KODAK NARROWS MARKETING PICTURE

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Eastman Kodak Co.'s George Fisher is borrowing from the past to build for the future, refocusing the company on its core imaging business and earmarking at least a 10% increase in consumer ad spending for 35mm films and cameras

Last week, Kodak announced that it will divest its non-core pharmaceutical, household products and Clinical Diagnostics divisions to concentrate on imaging (photographic, health and information) for greater long -term growth and profits.

The divestitures would cut Kodak's current annual sales of $16.4 billion by an estimated $3.7 billion, or 22.6%, but afford it more resources for imaging projects and marketing in general.

"You will see us dedicating more toward marketing and advertising," said Mr. Fisher, who in October joined Kodak from Motorola as chairman, president and CEO. "In my opinion, we were trying to do too many things with not enough resources ... At least this way we will win the imaging war."

Reaction was swift. Kodak's stock on May 3, the day of the announcement, closed at $46.125, up $1.375 per share in heavy trading. Colgate-Palmolive Co. CEO Reuben Mark told his company's shareholders May 5 Colgate was interested in Kodak's L&F household products unit. Separately, speculation the Sterling Winthrop drug unit would be sold drove up Kodak's stock price by $3.25 in one day.

Such a sale has long been rumored. Bayer aspirin has seen double-digit sales declines and Bayer Select non-aspirin analgesics have been disappointing. Roche Holding; Bayer AG, which lost the North American brand rights after World War I; and Elf Sanofi, a Sterling partner, are all said to be interested suitors.

Sterling's agencies include BBDO Worldwide, New York, which recently won the $65 million Bayer account from N W Ayer; and Ammirati & Puris, for Midol menstrual pain relievers and Phillips' laxative.

While Wall Street welcomed Mr. Fisher's decision to sell off Kodak's allied businesses, analysts recommended he re-examine Kodak's marketing department.

"They need to hire some new blood," said Brenda Lee Landry, an analyst at Morgan Stanley & Co., New York.

Analysts have also faulted Kodak for not clearly defining its mission in the digital revolution, an area that Mr. Fisher indicated needs more analysis. "The talk is getting ahead of the walk," he said.

Already, Kodak has approached agencies about assignments related to its estimated $75 million account, the majority of which is handled by J. Walter Thompson USA, a Kodak agency since 1930.

Kodak denied it's looking beyond JWT to handle consumer ads.

A new campaign that will bow shortly was developed under the stewardship of Mr. Fisher's predecessor, Kay R. Whitmore, who was ousted by Kodak's board last August after failing to cut payroll and stem the erosion of Kodak's 68% market share in 35mm films.

Kodak will break a brand specific ad campaign this spring for its FunSaver line of single-use cameras plus the Kodak Royal Gold and Gold films. The campaign will stress quality and value, trying to distinguish Kodak films from one another and their private-label and Japanese competitors in the $3 billion industry.

"The pricing pressures in the market are very real and are not going to change," Mr. Fisher said, making it incumbent upon Kodak to "provide added value so we can charge the prices we dictate for our products."

In January, Kodak unveiled a three-tier film pricing strategy with the introduction of its economy-price Funtime film, which is unadvertised.

JWT's upcoming campaign for Kodak's Royal Gold and Gold brand films will explain why Kodak should be bought and when each of the films should be used.

"Our intent is to be more aggressive and reinforce the belief that consumers have, which is that Kodak is the preferred brand for all their photographic needs," said Gregory Walker, manager of marketing communications for Kodak's consumer imaging for the U.S. and Canada.

Mr. Walker said the ad hike for films and cameras will be a minimum of 10% and conceded it could be much higher. Kodak spent $36 million on film and camera media advertising in 1993, according to Competitive Media Reporting.

In the quest to continue growth in its consumer imaging line, Kodak is working on a joint venture with Minolta Camera Corp., Canon, Nikon Corp. and Fuji Photo Film Co. to develop smaller film cartridges that would make tinier cameras a reality.

Emily DeNitto contributed to this story.

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