SUMMARY • Frito-Lay\'s SunChips brand was relaunched in April 2008 as an environ
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SUMMARY • Frito-Lay's SunChips brand was relaunched in April 2008 as an environmentally friendly brand, aiming to appeal to the growing number of consumers that purchase green products. The company aims to capitalize on the link between products that are good for consumers and good for the environment, a strategy that has worked given the strong sales it has recently generated. • Central to the brand's green overhaul was the installation of solar power in one of its factories, with others planned for the future. In addition, the company promoted its carbon offsetting initiatives on SunChips labels, following owner PepsiCo's lead in purchasing renewable energy credits. However, critics state that carbon offsetting is the easy option for a company to claim to be green, allowing them to carry on polluting practices. SunChips therefore stands out for its genuine green improvements with its solar powered factory. • The company has invested substantial amounts in marketing the relaunched SunChips brand, spending $15 million in only four months in 2008. It has provided strong visibility for the brand through quirky sun shadow adverts and a relaunched website that help to convey the brand's new green focus in a lighthearted manner. CASE STUDIES SunChips case study Re-branding a product with greener credentials Reference Code: CSCM0206 Publication Date: October 2008 SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 2 ANALYSIS Consumer packaged goods firms increasingly perceive green business practices as a key marketing tool Over the course of the last decade, an increasing number of consumer packaged goods companies have seen the value of adding green product ranges to their line up. This is because the environment is becoming of central concern to a wide sector of society, with consumers increasingly seeking out products that offer ingredients and production methods that are less polluting and kinder to the environment than their traditional counterparts. The easiest way for companies to gain greener credentials is to purchase an existing green brand, as L'Oreal did when it bought The Body Shop, and Clorox did through the purchase of Burt's Bees. Clorox has also produced its own range of green household products, Green Works, to satisfy demand for more environmentally friendly products. However, some companies, such as PepsiCo-owned Frito-Lay, are adding greener credentials to existing lines. This case study focuses on Frito-Lay's SunChips brand and how the company intends to target mainstream and green consumers with the brand's new environmentally focused proposition. Strong ethical credentials are associated with enhanced consumer trust Developing greener brands can enhance a company's levels of trust among consumers. Datamonitor's report, The Next Step in the Ethical Consumerism Revolution (BFCM0233), notes that ethical credentials in food, drink and personal and home hygiene are often associated with higher consumer trust, despite there being some skepticism of the ethical trend. The report refers to a 2007 study by GfK NOP, in the US, Germany, France, the UK and Spain, that found widespread pessimism about corporate practices, with 64% of respondents in Germany and 55% in the US perceiving the worst deterioration in standards. Consumers in these five leading economies believed business ethics have worsened in the past five years and are now turning to 'ethical consumerism' to make companies more accountable. The report concluded that 43% of respondents across all five countries judged that brands with 'ethical' claims—on environmental policies or treatment of staff and suppliers for instance—would make business more answerable to the public. Natural and organic products and brands are also often deemed more trustworthy than their synthetic counterparts in nonfood categories. Due to the nature of product formulation and ethical positioning/causality marketing associated with natural manufacturers, consumers are more inclined to trust and feel safer with them. The Food and Drug Administration of Cosmetics and Colors found that 74% of US respondents believed that “natural products are safer to use in the long term” and 76% believed that “natural products have fewer and less severe side-effects”. Generally, consumers are inclined to view natural products more favorably, which could have a positive sales impact on the launches of green ranges such as SunChips. SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 3 However, consumer skepticism has marred many corporations' ethical attempts as 'greenwashing' While consumers are increasingly receptive to green brands, many are cynical of mainstream companies entering the territory of traditionally niche products. This lack of trust has been heightened by widespread media reports into so-called 'greenwashing'. According to a 2007 report by TerraChoice Environmental Marketing, an overwhelming majority of environmental marketing claims in North America are inaccurate, inappropriate, or unsubstantiated. Using metrics from the Federal Trade Commission (FTC) and the Environmental Protection Agency (EPA), TerraChoice concluded that out of more than 1000 products reviewed, all but one of the claims raised red flags. Ranging from cleaning and personal care products to televisions and printers, the report concluded that the claims in question were "…either demonstrably false or risk misleading intended audiences" (brandchannel.com, 2008). Companies such as Frito-Lay therefore need to be vigilant in order to ensure their green brands are not viewed cynically by consumers. Carefully worded marketing and transparent product information are the best methods of guaranteeing this. Frito-Lay has relaunched SunChips as an environmentally focused brand Frito-Lay introduced the SunChips brand back in 1991 as a healthy snack range, consisting of wholegrain, low fat potato chips. However, the company capitalized on the growing trend for environmentally friendly products by relaunching SunChips in April 2008 in a greener format. One of the eight US factories that produce the chips, located in Modesto, California, was fitted with solar panels so that a proportion of its energy use could come from renewable sources. Another plant at Casa Grande is being converted so that it can be taken off the national grid, and run almost entirely on renewable fuels and recycled water by 2010. In addition, the company began purchasing renewable energy certificates (RECs) to fund renewable energy initiatives and offset its carbon production, to match 100% of the electricity needed to produce SunChips snacks in the US. Such activities aim to enhance the company's green credentials, as well as save it money in the long term. The relaunch acknowledges an intersection between health and the environment Gannon Jones, vice president of marketing at Frito-Lay, told BrandWeek that the relaunch acknowledged the strong link between health and green issues: "We were looking at how to maintain the growth of the business. It was late 2006 when like everybody else we were starting to become concerned about the planet and environment. Al Gore’s An Inconvenient Truth came out. We started to see that there was an intersection of people who were concerned with their health and the planet’s health. Out of that was born the hypothesis that we could begin to connect Sun Chips more prominently with the environment so [the brand would become] a small step for me and the planet" (BrandWeek, 2008). The most obvious product sector that has strong links to both health and the environment is organics. Consumers believe that such products are healthier for them as well as being less harmful to the environment, thereby creating a dual benefit. SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 4 However, the launch of SunChips highlights how the health/ethical intersection can be translated into other product types, combining to create real added value for the consumer. The relaunch has proven a success, with annual sales for the brand rising substantially The SunChips relaunch has appeared to have paid off. According to IRI, the brand grew 17.6% in the 12 months ending June 2008, to reach $201.8 million. Gannon Jones stated that SunChips had become "one of if not the fastest growing snack brand in our company and the snack industry" (BrandWeek, 2008), highlighting the company's belief that the relaunch has paid off and generated substantial support from the public. The green focus could help save the company money, as well as improve its image While being beneficial to the company's image, using renewable energy to power SunChips plants could also save FritoLay money in the long term as the price of fossil fuel continues to rise. The SunChips re-brand is not the first time the company has attempted to cut energy bills. According to the International Herald and Tribune, since 1999 Frito-Lay has reduced its water use by 38%, natural gas by 27% and electricity by 21%, cutting $55 million a year in utility costs. Its new green focus with the SunChips brand could help enhance these energy savings substantially going forward. Improving the environmental impact of SunChips' production has been a major part of the company's green plans Key to Frito-Lay's overhaul of the SunChips brand has been reviewing its factories' environmental impact, so that they do not rely so heavily on fossil fuels as a power source. While currently just one factory has been converted to renewable energy, the company said it intends to add solar power to as many as it can, and plans a major overhaul of another one in the future, highlighting its commitment to the issue. The company has installed solar panels to one of its SunChips factories to make it more environmentally sound SunChips' Modesto plant in California reopened on Earth Day 2008 (April 22) having been installed with solar collectors for generating solar power. The 10 acre farm of solar collectors will reportedly provide up to 75% of the plant's energy needs. The company choose the Modesto plant for its first solar power installation due to the high amount of sunshine the state receives. Although the company did not say how much the installation cost, Gannon Jones said that it was a "multimillion dollar investment". While some companies have been accused of spending more on advertising their green initiatives than SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 5 the actual initiatives themselves, Jones is adamant that the company's is not just a publicity campaign, noting that the installation cost significantly more than the marketing for it. This shows how the company is trying to gain consumer trust and loyalty in the SunChips brand by highlighting the integrity of its green projects. The factory was reopened by Arnold Schwarzenegger on Earth Day, helping generate publicity for the initiative The factory opening was given a great deal of publicity due to the presence of Arnold Schwarzenegger, who cut the ribbon at the opening ceremony. The ceremony was covered by major news outlets across the US, including The New York Times. Since becoming the governor of California, Schwarzenegger has passed a number of environment-friendly laws, so his presence at the factory highlighted his enthusiasm for green projects while positively promoting the SunChips brand. The company plans to refit another factory by 2010 to run off the power grid Frito-Lay is currently overhauling another potato chip factory to high environmental standards. The factory, located in Casa Grande, Arizona, is being installed with at least 50 acres of solar concentrators, a biomass generator and high-tech filters that can recycle the water it uses. The re-fit is scheduled to be completed by 2010, reducing electricity and water consumption by 90% and its natural gas use by 80%. Although the plant makes mainly Lays and Ruffles snacks, rather than SunChips, it highlights how Frito-Lay is investing green technology in its other major brands to conform to increasing consumer demand. Figure 1: SunChips are now manufactured partly in a solar powered factory, while it uses the Green-e mark on packs to show its support of green energy Source: Datamonitor D A T A M O N I T O R SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 6 Carbon footprint reduction has also been a major company focus Although a term not widely used five years ago, carbon footprint has become a much talked about concept among mainstream consumers. Carbon footprint is a measurement of the impact which human activities have on the environment, in terms of the amount of green house gases produced, measured in units of carbon dioxide. A number of companies have begun to place carbon labels on products, showing the product’s contribution to consumers’ carbon footprints, as well as reporting their companies total carbon footprint on corporate websites. Because of this corporate and public awareness, consumers have been taking more notice of carbon footprints. A survey by GfK NOP in 2006 found that 66% of UK consumers want to know the carbon footprint of the products they buy and 67% are more likely to buy a product with a low carbon footprint. SunChips has become one of the first major brands to highlight its renewable energy purchases on its packaging The enhanced consumer interest in carbon footprints has prompted Frito-Lay to start including the Green-e logo on SunChips' packaging, to show that the brand offsets the carbon emissions produced by its factories. The company believes SunChips will be one of the first national consumer packaged goods brands to include the Green-e logo on packaging. Produced by the Center for Resource Solutions, it describes Green-e as "the nation's leading independent certification and verification program for renewable energy and greenhouse gas emission reductions in the retail market." The symbol recognizes businesses that have purchased RECS which fund either tree planting or green energy projects to offset fossil fuel emissions. The RECs purchased by SunChips reportedly match 100% of the electricity needed to produce SunChips snacks in the US. However, one problem with the label is that not many people may know what it stands for. Even if they do, it is not an official countrywide label, as there are many small verification programs rather than one official label. Carbon footprint labeling is still in its early days of use, but SunChips' inclusion of the Green-e label nevertheless shows it is ahead of many rival snacks in utilizing the concept. SunChips' carbon offsetting practice is in line with PepsiCo's overall policy The rebranding of SunChips as a green brand comes at a time when Frito-Lay's owner, PepsiCo, is attempting to enhance its overall ethical image. This was shown most clearly in 2007 when PepsiCo made the largest corporate purchase of RECs in history. The RECs matched the purchased electricity used by all PepsiCo US-based manufacturing facilities, headquarters, distribution centers and regional offices. Amounting to more than 1.1 billion kilowatt-hours, the purchase put PepsiCo at the top of the US's Environmental Protection Agency's list of top-25 green power purchasers at end of 2007. By July 2008, the company had slipped to second place (see Table 1), but was still the leading food and drinks company on the leader board. "Energy is a key focus for PepsiCo within its environmental sustainability agenda. The purchase of these RECs is not only in line with our progress to date, but further advances our commitment to sustainability and helps make a positive impact in SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 7 the communities we serve across the country." John Compton, chief executive officer at PepsiCo North America (Renewableenergyworld.com, 2007). Table 1: Top five green power purchasers in the US, as of July 2008 Corporation Annual green power usage (kWh) GP % of total electricity use Organization type Providers Green power resources Intel Corporation 1,302,040,000 47% Information technology Austin Energy, PNM, Sterling Planet Biomass, Geothermal, Solar, Wind PepsiCo 1,144,773,154 100% Food and beverage 3Degrees, Sterling Planet Various US Air Force 899,143,000 9% Govt. (federal) 3Degrees, Basin Electric Power Cooperative, Bonneville Power Administration, Colorado Springs Utilities, Georgia Power, Minnkota Power Cooperative, Oklahoma Gas & Electric, Rocky Mountain Generation Cooperative, Sterling Planet, TransAlta Energy Marketing Biogas, Biomass, Geothermal, Solar, Wind Wells Fargo & Company 550,000,000 42% Banking and FS. 3Degrees Wind Whole Foods Market 509,104,786 100% Retail Austin Energy, Community Energy, On-site Generation, PNM, Renewable Choice Energy Biogas, Solar, Wind Source: epa.gov D A T A M O N I T O R However, there has been criticism of the value of carbon offsetting There has been much criticism of carbon offsetting schemes, with many comparing them to the Catholic Indulgences sold in Europe in the Middle Ages, which consisted of papers that were bought to absolve the purchaser from their sins. Critics believe the purchase of RECs or similar schemes enable a business to carry on with their polluting activities without changing their business practices. In addition, the offsetters themselves have been criticized for offering to undertake green offsetting projects that may not take place, laying claim to certainties that are beyond their reach. Dan Welch, a journalist writing for Ethical Consumer SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 8 magazine, noted: "Offsets are an imaginary commodity created by deducting what you hope happens from what you guess would have happened" (The Guardian, 2007). For this reason, PepsiCo would receive more praise if it converted more factories to renewable energy, like in SunChips' case, instead of continuing to purchase RECs. The company has invested substantially in marketing the new-look SunChips brand In order to promote the relaunch of the greener SunChips brand, Frito-Lay has invested substantial sums of money is marketing initiatives, being careful to state the genuineness of its claims while avoiding taking a moral high ground stance. The former is particularly important given the US Federal Trade Commission's (FTC) crackdown on unsubstantiated green claims. The agency is currently reviewing its green guidelines, a year earlier than originally planned, due to the sheer number of product launches now claiming to have environmental benefits. At the beginning of the year, Hampton Newsome, an FTC attorney who moderated the first FTC forum reviewing green practice, underlined the FTC's beliefs that marketing claims, "whether expressed or implied should be backed up with reliable evidence" (BrandWeek, 2008). It is not just the government, but also cynical consumers that green products have to satisfy, making SunChips' job of marketing its genuine claims a difficult but essential one. SunChips' marketing spend in 2008 hit $15 million in only four months Frito-Lay has enhanced its marketing budget for SunChips substantially over the last two years. In 2006, the company reportedly only earmarked $18,000 to promote the brand; this had increased to nearly $11 million for 2007 (TNS Media Intelligence). Meanwhile, marketing spend for the brand for the first four months of 2008 had already surpassed 2007 levels, increasing to $15 million (Nielsen Monitor-Plus). This highlights how much faith Frito-Lay is putting behind the brand being a success in its new green guise. The company has produced tongue-in-cheek adverts to avoid being perceived as morally superior Along with more conventional TV and print adverts, Frito-Lay also released two novel marketing campaigns to announce the SunChips' relaunch in an eye-catching, but not-too-serious way, thus avoiding being seen as thinking itself too morallypure on its green conversion. SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 9 The relaunch was promoted with a 'solar powered' newspaper advert One advert consisted of a double-sided 'solar' newspaper advert. The reader was instructed to place one side in front of the sun to read the ad, thereby linking it well to the solar power issue. The front side carried the note: “Take this page and hold it up to the sun.” When the readers do so, the type was visible through the page. The advert worked by printing the type backward on the back side of the page, which could only be read through the front page. This was a simple, but effective way of transmitting SunChips' message. In addition, solar billboards used the sun shadow to display the SunChips brand name Another tongue-in-cheek SunChips advert consisted of billboards that utilized the sun's shadow to display the brand name. The billboards were built so that the SunChip letters were spelt in mirror writing above the billboard, so that when the sun came out, the name appeared, cast in shadow across the white space of the billboard. The concept of sun shadow advertising is not new. WWF and McDonald's, to name two, have used sun shadow billboard in the past to advertise themselves. Nevertheless, SunChips has created a strong marketing image with this promotion, as it fits so well with the company name and its new solar powered production methods. Figure 2: A substantial amount has been spent on promoting SunChips' relaunch SunChips has been promoted in a tonguein-cheek way since its relaunch, including a ‘sun shadow’ billboard, to avoid accusations of taking the moral high ground Source: Datamonitor analysis D A T A M O N I T O R SunChips has also financed the rebuild of a tornado-hit town, which has been shown on the Discovery Channel Frito-Lay enhanced the ethical credentials of the SunChips brand in 2008 by donating $1 million to rebuild the tornado hit town of Greensburg. The company had a connection to the town as two of its sales reps lived there and had their homes destroyed in the catastrophe. The aim is to build the town in an eco-friendly manner, so that it lives up to the 'green' of its name. SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 10 The company has partnered with the Discovery Channel to film the rebuild, which is being shown on US TV over summer 2008. Gannon Jones stated that SunChips has "a very big presence in the show... [but] it's not about gratuitous packaging placement. It's about us talking about why it makes sense for us to be involved considering our green commitment" (BrandWeek, 2008). The connection to the town's rebuild also fits in well to SunChips brand philosophy of encouraging consumers to take small steps towards a better planet, thereby being a strong promotional vehicle, as well as charitable cause, for the brand. Figure 3: SunChips has donated funds to help rebuild a tornado-hit town Source: Kansas City Star D A T A M O N I T O R Wal-Mart is featuring the brand in adverts that promote the retailer's sale of green brands Also helping promote SunChips' new green positioning was the brand's promotion as part of Wal-Mart's new environmental push. In April 2008, Wal-Mart promoted various green brands, covering SunChips as well as GE light bulbs and Tide cold water, among others, in order to highlight its new aim of being "serious about moving 'green' from costly dream to routine for its customers." Wal-Mart has a huge customer base, so through this promotion SunChips had the potential to reach a substantial section of US society. The brand's web presence includes a revamped website and a page on Facebook The company has not neglected to provide a well-focused web presence for the SunChips brand, with both an updated website and Facebook page on the brand. As well as providing product information, the website includes pages on 'healthier you' and healthier planet', giving information on the brand's healthy profile for both consumers and the environment. Its Facebook presence could also help promote the brand among young adults, as these are the main users of such social networking sites. SunChips case study SunChips case study CSCM0206 / Published 10/2008 © Datamonitor. This brief is a licensed product and is not to be photocopied Page 11 SunChips faces various threats to future growth Future success of the brand could rely on green issues staying on-trend Although the brand has reported strong growth since its green re-branding, its future success could hinge on the green trend staying on-trend. The majority of commentators believe green issues will remain of paramount consumer importance for the long term. John Griffith-Jones, UK chairman and senior partner of KPMG LLP, noted that: "Companies must act – to protect their own growth, to meet the expectations of their investors, customers, employees and protect the environment. Climate change can no longer be seen as an environmental problem, it is a key economic issue that needs to be dealt with accordingly.” However, the Houston Chronicle reported in July 2008 on a study by the Shelton Group that showed consumer support for green products was falling. Consumers surveyed in 2007 were between 22% and 55% less likely to buy a wide variety of green products than in 2006. The group said "message overload" was a major contributor to the fall. The company must therefore work to ensure the SunChips brand does not suffer from consumer apathy by continuing to underline the positivity of its environment friendly production. The credit crunch could hinder the growth of green companies as consumers choose price over ethics The credit crunch could negatively impact green brands as consumers choose price over ethical concerns for their food and drink purchases. In the UK, it has been reported that the economic downturn is affecting the exponential growth in the organic food market. The Soil Association stated that it expects sales growth of organic food to rise just 5% in 2008, compared to a 30% rise in previous years (as reported in The Independent, 2008). However, SunChips could avoid sharp fall in its growth during the economic downturn because its products are affordable to the majority of consumers, on a par with other snacks in the market. Indeed, its products cost around $2.85 for a 240g bag. SunChips could therefore survive a period of slowdown green brand positioning.
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Case Analysis:
The case highlights how consumer packaged goods companies are increasingly using green business practices as a marketing tool as environmental concerns are becoming a major purchase influencer amongst a large group of consumers in the society. The easiest way that companies are using to achieve this is by purchasing existing green brands. For example, L’Oreal purchased The Body Shop, etc.
Other companies like PepsiCo are adding greener credentials to their existing product lines and brands like in Frito-Lay. The case focuses on how the Frito-Lay's SunChips brand used greener practices to lure their mainstream green consumers. They used re-branding to substantiate the brand's new environmentally focused proposition for their consumers.
A Datamonitor's report, The Next Step in the Ethical Consumerism Revolution highlights how ethical credentials in food and drinks and personal and home hygiene sectors are influencing or bringing higher consumer trust on the brand. Natural and organic product brands are also deemed more trustworthy and thus more favorable by the consumers as they are perceived safer for use in the long term when compared to their synthetic/cosmetic counterparts. Consumer skepticism has also led them to believe many ethical attempts by companies as simple “green washing” attempts. Where on one hand consumers have been more receptive and accepting for greener brands, there is a fair share that is cynical of such companies entering the territory of the traditional products (niche).
Hence, Frito-Lay needs to be extra vigilant to ensure that their green attempts are not viewed as “green washing” by their consumers. To do so, carefully worded marketing and transparency in communicating product information is the key. The company has re-branded and launched its SunChips product in a greener format, where one of the 8 factories of the product have been fitted with solar panels to allocate a proportion of their energy consumption to renewable sources. They are expanding this project to their other plants as well. This re-launch of SunChips has been successful as it led to a substantial rise in the product’s annual sales. Use of renewable sources of energy has also saved money for the company. The company is also making sure that they highlight the integrity of their green attempts.
Enhanced consumer interest in carbon footprints has also prompted the company to start including the Green-e logo on their product (SunChips) packaging to highlight that the brand offsets the carbon emissions produced by them. However, not many consumers are aware of the meaning of this logo. But it still puts the brand ahead of its competitors. SunChips is also purchasing RECs which fund tree plantations or green energy projects that offset fossil fuel emissions. Critics however believe that purchasing RECs is not a wise step. Converting more of factories to renewable energy will be more beneficial for the brand than purchasing RECs.
In addition to that the company is also using inventive marketing campaigns and charitable causes to communicate their greener image without imaging themselves as too moral to believe. A Houston chronicle report of 2008 has highlighted how message overload has led to declining consumer interest in green products. Hence the company needs to ensure that SunChips do not suffer with consumer apathy by managing their communications well. Economic downturn and credit crunch resulting from it, although are predicted to slow down the green projects. But SunChips was able to avoid any sharp decline in its growth during economic downturn due to the affordability of their product.
The case has highlighted how companies can cash in on their green image and what considerations they need to keep in mind to ensure that the green projects they undertake do not back fire for the company. Also, how honest green initiatives are a win-win for companies, as they not only improve their growth prospects but also save them costs in the long-run.
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