It keeps getting sweeter !!!

Hershey's one of the leading chocolate and confectionery manufacturer in the NA and across the world has got sweeter by recording a very robust growth in sales and most importantly in their Earnings

Hershey Co.'s first-quarter earnings doubled as the maker of Kisses and Reese's Peanut Butter Cups continued to profit from belt-tightening and price hikes, though sales volumes also climbed.


Results handily topped analysts' expectations and the company boosted its 2010 forecast. It now expects double-digit profit growth and a sales increase of at least 6%, compared with prior view of up-to 8% earnings growth and a sales gain of 3% to 5%.

The chocolate maker also announced plans for an ad-spending boost that will be 10 percentage points more than its previous forecasts, putting this year's growth at 35% to 40%.

They will continue to look at inorganic growth across the world, after having shown interest (and in some senese lost) in acquiring Cadbury and Wrigleys previously.

Majority FDI in Multi Channel Retailer possible

This will come as a welcome move for the international Retailers who want to foray into India.

Government may relax the FDI in Retail

The commerce and industry ministry is working on a concept note to allow up to 51 per cent FDI in multi-brand retail other than primary goods (foods, groceries and vegetables), but with some stiff riders.

What I like about this approach is that the Government is planning to use this as a means to their end of inclusive growth and that is a good plan. FDI which will flow into the sector can surely create a good logistics infastructure which is a key hurdle to India's growth. More so it can help create jobs and give opportunites to rural India too. Some key ideas which I surely find promising are:

The ministry is also keen to permit FDI in retail of foodgrain as well as other essential commodities to create a parallel network to the public distribution system, which has become notorious for its leakages.

The core of the plan is to allow FDI in retail, provided the retail stores are located in cities with a minimum population of one million. The move aims to protect vendors in small cities.


The ministry may also suggest minimum capitalisation norms for companies investing in retail, in addition to a minimum built-up area rule for their retail outlets.

A few days back the Government had given a jolt to the International retailer houses and their Indian partners. On that backdrop this is a welcome move. Though this is just a concept paper open for debate, this act itself is encouraging. The UPA government needs to use capitalism to get inclusive growth rather than leaning towards the left.

Hoping to see the international retailers in India soon and helping India grow rather than profiteering alone.

Differentiate - More so in Recession !!!!

Brands as simply defined are "Percieved conceptions in the mind of the consumer"

Now in order to create or further fortify these percieved conceptions one needs to nullify poinst of parity with the competition and more importantly create points of differentiation in the mind of the consumer.

Some of the oft held thoughts on the Brand perceptions have been:

1. Brands signify better quality (Hence adverts on "New and Improved" and "Better")
2. Brand Loyalty is price inelastic (I can charge higher because my Brand is percieved upscale and I have better quality or vice versa)
3. All Brand rules (like above) will be back in vogue once the recession ends

However a very insightful study conducted by IMD business school has revealed some great results. Here is the study in its full and a few notable thoughts given below:

It’s not doom and gloom for all companies, of course. Value retailers and discounters such as Wal-Mart are one segment of companies that have been performing well over the past 18 months.


If anything, the crisis has accelerated a shift in the demographics of the shoppers at these stores. While in the early days mostly low or middle-income customers shopped there, the Wal-Marts, ALDIs and Lidls of this world are increasingly attracting high-income consumers too.

Our first insight was not surprising but informative nevertheless. Habitual shoppers value brands significantly more than experimental shoppers. In other words, for a significant segment of the population, brands are a convenient mechanism to support habitual shopping.


This is in principle good news for an established brand franchise. But it can easily turn into bad news if consumers, due to personal economic circumstances, are forced into choosing a different and less expensive brand.

Once consumers are familiar with such a less expensive brand, it will be as effective in supporting habitual shopping as the original, more expensive, brand. Thus there is little incentive for habitual shoppers to switch back to the original brand once economic conditions improve.

Our second finding was outright shocking. It is generally argued that strong brands signal quality. Yet we found that consumers who place a high value on quality, valued their favorite brands no higher than consumers who are satisfied with “good enough”.

Hence brands in the FMCG realm do not serve as signals of quality. Consumers who have abandoned national brands for economic reasons will in all likelihood see no reason to return to these brands because “they stand for quality”. They do not stand for quality in consumers’ minds. Our final insight underscores the importance of differentiation. Consumers who perceive there to be a difference between brands also value their favorite brands higher than consumers who perceive little difference among them.


This is perhaps not a very surprising finding, but it does offer tangible guidance for brand managers. It reinforces the old mantra “Differentiate! Differentiate! Differentiate!”

The Great "Guru" CK Prahalad - May your soul RIP

As one of the greatest "guru" in the arena of Management Thinking and Theories passes away here is the link to one of his oft quoted theories which has benefited many a CPG companies in winning in the developing markets.

Here it is in in its entirety and absolutely worth a read

Digital Marketing - New Era for CPG Companies

While I compile my post on the use of social networking and digital marketing by the CPG companies worldwide, here is an interesting article on the digital marketing

Here’s one recent example of the opportunities presented by this new era: Adding a “become a fan” of your brand option to online advertising drives signficiant additional purchase intent. That according to a new study by allrecipes.com and Psychster, which ranked how users responded to various forms on online advertising.


Pretty simple concept: Give consumers a reason to interact and form a relationship with your brand (in this case through a “become a fan” option) and they are much more likely to back that up with an actual purchase.

Free Samples? CPG riding on USPS "test"

United States Postal Services "USPS" is trying to battle competition and recession with trying to innovate into new business services and models. In the Indian context I have always believed that Indian Postal Service has a very large untapped potential because of the amazing reach that they have. Let us see if they can also innovate at "Bottom of the Pyramid" << cannot but regret the death of one of the finest thinkers of our times CK Prahalad >>

Here is what USPS is doing:

Free samples of CPG products, including candy and snacks, will be delivered direct to homes through a test program by the U.S. Postal Service (USPS) early next month.


Sample boxes will contain an assortment of 10 to 11 products from a range of CPG companies, it says. It will be distributed by letter carriers on a national, but limited basis in May, and in larger quantities to consumers in Charlotte, NC, and Pittsburgh, PA, the USPS says.

According to Robert Bernstock, president of mailing and shipping services, the product samples will be traced to determine whether sampling converts to sales.

Patricia Licata, senior public relations representative, says CPG companies will not be charged for their test participation, but will have to pay in the future.

HUL and P&G - battle heats up

As noted previously HUL and P&G had the battle lines drawn the battle now heats up even further and this competition will be good for the consumer

Here is a take

This heightened brand skirmish is a signal Unilever and P&G’s joust may have come to the knockout stage. For some time now, media attention has been focussed on a sideshow: a legal battle between HUL and P&G playing out in Chennai and Kolkata. Whatever be their eventual outcome, much of this shadow boxing may remain just a mere footnote in P&G’s latest battle with Unilever. The real story is about strategic intent; and more importantly, about capabilities to compete aggressively in emerging markets like India.


For ten long years, under AG Lafley’s leadership, P&G has quietly reworked its globalisation game plan. Today, it is perhaps much better prepared to win in emerging markets. Soon after taking over in July last year, the new CEO Bob McDonald articulated the company’s new purpose: Focus on winning consumers in emerging markets. “We are serving 3.5 billion people today I am confident we can reach at least another one billion or more in the decade ahead,” McDonald said. “If, over time, we increase per capita consumption [of P&G products] in both China and India to the rate we see in Mexico, it would generate an incremental USD 40 billion in annual sales,” he told the Financial Times.

CPG companies on Google?

CPG companies advertising on Google - Now I have not seen those a lot but then numbers cannot be wrong and I always ignore the Google Adsense advertisements anyways.

Higher spending by clients in some categories helped buoy Google's display ad business during the first three months of 2010, executives said today.


Large entertainment and packaged goods companies were among those to boost their spending on Google's ad network, CFO Patrick Pichette said during the company's quarterly earnings call. "Large advertisers have come back," he said.

Nestle - getting Nutritious!!

Here is a good interview with Nestle India’s new CMD, Antonio Helio Waszyk. His vision on science based nutrition is worth a look.

Here is a quick snap (though the entire interview is worth a read):

Do you see the Kraft-Cadbury deal as a threat? How will you counter them?


No. I do not see it as a threat. It doesn't change my strategy. Our major strength is our understanding of India. Besides, Nestlé's knowledge of good food and the ability to provide science-based nutrition in an affordable manner is unmatched. You just have to wait and see.

Mithunda to be the new brand ambassador for Coke?

Well... Not actually (at least not yet). But then who knows?

Mithunda is famous for his unforgettable role of Mr. Krishnan Iyer MA nariyal paaniwala in Agneepath. And this very role of him can earn him the multicrore package to be the brand ambassador for Coke !!!

Because Coke has now decided to get into the "Naariyal Paani" or Coconut Water business !!!

Coconut water is making a splash in the US beverage market, promoted by manufacturers and fans as the healthy way to hydrate.


"It's an exciting category right now," says Arthur Gallego, spokesman for Vita Coco, which recently got an endorsement from none other than the pop singer Madonna.

Coconut water - the liquid found in green, i.e. young, coconuts - has been popular in tropical countries ever since someone figured out how to crack that nut.

And now that Nimboo Pani is sold in India by beverages company you never know when this coconut of a coke will come to India too (and give the real coconuts a run for their money) There is also a chance that even before that happens Vijay Amritraj will bottle the coconut water himself and then use the shell to sell ice cream at wimbeldon !!!

Coke and its Advertisements

Professor Prashant Kale (ISB, Univ of Michigan - Corporate Strategy) very famously said in one of our classes that "What is Coke? Just a brand !!!". And obviously he was right. That brand building takes a lot of effort though and Coke is a master at the same. Hence no doubt they top the list in the Interbrand Ranking of the brands.

Their latest advertisement for Vitamin water is making the waves for the wrong reasons though. In the advertisement Coke "prescribes" about how to call in "sick" and some people just cant take the joke !!!

The wording on Glaceau Vitamin Water - a brand owned by the soft drinks giant - says: "If you've had to use sick days because you've actually been sick, then you're seriously missing out my friend.


"The trick is to stay perky and use sick days to just, erm, not go in."

But the ad has angered a small business group - which has claimed the label is "irresponsible and ill-timed".

However on the other hand Coke, Pepsi and Dr. Pepper have got together (now that's a new one) and created an ad campaign against obesity amongst US teens (thanks to Mrs Obama) and are talking about taking the calories out of the schools !!! See the ad to believe it.



"Rivals" TV Ad from American Beverage Association on Vimeo.

Curious story of Kraft , Cadbury and Sania

While in UK the Commons are planning to enact a law, currently known popularly as the "Cadbury Law" which will enable the Government to intervene in international takeovers, back home Cadbury has decided to dump Sania as its brand ambassador (predominantly for Bournvita)

Interesting how public pressure and media can make a difference !!!! The publicly critisized (in UK) hostile takeover of Cadbury by Kraft has led the so called liberal government to now adopt what I think is a more left winged approach to a business problem. The protectionist view of governments do have some merit but this trend internationally does not bode well for business.

The final weeks of a general election campaign are always strewn with populist policies with dubious practical sense, and the countdown to Britain's national poll on May 6 is no exception. The latest policy to emerge, courtesy of the Labour Party, is the so-called Cadbury Law that will tie up takeovers in knots by greatly increasing the voting threshold needed, and limit the participation of funds and other short term investors.

On the other hand Sania's decision to marry Shohaib is another hush hush reason for her losing the coveted brand.

Cadbury Bournvita, the brand that Sania endorses, has decided not to renew its contract with the tennis player. “Our contract with Sania Mirza was signed for a period of one year that expired last month and we do not intend to renew the contract,” a Cadbury India spokesman told Economic Times. He refused to cite any reason.


“Unfortunately, Sania has not been able to play consistently for the last 16 months which has resulted in a drop in rankings,” Andreas Gellner, MD Adidas India, which signed a multiple-year endorsement contract with the tennis player in 2008 told ET.

Agreeing with Gellner, Manish Porwal, managing director of marketing solutions firm Alchemist told ET, “The negative press surrounding her marriage has definitely depleted her brand value and image with the advertisers currently."

Cash and Carry back channels in trouble?

The Indian Government has put restrictions on the amount of goods that the Cash and Carry businesses can sell to their sister concerns.

This will prove to be a road block for the plans of many international firms like Wal Mart and Carrefour who were planning to enter the Indian Retail space using this as a backdoor channel.

Cola's answer to Baba Ramdev

The beverages category is getting fitter by the day.

Days after Coke announced that it will be strengthening their Fruit based drinks, Pepsi has now announced a Joint Venture with Tatas

Tea and PepsiCo took the first step to form a joint venture on Friday by signing a preliminary agreement for a new non-carbonated beverage entity. The new company will be exclusive for the Indian market, said Sanjeev Chadha, chairman of cola and snacks foods multinational PepsiCo.

By this Pepsi will turn a new page and Tata's will try to strengthen their foothold in this category

Baba Ramdev has always been a vocal supporter to health drinks and his opposition to Colas has been well known. Now that he is entering Politics I am sure he will have something similar on his political agenda. This post is not to discuss the political or non political travails of Baba Ramdev.

However not so long ago both Coke and Pepsi have realized that if they want to be popular drink choice of the consumer they need to go beyond colas and thus both the companies have in the past started adding healthy options to their portfolios.

Recently Pepsi announced that it has set health targets across its product ranges

The plan is set out in the company's inaugural Health Report. It includes a target for 50% of PepsiCo's UK savoury snack range either to be baked or include ‘positive nutrition', such as fruit and vegetables, wholegrain or fibre, by 2015. Currently only 10% of the company's savoury products fall into these categories.


Also by 2015, PepsiCo UK will place a ‘cap' of 160 calories on all single-serve savoury snacks that lack positive nutrition, and is aiming for 65% of its carbonated soft-drinks sales to be accounted for by sugar-free variants.

Innovation on Packaging

What do all the following brands have in common?

MGD
Bacardi
Starbucks Dawn
Kraft
Fresh
Dove
Head and Shoulders

All these brands are using the Pressure sensitive labelling for their brands.

I was doing some googling on what innovations are happening in the Packaging world with reference to one of my previous posts "Consumer Packaged Goods face a packaging issue"

I came across this site which is worth a visit

http://www.enhanceyourbrand.com/

P&G Board into your homes !!!

After Adverts, Blogs, Tweets, etc the CPG industry is literally walking the extra mile and reaching out to the customers directly.

P&G board members will be visiting the homes of some of their consumers to get a better handle on their needs and assess their own brands

Kenneth Chenault, chief executive officer & chairman of American Express and Rajat Gupta, former managing director of McKinsey & Company, both on the P&G board, would visit India for a day, following the company’s global board meet in Singapore.


Both senior executives will be visiting the houses of some P&G consumers in Mumbai. The meets would be coordinated by the local P&G team, a person familiar with the development said.

Interesting interview with Mr. Banga from Unilever

Mr.Vindi Banga from Unilever has appeared in the Brand Equity interview for ET today and the interview in its entirety is an interesting read.

A snippet which is what I believed too:

The first thing that struck Vindi Banga in 2004 when he moved out of the Hindustan in Unilever, is that unlike in India, the FMCG behemoth is considered a ho-hum , stodgy and old on its home turf. Not to mention persistent headlines about the company being the most likely takeover target; what with the dismal state of its share prices and perceptions that it was failing to find its feet.




“When I joined Hindustan Lever, it was an iconic company. It is not seen as iconic in the rest of the world. That mattered to me,” he says.

Consumer Packaged Goods face a packaging issue !!!

FMCG (Fast Moving Consumer Goods) is known as CPG (Consumer Packaged Goods) worldwide. The name comes from the basic principle that these goods (Home Care, Personal Care and Foods & Beverages etc) are packaged for final consumption.

Today Economic Times has reported that this industry is facing the inflationary pressures on the Packaging materials:

A sharp surge in packaging costs is tormenting consumer product marketers, squeezing their margins and forcing them to consider increasing prices of processed food and some other products in a cut-throat market, company sources say. 

This will also force them to innovate a bit more on this front.
 

Companies are also exploring innovation in packaging. Shyam Sunder, senior design manager at IDE (Innovation Design Engineering) division of Tata ELXSI, said many FMCG companies now demand for smarter and cost-efficient packaging solutions

Will we now see better deals on larger packs or better pricing on bundles or will the companies explore the option of going "loose"? Time will tell......

Let us wait and watch.

B2B Retailing - New Consumer group !!

Business to Business Retailing for smalle and medium enterprises has been a neglected channel barring some categories like stationery.

However news that "FMCG cos tie up with barbers, dhabas as unique point of sales" is very interesting and encouraging. These tie ups can be symbiotic for them.

FMCG marketers have found a new league of extraordinary consumers: Kanwariyas in Bihar, barbers of Meerut, Mumbai’s dabbawallas, devotees at Kumbh Mela, highway dhaba owners and resident welfare associations.

Companies such as Emami, Godrej, Dabur, PepsiCo and Perfetti Van Melle are chasing these unlikely customer groups to keep demand ticking at a time when prices of grocery items like soaps, shampoos, hair oils and beverages inch up. And it’s working.

Convinience Shopping helping the Pre cut Vegetables Category

A friend of mine had started his own business 3 years back where he was supplying cut and cleaned vegetables to consumers (Ready to cook). He had even added the spices and masala that was required to prepare the dish to his offerings. However his business idea did not take off successfully for want of correct consumer research and lack of coordination in implementation. The consumers too at that time did not seem very enthused aboout this idea. He finally shut it down !!!

However good news for him now. The news is that "Pre-cut vegetables, fruits bring profit to retailers"

Pre-cut vegetables and fruits are emerging as a strong growth category in the organised retail market. With singles and working couples being cramped on time, many reach out to the neatly packaged trays of evenly cut vegetables for the night’s dinner.


This category has been finding more significant space on shelves now — at Aditya Birla’s More stores, cut fruits and vegetables account for 10% of the fresh merchandise. “Cut fruits and vegetables at our stores are priced two to three times more than the whole fruits and vegetables, but find demand from working women and home makers alike,” says Thomas Varghese, CEO of Aditya Birla Retail.

However it is not always a success story

But there are some who aren’t entirely convinced. Heritage Foods, for instance, has stopped offering cut fresh produce altogether. “For every five packs that are sold, we found that we were throwing away 10, since the shelf-life is shorter in this category,” says S Jagdish, COO (retail), Heritage Foods

Monkeys Explain why Retailing works?

While paleontologists across the world are busy finding the missing link where apes became apemen and finally the human kind dawned on this earth, elsewhere the Darwin theory is manifesting itself to show why Retailing works

Retailing has primarily been about offering variety and choice to customers. The Retailers and the CPG industry thrives on this basic need of shop keeping. The concept of Malls also thrived because of this need where competitive players opened shops next to each other in order to give choice to the customers and thereby increase the overall footfalls.


Now interestingly this theory has been proven to be right by our most ancient forefathers – the monkeys !!!

Italian scientists say they've found monkeys, given a choice of their favorite food or choosing from a variety of options, will opt for variety.


Duke University scientists led by Professor Dan Ariely said the choices made by the captive-bred capuchin monkeys in Italy's Institute of Cognitive Sciences and Technologies seem to show some innate desire to seek variety.

In a series of experiments Ariely conducted with his Italian colleagues in Rome, eight monkeys were taught they could use different tokens to buy one piece of their most-preferred food, or to buy one piece from an assortment of foods that included the most-preferred food.

And we have also followed their footsteps

The findings are expected to shed light on human consumer behavior, since earlier work on human variety-seeking found people eat 43 percent more M&M candies when there are 10 colors in a bowl instead of just seven.

So Retailers worldwide have nothing to worry as long as we all behave like monkeys !!

Kya aapke Toothpaste me Namak hai?

The fight for your teeth is heating up in India !!!

Competing with the stalwarts like Colgate, Close Up and Pepsodent will be the three new launches this year

This segment has been heating up with Colgate having nearly 50% of the market. HUL with its two brands Pepsodent and Close up have nearly 28% of the share.

Crest has been a good brand in some of the international markets for P&G and its launch in India will be a good rake up in the competition for our teeth !!!

The company plans to launch its global toothpaste brand Crest at an aggressive price point late this year, said two sources familiar with the development, in a bid to take a chunk of a Rs 5,000 crore plus business segment.

Company CEO Bob McDonald has earlier said he intends to add a billion new customers from countries like India and China to the company’s existing customer base of 5 billion.

Future Brand has launched SACH (Sachin Tendulkar) as a private label being sold in Big Bazaar.

Recently, GlaxoSmithKline Consumer forayed into the sector by launching Sensodyne (though it was available as an import earlier), a toothpaste brand for sensitive teeth.



Colgate, Close Up, Pepsodent, Babool, Vico and now CREST (biggest Oral Care Brand in the US) !!!! May the best brand win.