Creating and ruling block-buster categories FDIN, June 2010 Presented by David Jago

1 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Todays presentation Being in the right place at the right time with the right product and the right price Its obvious, but… What should have stood the test of time, but didnt? Why, and could it have been saved? What tracking hundreds and thousands of product launches worldwide has taught us Good innovation and ongoing product development You need both, but real innovation is rare… The winning habits of category creators and rulers When to innovate, when to develop or change, and when to stick to your guns

2 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Looking back, what should have stood the test of time, but didnt? Nabiscos SnackWells brand in the USA started life as a range of low fat alternatives It moved to sugar-free as the market shifted beyond fat-free (and taste-free) It picked up on the low carb fad with CarbWell extensions It went back to sugar-free, but too late…

3 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Some innovations were just too clever Douwe Egberts launched Café Switch in the UK in autumn 2006 A liquid blend of coffee, milk and sweeteners in a dual-compartment pod to be squeezed repeatedly to produce a smooth froth, before mixing with water in the cup Achieved reasonable distribution and sold when promoted…

4 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Others got the timing wrong… Nescafe Hot When You Want, self-heating canned coffee, launched in the UK in 2001 Problems with package functionality and safety issue… But also launched into the period of the coffee shop explosion…

5 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. What should have done better? What went wrong? Right place, right time, right product, right price… Could it have been saved?

6 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. New Covent Garden, juice Range of apple based juices launched January 2009 Pressed and squeezed from 100% fresh apples with no concentrate or added water Bottle format offers differentiation Sales of best-selling varieties peaked after 3 months, since withdrawn Brand equity didnt transfer well to juices category? Entry into a category that was increasingly commoditised, especially with effects of economic downturn

7 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Kellogg FrutaBü Launched April 2008 as the latest attempt to break into the BFY fruit snacks segment 100% fruit and fruit juice in a 29g pouch pack, helping you get more fruit Failed to reach more than 40% distribution at peak in first 6 months Kelloggs brand down-played Convenience attributes were clear versus fresh fruit, but the package format was likely to confuse (snack or beverage?) Targeting not clear?

8 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Oxo ready-to-use stock Launched 2007 as a logical, added value extension to the Oxo brand Affordable price point: 450ml at 99p Failed to reach more than 20% distribution, sales fell significantly after about 20 weeks Oxo brand association with granules and cubes didnt transfer well to ready to use stock? A little early to capitalise on ongoing trends towards home cooking? Competition followed with Knorr Stock Pots, shelf-stable, concentrated premium stock at £1.98 for an 8-pack to make 4 litres Achieved 80% distribution within 8 weeks, single varieties have average weekly sales of £50,000 each

9 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Schwans Ugly frozen pizza Launched June 2008 under the strapline Looks arent everything, taste is Focus entirely on quality of ingredients (specific cheeses, mushrooms, olive oil dough, etc.) and bake at home message Sales fell after initial burst, distribution not much over 20% Brave proposition… perhaps a little too brave? Compare and contrast to premium chilled pizza that typically communicates same values, with visibility

10 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Tropicana smoothies Launched February 2008 in 1 litre at £2.99, and 250ml June 2009, new 750ml carton at £1.99, smaller pack, better value

11 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Slim-Fast Hunger Shot (Unilever) Launched February 2008 as a radical development of the Slim-Fast brand Took the brand from the negatives of slimming into a more positive and inclusive approach, hunger management Small bottle format was already well established in dairy-based health drinks, and Unilever had experience via Flora products Sales peaked after about 4 months, at 40% distribution Price competition in the chill cabinet created an unfavourable environment Private label (Tesco) present Market opportunity simply too small?

12 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. The winning habits of category creators and rulers Category creation is rare… in recent years Many category rulers are unique, long-established, and have stayed largely through factors other than (product) innovation: Marmite, Ribena, Coca-Cola, Hovis, Heinz soup, Nescafé… But Red Bull, New Covent Garden Soup, Innocent smoothies, Bottle Green elderflower pressé, Snack-a-Jacks… all could be said to be category creators and maintain a strong position despite imitators and lower-priced alternatives

13 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. What do they have in common? Winning factors include, but are not restricted to: Specialism – brands that are indelibly tied to a category A focus on categories that are not commoditised, where private label is (relatively) weak Heavyweight support Significant differentiation in key brand/product attributes Development of package/flavour formats in tune with trends, while remaining very loyal to core attributes (not stretching too far) Cautious innovation Knowing when to innovate, when to develop or change, and when to stick to your guns

14 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Wrigley = chewing gum Heritage Authenticity Specialism Small number of strong brands that appeal to distinct segments Strong, steady rather than spectacular NPD that can draw on development in other markets esp USA Strong flavour and packaging development A category that has virtually no private label and just one other strong player

15 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Wrigley product development

16 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Wrigley product development Flavour extensions ?

17 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Hellmanns = mayonnaise Focus on real food values Authenticity Specialism Brand development has focused on increased consumption occasions, rather than short-term flavour appeal Small number of SKUs, each with appeal to a distinct segment, but all in line with core brand attributes

18 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Hellmanns product development

19 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Heinz = tomato ketchup Enjoys very strong position of trust Authenticity and real food values Consistency, tradition Brand development has focused primarily on convenience (pro and con), as well as appeal to distinct segments in line with ongoing trends Flavour developments have been cautious…

20 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Heinz ketchup product development,

21 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Ruling brands are loved

22 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. And are entrenched in everyday consumer behaviour

23 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Ruling brands are reliable, traditional, authentic… The antithesis of new and innovative? Brands remain loyal to core attributes, and rely on existing mechanisms of trust…

24 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Conclusions Fundamental consumer attitudes are consistent: Health, convenience, authenticity and provenance remain key drivers Balance and compromise are important key words, especially now Brands' mechanisms of trust are in still in place Transparency, authenticity, authority… Emotional attachment is critical Real engagement can draw the consumer to premium segments, to trade up as an affordable treat Provided it offers value for money (important at the top and the bottom end of the market) Right now, its about value with values…

Attitudes towards changing own-label grocery purchases in the last 12 months, December 2009 Base: 1,000 internet users aged 16+ Source: Toluna/ Mintel Brands struggle to maintain relevance

Consumer attitudes towards branded and own- label products, December 2009 Source: Toluna/ Mintel Base: 1,000 internet users aged 16+ But higher cost perceptions still a challenge

27 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. And bear in mind: Great concepts can fail for a variety of reasons What didnt work then might work now Dont overdo flavour/line extensions New flavours should maintain consumer interest in the category, not create additional sales via a separate brand equity! Steal with pride Copy and improve Consumers seem to have a narrow tolerance for new thingsyou cant make it too much of a disconnect The end result has to have real, tangible benefits

Thank you tel: Director of Insight & Innovation David Jago