Chairman and CEO, Nestlé S.A.
KEY DEVELOPMENTS: Moved into the No. 2 health care nutrition market spot.
WHAT'S NEXT: Become the world's leading nutrition, health and wellness company.
It seems there is something in the Perrier water at Nestlé.
Despite higher input prices, all businesses and geographic regions at the world's largest food and beverage company contributed positively to a first-quarter organic growth rate of 7.1%. (The company won't report half-year results until August 15.)
“These encouraging figures reflect the acceleration of our move toward nutrition, health and wellness across our main food and beverage brands, as well as the strong performance of our globally managed Nestlé Nutrition unit, which achieved its long-term target of 10% organic growth,” said Peter Brabeck-Letmathe, Nestlé's chairman and chief executive officer, in a statement.
The breadth of Nestlé's established brands, including Stouffer's, Nescafé, Purina, Kit Kat and Perrier, touches nearly all categories in more than 80 countries.
The Swiss company's healthy high is fueled, in part, by the higher margins that typically accompany nutrition-enriched items. Thanks to its charismatic leader, it continues to gain momentum.
“When he enters a room, you can feel his presence,” said Spencer Blaker, a consultant with Willard Bishop, Barrington, Ill., who, during his tenure at Nestlé Purina, worked under Brabeck-Letmathe. “He's constantly self-assured, yet approachable. He has high expectations and a good focus. The people under him believe in his leadership and are proud to work for him.”
Brabeck-Letmathe's sights have most recently been set on fortifying Nestlé Nutrition.
Centered on science-based nutrition products and services and built around Nestlé's global infant, health care and performance-nutrition global businesses, the stand-alone company was formed last year. Nestlé Nutrition aims to enhance the quality of people's lives with products like Nestlé infant cereals, Nutren Balance Cereal Bars for diabetics and PowerBar Performance Bars.
Earlier this month, Nestlé completed the acquisition of Novartis Medical Nutrition, propelling it into the No. 2 position globally in the health-care nutrition market, according to the manufacturer.
As part of another play to help boost its positioning, Brabeck-Letmathe announced earlier this year the company's intention to acquire baby-food maker Gerber from Novartis for $5.5 billion.
The deal, which is subject to regulatory approval and is expected to be completed in the second half of this year, will not only mark Nestlé's foray into U.S. baby food, it will also catapult the supplier into the No. 1 spot in the world's single largest market for the category.
“Nestlé is looking to the health and wellness cradle-to-grave approach. It wants to be where people are and service them in their time of need,” said Blaker. “It makes total sense — the company is going back to its Henri Nestlé roots.”
The legendary Nestlé founder is credited with developing the first milk food for infants, and saving the life of a neighbor's child in 1867 as a result.
— JULIE GALLAGHER
MICHAEL B. POLK
President, Unilever Americas
KEY DEVELOPMENTS: Bringing Unilever's American businesses together to leverage their strengths in innovation and sales.
WHAT'S NEXT: Growing categories, especially outside the U.S., and creating value while building on leadership in wellness and sustainability.
Michael B. Polk is charged with continuing the implementation of the “One Unilever” initiative in the Americas, along with instilling the company's values of vitality and sustainability, while finding new avenues for sales.
Polk took over as president of Unilever Americas, Englewood Cliffs, N.J., when John W. Rice retired from the company in March. Kevin Havelock, who was running the company's U.K. operations, now is in Polk's former position as president of Unilever U.S.
“Unilever's new structure and capabilities create our competitive advantage,” Polk told SN. “They enable us to deliver on our mission of adding vitality to life by meeting everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life.”
An industry insider commented: “Polk is an outstanding leader, results-driven, an excellent manager of people and a strategic thinker. He's very sharp, decisive and has a very strong bent toward innovation. He's the ideal person for the challenges ahead for the industry and for Unilever in North America.”
The transformation of Unilever can be traced to Patrick Cescau's 2005 appointment as group chief executive of the combined Unilever PLC and Unilever N.V. businesses in London. He was the first in the company's history to hold this position of unified responsibility. Cescau launched the “One Unilever” initiative to bring together the company's diverse geographic and product interests, while prompting more innovation, sales and attention to issues like wellness and sustainability.
“Patrick's expectations of the U.S. operations is that we breathe life into the company mission, we deliver competitive levels of profitable growth, and that we do business in a way that supports the company's commitment to ‘Do Well by Doing Good,’” Polk said.
Responsible for Unilever's $17 billion business in North America and Latin America, as well as for accelerating the company's global customer development, Polk is working toward bringing Unilever's businesses in the Americas together.
“Our biggest opportunity is to leverage our new organization to grow competitively. ‘One Unilever’ allows us to clearly differentiate ourselves vs. our peers,” he said.
“The transformation of Unilever is delivering results in the marketplace. Unilever's focus on the creation of new capabilities for the business, leveraging the power of ‘One Unilever,’ has resulted in improved performance and a steady rise up the rankings in the Cannondale [Associates PoweRanking] Survey, and other similar research outside the U.S.,” he said.
Polk outlined three paths to growth in the U.S.:
Grow categories: “We build the category by leveraging our world-class portfolio of brands to bring new ideas to consumers that increase their involvement,” he said.
Leverage geographic footprint: “Unilever's broader geographic footprint, and the global diversity that allows us to leverage shopper intelligence and insight from around the world, are unlike any other competitor in our industry.”
Enterprise value creation: “Unilever is committed to creating value across the entire enterprise, from the crop to the cash register,” Polk said.
Two areas where Unilever has been recognized in leading the industry are wellness — or ‘vitality,’ as the company prefers to refer to it — and sustainability.
Examples of adding vitality to the company's food portfolio include Wishbone Salad Spritzers — “one calorie in every spray” — Lipton teas with antioxidants, and Promise Activ Supershots, mini drinks that remove cholesterol, Polk said. In personal care products, the Dove “Campaign for Real Beauty” debunked the traditional stereotypes of physical beauty and replaced them with a message of self-esteem, he added.
Unilever has launched an “Eat Smart/Drink Smart” program, too — a front-of-package consumer information campaign designed to help consumers choose “better-for-you” products, he said.
“Unilever's new structure and capabilities create our competitive advantage. They enable us to deliver on our mission of adding vitality to life by meeting everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life,” he said.
The industry insider noted: “When Unilever talks about vitality, health and wellness, that comes from the top, and it is reflected in their values, in their product portfolio and in their advertising.”
An example of sustainability and doing well by doing good is the innovative packaging of All Small & Mighty concentrated laundry detergent, which uses less resources and takes less shelf space, Polk said. “Since the launch in the U.S., Unilever has rolled the concept out into Canada, the United Kingdom, France, Argentina and Chile,” he said. Competitors are now doing the same, he added.
“Not only is sustainability the right thing to do, it makes good business sense. Value-led brands increasingly drive our business strategy, and we are now integrating social, economic and environmental considerations into our brand innovation and product development. We will do well by doing good,” Polk concluded.
— DAN ALAIMO
Chairman and CEO, PepsiCo
KEY DEVELOPMENTS: About 40% of the company's 2006 North American revenues came from products with a healthy positioning.
WHAT'S NEXT: Fifty percent of new food and beverage products are to have health and wellness positioning.
Not only is Indra Nooyi PepsiCo's first-ever female chairman and chief executive officer, she's also one of just a dozen women CEOs in the Fortune 500.
Nooyi became president and CEO of the $35 billion marketer of Frito-Lay, Pepsi-Cola, Gatorade, Tropicana, Quaker and other brands this past October, and assumed the chairman role in May. She succeeds Steven Reinemund, who retired.
Prior to becoming CEO, Nooyi served as president and chief financial officer since 2001, when she was also named to PepsiCo's board of directors.
During her tenure, she directed the company's global strategy and headed the company's acquisition of Tropicana and merger with Quaker Oats.
Nooyi assumes leadership at a time when carbonated soft drinks and packaged goods are under fire for soaring childhood obesity rates.
PepsiCo has fought back by launching new products and reformulating existing ones. It is one of five major consumer packaged goods firms that joined the Alliance for a Healthier Generation — a joint initiative of the William J. Clinton Foundation and the American Heart Association — to establish first-ever voluntary health guidelines for snacks and side items sold in schools. As part of the partnership, PepsiCo agreed to reformulate several products sold in schools.
The company has aligned itself with health and wellness in many other ways, including with the recent purchase of Naked Juice, marketer of all-natural juices and juice smoothies.
It also launched the “Smart Spot Dance!,” an initiative designed to motivate the Latino and African American communities to adopt active lifestyles.
The company's Smart Spot symbol, an icon that identifies products that contribute to a healthier lifestyle, now appears on more than 250 products, including Tropicana orange juice, Aquafina water, Gatorade Thirst Quencher, Baked! Lay's, Quaker Oatmeal and Diet Pepsi. Such brands have been growing at 2½ times the rate of the rest of the portfolio.
In 2006, more than 40% of the company's North American revenues came from products that are Smart Spot eligible.
Further, 50% of PepsiCo's new food and beverage products are expected to be comprised of wholesome and nutritious ingredients or offer improved health benefits.
Efforts like this help explain why PepsiCo is on the fast growth track, according to an industry observer.
“Rather than remain dependent on CSDs, Pepsi has created a wide beverage portfolio,” said the observer, who requested anonymity.
The observer expects that Nooyi will use her background to achieve international growth and profitability.
— CAROL ANGRISANI
CEO, Kraft Foods
KEY DEVELOPMENTS: Kraft's spin-off from parent company, Altria; sprucing up of core categories.
WHAT'S NEXT: Sales-driving innovations, global expansion.
It's been a busy year for Irene Rosenfeld.
When she took the reins at Kraft, just about a year ago, it was a homecoming of sorts — she had spent nearly 20 years at Kraft and General Foods before moving over to PepsiCo's Frito-Lay division as its chairman and chief executive officer in 2004. Since her return, in the midst of a restructuring, she has developed a three-year plan that includes not only cost-cutting goals, but also a strategy to reinvigorate the company by reframing categories and putting marketing muscle behind them.
“I think she brings a very consumer-oriented focus to the brand given her background, and she should jump-start innovation within the company,” said Neil Stern, senior partner, McMillan/Doolittle, Chicago.
“Her plan is based on four planks: cost control, organization change, driving sales synergies and reframing categories.”
Stern also said this year's spin-off from parent company Altria Group, New York — also the parent of the Philip Morris companies — has the benefit of separating the food business from a portfolio that includes a controversial category, tobacco. However, he said, it also puts the microscope on Kraft.
The spin-off, in part, spurred Goldman Sachs, New York, to remove Kraft Foods from America's Sell List, their investor's report announced last month.
“Since the spin-off from Altria, Kraft has greater financial flexibility,” the report said.
One New York-based financial analyst, who requested anonymity, said “We feel she [Rosenfeld] has the right approach. In previous years the strategy at Kraft was to move prices down, but she has reversed that. We feel it's a more sensible and sustainable strategy.”
Rosenfeld has driven product improvements and supported the improved categories with bigger marketing budgets.
“She's putting more money into quality, marketing and innovation, and she has also clearly articulated to investors that significant results will not be immediate,” the analyst told SN.
Rosenfeld has said progress has been made in many areas, but she points in particular to broadening the appeal of some categories.
An example of that, Stern said, is Kraft's buildup of its frozen pizza business with a new DiGiorno line. With a thinner crust, higher-end ingredients, and an aggressive marketing push, the new line is designed to compete not just with the $4 billion frozen pizza market, but with the $30 billion pizza takeout and delivery business as well.
During the April conference call, Rosenfeld alluded to the company's beefed-up investment in core categories, especially those that present more convenience to the consumer.
“A fairly significant portion of the $300 million to $400 million investment that we have laid out in 2007 is behind the quality of a number of our base products,” she said.
“We have made some of those investments in products like mac-and-cheese and pizza, and you'll continue to see progress on a number of others as the year progresses.”
If its most recently announced plans pan out, the company will have bolstered its fastest-growing category — snacks — and broadened its global reach at the same time. Kraft announced on July 3 that it plans to buy the French company Groupe Danone SA's biscuit unit for 5.3 billion euros, which would make it Europe's largest maker of cookies.
Acquiring the Danone unit will give Kraft $13 billion in global revenue from snacks, Rosenfeld told analysts on a conference call in Paris this month.
— ROSEANNE HARPER
RICHARD L. BOND
President and CEO, Tyson Foods
KEY DEVELOPMENTS: Launched major new R&D facility while effectively implementing a $200 million cost management initiative.
WHAT'S NEXT: Contending with rising feed costs; continuing to build value-added products business.
In little more than a year as chief executive officer of the world's largest meat-processing company, Richard Bond has proved himself to be one of the most effective leaders in the supplier community. Tyson announced in February that it had returned to profitability after several negative quarters, crediting the $200 million cost management initiative that Bond began implementing in May 2006, immediately after taking the reins at the Springdale, Ark.-based company.
The news certainly cheered investors, although it was somewhat overshadowed by the buzz building over Tyson's new Discovery Center — a $45 million, 100,000-square-foot facility staffed with 120 chefs and culinary scientists, and outfitted with 19 research kitchens, a multi-protein pilot plant, a packaging innovation lab, a sensory analysis lab and consumer focus group facilities.
“Initially, a little over a year ago, I felt that we did need to do some cost management initiatives,” Bond told SN. “We set out to save roughly $110 million, but the Tyson team brought back about $200 million in terms of savings. And we're well on schedule to exceed that on an annualized basis this year. But, we never lost sight of our primary strategy of continuing to grow by adding more value-added products. The Discovery Center in my mind is an extension of that primary strategy.”
The Discovery Center consolidates the company's existing research and development processes under one roof, Bond explained. And with 19 test kitchens replicating environments ranging from quick-service and casual dining restaurants to supermarket delis and home kitchens, it allows Tyson to work directly with its customers to get products developed, tested and production ready in a very short time frame.
“We've been able to help all of our customers with speed to market, and we really have built a great R&D team to work with our customers to help develop and innovate with new products,” Bond said, noting one example in which a customer stayed at the facility for two days and left with six new products.
Citing research that indicated 91% of consumers would prefer chicken raised without antibiotics, Bond announced last month that all of the company's fresh, Tyson-brand chicken will be produced without the use of antibiotics, a move that the Wall Street Journal said “could lead to stronger earnings and a higher valuation as investors stop viewing [the] company as a simple ‘protein’ purveyor.”
Along with the Discovery Center, the antibiotic-free initiative illustrates Bond's efforts to steer Tyson toward a future where it can create demand by adding value to products, rather than relying on the size and scope of its business in a market still largely dominated by commoditized items.
And the timing could hardly be better. These labels have already demonstrated strong mainstream appeal. And poultry, pork and beef producers this year have faced steep increases in feed costs. The cost of corn has doubled in the past year, due to a boom in ethanol production led by the federal government's renewable fuel initiatives, and many analysts predict that feed costs could remain high for at least five years. While producers of commodity proteins struggle to pass those costs along to customers, Tyson's antibiotic-free claims and innovative value-added items help reinvigorate the brand, and should help justify new pricing.
“The company is poised to grow,” Bond said. “Our team has really stepped up and done a great job focusing, keeping costs down and keeping new innovation coming. We've got a great team and a great strategy.”
— MATTHEW ENIS
E. NEVILLE ISDELL
Chairman and CEO, The Coca-Cola Co.
KEY DEVELOPMENTS: After a period of transition, Isdell stabilized the company, restoring morale and investor confidence.
WHAT'S NEXT: More noncarbonated products, increasing U.S. sales and implementing sustainability efforts.
The story has a familiar ring: Company veteran is brought in to stabilize a stagnant packaged goods giant, and proceeds to inspire a resurgence in all areas of the business.
This sounds much like A.G. Lafley and Procter & Gamble Co., Cincinnati, a few years ago, but now a similar story is being told in Atlanta about E. Neville Isdell, chairman and chief executive officer of the Coca-Cola Co.
It has been widely reported that the Irish-born Isdell came out of retirement in June 2004 with a wealth of experience in Coca-Cola's international bottling operations. He almost immediately boosted morale, improved the management team and led the process in crafting the company's “Manifesto for Growth,” meeting earnings expectations for 10 consecutive quarters and improving shareholder return, according to the company.
There were 1,383 product launches in 2006, including 367 existing items in new markets; acquisitions of noncarbonated brands like Glaceau and Fuze in North America; and widely reported interest in buying the Snapple line from Cadbury Schweppes. Coke Zero has been a particular success. An integrated marketing campaign, “The Coke Side of Life,” will be in 200 markets by the end of 2007, the company reported.
At the April Annual Meeting, Isdell said that “fixing” sparkling beverages was the key to growing the rest of the company's portfolio, and he reported that Coca-Cola had a 4% growth rate for sparkling beverages in 2006 globally. “We are on our way to be a truly great company again,” he said. “To get there, we will create demand for our brands through consumer marketing that is innovative, that is inspirational, that is also flexible in a very changing environment.”
Additionally, Isdell has said in recent speeches that the company is focusing on three environmental priorities: packaging, energy — mainly concerning refrigeration equipment — and water. “The Coca-Cola Co. pledges to replace every drop of water we use in our beverages and their production,” he told last month's conference of the WWF-World Wide Fund for Nature in Beijing.
Isdell characterized this as “aspirational” and a “multi-year journey,” and said, “Our aim, ultimately, is to establish a truly water-sustainable business on a global scale.”
Industry observers and analysts are more focused on prospects for growth, primarily in North America.
“His challenges in the future will be to connect with a healthy consumer with products that meet the various and changing demands of the marketplace,” said Mark Batenic, chairman, president and chief executive officer IGA USA, Chicago. “The wants and needs of the consumer will change quickly and dramatically, and Coca-Cola has to be in a position to meet those needs.”
The company has progressed through transition and stabilization under Isdell, and is now ready to start focusing on growth, said Lauren Torres, analyst, HSBC Securities, New York. “He is trying to stabilize the carbonated soft drink business, and then add on potential growth of categories that they weren't a major participant in,” she said.
“I think he was the man to bring about change and improve a company that was somewhat stuck. We are now looking toward the company growing again,” mainly in “troubled markets” that are also the more established markets, such as the U.S., Western Europe and Japan, Torres said.
The beverage market has become more complex than ever, and a challenge to big companies like Coke and Pepsi that traditionally thrived on high-volume brands, said Gary Hemphill, managing director and chief operating officer, Beverage Marketing Corp., New York. “It requires a large portfolio of well-managed brands to succeed today, and that's what he has been working on figuring out,” he said. Besides adding noncarbonated brands, Coca-Cola needs to focus on its U.S. business, he said.
“Isdell is the man who has triggered this transformation in the Coca-Cola Co. He came in and took six months to a year to analyze the business and determine what the needs were, but after that, he has moved very quickly to respond to those needs. He is still in the process of turning the company around, but I think that all signs are very positive in Atlanta,” Hemphill said.
“He has certainly been a stabilizing influence,” said Don Stuart, managing director, Cannondale Associates, Wilton, Conn. “He brings a long history of experience in the business and a very global perspective that is still a huge Coke strength relative to Pepsi. But the challenge in the year ahead is to reignite growth on the home front,” he said.
“Neville Isdell has proved that he is the person that was needed to take Coca-Cola to the next plateau,” said Bill Bishop, president of the Willard Bishop consultancy in Barrington, Ill. In some ways, Isdell's track record parallels that of Lafley's at P&G, he noted. “He is creating a very powerful, resilient company that will serve consumers and be a good partner for retailers.”
“He's the right leader at the right time for that company, and not afraid to make some of the dramatic changes that they are in the process of making,” said Neil Stern, senior partner, McMillan Doolittle, Chicago. This is especially hard with an old, established company like Coca-Cola, he noted. “We are all creatures of the business model that we grew up with, and making changes to that and the network has been most difficult for them.”
— DAN ALAIMO
Chairman and CEO, Sara Lee Corp.
KEY DEVELOPMENTS: Spinoff of Hanesbrands.
WHAT'S NEXT: The Kitchens of Sara Lee, a new research and development facility being built at its headquarters.
Sara Lee Corp. is halfway through a self-described company transformation.
The goal of the five year-plan, which began in February 2005, is to exit non-core businesses, while building key brands like Ball Park, Hillshire Farm, Jimmy Dean and its Sara Lee namesake.
“We have transformed from a very decentralized holding company into an integrated operating company,” Brenda Barnes, chairman and chief executive officer, told SN.
The effort led to last year's spinoff of Hanesbrands, as well as the sale of the company's European meats business, direct-selling business and U.S. retail coffee operations. Combined, these businesses accounted for 40% of Sara Lee's fiscal 2005 sales base.
“Sara Lee has become a smaller, but much more focused company,” said Barnes, who joined the Downers Grove, Ill.-based company as president and chief operating officer in July 2004, became president and CEO in February 2005 and was appointed to her current position in October 2005. (Prior to joining Sara Lee, Barnes was president and CEO of Pepsi Cola North America from 1996 to 1998 and chief operating officer since 1994.)
Along with divestitures, Sara Lee acquired Butter-Krust Baking last year, which helped expand the reach of the Sara Lee fresh bakery brand.
It also created a dedicated North American food-service business, a North American retail meats and retail bakery business, and an international business focused on coffee and tea, bakery, and household and body care.
Such efforts have had a positive effect on the business, Barnes said. Though Sara Lee's net sales slipped 1% to $15.9 billion in fiscal 2006 vs. fiscal 2005, net sales for the third quarter of fiscal 2007, ending March 31, 2007, were $3 billion, a 9.2% increase compared to prior year's third quarter. It marked the fourth consecutive quarter of improved business performance across all segments.
“It is very rewarding to see that all of our hard work is starting to pay off,” said Barnes.
New product launches played a big role in that. Capitalizing on the health and wellness trend, it developed Soft & Smooth whole-grain white bread to bring the goodness of whole grains to people who don't like traditional wheat bread. Information Resources Inc. named Soft & Smooth one of its 2006 new product “pacesetters,” those that have achieved $7.5 million in first-year retail sales across food, drug, mass channels, excluding Wal-Mart.
Along with new products, the company has beefed up marketing support with its “The Joy of Eating” multimedia advertising campaign, the first time the company has advertised its signature Sara Lee brand of breads, deli meats, cheeses and desserts under one platform. Celebrating the emotional connection food plays in people's lives, the campaign includes thejoyofeating.com, a website that offers recipes, stories about food and more.
Cannondale Associates' partner Don Stuart described Sara Lee as an entirely different company than it was just three years ago.
“It's made a lot of progress by trimming its portfolio, focusing on sales and marketing, and communicating more directly with customers and consumers,” he said.
— CAROL ANGRISANI
AUGUST A. BUSCH IV
President and CEO, Anheuser-Busch
KEY DEVELOPMENTS: Expanded its portfolio through new product innovations and alliances.
WHAT'S NEXT: Become the leading global beer and specialty beverage company.
August A. Busch IV wants to make sure that no matter the drinking occasion, Anheuser-Busch has something for everyone.
With an eclectic mix that includes blueberry lager, wheat-free beer and a Budweiser and Clamato tomato cocktail brew, the beer giant's got its bases pretty well covered.
“While we continue to focus on growing our core brands, our commitment to creating new specialty beers will continue,” Busch told SN. “Today's beer drinkers want more variety and choices, including beers with natural flavors and organic ingredients. We are looking at the total beverage landscape with an objective to build Anheuser-Busch into the leading global beer and specialty beverage company.”
A-B's Bud Light and Budweiser are the world's No. 1 and No. 2 best-selling beers, and more than half of the beer consumed in the U.S. is a product of one its breweries.
To help quench the thirst of the burgeoning Hispanic population, A-B recently introduced Budweiser & Clamato Chelada and Bud Light & Clamato Chelada beverages in select Texas and California markets.
“Latinos, specifically those of Mexican descent, have been mixing beer with Clamato since 1969,” said Busch.
A-B is also tapping into the tastes of drinkers who don't normally reach for beer with such beverages as its recently introduced seasonal Michelob Ultra Fruit-Infused Beers, which are low in carbs and calories. Athletic and image-conscious consumers are the target of its antioxidant-rich 180 line of energy drinks, which includes 180 Red with Goji and 180 Blue with Acai.
“Energy drinks are predicted to exceed $3 billion in sales by 2008,” said Busch. “Sales to retailers for the 180 family were up 97% in 2006.”
The manufacturer is also broadening the choices it offers through acquisitions and distribution agreements.
Last year, A-B acquired Rolling Rock, launched its Harbin brand in the U.S. and announced import agreements for the Grolsch, Tiger and Czechvar brands.
Earlier this year, it became the U.S. importer of InBev's European portfolio, including Stella Artois, Beck's, Bass and other high-margin brands. It's also built its craft beer portfolio through distribution arrangements with Chicago-based Goose Island Beer Co. and an investment in Coastal Brewing Co.
“These moves are designed to utilize our world-class sales and distribution capabilities as a competitive advantage,” said Busch.
A-B's efforts come at a time when beer is losing share to wine and spirits.
The company has an online beer university in the works to help siphon sales. Adults who enroll in A-B's Beer Connoisseur program will learn about beer ingredients, brewing processes and styles and the fundamentals of food pairing. A-B plans on recruiting participation from consumers and from both on- and off-premises retail segments.
“Of particular value to retailers will be the Beer Connoisseur's ability to generate reports, allowing for a beverage manager or director to track an employee's knowledge along the way,” noted Busch.
A-B's “Here's to Beer” resources continue to offer tools to help retailers grow their beer business.
Through its members-only site, www.htbmarketing.com, the manufacturer provides downloadable sign-making and point-of-sale templates to help retailers enhance their beer aisles.
— JULIE GALLAGHER
CEO, ConAgra Foods
KEY DEVELOPMENTS: Driving sales growth within a revamped company structure.
WHAT'S NEXT: Precise innovation within established brands.
When Gary Rodkin swept into Omaha two years ago, the last thing on his mind was staying the course. ConAgra, the Nebraska-based company placed in his charge — one of the largest brand manufacturers in the country — was struggling to compete and meet its financial goals.
Everyone knew there needed to be changes, but the ConAgra chief executive officer wanted a complete turnaround. Since Rodkin's arrival, he's gutted top management, replacing nine of 11 spots, including marketing chief and chief operating officer, with his own picks. He's also made cost cuts totaling $100 million, beefed up advertising and worked to integrate all arms of the company.
This major and ongoing reform represents a sizable risk for such a large company, but so far it's gotten results. ConAgra's most recent earnings report shows a 13% increase in fourth-quarter revenues from a year ago.
“To make a major turnaround successful, you need full engagement of your organization,” said Rodkin in a conference call with analysts earlier this year. “I can tell you that there is a very different feel around ConAgra than there was 12 or 18 months ago.”
Despite its internal revolution, ConAgra doesn't plan on shaking up the grocery shelves with a streak of new products and a revamped image. Instead, the company wants to get the most bang for its buck by focusing on efficient, precise innovations, mainly within established brands.
These include a soon-to-be-released line of panini sandwiches in the Healthy Choice brand, a PAM cooking spray designed for high-heat cooking, and low-sodium Orville Redenbacher's popcorn.
“It's a totally different ball game today,” said Rodkin during the call. “We have new leadership, a new R&D organization and a totally new sense of urgency, all about fewer, bigger, better and faster innovation.”
In an industry that holds big rewards for a healthy image and new products, Rodkin's strategy to stick with traditional offerings and innovate mainly from within is something rare. To be sure, some analysts say the ConAgra lines are outdated, in need of more than a facelift, and that the most recent earnings surge has a precarious foothold.
“Such a massive earnings surprise on the upside lead us to wonder what the downside could be in other quarters,” said JP Morgan research analyst Pablo Zuanic, in a recent note to investors.
Rodkin is unfazed. He said he's looking to fuel steady growth, not hit home runs. After all, the company still needs to get its feet planted after years of underperformance followed by the reorganization. For the coming year, he has set a sales growth goal of 2% to 3%.
Moving forward hasn't come without its share of setbacks, however. In February a sizable quantity of Peter Pan and private-label Great Value peanut butter manufactured in Georgia was found to contain salmonella.
All told, more than 600 people in 47 states became ill. In response, ConAgra immediately closed down the plant, offered full refunds to customers and destroyed the company inventory of the product.
Lawsuits loom on the horizon. Nevertheless, Rodkin believes that ConAgra has absorbed the blow and is ready to move on. The plant is set to reopen in August with updated safety measures.
“I am convinced that this is an isolated issue, that it will not interfere with our plans for ConAgra's success, and it doesn't dampen my enthusiasm one bit,” Rodkin said during the conference call.
— JEFF WELLS
Chairman and CEO, General Mills
KEY DEVELOPMENTS: Launch of Curves food bars and cereal as part of long-term partnership.
WHAT'S NEXT: Dairy innovation, including Fizzix, a carbonated yogurt.
Breakfast is getting a lot healthier, thanks to General Mills.
“Whole grain news was a driver of sales growth across our cereal business,” Chairman and Chief Executive Officer Steve Sanger told SN.
As the company continues its focus on health as a key segment to grow its business, it's introducing Curves-brand whole grain cereal this month, following the launch of Curves food bars. The new Curves-branded weight management product line is part of a long-term partnership with the Curves franchise.
General Mills' wellness theme extends into other meal occasions. The company now has 250 products that contain 130 or fewer calories per serving. Progresso's retail sales were up 10% in 2007, driven in large part by new lower-sodium varieties, according to Sanger. Along with two new low-sodium flavors, the company will launch a line of Progresso Light soups that count as zero-point foods on the Weight Watchers diet program.
There's also been plenty of innovation in snack bars, one of General Mills' fastest-growing businesses in 2007. Sanger expects that to continue in 2008 with the launch of Nature Valley Nut Crunch bars, as well as continued growth from Caribou Coffee Bars, the Curves bars and new Fiber One bars.
Its dairy business is no exception. Fizzix, a carbonated yogurt, is on the way, as is what's touted as the first symbiotic yogurt; and a new drinkable version of Yoplait Kids yogurt with omega-3.
“Consumers continue to seek foods that offer convenience and deliver health benefits — whether it's weight management, heart health, whole grain benefits or lowering cholesterol,” Sanger said. “But they have to taste great.”
As for convenience, Sanger pointed to the launch of Fiber One bars, Green Giant Simply Steam and Hamburger Helper Singles, among other new items. And in 2008, it's expanding the dinner-mix category with a new line of Wanchai Ferry Asian dinner kits.
One of General Mills' biggest challenges continues to be rising dairy and other costs. It has responded in a number of ways, including price increases.
The company is increasing Yoplait pricing in the mid-single-digits.
Select cereal prices are also rising by way of reduced package sizes. On average, the price per box will be lower, but the cost per ounce will be higher, representing a low single-digit increase.
The company said the move puts General Mills cereal pricing in line with that of other manufacturers.
— CAROL ANGRISANI
President and CEO, Kellogg Co.
KEY DEVELOPMENTS: Setting nutrition criteria for foods marketed to children under 12 and front-of-pack nutrition labeling on ready-to eat-cereals.
WHAT'S NEXT: Reformulating or changing the marketing plans for almost half of its products marketed to kids.
Toucan Sam might be hanging out with an older crowd now that he's under David Mackay's watch.
The tropical bird's cereal of choice, Froot Loops, is one of the many products from Kellogg Co., Battle Creek, Mich., that don't meet the company's new set of standards for marketing to kids under 12.
“We think these initiatives are the right thing to do for our customers and the right thing to do for our business,” Mackay, Kellogg's president and chief executive officer, told SN.
Kellogg is establishing internal nutrition criteria for its products this June. They set upper limits per serving on calories, trans fat, saturated fat, sodium and sugar. “Any product that does not meet that criteria will not be advertised to children under 12 or will be reformulated to meet the nutrition criteria,” Mackay, who moved to the CEO position from that of chief operating officer in August of last year, said. The criteria set an upper threshold of 200 calories per serving, 2 grams of saturated fat, labeled zero grams of trans fat, 230 milligrams of sodium and labeled 12 grams of sugar.
As a result, products like Froot Loops have until the end of 2008 to get healthy. If they can't do so without sacrificing taste, their ads will probably have to vacate Saturday morning TV programming.
“Finding the right solution for our products without adversely affecting taste is a huge challenge, with many moving parts,” Mackay said. “If we do elect to reformulate any products that don't currently meet the criteria, we won't compromise on delivering the high quality and great taste consumers love in our products.”
Kristi Bridges, mom, partner and creative director at the Woodbridge, N.J.-based ad agency Sawtooth Group, thinks Mackay is doing right by consumers. “This philosophy is one of a proactive leader and in keeping with what parents ultimately want,” she said.
Companies that are responsible in their marketing practices have a better chance of connecting to parents on a deep level, garnering long-term loyalty, she said. And it's going to have a widespread effect on the advertising industry. “More responsible marketing, especially to kids, is a trend that I expect to see continue. There is so much talk and increased awareness around childhood obesity and health and it doesn't appear to be going away any time soon.”
Close to one month after Kellogg made the announcement, 10 other food companies including Campbell Soup Co., Camden, N.J. and General Mills, Minneapolis, followed suit with similar pledges.
Although he's been at the helm since the plans were announced, Mackay told SN the entire company had a hand in this change. “As a company, we have been working on this initiative regarding marketing to children for more than two years.”
“The impact of this initiative is significant,” he said. Almost 50% of Kellogg's products currently marketed to children worldwide will need to be reformulated or will no longer be marketed to children under 12.
Kellogg is shifting into a dialog with consumers, said Laurence Knight, president of Fletcher Knight, a branding agency in Greenwich, Conn. Moms are a key part of that dialog, and Kellogg is participating by helping parents monitor what their children eat and, through advertising, what children want to eat.
“Kellogg was already doing so, as evidenced in 2007 product launches such as Special K20 Protein Water,” he said.
But turning Mom into a “brand evangelist” will be the biggest challenge going forward, Knight said. “Kellogg has 18 months to make some of its products icons like Toucan Sam for Fruit Loops have healthier personalities.”
— WENDY TOTH
President and CEO, Campbell Soup Co.
KEY DEVELOPMENTS: Distribution deal with Coca-Cola North America.
WHAT'S NEXT: Continue to reduce sodium and increase whole grains in Campbell's products.
Douglas Conant had his V8 today. And apparently he's not alone.
The president and chief executive officer of Campbell Soup Co., who is partial to pomegranate-blueberry V-Fusion, attributes the success of Campbell's best-performing business — beverages — to the vegetable juice.
You may soon notice even more consumers standing tall, thanks to an agreement Campbell's entered into last month with Coca-Cola North America and Coca-Cola Enterprises for the distribution of its single-serve beverage portfolio. Under the terms of the agreement, CCNA will have the master distribution rights for Campbell's refrigerated, immediate-consumption beverages, including V8 100% vegetable juices, V8 V-Fusion juices and V8 Splash juice drinks.
“We anticipate that the agreement will generate significant incremental volume for Campbell's refrigerated single-serve beverages,” said Conant.
Fall will also mark Campbell's introduction of soups to the two largest soup-consuming markets: Russia and China.
U.S. sales of Campbell's soups increased a sizable 10% in the third quarter of fiscal 2007 — thanks, in part, to trial and repeat purchases of reduced-sodium varieties, according to Conant.
“We continued to see higher incremental purchases than we originally anticipated,” he said.
Next month, Campbell's will introduce 12 new or reformulated low-sodium soups and two pastas. Several of the items are also members of Campbell's convenience line, including two varieties of Campbell's Soup at Hand with 25% Less Sodium; three Campbell's Healthy Request ready-to-serve soups; and four Campbell's Healthy Request soups in microwavable bowls.
Convenience and ready-to-serve Shelf Maximizer units will help retailers merchandise Campbell's soups. The units facilitate increased sales, while reducing costs for retailers, and allow store associates to easily spot holes when shelf stocks have been depleted. The two Shelf Maximizer units will continue to join the company's condensed soup Maximizers in 16,000 locations.
“This initiative has reinvigorated the soup aisle and dramatically improved the shopping experience for our consumers,” said Conant.
Thanks in part to its commitment to combat childhood obesity, Campbell's will reformulate its top two varieties of SpaghettiOs. Whole-grain pasta will also be added to two of its kids' soups, and three new condensed soups that provide a good source of fiber will soon be launched. In addition, a line of Prego Heart Smart Italian Sauces will debut next month.
Driven by Goldfish cracker and bakery sales, Campbell's Pepperidge Farm business is maintaining its momentum. In 2008 it will introduce three new varieties of Pepperidge Farm 100-Calorie servings of cookies.
Campbell's will also expand the whole-grain options at Pepperidge Farms.
“We recently introduced 100% Natural Honey Flax bread that is an excellent source of omega-3 fatty acids,” said Conant. “We also introduced whole-grain white bread, bagels and rolls, and we will soon announce more additions.”
Cause marketing will continue to be a priority for the Camden, N.J-based company. Last October, Campbell's teamed with Kroger Co. on a first-ever promotion involving limited-edition pink soup cans packaged especially for Breast Cancer Awareness month.
“We plan to reprise our pink can this fall with Kroger as well as with other retailers,” said Conant, who could not disclose specifics.
— JULIE GALLAGHER
RICHARD H. LENNY
Chairman, President and CEO, The Hershey Co.
KEY DEVELOPMENTS: Major joint ventures with established leaders in the Indian and Asian markets.
WHAT'S NEXT: The pursuit of rapid growth in global markets, to drive investment in existing and new product lines.
Richard Lenny, chairman, president and chief executive officer of the Hershey Co., has developed a sweet tooth for high-growth global markets, where he sees an opportunity created by rising consumer purchasing power and the age-old desire for indulgences such as chocolate.
Lenny, who is also serving a third term as chairman of the Grocery Manufacturers Association, is betting on what he calls “disciplined global expansion” to drive growth for Hershey.
He admits that the North American market, where the Hershey, Pa., company holds the dominant position in quality chocolate and confectionery, has reached maturity.
By disciplined global expansion, Lenny told SN, he means picking the markets that are growing most rapidly — and choosing partners there that offer the best route-to-market. In January, Hershey announced a partnership with Lotte Confectionery Co., South Korea's leading confectionery and ice cream maker, to produce products in China. This was followed in April by the announcement of a joint venture with India's Godrej Beverages and Foods Ltd., which Lenny described as “a well-known company, highly respected and admired by Indian consumers.”
“It's not just China and India,” he was quick to point out. “We see growth opportunities in Eastern Europe, in Latin America.” Products will be adapted to satisfy local tastes for each market, he added. “For example, there'll be green tea-filled Kisses in China.
“We're looking for where there's opportunities. The chocolate market in India is $400 million; it's over $7 billion in the U.S. There's room for growth.”
Hershey is planning a major new production facility in Monterrey, Mexico, in conjunction with top-quality cocoa processor Barry Callebaut of Zurich, Switzerland, which will build a major plant there as well. “The alliance goes beyond production; it goes to sharing of technology, opportunities for innovation,” Lenny said.
Callebaut and Hershey are also working together on sustainability issues for West African cocoa-growing regions through the World Cocoa Foundation. In May, Hershey appointed John C. Long to the newly created position of vice president of corporate social responsibility to oversee this and other efforts on behalf of the company. “John really understands both the commercial and social responsibility of a very strong cocoa growing region,” Lenny said.
The new capacity in Mexico, Lenny noted, is primarily to supply the rapidly growing Mexican market, where Hershey has been manufacturing for close to 40 years.
Likewise, “The only way for the Hershey Co. to be successful in China and India is to have in-country manufacturing,” he said of the joint ventures in those countries. “We don't ‘ship jobs’ there.”
The idea of food production in China may routinely raise eyebrows these days, but “food safety and quality is Job No. 1 for our company,” Lenny emphasized. “Regardless of who produces or distributes our products, or where, all will adhere to Hershey's high level of product quality and safety.”
With a commitment to global expansion, Lenny is certainly well positioned to serve GMA, since the association advocates free and open trade with developing nations.
Cal Dooley, president and CEO of GMA, described Lenny as “focused and disciplined. I've been most impressed by his leadership and commitment to the association and the industry.”
For the year ahead, Lenny said Hershey will “continue to focus on our core brands; we're going to step up new product innovation, particularly in premium and dark chocolate, which represents great growth; and then, third, disciplined global expansion.
“Winning in the marketplace is really the No. 1 priority for us,” he said. “That requires us to have superior brands, well positioned, and strong category management and retail execution capabilities — and being able to invest accordingly.”
— GEORGE ELLIS