UPDATE 3/4/2009: Ad Age reports General Mills has given Target a month-long exclusive on retro box designs for Cheerios, Honey Nut Cheerios, Lucky Charms, Cocoa Puffs and Trix. They’re even giving away T-shirts with the old designs as part of the deal. Brilliant: these will stand out on shelf vs. private label, provide a nostalgia kick to Boomers, and it fits perfectly with Target’s image. I love this.
Private label pirates accounted for more than $81 billion in U.S sales in 2008. That’s a 10.2 percent leap over the previous year. And, it’s no secret that the worsening economy has put significant wind at their backs.
According to a Nielsen survey conducted in June/July 2008 (when the economic outlook was comparatively rosier than today), 72% of American consumers believed that private label products are good alternatives to name brands. And only 24% believed that name brand products are worth the extra price. No wonder that in late March, Wal-Mart plans to reintroduce its Great Value food line, with new packaging and more marketing support.
Yet General Mills (which gets about 19% of its revenue from Wal-Mart, by the way) is successfully fighting off private label, against the odds.
What are they doing right? What can we all learn?
No Retreat, No Surrender
General Mills knows that brand perceptions are built on marketing. Instead of pulling back, they’ve increased their spending 19% in the first half of fiscal 2009, which began in June. That’s a big investment in their brands, and it says a lot about their confidence. Private label pirates thrive on big-brand complacency: when companies innovate and go to market with those innovations, private label is forced to play catch up.
50 Year Olds Can Still Be Hot
This marketing spending includes major support for 50 year old cereal brands like Cheerios. There’s a significant effort to reach Baby Boomers, who will make up about half the U.S. population next year, and who apparently eat a whole lot of cereal.
This is smart because Boomers watch more TV than their kids and grandkids. Plus, keeping core brands vital and marketing to the right segments makes it harder for private label to make inroads.
Barriers to entry are critical when your product is just cereal in the shape of an “o”.
Betty Crocker’s On Your iPhone. Do You Have Any Cilantro?
The consumer spend is about more than TV and advertising.
It’s also about digital and utility.
General Mills is marching to the grocery store right next to Mom, on their iPhones.
General Mills just launched a free Betty Crocker iPhone app that includes a lot more than cake frosting. They’ve got everything from Chicken Enchiladas to Cactus, Zucchini and Red Pepper Salad.
It also makes smart use of technology with a “Surprise Me” button that brings up a random recipe. Pretty good for bored Moms who are tired of wracking their brains. The app is perhaps not as slick as Kraft’s iPhone app, but the utility is there.
General Mills is fighting the war where it matters.
Who else in CPG is doing this well today?
Can you point to other examples?