Great brands, great future

Del Monte Foods is one of the largest and most well-known producers, distributors and marketers of premium branded and private label food and pet products for the US retail market. Del Monte is, as a company, focused on two very powerful business trends. The first is "Health and Wellness" on the human side. The second is "Pet as Family Member."

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Del Monte Foods is one of the largest and most well-known producers, distributors and marketers of premium branded and private label food and pet products for the US retail market. The San Francisco, California, USA-based company generated US$3 billion in net sales in fiscal 2006, with 40% of its sales coming from a powerful portfolio of 14 pet product brands including Meow Mix, Kibbles n Bits, 9Lives, Milk-Bone, Pup-Peroni, Gravy Train, Nature's Recipe, Snausages, Pounce and Meaty Bone.

Paying attention

Del Monte is, as a company, focused on two very powerful business trends. The first is "Health and Wellness" on the human side. The second is "Pet as Family Member." Del Monte believes it is uniquely positioned, given its portfolio and the core competencies of the total company, to capitalize on those two powerful trends.

Blending in

Recently, I spoke with Jeff Watters, senior vice president of Del Monte Pet Products. He provided his perspective on how the company has been doing since its most recent acquisitions. According to Watters, the integration of both Meow Mix and Milk-Bone has gone very smoothly. There has been a positive and immediate response to the company's changes in programming and increases in investment in the brands.

Del Monte's total market share of the cat food category is growing nicely with the addition of Meow Mix. "We've capitalized on the momentum that Meow Mix had coming into the acquisition and we've actually built off of that. We have also taken the work that the Kraft team did on Milk-Bone and we believe elevated Milk-Bone to an even better place over the last six months or so," he says.

Watters explains that Milk-Bone was a non-core business for Kraft. "I think even the Kraft folks at the time would have admitted that it didn't get its fair share of attention. It certainly gets its fair share of attention within the Del Monte pet portfolio, so those businesses have both responded quite nicely to the attention, focus and investment that they've received over the past six to eight months," he says.

Watters notes that the Milk-Bone and Meow Mix businesses have allowed Del Monte to improve its innovation platform. "I think they have really enhanced our relevance to both our consumers and our retail customers. We expect very big things for both of these businesses over the next 12-18 months."

New products, innovation

In the past year, Del Monte has launched its share of new products. Kibble n' Bits Brushing Bites, the first mass marketed oral care dry dog food, is the most successful new item launch into the dry dog segment in the last couple of years, according to Watters.

Del Monte has also had strong launches with Pup-Peroni Ribs, as well as its 9Lives Daily Essentials. "We feel as though across the board we have had a very strong legacy of innovation," Watters comments. Innovation is key to Del Monte's future success in the pet product arena as, historically, its core market has been the mass market consumer.

"We do a lot of work to mine insights associated with certain consumer segments in the mass market, particularly what we call the 'Dogs and Cats are People Too' consumer segments. These are people that very much epitomize the pet as 'family member' or the 'humanization of pet' trend. That target tends to be more of a mass market consumer than a specialty or niche consumer," he notes.

Del Monte sees opportunity to not only develop that core market, but also to extend its current platform into niche segments, such as the specialty user or the premium/superpremium target over the next several years.

Growth keys

According to Watters, growth starts with understanding the company's consumer target and ensuring that it is developing new products and/or solutions that meet the needs of pet families.

Another key to retail success is to develop point of purchase "excellence," to ensure that the consumer shopping experience is a successful one.

Watters believes that Del Monte leads the competition in areas of innovation and thought leadership. "We recognize that we are probably not the deepest-pocketed competitor in the pet category. We have some very well-established, entrenched and rich competitive sets, and as a result we have to work smarter."

He notes that while product innovation is central to its success, Del Monte needs to think more broadly to further solidify its position as an industry leader. "Thought leadership, as we see it, is both the way we carry our message to our consumer and the way in which we carry our message to our retail partners," Watters says. Del Monte has been successful in its approach to category management and the tenants of merchandizing, assortment pricing and shelving optimization with what it calls the "Star Set." This helps retailers build their shelving schematic around "consumer need states," according to Watters.

What's in store?

"We're going to place our bets on our ability to think more clearly about consumer and customer needs, and we hope that our platform of innovation and thought leadership will ultimately be differentiating for Del Monte Pet Products and presumably lead us to greater market success than we enjoy today." Overall, Watters is optimistic about the future of the entire company. "We have dramatically transformed the total portfolio for Del Monte over the past 12-18 months," he notes.

Business Basics
Headquarters: San Franciso, California, USA
Officer(s): Richard G. Wolford, chairman of the board, president and CEO; Jeff Watters, senior vice president, Del Monte Pet Products
Annual sales: US$3 billion in fiscal 2006
Brands: Meow Mix, Kibbles 'n Bits, 9Lives, Milk-Bone, Pup-Peroni, Pounce, Wagwells, Gravy Train, Jerky Treats, Canine Carry Outs, Snausages, Nature's Recipe, Alley Cat, Meaty Bone
Facilities: 17 production facilities and 18 distribution centers in North America; petfood research facilities in Walnut Creek and Terminal Island, California, USA. Operating facilities and distribution centers in American Samoa, Ecuador and Venezuela.
Employees: 1,760
Company wesite(s): ; various brand websites
Historical perspective

The exact origin of the "Del Monte" name is unknown. Apparently, the name was used in the 1880s by a food distributor to designate a coffee blend prepared for the Hotel Del Monte in California. In 1892, the firm selected Del Monte as the brand name for its new line of canned peaches. In 1917, Del Monte became the first US fruit and vegetable processor to advertise nationally.

In 1979, the company was acquired by RJ Reynolds Industries (later RJR Nabisco). In the late 1980s, RJR Nabisco sold off the fresh fruit portion of Del Monte. The remaining core domestic companytoday's Del Monte Foods, which owns the Del Monte name and trademarkwas sold to a Merrill Lynch investor group in 1989,and subsequently acquired in 1997 by the Texas Pacific Group (TPG). TPG took the company public again in 1999.

Late in 2002, Del Monte acquired the US StarKist seafood, North American petfood and pet snacks, US infant feeding, College Inn broth and US private label soup businesses from the HJ Heinz Company. Merging these businesses into the company more than doubled Del Monte's size. With these businesses came top selling brands such as Kibbles n Bits, 9Lives, Pounce and Pup-Peroni, which enhanced the company's presence on grocery store shelves.

In March 2006, Del Monte announced its agreement to acquire the Meow Mix Co., maker of Meow Mix brand cat food and Alley Cat brand dry cat food for US$705 million. Later that year, Del Monte announced that it had completed its acquisition of certain pet product assets, including the Milk-Bone brand, for approximately US$580 million from Kraft Foods Inc.

Rick Wolford, Del Monte's chairman and CEO, noted at the time that "this transaction, coupled with our acquisition of Meow Mix, creates an improved platform for developing innovative and successful products, significantly improving Del Monte's competitive position in the petfood category."

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