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Monday, September 7, 2009

Why Walmart's Great Value Changes the Game

Retailer Revamps Store Brand to Make It Stand Out From Competitors
BATAVIA, Ohio (AdAge.com) -- The recessions of the 1980s gave us black-and-white generics; this one has given us Great Value.

While Walmart's redesigned, repackaged and reformulated store megabrand has drawn some unflattering comparisons to those generic brands, to write it off as similar not only misses the point but underestimates its potential impact. The new Great Value is a game changer, not simply because of its size -- the brand is estimated to be larger than $10 billion -- but because its novel approach to store-brand packaging and merchandising. Great Value isn't trying to pass itself off as a clone of the brands it competes against; that bland whiteness aims to set the brand apart with a distinct look and identity.

"Walmart identified an opportunity to treat our private brands more like brands," said Andrea Thomas, senior VP-private brands for the chain, noting that Great Value ultimately has to earn its place on the shelf just like the others. She said the chain made "a conscious decision to hire people who have managed big brands and apply some of the basic brand-management techniques."

Ms. Thomas, who was VP-global chocolate for Hershey Foods and a veteran of Frito-Lay and Pizza Hut before coming to Walmart in 2007, said that means differentiating Great Value from other brands rather than trying to mimic them. "If you made a decision in one category [before], that equity or experience didn't transfer into any other category," she said. Great Value was "more than anything a collection of items," rather than a brand, she said.
The second objective was simply to upgrade the image, she said. "We needed it to look like we cared about the quality."

Publicis & Hal Riney, San Francisco, is handling advertising and marketing, but Ms. Thomas declined to disclose who was responsible for the design.

Taking the lead
Walmart, more often a creative follower of its retail competitors, has been a leader this time. A revamp of Target's entry-level store brand as Up & Up is hitting shelves a few months behind the new Great Value, and bears a remarkably similar plain-white resemblance.

Up & Up was developed largely simultaneously rather than as an imitation of Great Value, said a person familiar with the brand's development. But the goal was similar: to make the low-price brand stand out on the shelf from its premium competitors. In Target's case, the effort also meant trying to convey more of an emotional appeal than a strictly value-based one, while simultaneously removing the cherished bulls-eye logo from cut-rate merchandise.

The stark approach works for store brands with access to as much shelf space and merchandising support as they want, he said. Other marketers, which never know how much of either they'll get, have to cram as much visual impact and verbiage as possible onto their packages.

The risk of Great Value is to what extent Walmart will trade consumers down from the brands that have been its bread and butter for decades, which could depress same-store sales but possibly sweeten profits and margins. Ms. Thomas declined to say whether it had that effect last quarter, when Walmart's U.S. sales came in lighter but its earnings and margins were higher than expected.

The risk for Walmart suppliers is that, having taken on Great Value, Ms. Thomas will turn her attention elsewhere, such as the Equate health-and-beauty brand. "We are assessing the needs and opportunities for all the private brands," she said.

How the brand stacks up

If it were a stand-alone merchant, Great Value would rank as the nation's 39th-largest retailer, at an estimated $10 billion in annual sales. That's bigger than A&P, Whole Foods, Family Dollar Stores or Bed Bath & Beyond.
Great Value's estimated sales are ...
  • Equal to $86 from every household in the U.S.
  • Nearly twice the worldwide revenue of Clorox Co. ($5.5 billion) or Hershey Co. ($5.1 billion).
  • Bigger than the U.S. revenue of McDonald's Corp. ($8.1 billion) or Kellogg Co. ($7.9 billion).
  • More than the U.S. sales of Amazon (about $9.6 billion).
  • Close to the sales of Dollar General Corp. ($10.5 billion).
  • Approaching Procter & Gamble's fiscal '09 sales to Walmart Stores (about $11.9 billion, or 15% of P&G revenue).
Sources: Ad Age research, company reports, Stores magazine/Planet Retail

The private-labels are becoming stronger than ever. While the buyers pressing brand owners to spend more money to keep their presence on the shelves, giant retailers are growing billion-dollar brands on their own. More brand marketers are hired to revamped the old-plain cheap store brands into developed, at par quality vs branded ones even in some cases doing better marketing too.
It must be challenging to have big players that can play across categories under one name in the pool.

How Heinz Satisfies Moms' Hunger for Comfort Food

CMO Brian Hansberry on Pulling Once-Sleepy Brands Back Into the Mix


CHICAGO (AdAge.com) -- Comfort food never goes out of style, but it's a particularly good time to be helping consumers make their own. With more mothers looking to cook at home for their families, attempting to recreate the restaurant-style experience they can no longer afford, marketers that understand that dilemma, such as Heinz -- purveyor of ketchup, Ore-Ida potatoes, Classico pasta sauces and Smart Ones frozen meals -- are sitting pretty indeed.

Brian Hansberry, a nine-year Heinz veteran, is a CMO who also runs the $1 billion comfort-food business for a brand that, according to TNS Media Intelligence, spent $70 million in measured media during 2008. Mr. Hansberry, 43, cut his teeth at Procter & Gamble, working for 10 years on brands including Duncan Hines, Folgers, Jif and Sunny Delight. He reports directly to and works closely with Heinz CEO David Moran.

Heinz has met or exceeded earnings expectations for each of the past six years, something Mr. Hansberry attributes in part to the composition and structure of the 95-person team he built nearly from the ground up upon arrival. He sought marketers who are also skilled business managers, as each brand manager has responsibility for the brand's profit and loss and ownership of pricing decisions.

Tough economic conditions have created an opportunity for the food business, Mr. Hansberry said. "People look to food for comfort, security, escape and high-quality time with your family, and a number of our categories are taking off: pasta sauce, gravy, potatoes. We play right in the sweet spot."

Indeed, with an average household income of $49,000, most moms spend $5,700 a year on food, or $100 a week, Mr. Hansberry said. That's $15 a day and, at three meals a day, $5 per meal to feed a family of four. That's been a boon to brands such as Ore-Ida and Classico, but Mr. Hansberry said it's a challenge for "me categories" such as Smart Ones, which is geared toward single portions and can cost about $3 per serving.

Another big change in the marketing landscape since his arrival has been the ability to test new products via social networks. Mr. Hansberry said consumer insights have pulled once-sleepy brands back into the mix. For quicker-to-market strategies, Mr. Hansberry looks to online communities to deliver rapid feedback on new-product tests. Ore-Ida launched a Steam n' Mash frozen-potato product last year, and he said the redskin-potato selection was the result of consumer requests.

In an interview with Advertising Age, Mr. Hansberry talked about understanding moms, the relevance of comfort foods and how Heinz is waking up the ketchup business in the midst of a recession.

Ad Age: How important is sustained marketing support right now?
Mr. Hansberry: One of the things we can do to navigate this recession is to increase marketing support. We have data to back us up. Nielsen conducted a study [that showed] businesses investing in increased marketing during recessionary times emerge from recession dramatically faster than businesses where marketing [was flat or declined], and we have support right on up to CEO Dave Moran.

Ad Age: How are you funding these increases?
Mr. Hansberry: We're attacking costs because Mom, in these recessionary times, is not willing to pay for everything anymore. We've identified what she's willing to pay for and what she's not willing to pay for. For example, the corrugated packaging we ship our ketchup in is not something [she] values, so we found the least expensive way possible so that we can drop those costs and fuel marketing budget and fuel our brands. The one thing we won't sacrifice is what comes in the packages, and that's the taste, hence our emphasis on taste.

Ad Age: Mom?
Mr. Hansberry: My background is 10 years at P&G and nine years here. I was trained in [the concept of] the consumer is our boss. I very much believe that. We use the word "she" to connote the consumer is our boss. Anybody can be doing the shopping, but we speak in terms of she.

Ad Age: You redesigned the Heinz ketchup label last year, adding a picture of a tomato. How has that been received?
Mr. Hansberry: Heinz is in every household. In America it has higher household penetration than salt and pepper. It's an amazing thing, one of the strongest brands within consumer package goods. It's a blessing and a curse when you have a business that everybody had tried and has in their home, and when you're in charge of growing that, it can be quite challenging. Our biggest opportunity was to grow usage occasions and [get consumers to] consider using Heinz ketchup more than they do.

Ad Age: But moms needed to know there were tomatoes in the ketchup?
Mr. Hansberry: That's the single kernel behind "grown not made," to remind mom that when she buys Heinz, it's a product we have essentially cared for from seed to plate. Every bottle of ketchup starts with the tomato.

Ad Age: There's a piece of insight that'll blow your mind.
Mr. Hansberry: That was the thing we took for granted, that she knew it came from the tomato. Not all people spend as much time thinking about ketchup as we do.

Ad Age: And you've also innovated in ketchup since arriving nine years ago. How did you do that?
Mr. Hansberry: If you look back over last six years, you see a track record of innovation. We took a relatively sleepy category and we've been innovating like crazy with kids' colors, upside-down bottles, fridge-fit bottles -- we have been able to grow the category and market share. There's no such thing as tired brands, but tired brand managers. We have certainly worked up these brands.

Ad Age: But what drove those changes?
Mr. Hansberry: We believe here innovation begins with an eye; it's about observation. It's an amazing insight that ketchup was kept around for so long that consumers stored it upside down, and we didn't know that until we saw it with our eyes.

Ad Age: How are you looking at private label these days?
Mr. Hansberry: In recessionary times, the No. 1 competition is private label. The single biggest thing we can do is to deliver value proposition, product benefit -- particularly the taste we provide -- and communicate that message to consumers. Private label has been growing, so it's critical to be No. 1 or 2 or your distribution is going to the threatened. Our responsibility as a branded leader is to innovate and grow the category for our trade customers, so we play a leadership role. In doing so, we throw private label off their game.

Ad Age: You've also developed online communities to assist in product development and marketing. How did that work with the Steam n' Mash mashed-potato launch?
Mr. Hansberry: We were able to place the product with the moms [through the Let's Dish and She Speaks] communities. They were able to taste it, test it, record different things for us. They looked at packaging, choices on flavors; they really influenced the flavors that launched. In the offline world, if we did a traditional test-market launch, it takes nine to 12 months to read [the results] and would take about another nine to 12 months to roll out. But by leveraging communities, from ideas to execution, the first presentation from a summer intern to national launch was nine months.

Continuously digging consumer insights to fuel innovations is key success of Heinz to delight its mom consumers during recession. On top of that, striving to be #1 or #2 brand in the market cannot be more than relevant rallying cry under stiff competition to win the shelf-share among exponential private-label growth.