Brands look for credible extensions

We all know that Vachon takes the cake - the snack cake, that is....

We all know that Vachon takes the cake – the snack cake, that is.

But now, the maker of the popular Jos. Louis and Ah Caramel! brands hopes to take the cookie, the ice cream, and the frozen cake bar, too.

In the coming weeks, Montreal-based Culinar, the maker of Vachon cakes, will announce its new ‘Sub-Zero’ line, a freezer version of its three most popular snack cakes, Jos. Louis, Ah Caramel! and May West.

The three-SKU extension follows the successful launch last month of a new Ah Caramel! cookie – which comes in caramel and fudge varieties – and will hit the market around the same time as a new co-branded Breyers Jos. Louis ice cream.

This flurry of activity comes as Culinar looks for new and innovative ways to boost sales outside of the flat snack cake sector, which it dominates in Canada.

‘Just as with most other food products, [growth] is fairly static,’ says Daniel Boulais, vice-president of marketing at Culinar, a subsidiary of Saputo since September 1999. ‘You have to find ways to [enhance] your presence and increase sales.’

In that quest, Vachon is not alone. Across the board, marketers in almost every category are in a seemingly endless hunt for new means to increase their share whether by extension, or all out migration.

For Vachon, the benefit, says Boulais, is – first and foremost – exposure. Jos. Louis and Ah Caramel! are currently major sources of sales revenue for the company. According to Saputo’s annual report, snack cakes generated $96 million in sales over the last 28 weeks of fiscal 2000.

‘This brings [the Jos. Louis, Ah Caramel! and May West brands] to a second and third location [in-store] and increases the awareness of the brand and, down the road, the equity.’

The risk, of course, is that a failed brand extension could affect the core brand negatively. But that hasn’t stopped a lot of brands from trying.

The migration of brands into new segments appears to be limitless.

Kodak, arguably the world’s best-known maker of film, has just launched the MC3, a combination digital camcorder, MP3 player and digital still camera. Greeting card company Hallmark has extended its territory into flowers. And Rogers, at one time solely a cable television company, has since added its name to an Internet service provider, a wireless phone company and a video store chain.

On the strange shelf-mates front, there’s running shoe maker Reebok prepping a new soft drink brand, thanks to a partnership with Vancouver-based Clearly Canadian. Then, of course, there’s computer manufacturer Dell adding its stamp to whisky. (Actually, we’re just making that last one up, but you can see where this is going.)

It’s a strategy that makes sense, according to Bill Ratcliffe, president of Toronto-based Millward Brown Canada, particularly if the category is shrinking or static.

‘Leveraging existing brand equity – those that have been bought and paid for over time – allows companies potentially to extend who they are and what they do,’ says Ratcliffe.

Millward Brown, which is part of the WPP Group, released a report in November that attempted to gauge just how far companies can stretch brands into other categories. The ‘Brandz’ report was part of an ongoing international study which, since 1998, has measured equity on leading brands, covering 70 different product categories in 27 countries. In Canada, the study looked at about 15 categories in 1999, including airlines, banks and hair care.

The Dell whisky idea, by the way, was one Millward Brown posed to consumers last summer. Only 5% in the U.S. felt it was appropriate.

Results provide WPP agencies, such as Ogilvy & Mather and J. Walter Thompson, a database they can tap into for pitches or make available to clients on a proprietary basis.

The study concluded that some brands are more ‘elastic’ than others. The keys to a successful move, the study says, include a strong ‘brand personality’ and a history of diversity – Sony and Virgin were cited as two extremely elastic brands. In other words, once a brand has made a move, the next move is more likely to be greeted with acceptance.

In Canada, Ratcliffe says, Roots exemplifies the elastic nature of a brand, making the transition from shoes to clothing to home furnishings to an airline.

On the other hand, a strong association with one category – McDonald’s in fast food or Coca-Cola in soft drinks – can limit a brand’s ability to expand.

‘When you define yourself narrowly in terms of feature benefits that are category specific,’ Ratcliffe says, ‘it makes it harder to enter into other categories.’

The best bet, Ratcliffe says, is to target an adjacent category, one that makes sense in the minds of consumers. Gillette, for example, has successfully extended its brand from razors to shaving cream and subsequently to aftershave lotion and deodorant, one step at a time.

It’s a formula that Colgate-Palmolive seems keen to adopt, with the June 2000 launch of the Colgate Actibrush battery-powered toothbrush.

‘Toothpaste and toothbrushes have predictable growth in the single digits,’ says Philip Durocher, director of marketing at Toronto-based Colgate-Palmolive. ‘This was a way to answer the question, ‘How can we create a new market and be the pioneers in that area?”

Thanks to its moderately priced entry, which undercuts competitors such as the Sonicare Sonic toothbrush and the Braun Oral B Oxyjet 3D, the company has managed to snare some 25% of the electric toothbrush market.

‘As long as it fits within the hierarchy of it being an oral care product, we’re OK. We figure that’s a good extension for Colgate. That’s the acid test for us,’ says Durocher. (But even a seemingly logical brand extension is not a sure thing. Colgate, for example, failed at its attempt several years ago to brand a mouthwash.)

In Vachon’s case, Culinar appears to have pulled out all the brand-extension stops. Not only has the company leveraged its awareness in the cookie aisle and the freezer case, it recently launched an Ah Caramel! sandwich spread (co-branded with Smuckers) and has also been making inroads into the alternative snack market with its Hop & Go Homestyle Bars, a cross between a snack cake and a muffin that hit store shelves in 1998.

Boulais says the company has ongoing discussions as to how far it can stretch its brands on the market.

‘From a consumer’s standpoint, we have to be credible before we can move into those new categories. So we have to go step by step and stretch the elastic as far as we can.’