Leading the market or a segment – Kettle vs. Walkers (bgym book post 2)

In this second post on topics from the new brandgym book we look at gaining leadership in a segment, rather than the total market. We illustrate this with the example of the UK potato chip market, and the battle between Walkers and Kettle Chips.

Being a leader is better – market or segment

We saw in the last post that being a leader is better for business.
This can be leader of the total market, as is the case with Walkers
(Lays in the USA) in the UK potato chip market. With sales of
c£500million, they are over five times bigger than the number 2 brand
McCoy's. And they've also managed to drive growth, with sales up 8.4%
in 2009.

But leadership can also be of a segment, such as the premium end of
the market. And this is where Walkers are having a much harder time.
Kettle Chips is edging ahead of Walkers premium offering, Walkers
Sensations. And Kettle's faster growth(16.8% vs. -12.1%) means they in pole position to be the clear Leader Brand in this segment.
The risk of being stuck in the middle

Walkers Sensations shows how hard it is for a mainstream Leader Brand to also lead in the premium segment. At launch in 2001 Sensations did have more exotic flavours, such as Thai Sweet Chilli, and different packaging with cues of provenance. And it did pretty well. Indeed, I used Sensations as a case in my book, Brand Stretch. By 2002 sales of c.£60million were twice that of Kettle, helped by a decent mix and the power of Pepsico's business system. It had leadership of the premium segment.

However, the challenge was not just gaining leadership, but retaining it. Consumer expectations in terms of sourcing, provenance and quality kept going up. And Kettle had a much more authentic and credible story here. Also, the rate of flavour innovation was perhaps not fast enough. Sensations was too expensive to be mainstream. And not authentic enough to be truly premium. Last year's re-launch, with an all-black pack and new ad campaign, doesn't seem to have been enough to turn the brand around.

Leadership needs focus

Another challenge for the premium offers of mainstream brands is getting enough attention. Sensations is amall for Walkers, and you wonder how much love, care and focus it got. Enough at launch. But what about the hard work and creativity needed to keep it growing?

Kettle had no such issues. It was sold to private equity company Lion Capital in 2006 for $280-320 million. And we know what private equity firms do. They FOLLOW the MONEY! This focus on growth helped Kettle catch and over-take Sensations. And last month Lion sold Kettle to Diamond Foods for…. $615 million. Nice work if you can it eh?

Last attempt to lead

As I posted on here, Walkers have launched a "true premium" brand called Red Sky to compete with Kettle Chips. I gave this a medium chance of success. It has quite a nice story, and no Walkers branding. And Pepsico's business system give them extra muscle vs. Kettle Chips.

But as we said in the last post, Leader Brands like Kettle own the key benefits of the category. And "re-wiring" these associations takes time, energy and money. Only time will tell if Walkers have enough of this to re-gain leadership.