Feature By Victoria Slind-Flor

Money and mayhem

Brand extensions and celebrity endorsements can be license things that otherwise might not make a whole lot of sense. the easiest route to a rapid increase in revenue. But as For lifestyle products you can extend the brand to all kinds of different things customers might buy.” some companies have found out, they are not According to licensing consultancy The Beanstalk Group, Harley- guarantees of success Davidson has 80 licences in 18 product categories and generates approximately $1 billion in retail sales annually. By comparison, at the end of Harley-Davidson’s 2006 fiscal year, the company earned $4.55 billion from motorcycle sales, $862 million from sales of parts and accessories, and $277.5 million from its own general Why do some brand strategists think Harley-Davidson beer makes merchandise. sense, but a Harley-Davidson cake-decorating kit is a dumb idea? Harley-Davidson’s licensing partners include KidKraft of Dallas, And who would ever expect that sales of a fat-free electric grill Texas, which manufactures Harley-themed children’s desks and would soar because of an association with a heavyweight boxer? rocking toys; Miller Brewing Company of Milwaukee, Wisconsin, Why would you be able to find the logo of the National Association which produced the pale lager Harley-Davidson beer; and Zippo for Stock Car Racing (NASCAR) on an ice cream bar? Manufacturing of Bradford, Pennsylvania, which makes cigarette Companies seek to extend their brands for a variety of reasons. lighters bearing the Harley-Davidson logo. For one thing, it’s a form of free and permanent advertising. Then, of Jacqueline Lampert, KidKraft's director of licensing, says her course, the revenues some brand-extensions deals generate can company has been making and selling a wooden Harley rocking contribute significantly to the bottom line. “If you’re a brand motorcycle for about eight years. Although her company makes other manager and can increase revenue without any expense, that’s a Harley-themed items, it's the rocking bike that sells the best. “We find good thing,” says Gregory P Gulia, a trademark partner at New York’s that if we make licensed items, the ones that do best are most closely Duane Morris. Sometimes, though, he says it’s “difficult to know related to the thing that's licensed,” she explains. And the rocking who is paying whom”, as the dollar value of a deal and the direction motorcycle “has the closest relationship to the Harley brand”. in which the money flows are generally very closely held. KidKraft approached Harley about licensing. “We had a line of If the product has a unique coined name, such as Crayola or products – rocking horses – that were relatively successful, but anyone Popsicle, the name becomes stronger with each additional product can make a rocking horse,” says Lampert. KidKraft wanted an item that to which it’s attached, says Gulia. POPSICLE – the trademark for what competitors couldn't copy. “Licensing is a bit of a science and an art at is known as a “quiescently frozen confection” – is a brand now the same time. Sometimes you can hit it right and sometimes you can extended to include children’s toothbrushes. Binney & Smith’s misread it completely. We try to capture an essence of the brand and Crayola brand has moved past colour crayons to show up on kids’ what it is in the eye of the consumer,” Lambert explains. She declines bedding, cake decorations and music CDs. to reveal sales figures, but says the rocking motorcycle has done very well over the years for KidKraft. The newest model features a sound Harley’s hit and miss chip that plays the distinctive roar of a Harley-Davidson motorcycle. But the world of brand extension is filled with many odd-seeming That sound itself is a registered trademark. marriages. For example, the logo of motorcycle manufacturer But some are critical of some aspects of the Harley-Davidson Harley-Davidson Inc can be found on an easily anticipated product licensing strategy and point to the cake-decorating kits and the range of leather jackets, t-shirts, helmets and beer. But it’s also perfumes as a step too far from the company’s core brand equity. possible to buy Harley-Davidson branded perfume, condoms, Such choices are signs the extension strategy is “seriously adrift”, cribbage boards, furniture for children, coffee, beef jerky, bedding, brand consultant Alycia de Mesa wrote in a piece recently published Barbie dolls, wedding-cake toppers and the aforementioned cake- on www.brandchannel.com. And in the annual ranking published by decorating kits. New York’s TippingSprung consultancy, the Harley-Davidson cake- Harley-Davidson is a “lifestyle brand”, says Edward Tauber, of decorating kit – licensed to Bakery Crafts of West Chester, Ohio and Palm Springs, California’s Brand Extension Research. “They have a intended for children’s birthday cakes – was deemed “the worst group of customers who use the product as a lifestyle, so Harley will brand extension of 2005”.

10 World Trademark Review November/December 2007 www.WorldTrademarkReview.com Right Austin Katz, Director of business development, Brand Sense Partners in Los Angeles

We developed a brand and a strategy that transcended Britney as a person. [The fragrances] were able to survive and flourish in a world in which there wasn't the best news about what Britney was up to

The critics say that Harley-Davidson’s iconic outlaw image – the equity and pick good partners who are strong in their categories and bike of choice for members of the Hell’s Angels Motorcycle Club and a good cultural fit for your company,” she says. Easy Rider wannabes – is not consistent with something as innocent as a child’s birthday cake. And one could only imagine the kind of Brand integrity scent associations the name Harley-Davidson would conjure up on a Austin Katz, director of business development at Brand Sense perfume bottle. Eau de crankcase, perhaps? Partners of Los Angeles, says brand extension has changed dramatically over the years. “In the most traditional sense, it is taking Looking for synergies a logo or a trademark and attaching it to a hat or keychain. But that Any NASCAR auto race looks like brand extension run amok. The kind of extension has become less meaningful,” Katz explains. cars and the drivers’ uniforms are almost wallpapered with Companies that are content to do that kind of label-slapping can be corporate logos, with the names of tyre manufacturers and motor- dangerously careless of the integrity of the brand, he says. oil products predominant. But for the 2007 NASCAR racing season, “Some licensors have extended too far and have made terrible at least one of the cars will be wearing the logo of an ice cream mistakes, licensing new products that can be harmful to the brand,” confection, Unilever’s Klondike Bar. Additionally, race fans will be Katz continues. It’s a balancing act, he says, and all about factoring in able to find a specially labelled KLONDIKE NASCAR bar for sale at potential negative exposure against licensing revenue and their supermarkets. promotion of the brand. Gulia insists the KLONDIKE-NASCAR deal is a great marriage of Tauber agrees. He is critical of Sunkist which, he says, has two well-known brands. “Brand managers look for synergies,” he harmed itself through some of its brand extensions. Sunkist said. In the best deals, he explains, it works both ways. People will Growers Cooperative Inc is a 114-year-old citrus growers’ cooperative want to eat KLONDIKE NASCAR ice cream at the tracks and will think based in Sherman Oaks, California. “It was the first branded fruit. It of NASCAR every time they reach into the supermarket freezer case. was successful because it was a different orange. It tasted different. Church & Dwight Co Inc of Princeton, New Jersey, takes a They branded it and got a premium price for it,” Tauber says. hardline approach to brand extension. The company produces a But then Sunkist began to diversify, starting with a carbonated wide range of consumer products, among them home pregnancy soft drink. “They were taking the image of a healthy fresh fruit and tests, cat litter, denture adhesives, hair-removal cream, water putting it on something it wasn’t,” says Tauber. The orange soda was softeners and deodorants. But the crown jewel is the bright yellow a big success, and so were many of the other 500 Sunkist branded box of Arm & Hammer baking soda, with its distinctive logo products, such as baking mixes, candies, dried fruit snacks and incorporating a burly flexed arm wielding a sledgehammer. Church almonds. “They made a lot of money, but they’ve diluted the brand,” & Dwight has been selling Arm & Hammer for more than 150 years. Tauber claims. “Sunkist is not the brand it used to be.” “We have a wonderful history with consumers,” says licensing director Tammy Talerico. The Clorox solution All licensed products bearing the Arm & Hammer logo must fit One of Brand Sense Partners’ clients is the Clorox Company of within the “core equity of deodorization, safety and cleaning,” she Oakland, California. Besides the well-known bleach-related products, says. And every licensed product must actually contain Arm & Clorox also produces Kingsford charcoal briquettes used for Hammer baking soda. In one of the most recent licensing deals, Arm barbecueing. “The Kingsford division knows how to make charcoal & Hammer announced a hook-up with Electrolux Home Care really well. That’s their expertise,” says Katz. But it was Brand Sense Products Ltd last August for deodorizing vacuum cleaner bags. that came up with the idea of developing barbecue grills to be sold All told, Arm & Hammer has only “about a dozen” licensing under the Kingsford name. “This was never even fathomed by the partners, says Talerico. “Believe it or not, as old as our company is, Clorox executive team,” Katx continues. “It’s so far from their core our licensing business is in its infancy.” She’s been with Church & competency.” Dwight for only two years and is the company’s first dedicated But Kingsford was facing a potential sales slump, given the licensing professional. Her advice for anyone new to the brand- increasing number of gas-fuelled barbecue grills on the market. extension game is to avoid what she calls “label-slapping”: sticking “Kingsford has 80% of the charcoal market, but how do you convert the brand name on any product willy-nilly. “Be true to your brand people from [barbecueing with] gas to charcoal? The grills solved www.WorldTrademarkReview.com November/December 2007 World Trademark Review 11 Feature: Money and mayhem

both problems,” Katz explains, by “getting people to grill more often and helping the conversion from gas to charcoal.” But that was not all. “The icing on the cake was bringing millions of dollars in royalties to Kingsford from the sale of the grills. That’s why we’re not doing key chains and hats. We’re building business that’s significant.” Tauber has also consulted for Clorox. “They had a commodity: bleach. And customers could buy a store brand or another cheaper brand,” he says. So the strategy was to think of other products that could benefit from the Clorox association. “Historically [Clorox officials] thought they were in the laundry- room business, so corporate officials were sure that the Clorox brand should be extended to other laundry-related products,” Tauber explains. But after he did an analysis, he discovered that consumers perceived bleach as a commodity with a number of non-laundry uses. “What the brand ‘owned’ were the properties of bleach, including the ability to kill mould and remove stains from hard surfaces,” he says. Those very qualities made a Clorox-branded laundry detergent a product consumers were afraid to try. “People thought it would take the colour out of their clothing,” says Tauber. “When a company puts out something that’s a non sequitur, that doesn’t make sense something like a pencil sharpener,” LeRoy says. But products used with consumers, these things usually fail.” for washing the car did fit, so now there’s a Mr Clean AutoDry So instead, Tauber suggested a new range of products that would carwash system on the market. capitalize on bleach’s stain-removing qualities. Today the Clorox product range includes a toilet bowl cleaner, disinfecting wipes and The celebrity factor a disinfecting kitchen cleaner. All of them are used on surfaces If a carwash product makes sense for a Mr Clean product, babycare consumers perceive would not be harmed by bleach. products are a natural for a company bearing the name of a beloved paediatrician and author of childcare books. In late 2005, the Dr Spock Picky at P&G Company of Menlo Park, California, formed a licensing agreement Procter & Gamble (P&G) is one of the giants of the consumer with Cosmetic Essences Inc, of Holmdel, New Jersey, for a line of baby- products world, with annual revenues of $75 billion and a market oriented bath and body products. Dr Benjamin Spock’s Baby and Child capitalization of $195 billion. But surprisingly, P&G is also not Care, first published in 1946, became the bible for several generations hugely into the brand licensing game and is wary of offers from of American parents. The company that bears his name worked with those who want to license its various brands. “We probably say no TippingSprung on the Cosmetic Essences transaction. more than 90% of the time,” says external relations manager Jeff While the Dr Spock brand extension was a natural, other LeRoy. But P&G says no very politely and always invites potential celebrity-related products may seem curious at first glance, while licensees to come back another time. Any potential licensee must fit others sizzle outright. One of the most unexpected successes is the three criteria, says LeRoy. They must be “best in class, there must be alliance between boxer George Foreman and Salton Inc, of Lake an unmet consumer need [for the new product] and it must be Forest, Illinois. This resulted in the George Foreman Lean Mean Fat- aligned with the brand equity”. Reducing Grilling Machine, commonly known as the Foreman grill. P&G will not out-license its biggest brands; that is, the 22 that Foreman was looking around for an endorsement opportunity and each generate more than $1 billion in annual revenue. These include Salton was seeking a celebrity endorser. They hooked up in the mid- Tide laundry detergent, Crest toothpaste, Pampers nappies, Clairol 1990s and ultimately Foreman reaped a $137.5 million one-time hair dye and Gillette razors. bonanza for the use of his name on the grill. The company’s biggest brand extension venture involves Mr “At that time I thought, how could they possible get any value out Clean, a liquid cleaning product that came onto the market in 1958. of that,” says Gulia. “But it came to be one of the best-selling products. One of the extended-brand products is the Mr Clean Magic Eraser, The numbers were staggering.” By 2004, the Foreman name had help a sponge-like device that can be used to swipe away dirt on many sell 50 million grills, leading to revenues of $2 billion. surfaces. “We found the Magic Eraser at a trade show in Japan. Foreman, who is a frequent guest on home-shopping television We weren’t even looking for it,” LeRoy says. In that particular case, shows, comes across as gentle and personable, and as someone who P&G took the initiative in the transaction. genuinely uses and likes his product. He’s now a grandfather and a But sometimes the brand-extension suggestion comes from church minister who has successfully transcended his blood-and-guts outside the company. A manufacturer approached P&G about boxing-ring past. So in January 2007, Salton announced an extension extending the Mr Clean brand to a line of mops. The synergy of the deal with the ex-boxer to the tune of $2 million per year. between the two companies apparently worked well, because four And looking ahead, Salton has gone to another affable African- weeks after the Mr Clean mop was introduced to the market, it American celebrity, Al Roker, who is the weatherman on the NBC became the top seller. The Mr Clean rubber gloves quickly became Today show. Roker will be endorsing a coffee maker – the Melitta number two. “This kind of licensing gets us to the market fast, with Smart Mill & Brew – which uses Microsoft-developed technology to no cash outflow,” says LeRoy. provide real-time region-specific weather information. Any new Mr Clean brand extension has to make sense for Jimmy Buffett has also parlayed his fame into myriad lucrative P&G. Because its brand equity is as an efficient, easy-to-use deals, says Gulia, who has represented the singer. “Back when people household cleaner, “we wouldn’t have the Mr Clean name on were just buying concert t-shirts, he created himself as a brand,

12 World Trademark Review November/December 2007 www.WorldTrademarkReview.com Below Britney Spears's Curious fragrance, developed for Elizabeth Arden Left to right Gregory P Gulia Trademark partner, Duane Morris Tammy Talerico Director of licensing, Church & Dwight

much more than what he already was musically. He was restaurants. He was margarita mix. He was frozen shrimp. He had deals with hotels,” Gulia explains. And Buffett managed to leverage some of his were able to do her fragrance deal with a company that’s been in the creative material even further, using song titles “Margaritaville” and beauty business for 100 years. Fantasy was number one when it “Cheeseburger in Paradise” as trademarks. Buffett now owns launched. Last year it was in the top two or three. That fragrance Margaritaville brand tequila, as well as seven Margaritaville Cafés. sells over $250 million. That’s an example of how to do it right,” Katz He launched the Cheeseburger in Paradise chain in 2002 and says. “She can go through anything and every time something bad currently operates restaurant properties in 18 US states. He’s also was reported in the media, we sold more.” used his celebrity to promote causes he believes in – working with Katz is clear as to the reason for the continued success, despite the Humane Society of the United States to oppose Canadian seal Spears’ woes. “We developed a brand and a strategy that transcended hunts. His restaurants are participating in a high-profile boycott of Britney as a person. Yes Curious and Passion are her fragrances, but Canadian seafood as part of a campaign against seal-hunting. they are stand-alones. They were able to survive and flourish in a The lives of singer Jennifer Lopez and hip-hop mogul Sean “P world in which there wasn’t the best news about what Britney was Diddy” Combs are constant tabloid fodder, but their branded up to,” he explains. products continue to flourish in the market. Diddy’s clothing line, The strategy is to separate the celebrity from the product itself Sean John, was named best menswear in 2004 by the Council of so the brand can live on beyond the celebrity. Katz suggests that the Fashion Designers and Lopez’s JLo brand encompasses swimsuits, White Diamonds fragrance associated with Elizabeth Taylor will fragrances, shoes, lingerie and jewellery. Each of the stars’ companies survive even when the ageing star is no longer around. “Elizabeth has generated annual revenues of as much as $300 million. Taylor may die, but White Diamonds goes on forever,” he says. While Katz wouldn’t name names, he said there was a celebrity Falling stars who came to Brand Sense who “really liked drinking Snapple”. This Sometimes celebrities get into serious trouble and their brand- celebrity proposed that Katz’s company help develop a brand of iced extension endorsement deals go sour. Certainly OJ Simpson, who tea. “But this person was in the music industry, the urban music used to run the length of airport terminals in commercials for the industry. There was no meaning or sense to this deal and we flat-out Hertz Corporation’s rental cars, no longer has a bankable name. A told them this didn’t make sense,” he says. After Katz’s company deal between Pepsi and pop star Madonna veered into oblivion refused to develop the product, the celebrity went to a different shortly after the releases of her provocative Like a Prayer music company and did make an iced tea deal. “But who knows if it’s even video and her envelope-pushing erotic book Sex. sold anywhere,” Katz says. If a celebrity’s troubles or behaviour becomes too notorious and But the trouble is not all one way. Occasionally bad news travels distasteful, Gulia says the best strategy may be for the company to in the other direction. Recent salmonella outbreaks related to fast- pay off the celebrity’s full contract amount “and then immediately food restaurants and some food processors would be enough to terminate the association”. But not all brand-extension deals fall make any celebrity want to bail out on an endorsement deal apart when bad things happen to famous people. Pop icon Ashley connected with the products. And sometimes the product even Simpson was caught lip-synching her performance on NBC becomes more famous than the celebrity. Katz says that some of his television’s Saturday Night Live programme. Shortly afterwards she company’s younger employees know Oscar-winning actor Paul was booed offstage at the Orange Bowl football championship game Newman as “the salad guy”, because his name is found on a well- in 2005. But Unilever kept her as the celebrity spokesperson for its known brand of salad dressing. WTR Thermasilk hair-care line. Katz, of Brand Sense Partners, worked with songstress Britney Spears to develop two signature fragrances for cosmetic giant Elizabeth Arden Inc. Katz says Spears’ well-documented problems with alcohol and her less-than-ideal parenting style have not had any negative impact on the sales of her Curious and Fantasy This article originally appeared in issue 24 of WTR’s sister products. “Britney’s gone through a lot in the last three years, yet we publication IAM magazine (www.iam-magazine.com) www.WorldTrademarkReview.com November/December 2007 World Trademark Review 13