Marketing shift sweeps food industry

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A marketing sea change is roiling the consumer food industry.

Faced with a failing economy and fearful Wall Street investors, food companies are realigning their executive rosters at top levels to drive a renewed emphasis on innovation and integrated marketing across their stable of brands.

Management shifts are afoot from behemoths such as Kellogg Co. and Kraft Foods to smaller players such as Ben & Jerry's Homemade as the industry struggles to be more effective and efficient to gain elusive top-line growth. "It's a dramatic change," said Gary Stibel, founder and principal of New England Consulting Group, "from brand management in the `80s to category management in the `90s and, now, to management for innovation."

Innovation had been put on the back burner as marketers undertook cost-saving initiatives to reduce debt incurred during recent consolidations, according to Gary Fraser and Brian Mattimore, co-presidents of Growth Engine Co. But now, with integration of acquisitions well under way-and rising pressure from shareholders to deliver growth and profitability- the focus is back on the future.

"Previously, innovation has been organized around brands or even categories, and these companies are saying that's not a big enough arena to play in," Mr. Fraser said. He added that now, when only $100 million ideas are considered worth pursuing, "business as usual isn't good enough," and said the easiest way to communicate externally and internally that innovation is a priority is to name a new VP or senior VP.

all about innovation

Kellogg earlier this year named both a VP-innovation for its Morning Foods division and a senior director of innovation for Keebler Snack Foods. Kraft recently named its first-ever president of North American businesses to oversee its five operating groups as well as new-product development. Sara Lee Foods-the newly consolidated Sara Lee Corp. unit housing formerly disparate meat divisions-named a president of innovations and business development. ConAgra Foods has a new VP-product innovation heading its Advanced Product Development team, while Ben & Jerry's has reorganized to include both a new director of brand management and a "mother of invention."

Sara Lee CEO Steve McMillin said last week that the company will focus on innovation among the key 30 or so brands that have $100 million in sales or above rather than turn to acquisition for growth. While each of the company's separate units will go about that in a different way, the newly consolidated Sara Lee Foods will identify new products and processes with the help of Jerry Laner, now president-innovations and business development.

At Kraft, five presidents responsible for building individual businesses previously reported to Kraft Foods North America President-CEO Betsy Holden, who is also co-CEO of Kraft Foods. Earlier this month, though, Irene Rosenfeld was named to the new position of president, North American businesses. Although a company spokeswoman said new-product development will continue to reside with group business heads under Ms. Rosenfeld, executives close to the situation offer that Kraft is indeed trying to go at cross-brand marketing and integration more holistically with the new position.

Kellogg's new VP-innovation for Morning Foods, Graham Petersen, is likewise trying to leverage the company's "powerhouse priority brands" such as Special K and Fruit Loops with a cross-functional team that takes ideas from brand managers and puts them through a disciplined process from R&D to launch. "Because innovation deals with future and long-term initiatives, it can sometimes get de-prioritized," especially when brand managers are focused on the day-to-day realities of their franchises in the market, Mr. Petersen said. But his dedicated team, internally dubbed "Food Works," is focused on creating products and licensed-property agreements that are, he said, "guaranteed, on-time and deliverable."

no drudgery

ConAgra, too, has created a long-range new-product team headed by Tracy Bargman that its Retail Products Co. President Marty Thrasher said is "unencumbered by the drudgery of the day-to-day." He said, "All of us [in the food industry] understand that in the war for share of stomach, ramping up the innovation agenda is key."

At Ben & Jerry's, new chief marketing officer Walt Freese has reorganized with both integration and innovation in mind. Since joining in June 2001, he's hired Marty Hogan for the new position of director of brand management to gain a consistent message across every consumer interaction, including international efforts and initiatives across retail scoop shops. Previously, those functions were handled outside of traditional marketing. As for innovation, Mr. Freese has placed Lisa DeNatale in the position of director of new products, or "mother of invention," and has brought the R&D function, or what he calls "Bizarre & D," under the umbrella of marketing.

But while many observers applaud the strategic thinking behind the management changes, some are skeptical. "Performance in the end is what's going to sway Wall Street, so if these changes don't come down to improved performance, it's just another level of fat in the organization," said Hormel Foods VP-Marketing Larry Vorhpal. n

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