Packaged Goods? Don't Give Up on Growth

Mritunjay "Manju" Bonsai works in brand management at Kraft Foods and can be reached by email at mbansal@kraft.com Views expressed are his own and not necessarily those of his employer.

Most of us in classical packaged goods are resigned to the fact that we compete in mature categories devoid of the hypergrowth opportunities of the technology world. While the routine double-digit growth rates of a Dell or a Microsoft may be beyond our grasp, we should be able to do better than the staid 2-4% growth we have come to expect, both of ourselves and of our competitors. Although to exceed that growth rate is not routine, neither is it by any means an impossible feat for those who are able to adhere to the following key strategies:

Don't be afraid to make your own product lineup obsolete. Even if you're the leader of your industry, you must consistently reinvent yourself, knowing that if you don't make your products obsolete, someone else will. Microsoft launched Windows95 in August 1995 and followed less than three years later with the upgraded Windows 98; that despite the fact that more than 90% of all PCs in the world use Windows software. By contrast, Gillette, which has just as strong a global presence in the shaving razor category, needed 15 years to follow the launch of Gillette Sensor in the early 1980s with the recently introduced Mach3 razor upgrade. True, the Mach3's patented "comfort edges" are not a negligible accomplishment, with some touting them as the first major razor innovation in 30 years. And, of course, one can also argue that there is far more in the realm of functionality that one can do with a computer operating system than a shaving razor. Still, such issues haven't stopped Procter & Gamble from offering meani ngful improvements to its Tide laundry detergent time after time. Since in 1998 there likely are more people in the world who use shaving blades than use computers, I would have expected Gillette, the market-leader, to innovate more frequently than it has to serve that large audience.

Don't merely fulfill consumer demand, create it. If you make it. they will come. Some 120 years after the 1863 invention of rollerskates, two brothers from Minneapolis put together the first in-line skate as a training tool for offseason hockey players. In just 15 years, their Rollerblades have spawned an entire fitness movement involving people of all ages. The 29 million who have taken up in-line skating have made it the fastest-growing sport for eight years now, and drawn the interest even of such established athletic-gear manufacturers as Nike. That is all new demand that was created.

Focus, focus, focus. To stay focused, companies need to be rigorous in divesting businesses that are not in synch with where the organization is going. In divesting its American Home Foods line last year, American Home Products eliminated a food portfolio that accounted for less than 9% of total sales and less than 5% of overall profits, in order to focus on Advil and similar products, where it has a more unique competitive advantage. Similarly, Unilever divested over $8 billion in chemicals activities to focus on consumer foods. It's not clear to me why chemicals and cleaning products giant Clorox continues to hold on to two food businesses-Hidden Valley salad dressing and KC Masterpiece BBQ sauce-that, despite having very strong consumer equities, remain underleveraged in their categories.

Make strategic acquisitions. Overcome the classic "not invented here" prejudice and acquire the new competencies you can't develop on your own, as Microsoft has with Hotmail after struggling to attain a meaningful presence for its own online service. In packaged goods, Unilever added more than $800 million to its top line last year through the acquisition of 23 businesses to augment its strategic goal of being a global food giant.

Be a consistent marketer. Instead of just throwing money at advertising spending, use all elements of the marketing mix to hammer home a singular message, as Visa has with "everywhere you want to be" in venues as diverse as the Olympics, the Triple Crown Challenge and Nascar.

Internalize the mantra of revenue and earnings growth among employees. Where employees own significant amounts of stock, that can be a straightforward objective. But even a company like Campbell Soup, which does not offer stock options to most employees, has an interesting tradition of benchmarking quarterly earnings targets versus the competition, and then posting them all over the office via flyers and posters. Since everybody knows what the target is, it is so much easier to internalize what financial adjustments may be necessary to make that number.

COPYRIGHT 1998 BPI Communications, Inc.
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