McDonald's has named 18-year company veteran Neil Golden as its new chief marketing officer, succeeding Bill Lamar, who will retire effective March 30. Lamar had been with the company for 22 years. The choice surprised no one. Most recently vice president of marketing for McDonald's USA, speculation had centered on Golden as Lamar's possible successor. Golden joined the company in 1989 as a regional marketing supervisor for the Indianapolis region. In his most recent position, Golden was responsible for new initiatives, identifying emerging trends and strategic planning and ethnic marketing. "For any current or aspiring marketer, the CMO job at McDonald's is the equivalent of the elusive brass ring," said Golden in a statement. "It's humbling to think about the leadership marketing campaigns produced for this great brand during the last 50 years. However, because we have so many passionate, creative and tremendously talented marketing professionals working on our business, I am absolutely confident we'll continue to surprise and delight our customers in ways that are fun and uniquely McDonald's." Lamar, who had been the company's U.S. CMO since 2002, was also responsible for new product development--he recently promoted the new McSkillet breakfast burrito in a Web cast with journalists earlier this week--as well as business research for the company. "Bill's contributions to our brand are simply too vast to attempt to quantify," Don Thompson, President of McDonald's USA, said in a statement. "What Bill has effectively done in his own unique and quiet way is leave an indelible mark on our brand that will last for generations to come. Brand McDonald's has benefited greatly by his contributions." A popular and engaging public speaker, Lamar was on the McDonald's management team that developed and implemented the company's so-called "Plan To Win," which led to the turnaround of the McDonald's business in 2003 and continues to build momentum today, said the company. That team also developed the company's first global advertising campaign and unifying tagline, "I'm lovin' it." In the U.S. company, Lamar was responsible for tailoring that tagline and the creative executions for relevance in the U.S. market. As head of new product development, Lamar oversaw the development of several new menu items, including a line of salads and the McGriddle breakfast sandwich. Lamar also worked on the operations side of the business, and spent five years as general manager of the 700-store Atlanta region before moving into a national marketing position in August 2002. "The health and trajectory of McDonald's business continues on a path to a bright and prosperous future," said Lamar in a statement. "It's a good time for me and my wife to turn the page knowing the brand we love is in such a good place."
As hard as domestic car and truck manufacturers have been trying to win younger buyers on the coasts with messages about vehicle quality, reliability and youth, they aren't swaying younger buyers just yet. According to J.D. Power and Associates' "2007 Avoider Study," released Thursday, pro-domestic and pro-import vehicle buyers are divergent in age and region. The study found that the younger a buyer is, the more he or she is likely to avoid domestic cars and trucks. Conversely, buyers who purchase domestic vehicles are more likely than younger buyers to avoid a vehicle because it's an import. Younger buyers also give more importance to gas mileage as a reason for purchasing, versus older buyers. Generally, domestic-vehicle buyers say styling and cost are the biggest reasons they avoid import vehicles. The study, in its fifth year, is based on responses from over 35,000 vehicle owners who registered their cars and trucks in May this year. The study takes a contrarian look at consumer choices, focusing on the ones that got away: cars and trucks that consumers didn't consider and why. The study found that the highest number of domestic-vehicle buyers (41%) who do not even consider import brands during the shopping process live in the North Central region of the United States, per J.D. Power. Their opposites--younger import buyers--are concentrated in the coastal areas, per the consultancy, with the Northeast and the West Coast populated by the largest numbers of import vehicle buyers who eschew domestic vehicles entirely. The most common reasons: concerns about reliability, fuel economy, quality and depreciation. Says Jon Osborn, director of media/marketing research at J.D. Power and Associates: "Import buyers seemed to have a list of substantiated reasons for not buying domestic, such as reputation and quality, depreciation and gas mileage." Gas mileage, or in some cases perceived gas mileage, is the most frequently mentioned reason for purchasing a vehicle, while it remains the seventh most frequently cited reason for avoiding a particular vehicle model. In all regions, compact cars and SUVs were the most popular vehicles, followed by mid-sized vehicles. Osborn says Hummer H3 is the most-avoided model in its segment due to fuel economy. But he says EPA fuel economy estimates for the vehicle are around the same as for Jeep Commander and Chrysler Aspen, which don't have the same stigma, and enjoy lower avoidance rates. Also, the study found that buyers are basing their decisions not to buy a vehicle on consumer-generated content online, particularly consumer reviews, followed by expert reviews and manufacturer site information. Among all new-vehicle buyers, the top reasons for buying or avoiding a vehicle were reliability and fuel economy, at 34% each. Then comes exterior styling, performance, and quality of workmanship. The most frequently mentioned parameter in the Northeast and West was reliability, while fuel economy was the most mentioned in the North Central region of the U.S.
Thanks to the legendary financial skills of Edward Lampert, CEO of Sears Holdings, investors have more or less been willing to live with the steadily stinkier performance at its Sears and Kmart stores. But that may be changing: The retailer posted a stunning 99% nosedive in third-quarter profits. And comparable-store sales--the measure most closely watched by retailing insiders--continued their southbound slide, falling 4.6% for the quarter, including a 4.2% decline at Sears' domestic units, and a 5% fall-off at Kmart. The problem "is creating a sustainable and profitable business," says Neil Stern, a senior partner at McMillan/Doolittle, a retailing consultancy in Chicago. "Lampert's approach has been different than conventional retail wisdom, focusing more on profitability and inventory management than chasing sales. But you can't keep cutting costs, losing customers, and losing sales." "We are very disappointed in our performance for the third quarter," Sears executives said in releasing the news. "We cannot blame our results entirely on the retail and macro-economic environments. We have much to improve and are working hard to do so." The company says declines were worst in apparel and lawn and garden at both chains, partially offset by stronger sales in Sears' home electronics. One could hardly argue that Sears is not still an important player in the retail world: The combined companies comprise the nation's fourth-largest broadline retailer, with over $50 billion in annual revenues, 3,800 stores, and a portfolio of powerful brand names, including Kenmore, Craftsmen tools, and Diehard. And it certainly continues to be controversial from Wall Street's perspective, especially with last week's news that it has bought up a 13.7% chunk of Restoration Hardware, a niche retailer in one of the most struggling market segments. (Separately, Lampert's hedge fund recently acquired 16.7 million share of Home Depot stock, valued at about $541 million.) Certainly, "many regard the holding company as kind of publicly traded hedge fund," Stern says. "But as a retailer, the numbers speak for themselves. Sears is a company with a tremendous reputation, a lot of goodwill, and strong product line. But over time, interest has dissipated. They do have great assets to work with, but you've got to work them. Sears is doing 10 mph, and its competitors are going by at 60."
Anheuser-Busch management told Wall Street this week that the U.S. beer market has a lot of fizz, driven by consumer demand for beer. The company, which predicts that it will exceed its own earnings projections for 2007, plans price increases on the majority of its U.S. beer volume beginning this quarter. Speaking to analysts and investors, A-B said it expects to better its 7% to 10% long-term growth targets. The company touted its portfolio strategy and its selling system upgrade, as well as its marketing. "Anheuser-Busch is clearly better positioned for long-term growth due to these changes than we were two years ago," said W. Randolph Baker, vice president/CFO of Anheuser-Busch Companies, at the meeting. He said that last year--the industry's best year in the U.S. since 1990--beer shipments grew 2.1%, and so far this year, beer industry growth is up 1.8% through October. Baker said the company's international beer business is becoming more and more important as an earnings driver, because of the company's 50% investment in Grupo Modelo of Mexico, which owns Corona, the leading U.S. import brand, and its footprint in China, which the company says is the largest and fastest-growing beer market in the world. With a 27% stake in Tsingtao, the company says its Budweiser brand is the leading super-premium brand in China. Per market research and consultancy firm Mintel, domestic beer volume sales accounted for about 60% of U.S. beer sales by volume last year. But, although the leading domestic brewers--Anheuser-Busch, Miller Brewing and Molson Coors--account for 88.5% of all beer sales, growth has come from new products and specialty brews, such as microbrews, regional brews, and seasonal brews. Meanwhile, per Mintel's 2006 report, domestic beer sales--except for light beer--were flat on a volume basis between 2001 and 2006, although the market grew 23% during that period. Domestics lost 3.5% percentage points in market share during that time to imports, wine and spirits. The consultancy says regular domestic (i.e., excluding light beer) beer posted a 19% decline between 2001 and 2006. High-end beers from the likes of Boston Beer, Sierra Nevada, New Belgium Brewing, and specialty brews from major brewers like Anheuser-Busch saw growth. Mintel predicts that growth will be 18% at current prices, which represents a decline of 1% at constant 2006 prices between 2006 and 2011. The firm says the beer industry spends over $1.2 billion each year in traditional advertising, but consumers don't necessarily respond to the often sophomoric tone of beer ads. Mintel says less than a third of respondents to its fall 2006 survey, who bought beer in the preceding month, liked the way the beer they drink is advertised. The firm said a higher percentage will buy a beer at retail that they have tried on-premise than a beer they see advertised. The firm predicts that the market will see more beers targeted specifically at women, "health" positioning, more adventurous flavors, and convenient packaging. The over-55 population will grow 14.2% between 2006 and 2011--from 68.7 million to 78.5 million. People in this age group are less likely to consume alcohol or beer. The domestic light beer segment will face stiffer competition from imported lights.
H.J. Heinz on Thursday reported strong double-digit growth in its second fiscal quarter, thanks to "creative, targeted marketing in support of our new product innovation," per the company. Net profit rose 19%. Heinz increased its marketing spend by 23% in the quarter, and sales increased 13%, to $2.52 billion. Net income rose 15%, to $227 million. From January to August of this year, Heinz spent $21.4 million compared with the $20 million it spent in all of 2006, according to Nielsen Monitor-Plus. "We have now invested in double-digit marketing increases in five of the last six quarters," Michael Yeomans, communications manager, tells Marketing Daily by e-mail. "Importantly, we are getting good returns on this investment, particularly in the U.K., where we supported three new soup ranges with an extensive print and outdoor campaign, helping us to achieve 23% sales growth in the quarter and our highest category dollar share ever. Operating income in the second quarter rose 9.9% to $421 million despite the incremental marketing investments and the impact of higher commodity costs affecting the entire food industry, the company reported. The strong growth in operating income reflected broad-based profit growth in Europe, Asia/Pacific, and North American Consumer Products, driven by strong volume, net price gains, the success of productivity initiatives and Heinz's increased investments in marketing and R&D to drive innovation and growth, especially in its top 15 brands. Heinz has an integrated campaign ready for next week's launch of Smart Ones Fruit Inspirations, the first such meals to contain a half-serving of fruit. The campaign for Smart Ones Fruit Inspirations includes a media tour featuring celebrity chef Devin Alexander and a new Web site, eatyourbest.com. "Combined, our Smart Ones, Boston Market and Weight Watchers meals ranges grew 31% in the second quarter," Yeomans notes. He said the company is working hard to build brand awareness in Canada for its Renee's Gourmet chilled dressings brand, which it bought over a year ago. "We are using TV to drive trial in the country's faster-growing Western provinces and Quebec in order to build the brand outside of its stronghold in Ontario," Yeomans says. "For the eight weeks ending Sept. 29 we achieved a 74.3 dollar share of the refrigerated salad dressing category, a gain of 2.3 points versus a year ago on the strength of our "Blame Renee" TV commercial." In it, a woman licks her plate after finishing her salad -- to the surprise of those around her. Heinz also did heavy in-store sampling over the spring and summer with events in some 2,000 stores. Yeomans says a disproportionate portion of growth is coming from emerging markets, which grew sales 24% in the quarter. "One of our fastest-growing brands in the company is Long Fong in China, a premium range of dim sum, rice balls, hot pot soups and steam bread," he says. There, Heinz is driving trial with extensive in-store sampling and by feature Zhang Yining, reigning Olympic table tennis champion and Chinese national hero, on packaging and in new TV commercials that recently began airing. "Our relationship with Ms. Yining is effectively driving brand awareness and trial as we head into the summer Olympic Games in Beijing," he says. Increased investment in marketing also led to a 26% sales growth in the company's global infant nutrition business. Yeomans cites the strength of Heinz' strategy to "up-age" the category into biscuits, beverages and toddler meals and snacks.
Pittsburgh-based Dick's Sporting Goods has set plans in motion to acquire Chick's Sporting Goods under a stock purchase agreement for approximately $40 million in cash. The company will assume about $31 million of debt. Dick's Sporting Goods will fund the deal through an existing credit facility. Chick's Sporting Goods shareholders could earn up to $5 million in additional payment if performance criteria are met through June 2008, the company says. The deal should close on Dec. 31. The small, yet strategic move into the California market gives Dick's Sporting Goods a solid foothold on the West Coast, according to Reed Anderson, senior research analyst at D. A. Davidson & Co. "Dick's has about $4 billion in annual sales, with nearly zero debt, so it's a rounding error for them to take on about $30 million in debt," he says. "Plus, they're not coming into the market with a bunch of new stores, so they don't add to the competition in the market." Chick's Sporting Goods will add 15 specialty sporting goods stores in Southern California, averaging 50,000 square feet, to Dick's Sporting Goods 340 stores in 36 states throughout the eastern half of the U.S. The stores generated more than $120 million in sales during the last fiscal year, end June 30, 2007. Paying attention to marketing trends, Anderson says Dick's Sporting Goods has been migrating away from print and more toward television and online ads. "Though not eliminating it, Dick's has been steadily reducing their print circular distribution numbers for the last couple of years," he says. Jeffery Hennion, Dick's Sporting Goods SVP/CMO, says Dick's could eventually integrate marketing promotions with Chick's Sporting Goods, but not until after the acquired store's fiscal year ends in June. As for Dick's Sporting Goods, on Saturday the sporting goods store chain will debut television and print ads featuring Lance Armstrong as one of the store managers promoting both Nike Training and Nike Livestrong product lines. Although no online ads are planned, Wall Street insiders have noticed an increase in attention given to Dick's Sporting Goods' Web site, a flashier look with editorial and marketing content. But the real attention to marketing comes with having a national footprint with a local feel, says Stifel Nicolaus equity analyst David Schick. "In this part of town, the local football team wears blue and white, so make sure the clothing displayed in the store has blue and white when you first walk in," he says. "These are little details that you have to get right in sporting good stores." They're doing something right, Schick says, estimating that Dick's Sporting Goods generates about $200 per square foot in sales annually. Dick's Sporting Goods last week reported for the third quarter, end Nov. 3, that net income rose 57%, to $12.2 million, and earnings per diluted share increased 43%, to 10 cents per share, compared $7.8 million, or 7 cents per diluted share, in the year-ago quarter.
Sales of gourmet and specialty foods are expected to rise nearly 63%, to $96 billion over the next five years, according to new research in the category from Packaged Facts. According to the study, sales in the (admittedly loosely defined) gourmet, specialty and premium food and beverage category grew to $59 billion in 2007, a nearly 11% increase over 2006. The research company predicts the entire category will grow at a compound annual rate of 10.2% between 2007 and 2012. That's higher than a predication made in a previous report two years ago, predicting a compound growth rate of 9.7% between 2005 and 2009. "America's fascination with world flavors, along with its growing ethnic population, is also helping to fuel the dramatic growth of gourmet/premium foods and beverages," according to the research. "As the United States increasingly becomes and recognizes itself as a multicultural society, ethnic foods are soaring in popularity and acceptance." The research cited several factors for the growth, including consumer desire to have more natural ingredients and a proliferation of gourmet and premium products in supermarkets and convenience stores. Mainstream supermarkets accounted for 52% of the total category sales. "Attracted by the high growth rates and higher profit margins of gourmet/premium foods and beverages, more and more mainstream marketers are moving into this segment, either through acquisition or through internal development," according to the research. "Retail distribution of gourmet/premium foods and beverages is expanding as well, leading to greater availability, greater exposure and more choices, often via 'channel blurring'." According to Packaged Facts, nearly 15% of all new product introductions in 2007 fell into gourmet/specialty foods category, with an estimated 641 new product or product-lines meeting that distinction during the year. Of these products, many -- some 40% -- were marketed as healthier choices than mainstream foods. Some 259 products were labeled or classified as "natural," according to the research. (In 2006, 174 products carried that designation.) Another 123 products were tagged as "fresh" and 49 were labeled "organic." The beverage category -- which includes flavored sodas, waters and other non-alcoholic, pre-packaged drinks -- was the largest segment, comprising 37% of the total sales (about $21.5 billion). Baked goods, pastas and grains were 15% of the total sales ($8.6 billion), and fresh foods, such as produce, meat and poultry, accounted for just under 13% ($7.4 billion) of the total. Moving forward, the cheese and dairy segment, which accounted for about 6% of category sales, is expected to grow the fastest over the next five years, at an estimated compound annual growth rate of 13%, according to Packaged Facts.