* Bacon bologna, new juices also on tap
* Companies use existing brands for safety
* 'Playing it safe' given economy - analyst
By Jessica Wohl
March 8 With the U.S. economic recovery
struggling to take hold, household goods companies are betting
consumers will pay for the latest versions of paper products,
shampoo and baby carrots -- wrapped in the safety of proven
Super-strong versions of Bounty paper towels are on tap, as
are new flavors of Oscar Mayer bologna, all in an effort to
squeeze out fresh sales from old brands.
Consumers might be cutting back on major purchases in light
of higher payroll taxes and gasoline prices, but they still need
the basics and turn to brands they know. That is why companies
ranging from Procter & Gamble Co and Colgate-Palmolive Co
to Kraft Foods Group Inc and Campbell Soup Co
unveiled updated versions of existing products at the
recent Consumer Analyst Group of New York conference.
"They're playing it safe in a tough consumer environment,
which probably reduces any major risk for investors and for
themselves," Credit Suisse analyst Michael Steib said of the
household products makers' push.
It takes less effort to promote brands that shoppers already
know, as opposed to something completely new. Companies are all
too familiar with that bumpy road.
In 2011, 81 percent of the hundreds of newly launched
consumer packaged goods failed to hit $7.5 million in first-year
sales, according to industry research firm SymphonyIRI. The
top-selling products of 2011 used existing brand names,
according to the firm's "Pacesetters" list.
A Brand Keys survey of 39,000 American adults in January
showed that goods such as P&G's Pampers diapers and Colgate
toothpaste had high brand loyalty.
But the value of brands in areas such as facial moisturizer,
hair color, shampoo, conditioner and laundry detergent has
declined to the point where shoppers make their selections based
on convenience and not loyalty, Brand Keys President Robert
P&G, the world's largest household products company, is one
of several manufacturers launching goods under existing brands.
Its lineup includes several "change innovations," or fresh
products that build on established brands, such as last year's
single-dose Tide Pods laundry detergent.
Companies such as P&G, Colgate, Energizer Holdings Inc
and Newell Rubbermaid Inc are poised to use
funds from restructurings announced since early 2012 to spend
more on marketing their latest goods.
"They probably feel better about the consumer, and therefore
think that new products can actually succeed," said JP Morgan
analyst John Faucher.
Marketing spending continues to rise, but budgets can be
kept in check as companies take advantage of digital and social
media that cost less than traditional television and print
campaigns and make concerted choices about where to spend.
Kraft, for example, said it increased its marketing
spending from about $5 million per product launch to about $25
million per big bet. For the MiO water enhancer line it launched
in 2011 and continues to expand, it spent over $50 million on
advertising and consumer support.
"It looks like there are a lot of plans to spend behind the
innovation once you actually put it out there ... to really
nurture it out of the gate for the first two or three years,"
said Wells Fargo food industry analyst John Baumgartner.
SAME BRANDS, NEW FLAVORS
Companies are trying to tweak some products to provide more
for the same money. Clorox Co, for example, put grooves
into its Kingsford charcoal, which cut the weight of the product
by 7 percent but added surface area and therefore improved the
performance even while reducing Clorox's materials costs.
This year, even Kraft's Oscar Mayer bologna is getting a
flavor reboot, with a bacon-infused variety as well as a
jalapeno version. Campbell Soup is testing Bolthouse Farms Baby
Carrot Shakedowns, which feature salsa, ranch or chili lime
flavoring for consumers to sprinkle on the carrots.
P&G is updating its Bounty paper towel line, bringing out a
new cloth-like Bounty DuraTowel, which it claims leaves surfaces
three times cleaner than if they were wiped with a used
dishcloth. It is making its mainstream Bounty twice as absorbent
and the lower-priced Bounty Basic 50 percent stronger.
Clorox Chief Executive Don Knauss said his company made a
point of making product development part of each brand's push
more than two years ago, when basic categories such as home care
were facing declines.
Kraft, meanwhile, is fleshing out a "good, better, best"
strategy for its products and emphasizing the lower and upper
tiers, as middle-class consumers are getting squeezed.
That means new kinds of basic Kool-Aid Jammers drinks for
$1.79, as well as Capri Sun Super V drinks, which have vegetable
juice and cost $2.99. New flavors for Kraft's 99-cent cup of
Velveeta Shells and Cheese include Queso Blanco. It will also
add to the Velveeta Cheesy Skillets meals line that costs $3.49.
Whatever forms the new products take, executives say
companies need to spend their way out of the malaise.
"Companies' success is much more dependent on what they do
as opposed to the environment they're in," Newell CEO Mike Polk
said in an interview. "You've got to adjust your agenda to the
reality of the moment you're in."