How ‘Ankle-Biters’ Nip Big Brands

The Wall Street Journal: “Consumers in rich countries once embraced the consistency, convenience and affordability of their offerings, from disposable razors to ready-to-boil ravioli. In other parts of the world, a growing middle class clamored for many of the same trusted, Western brands.”

“Today, that isn’t good enough. Shoppers have gravitated in droves toward smaller, niche or locally made products. In many cases, they are seeking out healthy alternatives and more natural ingredients. Manufacturing costs have fallen, allowing small players to seize quickly on trends. Social media and e-commerce have made marketing and distribution easier.”

RBC analyst James Edwardes Jones comments: “We think big incumbents—however well managed—are going to continue to struggle against the depredations of the ‘ankle-biters’.”

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Perfumarie: The Nose Knows Retail

The New York Times: Mindy Yang’s Perfumarie in SoHo “specializes in blind perfume shopping, allowing customers to smell fragrances with all the branding removed … In her quest to encourage consumers to trust their noses, Ms. Yang decided to put perfumes on tap, labeling them only by number. She installed 32 identical fragrance spouts along the minimalist back wall of the space, removing any hints of branding, packaging or price information. Underneath each tap is a small gray stone tagine containing a white paper swan soaked in the mystery perfume”

“Customers are encouraged to sniff in numerical order, taking notes on a clipboard about the scents that set their synapses ablaze. The scents begin light, with airy and citrusy notes, and get progressively stronger. Ms. Yang likens this to beginning with white wine and graduating to a full-bodied cabernet. Shoppers are not permitted to know the name of the perfume they’ve selected. Instead, the vials are labeled with numbers, looking a bit like prototypes stolen from a chemistry lab … At the end of every month, Ms. Yang hosts a cocktail party to unveil the tap selections. She also posts the full list online so that customers can discover the truth about the perfumes they took home.”

“When customers pay for their first blind smelling, they have the option to become a Perfumarie Explorer’s Club member. Their scent notes are scanned into a database and saved for future reference … Ms. Yang hopes that by offering membership and stressing the community aspect of the store, customers will return month after month. She wants them to treat their past smelling notes like a library, learning how their taste evolves over time … she hopes it will be equally attractive to the industry as a street-level test lab.” She comments: “I am no longer interested in traditional retail. People need to learn how to be empowered to have a point of view and choose what they like for themselves.”

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Chock Full O’What? Yes We Have No Nuts

The New York Times: “It is almost as familiar a part of New York lore as a taxi or King Kong or the building that he climbed — a can of Chock full o’Nuts coffee. But then it became a New York export. And as the quintessentially recognizable can crossed the Mississippi River in a push to go national, concerns arose about one word on the label that might not play well in Omaha or Oklahoma City — nuts. So Chock full o’Nuts has put what amounts to a giant disclaimer on the can: ‘No nuts’.”

“Do people really think that Chock full o’Nuts cans are chock-full of nuts?Apparently so. Convincing consumers that there are no nuts in Chock full o’Nuts is, well, a tough marketing nut to crack.” Marketing chief Dennis Crawford comments: “Every time we’ve done consumer research on why some people do not purchase the product, the No. 1 thing that comes back to us is there’s something in the coffee. Most of the people in New York — we’ve been there forever and they get it, but if you’re in Omaha and suddenly we’re on the shelf and you see the brand for the first time, there’s confusion.”

“The ‘no nuts’ panel on Chock full o’Nuts cans summarizes the history of Chock full o’Nuts. ‘1920s — we sold nuts. 1930s — we sold nuts and coffee. Now — we don’t sell nuts. We just sell coffee. But we like our name’.”

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LaCroix: The Essence of Effervescence

The Wall Street Journal: “The makers of LaCroix sparkling water go to great lengths to explain what isn’t used to create the beverage’s 20 flavors. There are no calories, no sugars, no artificial ingredients, no castoreum, no genetically modified organisms and no added phosphoric acid, according to the company. LaCroix nutritional labels contain only zeros. LaCroix is less forthcoming about what is actually inside its ubiquitous neon cans. The company says the flavors, such as peach-pear and pomme bayá, are derived from ‘natural essence oils’.”

“Essence is, essentially, the mystery behind a billion-dollar brand. As cases of LaCroix pile up to the ceiling of grocery stores across the U.S., die-hard fans admit they don’t have a clue what’s inside—and don’t care, either … Ask LaCroix executives for a definition of essence and you may receive something short of a clear response. ‘Essence is our picture word,’ LaCroix spokesman Rod Liddle said in a written response to questions.” He added: “Essence is—FEELINGS and Sensory Effects!”

“Essence isn’t defined in U.S. Food and Drug Administration regulations, an FDA spokeswoman said … Essence is created by heating at high temperatures the skin, rinds or broken down remnants of fruits or vegetables. Alcohol is sometimes added to the mixture. The vapors that rise off the stew are captured, condensed and eventually sold by the 55-gallon barrel … The LaCroix spokesman didn’t pour cold water on that interpretation, but wouldn’t provide cut-and-dried details of its manufacturing process.”

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Truth to Power: Tesla Flips The Switch

Quartz: “In 2016, Tesla sold two different versions of their Model S and X electric cars. One version had a 60 kilowatt per hour battery, and another a 75. The 75-kilowatt version cost $9,000 more. Prior to Irma’s landfall, Tesla announced that it would flip the proverbial switch, and allow the 60-kilowatt cars to become 75-kilowatt cars. This enabled the 60-kilowatt vehicles to go 230 miles per charge, rather than 200 … Tesla was able to upgrade the kilowattage in the cheaper version of the car because both models actually have the same 75-kilowatt battery. The company just chooses to limit the capacity in some cars so they can have two different price points.”

“The response to Tesla’s decision has been mixed. While some observers congratulated the company for proactively reacting to the impending storm, others were disturbed by the revelation that the company could so easily increase the capacity on their cars. If the battery could be more powerful without any extra cost to Tesla, ask critics, why deny this capability to certain drivers?”

“The answer: Limiting battery capacity actually makes Teslas more affordable. The extra $9,000 that Tesla gets from its less price-sensitive customers is what allows it to charge a lower price for the lesser version of the car, the one that more cost-conscious consumers might purchase (though of course anyone purchasing a $60,000 Tesla is not poor). Perverse as it may seem, having a version of the car that gets less mileage actually makes it more accessible.”

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Costco Knockoffs: It’s Cruel to Be KIND

The Wall Street Journal: “Kirkland Signature, Costco’s store brand, is challenging manufacturers hoping to earn or retain a coveted spot at the warehouse retailer. Since 1995, Costco has used its Kirkland products to attract shoppers, building a reputation for quality and low prices on milk, toilet paper, men’s shirts and golf balls bearing the unassuming red logo. About a quarter of Costco’s $118.7 billion in annual sales come from Kirkland Signature products, and the percentage is growing, company executives say.”

“Costco often introduces a new Kirkland product when its buyers or executives believe a brand isn’t selling at the lowest possible price.” For example: “Kind Bars sold for about $18 for a pack of 18 … When almond prices dropped in 2016 … Costco developed the Kirkland Signature Nut Bars, made by Leclerc Foods USA, which is owned by Leclerc Group, a Canadian manufacturer, and now sells a 30-pack for $17 in stores.”

“Kind Bars are still carried at Costco, though mostly new varieties, including fruit bars, mini nut bars and a peanut-free bar. ‘We look forward to continuing to grow with them,’ a Kind spokeswoman said.”

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Perennial Seller: Make Connections, Not News

The Wall Street Journal: In Perennial Seller, Ryan Holiday “emphasizes the value of low prices and word of mouth over press coverage. Raymond Chandler, he writes, became the ‘quintessential detective author’ because he encouraged his publishers to sell his books as pulp paperbacks, for 25 cents a copy. Suddenly his books went from selling a few thousand copies in bookstores to hundreds of thousands in gas stations, train stations and cigar stores. Humphrey Bogart as Philip Marlowe followed.”

“Likewise, the comedian Drew Carey’s long run on network television began with an invitation from Johnny Carson to appear on “The Tonight Show.” Validation by one person whose opinion is valued, Mr. Holiday argues, is worth all the press coverage in the world.”

“Iron Maiden has never relied on hit singles or frequent radio play, since its songs often run to 10 minutes, with solos from each of its three guitarists. Instead, the band has toured almost nonstop, building close connections with thousands of fans who now buy almost anything it puts out, from albums to beer to belt buckles. Its core of hard-core fans, Mr. Holiday writes, has allowed Iron Maiden to ‘endure through fads, technological shifts, and the fact that their music was never mainstream’.”

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Amazon’s Secret: 19 Phantom Brands

Quartz: “Amazon is selling products across a wide array of categories, using a host of brands that do not exist outside the confines of amazon.com and do not make it clear that they are Amazon-made products. Trawling through over 800 trademarks that Amazon has either been awarded or applied for through the US Patent and Trademark Office (USPTO), Quartz identified 19 brands that are owned by Amazon and sell products or have product pages on amazon.com.”

The Amazon brands include: Arabella (Lingerie); Beauty Bar (Cosmetics); Denali (Tools); Franklin & Freeman (Men’s shoes); Happy Belly (Fresh food); James & Erin (Women’s clothing); Lark & Ro (Women’s clothing); Mae (Underwear); Mama Bear (Baby products); Myhabit (Consumer goods); North Eleven(Women’s clothing); NuPro (Tech accessories); Pike Street (Linen); Scout + Ro (Kid’s clothing); Single Cow Burger (Frozen food); Small Parts (Spare parts); Smart is Beautiful (Clothing); Strathwood (Furniture).

“The only indication that any of these other brands might have an affiliation with Amazon is the fact that their company pages … say that their products are ‘exclusively for Prime members.’ It’s not clear that they’re exclusive because they are Amazon products, rather than products from companies that have struck deals with Amazon … It’s possible Amazon has other brands on its site that it hasn’t yet trademarked.”

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How Big is the ‘Store Brand’ Threat?

The Wall Street Journal: “Supermarkets’ ‘private label’ goods have historically been less important in the U.S. than in other mature markets … But now the big European discounters are expanding in the U.S.Lidl launched on June 15 with six stores in North Carolina, just a few days after its key rival, Aldi, unveiled a five-year, $5 billion U.S. expansion plan. These expansion efforts themselves don’t need to succeed. The threat alone will hasten the shift of U.S. grocery toward private label.”

“The more upscale team of Amazon and Whole Foods will speed the push into private label. The tech giant has been plowing resources into its AmazonBasics range; the Whole Foods equivalent, 365 Everyday Value, anchors the grocer’s new, compact store format, 365. Ever attuned to millennial trends, Silicon Valley has even thrown up an online retailer called Brandless that sells $3 health-conscious, private-label goods.”

“Some companies look less exposed than others. Those with big overseas operations, such as Nestlé, Unilever UL or Mondelez, or must-have brands, like Kraft Heinz, stand a better chance of seeing off the new competition than those with U.S.-centric portfolios or lots of third or fourth-placed brands. Bernstein thinks Campbell’s, Conagra, General Mills, Kellogg and Smucker’s are all at risk.”

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Brandless: When The Brand is No Brand

Quartz: “E-commerce company Brandless launched last week, but it is already billing itself as the ‘Procter and Gamble of millennials.’ The startup sells a variety of Brandless-branded foods and household goods, supplied by its proprietary partner manufacturers, and all priced at $3 … The company promises to keep prices low by eliminating the BrandTax, a phrase it requested a trademark for last November, and which it defines as the ‘hidden costs you pay for a national brand.’ Its simple white labeling was designed by a team of product and marketing experts and food scientists.”

According to CEO Tina Sharkey: “The Brandless movement is the ‘democratization of goodness.’ It’s that everyone ‘deserves better, and better shouldn’t cost more.’ The $3 price point is designed to make it ‘very freeing when you shop on brandless.com.’ Brandless wants people to ‘live more and brand less,’ to ‘tell their own stories,’ and to drop the ‘false narratives’ sold by Madison Avenue. ”

“In the meantime Brandless is crafting its own narrative. On its website, the company claims the average person pays a 40% or greater BrandTax markup on products ‘of comparable quality as ours.’ This seems likely true of Brandless organic extra virgin olive oil ($3 for 8.5 oz, or about 35 cents an ounce) but perhaps less so for its organic taco seasoning mix ($3 for a pair of 1 oz packets).”

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