By Elaine Wong

In boom times, food giants like Kraft and General Mills tried to persuade consumers to trade up. Now, as the recession bites into its business, Big Food is changing its approach. The name of the game now is customer retention via value messages.

Says Matt Arnold, an analyst with Edward Jones: “Trade down is the big issue, whether it's all the way down to private label or down within the branded continuum.”

That’s a change from years past when such companies focused on improving their portfolios with higher-priced items that offered more health/wellness and convenience options. Big Food these days is working from a much more limited menu.

Instead of innovation, this year you’ll see old brands and products being hyped for value. For example, Kraft brought back its Kool-Aid mascot, as part of a new campaign that shows the beverage character outrunning a bottle of soda. Ads by Ogilvy & Mather, New York, claim: “Regular Kool-Aid goes almost three times further than soda.”

And ConAgra Foods, maker of Wesson cooking oils and Egg Beaters, recently relaunched its Healthy Choice brand, including the introduction of All Natural Café Steamers (in a campaign starring Julia Louis-Dreyfus) to give it some 2009 relevance. CMO Joan Chow said the brand, which has started the frozen healthy foods category, had lagged behind with new products and flavor introductions over time. (It now has a new, All Natural line as well as an exclamation mark on all packaging.)

General Mills, meanwhile, has taken a page from fast food marketers’ dollar menus and now runs ads touting its cereal as the original “50-cent” breakfast. The idea could be catching on. Citing strong gains in its North American cereal business (6 percent, per its latest quarterly earnings), General Mills also introduced Banana Nut Cheerios, which “captured nearly 0.8 of a share point in recent weeks,” the company said in its third quarter report.

When it comes to value, Big Food clearly practices what it preaches. Kraft, which bases its ad spend on a percentage of revenues, believes it can achieve the same “share of voice” with less ad spending because it can score deals with equally beleagured media firms. Kellogg, meanwhile, says it can run a tighter operation and funnel savings into bigger ad spends.

Overall, the picture for packaged foods is a bit of a mixed bag: There’s still threats from private label, but there’s lots of new business from frugal consumers who are eating out less and eating in a lot more than they used to.

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