Too much, too soon

The unexpected success of a relatively unknown Irish cider brand has thrown the spotlight onto a much-neglected area of marketing. Demand planning is often restricted to big launches, but even the largest multinational can be tripped up by failures in research…

Magners, the Irish cider brand, was only launched nationally across the UK six months ago but it is already being hailed as one of the most successful marketing stories of recent years. It is a shining example of how a brand launching into a stagnant market can use advertising to reinvigorate a moribund sector.

C&C Group, the company behind Magners, has re-invented cider drinking with the help of a campaign that focuses on drinking the product over ice with friends. It positions Magners as the perfect drink for successful young adults enjoying long summer afternoons and evenings.

Magners, which has been available in some regions since 2002 (MW June 6, 2002), has gone from an unknown brand to market leader almost overnight and its entry has driven growth in the cider sector as a whole. Last week, in a trading statement which accompanied its results for the year ending February 28, 2006, C&C said that in the six months to the end of August, Magners sales went up by 250%, on top of a 130% increase in sales for the 2005/06 financial year.

Cider contributed £85.3m out of a total operating profit of £124.7m in the full year to the end of February 2006, compared with £64.7m out of £110.1m a year earlier.

hitting where it hurts But that success has come at a cost. C&C has been forced to warn investors that financial results for the six months to the end of August this year are going to be hit badly by the need to bring forward major capital investment plans because it cannot keep up with demand for Magners (MW last week). It has just had to spend about £50m on new bottling facilities to cater for increased demand in the take-home sector.

Magners is not the only brand to have problems keeping up with consumer demand, nor is the problem a new one. Giles Lury, director of branding at The Value Engineers, ran the Oxo account at JWT 15 years ago when Brooke Bond Foods launched Oxo Gravy Granules. The ad campaign created for the launch was so successful that Oxo saw sales increase by 35% in the first quarter of 1992 compared with a year earlier, almost entirely because of the new product.

Lury says: “As far as I know, it’s the only time an ad agency has ever been told off by the client for making ads that were too successful at selling the product.”

Two weeks after the campaign broke, the factory had to move from a two-shift working day to a three-shift working day, but even that failed to meet the demand so Brooke Bond pulled the ads.

damage limitation The Institute of Grocery and Distribution (IGD) is about to publish a new report recommending a raft of measures that companies can take to better manage supply and demand. The IGD argues that demand planning must be an integral part of any marketing campaign. The potential damage caused by creating consumer awareness of a brand – old or new – and then having to disappoint shoppers who actually want to try and buy is enormous, says Darran Watkins, senior business analyst for supply chain at the IGD and the author of the report.

Watkins says: “Consistent or long-term shortages of a product could lead to a loss of distribution or listing with a given retailer. IGD consumer research shows that when a product is out of stock, 19% of shoppers will buy another brand. While a further 23% of shoppers might buy a different type or size of the same brand, 29% of shoppers will not buy anything at all.”

Watkins adds that while many companies have taken steps to address the problem by creating a structured sales and operations planning (S&OP) process, according to new research carried out for the report, almost 21% of suppliers have no such process in place.

think ahead There is no shortage of market research tools to help marketers predict likely demand based on different advertising and promotional strategies. But David Soulsby, client services director of research company TNS UK, points out that marketers will often cut back on market research for launches they do not believe to be high risk, such as line extensions or pack variants: “They are likely to invest far more in the big new product launches.”

However, even then they can be caught out, particularly when a product generates positive consumer word-of-mouth, which is notoriously difficult to measure. Soulsby adds: “Word-of-mouth can take on a life of its own. Look at the launch of Procter & Gamble’s Sunny Delight in the UK.”

Even a packaged goods giant like Unilever, which might be expected to have demand planning down to a fine art, can experience problems. Its new soya-based fruit drink, Adez, has been so popular with consumers that retailers say supply problems could threaten its long-term success (MW August 24).

But it is not just fast-moving consumer goods companies that can become victims of their own successful campaigns. Ikea saw a riot break out when it opened a new store in Edmonton, North London, in March 2005 despite an extensive campaign which attempted to manage customer flow by restricting offers to particular time slots.

Carphone Warehouse’s launch of its “free” broadband service was also over-subscribed. In the first eight weeks after it launched in April this year, 340,000 customers signed up, almost double the number Carphone had anticipated.

McDonald’s had similar problems in 1999 when it ran a week-long two-for-one voucher offer on Big Macs to celebrate its silver anniversary in the UK. In the first two days, it sold 4 million Big Macs, twice what it had expected and eight times the normal number. Some outlets stopped honouring the vouchers, others offered alternatives but ran out and many had to close while they were restocked. McDonald’s had to take out ads apologising for the disaster in UK national newspapers.

planning failure Consumers complained to the Independent Television Commission (the forerunner to Ofcom) because McDonald’s continued to run TV ads for the promotion even though it had problems meeting demand. But the Commission cleared McDonald’s after the burger giant presented evidence of the extensive demand planning process it used.

The message, Watkins concludes, is simple. Significant numbers of companies do not conduct post-mortems on the true impact of advertising and marketing campaigns, so they have no real understanding of how to tackle any problems if they occur. He says: “Without understanding the past, it is very difficult to forecast the future in a coherent way.”

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