Digital CPG Blog

Mary O’Connell of Clorox gave a great interview with eMarketer earlier this week (excerpt here).  In the interview, Mary talked about how Clorox has moved aggressively into social media in the past 18 months and is “creating a new vision of digital marketing, which is rewiring and re-imagining our entire brand experience.”

Mary mentions a number of great examples in the interview, including the launching the new Clorox Greenworks line which was supported by a blog site called the Shades of Green Journal and a program called 30 Days to Natural.

Why the strong move into social media and digital?  In the words of Mary, “we went where our consumers are.”  Another great example of a CPG brand adapting to today’s consumer.

As we’ve mentioned previously, manufacturers in non-CPG industries are increasingly using the online channel to sell direct to consumer (for example, Internet Retailer recently announced that manufacturers selling direct to consumer is the fastest growing online retail category in this year’s Top 500 Guide).

Mattel, the largest U.S. toymaker, made news this week with a new direct to consumer website that offers all of Mattel’s well known brands under one eCommerce site.  The site, located at Mattelshop.com, includes a number of innovative social features (full coverage here).

It is very interesting to see a manufacturer combine its broad brand portfolio into a single eCommerce effort.  But what I find even more interesting is the analogy to the CPG industry.  Both the toy industry and the CPG industry have a retail landscape that is dominated by a few giants.  Mattel, for example, generates approximately 1/2 of its revenues from three big retailers, Walmart, Target and Toys “R” Us.  The national CPG brands have similar distribution among a few retail giants.

The takeaway for me?  A big national manufacturer like Mattel can take bold steps to go direct to consumer online without disrupting  its traditional retail relationships.  

Shouldn’t the CPG industry be in the same position?  CPG manufacturers have an assortment problem in going direct on their own (something we are trying to help solve with our shared platform at Alice.com).  Are there other pitfalls to a CPG manufacturer going direct that aren’t present for Mattel?  If not, I think Mattel is leading the way in what is sure to be a bigger trend online.

In the past week, Walmart and Amazon have been engaging in a very public war over the price of popular new books sold online.  Walmart fired the first salvo with a $10 book price, and the two have traded cuts back and forth.  Amazon matched the $10 price, so Walmart dropped their price to $9.  Not to be outdone, Amazon and Target both went to $8.99.  Now Sears has joined the battle, with a very clever promotion (free books) that trades off the price war (more on Sears’ strategy here).

On the surface, this battle may not appear to be about CPG brands, but there are important lessons to take away.  At the end of the day, this isn’t about selling more books in the fourth quarter.  Instead, this is a battle for brand leadership.  These companies are fighting to be the most trusted, top-of-mind brand for consumers.  It is a battle worth billions.

The national CPG brands are fighting a similar battle in the face of increased competition from private label, retailer sku rationalization, media fragmentation, and a consumer focused on spending less in a tough economic climate.

Herb Sorensen recognized this fact in a very interesting commentary on the price war over on the BrainTrust blog.  In the post, Dr. Sorensen concludes that the way out of this “paying of customers to buy” is to “genuinely engage individual ‘shoppers’ in personal ‘conversations.’”  The result will be an engaged and highly profitable consumer who trusts your brand and seeks our your products and marketing.

Importantly, Dr. Sorensen points out that this one-on-one strategy isn’t available exclusively to retailers.  In fact, he argues that the national brands have an even greater opportunity to use one-on-one marketing to engage consumers across all their channels of trade and realign the balance of power between manufacturers and retailers.

Will the national CPG brands respond to this opportunity?  P&G announced a clever social media campaign with its Charmin brand yesterday, and I expect we will see many more efforts like this as national brands continue to evolve their marketing to stay top of mind with consumers.  Mark Addicks, the CMO at General Mills, laid out the challenge nicely in a recent interview in The Hub Magazine: “Part of the next frontier of brand identity is how brands are going to continue to grow in this world of consumer engagement.”  It appears that national CPG brands are ramping up their digital and social media marketing to do just that.

The Meijer grocery chain announced recently that it has expanded the test of its new online/store concept called Grocery Express into the Chicago area (coverage here and here).  The concept is pretty straightforward-the customer logs onto the Meijer website, picks out the items she needs and schedules a convenient pick up time for the order.  Armed with the customer order, Meijer “personal shoppers” grab all the items and package them up for pick up by the customer in a designated parking lot pick up zone.  The customer pays an extra $6.95 fee for the privilege of zipping into the parking lot to pick up the goods.

Webvan put a fork in the online CPG industry for several years, but innovation is starting to percolate again in this market.  For example, delivery services like Amazon Fresh are expanding, and CPG manufacturers like P&G have been making some noise about eCommerce lately.  (Our company Alice.com is certainly making a run for the mainstream CPG consumer as well).

It makes sense for a traditional retailer like Meijer to leverage its existing store infrastructure to deliver an online/offline hybrid offer.  So much sense that I suspect many traditional retailers will jump on this bandwagon if the concept shows promise.  But the key question becomes whether this will attract the mainstream consumer.  Our research at Alice.com shows that shipping fees have been a huge barrier to online CPG.  Will consumers view this $6.95 fee in the same fashion?  Another high profile launch of the “order online/pick-up” model, Sears MyGopher, hasn’t faired too well.

Time will tell whether Meijer will be more successful, but we’d love to hear your views.  Is the Grocery Express concept a winner for CPG eCommerce?

Want some evidence that private label store brands are becoming a huge threat to national CPG brands?  Look no further than Walmart’s recent efforts with its Great Value Brand.  According to a recent Ad Age article (subscription required) Great Value Brand sales are estimated to be larger than $10 billion.  $10 Billion.  As Jack Neff points out in the Ad Age piece, that means Great Value sales are:

• Nearly twice the worldwide revenue of Clorox Co. ($5.5 billion) or Hershey Co. ($5.1 billion).
• Bigger than the U.S. revenue of McDonald’s Corp. ($8.1 billion) or Kellogg Co. ($7.9 billion).
• More than the U.S. sales of Amazon (about $9.6 billion).
• Close to the sales of Dollar General Corp. ($10.5 billion).
• Approaching Procter & Gamble’s fiscal ’09 sales to Walmart Stores (about $11.9 billion, or 15% of P&G revenue).

The Great Value brand is out in front of a concerning trend for national CPG brands–Retailers are now full-blown branded manufacturers, and they are competing directly and effectively against you. In the U.S., private label CPG unit share has grown 1.2 percentage points to 22.8% and dollar share has grown 0.7 percentage points to 17.6%, according to this recent study by research firm IRI (via Retailer Daily).

The most concerning element of this growth? Private label brands are no longer cheap, generic versions of the national brands. In many cases, private label brands are working to lead the market with innovative products priced across a broad spectrum.  This is a huge, aggressive step for retailers.  As the folks at Integer Group pointed out in this recent post:

Branded consumer goods and private label have traditionally coexisted by way of segmenting the consumer population on perceptions of value. Those consumers who correlate value exclusively with price have been the rightful territory of private-label brands, whereas those consumers who use additional factors such as “performance” and “experience” have tended to lean toward branded goods.

Take-away: Retailers are no longer satisfied to be the bottom dwellers in the market.  They are going hard after the mainstream consumer and it is working.  It will be very interesting to see how the national brands respond.

Private label-circa 1980

Private label-2009

Mark Addicks, General Mills’ chief marketing officer, gave a very insightful presentation on General Mills social media strategy at a recent BlogWell conference in Minneapolis. The presentation (located here) lasts about 20 minutes and is well-worth a listen. You can also check out Mark’s slides below:
BlogWell Minneapolis Social Media Case Study: General Mills, presented by Mark Addicks

It is great to see a big player like General Mills beginning to embrace social media with such gusto.  As Mark mentions in his presentation, General Mills is working hard to “bring scale to social media.”  A few key takeaways:

• General Mills understands that “the consumer owns our brands,” which is part of the overall shift in marketing that social media is driving
• General Mills is working hard to get closer to its consumer in lots of ways, and social media is a big part of that push
• A good social strategy enhances “margin advantage”
• General Mills is now launching many of its new products “conversationally” with social media

Want further evidence that General Mills is going after social media in a big way?  Mark mentions (almost in passing) that the Betty Crocker brand is almost completely out of t.v. in favor of social media.  That is a pretty amazing statement, but seems to make perfect sense when you see studies like this.

What other CPG brands are using social media in effective ways?  P&G’s Loads of Hope campaign comes to mind, but we’d love to hear of others.