Consolidation leaves CPG leaders in control of more brands as retailers watch for a loyalty marketing assist.
Retailers could get more of a good thing as packaged goods consolidation continues.
Its planned purchase of Pillsbury gives Minneapolis-based General Mills new supermarket aisles – and brands – to play out its well-respected marketing abilities.
In July, General Mills said it will buy Pillsbury, also Minneapolis, from London-based Diageo in a $10.5 billion stock swap. That follows Kraft Foods’ purchase of Nabisco (which is expected to close this month), Unilever’s buyout of Bestfoods, and ConAgra’s acquisition of International Home Products (August PROMO).
And it ain’t over yet: At press time, word was that Kellogg might buy Quaker Oats Co. or Keebler, and that H.J. Heinz and Campbell Soup Co. may pair up. (ConAgra continued its shopping spree, too, buying vegetarian and soy foods maker Lightlife Foods, Turners Falls, MA.)
The General Mills deal may have immediate impact on consumer promotion, especially in-store merchandising.
“Retailers are looking for General Mills to ratchet up marketing on Pillsbury brands,” says Jack Ryder, president of consultancy Cannondale Associates, Wilton, CT. “Retailers see four companies as the real elite: Procter & Gamble, Kraft Foods, General Mills, and Coca-Cola. As Kraft picks up Nabisco and General Mills buys Pillsbury, retailers are looking for [those companies] to bring marketing expertise on a broader brand level.”
Mills/Pillsbury’s combined $13 billion portfolio is heavy on convenience foods; 80 percent of retail sales come from ready-to-eat or quick-to-prepare items. And Pillsbury’s brands are in faster-growing categories than Mills’ are. That should bump annual sales growth at least one percentage point to seven percent, says Mills ceo Steve Sanger.
“Virtually all of Pillsbury’s leadership brands compete in growing market categories, several of which represent dynamic new growth platforms for General Mills,” Sanger said in a statement announcing the deal. “We see excellent opportunities to build these businesses with the same mix of product and marketing innovation that has been fueling consistent growth by our current portfolio.”
The deal gives Pillsbury brands “the right platform from which to achieve their full potential,” says Diageo ceo Paul Walsh. Mills is expected to sell off Pillsbury’s North American dessert mix business and Green Giant canned vegetables by 2003.
Ryder predicts more cross-category branding. “As General Mills buys into frozen and refrigerated expertise, there’s a huge opportunity to roll out Betty Crocker, for example.”
The Mills also could provide more meal solutions as its brand portfolio broadens to more aisles. That’s good news for retailers eager to compete with Wal-Mart.
“Retailers are concerned about consolidation, about Wal-Mart, about their ability to retain customers’ loyalty,” Ryder says. “They see their own customer loyalty as the key to defend against Wal-Mart. The more that manufacturers bring meal solutions and total solutions programs, the better retailers can serve their own customers.”
The key over the next two years will be customer loyalty. “Retailers are very worried about it,” Ryder says. “They need to find a way to keep consumers in their stores and away from Wal-Mart.” Proactive manufacturers may find willing partners for promos that piggyback grocers’ own loyalty programs or more intricate account-specific campaigns.
At the same time, manufacturers “have to be careful how closely they dance with Wal-Mart,” Ryder warns. “They don’t want to give up the volume Wal-Mart has, but they don’t want to alienate other retailers. It’s a tough balancing act.”
The acquisitions are being scrutinized. In August, the Federal Trade Commission asked for more information from Kraft/Nabisco and from General Mills/Pillsbury. Both Kraft and General Mills issued statements that such requests are not uncommon in transactions this big. The Mills/Pillsbury deal is expected to close late this year.
In 1997, the FTC ruled that Mills’ purchase of the Chex cereals portfolio from Ralcorp Holdings might inhibit private-label competition. The FTC required the Mills to permit a new company, New Ralcorp Holdings, to make (or sell off) private-label cereal similar to Chex. Three years later, the Chex business is healthy at Mills.
Dairy Management, Inc., Rosemont, IL, is targeting school kids with a contest awarding up to 1,000 Britney Spears posters.
The Crazy for Milk and Britney Spears Chocolate Milk Trivia Challenge runs through Oct. 15 at whymilk.com. Kids answer trivia questions and mail in their entry; randomly drawn winners get posters of Spears with a milk mustache. BSMG Worldwide, Chicago, handles.
The contest is part of DMI’s title sponsorship of Spears’ concert tour. Spears’ management approached DMI last fall to have Got Milk? sponsor her 2000 tour and make the teen singer’s image more wholesome.
In September, DMI held a week-long auction of Got Milk? memorabilia on e-bay.com featuring such items as signed posters and ad reprints from the Backstreet Boys, Elle McPherson, and David Copperfield; copies of ads; signed copies of the Milk Mustache Book; and Got Milk? toys. The auction is a fundraiser for Big Brothers/Big Sisters of America.