Mr. Peanut’s Alter Ego Leads Kraft Into Planters Butter

Mr. Peanut has a stunt double.

Sporting a goatee, aviator sunglasses and overconfidence, “Doug” performs death-defying feats that always end the same way: with him getting crushed and turned into peanut butter.

Doug’s daredevil act is part of Kraft Foods Inc.’s (KFT) move into the crowded U.S. peanut butter market. In what may be the most overdue brand extension in history, Kraft is using the 100- year-old Planters brand to spark growth in its mature grocery business. Store shelves are already well stocked with such brands as market leader Jif, Unilever PLC’s (UNA) Skippy, ConAgra Foods Inc.’s (CAG) Peter Pan and private-label peanut butter.

Kraft is targeting adults, who consume two-thirds of the $1.8 billion of peanut butter sold in the U.S. each year, said Triona Schmelter, Kraft’s senior director of marketing. Kraft was looking for an adult mascot and settled on Doug, voiced in Web ads by Kevin Dillon in an homage to the hapless Johnny Drama character he played on HBO’s “Entourage” series.

“Peanut butter was a natural extension,” Schmelter said, adding that “most other brands focus on moms and kids.”

The new spread and Peanut Butter Doug, as he is formally known, are signs Kraft is getting more aggressive with the grocery business, said Alexia Howard, an analyst for Sanford C. Bernstein & Co. in New York.

Photographer: Michael Kestner/Virginian-Pilot/AP

Mr. Peanut at Suffolk airport in Virginia. Close

Mr. Peanut at Suffolk airport in Virginia.

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Photographer: Michael Kestner/Virginian-Pilot/AP

Mr. Peanut at Suffolk airport in Virginia.

Like many of its rivals, Kraft is struggling to generate growth in its grocery unit and later this year will separate it from the faster-growing snacks business. While grocery sales rose almost 5 percent in North America last year, that was largely because Kraft raised prices in the face of inflation.

Risk-Averse

The grocery business “had been neglected for years,” Howard said in an interview. “Kraft was a risk-averse, conventional advertiser. They have shaken that up.”

Kraft, which is based in Northfield, Illinois, advanced 19 percent last year, compared with an 11 percent rise for the Standard & Poor’s 500 Consumer Staples Index.

Planters’s move into peanut butter follows an effort to revive the brand’s slumping snack business. From 2005 to 2010, Planters unit sales at U.S. stores excluding Wal-Mart Stores Inc. (WMT) tumbled 23 percent, according to data from Chicago-based researcher Symphony/IRI. Private-label snacks and offerings from San Francisco-based Diamond Foods Inc. (DMND) were feasting on its market share.

Kraft hadn’t invested much in Planters, and the marketing had gone stale. Though suave and monocled, Mr. Peanut was a guy in a foam suit, like a college mascot. He was human-sized and never spoke.

“He lost who he was from an advertising standpoint,” said Caroline Winterton, global brand leader for Planters at Being, a New York-based spinoff of TBWA Worldwide, which took over the brand’s advertising in 2010.

1920s Sophisticate

The new ads made Mr. Peanut small and peanut-shaped and gave him the voice of a 1920s bourgeois sophisticate. The revised Mr. Peanut helped push all-natural health snacks with the tagline “Naturally Remarkable.” Sales ticked up that year.

The Planters brand team starting mulling new products. Peanut butter had been kicked around on and off. Recession- stricken consumers were seeking cheap protein, pushing peanut butter sales up 9 percent in 2011. With Planters finding traction, the team decided the time was right, Schmelter said.

Kraft rolled out Planters peanut butter in June at an event where celebrity chef Marcus Samuelsson pushed adult-oriented recipes like peanut butter yogurt and -- yes -- peanut butter soup. More ads featuring Peanut Butter Doug are in the works.

“You won’t see PB and J” in the marketing campaign, Schmelter said. “You’ll see ideas for putting it in smoothies, on rice cakes or on English muffins.”

Private Label

After six months on the market last year, Planters ranked sixth, behind leader J.M Smucker Co.’s (SJM) namesake butters and top seller Jif, along with private label peanut butter, Skippy and Peter Pan.

Kraft has added a new peanut butter factory to boost production capacity. Market share so far this year has risen from 1.8 percent last year to “mid single-digits,” according to Schmelter.

While Planters’s brand recognition and Peanut Butter Doug’s viral antics on the Web helped get the new line off the ground, sustaining growth will be a challenge, according to Ken Harris, analyst with London-based research firm Kantar Retail.

Pulling buyers from established brands will require a big marketing push and more spending, he said. Peanut Butter Doug exists only online. Planters hasn’t spent the cash to put him on prime-time television and isn’t saying whether that’s the plan.

Specialty-Nut Butters

What’s more, Planters isn’t the only company trying to move beyond PB & J for kids. At a Florida conference for analysts last week, Smucker Chief Executive Officer Richard Smucker told investors that specialty-nut butter generates $260 million a year in sales and is growing faster than the overall peanut butter market. He plans to debut two hazelnut spreads next year, he said.

Kraft will need that kind of innovation when Tony Vernon, president of Kraft’s North American business, becomes CEO of the grocery company after the split, Howard said.

“It’s all about innovation and marketing,” she said. “They have stepped up innovation under Vernon. But it’s very early days with peanut butter.”

To contact the reporter on this story: David Welch in Detroit at dwelch12@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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