Wednesday, December 3, 2014

Kraft Foods Rolls Out ‘Breakthrough’ Innovation To Energize Brand Portfolio

There’s a special emphasis on innovation these days at Kraft Foods. “New and different” hasn’t exactly been the company’s middle name, for one thing. Its core portfolio consists of a group of classic, slower-growing brands that was cleaved from what is now the sleeker, sexier Mondelez International snack conglomerate a couple of years ago. And if that weren’t enough of a handicap, the entire traditional CPG foods sector seems to be bogged down in an era of slow growth and rising consumer indifference.

So what is the approach taken by Barry Calpino, Kraft Foods’ vice president of breakthrough innovation, to a strategy that arguably is more crucial than at any time in the company’s history?

“I’ve found that almost all successful innovations tend to have in common that they are really relevant with consumers today – and tomorrow, too,” he told CPGmatters. “They start with great insight, empathy and immersion with consumers – and ideas that usually hit upon big trends, versus fads.”

Kraft’s approach to innovation also relies heavily on its retailer partners, said Calpino, who recently also held forth on the company’s philosophy in a presentation at the recent Food Industry Forum at St. Joseph’s University. “I’m a firm believer that we must deeply involve our key retailers in our innovation journey,” he said. “And the earlier the better. It has been a common thread in many of our biggest successes at Kraft. We’ve made this a key part of our play book, with the addition of working early and upfront with key growth retailers that years ago might have been an afterthought – club stores, the dollar channel and convenience stores.”

Indeed, the times demand that Kraft have all parties rowing in the same direction to harness innovations most effectively. “In today’s climate,” he said, “innovation has never been more important to help drive growth for us and our retail partners.”

Moreover, as Calpino recently told a Wharton publication, “There is … an intention behind the term [breakthrough innovation] and the title. It’s really to push our organization and our innovation teams to shoot for bigger opportunities, more incremental white space, new categories and new usage occasions. We have teams that work on some of the closer-in extensions of current brands. But my charge and my push is to really encourage the organization and lead, making sure that we deliver on big, big innovations that help not just grow our brands here at Kraft, but also grow the categories that we’re in.”

One of Kraft’s biggest continuing innovation success stories under this paradigm actually was launched before the breakup of the old company. MiO, now the market leader in add-in liquid “enhancements” to bottled water, began three years ago “as a really close-in idea,” Calpino told Wharton – simply as a liquid version of Kraft’s Crystal Light powder, a rather ordinary brand extension, “and it was going to be marketed that way.”

But then as a result of the overhaul of its innovation thinking that already was occurring, he said, “We decided that rather than just make it a close-in extension of the current business, [we would] conceptually launch MiO as a totally new category idea – liquid water enhancers – and go after all the water-usage occasions there are in the U.S., both tap water and bottled water, and look at Mio as an opportunity to accompany all those occasions, rather than only targeting people who currently buy powdered mix-ins for their liquids.” Kraft even spent $50 million on the launch, the most it had ever spent on a new-product introduction.

The result of that bigger thinking was a “big, big bet” that has worked out handsomely for a company that began its new life in need of some major innovative wins. It created a new category for Kraft, competitors and retailers, one that is now more than $800 million in annual sales. “And that’s the concept of breakthrough innovation – thinking bigger and thinking broader and moving aggressively.”

As the company evaluates possibilities for new innovations, Calpino told CPGmatters that Kraft prioritizes what he calls the metrics of “momentum, margin and materiality” to its decisions. They are the baseline for “what a high-priority project should be made of – and then we overlay key differentiators like whether or not they are on a top trend we are tracking and are especially relevant with the fastest-growing consumer groups. We also look at overall feasibility and how they may fit with a current Kraft brand.” Kraft also emphasizes relevant new “platforms” as well as “significant rejuvenations” of existing brands.

For example, Kraft recently has been leveraging innovation to revive one of its most venerable brands, Philadelphia Cream Cheese. The brand has introduced significant product variations, such as cooking varieties, as well as new on-trend flavors. It has added fruits and vegetables to existing products in addition to simplified ingredient lines with the removal of artificial flavors.

Similarly, Kraft recently introduced a new platform called Oscar Mayer P3, which simply packages meat, cheese and nuts. “It’s one of our favorite recent innovations and it delivers on all of these fundamentals,” Calpino said. “They include the importance of protein, snacking, and consumers’ desire for products made with simpler ingredients. Consumers told us that P3 was very relevant – and convenient – and we believe that it is at the foundation, combined with a great marketing and retailer launch, of why it is off to such a good start.”

And when it comes to marketing these innovations, Calpino explained, “Our philosophy is to prioritize our marketing activity – traditional and new – against those big new-product-platform and base brand-renovation ideas. That way we’re investing behind substantive news and ideas that will help drive growth for us and our retailers, bring in new uses, occasions – and help drive growth.”


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