Special Report - May 2004

Under Siege
The American Marketing Association defines a brand as a "name, term sign, symbol or design or a combination of them, which is intended to identify the goods or services of one seller or group of sellers and to and to differentiate them from those of competitors." However, a brand stands for so much more than just a label used to distinguish a particular product on a crowded shelf. It is a complex symbol comprised of holistic ingredients that let consumers know that the benefits reaped from the brand are of significant importance. But with the introduction of nearly 30,000 new consumer products each year, in addition to private label competition (five year growth: 38 percent for private labels versus 19 percent for branded products according to Deloitte), the impact of branded goods is slowly but surely eroding.

"The brand is definitely threatened in the consumer goods space," says Bill Snyder, marketing director, AcuPoll Research, a global brand building research firm. "While an idea might appear to have strong potential to build the brand from an emotional and equity standpoint, examining the potential of an idea in a vacuum can be very deceiving." In many cases, Snyder says marketers have little sense of the impact a line extension will have on the performance of their entire brand - until it's too late. "Marketers need to understand the cannibalization impact of every product launch."

Withering Heights
 Synder says new product launches can wither away the strength of individual SKUs. With SKU proliferation and private label competition at an all time high, and marketers scrambling to bring the latest and greatest to market, many are watering down their brand or increasing sales at the expense of the overall success of the company.

"Retailers closely examine the velocity of individual SKUs when effectively managing their categories," says Snyder. "Launching a new product that does nothing more than capture most of its trial volume from its own sister SKUs, will only thin out volume and put the overall brand distribution at risk."

In addition, increases in warehousing and distribution of the additional SKUs with the compliance mandates imposed by big box stores, new products can actually cost manufacturers significant amounts of money over and above the mere cost of a failed product.

Private Label Popularity
While it's no secret that established brands are under attack from private labels, consumer goods firms still need to be vigilant in retaining their market share, according to Rob Frasca, president of Affinnova, a PLM provider with a client base that includes Procter & Gamble, Kraft, Coca-Cola and Johnson & Johnson. Frasca says that private labels grow their market share by creating and exploiting brand confusion. "The resulting challenge to established brands is to refresh the traditional identity in a way that will not alienate the base of loyalists and non-users," says Frasca. "Getting the such input rapidly and with an actionable level of very subtle detail from both of these groups early in the re-fresh process is the name of the game."
Personal and home hygiene products are the categories in which the strongest brands currently exsist which suggests that specific efforts to stem private label competition in these verticals are the ones to model other brand strategies around. Brands most severely affected by private lables currently exist in commodity type goods like sugar and toilet paper. The manager of a Stop & Shop located in Bergen County, New Jersey confirms that commodity type goods of the store's brands sell particularly well. Stop & Shop sugar and apple juice regularly outsells the competition by a significant margin but flour and canned vegeatbles do not.

The Bottom Line
The bottom line for marketing executives is to closely test and analyze the details of a new product to ensure its success without harming the core brand. Avoid paying too much attention to the obvious pain points, like consumers trying a product for the first time, and dig deeper to understand how to best communicate, build franchise volume and fulfill the brand mission of offering a compellingly differentiated message to consumers.
counting carbs

Three examples of how to HANDLE the carb-friendly craze:

> FRITO-LAY'S COMPETITIVE EDGE
As the first food manufacturer to eliminate trans fats from its core brands Frito-Lay is taking yet another step to offer a wide variety of better-for-you snacks. This month, the company launches a new line extension of Doritos and Tostitos that has less than half the carbohydrates of its top-selling tortilla chip brands. Named Doritos Edge and Tostitos Edge, both products contain a total of 6 net carbohydrates, 10 grams of protein, and 3 grams of fiber. "While we will continue to grow our base business, we are confident that by offering consumers a variety of better-for-you-snacks like Doritos Edge that we will deliver sustainable incremental growth," says Stephen Quinn, chief marketing officer, Frito-Lay North America.

> MICHAEL ANGELO'S MAKES THE DOUGH
Just-in-time production is the name of the game at Michael Angelo's Gourmet Foods of Austin, Texas. The company operates on a strict schedule to make sure that its freshly made ingredients are received and products are cooked, packaged and shipped to customers within 24 hours. Designed to address the specific needs of food processors, iRenaissance from Ross Systems manages the formulas and recipes and provides the business control that is critical to Michael Angelo's success. With the help of iRenaissance, Michael Angelo's launched a new carb-friendly product in under 90 days, significantly boosting monthly sales.

> DANNON TAKES CONTROL
The introduction of Dannon's Light 'n Fit Carb Control yogurt is "the first nationally available, reduced carbohydrate cultured dairy snack, found in the yogurt section." Carb Control, introduced with the help of PLM provider Affinnova, is available in four flavors and contains just three grams of carbohydrates, 80 percent less sugar than regular low fat yogurt, five grams of protein and 15 percent of the recommended daily value of calcium.