Thursday, February 24, 2011

Bracing For Higher Costs Of Living

Over the last 12 months, the food index has risen 1.8 percent with the food at home index up 2.1 percent.  Both 12-month changes are the highest since 2009.  This is no surprise to anyone that has shopped at the grocery store in the past two weeks.

Typically, manufacturers and retailers tend to hold the line on price increases during an economic downturn, but now, because of the increased cost of cotton, wheat, corn and soybeans, price increases are inevitable on almost everything we use.

On top of food prices, the political unrest in the oil-rich Middle East will nearly ensure that we’ll see gasoline prices in the $4 to $5 range by mid-summer.

From an agricultural marketing perspective, these events are both good and bad.  Crop farmers are finally realizing good profits but are faced with a very volatile market and increased energy costs.  Livestock producers are reducing stocks, based on high input costs, and will attempt to maintain margins and profits on market prices but with reduced herds.  In terms of productive agricultural land values, a record-high $9,000/acre was just paid for corn/soybean land in Central Illinois.

For consumers, everything from food to underwear will inevitably increase in price.  Hanes has informed its retailers that they want to reserve the option to employ price increases every 90 days if necessary.  Kraft which makes Oreo Cookies, Wheat Thins and Oscar Mayer wieners, has raised prices on more than half its North American products and plans on more increases.  The Coalition Against Hunger is predicting that rising prices will drive more families to food pantries and soup kitchens.

This situation is not just limited to the United States.  Higher food and fiber costs are being felt world-wide. (Note that the initial unrest and uprising in Egypt was based on the cost and accessibility of food in that country.)

How will consumers change their purchasing behavior when faced with a higher cost of living?  We suggest two dynamics will occur:  1) Less expensive and less nutritional processed food products will increase in demand; 2) Consumers will become even more discretionary in their premium food selections.

From a marketing perspective, several changes will also occur:
  • Brands will offer products in smaller packages – from half-loaves of bread, 12 oz. packages of cereal to 4 oz. packages of cured bacon
  • Brands may have to reduce the number of SKUs (a historical first) to focus on the manufacturing efficiencies of their baseline products
  • Retailers will look to alternative sources for fresh products – including growing their own leafy produce in greenhouses or on the rooftops of their own stores
  • Premium brands will need to further justify their price and differentiate themselves from the competition

Regardless of what the future holds, it is even now more critical for food brands to stay in touch with their consumers with frequent market research that will lead to successful market planning.

Monday, February 7, 2011

2011 Super Bowl Advertising: Winners & Losers

Now that the “Title” has returned to “Town” for the Green Bay Packers, how did the Super Bowl commercials score in television’s premier event?

As mentioned in our previous Blog, we evaluate Super Bowl commercial investment from a brand perspective with the following criteria:
  • Message – have something to say
  • Right Audience – make sure that the event delivers the right prospects for your product, and in-hand, you are equipped to maximize the increased interest in your brand or product
  • Right Budget – can you maximize the increased brand awareness and extend it through the marketing year?
  • Strong Creative – it must compete creatively with other advertisers, entertain as well as getting a strong message across
  • Has Legs – must have the ability to become a major positioning for your brand beyond Sunday’s broadcast

Here are our top picks from Sunday’s big event:

1.  CHRYSLER (Wieden & Kennedy, Portland OR).  Though this 2-minute spot won’t win the popularity contest polls, it was the strongest branding spot of the entire event.  The “Imported from Detroit” tagline, the use of Eminem and his 8-Mile soundtrack provided messaging that is right for America at the right time.  As we come out of the bad economy, most Americans are more inclined to identify with Detroit than any other city.  Chrysler is mapping out a brand territory based on the basic values of Motor City that can be a tremendous platform for product advertising – including the Chrysler 200 – “A car that you don’t have to own to be proud of.”

2.  BEST BUY (CPB, Boulder, CO).  This commercial is good not because everyone is either an Ozzy or Justin Bieber fan, but because it had a strong message – the introduction of the Best Buy’s Buy Back Program.  Even Ozzy Osbourne now has the assurance that his investment in current technology won’t be wasted as technology itself moves forward.  4G, 5G, 6G…10G – Best Buy has you covered.

3.  MOTOROLA (Anomaly, New York, NY).  Pointing out that Apple has now become “The Establishment”, this spot for the Xoom tablet took the brand equity of the “1984” Apple spot and truly contemporized it.  The ad not only gets it competitive statement across, but shows off the product benefits through the story line.

4.  BRIDGESTONE (Richards Group, Dallas, TX).  Unfortunately this spot aired too late in the game, but could be the best of the bunch from the Dallas Ad Agency.  “Carma” featured a life-saving gesture that is later returned by a beaver.  We’ll see more of this spot in sports programming throughout the year.

5.  DORITOS (Consumer-Generated).  The consumer creative competition for Doritos advertising continues to work.  Best of the bunch – “The Best Part” where the creepy coworker goes after the Doritos cheese seasoning on his fellow employee’s fingers – those chips have to be good!

Honorable Mentions
GROUPON – As a late entry into the Super Bowl, Groupon assisted their brand awareness through Timothy Hutton setting us up to promote Thai food discount coupons.  The spot got everyone’s attention.

VOLKSWAGON – The Mini-Darth Vader was cute and memorable, but will anyone remember that the spot is advertising the VW Passat?

CAREERBUILDER – Maintaining the “I Work With Apes” theme, the spot did a good job of targeting those viewers that are frustrated with their current job – a proven theme.

PEPSI MAX – Though the consumer-generated format seemed to work better for Doritos, it did produce a stable of good commercials that will continue to get exposure for Pepsi Max in the next few months – a good creative launch for the brand’s national campaign.