June, 1996

Fruits of Thought

Face The Branded Truth

I’m not all that old, but years of involvement with the issue of fresh produce branding is enough to make anyone feel like an old man. Here is the drill: two or three times a year, every year, for the past decade, I get a call: “We are going to bring real branding to produce.” Sometimes the call is from a big company, explaining that they just hired top people who “really know what branding is all about.”

Sometimes it is from a smaller company that just got outside funding from people “with a real commitment to creating a national produce brand.” Sometimes it is from long-time industry members with a powerful trade brand who have decided to try to create a consumer brand. The callers take me to dinner where I am regaled with story upon story of how these people will build a great brand in fresh produce.

Without any exception these efforts have failed. Within a few years, the consultants are dismissed, the non-produce executives are back in non-produce capacities and, of course, the budget spigot has been turned off.

This issue contains an intriguing piece (page 14) on some of the produce industry’s latest encounters with branding. Certainly with fresh-cuts, much has changed. Yet, truth be told, not as much has changed as the proponents of branding would like. A few years ago a big produce company shared with me its plans for fresh-cuts. The price would be fixed, and built into the price would be a substantial allotment for marketing.

With this marketing budget, substantial amounts would be spent on advertising and promotion. The company would develop a large line of value-added products, all sold at premium prices. Wall Street, recognizing, that the company was no longer a shipper of commodities but, instead, a value-added marketer, would raise the PE (price/earnings) ratio it awarded the company, thus increasing its value by several billion dollars.

But, as soon as the commodity prices dropped, others dropped the prices of fresh-cut salads and the competitive pressure forced the “branded” shipper into line as well. Out the window went the fixed margins, the marketing budget and the big Wall Street payoff.

What really caused this plan to fail? Or the plans of others who have striven to create produce brands? In one word: Distribution. When the price of sugar and other ingredients in cola falls, Coke may well feel pricing pressure as stores shift their promotions and consumers shift their purchases to lower profile brands or to private label colas. Sales don’t drop to zero, however, because every chain still feels the need to stock the product.

Produce is different. Supermarkets do not feel the need to stock multiple brands of the same item. They carry Fresh Express Caesar Salad OR Dole Caesar Salad. The implications of this are enormous.

First, produce suppliers must price in relationship to commodity prices. Since stores most often carry only one brand of each item, sales don’t just fall — they disappear. Either one is in Safeway or one is not.

Second, marketing is expensive. Advertising and promotion can easily run into tens of millions — sometimes more. In produce, two out of every three consumers are likely to go into stores with no bananas from the most powerful banana brand. What this means is that a banana company could run effective commercials and consumers won’t find the product. If they inquire, they may be told that the advertiser’s bananas weren’t that good this week so another brand was bought.

The key to brand building is advertising and promotion. The key to making this affordable is having sales outlets saturated with product so the advertiser can benefit from the expenditure.

The great produce brands like Chiquita and Sunkist were built with heavy media advertising. Go back to the Saturday Evening Post and Ladies Home Journal in the teens and twenties — the mass media vehicles of that time — and they are filled with Sunkist ads. Chiquita was a heavy media advertiser with the Chiquita Banana Song.

These investments were, however, made during times when these companies were their respective industries. They would get upwards of 80 percent of the benefits of such advertising. There is no private company in the industry in a position to do something similar today.

Commodity promotion boards try, but they have their own challenges. Particularly, they can’t impose uniform quality standards. The promotion board of an item has difficulty making a distinction between different producers and product within its marketing purview.

Of course, whatever the objective difficulties in produce branding, a lot of our problems would go away if we would just stop kidding ourselves. Hardly anyone who claims they do consumer advertising actually does so. They may have a T.V. commercial — usually seen more times at the PMA convention than on any television station — but even when it runs on T.V., it is rarely as part of a strategy to influence consumers.

Perhaps the biggest self-deception is that a brand is something that can often be built out of operating profits. The reality is that a brand is an asset. This asset, in most cases, is far more valuable than the physical assets of a company. Campbell’s brand is worth more than all of Campbell’s soup factories added together. Why? Because, it is the name that entitles its owner to shelf space across America.

The astonishing thing is that companies that will spend tens of millions on plants and equipment, fully expecting to amortize the investment over many years and large production runs, somehow think that a brand should be, and can be, built on a pay-as-you-go basis. Logically, the brand requires an investment to build, probably far more than is spent on the plant and equipment, and that can be recouped over many years.

Of course, this requires a leap of faith and a lot of self-confidence. It also requires that those who dream of building produce brands stop dreaming and face the real task ahead.  pb