Kraft lauds big brands

Kraft, the US food group, believes effective marketing and a diverse brand portfolio enhances its retailer relationships.

The company enjoyed a 5.7% increase in organic revenue during the last quarter, as its "power brands" - including Kenco and Trident - surged by 8%.

It reported these gains despite raising prices on a majority of products in Europe and the US, due to higher input costs, a difficult decision given many customers are still seeking to save money.

"I do think it's a … weaker consumer environment, particularly, in a number of the developed markets around the world," said Irene Rosenfeld, Kraft's chief executive, on a conference call.

"I feel very good about the strength of our brands and our ability to deliver value even in the face of a challenging economic environment."

While the Illinois-based firm has passed on rising costs to shoppers at least in part, it is also running several initiatives to assist buyers.

"We're not blindly pricing. We are certainly looking to bridge the price value impact of the pricing actions that we're taking," said Rosenfeld.

"We've got some innovative ideas like a fresh stack packaging format for Ritz, and Premium, for example, that allows us to sell fresher but smaller packages to help the out of pocket. We've gone some family sizes of Oreos and Chips Ahoy."

"So we're taking a number of actions in that business, as well as across the portfolio to help bridge the challenging price value environment."

Further schemes have incorporated the Huddle to Fight Hunger programme, where the company donates five meals to Feeding America when customers print a $5 (€3.50; £3.10) voucher and buy five dairy products.

"That really allowed us to get strong merchandising support and offer consumer value for a very important cause," said Rosenfeld.

Most leading retailers have focused on discounting and promotions as a means of stimulating footfall, and understandably resist attempts to raise prices.

"Retailers are no happier about driving costs than we are. But I think … [there is an] opportunity for us, because we have a broad portfolio. We have very, very strong iconic brands for the consumer," Rosenfeld said.

Kraft's long-standing commitment to advertising, combined with an extensive stable that has been bolstered by the recent acquisition of Cadbury, also yields numerous benefits.

"Certainly, the … investments that we've made in our brand franchises put us in a much, much stronger position. And it really makes our brands traffic builders for most of our retail partners," asserted Rosenfeld.

"As we look at category after category, and the impact our categories have on driving traffic … in all of our markets around the world, I think it gives us a very strong position to have a conversation."

"It gives us the opportunity to have discussions with them about snacking solutions, about meal solutions, about the Huddle to Fight Hunger programme and those sorts of things, and I feel very good about continuing to leverage capabilities in the US."

Another key aspect of Kraft's approach is Wall-to-Wall, where individual sales reps take responsibility for its entire range of goods in specific stores.

"Our sales capabilities like wall-to-wall, which enable us then to merchandise a number of those products in stores. So I think we are bringing to our retailers preferred consumer brands," said Rosenfeld.

Starbucks moves beyond coffee

Starbucks is set to broaden its reach beyond coffee after unveiling a redesigned logo, a move observers suggest provides opportunities and risks.

The company's insignia no longer features its name or the word "coffee", and now solely depicts a female "Siren".

"The world has changed and Starbucks has changed. The new interpretation of the logo at its core is the exact same essences of the Starbucks experience," Howard Schultz, Starbucks' ceo, said in a statement.

"That is the love we have for our coffee, the relationship we have with our partners and the connection we have built with our customers."

In an effort to ensure this strategy delivered the desired results, the organisation studied examples such as Nike and Apple, which place images at the heart of their branding.

Moreover, it noted the travails of Gap, the apparel retailer forced to withdraw a modified emblem in October 2010 following harsh public criticism.

"This new evolution of the logo does two things that are very important: it embraces and respects our heritage, and at the same time evolves us to a point where we feel it's more suitable for the future," said Schultz.

"In March 2011, we will celebrate the 40th anniversary of our company. There's some symmetry, I think, of being able to do this at that time."

Schultz argued emphasising the "Siren", originally intended to mirror coffee's maritime history, had a wider objective.

"We've allowed her to come out of the circle in a way that, I think, gives us the freedom and flexibility to think beyond coffee," he said.

Having reversed falling sales when the downturn began, Starbucks started selling Via coffee in grocery stores, and is expected to branch out into areas including food.

"Starbucks will continue to offer the highest-quality coffee, but we will offer other products as well," Schultz continued.

"Our new brand identity will give us the freedom ... to explore innovations and new channels of distribution that will keep us in step with our current customers and build strong connections with new customers."

According to John Quelch, a Harvard Business School marketing professor, this approach made logical sense.

"The brand is now evolving to a point where the coffee association is too confining and restrictive," he said.

"Starbucks is fundamentally selling an experience, but by no means is coffee the only part of the experience."

Robert Passikoff, the founder of consultancy Brand Keys, asserted this was the single rational motive for updating such a well-known symbol.

"If it isn't [for this purpose] and they're just trying to freshen stuff up, no one cares," he said.

A number of unfavourable comments were posted in response to Schultz's official blog, and social media sites like Twitter also contained negative feedback.

"It's easy for people to demean a logo change. Does that really reflect their genuine perception of Starbucks? I don't think so," said Tony Spaeth, president of consultancy Identityworks.

However, James Gregory, ceo of CoreBrand, described the decision as "nuts", and warned moving into the retail arena carrying a somewhat undifferentiated badge on packaging may be unwise.

"There you're dealing with people who aren't enthusiasts. You're looking at something that's almost generic and it's not shouting out as something that is Starbucks," he said.

Coke, Pepsi well placed in India

Coca-Cola and Pepsi are among the companies well placed to exploit the growth in demand delivered by rural Indian consumers, a study has argued.

The Associated Chambers of Commerce and Industry of India estimated FMCG sales in less developed regions of the country would register a compound annual expansion hitting 10% over the period to 2012.

According to the trade body, this acceleration should see the category swell from 87,900 crore rupees ($19bn; €15bn; £13bn) to 106,300 crore rupees.

With an audience of 150m households, three times the total residences in cities, ASSOCHAM stated brand owners have considerable opportunities in the countryside and semi-urban areas.

Currently, FMCG penetration typically stands at only 2%, suggesting there is still significant potential as the domestic retail and transport infrastructure improves.

Segments in line to enjoy substantial surges include biscuits, cold drinks, detergents and toothpastes.

A key driver of this trend is rising affluence, meaning many people have higher levels of disposable income.

Advertising, through both digital and traditional media, is also anticipated to play a major role in "awakening" shoppers to the available options.

However, competition may put pressure on manufacturers' profit margins, as intense rivalry leads to price cuts, promotions and similar strategies.

"The branded companies in the FMCG sector that will make killings will include a known number like Nirma, HLL, Dabur, ITC, Godrej, Britannia, Coca-Cola [and] Pepsi," ASSOCHAM said.

Research firm Nielsen is equally bullish on the possibilities afforded by the demographic, which it believes are growing at around twice the speed of metropolitan hubs.

"The rural market is currently worth approximately $9bn in consumer spending in the FMCG space annually," said Prasun Basu, vice president, The Nielsen Company.

"Today's rural consumer is not just indulgent but smart and choose the products that provide convenience and individualism in one go."

Overall, Nielsen predicted sales generated by this group could climb to $100bn in the next 15 years.

Coca-Cola, the US multinational, is seeking to strengthen its retail reach by 20%, to 1.5m outlets, in 2011, with a particular emphasis on untapped regions.

In 2010, it unveiled a range of new offerings it hopes will appeal to customers in the Indian countryside, such as an apple variant of Minute Maid and iced tea Nestea.

"We would like to tap the opportunity for still beverages in the smaller markets and rural India, which are fast getting urbanised," Atul Singh, president/ceo of Coca-Cola India, said last month.

Product placement boosts brands

Product placement boosts a number of core brand metrics, according to early figures from Germany following the relaxation of rules governing this practice.

SevenOne AdFactory, owned by ProSiebenSat.1, surveyed 350 consumers exposed to goods in such a way, as permitted since April 2010, in Deutschlands Meisterkoch, a cooking competition.

It assessed perceptions of supermarket chain Real and electronic appliances made by Siemens, which both appeared on-screen at various points during the series.

Some 56% of those polled provided broadly favourable feedback about these efforts, largely because they were seen as non-intrusive and in keeping with the nature of the show.

An 84% majority believed Siemens constituted a "suitable" partner for the programme, a total reaching 80% regarding Real.

The report further stated audience members typically distinguished between advertising and product placement.

For example, when asked to name a brand that was advertised during Deutschlands Meisterkoch, just 6% of the contributors only exposed to product placement name-checked Real.

This rose to 23% where placement and sponsorship were combined, but still fell considerably behind the 44% that recollected viewing a traditional TV spot.

However, unaided brand awareness among the cohort that did not see the relevant commercial also climbed from 41% to 52%, and hit 64% when used alongside sponsorship.

Siemens posted an increase from 44% to 66% on this latter measure, suggesting subtle promotion can leave a meaningful impression.

Elsewhere, Real saw benchmarks related to values such as "quality products", "wide range" and "healthy products" rise by up to 33 percentage points.

Siemens witnessed improvements of almost 20 percentage points concerning attributes like "high technology" and being an "innovative company", the study added.

Shoppers desire retail revolution

Consumers in the US and UK want "new ways" to shop which more fully integrate the online and offline worlds, a survey has revealed.

Cisco, the technology giant, interviewed 1,000 adults from these markets to gain an insight into current attitudes and preferences.

It found 63% of contributors employ digital channels to identify the lowest prices, and 46% use such mediums to save time.

Overall, 26% believed this strategy yields the best product selection, and 25% agreed the highest-quality goods are accessible via the web.

However, traditional word of mouth retains a central role, as 60% of those polled stated friends and family constituted the most important information source when making purchases.

Online reviews posted 29%, beating in-store staff on 24%, print media, securing just 19%, and TV, delivering a 10% rating.

Cisco reported two distinct communities of "tech-savvy shoppers" are emerging in the featured countries, with profound implications for marketers.

Members of the first category were described as "calculating shoppers", or 56% of the US population and 59% of their UK counterparts, and always used the internet before picking products.

The majority favoured researching potential acquisitions on the net to speaking with employees in bricks and mortar outlets.

Exactly two-thirds are looking for deals more regularly than two years ago, and 51% anticipated placing a heightened emphasis on this activity projecting forward the same amount of time.

Another 33% had visited coupon-sharing platforms, a figure reaching 31% when it came to accessing retailers' Facebook pages.

Nearly a quarter have exploited the opportunities afforded by bulk buying services like Groupon, but only 18% turned to the iPhone or devices powered by Google's Android for commercial purposes.

A further 11% are "extreme shoppers", and though this demographic is comparatively small, it does comprise a substantial number of customers from Generation Y.

Some 73% of "extremes" now dedicate more effort to hunting down special offers and promotions than previously, and 61% predicted they would still be doing so in 24 months.

The penetration of websites hosting vouchers and money-off coupons hit 60% concerning this audience, 56% of which had used a retailer's Facebook page, alongside 42% leveraging group-buying portals.

Smartphones were also influential, with 65% deploying these gadgets during the path to purchase.

"While 'extreme shoppers' receive the most attention, the larger group of 'calculating shoppers' has the greatest impact on retailers' revenues and margins," Cisco argued.

Of the latter segment, 54% were keen to try what was termed a "mashop", seeing retailers install innovative technologies in physical stores.

For example, 73% were enthusiastic about reading relevant information through a touchscreen on the shelf edge.

Around 44% outlined a desire to view product specifications, price comparisons and user-generated reviews on touchscreens, the same total as expressed interest in "virtual video advisers".

"Today's shoppers expect a completely custom shopping experience," said Lindsay Parker, Cisco's global retail industry director.

"They want to shop anywhere, anytime, on any device. And they prefer to shop with retailers that provide seamless, customised experiences."