THE BOARDROOM PLAYERS - ERIC NICOLI: Eric Nicoli understands and cares about brand loyalty and knows how to use advertising to combat retail challenges. Amanda Hall meets the chief executive of United Biscuits

By AMANDA HALL, campaignlive.co.uk, Friday, 27 November 1998 12:00AM

Agencies selling to Eric Nicoli, chief executive of United Biscuits, are preaching to the converted. For Nicoli landed the top job at the pounds 1.2 billion branded foods empire that is home to McVitie’s, Penguin and Hula Hoops via the marketing route. He knows the ad business, likes it, believes it is critically important to the corporate health of UB - and jokingly suggests that he might even go into the agency business himself one day.

Agencies selling to Eric Nicoli, chief executive of United

Biscuits, are preaching to the converted. For Nicoli landed the top job

at the pounds 1.2 billion branded foods empire that is home to

McVitie’s, Penguin and Hula Hoops via the marketing route. He knows the

ad business, likes it, believes it is critically important to the

corporate health of UB - and jokingly suggests that he might even go

into the agency business himself one day.



Dan O’Donoghue, now the deputy regional chairman at Publicis, is his

favourite adman, he says, ’for giving me my first job, and, of course,

for his excellent judgment’. O’Donoghue was a research manager at

Rowntree Mackintosh in York at the time and Nicoli a newly qualified

physics graduate looking for his first break. ’I liked Dan, I liked York

and I liked chocolate.’



But don’t be fooled. While all this advertising friendly stuff means

UB’s in-house marketers are spared the

’let-me-tell-you-how-advertising-works’ bit at budget time, Nicoli knows

all the tricks. He has been a marketing director, has hired agencies,

fired agencies, loved campaigns, hated campaigns and is as likely as

anyone to be a good judge of what is going to work.



He is also realistic about how there is more to marketing success than

advertising.



’At boardroom level, advertising is critically important and is regarded

as an investment priority,’ he says. While the City tends to lump all

food manufacturing companies together, Nicoli prefers to describe UB as

a branded goods company; as such its level of investment in marketing is

far higher than food industry rivals whose main business is own- label.

Eighty per cent of UB’s UK sales are brand sales. Overseas, the figure

rises to 90 per cent.



Earlier this year, the company restructured into two divisions:

McVitie’s Group, which includes all the McVitie’s biscuit brands and its

low fat range, Go Ahead; and UK Foods, which covers KP Foods’ snacks,

crisps and nuts, McVitie’s pizzas and Young’s seafood and potato

products. The new structure replaced an existing geographic organisation

and marked the end of a difficult three years that saw the company pull

out of the US and Spain, sell its French and Australian snacks

operations to PepsiCo and move further into the biscuits market by

buying France’s biggest biscuit brand, BN, and, in June this year,

acquiring Delacre, a European based biscuit business previously owned by

Campbell Soup.



This year, Nicoli will spend around pounds 220 million marketing his

portfolio of brands. It is the company’s single biggest investment item

and is in line with its stated strategic priority of focusing on growing

its ’power brands’ internationally - these are Penguin, Go Ahead and BN

- and in local markets to focus on its ’core brands’ - such as McVitie’s

Digestives and Homewheat in the UK.



While he will not split out advertising spend by brand for reasons of

commercial sensitivity, he says around pounds 40 million of that pounds

220 million spend will go on advertising worldwide. His main agencies

are Publicis, which handles Penguin, Jaffa Cakes and Hula Hoops, and Leo

Burnett, which has the international and domestic briefs for the

McVitie’s brands including Go Ahead. Mellors Reay also handles work on

some of the group’s frozen food lines.



’Advertising is critical,’ he says. ’But it is just one element of the

mix and accounts for no more than 20 per cent of the overall spend. At

the same time, pounds 40 million is a lot of money. One thing the

advertising community needs to take on board is that the rigour that

goes into assessing the pounds 80 to pounds 100 million we invest each

year on capital expenditure is immense. The rigour that goes into

assessing a pounds 5 million advertising campaign is - being charitable

- much less.’



A proposal to spend pounds 2 million on a piece of new manufacturing

equipment will now be assessed strategically, technically and

financially, although Nicoli admits it has not always been this way.

While he believes things have improved, although only relatively

recently, there is still plenty of room for improvement. And in the

context of a business where there are competing calls for investment

from numerous other areas - such as supply chain efficiency, training,

recruitment and UB’s involvement in the community - advertising must be

able to prove it is money well spent.



Unlike Paul Wilkinson, the chairman of RHM, who has also been

interviewed for this series (Campaign, 23 October), Nicoli doesn’t rely

solely on brand share as the main indicator of whether advertising is

working.



He says: ’Advertising is the single biggest contributor to a brand’s

equity over time. Its job is to create a reason for buying. But it is

very difficult to measure because a large part of its value is long term

and it is just one part of the mix.’



Nicoli has previously said that as chief executive, one of his roles is

to act as the brand manager for UB, the corporate brand. To do it well,

he cannot rely on advertising, given the highly specific nature of the

target groups who need to know about UB, the corporate entity -

analysts, fund managers, shareholders, journalists, and staff. His main

tool as UB brand manager is public relations.



’I always wonder why (in terms of consumer campaigns) advertising and

public relations are kept separate in people’s minds. Both are designed

to promote a brand, whether it is corporate name or a product. Of

course, it is harder to get cov- erage than with advertising but you can

create incredible value for money with well-directed public relations

work.’



UB’s board sanctions a pounds 40 million a year adspend because,

provided it is effective, good campaigns promote brand health - the

quality that ultimately makes us pick up a packet of McVitie’s

Digestives over the Tesco own-label variety. But the rules of the game

have changed in the past 18 months and brand health is under attack.



The cause? The ’buy one get one free’ offer. Across the country every

day, supermarkets are running half-price offers on a handful of

products.



Brand leaders such as Walkers crisps and Kit-Kat are doing it and UB has

been forced down a similar track with Penguin, McVitie’s and some of its

frozen and chilled food brands. The financial incentive for consumers to

change their buying habits is compelling and overrides brand

loyalty.



’When BSE hit, supermarkets sold beef at half price and they sold out

because even beef that kills you is worth a shot at half price,’ Nicoli

comments. ’My concern is not just the short-term impact on margins, but

what it will do to brand loyalty over the long term.’



Even the most effective advertising campaign is rendered impotent - at

least in the short term - by a compelling price offer. While no business

can go on selling its goods at half price for long, anyone sitting on

solid research that assesses the long-term impact of the

buy-one-get-on-free offer on brand health is likely to find a willing

listener in Nicoli.



Some weeks ago, Allan Leighton, the chief executive of Asda, was quoted

in Campaign saying he was happy with ’wallpaper’ advertising. It caused

much amusement and a little self-righteous indignation among creative

types - not least at HHCL & Partners which duly sent him a roll of

wallpaper.



Put the wallpaper question to Nicoli and he says: ’I’m inclined to the

view that clients get the advertising they deserve, although sometimes

it’s a struggle to get the advertising you want and deserve. Clients

have at least an equal responsibility to produce excellent advertising.

Sometimes wallpaper advertising is exactly what’s needed.’



Some of the McVitie’s advertising that he was heavily involved with in

the 80s when he was marketing director of the group’s then biscuits

division he freely describes as wallpaper, but says this does not mean

it was invisible.



’It wasn’t appropriate to make it intrusive. We were trying to promote

family values with a long-established brand. I don’t care what the

commentators think, I care how consumers react. Even boring wallpaper

serves a purpose.’



As chief executive, Nicoli takes a personal interest in UB’s advertising

and believes it is important for agencies to maintain a degree of client

contact at the highest level although he rarely gets involved in the

campaign process. Given his marketing background, he also has a clutch

of friends in the business he has worked with over the years. He cites

Jennifer Laing, now chief executive of Saatchi & Saatchi in North

America, as his ’most respected ad woman’. She was an account assistant

at Garland Compton when Nicoli was at Rowntree.



You only have to stand in the biscuit aisle and the snacks aisle at

Sainsbury’s to understand the level of competition in Nicoli’s market

sectors. Dozens of rival products - branded and own-label - vie for

shelf space. He wants his agencies to understand those markets and bring

real consumer insight to campaigns. Yes, he will use all the evaluation

techniques available to assess whether his agencies are getting it

right, but he warns of the dangers of relying entirely on technical

measures and losing sight of judgment.



’Judgment will always be important in advertising. That’s why you need

people who understand the business. I want to be important to my

agencies but it is a partnership; I don’t want people who respond

because they are afraid not to. I want them to respond because they care

passionately about the prospects and performance of our business.’



ERIC NICOLI



1991: Chief executive, UB



1989: European chief executive, UB



1986: Managing director, UB Brands



1985: Managing director, UB Frozen Foods



1984: UB group, business planning director



1981: UB, marketing director



1980: Joins UB as senior marketing controller from Rowntree

Mackintosh



OTHER POSTS HELD: Non-executive director EMI Group and deputy chairman

of Business in the Community



MAIN BRANDS/AGENCIES/REGION: Total estimated UB advertising spend:

pounds 40 million.



McVitie’s, Leo Burnett UK and internationally; Go Ahead, Leo Burnett UK

and internationally; Penguin, Publicis UK; Jaffa Cakes, Publicis UK;

Hula Hoops, Publicis UK; Ross Frozen Foods, Mellors Reay UK.



FAVOURITE ALL TIME AD: ’Coca-Cola’s ’I’d like to teach the world to

sing’ because it was a brilliant, confident statement of what the brand

is all about.’



FAVOURITE UB AD: ’Of our current campaigns, Hula Hoops and Harry

Enfield.



Of all UB advertising, the mid- 80s ’Nobody bakes them like McVitie’s’

campaign.’



MOST RESPECTED ADMAN: ’Dan O’Donoghue, deputy regional chairman,

Publicis Group, because he gave me my first job.’ Business guru ’Bill

Shankly, one-time Liverpool manager, because he really understood how to

motivate people.’



This article was first published on campaignlive.co.uk

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