Hope for heritage brands

We’re living in a golden age of ‘challenger brands’ – those agile, fast-moving brand start-ups that are shaking up the norms of FMCG. From Fever-Tree in the drinks category, to Kettle and Propercorn in snacking and Lily’s Kitchen in pet food, challenger brands are taking more and more market share from established consumer goods companies.

But how? How can these young companies – often set up on a shoestring – take on FMCG companies with billions of pounds in turnover, and every possible corporate defence mechanism at their disposal? Throughout the last year, we have asked this question to hundreds of leaders from across the consumer goods sector and three consistent themes have emerged.

Firstly, and most importantly, challenger brands have a very intuitive sense of customer trends and changing requirements – such as the consumer demand for healthier or higher quality craft products. Secondly, they have mastered the art of direct-to-consumer marketing – aided in no small way by the digital revolution – and market themselves by highlighting issues key to the next generation of consumers, such as the provenance of products and the ethics and values of brands. Challengers are bold in their marketing and not afraid to experiment with new and different channels to form a connection with their customer.

Lastly, they are not encumbered with legacy systems and fixed costs such as large factories. Put simply, they have the ability to be more flexible in how the operate, can change product and packaging more frequently to reflect changing consumer needs and can be much speedier in bringing innovation to market. Indeed, I was with a founder-CEO in the Nordics a few weeks ago and he described with huge pride how it had taken him just eight weeks to get a new product on the shelves all the way from the initial idea. The same process would have taken 12 to 24 months in a more established FMCG company, by which point the trend may have passed.

“Challenger brands have a very intuitive sense of customer trends and changing requirements – such as the consumer demand for healthier or higher quality craft products”

So, is all lost for traditional FMCG companies? We would strongly argue not – and in recent years there has been much evidence to show that FMCG groups are applying some of the same thinking as challenger brands to re-invigorate and refresh their established heritage brands.

Be proud of your heritage – then innovate

As Marketing Week columnist Mark Ritson argues: “The trick with most great brands that have reached the point where they are older than the customers that they serve is to use history and origins to work out the brand position and then apply that position disruptively to the current consumer world of 2017.”

In the last decade, there is probably no better example of using heritage to make a brand young again than Pimm’s, Diageo’s gin-based beverage which dates back to 1823. The brand endured some difficult times in the 1970s and 80s as it was passed between different owners and as the consumer demand for its core product variants fell. After Pimm’s entered the Diageo portfolio in 1997, the drinks group set about reasserting its reputation as an occasion drink suited to the summer months and sporting events like Wimbledon.

The branding remains unashamedly from the early nineteenth century, but the product and the marketing around it is ever-evolving under Diageo’s stewardship as it looks to appeal to modern consumers’ changing tastes and behaviours.

Product innovations have included a ready-to-drink Pimm’s can for the supermarket shelves, while savvy marketing communications – such as the coining of the slogan ‘It’s Pimm’s O’Clock’ – have reinforced the brand’s status as an occasion drink perfect for social gatherings.

Similarly, look at the renaissance of Stella Artois in recent years. Ten years ago, Stella sales were slumping and the brand was tarnished by its associations with excessive drinking and thuggish, violent behaviour. To combat this image, the marketing team on the brand went back to its origins to re-establish its reputation as a prestigious, luxury drink rooted in traditional European brewing methods.

Its proud heritage was communicated through some excellent advertising work that last year included an epic campaign tracing back the roots of founder Sébastien Artois to the early 18th century. Stella has also built prestige into the way the brand is served, handing out uniquely shaped glasses and even beer foam scrapers so that pubs and bars can create a degree of theatre every time they served a Stella.

“Use history and origins to work out the brand position and then apply that position disruptively to the current consumer world” – Mark Ritson, marketing professor and columnist

Given the positioning of the brand in the mid 2000’s this is an unlikely success story. Stella Artois has been able to reawaken its legacy values, while also making itself relevant to modern day customers who increasingly prioritise the craft and quality of the products they consume. Heritage brands looking to revive their fortunes must bring in talent who have the audacity to look backwards at a brand’s heritage to create a more exciting future.

Embrace new formats

Likewise, heritage brands need to be open to adapting their products and services to new formats. Lego, hailed as one of the greatest corporate turnarounds in history, is a good example of this. In 2003 the Danish family owned company was in dire straits, with sales down 30% year-on-year and debts of $800m.

The following year Jørgen Vig Knudstorp, a former McKinsey consultant who had only been at Lego for a few years, became CEO and transformed the business from the inside out. First and foremost, the company reconnected with customers to understand what fans of Lego, both young and old, wanted to see from the brand. It revived classic lines while also developing new toy franchises, embraced new digital platforms in order to build a global community of engaged fans online – and importantly, created physical experiences of the Lego brand such as through its Legoland partnership with Merlin.

The phenomenal success of The Lego Movie, which became the highest grossing film at the UK box office in 2014, was a clear sign that Lego had rediscovered its original brand magic and made it relevant for modern consumers. The Lego Batman Movie similarly opened to critical and commercial success this year.

Jørgen, who stepped down as CEO earlier this year but remains executive chairman, is the first non-family member to head Lego. His success highlights the need for legacy brands to hire strategists who are willing to take bold and decisive action to restructure a business and identify the emerging trends that will be relevant moving forward.

Sometimes, business as usual (in this case, selling Lego bricks!) simply isn’t enough – leaders need to unite a business around new strategies, directions and routes to market with renewed enthusiasm for the original, founding brand values.

We see similar brand reinventions from the retail world, not least the premium traditional department stores that have embraced new formats by re-imagining the bricks-and-mortar store with new concepts that appeal to modern consumers.

Fortnum & Mason, a business that traces its origins right back to 1707, has done this under the inspirational leadership of CEO Ewan Venters by launching stores beyond its iconic London home, including shops at St Pancras International and Heathrow Terminal 5.

“Leaders need to unite a business around new strategies, directions and routes to market with renewed enthusiasm for the original, founding brand values”

The business has also entered new markets around the world, including its first standalone store outside the UK in Dubai. At the same time, Ewan has prioritised and improved the various experiences on offer at the Piccadilly flagship, using the brand as a means of attracting tourists and visitors who are drawn to the store because of its luxurious, historic trappings.

This focus on reinvention has also been at the heart of Selfridges’ £300m regeneration of its London flagship over the past two and half years, which has included the installation of a 37,000 sq ft studio dedicated to lingerie, swimwear and sportswear, the opening of cocktail bar The Fount and new shop-in-shops for luxury brands such as Burberry and Chanel. The retailer has also set up events spaces across its stores to host music concerts as part of its Music Matters campaign.

Build a brave corporate culture

We have found that businesses with strong corporate cultures are able to be bolder in their innovation. In short, businesses who are clear about what they stand for and embrace and celebrate the values of their heritage, often feel most comfortable with change and rejuvenation.

Take for example William Grant & Sons, a family owned distiller founded in 1887 which today owns brands such as Glenfiddich, Grant’s and Hendrick’s. The business uses its heritage and traditions as the foundation for a “common framework” that guides how the group acts, does business and makes decisions.

New hires must buy into this framework, which provides the business with a platform to innovate in its products and entrepreneurial go-to-market strategies, while also remaining true to its rich heritage. Its two core assets are its brands and its people.

This solid foundation has enabled the business to be hugely bold in its product innovation in whisky – with recent innovations including Glenfiddich’s ‘Experimental’ series, featuring a collaboration with a local craft brewer that has produced the first single malt Scotch whisky ever finished in IPA craft beer casks. “The Experimental Series embodies our family philosophy of freedom and possibilities, to create a range of ground-breaking single malts,” says the business.

Fashion house LVMH has similarly embraced this spirit of innovation and collaboration as it looks to remain relevant to young consumers. Chairman and CEO Bernard Arnault previously set out his corporate vision in an address to shareholders, including his determination to prioritise new ideas and reinvention. He said the “capacity to bring newness” was one of the group’s most important growth drivers, and highlighted the importance of “creativity that’s pragmatic.”

A good example of this approach is Louis Vuitton’s extraordinarily successful collaboration with streetwear brand Supreme earlier this year. The tie-up, masterminded by Louis Vuitton’s artistic director of men’s collections Kim Jones, was a bold and creative move that saw a luxury French brand dating back to 1854 join forces with an urban New York label founded in 1994. Embracing this vision has paid off, as the collaboration has proved hugely successful and made Louis Vuitton relevant to an entirely new audience.

These case studies demonstrate that by embracing their history, developing new formats and propositions – and crucially remaining true to their values – the future of brands with heritage is bright. Indeed these businesses can beat the market disruptors at their own game if they learn from the challenger mindset and use their heritage as a platform on which to innovate and reinvent themselves.

If these strategies are executed correctly, challenger brands will struggle to compete with the real affection and emotional attachment that many of these heritage brands can proudly claim to have had with their customers over many decades.

Elliott@thembsgroup.co.uk | @TheMBSGroup | The MBS Group