retail news in context, analysis with attitude

The Wall Street Journal this morning reports that “food companies hope to capitalize on the slumping economy by steering consumers to cheaper, high-margin products. On Monday, Kellogg Co. is beginning a new advertising push for staple cereals such as Corn Flakes and Rice Krispies, while Campbell Soup Co. is about to launch a multimedia campaign to trumpet its condensed soups as a bargain buy. Kraft Foods Inc. has begun advertising its Kool-Aid powdered beverages on national radio for the first time in 11 years. Campbell and cheese giant Kraft are also teaming up to promote meals of soup and grilled-cheese sandwiches. Kraft's Web site will add recipes for cheap sandwiches and suggest Campbell soups to pair them with.”

The story notes that “it is a big shift for food makers. For several years they have tried to increase their profit margins by promoting higher-priced ‘premium’ brands such as Campbell's Pepperidge Farm cookies and Kraft's Wheat Thins crackers. But lower-priced ‘value’ products can also have wide margins because they're cheaper to make.”

KC's View:
This isn’t to say that the marketplace is going to become exclusively price-driven, though clearly value will be a greater component of most stores’ selections and marketing efforts.

Seems to me that one of the great advantages that supermarkets have is that they can stress the fact that in the grocery aisles, consumers don't actually have to compromise between cost and quality – you can eat good, nutritious and inexpensive meals by shopping intelligently.

Two great examples of this approach: the new Walmart and Boar’s Head ad campaigns.

Food companies can capitalize on the trend not just by providing such products, but also educating shoppers about their value and values. It will be an evolutionary process…but companies need to start now if they have not done so already.

(Michael Sansolo will have a good column about economic issues in tomorrow’s MNB, so stay tuned.)