CPG Companies Benefit from Consumer Concerns
Economic downturn?
Not for several large consumer packaged goods companies, who have recently posted better-than-expected sales results across many major brands. Executives have credited cost-cutting as the reason many consumers are eating home more often, bringing lunch to work, and relying on convenient, easy to prepare meals in lieu of take-out.
Last quarter, General Mills saw a 14% increase in revenue. Betty Crocker dessert mixes, Gold Medal flour, Yoplait yogurt, Nature Valley and Fiber One snacks, and cereal and soup sales all grew by double digits. Campbell Soup’s sales increased by 13% while Kellogg Co.’s and Kraft Food’s sales rose 11% and 21%, respectively. “The fact that people are eating at home more is certainly a positive,” Kraft Foods CEO Irene Rosenfeld said.
FMI President Tim Hammonds said, “Consumers are eating at home more but are not showing a renewed interest in cooking, which is why a lot of products seeing the biggest bump are the easiest to prepare: cereal, sandwiches, ramen, and macaroni and cheese.” Kraft Macaroni & Cheese sales grew 20% last quarter and, according to Rosenfeld, Oscar Mayer deli meats “are on fire.”
Pasta maker Ronzoni focused on convenience when it introduced a Bistro line of microwaveable pasta. “We’ve [introduced] the idea of pasta as being consumed in an out-of-home setting,” said Kevin Blacker, brand manager at New World Pasta, which owns Ronzoni. Timing is everything as pasta sales tend to increase in a down economy, said Blacker. “You can buy a one- or two-pound box of pasta and have a meal for four people at one of the cheapest prices you can find anywhere.”
General Mills capitalized on the cost-cutting and convenience trends by boosting ad spending 22% for the first two quarters of 2008. “People are eating more meals at home today, and cereal is a quick, convenient option for them,” said Jeff Harmening, President of General Mills’ Big G Cereal.
In addition to General Mills, The Associated Press reports that, “many major food makers are promising boosts to their advertising in the new fiscal year or reporting their spending is up in the most recent one. Their ads seem to be hitting a variety of outlets…and the Internet – which marketers say helps them hone in on consumers and get the most bang for their advertising buck.”
H.J. Heinz Co. recently pledged to increase consumer marketing by 8 percent to 12 percent in its new fiscal year as part of a two-year growth plan. Hormel Foods Corporation is planning on boosting advertising spending and expanding the number of brands currently being advertised, said President and Chief Executive Jeffrey M. Ettinger.
Sara Lee is hoping a multi-million dollar campaign linking the Soft & Smooth bread brand with Disney’s popular “High School Musical” enterprise will reach a more targeted demographic, said Vice President of Sara Lee Fresh Bakery Tim Zimmer. The campaign features characters’ “favorite recipes” such as Taylor’s “Sweet as Honey” peanut butter sandwich that consumers can look up on the Internet.
Sara Lee’s approach is smart, said Domenick Celentano, Adjunct Business Professor at Fairleigh Dickinson University. “Mass marketing is sort of dead and really what companies are looking at very heavily is using the Internet to get to the narrower-focused consumer,” he said.
To view additional statistics, visit Advertising Age and BrandWeek.
Rachel
Tags: Advertising Budget, Economy, General Mills, Heinz Co., Hormel Foods, internet, Kellogg, Kraft Foods, Sara Lee
