While a major push into mainstream media helped nearly double sales for the veggie burger marketer between 1997 and 1999, the increased marketing expenditures also contributed to plunging profits.
"Our challenge, like any business today, is trying to grow top line; and at some point you have to return to profitability to keep shareholders and maintain viability as a company," said James Linford, interim president-CEO of Gardenburger since the Aug. 4 resignation of Lyle Hubbard.
Mr. Hubbard came to the niche marketer in the mid-1990s with a "five-year mission to brand the company, to put Gardenburger in every grocery in America," Mr. Linford said. His plan included raising $13 million from institutional investors for an unprecedented $17 million TV advertising campaign in 1998, from Rubin Postaer & Associcates, Chicago, that included a much ballyhooed $1.4 million buy during the final episode of "Seinfeld."
"Our goal in getting into consumer advertising was that we wanted to brand the category, and we did that at a time when it was new and fresh and we were able to catch the ear of the consumer," said Wendy Preiser, director of retail marketing. "Our big [media] push enabled us to triple our grocery volume, triple household penetration and establish Gardenburger as a leader with consumers and trade customers."
Gardenburger finished 1999 with net sales of $89 million vs. net sales of $48 million in 1997, according to the company, but the net income column showed the toll of the expenditures: Gardenburger posted an operating income loss of $21.8 million in 1999 vs. a loss of only $2.6 million in 1997.
Such losses prompted Gardenburger's refocused strategy.
AN EARLY PAYOFF
Already, the new strategy has paid off. Gardenburger recorded $1.1 million for the quarter ended June 30, compared with an operating loss of $16.1 million for the comparable quarter in 1999. The savings came mainly from measured media. Competitive Media Reporting showed Gardenburger spent a total of $14 million on measured media in 1999.
"I credit TV advertising as the reason we have a strong, viable brand right now, but going forward, given the challenges we have from a business standpoint, we're going to have to rely on grassroots and creative ways to keep our message viable with consumers," Ms. Preiser said.
The ad withdrawl comes as the independent veggie burger marketer faces competition from Morningstar Farms and Boca Burger. Both are receiving increased marketing funds from new parents Kellogg Co. and Kraft Foods, respectively. Gardenburger retains the leadership position in the $580 million meat substitutes category Information Resources Inc. tracks in traditional food stores. But extended distribution and marketing by the deep-pocketed food behemoths is squeezing the brand. Gardenburger's sales dropped 14.5% to $56 million for the 52 weeks ended July 16, while Morningstar Farms grew 3.3% to $42 million and Boca Burger grew 33% to $23 million.
Mr. Linford said the added attention to the brands will "create interest in the category, and that benefits everyone," but he is not ruling out entertaining acquisition proposals to level the playing field.
Until then, however, Gardenburger has sought publicity through public relations efforts, initially surrounding FDA approval of the claim that soy products can help reduce the risk of coronary disease. For its new Flame Grilled veggie burger, Gardenburger developed a virtual "sample" of the product on its Web site (gardenburger.com).
Ms. Preiser does not rule out a return to TV advertising someday if it fills the company's strategic objectives, but in the interim, she said, "we established a fundamental awareness and position in consumers' minds that will last a couple of years." Time will tell.