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 becomes an excuse to misread the brand’s actual cultural meaning and look for some overly aspirational cross-category hook.
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 (which likely possess large marketing budgets focused on just that category).
These extension 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.
Kashi, for example, has done a better job remaining focused on driving the transformational product symbolism the brand has become known for: intense whole-grain nutrition. Most of its revenue and line extensions have remained in historically grain-based categories (cereal, crackers, bars) where its core proposition remains relevant.
Kashi Performance Across Categories
This temptation typically arrives quite late in the brand’s life, when brand has come to define the product experience so thoroughly that consumers will often treat the brand more like a category marker. That’s especially true with strong market-share leaders that defined a new category from its inception and consistently eliminated any meaningful competition. Oreo, for example, did not invent the chocolate sandwich crème cookie (Hydrox did), but it took over the category and has defined it for decades.
Brands like Oreo that remain closely tied to a focused sensory experience (a unique bittersweet flavor profile “no one else” can match) and/or emergent product symbolism (e.g., Kashi’s focus on whole-grain nutrition) end up surviving 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 flavor places and 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 packaged-food companies. It is possible to recover if the correction is quick (e.g., Starbucks’ return to quality coffee making), but difficult 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.
Questions or comments? Contact Blaine Becker, senior director of marketing, 425.452.0818, ext. 124 and firstname.lastname@example.org.
As leaders in the study of American food culture, The Hartman Group has been tracking how Americans shop for food since the 1990s. From one-stop shopping to multichannel shopping to online markets and click-and-collect, we continue to track consumers’ evolving perceptions, needs, habits and relationships with food retailers. New to the 2017 report is a special section on the expansion of the discount grocery channel, the emerging fresh-format channel and smaller-footprint retail formats.