Disney Consumer Product: Marketing Nutrition To Children A Harvard Business School Case Analysis

Index• Introduction• History• About DCP• Challenges• Alternatives• Disney Nutritional

Guidelines

• Imagination Firms• The Competition• SWOT Analysis• Recommendation• Conclusion• Future Scope

IntroductionIn 2004, The Walt Disney Company found itself in the middle of a maelstrom. The Disney brand was synonymous with fun and magic—• Characteristics children also associated

with the food treats, such as ice cream, popcorn which could be purchased in Disney’s theme parks, supermarkets.

• Disney-branded confections and novelties were sold.

• Yet packaged goods manufacturers, fast food companies, and the media outlets were subject to growing criticism from activists, parents and governments around the world who believed these companies contributed to the growing obesity epidemic.

• In 2004, health experts estimated that more than 30% of American children between the ages of 5 and 9 years were overweight and 14% were obese.• In Europe, childhood obesity rates in developed countries doubled from 1973 to 2003 •Most countries like Italy, Spain, the Netherlands and the United Kingdom all reporting 10% or more children aged 5 to 9 years were obese.

Increased portion sizes, eating out more often, increased consumption of sugar-sweetened foods and lack of exercise were major contributing factors to obesity.

History

1923Debut of Mickey Mouse in Steamboat Willie

1932Licensing became a formal business unit

1950Expand beyond film and television

1955Opened Disneyland in Anaheim, California

2004The obesity epidemic2006DCP launches offering of fresh fruits

By 2006 Walt Disney company was comprised of 4 major business segments:

•Media Networks, • Parks and Resorts, • Studio Entertainment,•DCP.

In the year 2006, • The Walt Disney Company was a $32 billion company, reporting net income of $2.5 billion. •Around the world, families spent an annual average of 9.16 billion hours immersed in Disney-branded experiences and products.•Disney held the top spots for the world’s most valuable franchise characters with Mickey Mouse & friends valued at over $5.8 billion, Winnie the Pooh & friends at $5.6 billion, and Disney Princesses at $3 billion.

Disney consumer products

Disney Consumer Products was responsible for extending the Disney brand to merchandise ranging from • apparel, • toys, • home decor and books to interactive games, • food and beverages,• electronics and animation art.

Disney consumer products

About DCP• In 2006, DCP’s Disney-branded merchandise accounted for retail sales of $23 billion in 90 countries and 56% share of the estimated $41.2 billion character licensing industry.• In 2005, DCP was the world’s largest licensor with more than $21 billion in retail sales of licensed products.• In 1935, merchandising generated more than $35 million in retail sales for Disney’s licensors.• In 1948, the company reported licensing income of over $1 million and retail sales of $100 million.

Contd….

• In 1954, Disney capitalized on the persuasive power of television when the company sold $300 million in coonskin caps and other merchandise inspired by its series, Davy Crockett—Indian Fighter.

Contd….• In 1996, DCP signed an exclusive, 10-year, $2 billion licensing deal with McDonald’s that gave the fast food giant the right to feature Disney characters in its promotions and to offer Disney toys with its children’s meals.

DCP’s Licensing and Distribution Models• Traditional licensing model,• Sourcing(designed and create products by Disney but manufactured and marketed by licensee),•Direct-to-Retailer(DTR)Entailed partnering directly with retailers.

Disney at the Supermarket

• In 2004, DCP estimated that its branded food products accounted for less than 1% of the children’s food market.•DCP executives believed that the company’s changing licensing models, retail industry consolidation and the obesity epidemic offered DCP an opportunity to simultaneously broaden and rationalize its product offerings.

Nutrition, Obesity and the American Diet•On January 12, 2005, the U. S. Department of Agriculture (USDA) updated its official federal nutrition recommendations on what Americans should eat to meet nutrient requirements, promote health, and reduce the risk of chronic disease.• From 1975 to 2005, the rates of overweight and obesity in children had skyrocketed: from 5% to 14% among 2-5 year olds, from 4%-19% for 6-11 year olds and from 5%-17% for 12-19 year olds.• Some industry experts pointed to progressive increases in portion sizes from 1977 to 1998 as a significant factor in rising obesity rates.

Contd…

•Other experts decried television advertising as a primary factor.• In 2005 and 2006, IOM recommended that the USDA develop standards for marketing foods and beverages to children based on portion sizes, calories, fat, sugar and sodium and issued a set of product development and marketing recommendations regarding the responsibilities of food and beverage companies to halt the obesity epidemic.

Challenges

•Disney needs to reconsider the nutritional value of their food products.•DCP products need to meet USDA( united nations department of agriculture) dietary guidelines.• The food has to appeal to children and deliver on the brand’s promise of magic.

Alternatives Pro’s Con’s

Keep Traditional Line

Keeping broad consumers base.Preferable by common children.

Negative public opinionNot supporting by government regulation.

Healthy Program Line

Establish good imageStrong BrandStrong distribution Channel Preferable by common parents.

Possible to loss broad consumers base.

Disney Nutritional Guidelines

Nutrition Control-•Control levels of added sugar, •Contain no trans or hydrogenated fats,• Promote fibre and calcium,•Minimize the use of additive, • Prefer to use whole foods that are intrinsically dense in nutrients.

Products to be reformulated and phased out as per recommendations.

Imagination Firms• DCP embraced a “whole foods first” philosophy and as a

result, marketed fresh fruits and vegetables in addition to its package products.• Imagination Farms contracted with 15 large U.S. growers

to provide both organic and conventionally grown produce to supermarkets under the Disney Garden brand.• DCP and Imagination Farms used a 3-pronged product

development strategy: differentiate commodity produce through promotion, create value-added products through product preparation

or packaging, and develop exclusive produce varieties that would yield more

child-friendly foods.

• Bagged fruits and vegetables featured a back panel that provided nutritional facts, jokes and other child-engaging information.• Imagination Farms also planned to market staple produce such

as potatoes, a category Goodwin admitted was not inherently child-friendly.• Imagination Farms was also working with produce breeders to

identify items in their portfolios which were particularly suited to children.• Disney Farms produce was sold in major supermarket chains,

including Albertsons, Safeway, Supervalu and Wal-Mart, though the assortment varied significantly from one retailer to the next.

The CompetitionNickelodeon•As the top rated U.S. basic cable network since 1996, Nickelodeon was seen by 89 million households and, in addition to its television programming, marketed consumer products, books, magazines and feature films using its popular children’s characters.•By the end of the 2005, unit sales of Darling clementines increased by almost 25% after the Dora and SpongeBob characters were added to the product packaging.

• In July 2006, Nickelodeon announced plans to extend its fresh fruit and vegetable line to apples, pears, and cherries, soybeans, and carrot and apple dips. • “My goal is to have every fruit a kid would want to eat with a Nickelodeon character,”

& • “We broke new ground in the world of licensing. We’re trying to see how many places we can use our characters to encourage kids to eat more fruits and vegetables.”

-TORRES, LICENSING VICE PRESIDENT

Sesame Workshop

• Preschoolers consumption of broccoli increased by 28% when the vegetable was branded with a Sesame Street character.• Initiative: “Healthy Habits for Life”-a content based program to “help young children and their families lead healthier lives through improved nutrition, physical activity, and hygiene.”

Warner Bros

•Cool Cuts Ready Snax single-serving packages of fruit. Each package contained two, 2-ounce packages each of grapes, apples and carrots, which Ready Pac promoted as lunchbox alternatives to cookies, potato chips or candy.• The company also marketed carrots and celery served with ranch dip or peanut butter, which it described as a “healthier snack alternative” and “the original kidpleasin’, mom-lovin’ dippity delicious snack!”

Disney and Kroger•DCP developed a broad range of products with Cincinnati-based Kroger Supermarkets, the largest pure grocery retailer in the United States with fiscal year 2005 sales of $60.6 billion.• Together, Disney and Kroger sized the opportunity at $250 million in annual revenue and used focus groups and Nielsen data to validate the categories and products they had selected as well as the brand name-Disney Magic Selections.•Disney had gained experience with DTR relationships with supermarkets in Europe.

Launching Disney Magic Selections

•Disney Magic Selections officially launched on September 10, 2006.•Kroger had exclusive U.S. use of two food-specific character personas•Kroger invested significantly in marketing the Disney Magic Selections line that was supported with in-store signage, advertisements and circulars, endcap and floor displays, direct mail, and billboards.

SWOT AnalysisSTRENGTH

Brand recognitionCreative process

Strong diversificationCooperate with big retailers like Kroger

Responsiveness to market

WEAKNESSLarge R&D costsHigh risk factor

Does not have own manufacturing for DCP

OpportunityMother’s positive

perception of the Disney brand

Disney character’s popularity

ThreatCompetitors

Differentiation form natural produce products

Pricing competition

Risks faced by DCP

• Pricing & Value• Legacy•Differentiation & Competition•Growth and distribution

Recommendations

•New characters can be introduced.•Collaborate healthy foods with Disney programs.•Awareness campaigns on healthy food for parents.• Improve coordination between Disney and its stakeholders

Conclusion

• The application of good business development strategies defines the success of DCP. The development of products in accordance with the current market requirements enables the company to position itself as the leader in the healthy foods production which has the potential to sustain the business model. Further implements of new marketing strategies will bring the company to a new level of world entertainment and food industry, and the competitors may only attempt to catch up.

Future Scope•DCP managers were excited about their entry into the food and beverage market and planned to capitalizing on the vast resources of the Walt Disney Company to gain market share and acceptance for its new undertaking. •Managers envisioned publishing cookbooks, televising cooking shows for children, and linking its nutritional efforts with exercise programs. •Extending its offerings from retail supermarket products to food service and out-of-home consumption in restaurants was also under consideration. •Disney—and by extension, DCP—was highly influential with children.

Could the company use its “magic” to get children to switch from sugary, processed foods and become lifelong converts to a more nutritious diet?

Yes, it can. Disney with its reach has the potential to influence the habits of children through proper marketing management.

Thank you

DisclaimerCreated by:Ramcharan Palnati, IIT Bombay,during a marketing internship by Prof. Sameer Mathur, IIM Lucknow.