Launch plans perking

Forget the Olympics. If it is tough, tactical, down-to-the-wire competition that interests you, tune in to the cappuccino wars.Since early May, Nestle Canada and Kraft General Foods, both of Toronto, have been engaged in a hard-fought battle to be first out...

Forget the Olympics. If it is tough, tactical, down-to-the-wire competition that interests you, tune in to the cappuccino wars.

Since early May, Nestle Canada and Kraft General Foods, both of Toronto, have been engaged in a hard-fought battle to be first out with new instant cappuccino products.

That is when the rival companies realized that their launch plans, which had been scripted in secret several months earlier, were uncomfortably similar.

Nestle’s entry in the instant cappuccino segment is called Nescafe Cappuccino. kgf’s product is called Maxwell House Cappuccino.

Both Nestle and kgf have been successfully introducing instant cappuccino in Europe since the late 1980s, and last January kgf expanded its market to include the u.s., so each company was aware the other would eventually launch in Canada.

But Jayne McCaw, kgf’s brand manager on new Maxwell House products, says she was taken by surprise when she learned both had scheduled early May to begin approaching the trade about distribution.

McCaw says since then, kgf has viewed the launch of Maxwell House Cappuccino with an entirely new level of seriousness.

‘We can’t be slap-happy about this one,’ she says.

‘Everything has to be pinned down because we have a competitor looking for a competitive advantage in everything we do.’

Nicole Gallucci, brand manager on Nestle’s Nescafe Cappuccino, says Nestle was equally surprised to learn it would be launching Nescafe Cappucino head to head against kgf’s Maxwell House Cappuccino.

But Gallucci says the discovery has not had an effect on the company’s launch schedule, which was drawn up in January.

She says Nestle had already scheduled an expeditious launch because it feared kgf was planning a turn-key launch from the u.s.

‘Since [kgf] had already gone into the u.s., we were prepared for them to simply ship into Canada,’ Gallucci says.

But kgf did not opt for turn-key distribution. Rather, it decided, as did Nestle, to formulate a product specifically suited to Canadian taste preferences and to make it in Canada.

Consequently, from an operations and marketing standpoint, the companies travelled largely similar paths before their products reached the store shelves.

In addition to scheduling virtually simultaneous talks with the trade, Nestle and kgf completed product distribution in early August and both have indicated they will begin running tv ad campaigns in the fall.

According to A. C. Nielsen, Canadians spend nearly $200 million a year on instant coffee. Currently, 10.5% of that spending is on instant specialty coffees such as kgf’s General Foods International Coffees.

Based on their experiences in other markets, Nestle and kgf expect instant cappuccino will quickly grow to dominate the specialty instant market.

McCaw, who predicts instant cappuccino sales will eventually account for as much as 10% of total instant sales, says the key to success in the specialty coffee market is product trial.

She says kgf’s marketing efforts, which begin in earnest this fall, are designed to promote sampling.

The marketing program will include in-store sampling, merchandising bins and couponing.

As well, kgf is looking for sponsorship opportunities that will facilitate sampling with prime target groups.

kgf’s ad agency is Ogilvy & Mather.

McCaw says even the packaging, produced by Thomas Pigeon Design Group of Toronto, is ‘designed to promote trial.’

Maxwell House Cappuccino is sold in packages containing five sachets apiece. The per-package cost is $1.99.

Nestle Cappuccino, on the other hand, is sold in packages containing 10 sachets apiece. The per-package cost is nearly double at about $3.90.

kgf is betting consumers will be more inclined to pay $2 for a product they have never tried before, than they will be to pay $4.

Like kgf, Nestle has developed an integrated launch campaign emphasizing product trial. The campaign includes in-store activities, in-store sampling, public relations, direct mail and special events.

The campaign also features a 30-second tv spot, produced by Toronto’s MacLaren:Lintas. The spot has yet to be released, but Gallucci says it, too, is geared to promote trial.