Keebler spends $30M on defense

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As Kellogg Co. braces to nearly double ad spending for its snack portfolio this year and push even harder in 2004, the primary focus will be on growing the wholesome-snack business rather than the flagging cookie brands.

The influx of $30 million in advertising will include a major restage of the flagship Chips Deluxe and a push behind Murray's Sugar Free cookies. But Brad Davidson, the new president of Kellogg's Snacks Division, said the moves are to "hold and defend" the cookie business rather than grow it. The category, he said, "will most likely become a smaller part of our portfolio."

The shift is not a huge surprise looking at consumer sales trends. The snack-bar category, where Kellogg has focused lately with Cereal & Milk bars and Special K bars, grew 31% in food, drug and mass outlets excluding Wal-Mart for the 52 weeks ended July 13, according to Information Resources Inc. But the cookie category was up just 1% with Kellogg's Keebler brands down 4% for the same period.

"Keebler brands now represent just around 50% of our total business, while the biggest growth engine has been wholesome snacks," Mr. Davidson said, "and we're evolving to reflect that [shift] as we see consumers wrangle with issues of obesity, child obesity and trans-fatty acids."

A Wall Street analyst who asked not to be identified commended Kellogg's adaptation to the decline in sweet snacking. He said Keebler is one of the few clear acquisition successes of all the deals that occurred in 2000, in large part because it gave Kellogg a vehicle and distribution for snacks. "Kellogg is doing a lot of things right."

Mr. Davidson, a 19-year-veteran of Kellogg who began as a sales rep in his native Canada, was brought on in June to lead the snacks business after successfully helping to revamp the retail sales organization of Kellogg's Morning Foods division, a crucial driver of the unit's recent turnaround.

Now, he is charged with leading the evolution of the snacks division to a "broader-thinking, more strategic company." Part of the new design, he said, is a renewed focus on major national media and promotions rather than the former Keebler emphasis on local efforts executed by the direct sales team.

Upcoming efforts indicating that strategy include a major effort this fall to support a newly improved Chips Deluxe line, which saw sales fall 9% to $146 million for the period ended July 13, while Kraft Foods' Nabisco Chips Ahoy! was flat at $357 million. Kellogg spent a mere $1.5 million on the brand last year, but that will increase significantly with the campaign from Leo Burnett USA, Chicago, that focuses on the addition of more chocolate and the new golden-brown hue of the cookie. The improvement is the first of many in the Keebler lineup, among them Famous Amos and Cheez-It. Murray's Sugar Free is also getting a big boost in ad spending, with a new print campaign, also from Burnett.

cheez-it push

In crackers, Kellogg wants to build Sunshine Cheez-It, which grew 13% to $311 million for the July 13 period. Spending for the brand during January through April of this year totals $9 million vs. full-year 2002 spending of $12 million, and many initiatives are still under way. In November, Kellogg will launch its first cinema advertising, with a new execution of the Cheez-It brand's "Get your own box" campaign from Burnett that spoofs the Hunchback of Notre Dame to tout a new Chili variety. The ad will be shown in more than 500 theaters across the country.

The brand will ramp up its link to sports with continued promotions featuring ESPN commentators Chris Berman and Digger Phelps for fall and March Madness, along with advertising and promotions featuring Fox commentator Howie Long around the Super Bowl.

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