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I want to share a head scratching moment with you for a sec. See if you can figure out what’s going on over at Ferrero (the makers of my beloved Nutella).

First, this article/press release found in The Drum from 6 November 2011:

Ferrero is to launch a £6m campaign to promote both flagship brand Ferrero Rocher and the Ferrero Collection.

The 30 second ad, by RKCR/Y&R will launch today (6 November) during Downton Abbey on ITV1, with a second standalone film also set to launch on 21 November.

Entitled ‘Food of the Gods’ the new campaign aims to change consumer attitudes to the brand, to make its range more social, having established the brand as one of quality for special occasions.

> UPDATE (11/30/11): A Ferrero representative contacted me today to let me know that the above statement (“Entitled ‘food of the Gods'”) was removed from the article published by The Drum. The email suggests that The Drum made an error in regards to the campaign’s name. This change affects certain elements of this post as it was written before the change.

Both campaigns will run until Christmas.

Mauro de Felip, marketing director for Ferrero, said: “The launch of these new creative advertising campaigns provides us with an excellent platform to exhibit our market leadership in special sharing and gifting. Both creatives capture the ‘new’ special that is relevant to consumers, and demonstrates our ability as a business to adapt to current market conditions and understand shifting consumer attitudes.”   (Source.)

Let that soak in for a minute.

Now… I am a very big fan of Ferrero, and have been since childhood. As a little French boy, I remember their ads, I was raised on their products (my allowance went almost exclusively to Kinder Surprise eggs for many years), and if you have been following this blog and its twitter feed for the last few years, you know how much I dig Nutella – one of Ferrero’s signature products/brands. So you can be assured that I am not writing this post to bash the company or throw them under the bus. I want them to do well. In fact, I want them to do VERY well. Perhaps that is why I notice their mistakes more than  mistakes made by companies I don’t really care about: As much as it sucks to see companies do the wrong thing over and over again when you don’t care of they succeed or fail, it is terribly frustrating to watch a company you actually care come off the tracks again and again and again.

Okay. Now that we’ve gotten that out of the way, read Mauro de Felip’s statement again and let’s look at some of the things keeping Ferrero from being a lot more successful than it already is.

Note: If you are in a hurry, skip 1-4 and go straight to 5 and 6.

Error 1: Brand Identity Disorder.

The folks at Ferrero still think Rocher needs to be  a luxury or prestige brand.

Let’s think about what qualities are innate to luxury brands: One is price. The other is exclusivity. You can’t just go to your local CarMax and buy a Bentley. Target doesn’t carry Cartier timepieces. K-Mart doesn’t have a Gucci section.  The bakery at Publix, BiLo or Piggly Wiggly doesn’t sell Lenôtre confections.

See where I am going with this? Luxury brands don’t place their products in convenience stores and grimy old grocery stores. Where do I find Ferrero’s products? In the case of Nutella, between the peanut butter and the grape jam squeeze bottles. In the case of Rocher (the gold-wrapped nutty chocolate balls Ferrero considers ), somewhere between the beef jerky and the nail clippers, right by the cash register, or in the chocolate aisle at your local CVS.

Ferrero Rocher is no more a prestige brand than Toblerone. The emphasis of their marketing should be on letting consumers feel like treating themselves to something delicious (and as often as possible) rather than making them feel like they only deserve to enjoy them mostly on special occasions, or when they can afford to spend more on chocolate products than they really want to.

The lesson here is that when you position your product as a luxury product (especially when it isn’t), you screw yourself in 3 ways:

1. You create a socioeconomic disconnect between your market and your product. People can’t relate to it as well as they might a more “down to earth” alternative. That creates a barrier between your product and your market. Your job is to break down barriers between your products and your customers, not erect them.

2. Because your premium pricing can’t bridge the gap between image and actual value, it teaches consumers to look for more budget friendly alternatives. In other words, it makes them buy from the competition instead of from you. This is how you guarantee that your market share will remain stalled for years.

3. Even if your pricing is competitive, too much of an emphasis on building a premium image will give consumers the wrong impression. If consumers believe – before they even walk into a store – that they can’t justify the expense of buying your product, they will stick to more budget-friendly alternatives.  This is how you ensure that your consumers’ buy-rate will never increase.

Error 2: Chasing very bad assumptions.

Someone at Ferrero Rocher still seems to think that people feel better about themselves when they spend more money on chocolate than the average consumer. This is true of some consumers IF you are a boutique chocolatier or confectionary, but the moment you a) begin selling your products alongside commodity products in everyday grocery stores and b) try to appeal to the average consumer rather than an exclusive clientele, you’re in the weeds with that theory.

There was a time when it was cool to blow cash on flashy sports cars, mansions and champagne breakfasts just to show off. Here’s the problem: The 80’s are long gone. The average consumer is looking to satisfy a need for the best price possible. Strangely though, Ferrero Rocher ads are still clinging to the same outdated narrative as if the 80’s were still going strong. Only now, we have moved Rocher from the manor house to the outer reaches of Mount Olympus.

Here is a dose of reality the folks at Ferrero probably need to hear: Nobody cares that you are serving mounds of Ferrero Rocher at your house parties, just like the fantasy millionaire models in all of their commercials. It’s a chocolate and nut ball you grabbed at the local Walgreen’s, not caviar from Caspian Sea belugas.

This outdated world view has to be hurting the Ferrero business, especially in a market like the United States, where 99% of consumers look for value and flavor rather than the notion that a chocolate treat will make them look or feel like a billionaire.

As for that billionaire market, the 0.o1%, how many boxes of Ferrero Rocher is it really buying?

Ferrero should be focusing on fighting for relevance and wallet share rather than perpetuating an image that is no longer relevant in today’s world.

I am struck by Mr. de Felip’s admission that the company wants to change perceptions about the brand. That’s terrific. If Mr. de Felip has any hopes of changing perceptions, increasing both market share and boosting monthly sales volume (objective indicators of that change), he and his team need to drop their internal assumptions, go out into the world, and look very closely at how they position the brand from the perspective of 2011 consumers.

Error 3: Holding on to outdated business dogma.

Because it has always been strong for them, the folks at Ferrero Rocher still think the Christmas season is the key to boosting sales. Even today, Ferrero Rocher still places its bets on Christmas season campaigns.

Here’s the problem: Teaching consumers that your product is a seasonal treat is the best way to make sure they won’t think about you for the other 11 months of the year.

The term you are looking for is strategic myopia.

Fortunately, this is an easy fix. Even if Ferrero executives aren’t yet ready to focus on boosting sales for Rocher year round, other holidays can help spread the sales load to all fourquarters instead of just one: How does Ferrero leverage chocolate-rich holidays like Easter, Halloween, Mother’s Day and Valentine’s Day? Not well, if at all. My question is why? Time to spread the advertising budget to other holidays and look for alternatives in terms of consumer engagement. (If only someone were to invent digital social networks where consumer communities could be… oh, never mind.)

As for the other 7 months of the year, it isn’t so hard either. With Rocher being pretty much everywhere now, the problem isn’t one of availability or distribution. So what is it?

The answer might be found in the context of the brand’s narrative. It is still so deeply rooted in the Christmas season that Ferrero is simply not top of mind for consumers at any other time during the year.

Think of this process as an internal Google search. When you think about Easter in the US, you think Cadbury eggs and Peeps. Valentine’s Day: Russel Stover, maybe even M&Ms. Halloween: Reese’s, Kit-Kat, Snicker’s, M&M’s again, etc. If Rocher is not top of mind, your marketing isn’t working. It’s that simple.

Shifting to year-round relevance wouldn’t suck. What’s strange is Ferrero already knows how to do this with their other brands: Nutella, Kinder, and the ubiquitous Tic-Tac. Why not do it with Rocher as well?

Error 4: Thinking that buzzwords and wishful thinking will save you.

Ferrero Rocher doesn’t need to “make its range more social.” It just needs to actually connect with its market. I am referring to this:

Entitled ‘Food of the Gods’ the new campaign aims to change consumer attitudes to the brand, to make its range more social, having established the brand as one of quality for special occasions.

Both campaigns will run until Christmas.

I have no idea what that first sentence is supposed to mean, so let me try to paraphrase it. Here we go:

Blah blah blah blah blah blah blah blah blah blah blah social blah blah blah blah blah blah.

Ferrero, let me share a few very important market insights with you:

1. Just because you use the word “social” in a sentence or attach it to a campaign doesn’t mean anything you are doing is actually social. Say no to buzzwords. If indeed you have something social to offer your consumers, great. If not, don’t pretend you do.

2. Nobody cares how much money you blew on your upscale advertising campaign. This is especially true now, during a global recession. People are too savvy to be impressed by that, and far too cynical right now to find it charming.

3. The gods of Olympus don’t make your brand narrative more social. In fact, they do the exact opposite: How much more exclusive can you get than the gods up on their mountain, looking down on us mortals? Are the gods not the prefect metaphor for the super rich? At a time when income inequality in Europe and the US is at its highest, when movements like #OccupyWallStreet illustrate a growing disdain for the super wealthy, is it really intelligent to align your brand with that 0.01% of the population that the other 99.9% isn’t all that happy with? (Especially if your market is that 99.9%.) More to the point, can someone explain to me how the penultimate aura of exclusivity embodied by Mount Olympus makes a brand’s range “more social?”

4. You don’t have to be a trained Jungian analyst to understand that Ferrero Rocher’s ads are 100% about ego projection. They have nothing to do with the reality of the market, which is to say the experiences of the consumers they aim to influence. Whomever is signing off on these ads and the direction of the brand’s marketing might consider walking out of the palace gates, coming down from the mountain and hanging out with average mortals, if only for a few days. A recalibration might be in order. These choices are not happening in a vacuum. Someone’s ego is driving this trainwreck.

Back to the “social” thing: Being “social” is not the end game. Connecting with your audience, with your market, with the people who will make you part of their lives for the next 50+ years, THAT is the goal. Focus on creating that connection.

Making a brand’s “range more social” means nothing and accomplishes even less. Buzzwords can’t take the place of results.

Error 5: Believing your own spin.

Denial cripples brands and erodes their relevance with every passing day.

“The launch of these new creative advertising campaigns provides us with an excellent platform to exhibit our market leadership in special sharing and gifting. Both creatives capture the ‘new’ special that is relevant to consumers, and demonstrates our ability as a business to adapt to current market conditions and understand shifting consumer attitudes.”

No.

– Advertising campaigns don’t provide brands with a platform to exhibit market leadership. They’re ads, not annual reports. Market leadership is exhibited by numbers. If you really want to talk about market leadership, let’s see the numbers. What makes you a market leader? What does that mean?

– There is no “new special,” and even it there were, it can’t be “relevant to consumers” if those consumers have no idea what it is or what it means. If you really want to talk about the “new special,” it has to be understood by the market. It has to be real. It can’t just be the product of an internal memo.

– Spending £6,000,000 on an ad campaign in 2011 doesn’t demonstrate a company’s ability to “adapt to current market conditions and understand shifting consumer attitudes.” In fact, it demonstrates the exact opposite.

But none of what we have talked about so far is as tragic as my next point:

Error 6: Allowing bullshit to pile up in your front yard.

New is new. New is not old. When a concept has been at the core of an ad campaign for 4+ years, it cannot be refered to as “new.”

Here is the quote again:

“Entitled ‘Food of the Gods’ the new campaign aims to change consumer attitudes to the brand, to make its range more social, having established the brand as one of quality for special occasions.”

“The launch of these new creative advertising campaigns […]. Both creatives capture the ‘new’ special that is relevant to consumers, and demonstrates our ability as a business to adapt to current market conditions and understand shifting consumer attitudes.”

So the assumption here, or the message being conveyed by Ferrero, is that the brand is doing something new with these ads. They are “new campaigns” with “new creative” that aim to capture the “new special” and change consumer attitudes. One might expect, then, that these ads would be nothing like Ferrero’s previous ads. Right?

Let’s see what Ferrero’s ads looked like in 2010:

(If the video doesn’t play, go watch it here.)

Wait a second… Aren’t those… gods? Isn’t the ad about Ferrero Rocher being the food of the gods? Wasn’t the ad campaign actually called “Food of the Gods?”

I’m confused. What’s so new about this year’s campaign then?

Here is another one, also from 2010, which features not only the gods but mythological hero Ulysses:

(If the video doesn’t play, go watch it here.)

Okay. Let’s go back a little further. Maybe that was just a glitch. Here is a 2007 TV ad from Ferrero:

(If the video doesn’t play, go watch it here.)

#Facepalm

I really want to ignore the fact that this 2007 ad is about the gods of Olympus inviting their “Nordic cousins” (Norse gods AND Mr. Santa Claus himself) to share with them their “Food of the Gods”. I really do. I really, really, really do.

Now you see why I find myself scratching my head at what Mr. de Felip is talking about:

What precisely is “new” about this £6,000,000 ad campaign?

How will using the same narrative and imagery (the Gods of Olympus) that have been used since 2007 somehow “change” consumer perceptions or give the brand a more “social range?”

The myth you might be searching for is The Emperor’s New Clothes.

If nobody cares, nobody cares. But… what if someone actually cares?

No matter how off-target a company’s ads may be, no matter how poorly devised that company’s product positioning or how outdated its brand narrative may be, no matter how disconnected from reality its marketing executives may be, a good product is still a good product. Ferrero Rocher is pretty tasty, and Nutella is simply one of the most delicious chocolate-related products on the face of the Earth.

Those of us who have already discovered these products and love them won’t stop buying them just because their advertising misses the mark or the company’s marketing executives spout nonsense at journalists through their PR teams. We will continue to recommend them and help other consumers discover them. So… does any of it matter?

Yes, but only if someone at a company like Ferrero wants to become the market leader they claim to be. Only if someone there wants to see high double-digit growth in sales, an acceleration in market penetration and a real, concrete, sticky increase in market share.

If the powers that be at Ferrero are truly happy with the company’s performance as it stands, then this is all moot. If that were the case though, would Ferrero blow £6 million on an ad campaign whose aim is to “change” consumer perceptions? That tells me that somewhere at Ferrero, someone cares. That’s good.

Ferrero vs.  Apple by the numbers: The importance of relevance.

Now, with €6.6 billion in global sales in 2010 (an increase of 4.3% over 2009), the Ferrero group as a whole is doing extremely well. But I want to throw a couple of quick questions at the Ferrero folks:

1. If the Rocher brand were managed better, could that €6.6 billion look more like €8 billion? Wouldn’t that be better?

2. Strong balance sheets aside, is 4.3% YoY growth for the entire group really all that stellar?

Every company I have ever worked for would have fired me if I allowed my growth numbers to drop that low. The most anemic of  my employers limped along at 6% growth YoY before they hired me out of desperation. 6% YoY growth was considered horrible.

Much to my chagrin, the jump from 11% to 14% I managed in my first year at another company still wasn’t enough to uncork the champagne in the CEO’s office, even though they had been stuck at 11% for half a decade.

It has always seemed to me that somewhere between 18% and 20% was the magic YoY growth figure for most executives and investors. I certainly never received any significant accolades if my numbers fell below 16% YoY growth.

Here’s a sobering little bit of insight: Most years, 4.3% barely keeps up with inflation.

For some context, let’s compare Ferrero’s 4.3% YoY growth for 2010 to Apple’s numbers for the same period:

87.2% YoY growth for iPhone and 24% for Mac.

Granted, using the incredible 87.2% YoY growth figure for iPhone might be a little unfair since the product is fairly new and cool and relevant, but… that is precisely why it matters: iPhone is exciting and relevant. Rocher no longer is, for the reasons outlined in this post. 87% growth vs. 4% growth. The numbers don’t lie. Ferrero needs to take a long look at their business and be realistic about what is happening to it.

But okay. To be kind, let’s instead compare Rocher to Mac, since the product was launched in the 1980’s, which was Ferrero’s heyday:

In an economic downturn, Mac is still seeing 24% YoY growth. Ferrero is only seeing 4.3% YoY growth.

What is going on?

Ferrero vs. Hershey by the numbers: Why Ferrero should be seeing double-digit growth.

If you feel that comparing a candy/chocolate company to a technology company isn’t fair, fine. Compare Ferrero’s growth to Hershey’s for 2010, and what you will find is a near stalemate:

Hershey’s 2010 YoY growth was 7% (source, source).

Ferrero’s 2010 YoY growth was 4.3% (source)

Now consider that Hershey is a far more established brand than Ferrero, especially in the US. Let me illustrate:

Ferrero owns Nutella, Rocher, Kinder and Tic-Tac.

Hershey owns… well, all of the Hershey bars, Hershey syrup, Hershey’s Kisses, Twizzlers, Reese’s, Kit-Kat, Almond Joy, Mounds and Ice-Breakers mints.

When was the last time you bought or enjoyed a Hershey product?

When was the last time you bought or enjoyed a Ferrero product?

What does this illustrate? An enormous gap in market penetration and market maturity between Hershey and Ferrero, at least in the US. As an established brand, Hershey’s market is relatively saturated. People already buy Hershey products regularly. EVERYONE has heard of and tried Reese’s, Kit-Kats and Hershey’s Kisses. How do you squeeze 20% growth out of a fully penetrated, mature market? With a lot of ingenuity. (Probably more emphasis on Frequency and Yield than customer acquisition.)  I am amazed (as in impressed) that Hershey still manages to score 7% YoY growth, honestly. Someone over there deserves to be paid some big bucks.

Ferrero, on the other hand doesn’t have Hershey’s problem: Nutella, Rocher and Kinder are outliers in the US market. They haven’t really been discovered or adopted by the average American. Only Tic-Tac has seen real penetration. Ferrero still hasn’t connected with that market. Unlike Hershey, which finds itself forced to focus more on influencing buy rate and yield, Ferrero can focus on not only buy rate and yield but good old customer acquisition. The market is wide open for its products to be discovered, adopted and shared by delighted consumers. Once customer acquisition is in full swing,  it becomes a question of positioning products so consumers buy more of them and more often. Addressing the 6 mistakes outlined in this post would certainly be a good way to get things back on track.

If Hershey can manage 7% YoY growth with virtually no new markets to conquer or customers to acquire, surely Ferrero should be able to see double-digit growth in markets where most consumers are not yet their customers.

4.3% growth is indicative of one thing: A company running out of ideas and losing touch with its market. Time for a reboot.

PS: Start with the basics.

Here’s a little bit of analyst insight – based on the numbers rather than internal “brand-driven” assumptions – that Ferrero needs to pay attention to:

“Despite economic woes, Hershey sustained its top-line momentum with consumers preferring moderately priced candies compared to premium ones.” (source)

Ferrero, here’s hoping that you will start turning it around in 2012.

All the best,

A  fan.

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