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Growth Recipe: Kraft foods, with Robert Eckert at the helm, is trying to promote its vast variety of products as "meal solutions". ECKERT POSITIONS KRAFT AS MICROSOFT OF FOOD INDUSTRY -- ONE ON ONE: MIDDLE OF THE PACK NOT GOOD ENOUGH

Published on .

Robert Eckert may have reached the pinnacle of corporate privilege, but that doesn't mean he's taken it all in stride. "Let me show you something," he said, grinning with genuine delight as he flipped a switch to ignite the gas fireplace in his well-appointed office.

Such unpretentiousness is rare among the elite executive group to which Mr. Eckert belongs as president-CEO of $16 billion Kraft Foods. He's a 20-year veteran who has headed Kraft's cheese and Oscar Mayer divisions, and who assumed the top slot last fall. Since then, Mr. Eckert, 43, enacted an agency realignment that saw Kraft part with Grey Advertising, New York, and embark on an ambitious cable advertising project that will eventually involve interactivity.

He recently discussed with Chicago Bureau Chief Judann Pollack what he calls Kraft's "middle of the pack" performance of recent years and his grand plan to give Kraft a lasting place as the food industry's leader.

Advertising Age: Kraft recently changed its agency lineup for the first time in years. Why?

Mr. Eckert: It was driven by both effectiveness and efficiency. . . . We've had good results as a company, particularly over the last couple of years, and one of the drivers of that is our ability to capture and leverage scale to compete more as a company rather than a group of individual products.

We consolidated brand groups over time in order to accomplish that, and the agency consolidation is a natural extension. . . . For example, we had Post split among two agencies, Grey Advertising and Ogilvy & Mather. And we're doing more and more marketing with Post as one trademark, as opposed to Raisin Bran and Honeycomb and Shredded Wheat. . . . It made more sense to have our agencies think that way.

AA: And the efficiency element?

Mr. Eckert: We changed our commission structure, such that we no longer pay commissions on what we call non-working media . . . production, talent and research. By doing what we did, while individual agencies would lose revenue because of our lower commission structure, they more than compensated for that with higher revenues because we consolidated agencies. So our partners are still very profitable in this, and we take the money we save on commissions and reinvest that in working media.

AA: There's some belief this may not be the end of the consolidation at Kraft -- that there's still another shoe to drop.

Mr. Eckert: There's certainly nothing imminent. . . . Having said that, to me it's like the structure we have internally -- you never say never. You never know what [the agency lineup] is going to look like three, four, five years down the road. But we're delighted with the agency lineup we have today.

AA: You said the changes will result in higher ad spending. How much higher?

Mr. Eckert: Well, last year we spent a little under $800 million and were up about 12%, 1997 vs. 1996. We'd like to continue pretty significant growth in the ad budget. It's hard to get precise, but the 12% increase we had last year I felt very good about. I would like to have a significant increase this year as well.

AA: Kraft announced a project with Tele-Communications Inc. to explore a highly targeted ad test, with a commercial for one brand cablecast to one household while the house next door sees a different spot. How feasible is this?

Mr. Eckert: I think it's going to happen in our lifetimes. That doesn't mean it's going to happen in 1998, but we're going to be in the forefront of it. . . . Part of our strategy is when we see those kinds of opportunities, we get involved with them early.

AA: When this kind of targeting was first touted a decade ago, the speculation was the array of products in one store could be different from a store only a block away. What's the status of that development?

Mr. Eckert: It hasn't happened to that extent, but clearly it has happened. . . . You see products introduced these days that are not designed for every supermarket. We have a coffee product we're working on in Canada -- our goal is to have it in several hundred stores. That's not the way we used to think when we introduced new products; we used to think 30,000 supermarkets. Not every product today is intended to be in 30,000 supermarkets.

AA: How would you characterize Kraft's results last year?

Mr. Eckert: Our volume across the company grew at 4%. We look at the food industry in general as growing with the population. . . . The population in this country is growing at less than 1%. We're twice as large as the next package-food company and we grew at 4%, four times the industry average. . . . That translates into market share growth in 18 of our top 20 categories, which represent about 85% of our profits. . . . Our profits were up 12% last year.

AA: There was softness in some categories, including coffee.

Mr. Eckert: There are two categories [out of our top 20] that didn't gain share -- one was coffee. We lost less than one-10th of a share point in the coffee business last year. Green commodity coffee costs were at the highest level ever in history. We had five different pricing actions in coffee last year, several of them noticeable increases. And as the commodities went up . . . consumption was a little bit soft, but more importantly, people shifted to private-label brands. Losing less than one-10th of a point, we fared better than our other branded competitors. But we don't like to lose market share.

The other one we lost share in was salad dressings.

AA: Procter & Gamble Co. has had a fairly strong market test of a coffee not under the Folgers brand name, Millstone. Other than Gevalia, would Kraft consider a superpremium coffee under a name other than Maxwell House?

Mr. Eckert: What has impressed me about the Maxwell House group is how -- again, this is consistent with how, more and more, we are competing as a company -- everything they've done is under the Maxwell House umbrella. That allows us to respect one idea. . . . We make Maxwell House, and we have enough brands under Maxwell House that we can satisfy whatever your coffee taste [is]. . . .

We talk increasingly about Post, and we're talking increasingly about Kraft in our "Everybody has a taste for Kraft" salad dressing campaign. We used to do separate advertising for one flavor that was very different than an ad for another flavor. That doesn't work for us anymore.

AA: Last year Kraft assigned a major corporate branding effort to J. Walter Thompson USA. When is that coming?

Mr. Eckert: It will be later this year. We are working on what I think is the next evolution of using our scale and competing at a higher level. And that is to tie some of these great brand names together.

AA: How specifically?

Mr. Eckert: First, let me tell you where we're trying to go as a company. And why this is important.

We were a middle-of-the-pack performer in the food industry as recently as several years ago. We had good excuses . . . but that's what they were, excuses. Today, we're doing as well as anybody else in the food industry. Part of the reason, of course, is that we've started to act less like a holding company and more like an operating company.

AA: How has that worked?

Mr. Eckert: It's been particularly effective for us in sales. When we go to call on a [retail] customer, there is one person who represents all Kraft and that person has several experts working for him or her who are specialists in a category. We speak with one voice. . . .

We go in and talk about meal solutions broadly, and the fact that consumers are spending 21 minutes in a supermarket, down 25% in the last five years -- the No. 1 question in America is what's for dinner tonight.

Another advantage we have is that we're the only company that covers breakfast, lunch and dinner, as well as snacks.

AA: So how does the new corporate campaign fit in?

Mr. Eckert: We have four $1 billion brands -- Kraft [cheeses], Maxwell House, Post and Oscar Mayer. We have 26 additional brands with sales between $100 million and $1 billion -- household names: Miracle Whip, Philadelphia, Cool Whip, Country Time, DiGiorno. We've been very effective in going into the supermarket and talking about that collection of brands -- how you can put these things together to satisfy what busy moms are going through in trying to put together meal solutions. . . .

The next logical step is to do this with consumers as well. So we are working on a marketing program that does recognize what's going on in households today and does bring together our brands to address it. Yes, we are working on a campaign. It's more than advertising but advertising is an important component.

AA: This isn't like the ill-fated 1980s "We're Beatrice" branding effort, is it?

Mr. Eckert: My recollection of "We're Beatrice" is that of a brand name on top of things -- Stiffel lamps, Samsonite luggage, Fisher nuts, County Line cheese -- and it was billed as "a company makes all these." This, you'll see when we finalize it, is about what's going on with consumers today and how our products happen to fit into that. It's not about us. That's the absolute wrong way to do this.

AA: Where do you see Kraft going in the next few years?

Mr. Eckert: I call it undisputed leadership. I could ask you who is the undisputed leader of software and you would say Microsoft Corp. I could ask who is the undisputed leader in athletic apparel and you would say Nike. . . . When I ask who is the undisputed leader in food . . . consumers might say Kraft, they might say one of four or five other companies.

When we ask our retail customers, increasingly more of them are saying Kraft. But if you look at the gap between us and our competitors, it's not very big. . . . We're among a handful of companies that are performing well, and recognized in our industry.

I see the opportunity to break away from the pack. . . . It's an opportunity unique in our industry and unique in our time.

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