DealBook: Glaxo to Sell Drink Brands for $2.1 Billion

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Advertising: To Put Puerto Rico Onscreen, the Right Brands

The story, a family-friendly romantic comedy, follows Mr. Miranda’s character, Raúl, and a small group of friends who come together to help him on his mission to send letters to all 200 of the women named María Sanchez who live in Puerto Rico. His hope is that one of the letters will reach his beloved. The film also stars Jaime Camil, Mayra Matos, Monica Steuer and Dayanara Torres.

The film, which made its debut in New York in June and will have its theatrical release in Puerto Rico on Sept. 12, was financed in part through product placement and brand partnerships, said Roberto Alcazar, an executive producer. “It’s not only the brands in the film,” Mr. Alcazar said. “It’s the whole plan of creating a marketing strategy so they can use themselves in the film’s assets.”

Many of the products seen in the film are from Puerto Rican brands like Banco Popular and Bacardi. Bruno Irizarry, who wrote and directed the film, said he wanted to incorporate brands that were “everyday products that everybody uses.”

“That was one of the first things that I was very specific about,” he said. “How to bring in partners that support the arts and what we wanted to do, but make it not in your face.”

The product placement is subtle. In one scene, the group eats lunch prepared by a roadside vendor who uses Goya seasoning when he cooks. In another scene, which takes place in a bar in New York, the characters drink alcohol from Diageo. Raúl and his friend Juan, played by Mr. Camil, work at Banco Popular.

Mr. Alcazar said the film was made for about $1.2 million, which included money from private investors and advertisers and the Puerto Rico Film Commission.

“My goal was not just to get money, but to create a platform where we were going to get sponsors to be part of the marketing team,” Mr. Irizarry said. To that end, some of the brands will also help market the film. A.T.M.’s for Banco Popular will feature ads promoting the film, and the bank will give away tickets to customers named María Sanchez. Banco Popular also provided the filmmakers with billboard space and a float in the National Puerto Rican Day parade in New York in June. Mr. Alcazar described the parade as the “biggest platform to promote a Puerto Rican film in New York.”

Digital banner ads, film trailers and behind-the-scenes videos will be displayed on advertisers’ social media channels. Advertisers including Target Rent a Car and Bacardi will host private screenings of the film. Goya will have promotional materials for the film on supermarket shelves where its products are sold.

Mr. Irizarry said he estimated the total value of these brand partnerships was about $300,000 in cash and related marketing. Additional brands featured in the film include the newspaper El Nuevo Día, Toro Verde Nature Adventure Park and the Villas del Mar Hau hotel. With the exception of El Nuevo Día, which was both an editorial and brand partnership, all of the featured brands paid for their inclusion in the film.

Manuel Chinea, chief operating officer for Popular Community Bank, the name for Banco Popular in the United States, said the film was “one of those projects that connects the island to the mainland.”

“We felt that the appeal of the movie was going to be to a wider audience in the U.S., not just to Puerto Rico,” Mr. Chinea said. “The bank has always been committed to supporting entrepreneurs and individuals who are doing things in creative ways.”

Being a part of the film could also help the bank extend the awareness of its brand to new customers in the United States, Mr. Chinea said. “As we look to be more efficient and effective with our marketing dollars as traditional media loses effectiveness, we certainly need to find new ways of connecting with our audience,” he said.

Luis Álvarez, a vice president at Méndez & Company, a distributor for Diageo products, agreed. “Marketing and communications have become so exploited and so badly used that one has to find a way to do it honestly and sincerely,” he said.

Gabriel Reyes, the press director for the New York International Latino Film Festival and the president of Reyes Entertainment, said filmmakers were increasingly using brand partnerships to secure funding for their films. “I think independent producers now that really go out and raise money are becoming a lot more savvy about how they can go and take advantage of these opportunities,” Mr. Reyes said.

Finding organic ways to put advertisers into a script is critical to making the product integration seem natural, he said.

“We know people cook with Goya,” Mr. Reyes said. “It’s not some foreign brand that no one has seen.” But perhaps the best way, he added, to get an advertiser to sign on for a brand partnership is to have a well-known actor in the film: “In this case it was Lin-Manuel Miranda. It’s easier to get that deal than if it was somebody out of the blue.”

Advertising: Courting Thrifty Consumers With Value and Quality Brands Stress Value and Quality to Reach Thrifty Consumers

Many on Madison Avenue are deciding to focus on value, as in value for money, celebrating thriftiness as they did during the dark days of 2008 and 2009 but also, in an effort to keep ads from growing stale, suggesting that product attributes like quality matter, too, in a “you get what you pay for” fashion.

For example, advertising to be introduced on Monday by Vonage, the Internet phone provider, replaces its usual message of lower prices, expressed by exhortations like “Ditch the big bill,” with a theme, “Crazy generous,” voiced by a brand character styled as the company’s new chief generosity officer. “What we need is a company that connects us with generosity,” the character says in a commercial by JWT, part of WPP.

The new theme is “bigger than just saving money,” said Barbara Goodstein, chief marketing officer at Vonage Holdings in Holmdel, N.J.

“We believe people should have the opportunity to find value in technology,” she added, listing elements that, in addition to low cost, include “flexibility, simplicity, quality, new products and innovation.”

The “Crazy generous” theme is meant to convey that Vonage remains “committed to providing consumers with low-cost communications services,” Ms. Goodstein said, as part of “a business philosophy” embodied by the brand character.

“He is a champion of the people,” she added, in a populist way, which makes him “the right spokesperson for our times.”

Procter & Gamble, the nation’s largest advertiser by spending, has been scrambling to fine-tune its lineup of mostly premium-price household staples in categories like beauty, detergents and paper goods. The goal is to add lower-price items to appeal to shoppers who have been switching brands to save money but still seek efficacy from what they buy, while not eroding sales for the company’s higher-price merchandise.

The recent abrupt departure of the Procter & Gamble chief executive, Robert A. McDonald, who was succeeded by his predecessor, A. G. Lafley, was attributed partly to concerns the effort was hitting too many bumpy patches.

One example of how Procter has sought to adapt to the times was the return in January of Vidal Sassoon hair products, discontinued in North America in 2003, as what the company called the “affordable” Vidal Sassoon Pro Series line — i.e., priced lower than the company’s Pantene brand name hair products, but higher than store brands.

This June, Procter & Gamble plans to introduce Iams So Good, a dog food that will cost about 15 percent less than the Iams line, which is among the higher-price dog foods like Eukanuba and Hill’s. Iams So Good, aimed at brands like Beneful and Pedigree, is being introduced with advertising by the creative agency for Iams, Saatchi & Saatchi in New York, part of the Publicis Groupe, that includes commercials, print and online ads, displays in stores and content in social media. The budget for the Iams So Good campaign, which echoes the Iams brand’s ad theme, “Keep love strong,” is estimated at more than $50 million.

Making Iams “more accessible” is “a big move for us,” said Kristine Decker, marketing director for North America at the Procter & Gamble pet care division in Cincinnati.

“We’re broadening our appeal,” she added, because “we realize a lot of our brands need to ‘tier down’ to appeal to more consumers.” She compared adding Iams So Good as part of the Iams line to the way the company added lower-price Bounty Basic and Charmin Basic products to the premium-price Bounty and Charmin lines of paper goods.

As Iams So Good arrives in stores, Procter intends to “support regular Iams, too,” Ms. Decker said, because “we’ve got to build the base as we expand.” According to Kantar Media, a division of WPP, Procter spent $69.9 million to advertise Iams last year in major media, compared with $67.4 million in 2011. That could help deter defections to Iams So Good by buyers of Iams.

The campaign for Iams So Good promotes the absence of ingredients like added sugar, dyes and artificial preservatives and proclaims that the new variety “has 100 percent wholesome ingredients and nothing else.” The product’s lower cost will be conveyed through the store displays and packaging rather than brought up in commercials or print ads.

“We don’t talk about the value or the price,” said Tris Gates-Bonarius, global creative director on the Iams and Eukanuba brands at Saatchi & Saatchi, so “the look and feel of the campaign” can be in “the Iams tone of voice, celebrating authentic, real relationships between pets and owners.” For instance, she added, the commercials for Iams So Good will feature pets, rather than trained animals, that appear with their owners, just as commercials for Iams do. One spot for Iams So Good depicts a dog named Harvey performing what is described as his “ ‘I’m happy you’re home’ dance.”

Ms. Decker echoed Ms. Gates-Bonarius. “Our first priority is to create awareness of what’s in your dog’s bowl,” Ms. Decker said of the campaign’s emphasis on the ingredients in Iams So Good. “We will drive more overt value awareness in stores.”

DealBook: Judge Approves Sale of Rights to Hostess Brands, Including Twinkies

Scott Olson/Getty Images

A federal bankruptcy judge on Tuesday approved the sales of several major Hostess Brands product lines, including Twinkies, fetching about $800 million for the various pieces of the bankrupt baking company and clearing the way for it to be eventually wound down.

Chief among the deals cleared was the $410 million sale of Hostess’s snack cake brands, including Twinkies and Ho Hos, to Apollo Global Management and Metropoulos & Company. That transaction could lead to the return of the cream-filled treats to store shelves as soon as this summer.

Also approved were the sales of most of Hostess’s bread brands, including Wonder Bread, to Flowers Foods for about $360 million. Grupo Bimbo of Mexico won control of the Beefsteak bread line for $31.9 million after beating Flowers in an auction.

No rival bidders emerged for the snack cakes or the other bread products.

Judge Robert D. Drain of the Federal Bankruptcy Court for the Southern District of New York gave swift approval of the sales, before moving onto more prosaic matters like the review of fee payments to Hostess advisers.

Hostess is also set to sell its Drakes line of snack cakes to McKee Foods, which bid $27.5 million.

DealBook: Judge Approves Hostess Brands' Plan to Close Down

David Pardo/Daily Press, via Associated PressThe doors shut on a Hostess Bakery outlet store in Victorville, Calif., last week.

A federal bankruptcy judge on Wednesday approved plans for Hostess Brands to wind down its operations, but there is little doubt that its best-known brand, Twinkies, will live on.

The company, whose corporate ancestors go back 82 years, said it would put Twinkies on the auction block, along with its other famous brands, including Ho Hos, Sno Balls, Ring Dings and Wonder Bread.

In granting the motion by Hostess, Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York said it was important to have a quick and orderly shutdown of the company to prevent the deterioration of its factories and assets.

The company’s chief executive, Gregory F. Rayburn, testified in court that he needed to lay off 15,000 of his 18,500 employees on Wednesday afternoon so that they could begin applying for unemployment benefits as soon as possible. He said such speed was necessary for maximizing the remaining value of the company.

“From this point forward, I need two things to happen,” Mr. Rayburn told the judge. “I need to maximize the value of the estate, and I need to do the best thing for the employees.”

Wednesday’s hearing came after a last-ditch mediation session on Tuesday between Hostess and its bakery workers union. After several hours of talks, the mediation efforts collapsed.

Hostess announced its intention to liquidate last Friday, and since then the company has received expressions of interest for its bakery brands from a wide range of potential buyers. Without naming names, an investment banker for Hostess, Joshua S. Scherer of Perella Weinberg Partners, said in court on Wednesday that they included regional bakeries, national competitors and retail customers along the lines of Wal-Mart Stores and Kroger.

Mr. Scherer added that his firm had plans to contact around 145 financial firms, including private equity shops and liquidators, to gauge their interest.

Investment concerns like Sun Capital Partners and C. Dean Metropoulos & Company, the owner of Pabst Blue Ribbon beer, have already said that they are interested in buying some or all of Hostess’s remains. Sun Capital has said that it would like to buy all of Hostess, not just its brands, hoping to preserve the company and improve its often-tense relations with its unions.

Mr. Scherer said that he expected asset sales to reap “significant values,” perhaps more than $1 billion. Hostess had revenue of $2.5 billion in fiscal 2012, and a net loss of $1.1 billion.

Its famous brands have been sold and traded for decades among companies, including I.T.T., Ralston Purina and Continental Baking.

“These products will surely live on in one form or the other — because these brands are about as indestructible as Hostess’s baked goods are,” said Jeffrey A. Sonnenfeld, senior associate dean for executive programs at the Yale School of Management.

Hostess was unable to resuscitate itself during this bankruptcy, its second in less than a decade. When it filed for bankruptcy last January, it had nearly $1 billion in debt as well as labor costs and work rules that it insisted were unsustainable.

According to Mr. Raymond, what sent the company into bankruptcy was both the refusal of one of its largest unions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, to accept far-reaching concessions and a strike that the union began on Nov. 9, crippling two-thirds of the company’s 33 bakeries.

The bakery workers union, with 5,600 workers at Hostess, repeatedly said that it saw no reason to grant a new round of givebacks — after having granted major concessions in the previous bankruptcy of Hostess — because it was convinced that Hostess was heading toward liquidation, with or without concessions. That union and Hostess’s other major union, the Teamsters, repeatedly asserted that the company was mismanaged, having had six different chief executives since 2002. The unions maintained that Hostess’s top management had done little to modernize the company’s aging bakeries or its sugary product offerings — in an era when the nation has grown increasingly health conscious.

After filing for bankruptcy protection in January, Hostess demanded lower-cost contracts from the Teamsters, whose workers at Hostess average about $20 an hour, and the bakery workers, who average about $16. To help the company survive, the Teamsters, with 6,700 members at Hostess, most of them drivers, reluctantly agreed to a contract with numerous concessions. They include new work rules, an immediate 8 percent pay cut, a 17 percent reduction in Hostess’s contribution toward health coverage and a suspension of its pension payments until 2015. In return, the company agreed to give its unions two of the nine seats on its board and a 25 percent stake in the company.

But the bakery workers’ union resisted a similar deal, convinced it would drive down wages in the industry while in no way guaranteeing Hostess’s survival. That union went on strike rather than accept that offer, hoping the company would bend.

A week after the strike began, Mr. Rayburn said he would liquidate the company.

The looming liquidation of Hostess has been a topic of debate, with many on one side criticizing greedy, stubborn labor unions and many on the other blaming what the bakery workers’ president has called “vulture capitalists.” The company entered its first bankruptcy in 2004 with $450 million in debt, and exited five years later with even more debt — $670 million.

“The private equity owners put this thing in such deep debt and asked for such deep concessions that it put the unions in a difficult situation,” said Thomas A. Kochan, a professor at the Sloan School of Management at the Massachusetts Institute of Technology. “The unions weren’t sure whether these concessions would be enough to salvage the company.”

Hostess Brands has corporate roots going back to 1930, but the company has had that name only since 2009, when Ripplewood Holdings, the private equity firm that took control of Interstate Bakeries, renamed it. Ripplewood, which has close ties to Richard A. Gephardt, a former Democratic House majority leader and longtime ally of labor unions, is rarely viewed as a predatory private equity company — it originally bought Hostess as part of an effort to save distressed unionized companies.

“The company had plenty of time to figure out a new business model in terms of products, but it didn’t, so it was convenient to blame labor for the company’s failure,” said John W. Budd, a professor of industrial relations at the Carlson School of Management at the University of Minnesota. “Hostess’s creditors weren’t willing to make any more concessions, so if they didn’t see a viable business model, that raises questions of why labor should be making more concessions.”

Advertising: Candy Brands Step Up Marketing for Halloween

As consumers stock up for door-ringing superheroes or for their own gatherings, candy brands are stepping up marketing efforts.

A new commercial for Snickers, a Mars brand, for example, features a white-haired man with an enormous head and tiny body, who unsteadily approaches a group of trick-or-treaters, and is asked by a young Dracula who he is.

“I’m the horseless headsman,” the man responds.

“I think you mean the headless horseman,” says another boy, dressed as an alien.

“No, I mean the horseless headsman.”

“How’s that even scary?” asks a girl in a mummy costume.

“Look at my head!” the man says, trying to scare the children to no avail. Young Dracula hands the man a Snickers, explaining that “you get confused when you’re hungry.”

When the man bites into the Snickers and is transformed into an actual headless horseman, the children scream.

The commercial, by BBDO New York, part of the BBDO Worldwide unit of the Omnicom Group, was introduced on Oct. 8.

Mars had a 37.9 percent share of the chocolate candy market in 2011, behind category leader Hershey, with a 43.3 percent share, according to Mintel, a market research firm.

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Hershey is introducing 10 Halloween products this year, up from six last year. Among them is a Halloween twist on its popular Easter treat, the Cadbury Creme Egg. The Screme Egg is also a chocolate egg with white filling, but with a green yolklike center instead of yellow.

Also this year, as noted in a recent Wall Street Journal article, Hershey is using seasonal packaging that focuses less on Halloween and more on autumn.

“We still have Halloween-themed packaging with black and orange,” Anna Lingeris, a Hershey spokeswoman, said in an interview. But she added that many new packages, including some for Hershey’s Kisses and Reese’s Pieces, feature “fall colors and fall graphics related to fall activities.”

While Halloween products are heavily discounted starting on Nov. 1, the new Hershey strategy enables more products to remain relevant — and at full price — through November, Ms. Lingeris said. Among seasonal candy purchasers, 30 percent buy at least some discounted candy right after the holiday, according to Mintel.

To increase what food marketers call usage occasions, candy brands often develop seasonal recipes. At Peeps, best known for marshmallow chicks, about 30 percent of candy sold is used in recipes or craft projects, according to Matthew Pye, vice president for corporate affairs at Just Born, which owns Peeps.

On its Web site, Peeps, which also makes Halloween marshmallow candy, includes a project that uses frosting like grout to conjoin marshmallow ghosts and cats to form a candy bowl. The recipe suggests filling the bowl with the autumn medley variety of Mike and Ike, another Just Born candy.

Noncandy brands also turn to recipe development.

For Halloween, Jell-O offers a brain mold on its Web site, JelloMoldShop.com. Suggested recipes include Oozing Brain, an opaque brain made from peach gelatin and evaporated milk over which warm strawberry gelatin is dribbled to resemble coagulating blood.

“You turn your face away, but you smile,” said Nadine Rich, the brand manager for Jell-O, a Kraft Foods Group brand, about the concoction. “And kids love this kind of thing.”

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Other noncandy brands also are angling for a Halloween lift.

Frito-Lay, a division of PepsiCo, has more in-store promotional displays tied to Halloween this year than ever, according to the company.

Displays feature haunted castles and characters like Frankenstein and the Bride of Frankenstein. For 20-count variety packs of brands including Doritos, Cheetos and Fritos, the displays show the snacks in buckets carried by trick-or-treaters.

General Mills discontinued its monster-themed cereals — Count Chocula, Franken Berry and Boo Berry — as year-round products in 2011, and now offers them only in the fall as Halloween items. General Mills also promotes cereal-bar versions of Count Chocula and Lucky Charms as handout treats, with the products available at Walmart. Also at Walmart, under the Betty Crocker Fruit Snacks division of General Mills, Halloween-themed mini Fruit Roll-Ups include Boo Berry and Franken Berry flavors.

Quaker Chewy Granola Bars, a PepsiCo brand, is marketing a 28-pack of small granola bars with chocolate chips and candy pieces for trick-or-treaters, with the package highlighting that they contain whole grains and no corn syrup.

Health claims are more pronounced for the Clif Kid Zbar Full Moon Brownie, a Halloween offering made with organic ingredients and fortified with vitamins and minerals.

“We wanted to bring out something that parents could feel good about giving to their kids as opposed to a lot of candy,” said Jennifer Yun, the brand director for Clif Kid, a division of Clif Bar & Company. Sold singly for about 90 cents, Ms. Yun said the bar may be costly for handing out to trick-or-treaters, and better suited for lunchboxes and classroom parties.

While homeowners may give little consideration to what they hand out on Halloween, Cybele May, founder of Candy Blog, said that for young trick-or-treaters that choice may be loaded.

“Whether they admit it or not, kids judge the adults they get the candy from, and their peers, based on their candy taste,” Ms. May said. “Kids that are 8 or 9 years old don’t have cars or anything to use as social markers, so candy is a good way for creating some hierarchy.”