Scott Rolls Out A Risky Strategy

`Everything but your family and your dogs in this world is for sale at the right price," Chief Executive Albert J. Dunlap told Scott shareholders on Apr. 18. Whoa: Scott Paper Co. for sale? Dunlap did nothing to dispel the acquisition rumors. On May 1, he announced he would sell extensive timberland and pulp operations. With all this coming on top of massive cost-cutting moves, says a top rival executive in Europe: "[Dunlap] may be polishing up the company to show it off to potential buyers."

Could be, but if Dunlap is out to sell Scott Paper, he has a fall-back strategy. Dunlap also has replaced much of its top management with savvy industry veterans from the likes of Coca-Cola Co. and Kimberly-Clark Corp. The new team is rethinking Scott's entire marketing approach. It will roll out new packaging and products in June. Says Richard R. Nicolosi, a former Procter & Gamble Co. vice-president who is now Scott's senior vice-president for worldwide consumer products: "We are talking about a revolution."

LOGO LAUNCH. Scott needs fixing. After a surge that more than doubled its value, to better than $91 a share, Scott's stock lately has settled in under $90. Even takeover rumors haven't given it a boost. Dunlap's 13 months of cost-slashing have hiked profits, but market share is faltering. In the year ended Apr. 2, Scott's bath-tissue sales in key U.S. markets slipped nearly 1%, to $592.6 million, according to market-tracker Information Resources Inc. In paper towels, Scott lost some 5.2% in sales, to $324.8 million.

Scott's new marketing blitz could revitalize its brands--or just confuse consumers. Some fault Dunlap's plans to use the Scott name and logos on several product lines. "This guy should study history more closely," says independent marketing strategist Jack Trout. "You've got to have focus. If you have a lot of Scotts, it doesn't mean anything."

Indeed, Scott is turning time-tested consumer marketing theory on its head. "ScotTowels" now are called "Scott Clean." "ScotTissue" becomes "Scott 1000." A breezy blue logo on both bath tissue and towels replaces the distinctive--if tired--brand packaging.

The changes come at a time when potent rival brand names are stealing Scott's thunder. P&G's industry-leading Bounty helped the company achieve a 20.8% sales gain in paper towels last year, and James River's Brawny recently eclipsed ScotTowels, the perennial No.2 brand. "We're just starting to threaten them now," says Michael A. Linton, a top exec with James River Corp.

Dunlap is betting that unifying the Scott name will help its products stand out. At the same time, Scott's marketers are trying to expand the brand franchises for Cottonelle tissues and Viva towels. They're adding baking soda and moisture, for instance, to the Cottonelle line, dubbing the product an "advanced personal hygiene" system. And the Viva name is replacing Scott on a line of hardy scrub cloths.

Scott's overseas strategy is even riskier. Its Andrex bath tissue is a top-seller in Britain, for instance. But Dunlap plans to phase the name out. He'll do the same with local brand names in the 80 foreign countries where Scott garners some 45% of its $3.6 billion in sales. His argument: Coca-Cola commands respect the world over, and so does Scott. Says Dunlap: "I truly believe the greatest name of all [our brand names] is Scott."

Taking chances with a healthy franchise such as Andrex worries some experts. True, the brand consolidation would save money. Scott plans to shutter some European factories. But, frets Michael Peters of Identica Ltd., a British marketing consultant: "Andrex has such good vibes in this country. It is a shame...they want to dilute it."

Dunlap argues that global branding, which will allow for common advertising messages around the world, will prove to be more important than local sentiment for brands. He also contends that the new strategy marks the end of Phase One of his turnaround of Scott. "We are out of the restructuring business, and we're in the building business," he says. And if that doesn't work, he can always fall back on another strategy: Find a buyer.

— With assistance by Paula Dwyer

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