Don’t Overlook the Small Brands You Already Own11 January, 2017 / Articles
In our most recent Breakthrough Innovation Report, Taddy Hall and I cite that 49 percent of the growth in U.S. food and beverage over the last four years is coming from twenty thousand companies below the top one hundred largest companies. Many large companies are on an acquisition spree to pick up these small brands to buy growth that is hard for many big brands to generate themselves, often at Silicon Valley-like valuations.
Ironically, many big companies have small brands they already own that they could use to generate growth in a much cheaper and easier way. More often than not, these brands are small not because they can’t grow, but because there aren’t enough financial resources and leadership mindshare left over to truly explore their upside.
Sometimes this is the natural result of portfolio strategy. But corporate development and M&A groups within companies need to apply the same rigor and imagination whether they’re evaluating the shiny objects outside of their companies or the seemingly dusty objects they already own.
Big companies can ask themselves three questions to see if they have a neglected small brand they own that could be much bigger.
The first is: “Has there been a big shift in demand underneath the surface?” Many companies miss this as they just look at overall growth rates without going deeper. A seemingly flat growth category may actually have a high growth sector that is being canceled out by losses in another sector. In my experience, this kind of thing happens more times than not.
Consider the SweeTarts brand from Nestle USA. A few years ago it was a flat growth brand. But over the last two years, Daniela Simpson, the director of marketing, helped it achieve 15% revenue growth per year, which is seven times higher than category growth. She and the team recognized a palate shift from traditional hard candies to gummier, chewier, and more sour candies.
Simpson quickly shifted her focus away from the hard candies line and launched new gummy products using existing excess capacity in a plant. She relaunched an existing product (Kazoozles) into SweeTart ropes (a tart, gummy licorice-like product). The gummy and rope products grew at forty to fifty percent growth rates, which more than offset the declines in the hard candies. But importantly, it drove new interest and new consumers to the brand. Key customers took notice and elevated the brand so that it grew 20% to 30% in those channels. Brand consideration went up 20% without any big TV advertising dollars. She brought the brand to life again.
Small brands are important here for a few reasons. First, it is much easier for smaller brands to shift and pivot than large brands because small brands have less at stake. Second, a big shift in a small brand’s product from current to emerging demand that is highly relevant and exciting can transform its brand equity farther, faster, and more cheaply.
The second question to ask is: “Is there a savvy, scrappy leader with a strong entrepreneurial spirit to lead this brand?” These leaders need to be someone who is willing to challenge conventional wisdom, test and learn, and ask for forgiveness instead of permission.
When Steve Clapp and Carl Gerlach took over the Ball Park hot dog brand in 2006, the brand had not grown in three years and was a good decade beyond its successful Michael Jordan ad campaign, with the tagline “Plump when you cook ‘em.” The brand was deemed not a strategic priority for its corporate parent, Sara Lee, and had little in the way of resources.
So in an entrepreneurial fashion and with minimal budget, Steve and Carl created Ball Park Angus hot dogs after a casual “what if” conversation with Mike Clabby, the lead food scientist. They tested the product with just a few retailers with whom they had good relationships, and who gave them a pass on slotting fees for this new product. It was a small-scale hit and they soon expanded it. Within two years, it became a $100 million dollar product and it became the number one brand of hot dogs. Steve and Carl were on their way to growing the business 40 percent over three years. Their actual advertising budget went down, but their spending worked harder for them as they had a hit innovation that created news energy and clarity around their super consumer—teen boys—to maximize their creative.
The last question to ask is: “Is there a senior leader there who will protect these leaders in the event of both failure… and success?” Achieving growth in this day and age requires placing bets and taking risks. When big brands do this, there’s a lot of care and checking done to reduce risk. Small brands and their leaders don’t have this luxury, so it is important that a senior leader protects them if their bets result in failure. Equally important, if less obvious, is the need to protect the leader from success, as well.
This is in keeping with the Japanese proverb, “The nail that sticks out gets hammered down.” Ironically, even when leaders of small brands realize success, the organization can inadvertently hammer them. Bending the rules brings the process police out. Savviness can be mistaken for recklessness. Thankfully for Daniela Simpson of SweeTarts, her boss, Nestle president Carlos Velasco, was supportive of her approach.
Hopefully more companies will ask and embrace these questions and not overlook small brand, high-growth opportunities right under their noses.