Coming Out Party for Mega Brands
NEW YORK -- Innovation is alive and well in the packaged food industry, but there’s a slight paradigm shift emphasizing new twists imbued upon stalwart brands.
At the Consumer Analyst Group of New York (CAGNY) conference, held mid-February, a growing number of food companies appear to be “playing it safe”—as one food analyst described—in a tough consumer environment where individuals are cutting back on major purchases in light of higher payroll taxes and other fiscal burdens.
Consumers are seeking value and, to that end, brand manufacturers understand it takes less effort to offer new iterations of existing products enjoying brand loyalty.
At CAGNY, executives from global food companies including PepsiCo, Kraft Foods and Campbell Soup Co. all reinforced this mindset—witnessed by the ways and means of their brand strategizing.
At Kraft Foods, the organization hit a trough several years ago where too many new innovations filled the pipeline at once, causing a density of offerings and perhaps undermining vision and choking performance potential.
As Barry Calpino, vice president of breakthrough innovation for Kraft Foods, described in his presentation at CAGNY, the company was saddled with a chronic dilemma that saw poor execution, lack of focus and very low investment behind launches.
The solution: Top-to-bottom attention to innovation and recognizing underutilized strengths such as R&D, sales and iconic brands.
In 2011, the company developed a playbook built upon the concept of “real fewer, bigger, better, marked by actions, not words,” Calpino said. The plan entailed investing in “multi-year platforms,” and departed from a mentality that crept into the organization to cut and run on a new offer if it did not live up to expectations after the first year.
The focus shifted from dozens of items to 13 “Big Bets.” During year two, Velveeta Skillets, MiO enhanced water and Oscar Mayer Selects all hit their stride, and a “new fresh take” was applied to Gevalia coffee and Capri Super V products, said Calpino. Kraft’s Oscar Mayer bologna is also getting a flavor reboot, with a bacon-infused variety as well as a jalapeno version.
Kraft is now emphasizing lower and upper tiers—demonstrated through offerings such as Kool-Aid Jammers for $1.79, Capri Sun Super V drinks containing vegetable juice at a $2.99 price point, and the 99-cent cup of Velveeta Shells and Cheese featuring Queso Blanco.
All told, revelation from food executives at CAGNY indicated that marketing spending continues to rise, but budgets are being “kept in check” as companies take advantage of digital and social media opportunities, which cost less than traditional television and print campaigns, and make concerted choices about where to spend.
It appears patience will be the watchword in new-product development. Analysts at the event predicted that companies plan to invest in innovation for a more sustained period of time, such as two to three years, to prove efficacy.