business news in context, analysis with attitude

Interesting juxtaposition in a pair of stories in the Wall Street Journal this week.

One story read:

  • ”Desperate to increase sales and market share, companies are digging deeper into shoppers' homes and habits to discover ‘unmet needs’ and then design new products to meet them. Last year, marketers launched a dizzying 34,000 new foods, drinks and beauty products -- representing more unmet needs than most people ever guessed they had. The strategy is turning out to be expensive, with the costs of marketing and promoting a new product often topping $50 million.”

    And, the WSJ added, “New products face tough odds. The average American family turns to the same 150 items for as much as 85% of its household needs, says Jack Trout, president of marketing firm Trout & Partners Ltd. Only about 2% of new brands and brand extensions hit $100 million in first-year sales, considered the threshold for success, according to Information Resources Inc.


  • The other story reported:

  • ”Kraft Foods Inc.'s auction of Altoids and Life Savers indicates how food companies are increasingly unloading brands they were frantically buying just a few years ago.

    “Bulking up back then seemed like the best way to get leverage with Wal-Mart and other big retailers. But these mammoth sellers care mainly about moving large volume and have become ruthless about the brands they will stock and the display they will give them. Anything but the top brands can end up on the bottom shelf.

    “The big food companies don't want to be in categories where they are relegated to the worst display, and they're finding they can't always manage the vast array of brands they've collected. So they're selling.”


  • There certainly seems to be a contradiction.

    Is it that the manufacturers are behaving in paradoxical ways, on the one hand shedding brands because they can’t get sufficient distribution, and on the other spending a small fortune to create new products and line extensions that will capture lightning in a bottle?

    Perhaps.

    Or is it that the two WSJ stores were just written by two different reporters who never spoke to each other, and therefore didn’t see the possibility of a contradiction?

    Perhaps.

    In all likelihood, both are true. Though the first is more troubling than the second.

    This apparent inconsistency of approaches is illustrative of the industry’s desperation, its desire to do whatever is necessary to find the magic SKU that will solve all its problems, while at the same time catering to the demands of public markets that require weekly, almost daily fealty.

    It seems to us that neither story deals with what consumers really want. Shoppers, we think, want enough new products that they get fresh choices offering a diversity of tastes. But they don’t want me-too products that clutter up the shelves and shopping experience. They want clear information about what to buy and eat, and they don’t want to be condescended to.

    And most of all, we think, shoppers want a marketplace that is designed to cater to their needs and desires, not one structured to build up share price.
    KC's View: