Rumble in the jungle

2006 is set to pit heavyweights against contenders who will strive to push their rivals into second place on the pitch, the supermarket or the living room floor. Enter Coca-Cola v Pepsi, Nokia v Motorola, Asda v Sainsbury’s, Levy v Sorrell…

Over the coming year, a series of head-to-head marketing battles will be fought between some of the most famous personalities and brands in the world.

England could face Brazil in the World Cup, and sponsors of the teams and their stars will seek to outstrip their rivals for maximum coverage. Meanwhile, media leviathans Richard Branson and Rupert Murdoch will fight for pre-eminence in UK television; Pepsi will step up its fight for market share against Coke; Toyota will bid to usurp General Motors as the world’s biggest volume car manufacturer; and Sainsbury’s will attempt to knock Asda into third place in UK grocery retailing.

This could be the year when the challengers finally overtake the incumbents. The results of these face-offs will do much to determine the way we live over the next decade. Participants will draw on a deep well of marketing expertise, only too aware of the benefits conferred by ascendancy in the pecking order. The showdowns of 2006 should make for spectacular entertainment.

Premier Foods v Heinz

Every British consumer knows that beans means Heinz, but food giant Premier Foods is looking to challenge the US giant’s dominant position with Branston Baked Beans.

Heinz Baked Beanz is market leader in the UK’s &£399m baked bean market, with a 68 per cent value share. According to IRI data for the year to October 8, its share has grown by 6.2 per cent compared with the previous period. But Premier has chosen to strike while Heinz is weak. The US company reported that revenue growth in its second quarter had been virtually flat in Europe. The UK arm froze its ad budget in the summer amid a strategic review under new managing director Jane Miller (MW July 21). Despite this, Heinz reacted to Premier’s &£10m launch by putting Beanz back on TV.

A price war began when Heinz slashed the price of Baked Beanz from 44p to 41p, forcing Premier to do the same. Premier claims that it has sold seven million cans in the first month since its launch, which is three times the number it predicted.

Credit Suisse First Boston food analyst Charlie Mills says: “While I do not think that Premier can usurp Heinz in the long term, it could be an irritating presence.”

England v Brazil

England and Brazil are set to meet in the World Cup semi-finals, giving sponsors almost four weeks to capitalise.

“The Premiership is in the spotlight in many countries, giving England a more global appeal,” says BLM Sports Marketing managing director Andy Clilverd. “Brazil’s advantage is that any fan will wear its shirt because it’s cool. No one outside this country would wear an England kit.”

England rakes in &£10m in sponsorship annually. Brands generally sign four-year deals to include a World Cup. It is a team player on the sponsorship front, although David Beckham’s looks make him its most branded individual. The skill and success of a number of Brazilian stars such as Roberto Carlos, Ronaldo and Ronaldinho make players, rather than the team, attractive to sponsors.

England may eventually succumb to Brazil on the pitch, but experts predict victory for Sven’s men in the marketing arena.

Motorola v Nokia

Motorola, which pioneered the mobile phone in 1973 and went on to dominate the handset market for more than two decades, has been living in the shadow of Finnish rival Nokia in recent years.

Motorola’s global market share slumped to a low point of 13 per cent in 2000 (Gartner), down from a high of 32.5 per cent in 1994. Meanwhile, Nokia, which had only 21 per cent of the market in 1994 grew its share to 35.8 per cent by 2002.

But the battle has become more intriguing in the past year with a sleek new handset range sowing the seeds for a Motorola comeback. The ultra-thin RazrV3 helped the US company increase its global share to 18.6 per cent (Strategy Analytics) by the third quarter of 2005, up from 13.9 per in the same period of 2004. Nokia’s market share stands at 32 per cent.

Strategy Analytics director Neil Mawston says: “Nokia doesn’t have a killer phone like the Razr, which is having a halo effect across Motorola’s portfolio.” But he adds that Motorola has been taking share from rivals such as Samsung and Sony Ericsson, rather than Nokia. He believes Nokia is too far ahead for Motorola to regain market leadership in the foreseeable future without buying a smaller rival.

Pepsi v Coca-Cola

For Coca-Cola and global rival PepsiCo, 2006 will be all about the race to diversify away from declining carbonated soft drinks and push the waters, juice and energy drinks demanded by increasingly health-conscious consumers.

PepsiCo has been the quicker of the two to exploit this trend and recently overtook Coca-Cola in market capitalisation for the first time in 112 years. Pepsi has successfully expanded into food, buying Quaker and performing strongly in snacks, while Coke has failed to diversify.

Experts say that both companies will adopt a dual approach to business. Zenith International chairman Richard Hall says: “While health will undoubtedly be the biggest single issue, another challenge will be keeping consumer interest in carbonated drinks through rivalry and innovation.”

Pepsi looks set to keep up the pressure and force Coke into an increasingly humiliating position.

Toyota v General motors

The once-mighty General Motors (GM) is fighting for survival, with one Wall Street analyst warning in October that the company has a 30 per cent chance of filing for bankruptcy. Conversely, Toyota has been unstoppable. Already the most profitable car maker in the world, the Japanese company looks set to overtake GM in the next 12 months as the world’s biggest car maker as well.

Toyota is expected to make 9.2 million vehicles in the year to March 2007, a figure that should see it surpass GM as the US company is forced to further cut production amid its well-publicised financial problems. Toyota is worth $160bn (&£92.2bn), compared with General Motors’ $16bn (&£9.2bn).

Although General Motors last year reported its best September sales in Europe since 1999, its US sales fell by 24 per cent. Toyota has built a reputation as a quality manufacturer and has been a pioneer in the hybrid market. The evidence is quite compelling that 2006 will be Toyota’s year.

Microsoft v Sony

Microsoft beat Sony to market late last year with its next-generation Xbox 360 console, but the battle in the year to come will be for supremacy in living rooms. The Xbox 360 and Sony’s PlayStation 3 are vying to be “home entertainment hubs”, offering high-definition television and programming via broadband.

At the moment, the two are the main contenders, but analysts predict the market will open up as the likes of Dell and Hewlett-Packard look to muscle in on the sector.   

Branson v Murdoch

For more than a decade, Rupert Murdoch has been king of UK pay-per-view television through his stake in satellite broadcaster BSkyB. But this year he faces a rejuvenated challenge from cable in the guise of populist entrepreneur Sir Richard Branson, as NTL seeks to acquire his Virgin Mobile business and rebrand with a “quadruple-play” proposition.

“It is potentially the most exciting thing to happen in the UK television market for a long time,” says Carat media director Steve Hobbs. Branson would hold around 14 per cent of the enlarged company; Murdoch’s News Corp controls 37 per cent of Sky, which has almost eight million subscribers, against cable’s five million. “Virgin Cable” would also have 2.5 million broadband customers, while Sky last year purchased Easynet broadband and holds the Premier League football rights that Branson needs.

SG Securities media analyst Anthony de Larrinaga says quadruple play, “a solution looking for a problem”, may not create the intended impact in the media world, although Branson has bolstered aspirations. “The question is whether NTL’s reach is longer than its grasp,” says de Larrinaga.

The media analyst believes the challenger must spend big on football, or not at all.

Sky, while sometimes complacent, is no easy target.

Maurice Levy v Sir Martin Sorrell

The confrontation between Britain’s Sir Martin Sorrell and France’s smooth-talking Maurice Levy for global share of advertising and marketing services will smoulder through 2006 and beyond. Sorrell has used his financial nous and deal-making skills to build WPP into a behemoth raking in revenues of over &£5bn. Some worry that the company has grown too fast and needs a period of consolidation.

Levy’s Publicis Groupe is half the size, though its agencies won a string of accounts last year, poaching the Samsung and Omo accounts from JWT, while BBH, in which Publicis holds a 49 per cent stake, won British Airways.

Bob Willott, editor of Marketing Services Financial Intelligence, says the encounter between the two will take five years to settle. “Sir Martin has the stronger business head and Maurice is the stronger showman,” he says. He is concerned that Levy lacks the financial skills of his rival, and worries that neither has planned for their succession.

Last year, both missed out on media group Aegis. This year could see the two go head-on for control of the remnants of Interpublic Group, the world’s third-largest marketing services group, which is facing a break-up in the US following accounting irregularities.

Justin King v Andy Bond

The battle for second place in the UK grocery market will heat up as Sainsbury’s, which had a 15.9 per cent market share in the 12 weeks to December 4 (TNS Superpanel), challenges Asda (on 16.5 per cent) for the runner-up prize. Both trail far behind mighty Tesco, which has over 30 per cent.

Sainsbury chief executive Justin King has had six months longer in the role than Asda’s opposite number Andy Bond, and so far the extra time is paying off. Bond’s admission that he needs at least another year to turn the chain’s performance around seems intended to soften the inevitable blow of Asda losing second place.

Experts believe Sainsbury’s will wrench it back this year. Stuart Whitwell, managing director of consultancy Intangible Business, says: “It had supply-chain issues, but its strong brand can take it a long way. Asda is associated with bargain prices, but can’t compete on shopping experience.”

Whitwell believes Asda’s belated move into convenience-store formats will do little for its share – although it may be able to lure punters from Morrisons, which also relies on pricing and promotions, but is still in turmoil after its takeover of Safeway.

Meanwhile, Panmure Gordon retail analyst Justin Scarborough warns: “King is doing a fantastic job at Sainsbury’s. But its big flaw is its assumption that investment in pricing can stop in 18 months. It will need a point of differentiation.”

The affable Bond will stick manfully to his task, but King is likely to be crowned the winner in this battle.

 

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