Behind Kraft's Seismic Shift: Why It's Shaking Up Its Shops

Once-Staid Marketer Experiments With New Agencies and Creative to Invigorate Sales, Beat Back Private Label

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NEW YORK ( -- When Irene Rosenfeld took the CEO slot at Kraft Foods in 2006, she came with a reputation as a take-charge leader unafraid of shaking things up. That is an understatement when it comes to agency relationships.

Under the Brooklyn-born Ms. Rosenfeld, North America's largest food company has morphed from a clubby client that prided itself on deep-rooted relationships with Ogilvy and DraftFCB to a demanding marketer aggressively seeking to experiment with new agency partners on its $1.75 billion business.

In what would have been viewed as heresy at the old Kraft, the company's marketing department has, over the past 24 months, snipped longstanding ties with those heritage Interpublic Group of Cos. and WPP shops on more than 20 iconic brands from Maxwell House to Mac & Cheese and Chips Ahoy to Cool Whip. In their place, Kraft is bringing onboard a new crop of agencies, most with which it's never worked before. In essence, Kraft has spread its seed; it now works with every holding company, as well as independents.

Nearly 100-year old Kraft says it's evolving to stay ahead of the rest of the packaged-goods pack.

"More than ever, we're focusing on contemporizing and making our iconic brands more relevant to today's consumers," said Dana Anderson, senior VP-marketing strategy and communications. "We're raising the bar with our agencies in order to deliver more creative and engaging campaigns. Our ultimate goal is to heighten the profile and performance of Kraft Foods brands and we believe we're on the right track."

About all the new shops on its roster, the company said: "Different agencies are being asked to bring a fresh infusion of creativity to build the profile and performance of our iconic brands."

The new group -- which includes Crispin Porter & Bogusky, McGarryBowen, Being (a spinoff of TBWA/Chiat/Day), Droga5 and The Martin Agency -- are all smaller than the sprawling global networks Kraft was using, and many are known for breakthrough, even risky approach to creative. Kraft is also working with independent Mother, New York, for Cadbury's Sour Patch Kids line.

While in the U.S. Kraft is spreading its relationships like Philly cream cheese, on a worldwide basis, most of them appear intact for now; DraftFCB remains the lead global shop for Oreo, for example. Still, it's a far cry from the Kraft that for so long stuck with the same stable of roster agencies.

"It's almost as if they have woken up to the power of their portfolio and [are] just trying to shake things up," said an agency exec at a Kraft roster shop. "I think they are recognizing that safe doesn't cut it," and for agencies, "anyone who is new is perfectly situated to take advantage of those who are old."

Translation? Any agency working for Kraft these days has got to earn it, continually -- and that could mean jump-ball pitches for work, or sudden switches in agency partners.

The ad agency changes are being driven by Chief Marketing Officer Mary Beth West, who assumed the role in 2007. Ms. West, said another exec at an agency that works with Kraft, "reacts on instinct and will not tolerate what in her mind is inferior work. She's moved up in the organization like a lightning bolt and is very, very close to Irene."

Another change agent is Ms. Anderson, a past president of DDB in Chicago -- whom the executive described as bringing "an added dynamic, because she comes from an agency background and is very actively involved in the pitches" -- and Deb Giampoli, director-strategic agency relations, who has spent time on new compensation arrangements for agencies.

While these executives have all been in place for a few years, elsewhere inside Kraft is a raft of new talent. At a meeting this fall with Wall Street analysts, Ms. Rosenfeld boasted that 80% of Kraft's leaders are new to the company or new to their positions. "We needed to be more nimble and respond faster to local-market conditions," she said.

It appears to be spending more money on marketing too. Measured media on all Kraft brands jumped more than $100 million in the first six months of 2010, to $454.9 million from $348.3 million in the same period last year, according to Kantar media.

There is some evidence the strategy is working. Sales of Mac & Cheese, for example, are up 6.6% in the year ending Oct. 3, as the brand gained 1.5 dollar market-share points, according to SymphonyIRI. And UBS called Kraft "an ongoing U.S. turnaround story."

Kraft is trying to catch up after neglecting to invest enough in marketing earlier this decade, according to Burt Flickinger III, of Strategic Resource Group. "At a time that Kraft should have been investing more ... Kraft was cutting back, and so Irene Rosenfeld has to make up for [that]," he said.

As it pours profits back into brand marketing, Kraft could find it tough to convince consumers to trade up in the face of competition from private-label brands, especially in the short term, if the economy does not pick up. Kraft's North American organic revenue for the quarter grew by only 1.1% from the year-earlier quarter, as higher prices were offset by lower volumes. "Consumers continue to be highly selective in their purchase decisions," wrote Morningstar analyst Erin Swanson in a recent note to investors, adding that Kraft's advertising in the third quarter "failed to drive demand."

Mr. Flickinger said the company "needs strong creative and strong consumer communications to drive newer, additional consumer demands and justify consumers paying a premium."

In the course of 2010, Kraft has launched new ad campaigns for 15 of its "power brands," including Ritz, Oscar Mayer and Philadelphia Cream Cheese. The tone of much of the new advertising has taken a bold turn, with campaigns like its brash "Don't Be So Mayo" Miracle Whip ad from McGarryBowen and the Mac & Cheese work from Crispin targeting adults–not just kids–with its "You know you love it" push. Most recently, the company rolled out a new campaign for Planters by Omnicom Group's Being, that for the first time ever features a talking Mr. Peanut, whose voice is supplied by Robert Downey, Jr., portrayed with a gash in his head from a nutcracker.

There are still more agency changes on the horizon in the Kraft portfolio of brands -- A1 Steak Sauce and Bull's-Eye barbeque sauce will soon be assigned new agencies -- but those close to the food giant say it's already eyeing its confection brands under Cadbury for the next phase of changes. Stay tuned.


Below is a partial list of Kraft brands shifting over the last two years
Year Brand Assignment Losing Agency Gaining Agency
2010 MILKA Global Creative Ogilvy & Mather MDC Partners' Crispin Porter & Bogusky
2010 MACARONI & CHEESE Creative Interpublic Group's DraftFCB MDC Partners' Crispin Porter & Bogusky
2010 JELLO Creative Interpublic Group's DraftFCB MDC Partners' Crispin Porter & Bogusky
2010 PLANTERS Creative Interpublic Group's DraftFCB Omnicom Group's Being, a spinoff of TBWA
2010 ATHENOS Creative Multiple Indie Droga5
2010 COOL WHIP Creative Interpublic Group's DraftFCB Interpublic Group's Martin Agency
2010 OREO Digital Razorfish Dentsu's 360i
2010 CHIPS AHOY Creative Interpublic Group's DraftFCB Dentsu's McGarryBowen
2010 FIG NEWTONS Creative Interpublic Group's DraftFCB Dentsu's McGarryBowen
2010 NABISCO 100 CALORIE PACKS Creative Interpublic Group's DraftFCB Dentsu's McGarryBowen
2010 CADBURY Media Buying Horizon (pre merger) Publicis Groupe's MediaVest ("One Team")
2009 TASSIMO Creative WPP's Ogilvy & Mather Omnicom Group's Being, a spinoff of TBWA
2009 LUNCHABLES Creative Interpublic Group's DraftFCB Dentsu's McGarryBowen
2009 KRAFT SINGLES Creative Nitro Dentsu's McGarryBowen
2009 CRYSTAL LIGHT Creative WPP's Ogilvy & Mather Dentsu's McGarryBowen
2009 OSCAR MAYER Creative WPP's Ogilvy & Mather Dentsu's McGarryBowen
2009 PHILADELPHIA CREAM CHEESE Creative Nitro Dentsu's McGarryBowen
2009 MAXWELL HOUSE Creative WPP's Ogilvy & Mather Dentsu's McGarryBowen
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