In a CPG First, General Mills Tries Groupon

12-Item Grocery Offer Drew Plenty of Takers, but Challenges Remain for Packaged Goods Marketers and Deal Site

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Betty Crocker, meet Groupon.

The 90-year-old brand icon -- once known for her hand-written responses to baking inquiries -- debuted today on the online daily deals site, as part of larger General Mills offering that the food giant says is the first consumer packaged goods partnership with Groupon.

The 12-item, home-delivered grocery bargain was offered in two cities and represents new terrain for Groupon, which has not actively targeted big CPG firms. Indeed, some experts have speculated that the typically slim profit margins and widespread name recognition at CPG firms had not seemed like a good match for the site, which has grown into a power by targeting lesser-known local merchants.

General Mills painted the move as an experiment. "We're always looking for efficient ways to sample our products and given Groupon's scale, we thought this would be a way to reach a sizeable audience," Karl Schmidt, the food giant's director of promotion marketing, told Advertising Age. "Our next steps are to evaluate the results -- I think the early read is positive -- and then factor the results into our next fiscal year, which begins in June."

The bargain, which tipped at midnight last night, was offered in General Mills' hometown of Minneapolis and San Francisco. For $20, the food giant offered a sampler pack of 12 grocery items delivered to the customer's door, including Betty Crocker Sugar Cookie Mix, Green Giant Niblets of Corn, Chex Mix and Hamburger Helper. The $40 value also included a $15 coupon book. Consumers scooped it up, with the Minneapolis deal selling out by 11 a.m. with 4,500 bought.

David Diamond, a CPG industry consultant, said General Mills should be "commended for sticking their toe in the water" of a platform so many other CPG firms have avoided. But the challenges are many, for sure.

One question plaguing CPG firms is if they can make a profit using Groupon's model, which relies on deep discounting. "It's a whole lot cheaper to ship a truckload of Cheerios [to a grocery store] than it is to ship a box of Cheerios [to a house]." Mr. Diamond said.

"The other question is what the nature of the Groupon consumer is," he said. "There's an argument to be made that Groupon consumers are consumers like all other consumers and, therefore, they are great people to sample. And there's another argument to be made that Groupon users are some slice of society that spends a tremendous amount of their time looking for deals and will do anything to get a deal," he said. And by using Groupon, General Mills might only be getting "a lot of people interested in buying their products -- but only when they are on sale really cheap."

General Mills is intent on driving new business to stores. "This is an in-home sampling program," Mr. Schmidt said. "It is not an ecommerce program. So our goal is to get trial across a breadth of products and get people to go into the grocery store with follow-up purchases."

Groupon made its name by targeting local restaurants, specialty retailers and service providers. But national players like the Gap and Barnes & Noble have jumped on board. Still, Groupon had seemed to downplay the possibility of working with CPG firms as recently as March, telling Ad Age that "packaged goods -- that's not why people look to us."

Groupon did not return calls or emails from Ad Age this morning.

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