With the economy on a path to recovery, food marketers are ramping up product pipelines, investing more money into digital, and increasingly using marketing to gain consumer insights. These were some of the topics discussed at the Consumer Analyst Group of New York (CAGNY) conference, a weeklong gathering of top food companies and industry analysts in Florida. What follows is a recap of Tuesday's highlights from Kraft, Unilever, ConAgra Foods, and others.
New products—are food makers willing to take a risk?
Line extensions, or playing it safe, was the name of the game last year. But food companies presenting at CAGNY expect an increase in new product introductions, including innovation that goes beyond the basic extensions and actually “sticks, and grows [past] year one,” as ConAgra Foods CEO Gary Rodkin put it. The food maker is once again focusing on its motto—"Fewer, bigger and better"—when it comes to new products.
Much of that innovation will come from ConAgra's frozen foods business: The Banquet dinners line and more health-oriented Healthy Choice Café Steamers. In an interview, Joan Chow, chief marketing officer for the Omaha, Neb.-based company, said the company has “not eased up on innovation at all.” As an example, she pointed to recent new product introductions like Healthy Choice Mediterranean Steamers. There will be more new product news on both its shelf stable and frozen business this summer. “Some of these line extensions are under existing brand names, but [nonetheless], it’s innovation that’s incremental to the business,” Chow said.
Food companies are at the forefront because they're benefiting from the eat-at-home trend. “We went back and looked at recessionary periods in the past, and a lot of great brands and innovation were launched during those periods,” Ian Friendly, General Mills’ evp and COO of U.S. retail, said in a meeting with reporters. “We see this as a very good time to innovate, whether it’s breakthrough innovation or line extensions,” he said. Last year, there was a bit of a “lull” in the industry as far as new food introductions. But this year, General Mills is expanding its product pipeline, with new and recent introductions including Yoplait smoothies and Chocolate Cheerios, which, so far, has been “a tremendous success,” Friendly said.
Is private label’s heyday over?
Consumers last year bought private label goods—and plenty of them—when the economy was at its worst. Now, branded food companies see private label’s gains easing back, according to the presenters at CAGNY. Sara Lee, for instance, said private label plays a small—and relatively minor—role in such categories as hot dogs, smoked sausages and breakfast sausages. (Private label share gains in its U.S. fresh bakery business are virtually “flat,” CEO Brenda Barnes said.) Citing Nielsen data, General Mills’ Friendly said that private label growth was moderating, or “up half a share point,” versus “almost a full share point” a year ago.
In a research note published in advance of the conference, Stifel Nicolaus food analyst Christopher Growe wrote that “the private label front has been relatively quiet.” Though retail, or store brands, saw a “slight resurgence in market share in January, we do not believe we’ll see any sort of material increase in [private label] market share for the year,” Growe said in the report.
Raising the bar on marketing
Food makers are also relying on marketing to identify new consumer trends and growth opportunities. ConAgra cited how a new way of looking at Orville Redenbacher’s popcorn helped shape marketing and advertising for the brand. Orville Redenbacher’s, which went through a packaging upgrade, wasn’t just a movie snack, it served as a “social magnet” for consumers, ConAgra’s Rodkin said. (Ads show the snack bringing a family together at the table.)
Another ConAgra brand, Healthy Choice, went through a similar marketing refocus when the marketing team realized that Healthy Choice’s target and positioning had lagged behind the times. “We needed the consumer to notice we were no longer your grandfather’s frozen dinner, [and so] we started with new formulations and then new packaging,” Rodkin said. The key insight, he added, was that the Healthy Choice consumer of the past was “male and [more] dinner targeted,” while the modern day consumer was “younger, female” and fashionable. Hence, a series of Web and TV ads with actress Julia Louis-Dreyfus were introduced, and new packaging that sports a giant, green exclamation sign. The launch has netted positive gains for ConAgra in the frozen food business, the company said.
Digital offers more bang for the buck
Just as packaged goods companies took advantage of lower media rates last year to gain more ad impressions, food companies this year are investing more money in digital. In a presentation on Tuesday, Unilever discussed results from its Dove “Evolution” campaign on YouTube. The spot, part of Dove’s "Campaign for Real Beauty," showed a makeup-free model going through the various stages of beauty transformation. By the time her eyebrows have been digitally arched, lips plumped and hair done, the woman in the spot no longer looked like her former self. The ad garnered 26 million downloads, and was “the cheapest piece of advertising we ever produced and uploaded to YouTube. You not only see the value, but the efficiency,” said Unilever president of the Americas Michael Polk. Unilever spends 10 percent of its marketing budget on “new media,” with much of the investment occurring in the U.S. and Canada.
General Mills, meanwhile, still spends the majority of its dollars on TV advertising, although focus on digital is growing. And much of these efforts take place outside of Twitter and Facebook, at company-created social networking sites. Pillsbury.com and BettyCrocker.com, for instance, allow General Mills to “reach out to consumers in different ways and let them guide us,” Friendly said. Another General Mills-sponsored site, EatbetterAmerica.com, allows visitors to “healthify” recipes. It's a way for the cereal maker to tap into the consumer migration to the Web.