Heavenly brand marriage can turn into messy divorce

Marketing partnerships can look perfect: both parties benefit and the money rolls in. But if the bride is indicted for fraud, the smiles fade. By Polly Devaney

They can seem like matches made in heaven and usually start off with misty-eyed declarations of how both parties are so right for each other; the happy couple play off each other’s strengths and the two of them are a stronger force together than they were apart. But further down the line, many marketing “marriages” end up in tatters, with lawyers being called in and bitter acrimony on both sides.

Kmart and Martha Stewart used to be one such happy couple. In 2001, Kmart, which operates stores in 49 US states, signed an exclusive, seven-year agreement with Stewart’s company to market the Martha Stewart Everyday brand of home and garden products. Stewart was the wholesome US “domestic goddess” – offering advice on everything from how to bake bread to how to plant your garden. Her brand was omnipresent and her company, Omnimedia, was huge.

But less than a year into the relationship, the couple began to have their differences. In January 2002, Kmart filed for bankruptcy protection and began the process of reorganising its business. This was a worry for Stewart. She told Newsweek magazine that the discount chain’s strategy to take on Wal-Mart by cutting prices was a “mistake”. She also openly admitted concern about her future with Kmart, telling the magazine: “A company in reorganisation poses certain problems for us in terms of our brand and our growth rate.” It also emerged that other potential suitors, including Target and Wal-Mart, were willing to woo Stewart away from Kmart.

The spectre of a declining Kmart dragging down her brand prompted Stewart to call then Kmart chief executive Chuck Conaway, to offer her “ideas and creativity”, for reviving the chain. But the tables were turned on Stewart in July 2002 when the SEC announced that she would face counts of conspiracy, obstruction of justice, making false statements and securities fraud, over the sale of her shares in drugs company ImClone. She was accused of acting on an illegal tip-off from her Merrill Lynch stockbroker.

At first, the partners stood by each other: Kmart issued strong support for its star endorser, saying her products were selling well and that Kmart would continue its planned spending on ads in Stewart’s magazines. However, the strain soon began to show. In June 2003, when Stewart was indicted for fraud and obstruction of justice, Kmart took a more neutral tone. It issued a statement saying: “This is a matter between law enforcement authorities and Martha Stewart as an individual and therefore, it would be inappropriate for Kmart to comment.”

When the marketing deal was signed in 2001, Kmart bagged exclusivity on the distribution of Martha Stewart’s products in return for a guaranteed series of escalating payments to her company. In the latest mud-slinging, Kmart has filed a lawsuit against Martha Stewart Living Omnimedia, claiming that these royalties are “excessive”. It is also challenging the amount of advertising it is obliged to buy in Stewart’s magazines. Omnimedia has released statements saying that Kmart is simply trying to renege on the deal.

The case continues to grip the US, where Stewart has always been a polarising figure. Sales of Martha Stewart goods at Kmart registered significant declines at the end of last year, even after deductions for discontinued products and Kmart store closures. Meanwhile, Stewart’s magazines are also feeling the chill. Over the whole of 2003, Martha Stewart Living magazine recorded a 34.6 per cent fall in ad pages, the largest among the top 100 titles. An analysis of the 2003 figures showed that a wide range of blue-chip advertisers, including Apple, Pfizer, Home Depot and American Express Corp, chose to switch their advertising dollars to other publications. Stewart’s syndicated television show has also seen ratings decline. It remains to be seen whether Kmart and Stewart can salvage anything from their relationship, but at this stage it looks as if it could end in a very public and bitter divorce, with each dragging the other down.

Pepsi is no stranger to failed marketing marriages. Its deal with Michael Jackson was the largest individual sponsorship deal in history; but he soon proved to be a brand that Pepsi was less than keen to be associated with. Pepsi also paid Madonna $5m (&£2.6m) to use her Like a Prayer song and for her to appear in its ads – until Pepsi bosses saw the video. It featured the singer in religious poses, with burning crosses, stigmata, statues crying blood and a black Jesus. The Vatican condemned Madonna, Pepsi dropped the ad – and Madonna kept the cash. On a smaller scale, Pepsi endorser Britney Spears has been photographed drinking Coca-Cola on several occasions. Pepsi must be hoping its latest coupling, a promotion with Apple’s iTunes, will prove to be a more successful union, as only brands, rather than individuals, are involved.

Elsewhere in the celebrity endorsement arena, basketball player Kobe Bryant has parted company with McDonald’s. Bryant, once famed for his wholesome, family-man image, was accused of sexually assaulting a 19-year-old woman in Colorado last year. His three-year agreement with McDonald’s expired in December and was not renewed. Even if Bryant avoids jail (he has admitted adultery but claims the sex was consensual), his value as a marketable commodity will have been almost completely eroded.

McDonald’s, meanwhile, has been cultivating a marketing partnership with pop star Justin Timberlake. The link comes as the world’s largest fast-food company launches the first global ad campaign in its 50-year history. Timberlake recorded the vocals for several McDonald’s “I’m lovin’ it” commercials to be shown in the 118 countries where McDonald’s operates. He is also appearing in cameo roles throughout the campaign and McDonald’s sponsored his 35-city 2003 European tour. Things seem to be going well with the multi-million dollar partnership, although McDonald’s can’t have been happy with the “wardrobe malfunction” during Timberlake and Janet Jackson’s performance at the Super Bowl this month (MW February 12). The tarnishing of a reputation can happen in a flash – literally.

Of course, things can go wrong in marketing even if the spokesman is an insider rather than an outsider. In the case of McDonald’s rival Wendy’s, founder Dave Thomas, who starred in more than 800 Wendy’s ads, died. Some industry observers believe the chain’s brand has suffered considerable erosion in its strength and stature since Thomas’s death, losing the company’s “voice” and “personality” with him. It has taken Wendy’s two years to develop a replacement advertising campaign, unveiled this month and featuring the character Mr Wendy. The chain says he is the complete opposite of Thomas and it is in no way trying to replace him.

For better or for worse, marketing partnerships and commitments will continue between brands, whether they are celebrities or products. Things will continue to go wrong and when they do run into trouble, they will be widely reported. But not all of them will end in tears. There are many successful marketing unions that create riches and go on to make stronger brands of both parties, even after the honeymoon is over.

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