Sidestepping Obsolescence

Case Study: How One Marketer Anticipated Consumer Demand and Delivered

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Hard as it may be, it's a question every CEO and CMO today must meet with an honest answer: Is your brand obsolete?

Second Helpings: Within 36 months ConAgra expanded the Healthy Choice brand to 15 products.
See a timeline of events surrounding ConAgra's launch of the Healthy Choice brand

This means taking a cold eye to today's metrics of sales performance and ruthlessly tracking how well the brand satisfies the current and untapped demands of your core customers. It also calls for a disciplined approach to betting on unspectacular brands with enormous promise over seemingly healthy brands that are in fact already on life support.

The fact is that every brand is in danger of becoming obsolete, especially those that appear to be the safest and most profitable. The simple reason is that the consumer insights that help managers conceive and launch most brands are often three, 10 or, in some cases, 30 years old. Successfully acting on fresh insights takes that long, especially in large companies with complacent cultures. As a result, many ostensibly healthy brands can become dogs overnight if a competing brand captures untapped demand with something new and improved.

Who's who of orphan brands
Successful brands resonate with powerful consumer interest, which is always evolving. In 1988, I was VP-new products for the frozen-foods division of ConAgra. At the time, ConAgra ranked fifth in the frozen-prepared-meals field. The category was dominated by the most successful and powerful food companies: Nestle with Stouffer and Lean Cuisine; Campbell with Le Menu and Swanson; Heinz with Weight Watchers; and Kraft/General Foods with Budget Gourmet. Our brand portfolio was a who's who of orphan brands. We had purchased Banquet from RCA and Armour Dinner Classics from Dial. Those were our cornerstone brands, and we categorized them on the basis of price. Banquet was the largest value brand and Armour Dinner Classics the premium entry. Armour had been losing share to Le Menu for several years, and it was clear that consumer loyalty to the brand was rapidly eroding.

It took a heart attack to shake us from our complacent and, one could say, unhealthy ways. ConAgra Chairman Mike Harper had a heart attack in 1987, and his doctor recommended a diet that was low in fat, sodium and cholesterol. Mike quickly found, however, that no brand existed that could meet this "healthy heart" demand. And so his wife, Josie, developed a turkey chili recipe that not only met those nutritional requirements but also tasted great. When Mike brought the chili to work he had a revelation. The $20 billion food business he was running could create a product line that tasted great and was low in fat.

Our original positioning targeted heart-attack survivors. Indeed, our working brand name was "Healthy Heart." But we discovered a major area of untapped demand quite early on in our consumer-insight research. At the time, "healthy" products were defined on the basis of low calories. Yet consumers were beginning to realize that "low fat" was a more meaningful nutritional advantage. And no brand had embraced this new insight as its primary benefit. Like Mike, a large segment of consumers was looking for low-fat foods. These were not just heart-attack survivors. They were part of a much larger group of consumers interested in a healthy, low-fat alternative.

Defining 'healthy'
So we evolved the entire brand to a more mainstream positioning and changed the name to "Healthy Choice." We needed to send a very clear signal that these products truly understood and responded to customers' strong demand for healthful foods. We took the lead in literally creating a new definition of what healthful meant. At the time, in 1988, consumer-package-goods products did not have to carry nutritional labels, as there were no common standards for low fat, sodium and cholesterol levels. Working with Dr. David Kessler of the FDA, ConAgra developed a definition that a low-fat meal had to derive less than 30% of its calories from fat and 10% from saturated fat. As a result of this work, companies were required, for the first time, to place a comprehensive nutrition label on every food and beverage package.

With an eye toward essentially creating a new niche, ConAgra developed and launched the Healthy Choice line of 10 premium dinners. Before launching the line, Mike Harper made a critical decision. Rather than protect Armour Dinner Classics, our premium dinner entree, Harper declared the market would decide whether the brand was obsolete. Healthy Choice was developed to maximize consumer appeal without concern for potential cannibalization of its sibling brand.

Fortunately for ConAgra (though not so for Armour Dinner Classics), Healthy Choice's introduction captured the powerful and largely untapped demand for low-fat products in virtually every grocery category. Within 36 months we expanded the brand to 15 categories and, in so doing, created a multicategory Healthy Choice consumer. The brand grew to $1.7 billion in revenue within five years, adding up to $5 billion in ConAgra's market capitalization and setting the company on course to become one of the largest and most successful brand-management companies in the industry. Over time, ConAgra's overall market share in frozen prepared meals climbed from 10% to 25%, enabling it to leap from fifth place to second.

Just rewards
Ultimately, Healthy Choice proved to be the catalyst for a new, low-fat food category that grew to more than $10 billion, proving the need to challenge markets through innovation when it becomes clear that existing brands are running on empty -- even if that means making an existing brand obsolete. Within a few years of the Healthy Choice launch, both Kraft and Campbell exited the frozen-food category, while the Le Menu and Armour Dinner Classics brands disappeared. These brands had been relying on obsolete consumer insights and had no chance of competing with an innovative product focused on a new dimension of consumer demand.
Steve Hughes is a director with the Cambridge Group and chairman-CEO of Boulder Specialty Brands. He was hired in 1988 as VP-new products of the ConAgra frozen-foods division, where he was responsible for launching the Healthy Choice line.
Steve Hughes is a director with the Cambridge Group and chairman-CEO of Boulder Specialty Brands. He was hired in 1988 as VP-new products of the ConAgra frozen-foods division, where he was responsible for launching the Healthy Choice line.

We understood that we could become obsolete at any point and did not stop innovating, expanding the core offering beyond the frozen-dinner platform into other major prepared-food categories over the next three years. The products had to taste as good as or very close to the full-fat market leaders in taste tests. In every category except one, we gained 8% to 10% market share. Our one failure was in Healthy Choice cheese, where we chose a zero-fat rather than low-fat product even though the taste was outside of our threshold range. Consumers, as always, voted with their taste buds.

Of course, consumers always choose to move forward, rewarding the companies that anticipate their demands and punishing those that don't. Today Healthy Choice has fallen from a $1.6 billion brand to $700 million. Indeed, it remains an impressive and popular product. But it also serves as a stark reminder that even brands that have made others obsolete are always in danger of becoming obsolete themselves.
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