But some private equity firms are adopting orphaned brands. For instance, Apollo Global Management and Metropolis & Co., recently purchased Hostess Brands for $410 million, and is re-launching Twinkies, Ho Hos and other snack cake products.
Most private equity groups adopt orphan brands for short-term gains; buying them in order to flip them quickly. But, there is tremendous upside in rebuilding and re-introducing brands for the long term.
For example, when P&G acquired Old Spice in 1990 from The Shulton Company, I was an executive at Saatchi & Saatchi, the agency of record. Old Spice had become, well, old. Its signature product was a pungent cologne packaged in a white bottle with clipper ship artwork, marketed by sailors whistling a familiar jingle. At the same time, AXE deodorant from Unilever was coming into the US market after having launched in France in 1983. In light of the impending competitor, the agency convinced P&G to skip a generation and target a new demographic with no preconceived notion of the brand: young men. P&G reformulated and repackaged the product, and we created a new story. Sailors were out. Getting the girl was in. The rest is history.
Today there are great opportunities for once popular brands, that for whatever reason were allowed to languish, to be brought back to life. On the other hand, brands that were popular and died, due to lack of quality, are harder to revive.
Take Sunny Delight. Originally marketed as an inexpensive way for kids to get their quota of vitamin C, it targeted families that couldn’t regularly afford orange juice. The brand made millions in sales in the US alone. But the press soon revealed that Sunny Delight was mostly water, corn syrup and only 5% juice. The negative publicity escalated even further when a girl in the UK allegedly turned orange from the beta-carotene coloring in the product. And so, P&G dumped the sinking brand in 2004. Soon after, it was scooped up by Boston-based private equity firm J.W. Childs, renamed SunnyD and positioned as the soda alternative with 40% less sugar. But it still struggles to recover.
Interested in adopting an orphan? Here are some key steps to success:
- Select a known brand. Brands that still have some equity and brand loyalty are promising. For example, the popular soft drink Orangina was orphaned in 2006 by parent company Cadbury, which had been focusing on other brands in its portfolio. The brand still had a sparkling reputation, which was recognized by The Blackstone Group and Lion Capital, who joined forces, stepped up spending and regained shelf space. The private equity owners sold the brand to Suntory three years later, realizing 30% annualized return on equity.
- Analyze. Ensure that the brand is still culturally relevant. Study the market and make sure it can support a newcomer. You don’t have to spend $200,000 on a market analysis. You can quickly find out if a product is damaged in consumers’ minds or which consumers the product will appeal to, for much less.
- Skip a generation. Jump to a generation that doesn’t know the brand. Treat it like a totally new product.
- Reformulate and repackage. Crystal Light originally was a powder drink sold in canisters for mixing in pitchers. When bottled water took over the market, Crystal Light adapted with convenient mix packets. They also reformulated the product with energy ingredients for fitness-minded women who needed to hydrate with more than just plain water, but didn’t want high-calorie sports drinks.
- Test Market. Test in a few highly isolated markets that have a high index of your target consumer before you launch a massive push. Don’t go into major markets. Find pockets in the cities, suburbs or rural areas that contain your core audience. If you do your homework you won’t have to spend millions.
- Advertise. Invest in creating a persuasive brand story incorporating nostalgia for consumers who were original fans of the brand. Find out why it became popular in the first place. Or find a fresh new narrative. Or combine the two.
- Find a Partner. Consider partnering with an advertising agency that will take a stake in the property rather than a fee. Agency compensation models continue to change and innovate as markets evolve. Influenced by the growth of technology startups, more and more marketing shops are reshaping themselves as idea incubators and accelerators. In other words, they are becoming more entrepreneurial, willing to shoulder the risk and share in the tremendous rewards of introducing something original, useful and exciting into the marketplace.
A parting word to the wise on adopting an orphan brand (borrowing a tagline from that once ubiquitous and now largely forgotten though still available men’s aftershave brand, Hai Karate): “Be careful how you use it!”