Dannon Case Study Essay

Danone, Dannon’s parent company, was one of the largest health-focused food companies in the world. Danone traced its heritage back to 1919 in Barcelona, Spain, when Isaac Carasso wanted to create yogurt with inherent health benefits. Through the years and different lines of succession, Danone continued to grow, but never lost its core vision of providing better health to people through their products. When this case was written, Danone’s global business focus was on fresh dairy (Activia yogurt), bottled water (Evian), medical nutrition, and baby nutrition. Danone viewed the United States as an emerging market for yogurt, thus Dannon’s marketing efforts needed to focus on growing U. S. yogurt consumption and expanding the category, while also growing its brand. (Marquis, p. 1) Dannon entered the US market in 1941 and by 2010 was poised to become the leader in America’s domestic yogurt sector. This was a major accomplishment for the simple fact that America’s yogurt market was practically non-existent at the time! A new product, called â€Å"Fruit at the Bottom† changed that and became an instant success. In 2007, even though Dannon had success, U. S. yogurt consumption was only 11. 8 lbs versus 62. 4 lbs in Switzerland and 42 lbs in France (Marquis, Exhibit 2) The implication of the latter statistics to Dannon was the U. S. was a high potential market for the next 5 to 10 years. (Marquis, p. 5) Dannon had maintained a strong commitment to CSR and was integrated into the company’s overall mission of â€Å"bringing health through food to as many people as possible. † Their CSR mission, however, was very internally focused and few customers knew about its activities. (Marquis, p. 1) Dannon’s CSR activities fell under the Regulatory and Corporate Affairs Department and focused around three key themes: nutrition and health, nature, and people. The case identified notable accomplishments in each of these areas, to include the U. S. Dannon Institute (nonprofit foundation dedicated to promoting excellence in the field of nutrition) with its many noteworthy educational programs. The question behind this case, as proposed by its senior director of public relations, was how Dannon’s long-standing, deeply ingrained corporate social responsibility (CSR) efforts could play a role in achieving Danone’s and Dannon’s overall marketing strategy. Discussion with Key Dannon Leaders brought out the following pro’s and con’s concerning the proposed idea of communicating Dannon’s CSR efforts to its consumers: Pro Con Possible increase in marketing of Dannon’s social mission Hard to measure ROI and benefits would be mostly intangible Possible increase in marketing individual products Limited, short-term sales impact Consumption of products might increase Impact of consumption might not be immediate Potential tax incentive or government assistance to promote health programs Competitors could take advantage of hallo effect Opportunity to communicate what Dannon stands for at the product level Change in overall budget priorities and expenditures for new program Opportunity to use Danone global brand Critics could say CSR efforts were only for publicity Brand campaign would have halo effects down to Dannon’s individual products Customers could perceive effort as disingenuous. Dannon employees would feel better about the company they worked for People don’t buy products just because they like the company’s CSR stance Would help build social interests May not support business interests Message might be too complex (Pro and Con information taken from case study, pages 9 -14) To Communicate or Not to Communicate? Dannon seems to be very focused on its Return on Investment (ROI) for marketing and communication dollars spent. While the question of whether or not to communicate its CSR seems very simple, research shows this important undertaking is very complex and there is no easy cookie-cutter answer for Dannon executives. What consumers feel does not always translate to what they buy. According to a 2010 survey, more than 75 percent of consumers surveyed say that social responsibility remains important to them despite the recession. In addition, 38 percent of these respondents indicated that they would spend the same or more on products or services from socially responsible companies compared to 2009. Yet, according to the very same survey, these sentiments do not have a significant impact on favorability and purchase intent — only 13 percent of folks actually proactively seek out CSR friendly brands and purchase them. (Lester, 2010) The latter finding seems to agree with other academic research. According to another survey, CSR impacts a very small group of people, namely the affluent. This report went on to state in its conclusion, â€Å"consumers with strong social preferences (and high income) buy CSR products and consumers with weak social preferences (or low income) buy non-CSR products. (Etile & Tyessier, 2011) General â€Å"assumptions† about CSR and consumer purchases may not be telling the whole story, though. Further research indicates consumers attach more CSR importance to certain industries. For example, the food and healthcare industries had an 88 percent importance rating for CSR initiatives – two of the top three in the entire survey (the other was energy). â€Å"Drilling down† even further shows the sector where CSR is both important to the consumer and CSR communications has performed extremely well is in the food industry. (Lester, 2010) One of the most telling findings in the 2010 CSR branding survey was the importance of tying social responsibility to a product. Its conclusion was consumers are more likely to select the product with an added social benefit hen given a choice between similar products. (Lester, 2010) Research shows a consumer’s loyalty to specific products also has an impact on a company’s overall brand. In an online article of The Economist, the author writes about the importance of brand in the context of specific product purchase. Once customers trust a certain product, they tend to look for the brand associated with it when selecting dissimilar products or services. (Case for Brands, 2001) This all being said, the flip side of the power and influence of a brand is its growing vulnerability – a single failed advertising campaign or hint of scandal can send customers fleeing. According to another article, â€Å"brands—and the multinationals that are increasingly identified with them—are not more powerful, but more vulnerable. Consumers will tolerate a lousy product for far longer than they will tolerate a lousy lifestyle. † (Who’s wearing the trousers, 2001) Pulling all of these points together lead me to the following conclusion: If Dannon intends to tie CSR into its product marketing, it should do so at the individual product level, and If Dannon intends to include CSR as part of its marketing and communications strategy, it needs to be sustained and intentional to have an affect (i. e. measurable ROI). My recommendation is Dannon follows my two suggestions above! Dannon has a distinct advantage in being a well-known name in both the health and wellness sectors as well as the food sector. Customers surveyed tend to research a provider’s reputation more stringently in these areas, as such, a combined external CSR and CR campaign would be, in my opinion, advisable. Dannon’s current CSR strategy, which is mostly internal, is good for its culture and employee retention. However, it does not maximize profitability and overall goodwill. Therefore, an external strategy must be added for full ROI maximization. Impact of a Corporate Parent Dannon is a wholly owned subsidiary of Danone and has a significant fiduciary responsibility to them. According to our case, Dannon is obligated to meet annual targets for profitability, operating free cash flow, manufacturing safety, and environmental sustainability. Dannon’s decision to change its marketing strategy, either as a branding exercise or for a specific product, would absolutely impact several of these obligations. (Marquis, p. 1) Obligation Potential Positive Impact Potential Negative Impact profitability a successively executed plan will increase customer sales and loyalty, both having a long term impact to the parent company’s bottom line. If customers feel the CSR communications are disingenuous, they will discontinue buying Dannon products, thus losing market share and reducing overall profits. operating free cash flow Increased profitability should increase overall free cash flow. Sustained marketing costs a lot of money and will reduce the company’s cash flow; assuming a long-term commitment, this will become a drag on profits if not successful. manufacturing safety No impact If cash flow is reduced, new equipment of safety training may not be purchased, thus allowing for accidents to happen. environmental sustainability No impact When cash flow is reduced, local operators might look for ways to cut expenses. One way to do that is to cut corners, especially in the ways waste is disposed of. customer loyalty A good campaign will increase the number of Americans buying Dannon products as well as the amount being consumed. Market share will increase and provide opportunities for new Dannon products to be distributed. All the reverse of the positive outcomes. Looking at our case, I think the impact to Danone is very minimal. It seems that Danone’s culture is to trust the country-based units and train its leadership to think globally. From my perspective, if Dannon executes a successful CSR campaign for a single product, the likelihood of success is extremely high. The Communication Strategy As indicated in the â€Å"To Communicate or Not to Communicate? † section of this paper, Dannon should take advantage of being in the market sectors where CSR impact is very high (health/wellness and food) and select a single product to use as a CSR marketing and communications platform. Because of its market penetration and dominance, I would use its top proactive health product, Activia, as the product. Danone and Dannon’s sustainable development model focuses around Nutrition and Health, People, and Nature. These three areas and how they relate to Activia would be my focus, with the specific bottom line result being how Activia contributes to a customer’s â€Å"personal health and nutrition naturally. † Once this is done, I would test my new outreach models in focus groups, specifically those that are already purchasing Activia (existing clients) and those that aren’t (potential clients). All successful marketing plan needs to keep both groups in mind; if no new clients are drawn to this approach, then go back to the drawing board. This strategy falls in line with Dannon’s desire to focus on growing the yogurt industry and proving its relevance to Americans. (Marquis, p. 5) When both groups trended positively toward the new marketing strategy, I would roll out a multi-faceted plan that includes print, web, television, internet, and social media. I would also tie this new communication in with the community grant programs that Dannon is already known for. This plan would need to be executed for 90 or 120 days and then measured for tangible ROI, specifically on the Activia product and secondarily on increases in other brand sales. Conclusion In conclusion, I believe that Danone was created with a definite CSR culture as part of their overall operating strategy. As such, all facets of their global organization reflect these core values, to include Dannon. I think this bodes well for an expanded, external CSR communications strategy because: Dannon risks very little in detractors saying they are simply communicating their CSR accomplishments as a profit motive – their legacy as a company, both locally and globally, state otherwise. Dannon is fortunate enough to be in the right sectors where CSR and CR are highly regarded. As such, they can leverage this fact to impact their product marketing even more. Dannon’s consumers, especially the health conscious, tend to have more disposable income and be more drawn to sustainable products and brands. Dannon has a single product, Activia, that is very high in market penetration and fits into both health/wellness and food categories. Again, this can be leveraged. Dannon can test the impact of communicating their CSR philosophy with a single product before exposing their entire brand. If Dannon’s product-based approach works well, then they have set a positive template to add new products, both within the United States and beyond. If it does not, then Dannon can quietly drop their marketing campaign without tainting all their products or the overall Danone brand. In the final analysis, I think Dannon is an ideal company to further communicate their CSR values. As a global company, they can impact and influence other organizations within the food industry. References Etile, F. & Tyessier, S. (2011). Corporate Social Responsibility and the Economics of Consumer Social Responsibility. Paris School of Economics. August 2011. Retrieved May 18, 2013 from http://ageconsearch. umn. edu/bitstream/120399/2/Etile_Fabrice_359. pdf Lester, B. (2010). Corporate social responsibility branding survey. Penn Schoen Berland. Retrieved May 18, 2013 from http://www. psbresearch. com/files/CSR%20Branding%20Survey%202010%20EXTERNAL%20FINAL. pdf Marquis, C. , Shah, P. , Tolleson, A. , & Thomason, B. (2011). The dannon company: marketing and corporate social responsibility (A). The Harvard Business School. Revised September 28, 2011. File number 9-410-121 The Economist. (2001, September 6). The case for brands. Economist. com. Retrieved May 18, 2013 from http://www. economist. com/node/771049 The Economist. (2001, September 6). Who’s wearing the trousers? Economist. com. Retrieved May 18, 2013 from http://www. economist. com/node/770992