Building a Relevant Brand Extension

Hartman Group report analyzes successes, slip-ups as legacy brands age

BELLEVUE, Wash.-- Product innovation is the lifeblood of the convenience-store industry, and consumer packaged goods (CPG) firms do their part to keep the new-product pipeline robust by expanding into new categories. But how do legacy brands maintain their position in the marketplace and consumer mind space? Often, it means expanding into a new category. That can work well—or backfire severely.

A new report by Bellevue, Wash.-based The Hartman Group shows both sides of this coin, homing in on what it calls “the fallacy of mega-branding,” and ways marketers can keep brand extensions relevant.

The report articulates that when “years of blockbuster success are followed by flagging growth, it is tempting for older brands that still enjoy high consumer awareness and stable base volumes to try to stimulate growth by moving into other categories.”

That desire, however, “becomes an excuse to misread the brand’s actual cultural meaning and look for some overly aspirational cross-category hook.”

In some instances, cross-category migration is a case of delusions of grandeur, as marketers assume a long-established brand can easily jump into another category. As the Hartman report points out, “while incremental revenue is possible with this strategy, it may not be very sustainable, especially if management mistakenly assumes that their brand’s ‘equity’ will easily overcome leaders in another category.”

These strategies work best for “brands that are extremely strong, contemporary and linked tightly to emerging distinctions in food culture that are gaining momentum. Above all, focused category extensions work the best,” the report noted.

Some marketers have demonstrated that laser focus, and success has followed. Kellogg’s Special K brand appears to be boundless with cross-category opportunities. In 2013, we saw the happy landing of such offers as Special K Pastry Crisps, a $100.6 million first-year brand, as well as Special K Cracker Chips and Special K Flatbread Breakfast Sandwiches.

“The Special K mantra is to eat wisely wherever you go, and the brand offers so many different forms of varieties. What Special K is communicating is that ‘We have something for everyone.’ ” says Susan Viamari, editor of IRI’s Times & Trends and co-author of the 2013 New Product Pacesetters report, which in March released its latest Pacesetters roster, the top-selling new products based on year-one sales. (Look for the extensive cover report detailing the IRI Pacesetters list in the July/August print issue of Convenience Store Products.)

Another example of mega-branding done with a vision is Kashi, which has “done a better job remaining focused on driving the transformational product symbolism the brand has become known for: intense whole-grain nutrition,” reads the Hartman Group report. “Most of its revenue and line extensions have remained in historically grain-based categories (cereal, crackers and bars) where its core proposition remains relevant.”

Marketers often become seduced by the idea of line extensions “late in the brand’s life, when the brand has come to define the product experience so thoroughly that consumers will often treat the brand more like a category marker,” said The Hartman Group. “That’s especially true with strong market-share leaders that defined a new category from its inception and consistently eliminated any meaningful competition.”

Brands that remain closely tied to a focused sensory experience and/or emergent product symbolism ultimately survive “late-stage market dynamics with more long-term control over the brand and what it means."

At that late stage, a brand’s meaning is heavily shaped by its role in popular food culture, and line extensions such as limited-edition UPCs rarely generate sustained growth and are often delisted within a few years.

“The market-wide deceleration of legacy brands is devastating to the bottom lines of most top CPGs. It is possible to recover if the correction is quick.” Hartman used Starbucks’ return to quality coffee-making as a case in point. But it is more difficult to recover if there has been “a divorce between the brand and contemporary food culture. It’s likely that the power brands of tomorrow will have shorter life spans than those in the past, and inattention or overextension will speed their ends.”

Click here for more and to download the complete report from The Hartman Group.