Four years after a failed effort to introduce premium-priced cereals with Kellogg Co. and juices with Coca-Cola Co., Walt Disney Co. is coming back to the grocery shelf. But this time it's partnering with General Mills and Cott Corp. for licensed lines that will be priced a whole lot lower -- just above private-label.
The plan is to roll out in January value-priced, nutritionally sound cereals based on Disney properties such as Mickey Mouse, Tigger and Pooh that retail for $1.99 vs. the $3.49 price Kellogg tried to charge consumers for its Disney cereals a few years back. Likewise the juice lines with Cott, already in stores, are selling for much less than the original products did for Minute Maid. The goal, Disney said, is to continue to license the brand for value-priced offerings in other categories, including pasta, frozen meals and yogurt drinks.
Disney magic fading?
General Mills and Disney tout it as an innovative model in an everyday-low-price world, using a licensed equity to eliminate the need for advertising or trade dollars, and saving General Mills from having to bring its existing franchises to lower price points to win over the penny-pinching consumer. But others see it as an admission that the Disney magic is fading, at least for its older franchises.
"What this says about Disney," said one agency executive, "is that it doesn't think their icons are as valuable to consumers as even the Trix Rabbit."
Disney is quick to defend itself. "Drawing the conclusion that our characters and brands don't have high value is completely wrong," said spokesman Gary Foster, pointing out that the Disney Consumer Products division has grown from $12 billion in sales in 2001 to an estimated $23 billion for fiscal 2006.
Private label for Kroger's
Yet, he added, in the past the entertainment giant "only handed over characters at the highest royalty possible and with the biggest guarantees possible, and how the products were sold didn't matter to us." Success in today's retail environment, however, necessitates Disney care more about how profitable its deals are for its licensees, and help them determine from the outset the "best price to value ratio" for each retailer, he said. That's the logic behind Disney's deal this summer to roll out a Disney Magic Selections line that functions as Kroger's private-label children's line.
A General Mills spokesman said the company "offers a full range of products at multiple price points to deliver value for consumers across the full spectrum of the category -- and the new Disney cereals fit perfectly into that strategy." He added that initial sell-in with retailers is going well.
Some retailers, however, aren't convinced the items will succeed, even on the cheap shelf next to the Malt-O-Meal. "I'd give them six months," said one Midwest retail executive.
'Very fragmented category'
Strategic Resource Group principal Burt Flickinger agreed that it will be difficult for Disney to crack the $6 billion ready-to-eat cereal category -- "a very fragmented category with very few power brands" -- especially with the little marketing spending expected to be put behind them.
And the days when a licensed character were surefire winners are waning, said Landor Associates managing director Allen Adamson.
Not everyone, however, thinks the strategy is flawed. Simon Williams, president-CEO of Sterling Brands, said, "The lower price gives you greater access and potentially higher volume, and Disney is a very democratic brand."