Food makers gear marketing to tough times

CHICAGO Thu Mar 19, 2009 4:45pm EDT

Constellation Brands CEO Robert Sands speaks during the Reuters Food and Agriculture Summit in Chicago March 18, 2009. REUTERS/John Gress

Constellation Brands CEO Robert Sands speaks during the Reuters Food and Agriculture Summit in Chicago March 18, 2009.

Credit: Reuters/John Gress

CHICAGO (Reuters) - U.S. food companies are tailoring their marketing strategies to the recession, trying to stretch budgets without cutting back on experiments with pushes into new areas such as online "viral" campaigns.

Executives at this week's Reuters Food and Agriculture Summit said they were using more efficient ways to marketproducts, and most said cutting back was not a good thing.

Constellation Brands (STZ.N) CEO Robert Sands said his overall advertising budget generally rises with inflation. Yet he said he plans to spend more to market Constellation's Svedka vodka, whose growth has been largely fueled by the online popularity of its futuristic female "spokesbot."

"That's the most contemporary example of how you reach (younger) consumers who are not receiving their advertisements through watching TV or reading magazines or newspapers anymore," Sands said.

Besides offering demographic advantages, online or viral campaigns are often less expensive than splashy TV or radio advertisements, adding to their attractiveness, said Mark Schiller, president of Quaker Oats' North American business.

Earlier this month, Quaker launched a campaign including billboards, print ads, giveaways and a temporary appearance on Yahoo.com of its Quaker man flying across the screen.

The campaign's scope was a departure from Quaker's earlier reliance on television and print.

"For really the first time in -- I think in forever, but certainly in my tenure with the company, this is much more of a 'surround-sound' campaign," Schiller said.

"One of the positives in tough economic times is your dollars go a lot farther. So we're finding that we get a much bigger bang for our buck in terms of purchasing power."

FOOD MAKERS GAIN PROMINENCE

U.S. advertising spending is expected to fall between 5 percent and 10 percent this year due to cutbacks by retailers, automakers and financial service firms.

This is also pressuring advertising rates.

Spending by food companies, which are in far less turmoil, is expected to hold up better. By simply maintaining their budgets this year, food companies could see their share of U.S. advertising rise in 2009, after increasing slightly in 2008 to 5.6 percent, according to TNS Media Intelligence.

Bakery-cafe chain Panera Bread Co (PNRA.O) is currently testing its first big foray into television.

As advertising costs come down, Panera can "dramatically" increase the value of its advertising at "modestly" higher prices, said William Moreton, co-chief operating officer.

The company has also been testing billboards, radio and the Internet, he said.

Whether on the web or on TV, marketers including food companies are increasingly using ads to trumpet cost savings.

Coupons, giveaways or entire campaigns built to promote "value" for consumers feeling the pinch of the recession have become a top trend.

Sara Lee Corp SLE.N, maker of Sara Lee bread and Jimmy Dean sausages, is shifting some of its marketing dollars from media toward in-store promotions, CEO Brenda Barnes said.

"It has to do with making sure that the value ... in-store hits the right price points," Barnes told the Summit.

The company is emphasizing the value of its Jimmy Dean Skillet product, Barnes said, noting that a consumer just has to add eggs and can feed a family of five a hearty breakfast for about $5.00.

The current draw of economical foods also has been a boon to Hormel Foods Corp (HRL.N), which for the first time in a long while has increased its advertising efforts around its Spam luncheon meat and Dinty Moore stew.

Hormel spent more in fiscal 2008 on advertising than in prior years, and CEO Jeff Ettinger said he is hoping to increase spending this year as well.

"We have 35 items within the portfolio that are either No. 1 or No. 2," Ettinger said.

"We do need to support those brands."

(Additional reporting by Paul Thomasch; Editing by Ted Kerr)