US giants focus on quality and value - WARC News

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July 4, 2009

NEW YORK: Major companies like Procter & Gamble and Starbucks, and supermarket chains such as Kroger and Supervalu, are all seeking to adapt their approach to "value" in the US as they and try to tap in to changing consumer trends.

The rise of own label and value brands has posed a major challenge to more established properties during the downturn, while heavy discounters are also increasingly dominating the grocery sector.

In promoting its fabric care asset Tide, Procter & Gamble is emphasising not just price, but also that the brand can "help keep your clothes like new" for longer than its competitors.

Tami Jones, associate director of global marketing communications at the company, said "we are communicating value with consumers both in monetary terms, and, importantly, the value P&G brands offer in performance."

However, the consumer goods giant is also now set to launch a new, low-cost version of Tide – called Tide Basic – which will be around 20% cheaper than the premium variant.

Initially, this brand extension will be rolled out in 100 Wal-Mart and Kroger stores, where it will compete with lower-priced branded competitors and private label goods.

Tide Basic will not contain the "bells and whistles", which include "added fragrance technologies", boasted by the more expensive equivalent, P&G says.

Starbucks has similarly been focusing on both quality and value in its recent ads, having come under increasing pressure from rivals such as McDonald's.

Alisa Martinez, its manager of communications, said the company ran a "$1.95 (€1.39; £1.19) iced coffee promotion with a radio media tour and using some of the more traditional PR tactics to generate awareness."

"This was about pricing, but also showing the audience the care that we take with our products. We really wanted to get that quality message in there because it's a differentiating characteristic," she said.

"We feel pretty certain that we are not going to compete with some people when it comes to price. But we know our customers very well and the kind of value that makes sense for them."

The coffee house chain, and firms like Burger King, is also seeking to move into selling products in retail outlets, but this sector is not without its troubles.

Kroger, which runs 2,400 supermarkets, has devised a campaign based around "new lower prices", as it seeks to improve its position in a sector increasingly dominated by Wal-Mart.

It has also run a variety of print executions promoting its store brand range, with the tagline "value for the way you live."

Previously, and in a similar fashion to its UK-based counterpart Tesco, Kroger had focused on offering "every day low prices" and its loyalty card programme, developed by Dunnhumby.

In the first quarter, its same-store sales, excluding fuel, rose by 3.1% on an annual basis, with profits rising by 13%, to $386m, as lower diesel costs helped it fund cheaper goods in-store.

David Dillon, Kroger's ceo, said that "our standard description is 'it's a very competitive environment out there,'" but he added that "in a number of markets, people are reaching out for sales."

By contrast, Supervalu, which operates around 2,500 supermarkets, has predicted that like-for-like sales will fall by 3% in its next reporting quarter.

The retailer's communications have increasingly emphasised a "big relief price cut" and "investments in price and higher levels of promotional spending".

However, the company, and the chain of Albertson's stores it purchased in 2006, are still struggling to drive positive price perceptions.

Robert Summers, retail analyst at Pali Capital, argued that flagging like-for-like sales in "one of the major players tends to create ripples across the industry, and makes for the potential for escalating price competition."

Data sourced from Financial Times/Wall Street Journal; additional content by WARC staff, 03 July 2009

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