Case Analysis done as part of Marketing Internship under Prof. Sameer Mathur, IIM Lucknow

1. obesity
levels
Disney
Consumer
Products

2. Won the Academy Award for
Best Cartoon for Flowers and
Trees, a Silly Symphony in 1932
Disney films introduced feature-
length films to audiences
accustomed to 8-minute short
films
Beauty and the Beast is the only
animated film ever to be
nominated for Academy Award
for Best Picture
The Lion King won the Tony
Award for best musical in
1997
In 2003, became the first studio
to surpass $3 billion in box
office receipts

4. 1.
Media Networks, including 10
television stations, 72 radio
stations, cable television
stations(ESPN, Disney Channel
and ABC Family), and Internet
holdings

5. 2.
Parks and Resorts ,
including 10 theme
parks in North
America, Europe and
Asia as well as 35
Disney Vacation Club
resorts and two luxury
cruise ships

6. 3.
Studio Entertainment,
which created animated
and live action films

7. 4.
Disney Consumer Products,
which licensed Walt Disney
characters, visual and literary
properties to manufacturers
and retailers, and published
books, magazines, video and
computer software products
for the home and educational
markets

8. Disney Consumer Products (DCP)
Softlines
(apparel,
footwear and
accessories)
Buena
Vista
Games
Home and
infant
Hardlines
(food,
health &
beauty,
electronics
and
stationary
Publishing Toys
DCP’s Disney-branded merchandise accounted for retail
sales of $23 billion in 90 countries in 2006- a 56% share of
the estimated $41.2 billion character licensing industry

10. 1.
Traditional licensing model, in
which licensees handled product
innovation, manufacturing, sales,
and marketing when DCP was
satisfied that licensees could
provide distribution strength,
superior product differentiation
and innovation and category
leadership

11. 2.
Sourcing model, which was
essentially contract
manufacturing, where products
were created and designed by
Disney and featured the
Disney brand, but the licensee
would handle manufacturing,
sales and marketing

12. 3.
Direct-to-retail (DTR) model, which
entailed partnering directly with
retailers, and selling brand and
character rights directly to them,
bypassing wholesale licensees. This
model was thought of as a private
label or corporate brand program that
enabled retailers to lessen their
reliance on national brands and
preserve margins while offering
consumers competitive prices

13. But what problem could have arisen
that’ll force DCP to rethink its strategy
and brace itself for an all-together new
challenge?

15. From 1975 to 2005, the rates of overweight and obesity in
children had skyrocketed: from 5% to 14% among 2-5 year
olds, from 4% -19% for 6-11 year olds and from 5%-17% for
12-19 year olds
Overweight children had a 70% chance of becoming
overweight or obese as adults with healthcare costs for
adults suffering from obesity and overweight related
illnesses estimated at $98 billion to $129 billion annually
The average child viewed more than 40,000 television
commercials annually-50% of which were for high calorie,
high fat foods and beverages such as candy, fast food, snack
foods, soft drinks, and sweetened breakfast cereals
Some alarming figures had emerged:-

16. • Social trends such as increased portion sizes and
eating out more often
• Increased consumption of sugar-sweetened
foods and lack of exercise
• Television advertising which reached children
through unregulated channels such as the
Internet and cable television
As a result, rising obesity was attributed to:-

17. In the United Kingdom, the Advertising
Standards Code of the Communications Act of
2003 ensured that broadcasters followed a tough
set of rules regarding advertising food to
children
“Dietary Guidelines for Americans”
recommended that children and adults adopt a
“balanced eating pattern”, consume a variety of
nutrient-dense foods and beverages and limit
their intake of saturated and trans fats,
cholesterol, added sugars, and salt
The Institute of Medicine (IOM) issued a
statement calling for the food, beverage,
entertainment, leisure, restaurant and
recreation industries to “share responsibility for
childhood obesity prevention”
This led to formulation of certain nutritional guidelines:-

18. Actively promote healthful diets for children
Create or reformulate children’s products to
improve nutrient content
Develop an “empirically validated industry-
wide rating system” for labelling and
advertising
Enforce strict marketing standards and
adhere to self-regulatory guidelines for
advertising
Avoid linking “nutritionally questionable”
products to admired celebrities, sports
figures, or cartoon characters
IOM recommended that food and beverage
companies:-

19. Taking cognisance of
the prevailing obesity
epidemic and its own
changing licensing
models, DCP saw an
opportunity to
simultaneously
broaden and
rationalize its product
offerings, and decided
to come up with its own
nutritional guidelines

20. To begin with, DCP had to determine
which product categories to work on,
and for which, it adopted the
following smart move

21. Moms were sent on
shopping trips to
gauge the difference
between the foods
children requested
and the foods their
mothers were
willing to buy for
them, and a
conspicuous gap was
discovered between
the two

22. Further research
showed that mothers
transferred their
perceptions of the
Disney brand as high
quality, trustworthy
and familiar to a line of
food and beverages
and so a new line of
products could be
conveniently
positioned

23. Next, to appeal to
mothers, products
needed to be portion
controlled, be high
quality, taste good, omit
or reduce fat and sugar
and be requested by their
children. At the same
time, the products
needed to make the kids
feel special and must be
non-patronising and
Mom-approved

24. As a result, DCP was
able to determine the
key product categories
which were- water,
fresh food, frozen
foods, juice, pasta,
soup, cereal, baked
goods and dairy/milk
and that all its new
products had to be
centred around these

25. DCP then proceeded to array
its portfolio of products into
five categories: main meal,
side dish, snacks, drinks and
treats so that only 15% could
be categorised as treats.
Having done that, calories
were allocated to each
category assuming each child
consumes three meals, two
snacks, one beverage and one
treat, daily.

26. • Products would be minimally processed, have
controlled levels of added sugar, and contain no trans
or hydrogenated fats
• Calories shall be limited by either adjusting a food’s
formulation or its portion size
• The use of additives will be minimised, while
promoting fibre and calcium in the products
Further, an internal nomenclature was developed for evolving a
healthier product line-

27. Before officially implementing the guidelines, DCP audited 2,100 of its
food products, results of which were:-
Products % of portfolio
Products met nutritional
guidelines
41
Products classified as treats-
exempted from the guidelines
15
Products able to meet guidelines
after portion sizes adjusted
9
Products to be reformulated 7
Products to be phased out 28
Total 100
Thus, while 41% already complied with the guidelines, more than
a quarter needed to be phased out

28. The final step was for DCP to
share its nutritional guidelines
with its licensees, and it adopted
three approaches toward creating
Disney food products

29. 1.
First, DCP would
offer products that
already had broad
appeal such as milk
or peanut butter and
strive to make these
healthier

30. 2.
Second, it would
take products like
whole wheat pasta,
which were already
healthy and make
them more “fun”
and appealing to
children

31. 3.
Third, it would use packaging to inspire
product sampling, such as making water
bottles in the shape of characters

32. IMAGINATION
FARMS

33. Disney began licensing its
characters to Imagination
Farms, a national fresh
produce marketing company
founded specifically to serve
as a license to DCP, in March
2006, to realise its mission of
improving the nutritional
value of its licensed food
products

34. Imagination Farms
contracted with 15 large
US growers to provide
both organic and
conventionally grown
produce to supermarkets
under the Disney Garden
brand

35. By June 2006, Imagination
Farms was distributing peaches
with Daisy Duck and Goofy
stickers and table grapes
displayed in Mickey and
Minnie Mouse grower’s boxes,
with Disney apples and citrus
in stores five months later

36. DCP and Imagination Farms used
a three-pronged product
development strategy:
differentiate commodity produce
through promotion, create value-
added products through product
preparation or packaging, and
develop exclusive produce
varieties that would yield more
child-friendly products

37. To engage children directly,
Imagination Farms posted
“collectible” pages on its
website that children could
decorate and featured a back
panel on the bagged fruits and
vegetables that provided
nutritional facts, jokes and
other child-engaging
information

38. Some of the Disney Farms
products:-

39. Disney Farms produce
was sold in major
supermarket chains,
including Albertsons,
Safeway, Supervalu and
Wal-Mart, at a
competitive wholesale
price

40. KROGER
SUPERMARKETS

41. In addition to licensing
through Imagination Farms,
DCP developed a broad
range of products with
Cincinnati-based Kroger
Supermarkets, the largest
pure grocery retailer in the
United States with fiscal
year 2005 sales of $60.6
billion

42. Kroger had a 12 percent
share of the U.S grocery
market, which fit with
DCP’s desire of having one
major DTR relationship in a
country where the retailer
has a 10-20 percent share of
the market

43. Together, Disney and
Kroger sized the
opportunity at $ 250
million in annual
revenue and came up
with the brand name:
Disney Magic
Selections

44. Disney Magic Selections
officially launched on
September 10, 2006.
Supermarkets stocked more
than 75 items, differentiated
by a “better for you” health
call-out and packages’ back
panel spaces featuring
children’s games, activities,
puzzles and mazes with
Disney characters

45. Some of the Disney Magic
Selections products

46. Kroger invested
significantly in marketing
Disney Magic Selections
line that was supported
with in-store signage,
advertisements and
circulars, end cap and
floor displays, direct mail,
and billboards

47. More than 14,000 new food and
beverage products entered the U.S
marketplace each year but less than 6
percent were successful ; the remaining
94 percent failed due to one or more
factors. DCP, too, faced a number of
risks.

48. 1.
Pricing and Value- Disney had
always been associated with
premium pricing and thus it was
a marketing challenge for DCP
to let its DMS and Disney
Farms’ products go out with
lower pricing

49. 2.
Legacy- This pertained to
whether the public, and
particularly the media, would
embrace the new food
products or not and whether
the products will be able to
gain credibility

50. 3.
Differentiation and Competition-
Disney Farms particularly faced
competition from Nickelodeon
which had tied up with LGS
Specialty Sales, Sesame Workshop
which had signed an agreement with
Sunkist to market fresh fruit and
Warner Bros. which signed a
licensing agreement with Ready Pac,
a produce company

51. 4.
Growth and Distribution-
Disney had to develop
additional lines for its products
and strengthen the distribution
system as it faced the risk of
too much exclusivity

52. • Disney parks and resorts to serve children’s meals
with low fat milk, fruit juice or water instead of soda
and apple sauce or carrots in place of French fries
• Publishing cookbooks, televising cooking shows for
children, and linking its nutritional efforts with
exercise programs
• Extending its offerings from retail supermarket
products to food service(school lunch programs) and
out-of-home consumption in restaurants
However, DCP was excited about its new product offerings and planned a
slew of measures to effectively tackle the risks:-

53. SUMMARY
 The Disney brand was synonymous with fun and magic-
characteristics associated with children’s treats, which could be
purchased in supermarkets where licensed, Disney-branded
confections and novelties were sold
 Yet packaged goods manufacturers, fast food companies among
others, that advertised their products were subject to growing
criticism due to the growing obesity epidemic
 DCP saw the controversy as an opportunity to reconsider its
entire range of food products
 In 2004, it embarked on a mission to improve the nutritional
value of its licensed products and by June 2006, had come up with
Disney Farms and Disney Magic Selections range of healthy
products

54. CREDITS
1. photo credit: <a href="http://www.flickr.com/photos/22045798@N00/27076182371">conductor</a>
via <a href="http://photopin.com">photopin</a> <a
href="https://creativecommons.org/licenses/by-nc-sa/2.0/">(license)</a>
2. photo credit: <a href="http://www.flickr.com/photos/35024384@N06/8805999778">Princess SAL -
Minnie Mouse</a> via <a href="http://photopin.com">photopin</a> <a
href="https://creativecommons.org/licenses/by-nc-sa/2.0/">(license)</a>
3. photo credit: <a href="http://www.flickr.com/photos/101445497@N05/16768314451">Sleeping
Beauty's Castle HDR</a> via <a href="http://photopin.com">photopin</a> <a
href="https://creativecommons.org/licenses/by-nc/2.0/">(license)</a>
4. photo credit: <a href="http://www.flickr.com/photos/39528897@N06/4636186270">Wall-e à
l'Etang</a> via <a href="http://photopin.com">photopin</a> <a
href="https://creativecommons.org/licenses/by-sa/2.0/">(license)</a>
5. photo credit: <a href="http://www.flickr.com/photos/26767541@N00/18345338539">IMG_1130</a>
via <a href="http://photopin.com">photopin</a> <a
href="https://creativecommons.org/licenses/by-nc-sa/2.0/">(license)</a>
6. photo credit: <a
href="http://www.flickr.com/photos/67084790@N03/16502466891">0m2_DSC5638</a> via <a
href="http://photopin.com">photopin</a> <a href="https://creativecommons.org/licenses/by-nc-
sa/2.0/">(license)</a>
7. photo credit: <a href="http://www.flickr.com/photos/99876567@N00/175613651">sunset in a
bottle</a> via <a href="http://photopin.com">photopin</a> <a
href="https://creativecommons.org/licenses/by-nc-nd/2.0/">(license)</a>