Increased focus needed on building brands
November 09, 2009
by Josh Sosland
Measured against the broad consumer packaged goods industry, baking historically has not received high marks when it comes to brand building. For decades, bakers were impeded in efforts to differentiate by the commodity-like character of their principal product — sliced white pan bread, a hurdle that has been coming down steadily with the mix shift in the baking aisle toward value-added varieties.
The emergence of successful new brands in recent years and the growth of established ones demonstrate that progress has been made. Still, with margins considerably tighter than the C.P.G. industry overall, bakers continue to face constraints in efforts to differentiate their products by investing in advertising and marketing programs.
Comments from ranking food industry executives in recent days suggest a significant new effort emerging to invigorate brands. In particular, a marked decline in advertising costs, as the result of turmoil in the media business, was referenced in quarterly earnings conference calls by both Irene Rosenfeld and David Mackay, chief executives of Kraft Foods, Inc. and Kellogg Co., respectively. Ms. Rosenfeld said Kraft would be increasing advertising by nearly 10% "even though advertising rates have declined considerably." Mr. MacKay said Kellogg would take advantage of "media deflation and efficiency programs to invest even more back into advertising to further drive the long-term health of our brands."
Such advertising bargains do not appear to be available to small- and medium-sized baking companies. Worryingly, trade sources indicate promotional activity in bread has intensified in recent weeks to levels described by one executive as "way out of whack." To avoid falling further behind their C.P.G. peers, bakers need to increase their focus on building brands rather than seeking share through excessive promotions, an approach that may offer near term benefits only to debase brands longer term.