Kellogg raises snack ad spending 20

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Despite the resignation of its snacks division president last week, Kellogg Co. is pushing ahead with a plan to build its flagging unit with an ad increase of well over 20% and a renewed focus on innovation.

Kellogg USA President David Mackay, who will head up the division until a replacement for short-time snacks president Paul Lustig can be named, will unveil specifics of the new ad plan at a meeting of the Consumer Analysts Group of New York this week.


The increase in media expenditures will be "significant," Mr. Mackay said, far greater than 20% above the $43 million Kellogg spent on its snack brands during the first 11 months of last year, as measured by Taylor Nelson Sofres' CMR. Although advertising-all from Publicis Groupe's Leo Burnett, Chicago-will get the biggest influx of spending, Kellogg will also increase promotional efforts, in-store activities and package-design initiatives. "We haven't been spending relative to our share of market at the level we need to build and grow our brands," Mr. Mackay said. That fact was underscored by Kellogg's latest fourth-quarter earnings results, in which sales of the unit declined 4%.

change in plans

Before Kellogg acquired the Keebler brands that make up the lion's share of its snack portfolio in mid-2001, Mr. Mackay said the focus at that company was on "buying, integrating and taking costs out and, as a result, the core business wasn't doing that well." Now, however, Kellogg will focus on strengthening and investing behind its core brands, among them E.L. Fudge, Sandies, Nutri-Grain, Cheez-It and Chips Deluxe.

Although Mr. Mackay said "breakthrough innovation takes an eternity... a lot longer than what [Wall Street] analysts will give you," the company is launching a variety of new lines in 2003 to make up for a previous lack of new products, especially in the biscuit category. Last month, the Snacks division launched E.L. Fudge Blasted, along with the first advertising for the cookie line in 11 years. In March, Kellogg will launch Sandies Swirls with an ad effort touting the brand as one relaxing cookie, and will extend its long-term alliance with Walt Disney Co. to launch new Mickey's Magix Middles cookies and a new chocolate chip variety of Disney Rumbly Grahams.

new launches

New Cereal & Milk Bars (Froot Loop and Frosted Flakes varieties) launch this month and will be supported in May with ads that leverage the Toucan Sam and Tony the Tiger characters from the two cereals. Kellogg will also push new Nutri-Grain Muffin Bars and Special K Bars (which launched last summer but were not advertised because of supply problems.)

Other ad spending will go toward a print campaign touting its Murray's Sugar-Free cookie brand to diabetics pushing its "surprising" good taste, while existing campaigns for Cheez-It, Club Cracker and Nutri-Grain will get more weight behind them. News on Chips Deluxe is coming soon, Mr. Mackay said. Packaging, will also be revamped on a number of key brands later this spring.


Analysts applaud Kellogg's initiatives, citing lack of advertising for the biscuit category as a whole compared to other product categories. One analyst cited somewhat "mindless" line extensions on Keebler brands, such as its unsuccessful Sesame Street-licensed line, and offered that "hopefully [Kellogg] will step up the innovation," especially in cookies where they most need it.

Keebler's total cookie sales in 2002 totaled $728.8 million compared to $1.6 billion in cookie sales for Kraft Foods' Nabisco brands, according to Information Resources Inc. In crackers, Kellogg's 2002 sales totaled $918.8 million to Nabisco's $1.7 billion, and the company is the leader in snack bars, with sales of $317 million.Mr. Mackay acknowledged that Nabisco has been able to leverage the scale of its massive equities-"in most instances two, three, even four times ours." He offered that, "if we don't strengthen and invest our brands, it makes us more vulnerable to competition."

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