Old Brands New Tricks

By Knowledge@Wharton | June 30, 2015

When Kat Cole took over as president of Cinnabon, the company was immersed in an initiative called Project 599.

The company’s gooey cinnamon rolls that are “the size of your face” topped out at more than 800 calories and, as consumers became increasingly health conscious, Cinnabon’s leadership was worried that people would no longer be so quick to give in to temptation. So they began thinking about how to get the calorie count down to that magic number just below 600.

But then Cole killed the project.

“So much money was spent on chasing this innovation goal, and that goal became the focus instead of the process of asking, ‘Is this going to achieve what we’re looking for?’” Cole said. “The second problem was that to get the product from 880 calories down to 599, we needed to take out real (ingredients) and put in synthetic (ones).”

To really reinvigorate the classic brand, leadership at Cinnabon — and other iconic brands – have had to figure out what people really valued about the brand, and how to change the conversation to highlight those aspects in a way that appeals to the coveted millennial demographic.

During a panel discussion at last week’s Retail and Consumer Goods Summit in New York, Cole, along with executives from Campbell Soup and Fisher-Price, discussed how they are trying to find growth in markets that have turned stagnant and reignite a “cool factor” around their brands. The conference was organized by Knowledge@Wharton, Wharton’s Baker Retailing Center and Momentum Event Group.

Viva Indulgence

Launched 30 years ago, Cinnabon landed in a “troubled place” in the middle of the last decade in part courtesy of the Great Recession. “Our core franchise business in the world is located in malls and airports,” Cole noted. “When people have no discretionary income, they don’t travel and they don’t shop.”

The brand still had a lot going for it — there was no real No. 2 competitor in the space, and it had a lot of visibility from being located in such high traffic areas — but franchisees were losing belief in the business model in the face of year-over-year double-digit sales declines, said Cole. She spent four years as president of Cinnabon and now heads its parent company, FOCUS Brands, which also includes Auntie Anne’s pretzels, Carvel ice cream and the Moe’s, McAlister’s and Schlotzky’s restaurant chains.

“When you have such small operations,” as most of the franchisees did, “there’s not a lot of fat to cut out of the business,” she added.

Leaving aside the push toward 599 calories, Cole and her team instead set out to answer a question: “What do we actually own? Do we own cinnamon rolls? Do we own cinnamon? If we own cinnamon, we should be putting the cinnamon in everything in the world,” Cole said. “Is it the frosting? Then we should put our frosting at every cupcake chain, every doughnut chain.”

The answer turned out to be none of the above — and all of the above. “We realized that although the cinnamon, frosting and dough were proprietary and extremely special, when we asked consumers, ‘If I say Cinnabon, you say blank,’ they didn’t mention an ingredient until word number 10,” Cole said.

Ahead of ingredients were words like “aroma,” “soft,” “moist,” and “indulgent,” which lead Cole and her team to conclude that what Cinnabon owned was “irresistible indulgence.” From there, the company made several critical moves.

Among them: For the first time in the product’s 22-year existence, the company mandated that all franchisees carry Minibons, which only have 80-90 calories each. Some within the company feared that pushing the smaller — and more critically, cheaper — product would actually push down profits further.

“They were blinded by short-term fear that would prevent long-term progress,” Cole said. “Yes, 5%-10% of customers might trade down. But because of the lower price point, now maybe they’ll add a drink or feel free to share or we’ll get people who wouldn’t even consider us today.”

As the brand evolved, Cole kept coming back to a story from her childhood. When she was nine years old, her mom announced that they were going to leave her father, who was an alcoholic. “I did not cry. I did not get upset. I said, ‘What took you so long?’” she recalled. “For three years it had been bad, but I did not have the authority to move us outside of our house. Evolving a business and a team is just like that. Our consumers and front line employees know the right thing to do for the business before we do.”

Back to Fresh

For Campbell Soup, part of the challenge was to change the culture of a 146-year-old brand that had enjoyed “uncontested” success for many years, said Carlos Barroso, senior vice president of global research & development. “The reality changed; people were eating less soup and, the fact is, they have for a long time. It just took a long time to sink in.”

One major hitch: Campbell’s core customer base is getting older — and as a group, it is very different than the millennial shoppers the firm is trying to attract. There has been a “seismic shift in consumer demographics,” Barroso noted. “They’re not the same consumers from my generation; certainly not from my parents’ generation.”

More than ever, today’s consumer is increasingly shopping the fresh food at the perimeters of the grocery store, not from the center aisles where most Campbell products can be found, Barroso said. They also want to know what goes into their food — and why.

Through its ownership of Bolthouse Farms, Campbell is one of the leading producers of carrots in the U.S. and sells fresh juices that are found in most supermarket produce sections. But most consumers didn’t connect those experiences with the company.

“We knew we needed to bring a lot of change to this brand,” Barroso noted. “But you can’t just go in and blow up the place with such an iconic brand. People don’t change their preferences overnight.”

To bring about change, Campbell looked at its offerings in terms of three categories. First were its core products, which had $4.5 billion in sales in fiscal 2014.

“The job there is to organize and manage for moderate growth and profit — but this is not going to get us the growth to achieve our targets,” Barroso said. But there are still innovation opportunities there, he added: For example, Campbell recently unveiled a line of sauces designed to create minimal-prep time meals in slow cookers.

The second category, snacks, includes the Pepperidge Farm line of products and a number of regional brands. The third — the packaged fresh division, which includes Bolthouse and a line of fresh soups — only had $1 billion in sales in FY2014, “but it’s the one where we expect the highest growth rate,” Barroso said.

In the food business, he added, “taste is king. Campbell’s learned that lesson the hard way when we got on the reduced sodium mantra; it looked like the right thing to do at the time, but it became the sole focus of R&D for many years. And it was a huge mistake because it compromised flavor. We took a big hit; Progresso picked up 4%-5% of market share; in a stagnant category, that’s huge.”

A Mobile That Doesn’t Shut Off

At Fisher-Price, the key to retooling the 85-year-old $3 billion brand was to go back to its roots, said executive vice president Geoff Walker.

“(Co-founder) Herman Fisher had a mom who was a schoolteacher. He had a roommate in college who was a child psychology major. He wanted to create toys and products that developed kids in a unique way,” Walker noted.

In recent years, however, that mission had gotten lost; the company talked about being a toy manufacturer “and creating a breadth of products to satisfy kids,” Walker said. “We went back to being a child development company.”

When Walker came to Fisher-Price from parent Mattel in 2013, leadership was “still talking about Generation Xers. We were still doing TV (ads). Why? That’s not where millennials are playing.”

The company retooled its marketing to focus on social media, and to present images of parents that millennials would recognize. It was hard for some company executives at the East Aurora, N.Y., headquarters to swallow an ad that featured a mother with tattoos — “but millennials have them,” Walker said.

He also got flak from some because the same mother wasn’t wearing a wedding ring. “But 50% of moms are unmarried,” Walker said. “We were changing the brand around identifying who the customer was and then talking to them differently.”

And it wasn’t just important that the moms Fisher-Price was trying to attract recognized themselves in the brand’s marketing — they also had to recognize their kids. “In the images from our old style guide — it’s beige hell. The kids don’t look like they’re having fun, it’s not really cool,” he said. “Now we have kids interacting with the products a lot more, looking at the camera, smiling. It doesn’t seem like rocket science, but it needed to be done.”

Fisher-Price also turned a designer’s eye to many of its products, streamlining its iconic xylophone and turning a clunky toy laptop into something akin to the sleek technology parents might have in their own offices. Thanks to gadgets like the iPhone or iPad, that’s the kind of attention to aesthetics that consumers expect, Walker noted.

“Moms wanted something that was room décor,” he added, showing a “before and after” image of a baby seat. “They want something that will fit into the design of their home. So we went from animals — lions and tigers and bears — to a really good geometric pattern.”

Fisher-Price is also pursuing partnerships with designers from the non-children’s products world, and is working with crowdsourcing platform Quirky to solicit new product ideas. And design isn’t the brand’s only nod to mobile technology — it’s also unveiling swings and mobiles that can be connected to consumers’ smartphones so they can restart them with just a swipe.

“We hadn’t grown since 2007; we had to change,” Walker said. “It made some people awfully uncomfortable when we started showing them some of the facts about millennials. But then they acknowledged that they were not millennials. You have to continue to go back to your numbers — we were a $2 billion business in dramatic decline.”

Vodka and K-Cups

Cinnabon’s Cole noted that among her firm’s new initiatives is the expansion of the brand into other consumer products through partnerships with Pinnacle vodka, Green Mountain Coffee and Pillsbury. The company now has more than $1 billion in product sales in consumer packaged goods. Cinnabon is not a manufacturer of any of the products, but works with the partner to make sure each one tastes and smells like the real thing.

“We’re listening to fans,” Cole said. “They wanted the flavors of Cinnabon in other sorts of occasions where they indulge.” Consumers also saw a clear connection between the cinnamon rolls and coffee.

“For our partnership with Green Mountain, we went through 17 different flavor innovations,” Cole noted. “Because we’re so differentiated, the expectations for Cinnabon are crazy high…. We know we’re a little guy in many of these partnerships, but we know our brand. And we wanted to be in single-serve coffee.”

Cole and her team are now working to bring the same type of initiatives to other FOCUS brands. Among the challenges of that effort is a lack of the urgency that the cinnamon roll chain was facing during the recession.

“We have a brand that has never been broken — Auntie Anne’s. It’s had year-on-year crazy growth and it’s never had a down year ever. It’s been more difficult to get very profitable franchisees and very comfortable owners to come around for the need for innovation,” Cole said. Her argument in favor comes down to three key lines: “The first one is, if we don’t, the competition will. Basically, we scare the bejesus out of them. The second is, just because we can does not mean we should. Those are the bumpers in the bowling alley that keep you from wasting resources and going off path.”

And the third: “Just because things could be worse, does not mean we do not deserve to … and are not obligated to make them better.”

Cole also shared a fourth guiding principle for growing brands, one that her mother writes every year in Cole’s birthday card: “Don’t you dare forget where you came from — but don’t ever let it define you.”