The Procter & Gamble Company
| Author | Judson Knight, Rayna Bailey, Mark Lane, Frank Caso, Debbi Mack |
| Pages | 1373-1403 |
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One Procter & Gamble Plaza
Cincinnati, Ohio 45202
USA
Telephone: (513) 983-1100
Fax: (513) 983-9369
Web site: www.pg.com
During the 1970s Procter & Gamble (P&G) helped establish its Folgers line as one of the two leading ground-coffee brands in the United States, along with General Foods' Maxwell House. By 1998 Folgers held the lead over Maxwell House in the $3.1 billion instant-and ground-coffee industry. For ground coffees, a $2.0 billion segment, Folgers held a 29.4 percent share in 1997, compared to 21.1 percent for Maxwell House. As the coffee market expanded, fueled by emerging competitors such as Starbucks, both companies faced new challenges.
To build its Folgers brand and drive business, in the 1960s Procter & Gamble turned to strong television advertising with a campaign created by the New York firm of Cunningham & Walsh that featured the advice-dispensing Mrs. Olson. In the mid-1980s Cunningham & Walsh introduced a new campaign built around the theme "Wakin' Up." By 1987 P&G had moved its Folgers account to N.W. Ayer. In 1998 Folgers continued to use the jingle "The Best Part of Wakin' Up Is Folgers in Your Cup" in its radio and television advertising, which was supplemented with print ads. Although P&G kept a close watch on company information, the fact that it spent $136.1 million on Folgers's advertising in a 20-month period during 1996 and 1997 suggested that the budget for the 1998 campaign was high.
The success of its "Wakin' Up" campaign led P&G to keep both the theme and its familiar jingle into the first years of the new millennium, despite changes in its advertising agencies. In 1999 the Folgers account was moved from Ayer to the agency's sister, D'Arcy Masius Benton & Bowles. That agency was closed in 2002 by its new owner, Publicis Groupe, and the Folgers account was shifted to Publicis shop Saatchi & Saatchi. The campaign was updated by Saatchi & Saatchi to introduce each Folgers line extension, including the launch of its Folgers Café Latte, an instant coffee designed to appeal to latte-drinking younger consumers and to take on upscale coffeeshops such as Starbucks.
In 1850, during the California gold rush, James A. Folger began selling coffee beans to miners. Eventually he established J.A. Folger & Company, which during the next century began to spread eastward throughout the United States. With the 1960 merger of its San Francisco and Kansas City divisions, each of which had operated almost as separate companies, Folgers began to take the Midwest by storm. By 1963, when it became a subsidiary of Procter & Gamble, it had annual sales of $160 million.
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During the mid-1960s P&G battled with the Federal Trade Commission (FTC), which questioned its purchase of Folgers as a possible antitrust violation. P&G eventually obtained FTC approval of the purchase, but as early as 1962 it was clear that a few large companies were becoming dominant in the industry; in that year the top five coffee producers controlled a combined 62.9 percent share of the market.
Folgers began to expand into large Eastern markets, aided by the Mrs. Olson commercials, which ran from the mid-1960s to the mid-1980s. These spots featured an attractive elderly woman played by actress Virginia Christine, who appeared with a seemingly endless array of young couples. Although the commercials never developed much of a backstory for Mrs. Olson, her name and accent suggested she was Swedish American, and her role was that of an advisor to the almost interchangeable newlyweds under her tutelage. The solution to all problems, to judge from Mrs. Olson's advice at least, was Folgers.
The Mrs. Olson years saw numerous changes in the coffee industry, among them a sharp increase in prices brought on by poor Brazilian harvests and other world events during the mid-1970s and the rise of decaffeinated coffee during the late 1970s and early 1980s. Although Folgers responded to these changes, its market share slipped somewhat, from 27.3 percent in 1979 to 24.9 percent in 1983. By the mid-1980s P&G had adopted a new strategy with the "Wakin' Up" campaign.
The switch to "Wakin' Up" arose from a realization among P&G executives that, despite the effectiveness of Mrs. Olson at one stage, that campaign was no longer effective in reaching younger consumers. The youth market, although it was the segment least inclined to drink coffee, also represented the best area for future sales. During the mid-1980s, as consumers increasingly moved away from coffee and toward soft drinks and other beverages, P&G made the switch to ad agency NW Ayer and developed the "Wakin' Up" theme, which centered on images of morning and newness. Eventually this evolved into the "Best Part of Wakin' Up" jingle, which started to get heavy exposure during the early 1990s.
At the same time a surprising thing happened in the marketplace. Suddenly, coffee, long considered the drink of one's parents or even grandparents, was perceived as a fashionable beverage. It had appeared for a time that coffee would go the way of its old companion, cigarettes—marginalized as an unhealthy, antisocial product—but by the early 1990s coffee had emerged as a new favorite among consumers under 35. Leading the trend were coffee bars, a phenomenon that first sprouted on the West Coast and then, like Folgers itself, spread eastward. In contrast to cigarettes, coffee now seemed decidedly healthy, part of an active lifestyle, and coffee bars appeared as a positive alternative to old-fashioned alcohol bars.
This new trend offered great promise for established brands like Folgers, but it also presented new challenges. It was true that the much-sought-after youth market was drinking coffee in great numbers, but they were buying it from retail chains such as Starbucks. In response to the trend, P&G in the mid-1990s stepped up promotion of Millstone, a specialty blend sold in stores. Millstone offered buyers the opportunity to make the kind of coffee they would normally buy at coffee bars, but to do so at home. As for Folgers, in 1998 it introduced its own whole-bean coffee line alongside a heavy advertising campaign orchestrated by NW Ayer.
In 1990, before the coffee-bar phenomenon exploded, Bill Saporito in Fortune described the fierce competition between Folgers and Maxwell House in these terms: "Think of two large men competing to see who can keep his hand in a pot of scalding brew the longest. For more than ten years," Saporito wrote, the nation's two leading brands had been "locked in an often profitless struggle to dominate the market, warring with blasts of advertising, perpetual rounds of price cutting, and millions upon millions of cents-off coupons." Although Folgers held the lead among all brands, Saporito reported, General Foods had a larger overall share through its control of the Yuban and Sanka brands, along with Maxwell House.
Taster's Choice was a brand produced by the Nestlé Beverage Corporation that exceeded both Folgers and Maxwell House in the instant-coffee category, a segment accounting for nearly $600 million in annual sales by 1994. Since 1991 Taster's Choice had been running commercials that created more buzz than those of either of its large competitors. These spots revolved around the "Taster's Choice Couple" as their romance built over cups of Taster's Choice. Successive installments in this saga offered ever more intriguing details, "from their first meeting as neighbors to the surprise visit of a young man calling the woman 'Mom,' " as Leah Rickard wrote in Advertising Age. At the end of the next spot, which aired during the highly popular CBS program Northern...
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