Keebler tries to stave off fresh batch of rivals

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Despite a makeover, Ernie Keebler will need nothing short of elfin magic to win Kellogg a greater share of the $3.5 billion cookie category.

Later this month, Kellogg will redeploy the signature Keebler elf across new advertising, packaging and store displays in a Herculean effort to rebuild the fast-declining cookie brand amidst growing focus on the category from the deep-pocketed leader, Kraft Food's Nabisco, as well as expansion-oriented snack marketers like PepsiCo's Frito-Lay and Hershey Foods.

Michael Allen, senior VP-snacks marketing at Kellogg Co., has built a new Keebler marketing team from scratch since the July move of Keebler's Hollow Tree to Kellogg headquarters in Battle Creek, Mich. A longtime Kellogg executive who recently returned from a stint in development in the U.K., Mr. Allen said the Keebler initiative is an effort to "reach back into the history of the brand" across all elements of the business, even down to ensuring that meeting rooms and staff-training efforts are imbued with a strong dose of the elfin world.

"When Ernie first got his start he was a smart guy with a little English accent, kind of a John Cleese, but he has degenerated into this shill with no personality," said one executive close to the situation.

In the past Keebler has used its relatively paltry ad budget to support its costly direct-store delivery system on product-specific advertising to support brands such as Chips Deluxe and Fudge Shoppe. But the new effort is intended to leverage the overall strength of Keebler to bolster good feelings about a brand "made in the hollow tree vs. a cold factory," Mr. Allen said.

THE FACTORY

But the cold factory, a.k.a. Nabisco's brand, is certainly churning out more cookie sales than the tree house. While Nabisco's cookie sales have improved overall, declining a mere 1.7% to $1.3 billion for the 52 weeks ended Feb. 20, Keebler's plunged a precipitous 9.2% to $404 million for the same period in food, drug and mass outlets excluding Wal-Mart, according to Information Resources Inc.

Kraft has worked hard to improve those numbers, especially for its No. 1 Oreo brand on which it showered $29 million in measured media for the first 10 months of 2004 vs. only $12 million in 2003, according to TNS Media Intelligence. The effort has paid off, with Oreo sales up almost 6%.

Meanwhile, Keebler's biggest single brand expenditure within the $12.5 million it spent during the first 10 months of 2005 was $5 million on Fruit Delights Sandies. Publicis Groupe's Leo Burnett Worldwide, Chicago, handles.

Campbell Soup's Pepperidge Farm unit has soared recently, backed by a campaign from WPP Group's Y&R, New York, featuring animated character O. Howie Bakem, while Nabisco adopted an umbrella ad approach for "Sensible Snacking" products from Foote Cone & Belding New York, featuring comedian Colin Mochrie as the new Nabisco "Snack Fairy."

Fresh competition is also coming from Hershey, with new a snacks division separate from its primary confection business. Frito-Lay Chairman-CEO Irene Rosenfeld likewise pledged to analysts in recent weeks that the salty snack giant will bite off far more of the $90 billion "macro-snacks" segment, which includes pushing harder on its Grandma's Cookies, expanding distribution of its Gamesa brand of Mexican cookies and using its new influx of $100 million in advertising toward brands such as its Quaker Rice Cakes and other non-chip categories.

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