CHICAGO (AdAge.com) -- The package-goods model has always been a no-brainer: Create a mass-appeal product; distribute it nationally; stoke demand with big-budget, shotgun-style advertising to spray the widest possible market; and hope sales hit the magical $100 million first-year benchmark.
But in this age of personalized web pages, super-sophisticated direct marketing and social-media tools that allow like-minded consumers to share and promote products, that traditional model is evolving at major marketers like General Mills. The $14.7 billion package-goods giant is now offering gluten-free baking products aimed at the 2% of the population with Celiac disease (which is characterized by an intolerance to gluten), and the additional 10% interested in avoiding gluten -- a niche the industry would once have dismissed as too small to target profitably.
"The classic new-product-development model was all around finding costs to pay for TV advertising," said Ann Simonds, General Mills' president-baking. But while TV is still the best way to generate mass trial and awareness, it's "not the only way anymore." Especially to reach consumers who require gluten-free foods, who are, of necessity, savvy social networkers.
But it's not just 88-year-old Betty Crocker adopting a more forward-thinking marketing recipe when it comes to package foods. Supermarket Guru Phil Lempert said the major industry players aren't just looking to develop billion-dollar brands anymore. "Just like fragmentation of TV viewing, we're seeing the same thing on supermarket shelves," he said. "It's not just about coming up with a product and selling a $1 billion or $100 million. They have to carve out these niches that very own-able and brand reliant." He added that package-food companies have grown increasingly responsive to consumer requests, removing high-fructose corn syrup, antibiotics and growth hormones whenever it makes financial sense.
Moreover, in many cases, package-goods players are developing their own niche products rather than relying on the old model of waiting to see if an upstart niche brand will be successful and then snatching it up, much like Coca-Cola did when it purchased the now-mass Vitaminwater. "For a while, the larger companies said, 'We'll let someone else do it, and then buy them if they're any good,'" said Bill Bishop, chairman of consulting group Willard Bishop. "Now it's become evident that you give up too much in opportunity by letting it get developed by the smaller players."
But what about the second key ingredient to product success, mass distribution? After all, gluten-free products would appear to run counter to the trend of retailers decreasing their product assortment counts 15% or more. But Mr. Bishop said stores are really shedding duplication, such as dozens of kinds of olive oil, and that frees up room for new products that target a need.
"What we're finding is the stores aren't really getting smaller; the retailers are saying, 'We're going to take the No. 1, No. 2 and No. 3 brands and our store brands, and that's it,'" Mr. Lempert said. "So there's more shelf space available than a year ago, and it allows for more [varieties] of the No. 1, No. 2 and probably No. 3 brands and store brands."
In the past year, gluten-free baking products became the most consumer-requested item at General Mills, a fact Ms. Simonds said was partly gleaned from social media as the company has more and deeper conversations with consumers. What was once a call to the consumer hot line or a two-paragraph letter is now an in-depth conversation about feelings and need states.
"The combination of talking to our own employees who have this challenge and the consumer requests we've been receiving -- the number there were, their depth and the passion -- was really compelling," Ms. Simonds said. "The fact that it happens to be a niche or smaller group of people than we traditionally serve didn't faze us, because we have this vehicle in the internet that allows us to reach those folks."
General Mills launched a gluten-free version of Chex cereal last year, and gluten-free Betty Crocker baking mixes hit the shelves last month. The platform is launching with mixes for chocolate-chip cookies, brownies, devil's food cake and yellow cake.
Dena Larson, marketing manager-baking products at General Mills, said while consumers with Celiac disease are a small percentage of the population, they are well-connected. She said rumors that General Mills was developing gluten-free baking products spread across Twitter like wildfire.
Since the audience was already clamoring for gluten-free news, General Mills knew consumers would carry the message. "We felt that this was a product that was going to be marketed almost entirely digitally," said Kelli Ask, interactive-marketing manager at General Mills. "We knew this was a group of very passionate consumers, always talking to each other and looking for solutions."
The company has partnered with the major Celiac disease foundations, and invested in search-engine optimization. That's a logical move, since Ms. Ask said once a person gets a Celiac diagnosis, "the first thing they do is turn to the search engine to figure out what they can eat." And when they do, "We want them to enter 'gluten-free' or 'Celiac' and be directed to our website."