Kellogg to cut snack spending

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Kellogg Co. will focus less marketing spending on traditional media for snack brands Nutri-Grain and Rice Krispies Treats squares as it integrates them under its newly acquired Keebler Foods Co. unit.

The two brands, along with products in the Kellogg pipeline, are part of a new morning and wholesome snacks group housed at the Elmhurst, Ill., headquarters of the cookie and cracker company Kellogg acquired in late March. But the physical move is not all that has changed for the brands. Although advertising will still be part of the mix, Kellogg will put more emphasis on the "in-store theater" Keebler is known for as it leverages the power of Keebler's direct-store-delivery system for the brands, said Jeff Johansen, VP of the new Kellogg snacks group.

"In the past we've had to rely on deep feature discounts and heavy advertising on top of that to drive consumer pull, but now that we have people visiting stores 2.2 times a week, we have a huge opportunity to drive the brands at point-of-purchase," Mr. Johansen said. To do that, Kellogg will shift spending from media toward strong trade programs, in-store programs and more promotions, supplementing those efforts with ad campaigns that can "live in these multiple areas," he said.

Kellogg spent $50 million in media on snack brands in 2000, according to Taylor Nelson Sofres' CMR. Kellogg spent $24 million on Nutri-Grain, $16 million on Rice Krispies Treats squares and $10 million on the launch of Snack 'Ums, a line of cereal-based canister snacks. However, Snack `Ums did not gain the critical mass to warrant costly direct-store delivery and will be abandoned, according to executives close to the company. A Kellogg spokeswoman confirmed it plans to discontinue the line. Bcom3 Group's Leo Burnett Co., Chicago, handles advertising for the brands.

Earlier this year, Kellogg pulled marketing for Nutri-Grain and Rice Krispies Treats altogether as it switched inventory from store warehouses to Keebler's warehouses and delivery trucks. This month, Kellogg will restore advertising for Nutri-Grain with a print, outdoor and TV campaign dubbed, "Respect yourself in the morning." Rice Krispies Treats will not get any advertising until at least the middle of first quarter 2002. The most recent campaign for Rice Krispies Treats, with the tagline "Best when eaten," included a spot featuring an unlucky subway straphanger who loses an arm. The campaign won awards including Ad Age's Best Award in the grocery-products category.

IN-STORE FOCUS FOR TREATS

"We haven't identified a campaign that has business-building potential on Treats, so in the interim we will focus on great in-store activities," Mr. Johansen said. Among the efforts is a locker display touting a back-to-school promotion with the Cartoon Network kicking off Aug. 15 that offers kids a variety of Cartoon Network-themed merchandise to "tune up your locker," floor graphics leading consumers to the Treats in the snack aisle, and ads in retailer circulars.

This year's back-to-school effort for Kellogg, which also will tout Nutri-Grain, Pop-Tarts and Kellogg cereals, will not include Keebler brands because of the timing of the acquisition. In the future, Kellogg will likely combine its full new roster for a large-scale effort on par with this year's Kraft Foods/Nabisco promotion (AA, July 16).

Keebler brands, now overseen by Kellogg's former general manager of convenience foods Doug Van de Velde, will not necessarily receive more media spending than in the past because of its new parent, but will likely get better-quality media buys as a result of Kellogg's leverage and scale, according to another executive close to the situation. Keebler spent $24 million in total on measured media in 2000, according to CMR. Going forward, Kellogg will put the bulk of its spending toward building Keebler's $300 million Sunshine Cheez-It brand.

Kellogg's decrease in traditional media spending for its snack brands follows a downturn in media budgets overall at the company this year, said Banc of America Securities analyst Bill Leach. He cited statistics showing Kellogg's spending is down 30% for the year, and down 58% for the month of April.

Although a Kellogg spokeswoman said the company's stated long-term strategy is to "put more investment in value-added advertising and promotion," Mr. Leach suggested Kellogg "hasn't been fully spending against its brands for a while." Instead, he said, the company routinely cuts spending to boost its bottom line, "a short-term strategy [Campbell Soup Co. CEO] Doug Conant recently called the `circle of doom."'

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