Brands in the News: Carnival, Spam and Pop Tarts

A fire in one of its generators left the Carnival Splendor dead in the water and easy prey for the media. Fueled by 4,500 passengers, many of whom have cell phones and can report and elaborate on the gory details of clogged toilets, cold showers etc, the ship has become news story of the week.

Featuring prominently in the story has been Spam and Pop Tarts which have become the diet of the unlucky passengers while the planned feasts have stayed uncooked and rotting. A typical report has been saying something along the lines of: "The passengers are not going to have to survive on Spam for much longer."

For a while, I was wondering how Spam and Pop Tarts were on board in the first place. They didn't seem like there would be much demand for them under normal circumstances. But it turns out that these were some of the products included in the food drops made by the Navy as it brought emergency supplies--and Spam and Pop Tarts were the ones with brand names that journalists could glom onto.

Overall, a bad week for Carnival whose offer of a full refund and a free, future trip is not really stemming the tide of bad press. And a bad week for Spam and Pop Tarts as well. I can't imagine that either brand was looking for this level of publicity associating them with emergency supplies. I know that, when I worked on Coffee-mate, way back when, that's the last thing that I wanted.

Private Label's gunning for you--better keep moving

Butch Cassidy and the Sundance Kid chase sequence

This clip from Butch Cassidy and the Sundance Kid shows the start of one of the most famous (and longest) chases in film history. Whatever Butch and Sundance do, wherever they go, the Pinkertons keep on coming. They try hiding, riding double on a single horse and negotiating an amnesty. None of that works. They get some respite when they throw themselves from a canyon into a river but not for long. Eventually they decide their only option is to move to Bolivia (where they eventually get killed by another posse).

This chase sequence came to mind as I was reading this AdvertisingAge article about consumer packaged goods companies intentions to increase marketing spending to stay ahead of Private Label. Private Label, like the Pinkerton posse, is in hot pursuit, tracking and following every change of direction and taking out all those who stand still and do nothing.

Now to stretch this analogy to its breaking point, the various responses proposed by CPG companies can be categorized with reference to the movie: More coupon spending--that's like asking the horse to run faster. It's only going to work for a short time before the horse collapses. More media spending--will work for a bit longer because at least the horse is getting fed. While meaningful product innovation, that's the one that's like jumping off a cliff. It's more risky but, if successful, can give some breathing room. Just for a while.

Taster's Choice welcomes Starbucks to the Hood

A few weeks ago, I taste-tested VIA, Starbucks surprising entry into the instant coffee market, to see if it stood up to its claim that it tastes as good as fresh-brewed coffee. And, give or take, it does.

In a Starbucks VIA Italian Roast vs. Starbucks Ground Italian Roast vs. Taster's Choice Original taste-off, as I said in that post: "In terms of appearance, aroma, mouthfeel and taste, VIA is pretty close to the Ground Italian Roast and miles different/better than Taster's Choice. Lots of body, no off-notes and no artificial flavor."

So what, I then said. I couldn't see the benefit for Starbucks to have the best instant coffee on the market and I still can't. But I could see the potential benefit for Taster's Choice (the brand I once managed) even though it doesn't taste as good and, sure enough, here it comes with a nationwide campaign to try and take advantage of the opportunity.

The campaign focuses on the the huge price difference between VIA (83 cents per cup*) and Taster's Choice (21 cents per cup*) with ads that mimic the style of Starbucks own advertising. The same theme is carried online with the website which includes a budget calculator and other unsubtle price comparison messages.

Given the recessionary times, the price gap and (in my opinion) the big taste advantage for VIA, this approach was perhaps inevitable but I'm not sure how effective it will be. I guess the hope is that VIA will generate interest in the instant coffee category and that there will be some who will balk at paying the VIA price and will try Taster's Choice instead and be satisfied with its taste profile. Optimistic.

What the new campaign is perhaps more likely to do is reposition Taster's Choice from being the premium (and best quality) brand in instant coffee to the one that's the most expensive, mainstream player. That could end up putting pressure on its prices to get it more in line with the other mainstream brands.

I'm actually hoping, for Taster Choice's sake, that VIA is an (unlikely) success. If it can carve out a niche in this previously unexplored high-priced area, it will give Taster's Choice space to launch higher quality, more expensive products that it so far has been unable to get into the market (despite several attempts). The Nestlé R&D team is quite capable of developing products as good as VIA but, up until now, such products would never have been pursued because the cost of making them would require a retail price perceived to be unrealistically high. If VIA can somehow generate interest and a market for this level of quality that will open up a world of new opportunities for my old brand.

The launch of VIA is a little like someone building an expensive home in a downtrodden neighborhood. In the best case scenario, those with the wherewithal will take the chance to renovate and increase their property value and the whole neighborhood will be revived. But perhaps the more likely case is that the expensive home loses its value and the owners will wonder what they were thinking moving there in the first place.

My cost per cup where purchased (sachets)

Why do popular brands have such incredible staying power?

Photo: atomicjeep (flickr)

Why is Tide so popular? Why is Heinz Ketchup still so popular in Pittsburgh? These questions, posed by Tyler Cowan on his Marginal Revolution blog, generated lots of interesting answers. I'll give you a summary in a minute but, first, the set-up.

Tide: It has a 44% share of the market and has held this market lead for decades even though it's more expensive than its competitors. Heinz: Launched in Pittsburgh in 1876 still has a better share in its hometown than in other cities. Tide and Heinz are just two examples. There are countless other longtime packaged goods market leaders and many other brands that have their best share in their home market* Why?

The theories that don’t work (at least not completely)

1) Product superiority: Tide works better, smells fantastic. Heinz is thicker, has a secret formula. No doubt that actual product quality plays a role but it doesn't explain why Heinz does better in Pittsburgh than anywhere else. And is it possible that Tide has been market leader all these years just by keeping product advantage over the competition?

2) Buy Local: Local people support local brands and local brands support the local economy. Seems logical for Heinz which has always been active in a fiercely loyal community but it doesn’t explain why, for example, Milwaukee’s Miller Beer has always done so well in Chicago. (But maybe that’s, in part, because it’s at least not St Louis’ Anheuser-Busch.)

Consumer-based theories

3) Mother knows best/habit: Several people talked about how the purchase of Tide/ Heinz is a tradition passed down in the family from generation to generation. Buying products with this heritage is both reassuring and familiar and gives you one less thing to think about when you are at the store.

4) Conditioning: After a while, people get used to certain aspects of products that may be technically quite similar. The taste of Heinz, the smell of Tide, the thickness, the packaging, the color. Try to get a diehard Diet Coke drinker to drink a Diet Pepsi (or vice versa). We’re all sort of like rats in the end.

5) Decision set/habit: Another variation of mother knows best. “Jeff G” who worked on a competitive brand to Tide, said that his company’s purchase decision research had shown that the first decision was “are you a Tide customer or not” Then, if not, you typically believe ‘All are the same’/ ‘I am Poor’ and your decision is based on price.

Competition-based theories

Then there were a set of theories that spoke to the power and advantage that a leader enjoys and can leverage in what is less than a perfectly competitive market:

6) Distribution advantages: Market leaders become category captains influencing what gets on the shelf and benefit from being able to justify more skus than anyone else. That “wall of orange” tends to crowd out everyone else at the point of purchase.

8) Fixed costs: Many of the costs of doing business in the CPG are fixed. Trade ads, for example. These can be absorbed with much less P&L impact by Tide than by the smaller players giving Tide a continuing margin advantage that it can either bank or spend on other marketing activities.

9) Brand equity/Sunk marketing costs: One place that they can spend those extra dollars is building up brand equity and connecting the brand to the important category drivers. Years of marketing spending build a strong brand foundation that's difficult to undermine.

10) Competitors are followers: In large part, competitors have not tried or been able to disrupt the category by coming up with big enough product innovations. One comment notes that, in detergents, only All has made a determined effort to take on P&G with breakthrough ideas.

Another interesting point is that this phenomenon is more pronounced in CPG products than in other categories. Being one-time leaders hasn’t helped retailers like A&P, Sears and Kmart. And, in the online space, being a one-time leader like CompuServe or AOL is more of a disadvantage.

Perhaps that's because CPG products differentiate more by their identity than by physical factors? If consumers can’t differentiate between products (at least not in blind tests), they need to rely on other factors to make their decisions.

So, can anything dislodge a package goods market leader? There were some thoughts on that as well:

1) The leader falls asleep at the wheel: The #1 brand is well protected from the competition for the reasons described above. And usually such brands have time to recover even if they make a series of missteps (New Coke?). But protracted neglect and no marketing investment may give challenger brands at least an opportunity.

2) Big market changes happen that disrupt the model: Typically, the pace of change in CPG is relatively slow compared to other categories (like consumer electronics) and there's less chance of a leader being caught completely unawares of new trends. Changing demographics (e.g. the rising influence of the Hispanic consumer) can have an effect and certainly creates opportunities for brands that previously were considered niche to become more mainstream (e.g. Nescafe Clasico).

3) Category reinvention: What business is Heinz in? Just ketchup? All condiments? BBQ vs. other meal choices? In the end, the biggest danger for market leaders like Heinz may come from the declining relevance of their categories. If ketchup becomes a less important part of the American dining experience, Heinz will suffer even it stays the leader. And, today, all packaged goods are suffering from the center-aisle problem with fresh alternatives on the perimeter gaining ground.

Bottom line: If you are a #1 brand in a CPG category, congratulations. You are in a strong competitive position for all sorts of reasons. Unfortunately, you've still got plenty to worry about. Retailers are scaling back shelf space for packaged goods to give more room to fresh products and, at the same time, they are launching own-label brands that are becoming more and more of a threat. That's, in the end, is where the real battle is these days.


* Current share in markets of origin for brands launched back in the late 1800s and early 1900s is 12 percentage points higher than their national share. Source: Brand history, geography and the persistence of brand shares by Bart J. Bronnenberg Tilburg University, Sanjay K. Dhar University of Chicago Booth School of Business, Jean-Pierre H. Dubé, University of Chicago Booth School of Business.

Starbucks VIA instant coffee taste test. Is it as good as they say?

Photo: me

It's the Starbucks VIA Italian Roast vs. Starbucks Ground Italian Roast vs. Taster's Choice Original taste-off. Via was launched earlier this year with a bold claim--that it tastes as good as fresh-brewed coffee. Let's just see how this claim stands up shall we?

First a note about the two judges: Me and my wife. We're biased. We both worked at Nestlé on its instant coffee business (which includes Taster's Choice). Before taking the test, we promised not to let our undying loyalty for our old employer impair our judgment. Honest. (We did blind tasting to compensate for bias.)

The results: The VIA claim more or less stands up. In terms of appearance, aroma, mouthfeel and taste, VIA is pretty close to the Ground Italian Roast and miles different/better than Taster's Choice. Lots of body, no off-notes and no artificial flavor. We both agreed that sample #2 (the Ground sample) had a slightly richer and more distinctive taste than sample #1 (VIA) but nothing that either of us would have picked up without a side-by-side comparison. I think it's fair to say that Starbucks has successfully reinvented the instant coffee category and shown what's possible.

The problem: So what? How does Starbucks benefit from having the best instant coffee on the market? One reviewer said that he really liked VIA and would be sure to take it with him the next time he went camping. Ouch! Is that the market? Overseas will be a better opportunity. There are many countries (mostly the original tea-drinking countries like England, Japan, China and Korea) where instant coffee is a much more important category than it is in the States. But what's the angle in the States?

Pricing, another problem: VIA is quite extraordinarily high-priced. Its cost per cup is 83 cents vs. (roughly) 32 cents for the ground coffee and 21 cents for Taster's Choice. Is this price point an attempt to signal quality? Or is it a reflection of production costs? I can't imagine that such a price point would work in supermarkets which would otherwise be a natural outlet for distribution.

The potential winner: Instant coffee and, curiously enough, Taster's Choice. If VIA makes enough of an impression to change consumers ideas about what's possible with an instant coffee product, then all the players in that category can benefit. Nestlé has succeeded with more expensive blends in other markets but those same products have failed here. Perhaps VIA will open the way for another try?

Notes:

On the technology: VIA is described on the label as "soluble and microground" coffee. What that means to me is that the product is a mix of traditionally-prepared instant coffee (which is brewed and then dried) and some coffee beans that have been ground but not brewed. These "microground" beans may not add significantly to the taste but they will add mouthfeel - the undissolved solids provide a thickness to the coffee that typical instant coffees lack. (You can actually see the grounds in the cup after drinking.) I imagine that the other way they improved the taste was by having a much lower extraction level than is typical for instant coffees (which does drive the cost up).

On other reviews: There are many other reviews of VIA. Most of them say the same thing: surprisingly good for an instant coffee.
1) Hivelogic
2) Viewpoints
3) WalletPop

On the new Taster's Choice packaging: Sorry, gang, I hate it. Not only have you killed the Taster but the cup of coffee itself looks like a grey, solid slab of cooking chocolate with zero appetite appeal. It's Tropicana-bad. Sales down 20%?

"Jack Of All trades or Master of One"

Which strategy works the best--a narrow, specialized positioning where a product focuses on one feature or an all-in-one solution where products offer a range of features? That's the question Alexander Chernev tries to answer in some new research (Source: Kellogg Insight Focus on Research review).

He tested various packaged good categories including toothpaste, the fruit fly of consumer marketing. His (not altogether too surprising) results show that consumers expect whitening-only toothpaste to whiten teeth better than toothpaste that both whitens and prevents cavities. This happens because consumers rely on a "zero-sum heuristic" which devalues the perceived performance of features if they are bundled together compared to a product with just one feature. Some thoughts about the implications of this research:

1) Pricing: Chernev shows that pricing can eliminate this effect. If the all-in-one product is priced higher than the single-feature product, consumers don't devalue its multiple features. This means that the common practice of pricing all-in-one products at the same price as specialized products is counterproductive from both a margin and revenue standpoint. It also suggests that marketers of single-feature products should raise prices to match competitive all-in-one products to benefit from this heuristic effect.

2) Product development: Tempting as it may be to add new features to a single-feature product to make it appealing to a wider range of consumers, this study suggests that this approach will likely fail. If the competition sticks with single-featured products, consumers are likely to discount each new feature you add for no net gain in benefit.

3) Line extensions: This research suggests that you can only successfully add an all-in-one product to a product line which includes single feature product(s) if you are prepared to have a higher price point for the all-in-one. And that will screw up all your price promotions so you probably won't want to do that.

4) Brand architecture: Maybe there are some brand architecture work-arounds? For example, I wonder if P&G's addition of branded, extra features (Tide with a Touch of Downy) breaks the zero-sum heuristic? I think Microsoft came up with a great solution way back in time when it decided to bundle its spreadsheet, word, and presentation products together as Office but keep the individual Excel, Word and PowerPoint brands. Previous bundled products like Ashton-Tate's Framework didn't do that and consumers thought that individual products like Lotus 1-2-3 and Harvard Graphics were better (as I understand it because it was, of course, way before my time).

And now a real leap:

4) Marketing specialists vs. generalists: Does the same principle apply to marketing consultants as well? Do marketing specialists have a perceptual advantage over those who bundle together a bunch of skills whether they are, in fact, any more qualified? Can marketing companies offering a range of skills use a Microsoft-like branding solution to overcome this perceptual disadvantage?

Diamonds just taste better

Sometimes, brilliance is staring you in the face. You just can't see it until you turn your head to one side.

This report from Maclean's discusses the launch of "Diamond Shreddies," an unusual line extension has helped re-energize this 67 year old, originally square, Canadian cereal brand.

Key quote: "One perplexed man wrote the Edmonton Journal: 'I am not usually the suspicious type, but don't the new Diamond Shreddies look like the original Shreddies just flipped on their side?'"

And here's some of the focus group research:



Congratulations to Ogilvy and Mather who were awarded the 2008 Grand Clio for "best integrated campaign" for this "diamond Shreddie" concept and the client, Kraft for being brave enough to trust that consumers would get the joke.

Links:
1) Diamond Shreddies website
2) Diamonds are a brand's best friend: Macleans.ca

These last two blogs courtesy of Chris, the intern. Get back to work!!

Fiji Water's green offensive

My very first blog, almost one year ago, was about the challenges faced by Fiji Water as it emerged as the poster child for all that environmental activists believe to be wrong with the bottled water industry. Its super-badge status, extreme price premium and the fact that it's shipped half way around the world from a place where many locals don't have safe drinking water of their own all contributed to this unsought position.

Fast forward to now and, whatever your opinion about bottled water, you've got to be impressed with the sheer commitment and determination that the company has shown to protect its business. Treating the press and blog commentary last year as an early warning signal, the company has geared up to meet its critics head on. And rather than play defense, Fiji Water is on the counter-attack presenting itself as an eco-friendly green company that's actually carbon negative.

It's also taken a whole series of actions to reinforce its green credentials: changed its shipping routes, made commitments to further reduce emissions, supported laws that would include water bottles in deposit-driven recycling plans (which most beverage companies oppose) and, with all that, launched FijiGreen.com and a new "Every Drop is Green" campaign to get the message out.

None of this will persuade its fiercest critics--but they don't buy bottled water. What it's more likely to do is turn back or at least weaken their critical assault and protect sales (which have, so far, stayed healthy). As Rob Six, Fiji Water's vice president for corporate communications, told Rob Walker in his New York Times magazine article: "Any time you see negative stories in the press, you have to figure out how to respond." In this case, all guns blazing.

Links:
1) Water Proof: Rob Walker (New York Times Magazine)
2) Message in a Bottle: Charles Fishman (Fast Company)
3) Trouble in Paradise: Brand Mix
4) Green water: Brand Mix
5) More water woes: Brand Mix
6) And more on water too: Brand Mix

Bottled Jamba Smoothies launched

News from Nestlé's Beverage Division (my former place of work)--today marked the launch of Jamba Juices and Jamba Smoothies in eight western states. These products are the result of a licensing agreement negotiated between Nestlé and Jamba Juice at the end of last year.

Looks like a win-win partnership, giving Jamba Juice much needed revenue and a platform to launch in new markets and giving Nestlé the opportunity to grow its beverage business by leveraging Jamba Juice's strong and dynamic brand equity.

I just tried the Banana Berry, already on the shelves at Safeway. $2.50 well spent (in my completely biased opinion).

Really staying in touch with your customer

I ran into Robert Hurlbut, CEO of Attune Foods today. He was out there on the frontlines handing out samples of his Attune wellness bars at RJ's market.

That's one of the great things about being a start-up. You still get to do things like that. When you're the CEOs of a major CPG company, such things are out of reach.

In between handouts, Rob told me that he's had one or two major distribution successes already including H.E.B. in Texas. More to follow in the New Year.

Center aisle

Ever since manufacturers realized that, whatever the product, it just seems fresher when it's next to the fruit and veg rather than stuck in the middle of aisle 10, manufacturers have been looking for ways to get out of the center. Some products, notably Pom, have had dramatic success doing this before anyone else thought of it.

So it's a little surprising that forward-thinking retailers like Safeway, even when they renovate their stores and dramatically improve them, stick to the old format more or less. Why aren't they being more ambitous and just getting rid of the center and all the aisles?

Dizziness in the supermarket jungle

Great. Just what we need. Multiple new systems to tell us what's healthy and what's not.

A New York Times story today reports that new and different systems for evaluating healthy foods are being launched with grocery chains opting for their favorite. "Within months, shoppers across the country may find numerical ratings, star ratings or letter grades plastered on the shelf next to virtually every product in a store", the story reports. Ugh.

No doubt things could be better. No doubt that the current dull, government-mandated nutritional labeling combined with the manufacturers' obfuscating claims make it hard for consumers to pick out the healthy choice. But throwing another layer of helpful information on top of what's already there is the answer? Especially when it's not a standardized system with more than a little subjectivity about the ratings.

What are consumers going to make of the story's example of a product at a Hannaford store that is given no stars but which has an American Heart Association logo on it? That's not helpful.

Best case now is that these various initiatives will spur the government and/or the food manufacturers to finally come up with some uniform code. Worst case, confusion reigns supreme.

Even billion dollar brands were babies once

P&G recently announced that Gain (R) had become the 23rd member of its billion dollar brands club. P&G has been increasingly focusing its resources on fewer of its brands, the ones with more growth and profit potential and either selling off or even shutting down those that are low growth, low margin. It's been an effective strategy and one that has helped P&G deliver good financial results.

But not all innovations and market opportunities fit under these 23 brands or even in the larger number of billion dollar hopefuls in the P&G franchise. What to do about those? All large CPG companies struggle with how to nurture and develop new-to-the-world brands. Until they reach about the $100 million mark they are often too fragile to survive the culture and environment of companies that are set up for much bigger things. The sales force doesn't know what to do with them, retail partners don't either. They can't be marketed using programs the companies typically use. There's a lack of patience and a demand for a positive return that doom many a promising idea.

So, it was interesting to read how P&G's has launched its new brand, Align to the world. This is a probiotic dietary supplement designed to aid the digestive system, an entry into a hot but still relatively new and niche category. Rather than try and push this new product through traditional retailers, P&G has sold it for the last two years via the web or phone. Only now that it has traction, has P&G added the likes of Wal-Mart, Walgreens and CVS to the mix.

It's a great idea especially for products like this that are both shelf stable and have a high price point ($33) where the online economics and logistics work out.