The Brand Man Speaks

Starbucks testing new retail concept without Starbucks' brand name

The recession has impacted many industries and businesses that might historically not have been hurt by a weakened economy. Starbucks which re-defined an entire industry around coffee has seen sales and profits plummet unexpectedly over the past two years along with much stiffer competition from fast food brands like McDonald's and Dunkin' Donuts.

In addition, Starbucks has made many strategic missteps even before the recession in an effort to expand their business beyond coffee and the local gathering spot strategy. Music, movies, casual dining food are among the various "products" the brand has tried to add to its offerings....with mixed results. Most importantly, some of these elements worked to undermine the core brand strategy adding more problems beyond the recession's impact.

Now comes word that Starbucks is exploring new retail ideas but without the Starbucks name attached. Some industry experts think this is a mistake and another strategic blunder. I do not agree.

I have recommended to clients many times over the years the idea of establishing a new sub-brand to introduce ideas and concepts that might undermine the core brand and give an entity the opportunity to reach different/new audiences. The new Starbucks concept is called 15th Avenue Coffee and Tea and will serve food and wine and beer beyond the coffee offerings. 15th Avenue will not have any Starbucks IDs on-site and will appear to be a completely independent concept giving even the most ardent anti-Starbucks consumer an opportunity to experience this brand's new ideas.

Starbucks can use its existing marketing muscle and savvy to successfully launch the new brand quickly if the idea is well received. The initial store is in the home market of Seattle replacing an existing Starbucks location. The company says additional locations will be in new real estate and not re-furbished existing Starbucks.

Success will depend on the actual concept itself, its appeal to consumers and uniqueness as well as how well the concept is executed in its test form.

I look forward to seeing this concept first hand soon.

Watching out for you everyday.

Eli

Netflix brand evolving while unexpected competition grows from Redbox

I have been a fan of Netflix since its inception. The idea of ordering online, sitting back and having the movies come to your home and just mailing them back (at your leisure) when you're finished transformed how I watched movies. I hated going back and forth to Blockbuster stores incurring late fees and always wishing I had some DVD at home to watch on that unexpected rainy day or "special' evening.

Many didn't believe Netflix would survive. My mom's investment adviser said not to buy the stock despite my strong marketing intuition about the company and its future. To his surprise, but not mine, Netflix has done extremely well in this recession with its stock price doubling.

Netflix is actively competing with itself by offering more downloadable movies directly from the internet to laptop or home TV and smartly understands technology based entertainment is a rapidly moving target. I have yet to download a movie from them, although I have three free movies that are available to me to do so, because I think watching movies on my laptop is disappointing (size and impact-wise) and I have not bought the requisite equipment to send downloable movies directly to my big flat-screen TV....yet.

Despite their success, Netflix has strong competition from an unlikely source, Redbox. Redbox is a vending machine DVD rental business that was started by McDonald's during a time when McDonald's like Starbucks was looking for new revenue streams from ideas inconsistent with their core brands. McDonald's had some success with Redbox but sold the concept to Coinstar this past year after they started investing in the business in 2005.

I understand why Redbox can be successful. $1 rentals of recent releases sold like buying Coke from a vending machine in thousands of locations. However, it doesn't work for me. I hate the idea of having to take the DVD back to some place especially if I am not going that way and find dropping the DVD in the mail so easy and effortless. But I am obviously increasingly part of the minority. Redbox's old fashioned delivery system is growing fast even as movie downloads (on the other side of the technology spectrum) are also developing steam. I suspect I will go the download path far sooner than renting from a Redbox, but that's just me.

Watching out for you everyday.

Eli

Cheerios under fire from FDA; fair or unfair?

Good old American cereal brand Cheerios is under fire from the FDA for posting drug like claims on the boxes of one of the country's favorite morning foods.

For several years now General Mills has promoted heart health by encouraging consumers to eat its Cheerios brand which contains whole grains which have been determined to assist in lowering one's cholesterol.

Out of the blue, under the new O'bama administration, the FDA has decided to crack down on what it believes to be questionable marketing practices and benefit claims.

The FDA says Cheerios' claims are "serious violations" of federal law as the words "clinically proven to help lower cholesterol" indicate the product is a drug without drug claim approval. The FDA doesn't dispute the claim just insists General Mills needs to apply for FDA approval to use those words.

The cereal has used this language for over two years with no prior complaints that I am aware of.

In a time when world food protection issues are not being handled by the FDA anywhere near as well as they should, this bold PR move against a honorable brand seems gratuitous and overblown. I suspect as do many experts that in the coming weeks, General Mills and the FDA will come to a compromise over the language given it is important for consumers to know what kinds of inexpensive basic foods they can consume that are good for them in a country where obesity impacts over 60% of the population.

Watching out for you everyday.

Eli

Starbucks goes competitive to re-establish brand superiority

The recession can be exemplified by how once high flying coffee industry darling Starbucks has stumbled and tumbled as consumers cut back on "mini" indulgences.

With strong competition from fast food retailers like McDonald's and Dunkin' Donuts who promote superior coffee taste and lower prices, Starbucks has decided it can no longer sit still after a recent report shows profits are down 77% in the past quarter.

Starbucks will begin a proactive ad campaign to promote why its brand is both superior to and a better value than competitive offerings. This campaign plans to remind many current and previous Starbucks brand loyalists why they were attracted to the coffee lifestyle business in the past. This is an important lesson for all brands; not to lose sight of the need to continuously remind consumers what is meaningful about the brand and how it will impact their lives in a way other brands can or will not.

Additionally, Starbucks has said it will re-align pricing on some of its products to ensure value is evident. Some basic coffee products will go down in price and more complicated drinks may go up slightly in price. Further, Starbucks will continue to package food items with beverages for a combo price that takes a page out of McDonald's long history of matching items together for less money than buying them separately.

Sometimes events like this recession force companies to regroup and go back to their core reason for being after years of getting away with off-strategy business moves when the economy is robust and consumers are flush.

Watching out for you every day.

Eli

(PS. Sorry for the lack of updates on the blog recently. I have been involved in some activities that were very time consuming. Now I'm back. Thanks for your loyalty. EP)

KFC to "Refresh" fill pot holes around America with cause branding effort

Given the general feeling among the American populace that US companies are run by selfish, money grubbing people, cause branding is surfacing as a hot marketing tool again as a way for entities to build trust and brand awareness hopefully leading to increased sales and loyalty.

One such case is KFC's "Refresh" pothole program that has begun in its home city of Louisville, KY. KFC is working with that city to repave or "refresh" potholes with new pavement "labeled" with "Refreshed by KFC" chalk statements. The program ties to the fast food retailer's new "fresh" campaign which promotes the freshness of its chicken offerings.

In these tough economic times cities are very short on funds for infrastructure repairs and the Mayor of Louisville welcomed this civic project with open arms. KFC is reaching out to Mayors throughout the US with the program and expects more cities to join this cause marketing effort.

Cause branding or cause marketing has been around for several decades but seems to resurface with greater activity when consumer morale is down along side weak economic times as a way for brands to break though the clutter and do "meaningful" things to build connections with consumers.

Whether or not KFCs sales will be enhanced by the pothole filling campaign remains to be seen but it is getting a great deal of free PR for the company as a corporate do good-er in a period when few companies are doing much of anything positive for the public.

Watching out for you everyday.

Eli

Kellogg's turns soured Phelps endorsement deal into humanitarian effort

Kellogg's one of the country's leading cereal makers has turned a bad deal into a good one benefiting thousands of really needy people.

Kellogg's terminated their endorsement deal with Olympian Michael Phelps after Phelps admitted use of illegal drugs at a party last year. The incident was photographed and featured on the Internet.

Kellogg's had already produced millions of boxes of Corn Flakes and Frosted Flakes brand cereals with Phelps mug on the front of the boxes. They pulled the product when they dropped him as a celebrity endorser. What to do with the tons of cereal? A really good thing.

Kellogg's donated all the cereal to a food bank in San Francisco where product was happily accepted including with Phelps' face. The food bank has said that they rarely get cereal products donated and this unfortunate situation had a silver lining for them.

Good move on the part of Kellogg's even if it was partially a PR stunt. In this economy food banks are really hurting and the donation of quality food to a deserving facility outweighs any self serving activity by the company.

Watching out for you everyday.

Eli

Pepsico's Tropicana Orange Juice to drop new flawed packaging design

According to the New York Times, The Brand Man Speaks was right: The new generic brand diluting packaging for Tropicana Orange Juice is killing the brand and therefore will be changed very soon.

Although sales damage information was not released, one could surmise that consumer dislike for the new look....which was expressed all over the internet was also sufficiently obvious in supermarkets around the US that Pepsico took the unusual but smart step to announce it would be discontinued and replaced without too much delay.

I am amazed when I see branding missteps as major as this one given the amount of marketing talent around the US these days. This was an obvious one to marketers I talked to but the question was would Pepsico cut their losses quickly or try like New Coke to hang on and hope for consumer acceptance. In this recession economy it is too costly to sit and wait....losing marketing share for a major brand when consumers are already turning to REAL generics in droves is a kiss of death today.

Let's acknowledge Pepsico for seeing the error in their ways quickly and doing something about it. Let's also suggest that Pepsico replace the brand management of Tropicana from the vast pool of brand talent that might be unemployed and ready to do a much better job of steering the brand in the future.

Watching out for you everyday.

Eli

Tropicana Orange Juice dilutes brand with new generic packaging

Pepsico's Tropicana brand orange juice has just devalued and diluted their brand with new packaging. In an attempt to update the famous Tropicana look, designers seem to have gone the generic private label low-end price route with this new design. It fails miserably.

The design is so awful and so recessive on the supermarket shelf that stores like my local Ralph's now have hanging signs (never seen before in the refrigerator section) to point out that this new look indeed is the old tried and true Tropicana brand orange juice....can you say ugly?

As a focus group moderator of many years, I cannot imagine that Pepsi tested this new packaging anywhere except among their in-house branding folks. In a kitchen research test I did against the other major brands 100% of participants thought new Tropicana was a store brand of lower quality than the old Tropicana packaged juice. Not good for Pepsico especially in this tough economic climate...they should go back to the old packaging or fix this one immediately.

I have to believe the brand is losing market share fast.

What do you think?

Watching out for you everyday.

Eli

Olympian Michael Phelps signs with Subway even though he prefers McDonalds

In a brand alliance move that makes little sense, Olympian Michael Phelps has signed on to be the spokesperson for the Subway brand of fast food.

On the surface this seems like a good fit. An incredibly athletic man with great appeal among young people world-wide promoting a healthy brand of fast food. The problem? Phelps doesn't eat Subway.

Phelps touted his addiction to cheeseburgers from fat laden brand McDonald's throughout the Olympic games going as far as to say it was his primary fuel....a 10,000 a day calorie diet...mostly of McDonald's food. He was even quoted as saying he wanted to be a spokesperson for the brand. So what happened?

After Phelps took an offer to promote Kellogg's high sugar Frosted Flakes cereal many scolded him for aligning himself with a product that promotes obesity among children. That rap didn't go well with his handlers who are trying desperately to make his all-American Idol like persona blemish proof to keep his income generating ability flying high even though the Olympics are no longer in the minds of most consumers or his herculean feat.

They are spinning this deal to promote the fact that it is more appropriate for Phelps to promote healthy food for a fitness lifestyle. The problem remains his celebrity endorsement does not ring true and could be harmful to both his brand and the Subway brand. This is a case where money trumps good brand strategy and certainly undermines Phelps credibility. Are Phelps handlers too greed oriented...so desperate to make him big money given there is nothing going on between now and the next summer Olympics to keep the Phelps brand relevant to consumers? Likely.

Watching out for you everyday.

Eli

AIG Insurance executives formally inducted into Club CLT

In a previous post I wrote about a "new" brand called CLT...and the elite "club" the brand was forming. CLT stands for Cheaters, Liars and Thieves and its club embraces the individuals in the country who have cheated, lied or stolen their way to prosperity and success on the backs of ordinary Americans.

The first major entry (from tens of emails I received) is an entire executive group from one company, insurance giant AIG.

If AIG is familiar to you it is because it is one of the US companies being bailed out to the tune of $85 million.

While Congress and the Federal Reserve were working on a bailout program, top executives of AIG "partied like it was 1999" as the song goes at the super expensive luxury California resort, St. Regis Hotel and Spa in Monarch Beach.

This "business" trip cost nearly $500,000 including $23,000 for Spa treatments. Chief Executive Martin Sullivan thinks there was nothing wrong with this trip and its costs and his team deserved it. (Read CNN Online story about this extravagant trip, also watch Anderson Cooper's 360 series that will feature the top 10 "most wanted" CLTs this week).

So here's to AIG executives behind their free-spending leader Sullivan....you are all now members of Club CLT. Hopefully this membership leads to some serious action against you and the company including the forced return of all that money from each individual who participated in the luxury trip on essentially tax-payer dollars.

Greed, greed and more greed. I wish we could put these folks in jail is the sentiment readers of my blog have expressed. So do I.

Watching out for you everyday.

Eli