Be Wary, The Dangers of Cost Cutting

By Karen Pelletier

Bull's Eye BBQ sauce is an example of a product whose cost reductions are hurting the brand.

Cutting product cost can kill the golden goose.

It’s the time of year to start executing plans for next year.  If you’ve planned to take cost out of your food product, BEWARE.  Public companies are under immense pressure to achieve a certain percentage of growth in profitability.  If you can’t achieve it through growth in volume, then the usual place to look is to cut costs, both in discretionary spending (like marketing) and through product cost reductions.

Don’t Take Your Cost Reductions Out of Your Food Product

I had a sad experience recently.  I’d made ribs for dinner, and took out a new bottle of Bull’s-Eye BBQ sauce.  OK, here’s the disclaimer, I’d worked on the introduction and rollout of Bull’s-Eye at Kraft back in the mid 1980’s.  When it was developed, it was intended to be a “super-premium” BBQ sauce, the Haagen-Dazs of BBQ sauces, with a clean ingredient line that read like a recipe.  No gums, starches, high fructose corn syrup or any ingredient that would jeopardize it’s positioning as “the” super-premium BBQ sauce.  We spent hundreds of thousands of dollars testing our recipe against the leading BBQ sauces in each region of the country, and it kicked-butt everywhere.  Everyone loved the sweet-spicy flavor.  Then we spent millions on marketing the brand.  It did well.

Even though I don’t use BBQ sauce often, for the last 27 years Bull’s-Eye was the only brand of BBQ sauce I would use.  Then, the other night, I took out a new bottle of Bull’s-Eye, tasted it, and was horrified.  This was NOT the Bull’s-Eye we had introduced.  It was thinner, more vinegary—not at all what I expected. Then I looked at the ingredient line.  What a shock!  High fructose corn syrup replaced tomato puree as the number 1 ingredient!  There was also modified food starch (the 6th ingredient) and a preservative, potassium sorbate.  The high fructose corn syrup and the potassium sorbate changes were really new.  It happened between an April 19 code date and an Aug 1 code date.  I was crushed.  A brand I had loved and counted on for years was now gone…  Kraft may lose me as customer after I had been so brand loyal for so many years.

The Irony

The irony is that Kraft should know better.  They had seen this movie before.  Maybe there is no one there now who knows it, but when Kraft originally introduced their first BBQ sauce, Kraft brand BBQ sauce, it was the same formula we ended up using for Bull’s-Eye, full of tomato puree, molasses and cider vinegar. But over the years they cut cost and cut cost to the point that the Kraft BBQ sauce became a thin, watery, vinegary product that people primarily used as a base to create their own “doctored up” sauce.  Kraft BBQ also lost a substantial amount of market share, was usually sold on deal, and was not very profitable.

That’s the insidious thing about cost reductions.  Any one minor change may not be noticeable to the consumer, but after a while, all of a sudden, they notice.   You lose brand loyalty.  All the equity you built is put at risk.

Now it appears that the same thing is happening all over again with Bull’s-Eye.

Click to Tweet:  Restore the original formula of Bull’s-Eye BBQ sauce!

Don’t Let This Happen To Your Brands

Public companies have a very real, short-term focus.  They have to meet analysts’ expectations for profit growth.  If you work for a public company, fight against cost reductions to your product.  Take cost reductions out of packaging or other discretionary spending, but leave your formula alone.  Better yet, think about restoring your product’s formula to what it was when it was originally introduced.  It might even support a price increase!

Private companies can take a more long-term focus.  They don’t have to make product cost reductions that may hurt the viability of their brands in the long run.  Document and protect your brands from cost reductions.

If you like this article, subscribe to my blog by clicking on “Entries RSS” under the Marketing Blog heading in the right hand column.  Thanks!

Advertisements

About Karen Pelletier

Karen Pelletier is an independent Marketing Consultant. She has over 30 years of experience in consumer packaged goods, new product development, technology marketing, and Internet Marketing. She can be reached at kjpelletier@marketing-consultant-k-pelletier.com.
This entry was posted in Uncategorized and tagged , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s