KELLOGG LOSES APPETITE FOR ENSEMBLE PRODUCTS

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Kellogg Co.'s much-hyped, cholesterol-lowering Ensemble line hovers on the brink of extinction just six months after it was scaled back from a five-market launch.

Industry executives said that the functional foods brand -- now solely in test in Grand Rapids, Mich. -- is floundering on store shelves. Some of the items that initially spread over seven categories from cereal to bread and frozen food have already been pulled. Executives close to the company predict it could disappear by yearend.

Signaling Kellogg's disappointment with the product, Dr. William Mayer, Kellogg's champion on Ensemble who had been boosted to exec VP-new business development in March during the brand's highly anticipated launch, resigned abruptly late last month.

NO REPLACEMENT YET

Kellogg has yet to name a replacement, although Donna Banks, senior VP-global innovation, who had been passed over for Dr. Mayer's job, has in essence been leading the department.

Dr. Mayer's leave-taking comes four months after the company folded its formerly separate Ensemble Functional Foods division into Kellogg, renaming it Natural & Functional Foods, suggesting a far broader definition of the emerging category.

RED FLAGS

Ensemble had initially been set to roll national early next year, but by late spring Kellogg limited the lineup, citing problems with distribution and merchandising. An executive close to the company claims huge red flags that were raised from the start -- including packaging that retailers cited as generic -- have finally succeeded in driving the brand to the ground.

"Although there is talk of a 2000 plan to go into another major market test, there's really nothing here and my guess is Ensemble will be gone by the end of the year," he said.

Kellogg officials deny the company is pulling the plug on its functional foods.

"We're still evaluating the marketplace and gaining learnings, and certainly we will be retooling and moving forward," said Stephen Benoit, president of Kellogg's Natural & Functional Foods division. "Our commitment to Ensemble is not waning." He declined comment on what changes would have to be made to the brand.

At Grand Rapids, Mich., retailer Spartan, which along with the Meijer chain has acted as a testing ground for Ensemble, "the grocery items within the line have bombed and we've pulled them," said one industry executive, adding that the brand name "means nothing all by itself in the frozen department."

He blames Kellogg for failing to put much marketing support behind the products, partly because the marketer limited Ensemble to only 35 of the chain's stores. Kellogg spent only $2 million in media against Ensemble via Y&R Advertising, New York, during the first half of this year, according to Competitive Media Reporting.

FUNCTIONAL DIFFERENCES

Kellogg's approach to functional foods, a category expected to reach $17 billion by 2001, according to Grocery Manufacturers Association, contrasts greatly with that of McNeil Consumer Products and Unilever, marketing the cholesterol-lowering Benecol and Take Control, respectively.

While Kellogg simultaneously launched an ambitious 21 products -- some in categories where it had comparatively little expertise -- Benecol was introduced with two spreads and later expanded to salad dressings and snack bars. Take Control, too, started out with just spreads and has since added salad dressings.

Both also have packed a wallop in media support. McNeil has put a whopping $100 million in media spending against its Benecol campaign from Saatchi & Saatchi Advertising, New York, while Unilever is heavily supporting Take Control with spots featuring talk show host Regis Philbin as spokesman, created by McCann-

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