NEW YORK (AdAge.com) — Marketing for Altoids and Life Savers is curiously weak. That’s the startling admission from Wrigley’s CEO, who told investors that ad efforts for the two brands were under-marketed when they were owned by Kraft Foods and haven’t been a lot better since Wm. Wrigley Jr. Co. purchased them for $1.5 billion last year.
‘Limited’ support
Bill Wrigley Jr., the mastermind behind the deal, blindsided analysts at the company’s annual meeting last week, when he said the brands, along with Creme Savers, had received “limited marketing and innovation support” and will require more significant investment than previously thought — at the expense of earnings — in order to grow.
“When [Wrigley] bought the business, they saw a certain level of distribution and thought they could maintain it without extra marketing spending, but that distribution continued to deteriorate,” said Credit Suisse analyst Rob Moskow.
Although measured-media spending on the brands rose in 2005 to a total of $50 million, up from $33 million in 2004, those efforts were still dubbed “quite weak” by Lehman Bros. analyst Andrew Lazar. Mr. Lazar surmised that Wrigley “was hesitant to invest aggressively behind these brands until it had a better sense of the innovation pipeline and had its own merchandising programs.” But he said the aftermath of Kraft’s underinvestment, coupled with the disruption of the transition to Wrigley’s ownership, resulted in disastrous sales declines.
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CEO Bill Wrigley Jr. said Altoids and Life Savers will require
more of an investment in marketing than previously thought. |
Altoids sales fall 17%
Mr. Lazar’s analysis of ACNielsen data shows Altoids sales fell 17% since Wrigley’s ownership, while Life Savers dropped 8% and Creme Savers plunged 33%.
Mr. Moskow predicted Wrigley will have to add at least $10 million in spending to the trio, whose annual sales total roughly $400 million.
Since the June acquisition, ads for the three brands are all remnants of Kraft’s efforts, but much is said to be “in progress” from Altoids agency Leo Burnett, Chicago, and Energy BBDO, Chicago, which works on Life Savers and Creme Savers.
Adding brand support
According to spokeswoman Jessica Schiller, “We are adding brand support at more significant levels to regain awareness and presence of these brands.” Building the innovation pipeline will also be crucial.
Analysts were clearly surprised by the near-term hit to earnings as a result of unexpected marketing costs. But the prognosis is good. Wrigley’s “strategy of spending to grow the brands will work in the long run, but it’s going to be a little painful in 2006,” said Mr. Moskow.
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