• Budweiser's Wise Strategy

    Things haven't been going well for the Budweiser brand in the United States. Demand for the iconic beer has been falling every year for the past 24 years as part of a flat domestic beer category. After a hostile takeover in 2008, the brand is no longer based in the U.S. and the company has set its sights on becoming the top brand everywhere else in the world.

    With demand for non-craft beer in the U.S. falling every year, any savvy marketer would naturally seek out new markets for growth, and Budweiser has done just this. The big problem with penetrating international markets is appealing to local tastes which can vary widely from region to region. And people are serious enough about beer in some places to the point where it is a source of local, national, or regional pride. Our growing craft beer segment here in the U.S. is further indicative that the need for variety in taste and alcohol content is indeed global.

    Will Budweiser unseat some popular beers in areas around the world, or will a beer that rates a 56 on website Beer Advocate where a 70 signfies "poor", fail to win over enough consumers to justify an expensive global strategy? One thing is for certain. Budweiser's days as America's top beer are well behind it.

     

  • Desheeting the Consumer

    In consumer goods manufacturing there is an odious practice known as "downsizing" whereby the brand clandestinely reduces the amount of product in the container without announcement or a noticeable change in packaging. Misleading? Certainly. Illegal? No. This has become a very common practice with industry leaders like Proctor & Gamble and SC Johnson, but now purveyors of toilet tissue are getting into the act. The downsizing technique employed is affectionately known as "desheeting".

    Kimberly-Clark recently rolled out a new Kleenex tissue that claims to be "15% bulkier". This may be true, but each box has13% fewer sheets, a fact that is not readily disclosed. Georgia Pacific and Proctor & Gamble have been desheeting for years, so there is competitive pressure to engage in this sketchy behavior. While not good for consumers, this practice reflects an overall retail environment that will not tolerate price increases. Consumers are simply too strapped. When a price increase is not an option, the only other alternative is to somehow reduce costs. Desheeting reduces costs.

    Will consumers revolt? Not likely, especially if all the brands are doing it. But the fact of the matter is that few consumers will notice the change, and the "15% bulkier" claim serves to further confuse the buyer. Perhaps the FTC or some watchdog not-for-profit consumer group will object on the grounds of misleading the consumer. More likely than not, nothing will happen and for consumers it's still caveat emptor or let the buyer beware.

  • Play Ball Already

    You gotta love the Wall Street Journal which, instead of making assumptions or referencing some obscure study, actually made the effort to time baseball games to determine how much action there really is on average as opposed to time spent just standing around. It's good to have statistics instead of inferences in the world of business analysis. That being said, the latest study involved analyzing three games with an average duration of 2 hours and 58 minutes and found that there is only 17 minutes and 58 seconds of actual baseball action. This leaves about 2 hours 39 minutes and 58 seconds of standing, jogging to and from the dugout, scratching, staring at the catcher, spitting, chewing, and other assorted anaerobic activities. No wonder the perception among many is that baseball is boring.

    It turns out that this assertion is largely true, but this lazy pace actually appeals to different types of sports fans, especially those that go to games for social reasons or to simply enjoy a day outdoors. Europeans will haughtily assert that baseball is dull, while most Americans will complain that soccer doesn't have enough scoring and is therefore quite boring despite the continuous nature of the play. Soccer games run only about 2 hours. As a former player of baseball, and a fan of 38 years, I must admit that the inaction is beginning to wear on me. The game is getting too slow, the concessions are getting too expensive, and day games are getting too hot to attend. I, and many others, am losing interest. NFL football, on the other hand, continues to grow and grow despite the fact that there is about half as much action in an average NFL game versus baseball. Since football games run longer than baseball games, it is true that football would be the sport with the least amount of action...by a lot!

    Perception is indeed reality among consumers. Perhaps the "smashmouth" nature of football makes the sport appear to have more action than baseball, but the reality after studying the subject is very different. All of this illustrates how important it is for marketers to study consumer behavior and attitudes rather than make broad based assumptions about why they do what they do. I'm also getting a bit tired of going to football games. NFL games run well over 3 hours and feature only about 10 minutes of action. For half of the season it is too hot to sit in the sun all day, and the other half it is too cold. Luckily I have upgraded my equipment at home so that I can consume sport in the privacy of my own abode and eventually phase out the increasingly unfulfilling act of attending live sporting events. Making rule changes to the core product in order to speed up both games would do much to improve the product. For those of you who want to kill 6 hours going to and from a game, more power to you. I must be gettin' old!

    -DDS

  • Sears Gets Fancy

    Whenever I'm in the market for a $33,000 Rolex watch, a $4,400 Chanel handbag, $500 La Victoire boots, or $445 Balenciaga sunglasses, I always know just where to go...Sears.com. Yep. In the company's recent efforts to revamp its image and become more hip, marketers have decided to offer prestige items on the website. Of course these products are sold by third-party vendors and not by the manufacturers themselves because these high end brands would never want to be associated with a low end retailer such as Sears. To do so would be very poor, ill advised brand strategy. Prestige-positioned and prestige-priced items are clearly best sold through prestige retail outlets. So what gives with Sears?

    Clearly the venerable retailer, like RadioShack, is struggling to maintain relevance in today's competitive retail environment. It has smartly retreated back to its core competency, selling appliances, and has implemented a pretty good advertising campaign on television of late, so the struggling retailer has some pretty good momentum. But Rolex? Really? Will high income consumers really use Sears as their retail outlet for prestige items? Is Sears this desperate or just naive?

    You decide. At least the offerings, for now, are limited to Sears.com. I think the company would be better off sticking with its core base and then expanding out from the appliance category, experimenting with what works and what doesn't. It doesn't have to be all things to all people. It can't. Those days have long been through. Sears should close underperforming stores and continue the good advertising. It should leave the fancy stuff to the fancy retailers.

    -DDS

  • RadioShack Sans Radios

    RadioShack? Is that place still around? And if so, why?

    Yes, it's still around, but as you might suspect, the venerable former seller of anything "radio" and current seller of seemingly random wires and adaptors is struggling to maintain cultural relevance. Most recently, the 4,000 plus store chain founded in 1919 placed a bet on mobile phones. Essentially RadioShack wanted to be the go-to place for everything mobile, but the company has found that strategy difficult to implement. It turns out that having an extremely knowledgable sales team isn't enough. The industry for mobile devices is simply too hypercompetitive.

    Yet, consumer tastes continue to shift, and many well-known brands are struggling to compete against smaller, more nimble competitors at all levels of the marketing world. Think JC Penney's, Sears, Yahoo, My Space, etc. And time is running out for many of these big brands including RadioShack. The company lost $139 million last year and is actively seeking private equity investment partners to ramp up for the holiday season. But what will RadioShack sell exactly? Radios? And is it time for a major re-branding or perhaps even a name change? Let's see what happens.

    -DDS

  • Blackberry Getting Squished

    So much for market leadership. Like Yahoo, My Space, Betamax, and many others, Blackberry has the dubious honor of having been a healthy market leader at one time, only to morph into a struggling shell of its former self. Market conditions can change rapidly, especially in the technology space where the product life cycle is often less than a year. Many organizations have trouble keeping up with the breakneck pace, and they can be "yesterday's news" very quickly. Which leads us to Blackberry.

    Blackberry botched just about everything that could have been botched. It failed to keep up with consumer tastes. It failed to innovate. It failed to react to competitors. Its new products were not on time. And the finished product did not meet customer expectations. Yuck. Fire everyone! As a result, retailers have cut the price from an average of $200 a unit down to $75 a unit, which is probably just about at cost. This means that retailers will bear the brunt of Blackberry's failure to launch temporarily, and will likely be much more reticent to accept Blackberry terms in the future. This means the end for Blackberry as we know it, at least here in the U.S.

    Look for a larger firm to buy Blackberry so that it can access its customers, and not because there is any real value in the phones themselves. The market has moved on. The competition has moved on. And I'm stuck with my Blackberry.

    DDS

     

  • Demand for Organic Still Exceeds Supply

    Unless you've been living under a rock or in a developing nation for the past several years, you know that certified organic products, especially those that carry the highly recognizable green and white USDA seal, are a fast growing consumer category. Consumer goods that feature the seal are viewed by many as healthier for both people and the natural environment since organic-compliant agricultural and manufacturing processes are monitored by the USDA. Products that are comprised of 95% or higher certified organic ingredients can use the seal on packaging and marketing materials, and this has been a tremendous competitive advantage and point of differentiation for several years.

    One problem with high consumer demand, however, is that the supply chain might not be able to keep up with the pace of demand. Organic ingredients are complicated, and it takes about three years to convert a field from traditional to organic. Simply put, there aren't enough certified organic ingredients available in the U.S. to meet the unrelenting demand from finished goods manufacturers. For one reason or another, ranchers and farmers are reticent to change what they are currently doing despite the obvious opportunities that this category affords. Laziness, cluelessness, skepticism, fear of change, government subsidies, and an unhealthy contempt for "hippies" and the organic process itself have all been identified as reasons here. By now, I would have expected a major shift from traditional agriculture to organic agriculture, but less than five percent of fields and ranches in the U.S. are certified organic at this time.

    The result is that manufacturers must source ingredients from other countries, which calls into question the "environmental-friendliness" aspect of organic agriculture. Is shipping an organic kiwi from New Zealand good for the environment? Probably not. To compound the problem, organic regulations and certifications differ by country, and so ingredients from far flung places might be more difficuly to confirm as legitimately organic. The answer is simple. The organic industry needs to pool its resources and fund an initiative to pay U.S. farmers to convert their fields and ranches, since it has been confirmed over the past 20 years that these folks won't do so on their own. Perhaps a cash incentive and a long term supplier agreement might change some minds and make this whole organic thing a lot more credible.

    DDS 

  • Mexico Embraces Free Market

    Most marketing students do not have an adequate understanding of how free the market really is here in the United States. It may seem like we have a lot of regulations that constrain what both businesses and consumers can and cannot do, but compared with most other countries, it's relatively easy to bring a new product to market here. One such country is Mexico, a land with a big appetitie for cerveza, but will only allow certain brewers to have access.

    Mexico's top brewers (a virtual duopoly dominated by Anheuser-Busch Inbev's Grupo Modelo and Heineken's Cerveceria Cuauhtemoc Moctezuma) have agreed under pressure to change the exclusivity rules that have given them market leadership while limiting consumer choice for many years. Modelo brands alone currently account for almost 60% of the whole 1.8 billion gallon industry in Mexico. This new development means that corner stores, bars, and eateries will be allowed to serve beer not brewed by these market giants allowing more market access to craft brewers and other competitors. And consumers love choice!

    In the larger scheme of things, a more level playing field may make Mexico seem more attractive to other companies in other industries, and perhaps this could be the beginning of a revolution in product choice for the people of this huge country across a variety of product categories. More open markets will bring more investment and an increase in job opportunities as well. Viva Mexico!

  • Tide Responds To Pod Problem

    Those wondeful little laundry detergent pods pioneered by Proctor & Gamble's Tide brand in 2012 represent one of the most successful brand extensions of the past several years. Tide Pods are expensive, but customers of this premium brand can well afford the extra dough. Not only is the product easier to use than other forms of laundry detergent, but the pods also look pretty darn cool. The packaging resembles a candy jar, and the signature bright colors that have long represented the brand, are featured on the pods themselves. Very clever stuff. It almost looks good enough to eat.

    But therein lies the problem. Last year, slightly over 6,000 young children mistook the colorful nuggets for candy, and wound up in poison control centers and emergency rooms across the country. That doesn't sound like a crisis considering the total number of children here in the U.S., but in the first half of this year alone almost 5,000 kids have been treated. This is a disturbing upward trend, and one that should not be ignored by brand managers concerned with social responsibility and image management.

    In response to some of the negative publicity generated by this development, Tide has announced that it will replace the candy jar packaging with plastic tubes and bags that are completely opaque, and will make the containers more child proof. This, the company says, should deter the accidental ingestion that continues to cause "excessive vomiting, wheezing, and gasping" among less discerning young children. The pods themselves will remain unchanged and will still look delicious, however. Overall this is a good PR move, and I would expect nothing less from the market leader in premium detergents. Well done.

    DDS

  • Zero Waste For MillerCoors

    In the world of sustainability and corporate social responsibility, achieving "zero waste" has been, up until now, an impossible task. It simply was not technologically possible to recycle, reuse, recondition, and compost absolutely everything. Times have changed, and this is good news for "green marketers" who endeavor to position brands as environmentally/socially responsible.

    MillerCoors, a brewery that opened its doors in 1873, has quietly become the largest brewery in the United States at 9 million square feet producing 346 million gallons of beer. Samual Adams, the nation's largest craft brewer, makes about 2 million gallons annually by comparison. That's a lot of beer and a lot of waste. Over a period of several years, the company has made sweeping changes to its operations, and has now achieved zero waste. Tons of paper, glass, plastics, and metals are now trucked to recycling facilities, and copious amounts of spent hops and grain are used to feed cattle. An orchestra of choppers, compactors, and balers, supported by a litany of colored cans, combine to insure that all waste is returned to either the technological cycle (to be reconditioned, recycled or reused) or the biological cycle (to be composted). Nothing reaches the landfill. New Belgium Brewery, makers of Fat Tire, has already achieved this, but the company is much, much smaller than MillerCoors and so its accomplishments in the area of sustainability are less remarkable.

    Why is this important to marketers? Zero waste is the "holy grail" of green business, and in general marketers are advised not to exaggerate their environmental and social initiatives in this age of social media. Word travels fast, and one has to "walk the talk", so now MillerCoors can play "the green card". So move over New Belgium Brewery. There might be a company larger and more sustainable than thou.

  • Schools Clean Up Nutritional Act

    Score one more point against the obesity epidemic here in the U.S.. Not only are PE classes back, but equally important to maintaining an optimal, healthy weight are the nutritional options found on campuses. Kids, like most consumers, will eat what's available to them, and if mom doesn't pack an adequate supply of food for the day, a hungry child will snack. If these snacks aren't nutritious, the long term effect of this behavior tends to result in a much fatter kid. It has gotten so bad that the government has been forced to step in.

    Enter the Agriculture Department, who in its' infinite wisdom has started telling public schools nationwide what sorts of snacks they can sell. Now it will be 100% fruit juice, granola bars and fruit cups instead of Cokes, Twinkies and Funyons. The net effect over time should result in a thinner, healthier student body as well as become a boon for marketers of these "lesser evil" snackfoods as the requirements move from K-5 (this first tier of schools have almost completely complied with the pending regulations already) to middle school, and finally high school. By the school year after this one, the campus landscape will have changed dramatically across the board.

    And why stop there? Anything that can be done to public K-12 schools may also trickle up to the community colleges and state universities. Think of the volumes that these purveyors of healthier treats can attain with this channel of distribution. Of course, the Pepsico's and Frito Lay's of the world are none too happy with these developments. Consumers, they say, should be able to make their own choices. I agree, except there is just one problem with this. Children are not "average" consumers, and don't approach the buying process in the informed way a mature adult can. A third grader is not likely to truly understand a label or the need to eat healthy, and yet she has buying power nonetheless. Thus limiting the options for children while they are at school seems like a reasonable, ethical approach to combatting this social disease.

    DDS

  • A Test For Starbucks

    In an ongoing and sometimes unsuccessful strategic effort to be more than just an expensive coffee beverage retailer, Starbucks continues to test new product concepts. From the introduction of breakfast foods to music to packaged goods, it seems that the company knows that it has to innovate to stay ahead of the game. Recent taste tests have exposed that there are tastier brands of coffee preferred by more consumers so it will be hard to the company to say that it is still the best. But this industry pioneer still has first mover advantages, and it is still the market leader. But it must be nimble to remain on top.

    The latest market test involves stores in Atlanta and Austin offering Starbucks-branded fountain sodas priced at between $2.45 and $3.45, depending on size. This move follows an even smaller test in the company's backyard, Seattle, wherein flavors like ginger ale, spiced root beer, and lemon ale were popular with customers. If successful, expect a national rollout in the months to come. This will free up the R&D people at corporate to think of yet another effective way to diversify the Starbucks product mix. Starbagels anyone?

    -DDS

  • Worst Meal Ever?

    Leave it to one of the 1.5 million not-for-profit organizations here in the U.S. to expose fast food companies for what we already know they are--unhealthy. In good form, the Center for Science in the Public Interest, annually chooses its pick for the "Worst Restaurant Meal In America". This is not meant to be a tongue-in-cheek, "eat a 10 pound burger as a novelty" kind of contest, however. The "winner" is carefully chosen through a battery of laboratory tests wherein variables such as calories, salt, fats, and others are considered in this race to the bottom.

    The winner this year is Long John Silver's, a chain well known for its focus on deep-fried, beige-colored, fish-based offerings. The television commercials are enough to make me gag every time, so it comes as no surprise to me that its Big Catch meal featuring hush puppies and onion rings took the honors this year. The meal features 33 grams of trans fat (a sketchy substance already removed from most foods), 19 grams of saturated fat (the "good" fat?), 3,700 milligrams of salt (more than a day's allowance), and 1,320 calories (about 70% of the day's allotment).  So how does a marketer respond to this sort of bad publicity?

    The Lousiville, KY-based company decided to use a deflectory approach and responded only that the Big Catch is a temporary menu item that it will offer through July or "while supplies last". Let's all hope these supplies don't last very long, and also hope that the new federal rules forcing larger chains to post nutritional information will help deter the widespread consumption of this particular "heart attack from the sea" as well as other products that blatantly and perversely feed the obesity epidemic. Indeed it's likely that the Big Catch was not at all intended to be temporary, as any successful product introduction would be quickly integrated into the chain's menu offering. So Long John Silver's response is suspect, and it is just this sort of publicity (in the face of impending legislation) that should serve as a wake up call for the unhealthier food chains. Consumers armed with nutritional knowledge can make more informed purchase decisions, and many might shy away from these sorts of dishes when they know exactly how unhealthy they really are.

    -DDS