U.S. food giants tailor products, marketing to international palates
Remember Tang? Astronauts drank it, so it got a lot of ink in the 1960s and 1970s. Nowadays, it gets about as much notice as the space program, holding just a small slice of the U.S. powdered-drinks market.
But in developing markets from Brazil to China, Kraft Foods Inc. has turned its Tang brand into an international juggernaut with $750 million in annual sales.
Kraft’s boxed macaroni and cheese, on the other hand, dominates its market in the U.S. But in developing markets, it’s mostly an afterthought for Kraft. The upshot: Powdered cheese doesn’t travel well; powdered beverages do.
It’s not just a trivial-pursuit sort of fact: Deciphering which products will sell well in emerging markets and then correctly marketing them is the Holy Grail these days of packaged-food companies such as Northfield, Ill.-based Kraft.
Bolstering its emerging-markets presence was a key driver behind Kraft’s recent $19-billion purchase of Cadbury. And companies such as General Mills Inc. and Campbell Soup Co. have also made emerging markets a key plank of their corporate strategies.
But packaged-food firms face a special challenge: Food, more than most products, is an expression of culture.
“It’s something where regional tastes are really strong,” said Mike Mazzeo, a professor of management and strategy at Northwestern University’s Kellogg School of Management. “It’s much more clearly tied with culture, so it’s much more difficult to penetrate our products in their markets.”
Plus, many countries have strong, local brands that serve up tough competition to food multinationals like Kraft, Mazzeo said.
Those factors help explain why U.S.-based packaged-food companies generally have less exposure to foreign markets than other U.S. industries. The U.S. packaged-food and meats business got 29% of its sales from foreign markets in 2008, compared with an average of 38% for 23 industry groups followed by Standard & Poor’s Capital IQ division.
Even before the Cadbury deal, Kraft was one of the more internationally oriented U.S. food companies, last year deriving 41% of its $40 billion in sales from foreign markets, not including Canada.
Kraft, maker of Oscar Mayer meats, Ritz crackers and other household brands, retooled its developing-market efforts three years ago, moving away from a scattershot approach.
“Planting flags all over the world was the old strategy,” said Sanjay Khosla, Kraft’s president of developing markets and global categories.
Now the company focuses on 10 “power” brands and 10 countries. The idea is to push brands that are the most easily translatable across borders.
“Mac and cheese is iconic, but it’s not one of our 10 power brands,” Khosla said. That’s not the case for Tang, though, which is one of Kraft’s 10 power brands in developing countries, right up there with the powerhouse Oreo.
Tang’s heyday in the United States came when it was known as a beverage astronauts toted into space. Nowadays, it has a 2.5% share of the U.S. powdered-fruit-drink market, according to Information Resources Inc., which tracks sales in traditional grocery channels.
But the United States accounts for less than 10% of Tang sales. The rest is spread out across more than 30 countries, and the beverage is particularly big in Latin America and Asia.
Catering to local tastes is vital, as New Jersey-based Campbell Soup found out in its first foray into China in the early 1990s.
The company essentially slapped a Chinese label on its classic U.S. condensed soups, said Larry McWilliams, president of Campbell’s international operations.
“They sold well for a while, but they were a novelty. They had no staying power,” he said.
Campbell returned to China in 2007, but only after two years of research revealed that in China, as well as Russia, there’s a cultural disposition to cooking soup from scratch.
So, in both countries, Campbell has introduced products that reduce the time to make homemade soup from 2 1/2 hours to about 45 minutes.
Like Campbell and Kraft, Minnesota-based General Mills has also made China a prime target.
General Mills has been in China since 1998 and has had particular success with its Haagen-Dazs ice cream and Bugles corn snacks. Haagen-Dazs is seen as an “affordable luxury” by upwardly mobile Chinese, said Chris O’Leary, chief operating officer of General Mills’ international business.
Meanwhile, Bugles have become the country’s second-leading salty snack, after potato chips. General Mills worked with one particular Chinese village to grow the right kind of corn for the snack, and Bugles are offered in several local flavors, including seafood.
But General Mills also found limits to its snacking success in China.
Kix, a salty snack made of what Americans know as Chex cereal, was introduced along with Bugles but didn’t click with the Chinese. So General Mills dumped it to focus solely on what was working: Bugles.
Hughlett writes for the Chicago Tribune.