Proof is in the pudding

Feb. 18, 2009

Kraft Foods Inc., Sara Lee Food Corp., H.J. Heinz Co. and others are trimming their lesser-performing brands to focus marketing dollars on their higher-margin, best-selling brands and retain consumers, who are trading down in the recession, reports The Chicago Tribune/Associated Press. Kraft Foods Inc. will no longer sell Handi-Snacks pudding to retail customers, but will push new flavors of its more lucrative Jell-O pudding. Meanwhile Heinz plans to cut between 15 to 20 percent of its SKUs (stock-keeping units) globally within three years, on top of a 50 percent cut from 2002 to 2006, and Sara Lee wants to cut its offerings 8 percent this fiscal year.

The nation's grocery shelves could stand some trimming, said Mark Gottfredson, head of the global Performance Improvement practice at consulting firm Bain & Co. Much as the housing and technology industries experienced growth bubbles, grocery store shelves have been bursting with products in the past 10 years, he said. They're straining with about 50 percent more products than 10 years ago, including new formulas, flavors and sizes of existing lines. Cutting back on SKUs has been the trend for the past three or four years, but greatly accelerated in 2008.

Will consumers mind? Probably not; they are cutting back as well. But when products are cut, sales volume drops. Kraft reported that unit volume fell 5.2 percent for the three months ending in December as consumers reacted to price increases and retailers cut inventory.

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