Cult brand growing pains

It's not the kind of press attention they're used to over at Lululemon Athletica, the Vancouver-based 'yoga-inspired athletic apparel' company accustomed to charming the stretch pants off the PR machine. Last month, a shareholder commissioned an independent test of the health claims of the retailer's VitaSea garments and sent the controversial results to the New York Times.

It’s not the kind of press attention they’re used to over at Lululemon Athletica, the Vancouver-based ‘yoga-inspired athletic apparel’ company accustomed to charming the stretch pants off the PR machine. Last month, a shareholder commissioned an independent test of the health claims of the retailer’s VitaSea garments and sent the controversial results to the New York Times.

The accusations of false advertising around the fabric’s benefits knocked the company off balance. After days of swan-diving stocks and general confusion, Lululemon CEO Robert Meers responded to the allegations in a press statement, saying, ‘We absolutely stand behind our products, our processes and refute any claims in recent press reports to the contrary.’ At press time, the claims on VitaSea garment tags were hastily covered over in stores, pending scientific evidence requested by Health Canada.

If you’re holding your breath for an aggressive, fight-back ad campaign, however, you’ve come to the wrong retailer. ‘We have changed the hangtags on VitaSea products, but our marketing tactics have not changed,’ says director of community relations Eric Petersen. ‘We will continue to lead with innovative, grassroots, community-based marketing.’

Since Petersen joined the Lululemon team in 2004, the company has worked to balance its community-based mass-roots structure with phenomenal growth. While still based in Vancouver, the retailer has come a long way from boardsport retail pioneer Chip Wilson’s single boutique/atelier/yoga studio in the Kitsilano neighbourhood almost 10 years ago. The curly A that is the Lulu logo seems to be on hems and cuffs everywhere; even Martha Stewart, more a fan of the brand than an athlete, plugged the line on her show in September. The number of stores has grown from fewer than 15 to 80 by the end of this year, with another 234 estimated by the 2010 Vancouver Olympics – for which Lululemon hopes to be the athletes’ unofficial ‘clothing of choice.’ Sales skyrocketed 80% in the three months leading up to the July 27 IPO compared to the same period last year, and revenues from the company’s stores increased by 98%.

That’s where the trouble started, says Rich Price-Jones, creative partner at Toronto’s Grip Limited. ‘None of this would have happened if it was still a private company,’ he says.

As Lululemon’s profile grows, Petersen has stepped in as guardian of the brand. He oversees the work of the community team, which includes branding, PR, web and design, plus supervising an ever-growing number of regional teams. ‘Sometimes I have to tell people I’m the head of marketing to get them to listen to me,’ he explains. ‘But really my responsibility [is] to direct the community relations efforts that we have.’

Petersen commissioned Grip to perform a brand audit 18 months ago, which resulted in the development of guidelines around logo use and positioning. Up to that point, marketing materials had varied from store to store. According to the company’s internal structure, the HQ, or ‘store support centre’ (SSC), creates customized promotional materials to the stores and helps to facilitate best practices. In turn, the stores, which are organized into approximately 12 regional units, develop their own local events and promotions around SSC guidelines – the most successful of which, such as men’s shopping nights during the holidays, are often picked up and spread company-wide.

Petersen has worked to integrate this community focus into Lululemon’s corporate fabric, in everything from job titles to R&D. Even the IPO was a community affair, with a huge billboard in Times Square featuring all 1,900 employees. This mass-roots model has often led to comparisons between Lulu and Starbucks, a connection that was made literal when former Starbucks CFO Michael Casey joined Lululemon’s board in October.

Like Starbucks, Lululemon has eschewed mass advertising. Petersen and his team talk of category mainstays such as celebrity endorsements and hired models with disdain. Instead, they scout out local athletes to act as brand ambassadors, wear the clothes and appear in the marketing materials unique to each store. It’s a strategy that has set Lululemon apart from the Nikes and Adidases of the world.

‘We have turned down hundreds of amazing opportunities – from Hollywood to some of the biggest names in consumer products – to do partnerships,’ Petersen admits. ‘We only do it if it’s relevant to our guests and our staff.’

The mass-roots mantra is word of mouth, and over the years the company has got people talking through both product innovation and PR stunts, such as the 2002 opening of the Robson Street store, where the first 30 people to show up naked scored free product. More recently, Grip produced a spoof viral ad for ‘L’odeur: the world’s first internal cologne’ – that is, sweat. Released five months ago, the clip has nearly 10,000 views on YouTube, and directs viewers to Lululemon.com.

Petersen’s in-house PR machine has worked up a lot of free press, most of it adoringly positive. Founder Wilson is known for his unscripted remarks to the press, though after the seaweed debacle, that might change, says Price-Jones, as the brand adjusts to its new position in the public eye.

Petersen is no stranger to the art of PR, having started his career in Washington in 1991, doing PR for George Bush Sr. ‘As soon as I got into government, I realized that was not a place I wanted to be,’ he says. He left to organize tennis tournaments for sports marketing firm ProServ the following year.

‘I’ve always wanted to combine sports with my career,’ says Petersen, who plays hockey, surfs, kayaks, coaches his kids’ soccer teams, cycles and, of course, practices yoga, which he discovered after moving to Vancouver in 2001.

From 1994 to 2001 Petersen worked for Electronic Arts in San Francisco and London, where he successfully marketed U.S. sports games such as NHL Hockey using the same strategies he applies to Lululemon today. (Lululemon famously runs only one long-standing ad, in the American magazine Yoga Journal.) ‘We realized that athletes were playing the games in their downtime, and we leveraged that in our advertising and worked very closely with athletes,’ he recalls. ‘We only advertised, TV-wise, on ESPN. We really stuck to our core, and built that up.’

There are already signs that Lululemon’s core of loyal consumers will see the brand out of this rough patch. ‘They’ve still got that cult, grassroots appeal. Wherever they open, people have been talking about it, people are running into the stores. And the sales are phenomenal…their consumer is probably not too concerned,’ says Price-Jones, who thinks something along the lines of a letter from Wilson to consumers would work to reinstill faith in the brand. ‘It will have an impact, but ultimately, as far as their loyal consumers are concerned, it will be a minor blip that will probably disappear.’

In the future, the challenge will be staying the course through competitive threats. ‘The issue going forward is staving off competitors that are actual competitors, not stockbrokers,’ says Price-Jones, who is skeptical about Lululemon’s ability to maintain the same mass-roots approach at 300 stores that it has at 80.

Petersen is unfazed. He insists that ‘nothing’s changed other than the volume of work that we do. We’re not doing anything differently: you won’t see us on television, you won’t hear us on the radio…It goes back to yoga, which is a combination of the physical and the mental. If you’re grounded, you know where you want to be and how you want to get there. If we stay true to our core, we’ll be fine.’