Change isn’t all plain sailing

Keeping abreast of social and technological trends through successful product innovation isn’t easy for iconic brands, which tend to have embedded cultural systems that defy change, as Coke is finding to its cost. But without such progress, they risk being cast adrift, says David Benady

Ensuring a brand is not washed up by the changing tides of technology and shifting social trends will be a key strategic issue for many companies this autumn.

From The Guardian relaunching in a smaller size last week, to snack food companies shaking off the “junk” tag and attempting to move into the “healthier” arena, radical transformation is essential to the survival of many long-established businesses.

Telecoms incumbents, too, are facing a challenge from internet call companies such as Skype, bought last week by Ebay, and Rupert Murdoch has decided his media empire will crumble unless he embraces the Web (MW last week).

Brand owners have had varying degrees of success in adapting as the ground moves beneath their feet. They need to adjust their internal culture before they can persuade consumers that they have been reborn. But cultural change for a big brand owner, particularly a multinational, is a slow, steady process, rather than a quickfire remedy.

Soft drink, hard task

Such change is proving tough for Coca-Cola. The company faced a setback last week in its attempts to shake off a reputation for pushing unhealthy, sugar-laden, flavoured carbonates at children and young people. Its UK launch of Powerade Aqua +, a sports energy drink aimed at fitness-loving women, received a knockback when a number of retailers contacted by Marketing Week said they would refuse to stock it (MW last week).

One retailer said Coca-Cola’s attempts to introduce healthier drinks and move beyond flavoured carbonates “smacked of desperation”, adding that the Powerade brand was not strong enough to support an extension.

Coca-Cola refused to discuss the situation. But it comes on the heels of last year’s Dasani fiasco, when the drinks giant tried to launch the water brand in the UK but quickly withdrew the product after it was revealed to be nothing more than filtered tap water. The final nail in Dasani’s coffin came when the company admitted it had been found to contain a cancer-causing bromate compound.

Coke urgently needs to tap into the growing area of healthy drinks to offset declining and stagnant sales of its core flavoured carbonates in mature markets – especially Europe. But being the world’s most powerful brand icon is heavy baggage.

The Powerade and Dasani examples indicate how awkward it can be for a company to transform a long-held cultural outlook and adopt a new vision – in Coke’s case from purveyor of sugary carbonates, to provider of drinks that enhance wellbeing. As one observer says: “The Coca-Cola brand is so transfixing and mesmerising inside the organisation that they find it difficult to think beyond the brand.” But he adds that the company has launched “quite confidently” orange juice drink Minute Maid in the UK, though he concedes it will be some time before its success can be measured.

Health stance

A further attempt by Coke to shift to a more healthy platform was the launch earlier this year of a corporate advertising campaign in the UK featuring all of its brands, presumably in the hope that some of the healthy sheen from the non-carbonates will rub off on its less healthy brands.

But while Coke struggles in some instances to exploit the new environment, PepsiCo-owned crisps brand Walkers appears to some observers to have made the health backlash work in its cent last year, partly because of consumer rejection of high-fat foods. But Walkers has used the publicity surrounding health issues that arose from the publication of the Government’s White Paper on health, as a hook to launch products with a healthier profile. Early this year, it launched Potato Heads, a range of low-fat crisps with no artificial flavourings, colourings or preservatives, aimed at children and their health-conscious parents.

According to Will Browne-Swinburne, account director for rival Golden Wonder at JWT, Walkers’ strength is that it has always managed to create some “new news” in a moribund crisps market. Whether it is Gary Lineker adopting a variety of roles in its ads, or the launch of premium crisps Sensations, Walkers always seems to find a new way of talking about the humble potato. “It has benefited from what appears to be a disaster – the obesity debate – through creating extensions such as Potato Heads. Its culture was well-placed anyway to take that lead,” says Browne-Swinburne.

Dillon’s mcdiet

It is not difficult to find other brands facing similar challenges. McDonald’s has hired fitness fanatic Mary Dillon as its global marketing director, replacing the rotund Larry Light, as the company struggles to portray itself as offering healthy choices, rather than forcing unhealthy burgers on customers.

And The Guardian last week changed its shape, switching to the Berliner format, as part of its attempt to galvanise itself ahead of a future of declining newspaper sales, internet-obsessed youth and the rise of throwaway, free newspapers.

The newspaper claims sales rose 40 per cent on the first day of the relaunch last Monday, but whether it will stop the long-term decline is uncertain. The new format has required a deep cultural change, highlighted in comments on the editor’s blog on The Guardian website.

The newspaper’s format change has been a long time in the making. But Terry Tirrell, chairman of branding agency Enterprise IG, which advises companies on changing their cultures, warns: “It is easy to say, but more difficult to do. Companies are far too impatient when they talk about changing their heritage and DNA.” Not all brands have taken the painstaking approach to change adopted by The Guardian.

Tirrell gives the example of one of his own clients, Ericsson, as a company that made a successful cultural change – but only after it discovered it did not need to change at all, but instead return to its roots. It was losing out in the mobile phone handset market to Nokia, which created handsets as fashion accessories, rather than pieces of high technology. Ericsson was still trapped in its engineering culture, producing leading-edge innovations but which were unsuited to a fashion-led market.

Hear the evidence

“Ericsson realised it needed to get back to its engineering roots, so it shifted handset production into Sony, and now has a successful handset business. Putting Ericsson’s engineering expertise together with Sony’s marketing expertise to create Sony Ericsson was a winning combination,” says Tirrell.

It is easier for some to transform their businesses than others. The BBC’s huge subsidies have helped it shift from traditional media to the Web and into digital television. Walkers has a lion’s share of the crisps market, so new developments can be pushed into retail channels. Coke’s might ought to help it, but its innovations still need to be workable.

Every company needs to have its antenna carefully attuned to the latest trends to avoid being stranded on the seashore in years to come. As Andrew Wanliss-Orlebar, corporate responsibility strategist at Corporate Edge, says: “It means looking much more broadly at trends and at what will happen in five years’ time. It is about identifying how in the long term your brand will continue to deliver value.”

That may be easier said than done, but in a sink-or-swim world, brands must beware of being beached.

In recent years there have been a number of examples of companies taking wrong turns when trying to innovate, serving as a warning that change can’t be rushedCoca-Cola’s Powerade Aqua + extension, seemingly set to be strangled at birth, is the latest in a long line of blind alleys entered by global marketing powerhouses.

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