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Monday, September 28, 2009

Media Brands Bringing Licensing Dollars Home

NEW YORK ( -- The beleaguered media business is still marching aggressively on at least one front: store shelves at a big retailer near you.

More and more media-branded consumer goods are squaring off against similar products from rival media brands. Earlier this month Martha Stewart Living Omnimedia announced a major home and outdoor line due exclusively in Home Depot next January, when its contract with Kmart officially ends. Kmart and Sears stores began selling more than 700 home products from Hearst Magazines' Country Living. And Meredith Corp.'s Better Homes and Gardens line at Walmart continues to grow, now numbering about 1,000 products after starting last year with half that number; Meredith said its total brand-licensing revenue grew 15% during the 12 months ending in June.

The recession is battering retail just like everything else, of course. But that's only making exclusive, established brand names more desirable to retailers and a diversified revenue stream more appealing to media brands. Rumors have even circulated that the top-to-bottom business review at Condé Nast could also foster a new openness to activities like licensing.

"When revenues tighten up, all of a sudden things you may have never considered before start to look more possible," said Martin Brochstein, senior VP at the International Licensing Industry Merchandisers' Association. "Licensing is definitely an area than can generate significant revenue, particularly in a time when magazines are under a lot of pressure on the revenue and advertising side."

And media brands actually have a renewed opportunity to earn shelf space right now, said Glen Ellen Brown, VP of Hearst Group brand development. "Three-plus years ago, retailers were thinking 'My goodness,' particularly in the home space, 'I need to be much more economical and build my own brands.'" Ms. Brown said. But the recession has made the costs and effort required to grow those brands look a lot less attractive, she said. "The cycle is turning a bit so the retailers are going back to developed brands that have real consumer loyalty and resonance."

Besting Kmart deal
Martha Stewart Living Omnimedia, for its part, needed to fill the void left by the expiring Kmart deal, which generated $1.6 billion in retail sales at its peak in 2002. It did that partly by getting into Macy's, but the Home Depot deal represented an important next step. "Between Home Depot and Macy's it's my view that we have the potential to have a much bigger business than Kmart in our heyday," said Charles Koppelman, executive chairman.

Wall Street will be watching: A J.P. Morgan analyst downgraded Martha Stewart stock after the deal was announced, partly because the Home Depot deal's "great potential" still didn't include minimum income guarantees like the Kmart deal did.

Home Depot has high expectations for the line, which is a departure of sorts because the retailer hasn't traditionally turned to celebrity or media brand partnerships. "We believe it will translate to additional top line sales," said Jean Niemi, a spokeswoman for Home Depot. "There's a level of credibility [Martha Stewart] brings." Ms. Niemi said a "robust" marketing campaign to introduce the line is in the works.

Perhaps retailers are hoping the tie in with trusted media brands will help. Sales of home goods were particularly lackluster for 2008, the latest figures available from The NPD Group. The bedding category sold $9.8 million, but that was down 10% compared to 2007; Bath sales were $4.2 million, off 9.5%; Bakeware sales were $211 million and cookware equaled $736 million, both down 4%; Dinnerware sales fell 12% to $488 million; and flatware brought in $199 million, down 11%. So far the first half of this year has been equally tough, with sales flat or down across many of the categories.

The deals can also be fruitful for media companies, which don't have to bear the cost of manufacturing products or operating a national retail chain. That means high margins when it's working right. Last year, for example, Martha Stewart Living Omnimedia collected $163.5 million in publishing revenue and just $57.9 million in merchandising revenue. But merchandising delivered almost $33 million in operating income, compared with just $6 million from publishing.

While there can be significant rewards, though, licensing is hardly foolproof. Time Inc.'s Real Simple has been successfully selling home office products in Target since 2006 and is introducing calendars to Target, Borders and Barnes & Noble stores in the fourth quarter.

But it discontinued its home cleaning products at the end of last year, said Gary Ryan, VP-brand development and strategy at Real Simple. "We were up against some stiff competition from Swiffer and Clorox," said Ms. Ryan. " It was also a much more price-sensitive category than we were anticipating."

Licensing deals can be risky for retailers too, especially if the personality that once helped move product starts going negative. In an interview with CNBC, Martha Stewart seemed to blame Kmart parent Sears Holdings for the end of her company's partnership with Kmart.

Sears Holdings let the Martha Stewart Everyday collection lose its luster, Ms. Stewart alleged. "I would say it has been diminished," she said. "The quality is not what I am proud of."

Sears said she ought to blame herself for any problems. "Given that the product is designed by Martha Stewart Living Omnimedia, manufactured to their specifications and subject to approval by the Martha Stewart team, we think that Ms. Stewart should accept responsibility for her product," said Chris Brathwaite, a Sears spokesman.

Saturday, September 19, 2009

Coca-Cola Retains Title as World’s Best Global Brand (Table)

Sept. 18 (Bloomberg) -- Following is a table ranking 100 global brands from Interbrand’s Best Global Brands 2009 report.

Rankings are based on five criteria and excludes those brands which are privately held.

-----Rank----- Value
2009 2008 Chng. Company Country Industry $ blns
1 1 0 Coca-Cola U.S. Beverages $68.734
2 2 0 IBM U.S. Computer Services $60.200
3 3 0 Microsoft U.S. Computer Software $56.647
4 4 0 GE U.S. Diversified $47.777
5 5 0 Nokia Finland Consumer Electronics $34.864
6 8 2 McDonald’s U.S. Restaurants $32.275
7 10 3 Google U.S. Internet Services $31.980
8 6 -2 Toyota Japan Automotive $31.330
9 7 -2 Intel U.S. Computer Hardware $30.636
10 9 -1 Disney U.S. Media $28.447
-----Rank----- Value
2009 2008 Chng. Company Country Industry $ blns
11 12 1 Hewlett-Packard U.S. Computer Hardware $24.096
12 11 -1 Mercedes-Benz Germany Automotive $23.867
13 14 1 Gillette U.S. Personal Care $22.841
14 17 3 Cisco U.S. Computer Services $22.030
15 13 -2 BMW Germany Automotive $21.671
16 16 0 Louis Vuitton France Luxury $21.120
17 18 1 Marlboro U.S. Tobacco $19.010
18 20 2 Honda Japan Automotive $17.803
19 21 2 Samsung Korea Consumer Electronics $17.518
20 24 4 Apple U.S. Computer Hardware $15.433
21 22 1 H&M Sweden Apparel $15.375
22 15 -7 American Express U.S. Financial Services $14.971
23 26 3 Pepsi U.S. Beverages $13.706
24 23 -1 Oracle U.S. Computer Software $13.699
25 28 3 Nescafe Switzerland Beverages $13.317
26 29 3 Nike U.S. Sporting Goods $13.179
27 31 4 SAP Germany Computer Software $12.106
-----Rank----- Value
2009 2008 Chng. Company Country Industry $ blns
28 35 7 Ikea Sweden Home Furnishings $12.004
29 25 -4 Sony Japan Consumer Electronics $11.953
30 33 3 Budweiser U.S. Alcohol $11.833
31 30 -1 UPS U.S. Transportation $11.594
32 27 -5 HSBC U.K. Financial Services $10.510
33 36 3 Canon Japan Computer Hardware $10.441
34 39 5 Kellogg’s U.S. Food $10.428
35 32 -3 Dell U.S. Computer Hardware $10.291
36 19 -17 Citi U.S. Financial Services $10.254
37 37 0 J.P. Morgan U.S. Financial Services $9.550
38 38 0 Goldman Sachs U.S. Financial Services $9.248
39 40 1 Nintendo Japan Consumer Electronics $9.210
40 44 4 Thomson Reuters Canada Media $8.434
41 45 4 Gucci Italy Luxury $8.182
42 43 1 Philips Netherlands Diversified $8.121
43 58 15 U.S. Internet Services $7.858
44 51 7 L’Oreal France Personal Care $7.748
-----Rank----- Value
2009 2008 Chng. Company Country Industry $ blns
45 47 2 Accenture U.S. Computer Services $7.710
46 46 0 Ebay Inc. U.S. Internet Services $7.350
47 48 1 Siemens Germany Diversified $7.308
48 56 8 Heinz U.S. Food $7.244
49 49 0 Ford U.S. Automotive $7.005
50 62 12 Zara Spain Apparel $6.789
51 61 10 Wrigley’s U.S. Food $6.731
52 57 5 Colgate U.S. Personal Care $6.550
53 55 2 AXA France Financial Services $6.525
54 52 -2 MTV U.S. Media $6.523
55 53 -2 Volkswagen Germany Automotive $6.484
56 59 3 Xerox U.S. Computer Hardware $6.431
57 42 -15 Morgan Stanley U.S. Financial Services $6.399
58 63 5 Nestle Switzerland Food $6.319
59 60 1 Chanel France Luxury $6.040
60 66 6 Danone France Food $5.960
61 64 3 KFC U.S. Restaurants $5.722
-----Rank----- Value
2009 2008 Chng. Company Country Industry $ blns
62 70 8 Adidas Germany Sporting Goods $5.397
63 73 10 BlackBerry Canada Consumer Electronics $5.138
64 65 1 Yahoo! U.S. Internet Services $5.111
65 67 2 Audi Germany Automotive $5.010
66 68 2 Caterpillar U.S. Diversified $5.004
67 69 2 Avon U.S. Personal Care $4.917
68 71 3 Rolex Switzerland Luxury $4.609
69 72 3 Hyundai Korea Automotive $4.604
70 76 6 Hermes France Luxury $4.598
71 74 3 Kleenex U.S. Personal Care $4.404
72 41 -31 UBS Switzerland Financial Services $4.370
73 50 -23 Harley-Davidson U.S. Automotive $4.337
74 75 1 Porsche Germany Automotive $4.234
75 78 3 Panasonic Japan Consumer Electronics $4.225
76 80 4 Tiffany & Co. U.S. Luxury $4.000
77 79 2 Cartier Switzerland Luxury $3.968
78 77 -1 GAP U.S. Apparel $3.922
-----Rank----- Value
2009 2008 Chng. Company Country Industry $ blns
79 81 2 Pizza Hut U.S. Restaurants $3.876
80 92 12 Johnson & Johnson U.S. Personal Care $3.847
81 82 1 Allianz Germany Financial Services $3.831
82 83 1 Moet & Chandon France Alcohol $3.754
83 84 1 BP U.K. Energy $3.716
84 89 5 Smirnoff U.K. Alcohol $3.698
85 88 3 Duracell U.S. Consumer Electronics $3.563
86 98 12 Nivea Germany Personal Care $3.557
87 91 4 Prada Italy Luxury $3.530
88 93 5 Ferrari Italy Automotive $3.527
89 94 5 Giorgio Armani Italy Luxury $3.303
90 85 -5 Starbucks U.S. Restaurants $3.263
91 New n/a Lancome France FMCG $3.235
92 97 5 Shell Netherlands Energy $3.228
93 New n/a Burger King U.S. Restaurants $3.223
94 100 6 Visa U.S. Financial Services $3.170
95 New n/a Adobe U.S. Computer Software $3.161
-----Rank----- Value
2009 2008 Chng. Company Country Industry $ blns
96 90 -6 Lexus Japan Automotive $3.158
97 New n/a Puma Germany Sporting Goods $3.154
98 New n/a Burberry U.K. Luxury $3.095
99 New n/a Polo Ralph Lauren U.S. Luxury $3.094
100 New n/a Campbell’s U.S. FMGC $3.081
Source: Interbrand

Sunday, September 13, 2009

Slowly But Surely, Line Extensions Will Take Your Brand Off Course

Would you like to steer the ship?" is a question I used to hear in the Merchant Marine.

The helmsman on duty would tell the neophyte, "Just take the wheel and keep the compass reading at 180," or whatever the course called for.

Steering a ship is not like driving a car. The ship drifts to the left, so the neophyte turns the wheel to the right to try to correct the course. But the ship keeps turning left, so the neophyte figures maybe he needs to do the opposite, so he turns the wheel to the left ... and the ship turns to the right. Now he's convinced that he's got the hang of it, until the ship turns left again. After a while, the poor soul is convinced the wheel isn't connected to the rudder at all.

It takes time to turn a ship and it takes time to build a brand. If you want to turn a ship to the left, you turn the wheel to the left ... and then you wait and you wait and you wait. Finally the ship turns to the left.

Marketing is like steering a ship. If you don't wait long enough for a marketing effect to run its course, you can draw exactly the wrong conclusion.

Take the 1981 introduction of Bud Light by Anheuser-Busch, virtually the last major brewer to introduce a light version of its regular beer.

I asked management, "Won't that hurt sales of Budweiser regular? Instead, why don't you introduce a totally new brand?"

"Oh, no," came the reply. "We're not positioning Bud Light against Budweiser. We're going to take business from Miller Lite, Coors Light, Schlitz Light and all those other light beers out there.""

Sure enough, the 1981 introduction of Bud Light did not hurt the regular Budweiser brand. Year after year, sales of regular Budweiser went up.

1982 ... Budweiser was up 4.1%
1983 ... Budweiser was up 6%
1984 ... Budweiser was up 3.9%
1985 ... Budweiser regular was up 4.2%
1986 ... Budweiser regular was up 3%
1987 ... Budweiser regular was up 3.1%
1988 ... Budweiser regular was up 2%

Seven years of sales increases seemed to prove me wrong. "And you thought that Bud Light would hurt our regular Budweiser brand? Are you crazy?"

Then came 1989, which saw regular Budweiser down one-fifth of 1%, the start of the deluge.

As of today, Budweiser volume has fallen every year for 20 years in a row, to 23.5 million barrels in 2008 from 50.6 million barrels in 1988.

Does anyone have any doubt that regular Budweiser will someday become a marginal brand in the U.S. market? We call line extension the "hockey-stick effect." Short term, you get the blade and score a few goals. Long term, you get the shaft.

Oddly enough, what gave Anheuser-Busch confidence in its line-extension strategy was the track record of Miller Lite. Introduced nationally in 1975, Miller Lite also did not hurt sales in the short term of Miller High Life, the company's regular beer.

Year after year, Miller High Life climbed up the beer ladder, from 5 million barrels in 1971 to 20.8 million barrels in 1978, the most explosive growth ever recorded by a beer brand. That was the year Advertising Age named John Murphy, Miller president and CEO, "Adman of the Year."

What drove the brand to such heights?

"Miller Time," in my opinion the most effective advertising strategy ever developed for a beer brand.

The target market: cowboys in hard hats. The psychological hot button: a reward at the end of the day for blue-collar men doing rugged jobs in outdoor occupations. (What Miller Time did for men, McDonald's was doing for women with "You deserve a break today," a campaign which coincidentally was also launched in 1971, the same year as Miller Time.)

By 1979, the combination of Miller High Life and Miller Lite (34.8 million barrels) outsold Budweiser (30.0 million barrels) by a significant margin. No wonder Anheuser-Busch pushed the panic button.

Too bad. If they had had a little more patience they would have realized that line extensions are inherently unstable. A successful line extension almost always damages the core brand ... over the long haul.

It's like a teeter-totter. When one side goes up, the other side goes down.

For Miller Brewing, 1979 was a year of high hopes. That was the year Miller broke ground on a new $411 million brewery in Trenton, Ohio.

That was also the year Miller High Life started its long decline, from 23.6 million barrels in 1979 to 5 million barrels in 1992, where it remains today.

The Trenton brewery? It sat idle for almost a decade and didn't open until 1991.

We kept forgetting the teeter-totter principle. When Bud Light declined this year, its first decline in 27 years, all hell broke loose. There were stories in all the major media.

"Anheuser-Busch InBev NW plans to tweak its marketing campaign for Bud Light and ratchet up spending," reported The Wall Street Journal, "in the hopes of reviving a brand that is facing a rare slump."

What slump? Bud Light is up 5% this year, not down 2.5% as reported in the media.

How can that be when everybody else is reporting a decline? The difference is that we included Budweiser's lime extension in Bud Light's volume. Bud Light Lime is the fastest-growing beer in America, with 1.2% of the market, and naturally that success came at the expense of Bud Light.

Budweiser, Bud Light and Bud Light Lime are not three brands with three different marketing strategies. They're one brand with three different flavors and three different marketing strategies that often cause confusion.

Line extension is a loser's game. It doesn't usually work, but even if it does, it almost always damage the core brand.

On the other hand, there's the well-documented evidence that a line extension doesn't hurt a leading brand as much as it does an also-ran. Why is this so?

A leading brand has a very strong position. It's the leader. And nothing works as well in marketing as leadership. Google in search. Hertz in rent-a-cars. Hellmann's in mayonnaise. Heinz in ketchup. Campbell's in soup. Thomas' in English muffins.

Many No. 2 or No. 3 brands become successful by narrowing their focus to segment the market, either demographically or in some other way. Miller High Life targeted the blue-collar segment.

Bud Light didn't destroy Budweiser's leadership perception. But Miller Lite definitely undermined Miller High Life's blue-collar perception.

What's a Miller? Over time, Miller became known as a light beer. And the cowboys in hard hats weren't about to drink a light beer.

What's a Budweiser? It's still perceived as the leading beer, but now available in a number of different flavors.

In the years that followed the fall of High Life, Miller Brewing tried to inject new life into its Miller brand with a raft of line extensions including: Miller Genuine Draft, Miller Genuine Draft Light, Miller Genuine Draft 64, Miller Lite Ice, Miller Lite Ultra, Miller High Life Light, Miller Chill, Miller Genuine Red, Miller Reserve, Miller Reserve Light, Miller Reserve Amber Ale and Miller Clear.

They even spent $60 million introducing Miller "regular" beer.

All for naught. Today, Miller sells considerably less beer under the Miller name than they did in the glory days of 1979.

So it is in many marketing situations: What works in the short term often doesn't work in the long term.

Well, you might be thinking, what about the trend towards light beer? It's true that light beer is now the largest segment of the market, but regular beer still accounts for 44%.

Why not have your beer and drink it, too? Why not try to dominate both segments with two separate brand names? Like Toyota and Lexus. Or Black & Decker and DeWalt.

Or Hanes and L'eggs.

Marketing people are often sheep when it comes to categories. Once a line extension becomes a big success, all the competitors get in line and say, me too.

Without giving a second thought to the possibility of launching a new brand that could clearly define the new market as a separate category.

It happened in light beer. It happened in diet cola. It happened in lithium batteries. It has happened in many other categories.

In 1995, to pick one year at random, the top 40 brands of light beer all used "light" in their names -- even Amstel Light, a brand that didn't have a "regular" version.

Line extension is a teeter-totter, but not necessarily in the short term. In the short term, both sides often go up. It takes time to turn a ship. It takes time to kill a brand.

You can't know whether a marketing move is effective or not until enough time has passed. Yet many companies are driven by short-term thinking -- promotions, coupons, special offers and discounts. And line extensions.

If it took Bud Light seven years to damage the regular Budweiser brand, how long are you taking to measure the success of your programs?

A month? Three months? Six months? A year?

Marketing is messing with minds. Getting into minds and changing them is not for the faint-hearted or for the impatient. You need to launch a marketing program and then have the patience to wait and wait and wait.

Which reminds me.

Maybe my misspent youth will start to pay a dividend. The House of Representatives has just passed a bill providing a monthly stipend to those who served in the U.S. Merchant Marine.

Good things happen to those who have patience.