Brand Stagnation Case Studies

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Part
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Brand Stagnation Case Studies

Kraft Heinz, Borders, and The Sharper Image are three US brands that neglected growing sales and revenue which led to brand stagnation. While The Sharper Image had successfully recovered, Borders did not and closed up shop. Meanwhile, Kraft Heinz fights on to recover from its misaligned sales and revenue growth strategies. These are outlined below.

Kraft Heinz

Borders

The Sharper Image

Sources
Sources

Quotes
  • "Over the past several years, Brazilian investment firm 3G has deployed brutal cost-cutting to raise profits at Anheuser-Busch InBev, Burger King, and Kraft Heinz, using an approach called zero-based budgeting requiring that each expense be justified from scratch each year, as opposed to the traditional approach of adding a couple of percentage points to last year’s line items. The strong implication is that managers should strive to lower all costs from one period to the next, at all costs."
  • " The numbers Kraft Heinz has been posting since the completion of the food giants’ merger in 2015 demonstrate that it’s achieved all gains in profits exclusively from chopping costs, that starving the brands resulted in flat sales and rising debt, and that falling margins and zero growth forced the company to suddenly reverse course by swelling marketing costs."
  • "That move, in turn, hammered profits, and came too late. The damage to the brands, the announcement acknowledges, are permanent."
  • "Let’s examine what how Heinz’e reported results chronicle its failed strategy: Revenues went nowhere"
  • "The juice was supposed to come from cost cutting, but it didn’t last At first, the strategy of raising profits based on pounding down costs appeared to be working."
  • "A Harvard Business School article in 2016 warned that the technique is “not a wonder diet for companies.” That prophesy was confirmed by Thursday’s catastrophic announcement from Kraft Heinz."
Quotes
  • "Kraft Heinz was formed in 2015 by a merger of the two food companies that was engineered in part by Warren Buffett’s Berkshire Hathaway. "
  • "The stock price of Kraft Heinz plunged 20% late Thursday after the food giant disclosed it received a subpoena from the Securities and Exchange Commission and reported a large net loss due to the reduction of goodwill in some of its best-known brands."
  • "Kraft Heinz also said in a conference call discussing earnings that it cut its quarterly dividend to 40 cents a share from 62.5 cents and that it was considering selling off some of its businesses to help pay down debt. The company reported $30.9 billion in long-term debt at the end of 2018, up from $28.3 billion a year earlier."
Quotes
  • "It appears to be all over for the Borders bookselling chain. ...The chain's 400 remaining stores will close their doors by the end of September."
  • "But in the mid-1990s, Borders lost its edge. "It made a pretty big bet in merchandising. [Borders] went heavy into CD music sales and DVD, just as the industry was going digital. "
  • "He says Barnes & Noble also invested in beefing up its online sales. Eventually, it also developed its own e-reader, the Nook."
  • "Borders did not. Instead, it expanded its physical plant, refurbished its stores and outsourced its online sales operation to Amazon."
  • ""In our view, that was more like handing the keys over to a direct competitor," Wahlstrom says."
  • "With so many people going online to buy books, Borders lost out. The last time it turned a profit was 2006."
Quotes
  • "For years, Borders outsourced its online book-selling to Amazon.com. So anytime you visited borders.com, you were redirected. "
  • "While at the time it may have seemed like a smart decision to jump on the coattails of the Amazon juggernaut, relinquishing control to another company hurt Borders’ branding strategies and cut into its customer base."
  • "It over-invested in music sales Borders was a bookstore, but over the years it morphed into a multipurpose entertainment retailer"
  • "In the 1990s, it invested heavily in CD sales. Bad move: Around then, people stopped buying CDs as they began buying iPods instead. "
  • "And one reason B&N has avoided Borders’ fate is thanks to the Nook, which has successfully grabbed a quarter of the e-book market away from Amazon."
Quotes
  • "Anyone who shopped at a mall in the 1980s or 1990s – particularly with their dad (or, really, anyone’s dad) likely enjoys a twinge of nostalgia anytime they hear the words “The Sharper Image.”"
  • "Conn noted, the brand had been going through “some issues” adopting to a retail environment that saw fewer and fewer consumers heading to the mall."
  • "With the brand’s reset, he noted, its focus has moved to distributing its widening array of branded offerings through large-scale store channels like Target, Kohl’s and Bed, Bath & Beyond, expanding its licensing agreements and thinking beyond the mall when it comes to serving up the old-school “Sharper Image experience” in real life and in real time."
  • "Last week, in fact, it announced its four newest licensing agreements with Conair Corporation, Allstar Products Group, Aerus LLC and Mystic Apparel, expanding the brand into beauty, infomercials, healthy homes and pet care."
  • "Among the brand’s new licensing partners, one that stands out is the deal with Allstar Products Group, will which see The Sharper Image venturing forth into the world of direct response programming in 2019."
Quotes
  • "The Sharper Image, a 30 year old, 184 store, 2000 employee retailer of gadgets such as massage chairs and robotic vacuum cleaners suffered a liquidity crisis after years of declining sales and the inability to reorganize and sell itself to a financial or strategic buyer."
  • "The company filed for bankruptcy protection in 2008 amidst a wave of retail bankruptcies that also claimed storied names like Linens n Things, Circuit City and, more recently, Borders and Filene’s/Syms. "
  • "A Hilco Global brand revitalization team then formulated and executed a licensing-driven strategy to rebuild the brand. The effort succeeded, resulting in the sale of intellectual property assets, including the brand name, to Iconix in 2011."
  • "Today, The Sharper Image is a vibrant brand once again, with products being sold online at www.sharperimage.com, via mail order and in retail stores like Bed Bath & Beyond, Bloomingdale’s and Lord & Taylor."
Quotes
  • "But for now, ThreeSixty says it is focused on marketing and advertising efforts to boost sales, as well as continued gains on distribution in the U.S. and opportunities abroad."
  • "As with FAO Schwarz, ThreeSixty says it sees an opportunity to build some flagship stores for Sharper Image, moves that would represent a return to brick-and-mortar operations for both brands if they were to come to fruition. "