BrandWatch by Michel Gutsatz

When Chefs Reinvent Fast Food

The season when financial results are announced will not be bright for groups such as McDonald's and KFC – who are (ultimately) facing growing consumer mistrust.  For the past several years I have been pointing out the escalation of Health as a mega consumer trend during my lectures. My post last week showed its impact on Coca-Cola sales (and on sodas in general).  This (global) disaffection among consumers for fast food chains is essentially caused by a breakdown of trust amplified by fear (we only need to look at the food scandals that rocked these food chains in China for example).
A host of new players are rushing into the breach - all of whom will draw their legitimacy from the quality of their food. We can cite two:

• Fast food chains such as Chipotle (see my post of 2010 here) with the slogan "Food with Integrity" - or Shake Shack (whose blog has the title "Stand for Something Good") that has now banned GMOs from its offer: the positioning it defends is to gradually rebuild consumer confidence in this category.
  
  

• Another new approach is, I believe, much more interesting: Chefs (starred, for the most part) are entering this category - reinventing it under a new name, "fast-casual".  They offer pizzas, burgers, salads, sushi, dishes - all sporting the health seal (origin of products, ingredients) AND guaranteed by the aura of their famous chefs.  The prices are all "entry-level".

 This new trend is at work both in France and the US.  For example:

• In France, BOCO – "Un repas de chefs étoilés en bocaux" ("A meal in a jar by starred chefs") - (www.boco.fr) offers dishes and desserts in old-style jars (ah, nostalgia and reassurance!!) and sold in their restaurants, as well as on the TGV. Their model: the neighbourhood Parisian bistro. Prices for each dish between € 7.40 and € 9.80.
  
  

• In the USA, INDAY (Indian food), BEEFSTEAK (a vegetarian restaurant - www.beefsteakveggies.com), PORANO PASTA + GELATO, LOCAL PIZZA, PASTA FLYER FAT NOODLE (Asian recipes) ... (see the very interesting article about them by WSJ). As John Kunkel who has just launched LEWELLYN'S CHICKEN & BISCUITS, says, "The lesson for all of us in fast-casual is keep it simple. If you're going to do something, specialize, and do it better than everyone else".

At last! Coca-Cola changes from four brands to one but...

Coca-Cola has announced a major change in its marketing strategy: it is abandoning a 4-brand approach (Coca-Cola / Coca-Cola Zero / Coca-Cola Life / Diet Coke) for a single brand strategy (Coca-Cola) for marketing the four products. This new strategy launched in Britain and Spain will gradually include 11 countries, among them the USA.
The arguments used by the company to justify this change are symptomatic of failure: they claim that consumers have a hard time identifying the characteristics that differentiate the brands (e.g., 50% are unaware that Coca-Cola Zero contains no sugar or calories).  We must therefore conclude that the significant marketing budgets allocated separately to the 4 'brands' do not help consumers to understand the differences between them! The company has therefore decided to streamline its brand portfolio to render its marketing outlays more efficient.
However, it is important to look beyond press releases and understand the market situation and the trend in Coca-Cola sales. The market for soft drinks is clearly in decline; consumers are becoming aware of the health risks of these drinks.



Coca-Cola has set itself a target: its products with lower sugar content and calories will represent 50% of its sales by 2020. But that's still a long way off!  In the USA the Coca-Cola brand still represents almost 60% of sales, Diet Coke 32% and Coca-Cola Zero 18%.  And the trend is very unfavourable to Diet Coke - global sales fell sharply:




In Britain the brand images of Diet Coke and Coca-Cola Zero are very weak:



So we see that, in a context where consumers are looking more and more for products that are good for health, the separate-brand strategy followed since the launch of Diet Coke in 1982 and Coca-Cola Zero in 2005 failed to really position Diet Coke, Coke Zero and (since 2014) Coca-Cola Life, in the marketplace.  Consumers still do not understand the differences between them.  Meaning that it has been a failure.

From a conceptual point of view this 4-brand approach in my opinion has been a fundamental mistake from the outset, since each one is implemented separately and does not bring value to the Coca-Cola brand itself.  Here we touch upon one of the deviances in the marketing of American brands that favours an architecture Masterbrand / Sub-brands, while a European approach would be Masterbrand / Product line.

There should be only one Coca-Cola story - each product being at the service of the story and answering a different consumer expectation. 

Now it remains to be proven that Coca-Cola's new approach will help to position the 4 products more successfully: the change of packaging, displaying the Coca-Cola name horizontally, colour codes, or the fact of now having to present the 4 products together - will they be sufficient to increase the sales of the 4 products?  Do the last three really correspond to clearly identified consumer expectations?

Subway bows to social media

At the end of April, Subway announced that all sandwiches sold in the U.S. and Canada are free from azodicarbonamide. The press release of the company is a gem – making people believe that this was a strategic initiative of the brand:
“To our knowledge Subway is the first major restaurant chain in North America to completely remove Azodicarbonamide from its core bread formulations. (...)We take great pride in our bread leadership… Azodicarbonamide is used in most bread and by most brands, but removing it has long been part of our bread improvement program.”
In reality, Subway was actually under fire from social media, relayed by traditional media, since February: a blogger (www.foodbabe.com) asked Subway to conform to European and Australian regulations that prohibit this additive. It is a chemical blowing agent that makes the crust of the bread lighter – in the same way that it makes yoga mats or shoe soles lighter by creating air bubbles.

The activist work of this blogger was echoed by many other sites and studies have detailed the dangers of this substance banned in Europe (e.g. the Environmental Working Group). We have here an example that is interesting from two standpoints:

• It shows the growing impact of social media - that enable one to take action with regard to brands in countries where official bodies do not.
• It shows that in the domain of health, European regulations are now used as a good example to follow.

The question remains as to when other brands in the USA using azodicarbonamide will eliminate it from their recipes!

Health Works: Chinese traditional medicine serving health

In Hong Kong, one can find around twenty small boutiques in the subway, with the name Health Works - Chinese Urban Healing Tea; some of them with also a dining area.  Crossing their threshold one enters an extraordinary universe: food products based on traditional Chinese medicine.  You discover products based on herbal teas, herbs, fruits - guaranteed free of preservatives and artificial colouring - in “responsible” packaging. Prices range from 16 $HK to 56 $HK (1.6 to 5.6 €).
The products change with each season – because in Chinese medicine food requirements are linked to organs and seasons.  For example, the "spring" selection aims at facilitating the functions of the liver.

The boutique provides advice aplenty, and explains the origin of the products as well as the philosophy behind traditional Chinese medicine.  Their nutritional principles are described and the benefits of each product are written on the packaging. The approach is thus both educational and responsible.
Founded in 1989 under the name Tong Zhi Tang, the company changed it to Health Works(hop) in 2000.  Its products are also distributed in 1,500 sales outlets such as supermarkets and convenience stores.  I find this concept very interesting - very modern, one that might have been conceived in Europe or the USA: the brand has chosen an approach that is sustainable and responsible, positioning it at an affordable price and preferring a local distribution network.  At a time when there are very strong fears about food safety in China, and where the government supports the development of domestic brands, it is reasonable to believe that Health Works will grow rapidly in the continent.

Osiao: Estée Lauder's Chinese gamble

Last October, Estée Lauder launched a new brand, Osiao (pronounced O-shao) intended for Asian consumers.  But make no mistake about it: the target audience is primarily Chinese. The strategy of the U.S. group is remarkable: it does not consist of creating a Westernized version of a beauty brand (which is the strategy pursued by L'Oréal with Yue Sai, for instance), but to create a beauty brand that is essentially Chinese. As Fabrizio Freda says: "It will be a brand with a unique position, a brand that will give consumers a sense of being local, of being really dedicated to them".
So what does it consist of? It is a brand that builds on the fundamental concepts of beauty in China: external beauty is the reflection of internal well-being.  In Chinese, health and well-being are both conveyed by the word, Jiankang - an adjective meaning healthy, whole; where the two ideograms signify Jiàn 健 (strong, to be good at, in good health) and Kang 康 (abundant, in peace).  Here, it is seen from the perspective of holistic health where beauty reflects health, and where health is the result of overall harmony.  Viewed in such a context Western beauty brands remain merely "cosmetic" - i.e., affect only the surface. Chinese beauty brands (as also Japanese brands) have a much broader spectrum: they refer back to health and well-being.
This concept of beauty has consequences that Osiao exploits:

• It positions itself as the "radiant" brand - its catchphrase is "to reveal the radiance of your skin".
• Its name is composed of 5 letters (an auspicious number) and starting and ending with the same letter, it aspires to be a sign of harmony.
• All essential ingredients are derived from traditional Chinese medicine.
• The range includes both skincare and food supplements.
• The counters remind one of traditional Chinese apothecaries, equipped with wooden cabinets.
• Its beauty advisers adopt a method of skin diagnosis on the lines of traditional Chinese medicine and develop local massage techniques to help the skin absorb the product.

With Osiao, Estée Lauder adopts the same approach as Hermès did with Shangxia: i. e., build a premium brand based on Chinese values ​​and know-how - in other words, create a Chinese luxury beauty brand (just like Herborist - the brand created by a prominent Chinese actor, Shanghai Jawa). This new business model should be studied closely: it is proof that all the players (Western as well as Chinese) are in the process of revolutionizing the world of brands.

Kellogg's called into question on “natural”

In October 2011, the Cornucopia Institute (an American activist organization) published a document entitled "Cereal Crimes" - warning consumers about the extensive use of genetically modified cereals and the presence of pesticide residues that are injurious to health in the breakfast products of major brands.

This report might have remained restricted to those concerned by the issue, except that last April, a supermarket in Rhode Island (Green Grocer) decided to withdraw one of the products named in “Cereal Crimes” from its shelves: Kashi cereals from Kellogg's.  Even if they are USDA certified, these contain GMOs.

The retailer placed a notice on its shelf explaining its decision:
"You might be wondering where your favourite Kashi cereals have gone. It has recently come to our attention that 100% of the soy used in Kashi products is genetically modified, and that when the USDA tested the grains used there were found to be pesticides that are known carcinogens and hormone disruptors."

This image quickly spread through the Internet: consumers posted comments on the Facebook page of the brand, used Twitter to condemn the fact that a brand that projects itself as “natural” and certified was not beyond reproach.  They also discovered that the brand is one of Kellogg's - information that cannot be found either on Kashi’s website or its packaging.

One can establish a parallel between this example and the information published by the Detroit Legal News: the growing number of suits filed against the "natural" claims of food brands in the U.S.A.  The most recent concern Ben & Jerry's, ConAgra, Frito-Lay, Kashi, Naked Juice, Snapple and Trader Joe's. The same article tells us that 95% of these complaints are squashed through a monetary settlement in favour of the complainants.
"Recent deceptive advertising suits that have settled include $550,000 paid by the maker of Nutella over claims that its hazelnut spread was a "an example of a tasty yet balanced breakfast" to a $2.5 million fund for a class of consumers who alleged Kellogg's falsely advertised that its Rice Krispies and Cocoa Krispies cereals could support the immune system."
One is able to take the liberty of making such farfetched claims in the U.S. for want of a legal definition of "natural", but the power of the Internet is now compelling food brands to rethink their positions: these examples illustrate the consumers’ growing demand for transparency.

China: headed towards organic and natural

On my recent trip to Shanghai, a visit to a new shopping mall, Joy City, convinced me that natural and organic products were set to grow rapidly in the Chinese market. Two new sales outlets have come up:

• An Organic+ boutique offering European organic beauty brands (Weleda, SoBio, Patyka, Planet Kid, and others). There are currently about ten Organic+ boutiques in China. The creator of the chain, Edward Lu, explained that the increase in health hazards for the Chinese (air pollution, food adulteration, etc.) is fast turning them towards natural and certified products.  In fact, during the month of January, the press was filled with alerts concerning the quality of air in Beijing and also Shanghai, presented the target of 10% in green buses in Shanghai by 2015, and denounced food scandals.
  
  
  
  
• The COFCO (food and housing) conglomerate has set up an outlet selling natural products – offering assurances in terms of origin (production area), and quality certification (ISO 9001 / HAACP) ("Good Pomegranate / Good Region / Good Techniques / Standardized management). All products are sold under its own brand name (which did not exist as such until now).  As Patrick Yu, its CEO, says: "The core objective of COFCO's industry-chain development roadmap is to solve the problem of food safety, a problem which is the biggest headache for customers now".

These two initiatives clearly illustrate that the Chinese market is maturing very quickly and has some surprises in store for us – both in beauty and food distribution.

 

 

CampaignForSafeCosmetics vs. J&J = 1 - 0

Johnson & Johnson has had to, in just 15 days, capitulate to the activist association, Campaign for Safe Cosmetics.
In March 2009, the CSC published a report, "No More Toxic Tub", denouncing (among hundreds of other products in the market) the use of two potential carcinogens (quaternium-15 and 1,4-dioxane) by J&J in its baby shampoo. Quaternium-15 is a preservative that releases formaldehyde and 1,4-dioxane is a by-product of a chemical reaction used to render products more gentle on the skin. Despite letters and successive meetings with the brand, no answer was forthcoming.


Last October, the Campaign for Safe Cosmetics - which allied with the American Nurses Association and doctors' associations for the circumstance - released a new report entirely dedicated to J&J - "Baby's Tub is Still Toxic".  The contents of the report sheds new light on J&J's practices:  among 13 Baby Shampoo products bought in 13 different countries, it was found that Quaternium-15 is only used in five countries (USA / Canada / Australia / China / Indonesia) - while it is replaced by other preservatives in eight other countries (Japan / Netherlands / South Africa / Sweden / UK / Denmark / Norway / Finland).  J&J follows the same procedure for its Johnson's Natural range marketed in the United States. The report therefore rightly stresses J&J's "double standards" policy that persists in using a potentially dangerous ingredient in countries where they are not explicitly prohibited by regulations.  The Campaign for Safe Cosmetics therefore asked J&J to bring all its formulations into line with those used in Europe.
On November 16, Johnson & Johnson announced (refuting the risk in question) that after removing all phthalates, they would, within two years, stop using Quaternium-15 and all the ingredients that release formaldehyde, and work towards eliminating 1,4-dioxane.
This story is fascinating because of what it reveals:

• An activist group can, in the space of two years (or 15 days if we refer to these recent developments), with the help of other associations and in-depth research work, get a brand to reformulate its products.
• Brands use different formulas for different countries:  today, campaigns conducted by activist groups that call this practice into question, will necessarily have an international impact and highlight these "double standards".
• Without saying so explicitly, European norms (or even individual countries - formaldehyde is banned in Japan and Sweden) override American "liberty": beauty and hygiene brands will have to systematically reformulate on a global scale by adhering to the strictest standards.
• Indeed, what could justify the coexistence of two brands like J&J and Johnson's Natural (the only thing natural is the name) on the same shelves in future?  Especially since the Campaign for Safe Cosmetics association is now denouncing the "greenwashing" of some so-called 'natural' brands...

P&G innovates with its business models

Procter & Gamble does not stop at just developing its brands.  Over the last four years, the company has launched into a reflection on its future poles of development which show three main characteristics:

1. Building upon key consumer trends;
2. Implementing an innovative business model;
3. Reinforcing the value of its brands.

P&G has thus set up a division - P&G FutureWorks - which is driven by two work ideals:

• Working in partnership – with "business contributors";
• Developing business models focused on service.

By connecting with external partners, our scope has expanded beyond P&G's strategic core businesses into new channels and domains. P&G FutureWorks seeks to create adjacencies and new business models for P&G brands in high-growth categories that are on-equity, strategic and service-based.

As a result, three initiatives have emerged over the past two years:

• Mr Clean Car Wash: 16 car-wash centres (including 13 in Atlanta) that capitalize on the Mr. Clean detergent brand - and strengthens it by adding a "service" aspect as well. Developed by franchisees, this brand places the accent on cleanliness, comfort, recycling of wastewater, price ... and sells Mr. Clean products.
• Tide Dry Cleaners: 4 franchised laundries (Kansas and Ohio) offer a unique range of services (drive-in / 24-24 secure deposit / same-day service / alterations...) in clean and odour-free spaces…
• The acquisition of MDVIP: a network of several hundred doctors who have established a one-to-one relationship with their patients. For an annual fee of $ 1,800, each person is entitled to health monitoring, 24/24 - 7/7 availability, a personal website and immediate access to a doctor. Each of the doctors handles 600 patients (as against an average of 2,000 in the U.S.).

Three elements seem essential here – those that The Scriptorium Company also systematically encourages with its clients:

1. The partnership aspect: 50% of P&G's innovations originate from outside the company - including its consumers;
2. The quest for new business models - an approach to innovation that is too often overlooked but which truly creates value;
3. The creation of new services in areas in which the group's brands excel – corresponding to a mega-trend that we now see among consumers.

SC Johnson and Transparency

SC Johnson is an American family group specializing in home care products that include Mr. Muscle, Canard WC, Brise, Oust (air-fresheners), Baygon, and others. In March 2009, SC Johnson innovated by creating a mini-website - www.whatsinsideSCJohnson.com - where the ingredients contained in all the products of its brands were listed.


Last week the group launched a new communications campaign that was particularly interesting both in content and form:

• SC Johnson promises henceforth to specify - by January 2012 – on this mini-website, the ingredients of perfumes and dyes and also the preservatives contained in its products: these relate to the most recent ingredients that were not yet available.
• The message relies on the family image of the company: "Sharing our ingredients, one family to another". The current CEO, Herbert Fisk Johnson III, said in The New York Times: "With our family name on products and our family name on the company, your family reputation is at stake. I like to tell the story that the difference between my situation and a public company C.E.O. is that if a public company C.E.O. screws up and damages the reputation of the company, they get a golden parachute and move on with their lives. If that happens with us, I have to look my family in the eye for the rest of my life".
  

This reminds me of Jean-Louis Dumas, who said to me: "Hermes is not a brand, it is a contract". Seeing my astonishment, he added: "My name is on all our products. Each time we sell a product with the Hermès signature, it is as though I signed a contract with this customer. I am bound by it".
We are entering the Age of Responsibility - where all brands, all companies, will eventually be required to account for the environmental, social and health impacts of their products. The example of SC Johnson - which puts commitment and transparency into practice - shows that family firms may be better equipped to cope with it than others.