinks. For those who do (a confirmed Coca-Cola fanatic), the positioning of 7-UP had no appeal. But that’s fine, since I am not their prospective customer anyway (even though THEY might consider me a prospect).- Courtesy of Steven “sbhoward” Howard Starbucks. I’ve been critical of Howard Schultz the turnaround CEO, but Howard Schultz the entrepreneur franchised “premium coffee,” forever upgraded the “coffee shop” experience, and created one of the world’s most powerful brands in the process. Swatch. The most famous example I can think of is Swatch. Created as a defense against low priced Japanese quartz watches that swamped the market, instead of competing on price, [parent company] SMH positioned the product as the famous “fashion watch,” thereby creating a whole new market, much larger in size than the original watch market.- Courtesy of Ricky ” rdewerk” de Werk Hyundai. Another fantastic example is Hyundai, a company that understands how to consistently move upstream through intelligent product positioning. Hyundai is increasingly creating havoc in the market for their competitors and finding ways to innovate, and develop value propositions that resonate with their customers and prospects.- Courtesy of Mikah “MikahDC” Sellers
Some of the flavors include Peppermint, Spearmint and Lemonmint
Soma Beverage has introduced natural mint water that combines pure water and real mint. It is available in 6 varieties, namely-Peppermint, Spearmint, Cherrymint, Lemonmint, Orangemint and Chocolatemint. The company claims that Metromint provides a cooling sensation and is a refreshment to beat the summer heat. Real mint stimulates the brain to open the senses and send cooling sensations throughout the body. The mint in Metromint stimulates the senses, soothes the stomach and restores the mind. More importantly, it sends cooling sensations throughout the body, which is why company is targeting style and health-conscious consumers. Scott Lowe, President of Soma Beverage, said: "Metromint is the perfect way to cool down during the hot summer months. All six mintwater varieties are made with pure water, and absolutely no sweeteners, preservatives, or calories. Metromint is this summer's coolest beverage." Each variety of Metromint is designated with a numerical chill factor. From Chocolatemint (-2 degrees) to super cool Peppermint (-9 degrees), the chill factor is a comparative scale that measures the range of minty refreshment.
ATLANTA - For most of us, the shape of a 2-liter bottle is something we take for granted.
For Hendrik Steckhan, head of carbonated soft-drink brands for Coca-Cola North America, the shape is a problem. Coca-Cola should not be in the same 2-liter bottle as every other brand, he said. “When you think about this, it just doesn’t make sense,’’ Steckhan said. Faced with a nagging decline in North American sales, Atlanta-based Coke and its bottlers are turning to packaging as a key way to set their products apart and try to generate fresh appeal. Consumers will see more sizes and bundles of Coke products at supermarkets and convenience stores. The iconic contour shape also will become even more prominent. A 2-liter contour bottle, already in Birmingham, Ala., and Chattanooga, Tenn., is being added to Atlanta in July. The push for what’s called “package diversity’’ is significant, and the stakes are high. Across the industry, US sales of carbonated soft drinks have declined for four straight years, according to figures from Beverage Digest, a New York-based trade publication. PepsiCo, Coke’s chief rival, also is using packaging, including new logos and different package sizes, as part of a strategy to revive soft-drink sales. For years Coke has relied on a wide range of package sizes overseas. It can easily be found in more than a dozen can or bottle sizes. The North American market, by contrast, is dominated by three packages: a 2-liter straight-walled bottle, a 12-pack of 12-ounce aluminum cans, and a 20-ounce plastic bottle. Coke executives attribute the difference to a highly competitive US market where Coke and Pepsi have battled for decades. “There was a point in time when value was defined as more - more ounces for less [money],’’ said Ralph Kytan, vice president of Coke’s North American bottling operations. Coke hopes to rewrite the value equation. “Package diversity is about matching up the benefits of the package with the needs of the purchaser for the occasion they’re buying for,’’ Kytan said. At convenience stores, the 20-ounce is the top-seller, but its price of more than $1 has hurt sales. A teenager looking for a more affordable option might grab a 16-ounce bottle priced at 99 cents, Steckhan said. At the grocery store, the 12-pack and 2-liter are the top sellers. But the 50-ounce twin-pack might be more appealing for smaller families, he said. One bottle can be shared for a meal, leaving the other unopened and fresh for the next meal. Coke also has high hopes for its 2-liter contour, Steckhan said. The original contour glass bottle was created in 1916 to help Coke stand out from the pack.
Kellogg Company is combining coupons and a cause. The company launched a program in which consumers who donate $5 or more to Feeding America, the nation's leading hunger relief organization, will receive Kellogg's cereal coupons worth a total of $5. To donate, consumers visit kelloggs.com/feedingamerica, and click into a secure donation page on the Feeding America site that is branded with the Kellogg's logo. Samantha Harris, correspondent for "The Insider," is helping Kellogg publicize the program. Harris kicked it off by presenting the first box of cereal to the Food Bank for New York City's Community Kitchen of West Harlem on Wednesday. The coupon program is part of an ongoing commitment by Kellogg, which has been a donor since the organization was founded. In April, the company said it will donate an entire day's worth of cereal production (more than 55 million cereal servings) to Feeding America.
Estee Lauder has joined L’Oreal and Proctor & Gamble in unveiling its strategy of targeting value products to appeal to cash-strapped beauty consumers. Speaking at the Reuters Global Luxury Summit in New York, Estee Lauder executives said the company is working on more affordable products for the holiday season. Reuters reported COO Fabrizio Freda saying that the price of Estee Lauder’s cheapest products would fall in some categories and innovation will now be focused on value products. To hold onto luxury consumers, Estee Lauder is also making smaller sizes of some products, such as 50ml and 30ml bottles of its Clinique Happy Perfume, which is normally sold in 100ml bottles. Estee Lauder CEO William Lauder said the smaller bottles are selling better than the regular size one. He said: “The consumer has some money to spend; she just doesn’t have as much so she’d rather spend a little bit now.” Analyst supports pricing strategy Kline consumer products analyst Carrie Mellage said Estee Lauder is pursuing a smart strategy. She told Cosmetics Design: “Consumers are holding onto their money and are not splurging on luxury items as they once did. Manufacturers have to respond quickly to adapt their products to the new marketplace.” The announcement from Estee Lauder comes shortly after Proctor & Gamble (P&G) unveiled its shift towards lower-priced products. At the end of last month P&G head A.G. Lafley said every P&G business is working to reach more consumers by widening the price range of its products. This is a marked u-turn in strategy for the consumer goods manufacturer which had been introducing increasingly sophisticated and costly products. Looking at breakdowns of recent sales figures provides a strong justification for the shift in approach. For example, last month L’Oreal reported a first quarter drop in like-for-like luxury sales of 17.5 percent while overall like-for-like sales were down 4.3 percent. The French company had foreseen trouble ahead in the luxury market and announced in February that it would release more value products and smaller versions of existing products. For example, L’Oreal Paris, which currently has products in the €11 to €18 price range, plans to release a €9 moisturizer in mid-2009 and a 20ml version of the Viktor & Rolf perfume was launched recently at €35. The regular 100ml bottle sells at €98. Risks associated with cutting prices By offering more lower priced products, L’Oreal, P&G and Estee Lauder could run certain risks. As the Wall Street Journal pointed out in relation to the P&G announcement, consumers might abandon premium products permanently, deciding instead that the new cheaper alternatives are good enough. Offering luxury products at lower prices could also reduce the value of a brand. However, Mellage said these risks are small so long as the higher priced products are kept and consumers are able to differentiate between the higher and lower priced ranges. With specific reference to Estee Lauder, she said it would be inadvisable to slash the prices of its high-end La Mer products, but that there is scope to broaden the price range for Clinique.
CHICAGO (AdAge.com) -- The coffee wars generated a flurry of advertising in May. McDonald's launched its first McCafe blitz, Dunkin' Donuts made its first concerted doughnut push in more than a decade and Starbucks began its first pure branding campaign. While it's too soon to say what the impact on sales has been, all three marketers saw a major uptick in buzz, as measured by Brand Index. Dunkin' led McDonald's and Starbucks in buzz and value perception. Brand Index, which tracks more than 1,000 brands by conducting 5,000 daily interviews from a panel of 1.5 million consumers, monitors key brand attributes, including buzz, value perception, quality ratings and customer satisfaction to compile its index (which has a range of -100 to 100). Dunkin' began May with a 24, peaked at 33 mid-month and settled at about 32 this week. McDonald's started with a 15, peaked around 24 and had dropped off to 16 by June 9. Starbucks' campaign, which has been confined to newspapers and select outdoor markets in its initial phases, has been more cyclical. The company began May with a score of 1, shot up to 11 within a week and plummeted again. In the past week, the chain's buzz has shot up to double digits again. Those numbers may seem low, but ratings vary dramatically by category. Within the fast-food sector, a good buzz rating is considered to be anything above 10. Ratings closer to zero mean consumers have heard an even number of positive and negative things about a brand. "Over the last few weeks, Starbucks has generated buzz through a variety of channels, including our national 'Coffee value and values' campaign hitting its stride, beginning our sponsorship with 'Morning Joe' on MSNBC and being named No. 1 best coffee by the Zagat survey," Starbucks' senior VP-marketing, Terry Davenport, said in a statement. He added that the retailer's online activity, including using Facebook and Twitter to tout its efforts, has also built excitement among baristas in its stores. Dunkin' did not immediately respond to a request for comment. McDonald's spokeswoman Danya Proud said the burger chain has been "extremely pleased" with the results of its coffee push. In particular, she said, the chain's "McCafé Your Day" online competition with Visa has gotten more than 10,000 entries. That response rate makes it "by far the most successful online sweepstakes in the company's history," Ms. Proud said. Starbucks tries 'a different tack'But all three companies got a pretty strong jump in buzz, said Ted Marzilli, global managing director at Brand Index. Starbucks' jump, he said, had the "highest magnitude," especially because it was coming from about zero. He said Starbucks should be heartened that it not only made a splash when its competitors were outspending it but got a second spike in interest as McDonald's and Dunkin' were leveling off. "They're probably going to be outgunned by McDonald's and Dunkin'," he said, noting that those brands spend more on advertising. "Starbucks is trying a different tack in last couple of months, getting people to think about bigger concepts. How expensive is a $3 latte when you think about other things like providing health care, working with farmers in areas where coffee is imported? That slightly different tack seems to be making a mark." Mr. Marzilli said an increase in buzz can trigger shifts in other metrics, but not always. And as it stands, Starbucks is still struggling with its "value" perception, or whether consumers view the brand as giving them the most bang for their bucks. The chain has been hovering around -26, with a small spike last week that seems to have already corrected. McDonald's is just behind Dunkin' in value perception, around 25 to Dunkin's 26. But when consumers want to treat themselves, all these numbers may go out the window. According to Brand Index, 43% of adults asked where they were most likely to purchase a "premium coffee drink" said Starbucks, 15% picked McDonald's, 11% sided with Dunkin' and 31% had no preference. 5 Comments By Rodney33 FRISCO, TX June 12, 2009 01:13:18 am: Grande Distribution.Distribution has been overlooked in the "coffee wars." But it shouldn't, here's why;Dunkin' Donuts has launched plans to grow beyond their core markets in the NE and Chicago.This aggressive roll out was timed well as Dunkin' Donuts not only has premium coffee at a value price, but also large metro distribution and a strong breakfast food menu enjoyed by many of the same demos as Starbucks and differentiated from McDonald's menu.Dunkin's expansion was designed to grow new markets into a truly national network with a very loyal customer base that follows Dunkin' in markets where it has substantial distribution. Dunkin' carefully aligned with blue chip franchisees with stellar credit and cash on hand. Dunkin' did a good job of lining up favorable financing for their best new partners, so that those partners wouldn't have to tie up a lot of their own personal cash into market build outs, to encourage more aggressive expansion goals.But Dunkin's expansion credit crumbled. Some of their important franchisee partners have gotten out their contracts and are in the process of selling the stores they developed, simply because they cannot operate in large metro markets without substantial scale, which has been slowed or halted by the credit crunch.That leaves in a national coffee war, Starbuck's and McDonald's with Dunkin' a strong regional player in many core markets and expansion on a more distant horizon.McDonald's sales have surged in the recession, Starbuck's have nosedived. McDonald's doesn't need to open new stores, they are the heavyweight champion of distribution, they've built out McCafe's in a good portion of their footprint and they aren't closing many if any existing stores.Starbuck's, who also had heavyweight distribution, has been closing stores, lowering their prices on their super premium coffee and reducing their already weak food offering.The retrench moves by Starbuck's and their inability or willingness to expand their menu beyond core coffee drinks means McDonald's is easily the Grande of all things coffee, no matter how you order it.If Dunkin' can get their expansion financing and partners in order, they've got a good run in front of them, for they have alternative morning foods McDonald's has never done well with on a national basis - Donuts and Wraps, all of which also trump Starbuck's current go-to-market strategy.Starbuck's best hope is to take calculated risks and not cut back on distribution or the price of their coffee, but instead work on their food menu to offer differentiated, value priced food, through their distribution channel. Procter and Gamble uses price brands to drive category traffic and premium brands to deliver margins. Starbuck's could use value priced food in the same way to drive more traffic and use premium priced coffee to deliver their margins.The French bistro model and heavy distribution served Starbuck's well. Why can't the value priced French bakery, with super premium coffee all driven by sizable distribution? Rodney Mason, CMOMoosylvaniaThe Great State Of Designhttp://www.moosylvania.com/www.twitter.com/rodmoosewww.twitter.com/moosylvania Permalink By Rodney33 FRISCO, TX June 12, 2009 01:21:51 am: Starbucks - not Starbuck's Permalink By firekid San Francisco, CA June 12, 2009 03:03:31 pm: lity is that there isn't much difference about walking into a Starbuck's versus a McDonald's or Dunkin Donuts these days. The above comments uniformly voice complaints about what was once (and should still be) Starbuck's Holy Grail: the experience. Walking into a Starbuck's used to be like crawling into a blissfully warm, coffee-scented Snuggie. Now it's like pulling over at an Appalachia truck stop. Fix the experience. Clean it up. Fact is Starbuck's got too big, too greedy. Their appeal was perceived as intimacy. Now there's a Starbuck's in every grocery store, gas station and lowest common denominator outlet out there. You can't sell "premium" out of the backseat of a Pinto. Would Louis Vuitton sell their bags at Wal-Mart? The bigger problem may be that the commoditization of coffee is unavoidable (uh, coffee IS a commodity by the way). The customer "base" is only a base if people have money in their pockets. In a market where almost 1 in 10 people is jobless, you can bet that premium coffee is on the short list of things to pass up. Bye bye base. Starbuck's has it rough—they want the perception of premium but they've developed the reputation of something much lower than that. Pitching against "low brow" competitors like McDonald's drops that perception even lower but what to do? Appealing to a premium minded base that has largely been dismantled by a floundering economy isn't going to magically make people decide that "premium" coffee is a top-priority. Take away: If there is so very much of something (16,000 stores), it can't possibly be that premium. It's going to be a hard sell this time around. Permalink By firekid San Francisco, CA June 12, 2009 03:04:29 pm: Differentiating themselves from the competition based on qualities like healthcare and fair-trade doesn't seem like the wisest approach at this point for Starbuck's. The reality is that there isn't much difference about walking into a Starbuck's versus a McDonald's or Dunkin Donuts these days. The above comments uniformly voice complaints about what was once (and should still be) Starbuck's Holy Grail: the experience. Walking into a Starbuck's used to be like crawling into a blissfully warm, coffee-scented Snuggie. Now it's like pulling over at an Appalachia truck stop. Fix the experience. Clean it up. Fact is Starbuck's got too big, too greedy. Their appeal was perceived as intimacy. Now there's a Starbuck's in every grocery store, gas station and lowest common denominator outlet out there. You can't sell "premium" out of the backseat of a Pinto. Would Louis Vuitton sell their bags at Wal-Mart? The bigger problem may be that the commoditization of coffee is unavoidable (uh, coffee IS a commodity by the way). The customer "base" is only a base if people have money in their pockets. In a market where almost 1 in 10 people is jobless, you can bet that premium coffee is on the short list of things to pass up. Bye bye base. Starbuck's has it rough—they want the perception of premium but they've developed the reputation of something much lower than that. Pitching against "low brow" competitors like McDonald's drops that perception even lower but what to do? Appealing to a premium minded base that has largely been dismantled by a floundering economy isn't going to magically make people decide that "premium" coffee is a top-priority. Take away: If there is so very much of something (16,000 stores), it can't possibly be that premium. It's going to be a hard sell this time around. Permalink By Everett78 New York, NY June 12, 2009 04:58:33 pm: Only ONE Dunkin Large Area developer is selling stores back and that is because they "listened" to Dunkin corporate and got into high rent structures and wasted lots of money. The market they are in is also saturated with mom and pop donut stores so the approach needed to be different but it was not. Every other LAD is doing very well and Dunkin is thriving in this recession. Starbucks will never reach the masses it once did since the days of paying $5 for a coffee are over. McDonalds will do well as long as it keeps pumping tens of millions into nationally advertising the McCafe's. Once they stop no one will go back since they are not that good and people do not associate a latte or cappuccino with a fast food hamburger. They do have the advantage in the number of locations nationally but they only have a limited amount of stores that have the McCafe's in them right now. Dunkin's huge expansion plans are second to none if they are strategically sound they can gain a huge market share as they move west and dominate not only the coffee market but the breakfast market as well.
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