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Kraft Heinz’s comparable sales rose 6.3% in its latest quarter. Kraft Heinz also raised its full-year guidance, saying that high-single digit growth is expected for the full-year, according to The Wall Street Journal.
As reported by Barron’s, the Dow Jones financial newspaper, Kellogg “… solidly beat third quarter earnings expectations.” Kellogg also raised its full year outlook. Kellogg expects organic net sales growth of 6% versus its previous estimate of 5%.
Kraft Heinz and Kellogg are examples of packaged goods-processed food companies that are currently performing beyond expectations. Demand at the grocery store for Kraft macaroni & cheese and Kellogg Special K are booming. Both companies are moving at light speed to keep up with customer demand. Both companies see this as customers’ desire for shelf stable, easy to prepare, kid-friendly fare. Prior to coronavirus, customers had spurned processed foods for fresh foods. But, Covid-19 changed everything.
Reckitt Benckiser (Lysol), Unilever (Knorr, Lipton, Dove, Hellman’s), Mondelez (Oreos), Clorox (Clorox, Clorox Disinfectant Wipes, Glad) and Procter & Gamble (Downy, Tide, Febreeze) are other companies seeing resurgences in packaged goods brands. Financial Times posed the question: is back-to-basics shopping here to stay? Spurning the new, niche brands, grocery customers are returning to established, easy-to-use products or trying these for the first time.
Many observers say that pandemic behaviors - from delivery to online car buying to food preparation - have become newfound habits. However, there is growing concern. In its long article on Covid-19 grocery shopping, Financial Times spoke with representatives of many companies. Most of the discussion focused on the uncertainty of these new behaviors lasting into the future. For example, the global head of consumer planning at Diageo, the spirits company, said, “ It’s not about normalization of behaviors – actually what we are looking at is behaviors in flux, and we’re not actually sure what will stick in the long term. The ability to pivot quickly will become more of a competitive advantage.”
McKinsey & Company, the global consulting firm, surveyed shoppers on their expectation regarding their current purchase behaviors. 40% of those interviewed have tried a new brand since Covid-19. The data show that 40% of those customers who switched brands say they will continue to use the new brand post pandemic. Another recent McKinsey & Company survey indicated that nearly one-in-five shoppers say they have purchased more private label than usual. But, McKinsey & Company stated that “signals point to this private label shift being temporary.” The upshot? Do not take the current purchase behaviors as lasting without making strategic changes.
For brands, facing uncertainty makes planning difficult. But, there is one action that all of these brand-business companies must undertake now. In addition to winnowing product lines and focusing resources on agility (business’ current buzzword), these organizations must devote serious time, effort and money to building brand loyalty. To continue their profitable growth post-pandemic, companies such as Kraft Heinz and Kellogg have to move their new and regular customers up the Loyalty Ladder. This will extend the current profit bump into enduring profitable growth.
Failure to translate transactions into brand loyal behavior is death-wish marketing. It is not enough to put more dollars into marketing, as Kraft Heinz is doing. Loyalty growth needs more than great messaging. Deal loyalty is not real loyalty.
Right now, packaged goods brands are building sales volume. Of course, this is important. But, for enduring profitable growth, all brands must not only build their quantity of sales but the quality of their sales. This means building sales based on an increasing base of brand loyal customers. In other words, customers must not only buy brands but also buy because they favor the brands. Brand loyalty builds high quality revenue growth.
Kraft Heinz and Kellogg, as well as other packaged goods organizations, must recognize that there is no enduring business value without brand value. Brand loyalty is one of the most critical elements powering brand value. So, sure, agility and flexibility on the corporate side are good, but without brand loyalty, all the enterprise dexterity in the world will not save your brand-businesses. The chief customer officer at Reckitt Benckiser told Financial Times there will be “… a before and after” impact on continued sales. Without brand loyalty, there will be no after.
Brand Loyalty is like a ladder. There are degrees of brand commitment from minimal to true devotion. Brand-businesses must understand and audit the entire pool of their users to determine how these customers array themselves on the Brand Loyalty Ladder.
The Brand Loyalty Ladder leads from non-usage to true brand loyalty. It is a construct reflecting the customer’s strength of commitment relative to competitive brands. Moving customers up the Brand Loyalty Ladder is essential. For Kraft Heinz and Kellogg, it is the way to ensure continuation of the current pandemic surge in sales.
In the universe of potential customers, in general, there are four types of brand commitment. There are Commodity Considerers, Short-List Customers, Preference Customers, and Enthusiasts.
Commodity Considers are customers who view a set of brands as being basically the same. This customer is indifferent to brand name. This customer is willing to consider any brand as long as it is convenient and affordable.
Short-List Customers have a short list of brands from which to choose. Being on a customer’s short-list is good. But, it is better to be the preferred brand among the short-list.
Preference Customers are those with a brand preference. In other words, the preferred brand is the favorite brand.
Enthusiasts are customers with true brand loyalty. True brand loyalty is the highest level of brand commitment. Enthusiasts will buy their preferred brand even if there is a price premium relative to their second choice brand. Enthusiasts not only stick with their brand if there is a price premium but also will recommend the brand to a friend.
Moving customers up the Loyalty Ladder is critical. The ultimate goal is to move a customer from Preference to Enthusiast.
Kraft Heinz’ CEO, Miguel Patricio, tells analysts and the business press that he understands how Kraft Heinz’s previous management put its storied brands in jeopardy. Mr. Patricio has consistently stated to the press that “… underinvesting in brands and focusing excessively on near-term profits” sabotaged the Kraft Heinz brand portfolio. In fact, prior to coronavirus, Kraft Heinz took a series of major write-downs due to the faded, shrunken and devalued forecasts for some of its most celebrated brands such as Oscar Mayer.
Growing brand loyalty is an ongoing job. It is easier said than done. If Kraft Heinz, Kellogg and other enterprises want to maintain the attraction of their current sets of customers post-pandemic, there are some important brand loyalty building actions they should take. Plowing more money into messaging is good, but moving customers up the Brand Loyalty Ladder requires more.
A brand cannot cost manage its way to enduring profitable growth. Here are four actions for growing brand loyalty that packaged goods enterprises must be doing now.
1. Focus the entire organization around building brand loyalty.
This is a cross-functional cultural issue. This mission of building creating loyal customers is not just the responsibility of marketing. The entire enterprise from the C-Suite down must believe in creating and building brand loyalty.
2. Focus on aligning around critical metrics.
Create metrics to understand where your customers are on the Loyalty Ladder. This means measuring more than sales, share growth and profit growth. It means metrics for assessing quantity and quality of sales. Use metrics not to just evaluate progress but to manage progress as well. Loyal customers are more profitable customers. Knowing the lifetime value of your loyalists will grab the attention of C-suite executives.
3. Focus on customer problems.
Know why people have problems with your brands. Know why some see your brand as a commodity purchase. Know why you are unable to move customers up a rung on the Loyalty Ladder. These problems may be bigger issues than previously thought. Innovating solutions to customer problems is essential. Become part of the solution for your customers’ biggest problems.
4. Focus on being a trusted source information.
Become a credible source of information for your customers. Kraft Heinz indicates that it is putting money into marketing. Research shows that trust is in trouble. Trust in corporations is in steady decline. Without trust nothing else matters. For a message to be trusted, it must come from a trusted source. In an uncertain world, brands can be touchstones of trust. Customers will look to brands for solid, credible and usable information.
Kraft Heinz and Kellogg are not alone in experiencing pandemic purchasing. P&G, Unilever, Reckitt Benckiser and Campbell’s are also finding increased demand for their products. Analysts are worried that many brands will not maintain their increased sales and profits once Covid-19 subsides. Wall Street worries about the durability of the new pandemic sales. Packaged goods businesses can prove analysts and Wall Street wrong by building brand loyalty.
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November 05, 2020 at 08:27PM
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Take These Actions Now Or Lose Your New Customers Post-Pandemic - Forbes
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