CVS Kicks The Habit and Sticks to Selling Good Heath

Health and wellness are good for the mind, body, and soul, but they are also increasingly good for business. For a retailer like CVS, where pharmacy services are at its core, you’d think this sentiment would resound throughout the company; but a couple of years ago, CVS and its Senior VP of Corporate Social Responsibility, Eileen Howard Boone, realized the brand needed to reevaluate one prominent product on its shelves: cigarettes.

With cigarettes raking in nearly $2 billion in sales, and constituting 2% of CVS’s sales (as of 2012), it’s hard to imagine eliminating this revenue stream in a low margin business. However, in October of 2014, the company rebranded its corporate name to CVS Health and became the first major U.S. drugstore to remove tobacco products from its 7,600 stores.  “The decision to stop selling cigarettes was one that came with a financial risk. Eliminating $2 billion in sales is not something that is done every day by a Fortune 12 publicly-traded company,” Ms. Howard Boone told Forbes. While publically committing to reduce near-term revenue is a tough sell for a public company, Howard Boone and CVS Health considered other serious numbers, like the approximately 430,000 deaths that are attributed to cigarette smoking annually.

For CVS Health, the business case was clear.  Providing health care services and promoting health as a core purpose would not be sustainable while selling a product that so directly competes with that aim. To Eileen Howard Boone, it’s all part of innovating and reinventing the business for the benefit of the customers. “Despite this loss in revenue, we were willing to take that risk, to ensure a positive impact on the long-term health of our customers, clients and colleagues and to advance the dialogue on public health,” she explained. It is important to note that while some cities like Boston and San Francisco ban the sale of tobacco products in pharmacies, the decision by CVS Health was completely voluntary. But many interested parties were already advocating for pharmacies to stop cigarette sales, beginning with the American Pharmacists Association in 2010. Dr. Risa Lavizzo-Mourey, CEO of the Robert Wood Johnson Foundation, which focuses on public health, called CVS Health’s decision “a bold, precedent-setting move because it acknowledges that pharmacies have become healthcare settings,” and hopes it will serve as a model for other pharmacies to follow suit.

As Boone explained in a recent interview with Forbes, the company’s CSR strategy, appropriately dubbed “Prescription for a Better World,” is three-pronged: building healthier communities, protecting the planet, and creating economic opportunities. The decision to eliminate tobacco products is just the tip of the iceberg in building healthier communities. CVS has aligned themselves with community partners such as the American Lung Association’s LUNG FORCE a women’s support program to educate and promote awareness.  Like the many companies truly embracing the CSR spirit, CVS Health is ensuring its CSR initiatives go hand in hand with business strategy and key decisions that start at the top. “I’m very fortunate to have the example of our CEO, our board and our senior leadership team.  This year, they made a bold move that really showed me firsthand what it means to be a leader in the area of corporate responsibility.”

See Eileen Howard Boone speak at BRITE ’15 (March 2-3, NYC) and hear more about the the power of purpose and the strategic role of CSR as a business imperative.

BY JENNIE MILLER ’15

How Ann Mukherjee (PepsiCo) Keeps Whetting Consumers’ Appetites

Ann Mukherjee (Pres., PepsiCo Global Snacks)

In the fiercely competitive and fickle beverage and snack business, you need a marketing leader with a deep understanding of the consumer landscape, an eye for innovation and the ability to delight consumers. One might argue that Ann (Anindita) Mukherjee is a “consumer whisperer” of sorts; she gets consumers and seems to be in lockstep with the latest trends in the art and science of marketing.

Mukherjee has built an impressive resume of accomplishments since joining PepsiCo and Frito-Lay in 2005, where she has advanced from VP of marketing to CMO at Frito Lay and is now President of PepsiCo’s Global Snack Group and Global Insights Group. Her leadership helped Frito-Lay reach $14 billion in sales with consistent annual growth rates higher than the global snack category as a whole.

Her most notable and enduring Frito-Lay campaigns include Doritos “Crash the Super Bowl” – the poster child for user-generated advertising –  and “Do Us a Flavor.” The “Do Us a Flavor” Facebook contest, which also leveraged consumers by helping them pitch ideas for new chip flavors, earned a 2014 GMA CPG Innovation and Creativity award. In its 9^th year, Frito-Lay’s “Crash the Super Bowl”, the largest online video contest in the world, has upped the ante, with its grand prize winner not only walking away with a cool $1 million, but a year-long gig at Universal Studios. These consumer engagement tactics resonate with consumers, causing them to feel empowered to participate and seek out brands that encourage this behavior. The “Crash” ads “are really not talking about Doritos at all,” says Peter Daboll, CEO of television analytics company Ace Metrix. “They’re more like sitcoms. And viewers respond to them because they’ve got a certain authenticity, aren’t overly produced and didn’t go through five approval committees at the marketer or several remakes by an ad agency”.

But Mukherjee, who has been playfully dubbed the “Queen of Corn,” has focused on much more than advertising. As she told the New York Times in 2012, “Demographics, the aging population and changing ethnic mix, and bifurcating income are the trends reshaping the way people are eating,” Ms. Mukherjee said. “We’re snacking more often during the day, and we’re looking for snacks that are more satisfying physically and healthier.” To meet these various challenges, Frito-Lay launched new brands like Stacy’s Pita Chips and Sabra for the more health conscious, and expanded the Lays and Cheetos brands into dollar stores and other discount outlets.

In a speech at Snaxpo 2014, Murkherjee noted that, “Mass marketing no longer resonates with today’s consumer and it must be replaced by one-on-one marketing with dedicated focus on pre-shop behavior.” According to Murkherjee, research has shown that 76% of purchase decisions are influenced before consumers even start shopping, primarily in the forms of social media and consumer written reviews. As such, there are significant strides to be made in the realm of word-of-mouth marketing.

So what’s next for the now President of PepsiCo Global Snacks & PepsiCo Global Insights? The need to gain a better understanding of the ways that technology will continue to change the retail experience, and continued expansion into emerging markets. “When people think of Lay’s they think America, but actually we have some of our strongest audiences around the world,” Mukherjee says, “There are no borders anymore, we all know that. The world is global. Everyone knows that. The same is true for the potato chip.” Chew on that!

See Mukherjee speak at BRITE ’15 (March 2-3, NYC) and hear more about her efforts at PepsiCo and how to leverage the art and science of marketing.

BY JENNIE MILLER AND MATTHEW QUINT

Chipotle Crows for Cause Marketing

Have you ever considered that viral videos might tickle your taste buds, say for a burrito? Well, Chipotle thinks they do.

Chipotle elegantly combines the art of storytelling, and the branding imperative of cause marketing to communicate its quest for wholesome, sustainable food. With over 12 million views on Youtube since it was posted in September 2013, Chipotle’s “The Scarecrow” has created quite a buzz. So what are the critics saying? As expected, much of the reactions spawned by the video’s release have been mixed; some fault it for misrepresentation of sustainable farming, some regard it a triumph, and others perhaps as a misstep in brand recognition. Chipotle’s first messaging on sustainable practices, “Back to the Start,” and more recently a four part series on Hulu, “Farmed and Dangerous“, also stoked both praise and controversy.

From a marketing perspective, one of the most intriguing of the critiques suggests that the lack of explicit branding or brand placement is harming the video’s effect on sales. This decision, however, may have very well been deliberate; done in order to appeal to a vital consumer demographic: Millennials – 86 million strong and $1.3 trillion in direct annual spending. Like Chipotle’s mission statement — “food with integrity” — The Scarecrow film aligns to the company’s sentiment that food (and ultimately the brand itself) should be simple and unadulterated. This messaging resonates with Millennials who gravitate to companies that take a genuine and holistic branding approach to making the world a better place. Through digital storytelling and minimal focus on Chipotle itself (and rather our food system), the film ultimately motivates purchasing behavior of Millennials who want to actively contribute to a brand with a strong purpose as opposed to the company’s bottom line. “Millennials view the lack of TV as more authentic,” said Carol Phillips, adjunct marketing and branding instructor at University of Notre Dame. “Millennials are likely to dismiss a lot of claims. They’re responding to everything the brand does and says.”

Plus sales growth doesn’t seem to be an issue, as Chipotle announced first quarter results on April 17th, with revenues of $904.2million, an increase of 24.4% from its prior year period and 7% from the fourth quarter of 2013. With numbers like these, it’s hard to make the case that the Scarecrow video produced a negative ROI.

Over the last six years, the role of social responsibility tied to purchasing decisions — and an awareness of which companies have joined the movement and which have not — has been a growing trend across consumer groups. Millennials are no exception. What’s more is that they expect what is called the reciprocity principle; a two-way mutual relationship with companies and brands. As a result of this engagement, Millennials are influential consumers and marketers in their own right and are significant indicators in consumer trends and behaviors.

Millennials are one of the most socially conscious generations and the most active on social media accounting for 47% of Facebook users, 68% YouTube, 34% Instagram, and 31% Twitter. Products or services that fail hit a high note with Millennials can quickly become a subject of negative feedback reverberating within the realm of social media. However, the risk/reward is huge for any company that embraces this new environment and leverages Millennials who are likely to project via social media their purchasing decisions and brand affiliations. In a recent article published by the Boston Consulting Group, the point is made that, “companies need to make marketing to Millennials a top strategic priority” and “move from push communications to two-way open dialogue.” Since 2009, Chipotle has taken this strategy to heart and sought to demonstrate that when you buy their burritos, you are “doing good” and acting as an agent of change.

Despite individual opinions of Chipotle and its videos, Crimson Hexagon, a leading social media data intelligence company conducted a study of the Twitter conversations following the video’s launch and found that 98% were positive, with 12% claiming the ad revolutionary and having set the standard for value-based advertising. But some may wonder if the championing of sustainable farming is a sustainable strategy for the Chipotle brand. When considering a brand holistically, it is important to remember that some of the most iconic brands, Coca-Cola and Apple, were not built in a day. Cause marketing takes time to become part of a brand’s DNA because consumers need not only to believe in the cause, but believe that the brand itself is actually putting its burrito where its money is.

BY JENNIE MILLER ’15