NABISCO BIDS TO RECAPTURE LOST LEADERSHIP: TURNAROUND TALE: BRANDS, CUSTOMERS DRIVE MARKETING

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"I was 6-foot-2 and had a full head of brown hair when I started this job," said Rick Lenny, president of Nabisco Biscuit Co.

In fact, Mr. Lenny is not tall and was prematurely gray before taking on his post. But those are about the only things that have remained status quo since he and his team took over the ailing $3.5 billion marketer in February 1998.

DISTRACTED FROM MARKETING FOCUS

At the time, a leveraged buyout had distracted management from a marketing focus. Ad spending had dropped precipitously. Nabisco's direct sales force, once the envy of the industry, was drastically scaled back.

Fewer new products were hitting the market. And existing product stars, such as SnackWell's, skidded to an all-time sales low.

Overall, the Oreo maker's cookie and cracker market share had eroded from the 44% mark to under 40% by early 1998.

"We had, quite frankly, abdicated our category leadership role," said Mr. Lenny, 47, in an interview at the company's Parsippany, N.J., headquarters. "Over the years we weren't supporting our brands, the category didn't grow, we lost share and competitors gained share."

Not anymore. Nabisco goes into this week's Food Marketing Institute annual supermarket trade show with a vastly improved direct store-delivery system; 30 product restages or seasonal products under its belt; and a 20% marketing spending jump.

Even though the unit's first-quarter share is flat, that's an uptick from the first half of 1998, which saw a 1 point loss. And in Nabisco's most recent quarter, the biscuit division reported a 2% increase in sales -- its third consecutive quarter increase and the first such showing in five years.

TURNAROUND MAKES PROGRESS

"I'm not declaring victory by any stretch," Mr. Lenny said. "But the turnaround is progressing."

By Mr. Lenny's account, that feat was accomplished by a simple formula -- becoming a company that's "consumer-driven and customer-focused."

That's meant looking outward first -- developing products and strategies based on consumer needs.

Nabisco revamped its internal operations, for example, dissolving its organizational line between sweet and savory snacks because "that's not the way consumers buy," Mr. Lenny said.

Nabisco also is working on a consumer model to deliver what it's calling Integrated Marketing Intelligence, defined as a means to determine and quantify the optimal level and mix of promotion for 20 of its brands.

The purpose is to find "where there are portfolio gaps and how best to spend our marketing dollars," Mr. Lenny said.

Those marketing dollars were once much more scarce.

"Not even adjusted for inflation, we were spending less on advertising in '97 then we were in '87," Mr. Lenny said.

Today, he said, "We are on the air with a Nabisco brand 52 weeks a year."

BRAND-BUILDING UPS BUDGET

In 1998, Nabisco promised a 20% increase in marketing spending across the board, a figure the company is expected to match or exceed in '99, even though Mr. Lenny declined to discuss spending specifics.

But he hastened to add: "The story isn't that the biscuit company is increasing its spending. The story is that we are increasing our spending because we have brand-building initiatives."

Among those in '98 were the "Chips Ahoy! Chipless Challenge," a promotion that will be repeated and asks kids to find a bag of the cookies without chips, and the "Don't Eat the Winning Oreo" promotion, in which actual cookies were embossed with prize designations.

So far this year, Nabisco is running an "Islands of Adventure" sweepstakes tie-in for several brands with Universal Studios' new theme park and planning a second-quarter "Endless Summer" promotion linking its crackers with Coca-Cola.

NEW ADS BEING PREPARED

Newly installed cracker shop J. Walter Thompson USA, Chicago, is preparing new advertising for Triscuit, Air Crisps and Wheat Thins, the latter reformulated with a wheatier, nuttier taste note.

Foote, Cone & Belding, New York, is at work on new Oreo advertising for kids and a teen-aimed spots for Chips Ahoy!

"What we're looking for is opportunities for these icon brands that haven't had some of the product improvements that have taken place in the category," Mr. Lenny said.

Last year, that meant lending news to existing products, with 30 restages or seasonal lines. Fig Newtons were rendered "more moist." Toastettes were given a Kool Stuf extension with new icing, flavors, packaging and promotions. Cheese Nips were given new Extra Cheddar and Pizza varieties. Wheat Thins got a new line extension, Big Wheat Thins, positioned as a crossover cracker to be used either for dips or as an accompaniment cracker.

Mr. Lenny holds up Teddy Grahams as an example of how marketing attention can revive a failing brand. In the 1980s, the teddy-bear shaped cookies were a $150 million business, but they had nosedived to $25 million in sales last year.

"We'd walked away from the kids segment," he reflected.

But Nabisco strode back in. It reintroduced the original bear shapes, refocused on the brand's original target market of 2-to-5-year-olds, broke new advertising and added a chocolate chip line extension.The result: "The business is up significantly," with double-digit growth, he said.

One reason Teddy Grahams stumbled was that the brand was a victim of Nabisco's fanatical focus on wellness, as it single-mindedly tried to pump up its flagging SnackWell's brand.

"SnackWell's was the most visible" sign of Nabisco's woes, said Mr. Lenny. "It was the hood ornament of our being able to turn around the company."

Not to mention an easy target for rival marketers.

The SnackWell's brand had shot up to $500 million in sales in three years, a phenomenal record. But it plunged easily, too. In 1996, '97 and '98, sales slid almost 20% each year; they bottomed out at $300 million last year.

Mr. Lenny said SnackWell's serves as an apt allegory to describe what had been wrong with the company as a whole -- it's habit of tapping an on-target trend but then not following through.

"We invented the wellness, better-for-you category and then we stood still. We let competitors come in," he said.

SnackWell's new ad strategy, along with new packaging and a stronger promotional focus on women, has helped put the brand back on track, although it still has a long way to go to regain its glory days.

ON ROAD BACK WITH RETAILERS

Nabisco also is on the road back with retailers, Mr. Lenny said, after a disastrous cutback of its direct store-delivery system.

"What we lost was single-store ownership of a sales rep. It's very important in a DSD-oriented organization to have people in the stores once a week, and in high-volume stores, perhaps twice a week," said Mr. Lenny.

Nabisco erred in "splitting up that single-store ownership and having anywhere from two to five people call on a store. That's where you lose relationships."

The company has been rebuilding those bridges with a test program now in about 70% of the nation's grocery stores. It gives sales reps back a small number of stores to work with, and adds improvements such as weekend service with some accounts because, Mr. Lenny said, 60% of category sales occur from Friday through Sunday.

STILL, EXEC IS REALIST

As far as Nabisco has come, Mr. Lenny remains a realist.

"Our business wasn't broken in a day, and it won't get fixed in a day," he said.

But it won't be for lack of trying.

"This organization has an unbelievable desire to win in the marketplace," the executive added.

Any doubts that the competitive fire is back in Nabisco's belly are banished by a walk through the biscuit division's marketing department. There desktops sport a framed photo of Keebler Foods' elf mascot Ernie -- lynched from the Nabisco

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