Today, legacy brands in FMCG are facing a dramatic escalation in the pace of business, technology and change.
With the 2008 financial crisis making a renewed virtue of thrift, the retail environment has been disrupted by the rise and rise of deep discounters like Aldi and Lidl. Purpose-driven startup brands have not only challenged incumbent brands but positioned themselves to become brand leaders in their own right. Strategic innovation has introduced new direct-to-consumer business models such as Graze snacks or Dollar Shave Club to the mix.
Giles Jepson is uniquely positioned to appreciate these challenges. He recently joined the disruptive marketing startup Been There, Done That, having put in his ten thousand hours of expertise-building at Kraft Heinz, Lindt&Sprungli and Colgate-Palmolive. Most recently Kraft Heinz’s European Chief Marketing Officer, Giles saw the heritage brand through nine years of growth and change. Giles is a Sloan Fellow (with distinction) of London Business School.
We spoke to Giles about the opportunities currently facing legacy brands, and how soft power thinking can help meet them their biggest challenges head-on.
Rare Design: In an interview with The Drum four years ago, you said there was a danger that legacy brands might rest on their laurels despite the threat from challenger brands. What’s the general feeling within big brands today? What are we going to do now?
Giles Jepson:The challenge remains, but is even more acute than four years ago.
The obsession with shareholder value means the short-term focus is firmly embedded in many companies’ culture, which makes actively managing heritage brands for the long-term incredibly hard. It’s even harder when there are fundamental structural shifts in the market that require serious strategic thinking and time to execute new approaches.
The internal short-term pressure, coupled with the pressure from challenger brands and businesses, means that heritage brands can easily fall into a cycle of short-term tactics which ultimately do nothing to resolve the situation.
While it’s clear that big businesses know they cannot afford to rest on their laurels, it seems that a lot of their focus is on acquisition, whether through sector consolidation or the purchase of small and fast-growth startups.
The likes of Unilever’s purchase of Dollar Shave Club or Colgate-Palmolive’s acquisition of PCS Skincare and EltaMD in the US are prime examples. There is also the increased interest in corporate initiatives to connect with entrepreneurs and their businesses. The Diageo-funded Distill Ventures reached a milestone this month with their first sale to Diageo of Belsazar, while Kraft Heinz announced the launch of Springboard in the US to connect with entrepreneurs in the food space.
These incubators and acquisitions make strategic sense, but do not directly address the legacy brand challenge.
RD: That’s business model innovation: what about product innovation? Can that differentiate the bigger brands from their challengers, or is that a smaller challenge?
GJ: For me, the product is the bedrock of the brand, so it’s critical that it offers high quality, strong value and meets consumers’ needs. Disruptive product innovation gets far more airtime than ensuring the core product offer remains relevant and continues to meet consumers’ needs. However core renovation is incredibly important to maintain consumer relevancy and competitive differentiation.
Beyond renovation, product innovation through extension can provide a powerful vehicle to obtain competitive advantage against both bigger and smaller challengers. It provides differentiation, enhances brands’ value propositions, expands usage touchpoints and blocks new competitors.
I think an important point to make is that technology has opened up multiple routes to the consumer. Ten years ago the retail landscape was much more stable, and product innovation followed a well-worn path of Grocery and Impulse rollout. Today the combination of a well-targeted proposition, high-quality product and disruptive route to market take the impact of product innovation to another level. We see this in exciting businesses like Beautycounter, Ever Skin and Rodan + Fields in the US. They’re either going direct to consumer or leveraging quite traditional peer-to-peer selling models – like the old ‘Avon lady’ model, reinvigorated by social media accessibility.
The product is where it starts, but you have to ask “what’s the right business model?” to deliver the offer to the consumer. This offers the chance for exponential growth.
RD: How easy is that to achieve in a huge legacy brand? There’s always the ‘design by committee’ factor that can be detrimental to innovation. Is it easier with only two or three decision-makers involved?
GJ: I don’t think there’s any lack of ideas in legacy brands and businesses.
The challenge is a structural fixedness that startups and entrepreneurs don’t have. Big businesses have built their brands and operating model over the long-term. This has led to significant cost efficiencies in the core business, but the downside is lack of flexibility, either operationally, financially or even psychologically.
Eight or nine times out of ten, innovation will dilute the overall margin percentage of the business, because you don’t have those economies of scale. It’s also going to take time for anything new to make a difference and make a significant contribution to a mature and scaled P&L. Patience is in short supply in big organisations. You often see standalone innovation teams that are trying to take the business out of that day-to-day mindset, but it’s tough. There is also the ‘design by committee’ factor that waters down strong ideas, slows the process further and kills agility.
RD: On the flip side, what are the opportunities for these legacy brands?
GJ: Legacy brands carry incredibly strong brand equity: high levels of brand awareness, loyalty, quality perception and a defined set of associations. By their very nature, they have high penetration levels and distribution relationships that startups would die for. That provides a big platform and strong base for them to innovate from.
I think it needs creative thought and fresh thinking as to how to take those assets and leverage them. The growth of challenger brands and startups has shone a light on the need for big brands to think and operate differently. It’s not the big that eat the slow, but the fast that eat the slow. Bringing a creative, agile, open mind and approach to the huge assets that legacy brands possess can create big opportunities.
RD: Repositioning and reframing products through soft power is the core of what we do. Do you think there are any big brands doing this well at the moment?
GJ:I think that the likes of Innocent can show the way for a big brand.
Innocent is the reference point for startup case studies, but they’ve now evolved into a big brand leader. Despite this, their values and personality remain; they haven’t become faceless and separated from consumers. They’ve remained consistent, true to their DNA and very human. In my mind, big brands are at their very best when they act small. They are built from a high-quality product or service that delivers, and they connect at an emotional and human level with their consumers.
I wouldn’t say the days of hard power are over, but these purpose-driven brands such as Innocent show how powerful soft power is. Ella’s Kitchen is another great example. Their story-led tone of voice was at the heart of their growth, and their use of pouches was an experiential packaging disruption of the category which added to their soft power. They immediately repositioned the incumbent players and became brand leader.
In a world of zero-based budgeting and stagnating growth, soft power is even more important. Consumers want brands to functionally deliver on their promise, offer great value and make them feel good about themselves. With marketing budgets becoming more constrained, I don’t think that’s necessarily a bad thing because it forces the conversation around really understanding the right levers to pull for maximum effect. The success of challenger brands shows you don’t need huge sums of money: it’s all about the solving a consumer problem, building a compelling proposition, a strong pack and a great product. In today’s hyper-connected world, the rest will take care of itself.
Look at Kellogg’s. They had an ad campaign for Cornflakes that was built around social and hashtags, rather than big TV spots and so on. They stole the lead from smaller brands. You can tell people as much as you like, shout at them and advertise to them, but you’ll go further if you embed yourselves in people’s lives and mean more to them on a one-to-one basis.
Get that right, and soft power can take you all the way.
Thanks to Giles for talking to us. Like this?
Now read ‘3 ways soft-power thinking can revitalise your brand’.