The Comfort Factor – Cover Story, June 2006

By Richard Turcsik

When it comes to consumer packaged goods, manufacturers say convenience is the name of the game.

Knucklemuck. It’s the sticky, gooey residue that coats your knuckles and the back of your hand when you dig a scoop into an ice cream container to scrape the dregs on the bottom. The folks at Wells’ Dairy say knucklemuck is a thing of the past now that they’ve redesigned the packaging of Blue Bunny ice cream. The half-gallon paperboard has given way to an oval plastic Tupperware-style container with a burpable lid.

The innovation, inspired by a desire to make things more convenient for the consumer, typifies the thinking at many consumer packaged goods companies today as convenience drives the growth and transformation of the CPG industry.

“Consumers have told us that when you get part way through using a paper container it collapses and doesn’t close very well, so this stays solid,” says Dave Smetter, director of marketing at Le Mars, Iowa-based Wells’ Dairy, adding that the Fresh Lock cartons are reusable and recyclable.

“This new container is very functional too,” says Michael Crone, vice president, retail sales. “The old round half-gallons are very wide and, unless you have a big hand, hard to hold. This one you can grab easily and scoop across the top. It was amazing to watch the consumers react with it. They just fell in love with it,” he says. “Convenience is what the consumer is looking for.”

Thanks to the trend, choosy mothers will soon have another reason to choose Jif. This summer the J.M. Smucker Co. is rolling out Jif To Go, peanut butter packaged in single-serve portable portion-control cups. Marketed to both kids and adults, Jif To Go fits easily into a lunchbox, purse, backpack, briefcase or gym bag, and can be used for dipping celery sticks, apple slices, crackers and pretzels, allowing it to be cross-merchandised in the produce and salty snack aisles.

Convenience is bringing new life to scores of product lines. The latest buzz in the sweetener aisle is around Granja San Francisco honey, packaged in a bottom-pour bottle that dispenses a stream of honey when squeezed and instantly stops when released. That eliminates problems like waiting for honey to reach the dispenser, drips, stickiness and cemented lids. “This is the easiest-to-use honey on the market,” says Jim Beaver, sales director at Globe Trends, Inc., the Chatham, N.J.-based gourmet foods importer that sources Granja San Francisco from Spain.

DRIVING INNOVATION
“A major trend we see driving innovation in food packaging and consumer goods packaging right now is consumer convenience,” says Jeff Wooster, senior value chain manager at Dow Chemical Co. in Midland, Mich. “Anything that can bring convenience to the consumer by giving them a package that is easy to open, portion control or the ability to save time and effort and still eat healthy, fresh and good-quality food is the No. 1 driver.”

Those are words to live by at Campbell’s. “We have three core pillars that we are focusing on: wellness, convenience and quality,” says Juli Mandel Sloves, manager, brand communications, at Camden, N.J.-based Campbell Soup Co. “We don’t view them as being independent. The idea is that we offer convenient foods that are good for you and high-quality. Wellness is part of who we are.”

Says Jim Flannery, director, global customer marketing, at Procter & Gamble Co. in Cincinnati, “All new products must first and foremost meet and deliver against a clearly identified consumer need. Ultimately, she is the boss.” He adds, “An equally important criterion is the idea to create value for our retail partners as well. Together, we can accomplish more than as individual entities against any new idea or product.”

GLOBAL STRATEGY
P&G has been concentrating on building billion-dollar brands and currently has about a dozen in its stable, including Pampers, Gillette, Pringles and Bounty. “P&G has been focused on global branding for the last five years, and they’ve been one of the leaders,” says Ted Taft, managing partner at Meridian Consulting in Westport, Conn.

P&G has been successful, Taft says, because it goes beyond filling in templates and using cookie-cutter approaches focusing on the four Ps: price, product, promotion, placement.

“The biggest change in the industry today is how quickly we and retailers can collaborate together on impactful new initiatives to successfully develop a comprehensive in-store plan,” says Flannery, citing P&G’s Gillette Fusion razor. “In years past, everyone would have been pleased with the product reaching the shelf by week nine after the first ship date. Today, we see retailers having the product in stores and ready for sale by hour nine. The need for us to develop good consumer ideas and then work with our retail partners to develop a successful, differentiated in-store plan will continue to be a major focus.”

That’s likely to involve more than just throwing the product on the shelf or slicing open a cardboard shipper. Successful products have to be better merchandised to attract attention, and increasingly that is being done on a store-by-store basis. “The demographics of the stores are becoming more and more important to the CPG companies to talk about which SKUs are part of the promotion,” says Tim McKenzie, executive vice president, sales & marketing, at Little Rock, Ark.-based Vestcom International, an in-store shelf-edge communications firm.

One of Vestcom’s products is a shelf tag that highlights what is advertised in the circular that week. “The trend has been away from national buys about the brand to where more dollars are being spent on cooperative advertising that is retailer-specific,” McKenzie says.

Adds Taft, “Retailers are looking for solutions bigger than a single category, and they are looking for tactics that are more than just the four Ps. Retailtainment is becoming huge.”

IMPORTS IN GROCERY
So is the impact globalization is having on the domestic CPG industry. “Products are not all from the U.S. as they used to be,” says Glenn Llopis, president of Glenn Llopis & Associates, a consulting firm based in Irvine, Calif. For a while, a walk down any nonfoods aisle has been like a trip to China, but imports are gaining ground in grocery as well. Wegmans, for example, markets private label frozen stuffed cabbage that is made in Mexico.

“In my opinion, H-E-B has done the most advanced work in spearheading global resourcing to bring higher-quality products at a value,” Llopis says. “It’s the pilot model of how retailers are going to look at procuring food products, and it’s going to change the perception in the consumer’s mind of what they can expect and what they can get for a value.”

The result? No brand is immune, and even the most iconic ones are subject to international influences and new entries into the market. “Today market leaders and their brands are no longer stable in the market,” Llopis says. “Clearly, they are at a point where they need to be time-sensitive and highly innovative to secure their positions in the market. The rules or terms of what is now global engagement require a different methodology and approach that we here in the U.S. haven’t quite grasped yet.” He notes that domestic manufacturing continues to be lost every day.

Llopis foresees consolidation continuing on the manufacturing side, with manufacturers now willing to work on pennies for margins. “Manufacturers are going to survive by creating their own brand and exclusive partnerships with retailers,” he says. “I see manufacturing continuing to dwindle and go outside this country over the next five years, and that is not favorable for our economy.”

Non-traditional manufacturing methods, like toll packing, are growing in popularity. In toll packing a company creates supplier contracts for all of its ingredients to be shipped into the manufacturing facility and then assembled. “What happens is the negotiations for the cost of goods are done with the major players, but the packing is done separately, so there is still a stronghold in the cost of goods,” Llopis says. “All they are really vying for is assembly efficiency.”

The search for efficiency is also changing how CPGs come to market. “The pace of new item introductions from concept to the market is clearly getting faster,” says P&G’s Flannery. “This has placed an even greater emphasis on understanding the consumer’s needs and the value she perceives from any new product introduction. We strive to find big ideas for the shopper and also for the retailer. It’s even more important today to understand our retailer needs in a given category so that we can ultimately help generate new sales, new users and/or added profit to them as a result of the initiative.”

SAFETY AND QUALITY
In addition to convenience, both new and repeat users are looking for safety and quality. “Innovations that combine all of these elements are the ones that will be the most successful in the marketplace,” says Dow’s Wooster, noting the success of fresh-cut packaged produce, ready-to-eat meals and case-ready raw meat. “All of those offer a combination of consumer convenience and improved safety and quality,” he says. “They serve to benefit everybody in the value chain—the consumers, food manufacturers and retailers—by reducing shrink, allowing for the stocking of more items and providing a better quality to the consumer without the worry of it going bad in a few days.”

Dow is working on sealants that will extend CPG shelf life even further.

“The shift will continue to products that are more convenient,” says Wooster. “Consumers are willing to pay a little more for an item that’s convenient to use, ready to use and ready to eat. A grower of lettuce who has the choice between selling it for $1 a head or chopping it up into a salad and selling it for $2 will not only offer consumer convenience but also make more money. That trickles down throughout the supply chain right down to the retailer.”
That’s one CPG trend that can be taken to the bank.