As had been widely expected, PepsiCo on Thursday reported that it will significantly up advertising/marketing this year -- by $500 million to $600 million, with particular focus on 12 of its largest beverages and snack brands and the North American beverages business. This will be accompanied by a significant workforce reduction, a major consolidation of agencies, and other cost-reduction initiatives. The plan includes eliminating 8,700 jobs across 30 countries, or about 3% of PepsiCo’s global workforce. PepsiCo hires between 10,000 and 20,000 employees per year, so actual head-count will continue to grow. A “simplified” organizational structure will reduce management layers and give regional managers greater authority. PepsiCo also confirmed that Massimo D'Amore, president of its Global Beverages Group, will retire this month. The company recently named former Frito-Lay chief Albert Carey to run the business, reported Reuters. Cost-Reduction Initiatives, Financial Targets In moves described as designed to redirect spending to “consumer-facing” investments and increase marketing ROI and accountability, PepsiCo will reduce its current approximately 300-agency roster by 50%, and institute joint-performance metrics and a pay-for-performance model with its remaining agency partners. Other cost-reduction initiatives will include consolidating manufacturing, warehouse and sales facilities and leveraging new technologies, processes and best practices across operations and global businesses. In total, PepsiCo projects that its plan will reduce costs by $1.5 billion between 2012 and 2014 ($500 million in each year) – on top of $1.5 million in cost cuts already announced – while implementing strategies designed to drive up core beverage brand sales in particular, and regain market share from Coca-Cola. Productivity improvements are projected to reduce costs in the North American beverages business alone by $500 million to $600 million over the next three years. Profit is projected to decline 5% in 2012, during the transition (costs will include a one-time restructuring cost of $910 million), but subsequently show annual percentage growth in the high single digits. Shareholder returns through dividends and share repurchases for 2012 are projected at $6.3 billion, a $700-million increase over 2011. Achieving these goals while facing a projected $1.5 billion in increased commodities costs in 2012 (7% inflation), other higher costs and a more intense competitive environment required “tough choices,” PepsiCo Chairman and CEO Indra Nooyi said, referring to the workforce reduction. Marketing Initiatives PepsiCo’s plan will result in a 15% increase in global advertising/marketing investment for 12 of its largest brands, including Pepsi, Mountain Dew, Lay’s, Gatorade, Tropicana, 7Up/Sierra Mist, Lipton, Doritos, Quaker, Cheetos, Mirinda and Sunchips. Advertising/marketing spending will be increased from 5.2% of net revenues to approximately 6% of net revenues by 2015. Nooyi, who has faced criticism from some analysts and shareholders who are questioning whether the company’s investments in “better-for-you” brands/products have come at the expense of core brands, acknowledged that the North American beverages business had lost dollar share in 2010 and, while it had since seen improvement, PepsiCo is “not happy with the pace” of the improvement. (In terms of volume share of the total North American liquid refreshment beverages market, PepsiCo lost 0.2% in share in 2011, compared to a 0.1% share gain by “the competition,” she reported.) Nooyi stressed that PepsiCo actually did not reduce its advertising/marketing spending on the overall North American beverages business over the past five years; rather, she said, it had been spread out over too many brands and too many agencies. “Non-working A&M” had “squeezed out working A&M,” she said. Once spending is focused on a limited number of core brands, “a 15% to 20% increase in visible dollars is going to feel like a hell of a lot more” in the North American business, Nooyi said. Going forward, PepsiCo also will be assessing its brands based on their core/non-core natures and their performance, and will be reducing its overall number of brands, focusing on those that are underperforming and also “under-related” to the company’s core missions. (Globally, the company currently has 400+ brands.) Among the major marketing initiatives coming: What Nooyi described as the first truly global campaign for Pepsi, planned for this summer. This year also will see results from investments in research and development, including the launch of products using a new, natural, zero-calorie sweetener that will represent a “breakthrough,” and a new “dispensing” machine. (Capitalizing on growth opportunities in the foodservice sector is one key priority for PepsiCo, and Coca-Cola has been pushing to leverage its new Freestyle vending machine to gain share in that space.) Investment in R&D will continue going forward, but be focused against specific goals in three types of innovation: “refresh, reframe and breakthrough.” In general, innovations and insights will be more efficiently shared across global businesses, and the emphasis will be on creating innovation “platforms” rather than isolated brand/product innovations, said Nooyi, noting that products and insights from developing markets are being leveraged in North America. ‘Healthier’ Products Still Key; No Company Split-Up Planned Nooyi also stressed that PepsiCo will continue to invest in its “healthier portfolio,” as well as core/traditional brands, because the healthier products are critical to positioning the company for growth in the years ahead. “This is an ‘and’ game, not an ‘or’ game,” she said. “We have to focus on both.” “Good-for-you” brands’ share of total revenue has risen from 17% to 20% over the past five years, Nooyi reported. The question of whether PepsiCo should split into two companies, beverages and snacks, was one part of the total operating review of the business just completed by management, the board and external advisors. The conclusion was that value is maximized by remaining one company, for several reasons, Nooyi said. These include cost leverage/economies of scale in operations (a breakup would result in an estimated $800 million to $1 billion in added costs) and snacks/beverages synergies that represent significant go-to-market and cross-category expansion advantages on a global basis, Nooyi said. In emerging markets in particular, the ability to grow snacks would be “much reduced” without beverages, and require a much larger investment, she said. In fact, one key execution strategy is focusing on driving more combined snacks/beverages purchases. Q4 and Full-Year Financials PepsiCo’s earnings-per-share increased 5% (to $0.89) in the fourth quarter, and 3% (to $4.03) for full-year fiscal 2011. Core EPS grew 9% (to $1.15) in Q4 and 7% (to $4.40) for the year. Q4 net revenue increased 11%, to $20.2 billion, and full-year net revenue increased 15%, to $66.5 billion. Net income grew 4% (to $1.42 billion) in Q4 and 2% for the year. Core net income increased 8% in Q4 and 5% for the year. Worldwide snacks volume grew 8% in Q4 and 8% in the full year. Worldwide beverage volume grew 3% in the quarter and 5% for the year. The company took a $383 million charge in Q4 related to the restructuring plan and reported that it will take $425 million in charges in 2012, as well as $100 million in charges between 2013 and 2015.
When it comes down to it, Kodak may become a case study of what happens when a company continues to innovate, but fails to recognize how those very innovations will change the industry. Less than a month after filing for bankruptcy protection, the venerable brand announced Thursday it was effectively getting out of the camera business, phasing out its digital camera, pocket video and digital picture frame lines by the middle of this year. While the company will continue its consumer-facing online and retail-based photo printing, as well as production of desktop inkjets, ir is clearly a casualty of the ways in which consumer photography has fundamentally changed in a relatively recent time frame. “Eastman Kodak didn't start as a technology company, creating groundbreaking cameras, they started as a chemical company making cheap, affordable cameras and making the bulk of their money off consumables like film and paper,” writes Jennifer Jacobson, a representative for consumer electronics Web site Retrevo.com in an e-mail to Marketing Daily. “We live in an instant gratification society when it comes to pictures. People want to share their pictures with friends and family. the day, even the moment, those pictures are taken. ‘Prints’ are no longer something people want on a regular basis.” When Kodak filed for bankruptcy protection in late January, many observers and commentators were quick to point out the company’s missteps, in particular the company’s invention of the first digital camera in 1975. But because the company was so steeped in the film and developing market, the technology was put on the back burner for fear of its cannibalizing the main revenue source. “If you want to point back to the most pivotal moment that caused this, it was back in 1975 when they discovered the digital camera and put it back into a closet,” former Kodak CMO Jeffrey Hayzlett told Mashable shortly after the company filed for bankruptcy. The company also failed to acknowledge the different ways in which people were sharing their photographs with others. Although Kodak introduced the EasyShare camera (which allowed people to email photos directly from their cameras via WiFi networks), the rise of social media and camera phones fundamentally changed the way consumers interacted with photographs. “Kodak is a classic case of [a company] not understanding what business they were in,” says advertising agency search consultant (and former agency executive) Avi Dan. The lesson, Dan says, is “if you don’t cannibalize yourself with the latest technology, someone else will.” Still, the company professed the move was the best way to keep moving forward. In its announcement, Kodak said moving out of the consumer products area would save the company $100 million a year (despite taking a $30 million charge to get out of the business). The company also holds thousands of patents, which would likely be attractive to many businesses that will be producing digital cameras in the company’s wake. “It seems to me the strategy the current CEO is taking is interesting,” Dan tells Marketing Daily. “It has a fairly reasonable chance of success. It’s not going to be easy, of course, because there are formidable competitors.”
Nissan has launched a social media campaign that lets consumers help design the Nissan 370Z sports car. The program, called "Project 370Z," is focused on the Chicago Auto Show, where Nissan is unveiling the 2013 version of the famed Z-car. The company says the goal is to crowd-source Z fanatics to find the best -- or perhaps most outrageous -- ideas for a one-off 370Z. The automaker says the Z will be customized from stem to stern, including interior, powertrain and NISMO aftermarket parts and accessories. The online kiosk for fan suggestions, and sideline cheering is at Nissan's enthusiast-centric Facebook page, facebook.com/nissanperformance. There, Z freaks can suggest and also vote on peoples' modification ideas, and watch. While automakers have been offering virtual modification platforms, usually in the form of virtual cars in virtual worlds that people can modify, this is unusual. Jon Brancheau, VP of marketing at Franklin, Tenn.-based Nissan North America, said that the Z-car is the right vehicle for this kind of program. "Car companies build project vehicles all the time, but we thought it'd be interesting to harness the power of social media to reach out to Z enthusiasts -- the people who are doing this to their own cars everyday," he said, in a statement. He said the company will take the finished car to Nissan Z club events nationwide. According to the automaker fan, likes, comments and wall posts will be reviewed over the course of each voting session and the part or accessory with the most fan support will be chosen for the build. Fans will decide on things like whether the car will have a turbocharger or supercharger, suspension and braking systems, paint, wheels, seats, interior design and on and on. Nissan says the final design will debut May 17 at the annual "Z DayZ" event along the "Tail of the Dragon" in the Appalachian mountains of North Carolina and Tennessee. The event has car shows, various competitions, and events, and group drives including one along the Dragon's Tail. Nissan says the Project 370Z car will also visit events like ZCON 2012 and the 2012 SEMA show. "We have never done something like this in the social space," says Josh Clifton, Nissan production communications social media manager. He tells Marketing Daily that the only thing that comes close is a program around the launch of the Juke crossover in 2010, where consumers could create exterior "skins" for the vehicle, with the winner getting the vehicle wrapped per his or her design. Clifton says the Z program involves 10 phases of customization. "Whatever gets the most aggregated votes will be in the car." The genesis of the idea came from Nissan's history of consumer comments around special-edition project cars. "Everyone always has suggestions. So we wanted to give people a chance to 'build' a Z themselves. Also we wanted to use social media to tie into the Chicago Show." Clifton says the car will be featured in Web video assets, and photos, and might find its way into ads.
It’s been nearly a decade since the term “metrosexual” first popped into the cultural lexicon, but men are still easing their way into the world of grooming products. New research from the NPD Group finds that while 9 out of 10 men over the age of 18 use some type of grooming product -- whether it’s deodorant, hair gel, shaving cream or fragrance -- only 25% use facial skincare products. But with more and more prestige marketers launching cleansers, moisturizers, lip and eye products, and anti-aging treatments in department stores, that’s changing: The men’s facial skincare market grew 11% in dollar sales last year. Karen Grant, vice president and senior global industry analyst with the Port Washington, N.Y.-based market researcher, tells Marketing Daily how men are gradually filling up their medicine cabinets. Q: Why are men more open to these products now?A: In some ways, it’s generational. Young men today grew up with people putting on sunblock, for instance. They’re used to the idea of men and women using something on their skin. Women are more open about men using products, so they encourage their partners to buy their own moisturizers, and stop using theirs. Another change is style-driven. Both men and women these days are gravitating toward a look that’s more tailored, and that means looking more polished, more groomed. Q: Still, 25% is pretty low for facial products. What are the obstacles?A: Men are very minimalistic in their approach, and very problem/solution-oriented. If they don’t see a problem or if no one tells them about it, they don’t see a need to buy a product. Women, on the other hand, have a whole different mentality. We see a lot more flaws, and are willing to buy specific products that address them. They’re also more relaxed about aging. Actors like Patrick Dempsey, who is 45, and George Clooney are still considered very sexy. Q: What are men doing now?A: More than one-third use facial cleansers, not including bar soap, as well as facial lotions and moisturizers. Three in 10 use lip products. And 26% are using acne treatment products. But they’re not so differentiated as women. Men have no problem using a body moisturizer on their face, until someone tells them there’s a better way. Q: How does the department store channel affect these sales? A: In two ways. First, they can get advice and instructions in department stores. And they can also get samples, as well as kits and sets, that make it easier for them to try new products. Q: IBM Analytics just reported that retail sales for men’s apparel are up more than 8% in the most recent quarter. Do grooming products fit in with that?A: Yes, and in fact, we’re seeing the fastest growth in premium products. Men aren’t just more willing to spend on themselves, they are more willing to spend more. Price seems to be a big differentiator. They see it as a worthy investment.
This week, Marketing Daily brings you exclusive coverage of the Brand Keys 2012 Customer Loyalty Engagement Index. Each day, you received a full report on key product/services categories from among the 83 surveyed for this year's study, including automotive, electronics, retail and technology. This fifth and final installment focuses on highlights from the airlines and hospitality categories. Continental edged out last year’s top-ranking Southwest in the 16th annual Brand Keys Customer Loyalty Engagement Index (CLEI). Dropping to number three is Delta, which last year was tied with Southwest for first place. United finished fourth, while JetBlue took the biggest nosedive, dropping to fifth (tied with US Airways) compared to third place last year and first place the year before. Midwest and Northwest tied for sixth and American finished seventh. In the airlines category, most of the brand strength Continental is showing is in inflight-related services and rates and extra charges (or lack thereof). “They seem to be doing it better than others in those critical drivers,” said Robert Passikoff, founder and president of Brand Keys, Inc. JetBlue has lost a lot of brand value by having planes sit on the runways for hours, he said. “Doing that takes away from the brand big-time, no matter how many salty snacks you pass around,” Passikoff tells Marketing Daily. “Sugar jags wear off and you're still on the ground. Not a delightful feature.” The other airlines missed the boat by cutting back when times were rough. “Flyers don't forget if you've tried to gouge them for luggage. Or blankets and pillows,” he adds. The CLEI, which quantifies consumers' current engagement/loyalty levels across 598 brands in 83 categories tracked by Brand Keys, once again ranked Avis as the top rental car company for a third consecutive year. Hertz finished second, followed by Enterprise, Budget, National, Dollar and Alamo. The top hotels, according to Brand Keys, were InterContinental Hotels Group (luxury), Hilton (upscale), Best Western (midscale) and Days Inn (economy). All of the brands took top honors last year with the exception of Marriott, which beat Hilton in the upscale category. Hilton moved up due to a large increase in scoring in “efficient services” and “amenities,” Passikoff says. “Given the general ubiquity in this level of hotel offering, it turns out to be the little things that can push a traveler one way or the other,” he says. “Like offering double AAadvantage miles.”
Procter & Gamble's Gillette brand is focusing on menswear during New York Fashion Week via a partnership with MADE, a six-year-old program comprising 50 fashion shows and presentations, parties, concerts, panel discussions and Web elements at milkmade.com. The year-round platform for new fashion, music, art and pop-culture talent also offers consumer brands sponsorship opportunities. Thus, the MADE for Gillette Menswear Program, whose locus will be Milk Studios on Manhattan's West Side. The week-long affair begins with a panel discussion under the aegis of the New School's Parsons division, and moderated by Simon Collins, dean of the School of Fashion. The Feb. 10 panel will delve into the future of menswear in the global fashion industry and how trends in male grooming play a role in overall style. Gillette spokesperson, hip-hop artist and actor Common will also be part of the panel, according to P&G. The program also includes a pop-up store called The Blind Barber for Gillette, billed as a combo barber shop/lounge. The Gillette program with MADE also includes a series of events from Feb. 9 to 12 touting 10 menswear designers: Antonio Azzuolo, Assembly, Band of Outsiders, Carlos Campos, NUMBER:Lab, Oumlil, Patrik Ervell, Public School, Simon Spurr, and Tim Hamilton. The designers will hold a fashion show at Milk that pairs the designers' sartorial inventions with outré facial-hair styles. For Gillette, the program is a springboard for the launch of the new Gillette Fusion ProGlide Styler 3-in-1 styling tool. “Gillette is stepping quite consciously into the style space given the increasing role that men’s grooming plays in fashion and overall style,” said Austin Lally, VP and GM of Gillette, Global Male Grooming at P&G. “Partnering with MADE and these prominent menswear designers for Fashion Week is a natural progression for Gillette,” Lally said. The Blind Barber for Gillette, which will be at Milk, is actually an extension of an East Village establishment that combines a barbershop with a bar. Common will participate in the unveiling of the pop-up version with Blind Barber owners Joshua Boyd, Adam Kirsch and Jeff Laub. The temporary establishment will offer haircuts, trims and facial hair styling using the new Gillette Fusion ProGlide Styler.
Here’s something that almost anyone from any side of the political spectrum can agree upon: the past week has been heinous for Susan G. Komen. And it has shown that the organization most known for its staunch (some, like me, would say steamrolling) support for finding a cure and raising awareness for a single type of cancer -- breast cancer -- above any other has a cancer all its own. It’s a cancer common to any group that has become bloated with a false sense of self-righteousness and one whose arrogance and hubris causes it to stray from its stated (if overzealous) mission and become embroiled in a politicized mess. What I'm talking about, of course, is this week's announcement that Karen Handel, Susan G. Komen’s vice president of public policy, jumped before she was pushed. A speedy resignation with no severance package, Handel excised herself from the organization before mounting pressure within the group would have forced her imminent departure. Her resignation caps a week of intense public backlash over Susan G. Komen's decision to first cut and then hurriedly restore about $680,000 in funding to Planned Parenthood, a provider of reproductive health services, including contraception and abortions. In her resignation letter, which has been posted on Forbes, Handel goes to great lengths to explain how the situation got so out of control. Her defense? Komen is in the business of saving lives. Anything that distracts from that goal is a disservice -- thus the decision to pull funding and divorce itself from a controversial organization that might be spending money illegally, like funding abortions. In October 2011, during Breast Cancer Awareness Month, I wrote about how the "pinking" of America was diluting the message of curing cancer and replacing it with corporate capitalism and too much consumption. I also took issue with Susan G.’s near-bullying tactics as they related to how the fundraising and marketing gargantuan has left smaller cancer-fighting organizations to fend for themselves, and how they aggressively muscle out any group that seeks to challenge breast cancer as the only cancer worth raising money for. This latest misstep only adds to my great concern that Susan G. Komen, for all the good it has admittedly done for breast cancer awareness, has become a monopolistic and politically compromised organization. If she were alive today, I wonder what Susan Goodman Komen -- whom the organization gets its name from -- would think. After what must have been a grueling fight for her life, finding a cure and staying true to the organization's mission and goals would be more important to her then whether or not grant money was going to another group similarly charged with helping save the lives of young, often poor women -- an organization that happens to provide abortions. Letters of resignation aside, let's not forget that Karen Handel is a former Georgia Republican gubernatorial candidate, whose campaign promises included cutting funding for Planned Parenthood, and was Georgia's 26th Secretary of the State. On Sunday, the Huffington Post reported that it had obtained an email exchange between Komen leadership confirming that Handel had the sole authority in crafting and implementing the Planned Parenthood policy. Does this not have all the makings of a woman hell-bent on achieving a personal goal and using a behemoth organization which itself had become too politically connected, as cover to achieve her aims? Yes -- the organization did reverse course in barely 72 hours, and restored the funds. It also made changes to its grant awarding guidelines that say only organizations under criminal investigation would be denied funding. But like a true cancer, this organizational one has already done much damage -- to those who truly believed in the structure of non-profits being “doers of good,” to those who held Komen as saviors of women, and to the brands who’ve invested heavily to be part of Komen’s shiny pink halo. The upside to all this? Susan G. Komen’s misdeeds have opened up an enormous pathway for all the non-profits around the country, breast-cancer-related or not -- to start reclaiming their place in consumers’ hearts, minds and wallets. And as for the PR advice, first administered by Ari Fleisher and now Ogilvy, all I can say is that it will take a lot more than some clever PR tactics and new positioning to rebuild this country’s trust in the Susan G. Komen brand and its “values.”