The party's over: Food

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The food industry, more impervious than most to economic downturns, is vowing to increase spending on marketing and advertising in the coming year.

Major players in the industry, among them Campbell Soup Co., Kellogg Co. and ConAgra Foods, all have pledged to boost ad budgets in the wake of criticism over prior years' brand-denigrating cost-cutting measures. And a spate of mergers announced in 2000 could lead to more ad spending in 2001 as new owners turn up marketing to energize their costly acquisitions.

"Food companies are looking to reinvest in marketing because they've found that their sales have gone south as a result of cutting ad spending in favor of trade discounting and promotions," said Burt P. Flickinger III, managing director for Reach Marketing. "For both marketers and agencies, there is a good possible upside next year to offset dot-com advertising as these major consumer products companies seek to create greater consumer demand for their brands."

Campbell, for one, already has begun increasing media spending for its soup brands by more than 20 percent during the crucial August through January period. The company spent $89 million in measured media from Aug. 1999 to Jan. 2000.

"At the outset of the fiscal [2001] year, we said we'd support our brands earlier, more aggressively and with more focus against our big guns," said a Campbell spokesman. As a result, he said, sales for Campbell's soup brands rose more than 10 percent in November - and "since the results are looking good, we're going to keep on pressing." BBDO Worldwide, New York, is Campbell's major agency.

Kellogg, too, is hoping to revive its slow-growing core segment - cereal - with focused ad efforts that aim to rebuild relationships with consumers. Those relationships fell apart after years of harping too much on price promotion, according to an executive close to the company.

ConAgra and H.J. Heinz Co. likewise expect to return to higher ad spending levels in the coming year by rechanneling savings from recent restructuring efforts into heavily-supported new product innovation.

Mr. Flickinger points to the ubiquitous merger-and-acquisition activity among food marketers as a factor in rising ad spending for the industry. He noted in particular PepsiCo's pending purchase of Quaker Oats Co. as a likely boon for undermarketed Quaker cereal brands and Philip Morris Cos.' acquisition of Nabisco Holdings Group as a potential windfall for a variety of ad-starved Nabisco cookie, cracker and confection brands.

Quaker's major agency currently is FCB Worldwide, Chicago. FCB's New York office is a Nabisco agency, handling its cookie account, while J. Walter Thompson, USA, Chicago, handles its cracker lines.

Prudential Securities analyst John McMillin also sees an uptick in ad spending. "As food companies get bigger and stronger, the outlook for advertising spending actually gets better, not worse," he said. The reason, Mr. McMillin said, is that M&A activity provides cost savings intended to be reinvested in marketing.

The newly combined Unilever and Bestfoods have pledged to grow advertising against a whittled portfolio of "Master Brands" in the food industry, much in the same way Unilever has done with its personal care brands, according to a company spokesman.

The new food behemoth, created with Unilever's October purchase of Bestfoods, likely will be followed in its efforts by an enlarged General Mills, about to integrate long-ignored Pillsbury brands; by Kellogg, which soon will be able to add a portfolio of strong Keebler Foods brands; and by other expanding food companies looking to reintroduce consumers to old brands and new ones.

"The New Year's resolution for food companies every year is more advertising, less consumer promotion," said Mr. McMillin. "Due to acquisitions, they may actually be able to fulfill their promises this year."

Copyright January 2001, Crain Communications Inc.

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