Magazine

Big Brands (Small Companies)


Ask people to name the big machine that lumbers around skating rinks resurfacing the ice, and chances are they'll say it's a Zamboni. In bike stores, customers looking for a super-strong lock usually ask for Kryptonite. And who can hear the name Archie without conjuring up that freckle-faced redhead from Riverdale?

Sure, you know these names. But you probably didn't know these brands are all owned by little companies, each with fewer than 100 employees and less than $50 million in sales. "Lots of people think we must be a $500 million company with two floors of a skyscraper in Midtown," says Michael Silberkleit, publisher of Archie Comic Publications Inc. Actually, it's a $15 million, 23-person outfit with modest digs in Mamaroneck, N.Y.

Standing alongside the Coca-Colas (KO) and P&Gs (PG) of the world, you'll find a good number of little companies whose brands loom large: Ovaltine, with $40 million in sales, is one of the famous old brands owned by the 30-person Himmel Group in New York. Tofutti frozen desserts come from a company with only 15 full-time employees and $13 million in revenues. Baby Jogger, a big wheel among the stroller set, is the product of The Baby Jogger Co. with a staff of 70 and $15 million in revenues.

How do you build a big brand without the ad budget or the marketing muscle of a giant corporation? The companies that have succeeded share certain traits:

-- They carve out a unique niche, often becoming the first and dominant brand in their category. Sixty-employee Kryptonite Corp., for example, owns 60% of the bike lock market.

-- They are masterful outsourcers, often farming out manufacturing and other functions that aren't central to building the brand. ID Software Inc., the 17-person creator of the computer games Doom and Quake, outsources everything but game development. Himmel, which manages other famous old brands like Bromo Seltzer and mouthwash Lavoris, farms out everything but advertising and marketing.

-- They often team up with bigger partners to boost distribution. The Republic of Tea, a 60-employee specialty company in Novato, Calif., got a big boost when Barnes & Noble bookstores agreed to sell its tea in their cafes.

-- They raise their profiles with astute public relations. Take Internet discount retailer Bluefly Inc. (BFLY), an $18 million company, which aggressively courted the business and fashion press to become an e-tailing success story.

Of course, establishing a big brand doesn't mean your work is over. Bigger fish, with much bigger budgets, may try to emulate your success. You may also spend a lot of time and money defending your patents and trademarks. And if you got big by standing on the shoulders of a giant, you could just as easily shrink back to the size of Tom Thumb if the relationship goes awry.

Here's what some small companies have learned.

BEWARE OF GIANTS

It sounds easy: Partner with a big corporation with a big distribution network to get your product out there. But as David Mintz, CEO of Tofutti Brands Inc. (TOF), found, the strategy has its risks. In the 1980s, the onetime Kosher caterer in New York invented a soy-based frozen dessert called Tofutti, which he sold locally. Then, Mintz hooked up with ice cream maker H?agen-Dazs for exclusive distribution in major markets. "All of a sudden, I was the hottest thing," he recalls. "My products were in supermarkets nationwide. I was on TV all the time--Joan Lunden, Regis Philbin, The MacNeil/Lehrer News Hour."

As the buzz grew, so did sales--from $30,000 to $18 million over an 18-month period. His staff of 10 ballooned to more than 100. But in 1988, Tofutti and H?agen-Dazs began to quarrel over money and control. H?agen-Dazs executive Jack Lyons, vice-president of distribution for the eastern U.S., says the two company presidents had a "clash of egos." Mintz chose to dissolve the partnership--with disastrous results. Sales plummeted to less than $10 million, and Mintz had to lay off all but a handful of workers. Patiently, he rebuilt the brand until sales crept back to $13 million last year. To keep consumers interested, Mintz focuses on creating new products. His latest hit: Tofutti Cuties, little frozen dessert sandwiches.

Mintz says he doesn't regret dancing with a giant. "It did get me known. But it almost got me bankrupt, too." Today, the 15-person company has more than a dozen wholesale distributors--including, ironically, H?agen-Dazs, which is now a non-exclusive distributor of Tofutti products in New York.

VALUE YOUR DISTRIBUTORS

When customers come into Gregg's Greenlake Cycle in Seattle for a three-wheeled, all-terrain baby stroller, they're clear about what they want--a "Baby Jogger." They're not even aware it's a brand name with a legion of knock-offs, says store manager Marty Pluth.

How did Baby Jogger become a household name? In 1984, Mary Baechler and her then-husband, Phil, invented the big-wheeled carriage in their Yakima (Wash.) garage. At first, it was mostly runners who bought the Racing Stroller, as it was then called. But as more retailers picked up the product--and turned it into a mainstream lifestyle item for active Baby Boomers--Baechler realized those distributors were the key to building her brand. So she focused on training retailers to demonstrate its proper use to skeptical parents. The strategy worked: By 1994, sales of what by then was called the Baby Jogger reached $5 million, and by 2000, they had leapt to $15 million.

But like any great idea, this one bred numerous copycats around the world. Baechler, whose strollers sell for about $180 and up, was shocked on a recent business trip to Amsterdam to find about 30 different competing all-terrain strollers in a baby store. "I said: `Yikes! How did this happen?"'

To goose her sales, Baechler started selling strollers online last year, but that strategy backfired. Some angry retailers called her up and screamed at her, she says. Others turned to her rivals.

The result: Baechler recently halted all Web sales, despite her hefty investment in an online shopping system. Ultimately, she realized, The Baby Jogger Co. needed its retailers far more than the Internet. "They're what built this company," she says.

INSPIRE AFFECTION

Few industrial products have the pop culture appeal of the ice resurfacer made by Frank J. Zamboni & Co. Hockey fans cheer the slow-moving Zamboni when it rolls out at National Hockey League games. "It's like a mascot," says Paula Jensen, who handles merchandising for the 50-employee, Paramount (Calif.) company.

That warm feeling translates into sales industry estimates peg at $16 million. Over five decades, Zamboni has kept its lead in the market despite growing competition from Canadian rivals such as Ontario-based Resurfice Corp. At about $80,000 a pop, these babies aren't cheap, and there's little to differentiate them--except for the Zamboni brand. Indeed, the Zamboni name is closely associated with skating culture, says a loyal customer, Ed Peduto, general manager of Burbank Ice Rink in Reading, Mass. "They have a commitment to rink operators. They've been at every trade show I've ever been to, and they work hard to stay on top."

Not only do patrons applaud when the Zamboni rolls out, says Peduto, they eagerly consume Zamboni merchandise. His best-selling item: Zamboni die-cast miniatures featuring the logos of the NHL Stanley Cup winners.

The Zamboni's mystique isn't lost on Jensen. She's a former Walt Disney Co. merchandiser who joined Zamboni in 1997 and has expanded licensed goods from the usual caps and T-shirts to include everything from duffle bags to coaster sets. Such sales account for nearly 10% of revenues.

She let Wendy's International use a Zamboni in a 1997 Superbowl commercial, and in 1999 David Letterman was allowed to stage a mock Zamboni race outside his studio. But Jensen turned down the request of a beer maker that wanted to claim, "Our beer is colder than a Zamboni," because it clashed with the company's image. When it comes to protecting your brand, there are some brews that just don't mix.

STAY TRUE TO YOUR BRAND

Developed by Louis Silberkleit and his partners during World War II, Archie may well be the world's oldest teenager. But Archie's staying power isn't accidental. Silberkleit and later his son Michael, now the publisher and CEO of Archie Comic, have worked hard to keep Archie and his pals relevant while retaining their wholesome charms.

In the 1940s, Archie sold 6 million comic books a month. Then, TV supplanted comic books. Archie would surely have become a socio-cultural footnote if it weren't for Louis Silberkleit's move to put an Archie cartoon on TV in 1969. Today, the company sells about 800,000 comic books a month, but a growing share of its $15 million in revenues comes from licensing for television, movies, and merchandise.

Michael Silberkleit doesn't make decisions about the brand lightly. Residents of Archie's Riverdale now use cell phones and computers and grapple with contemporary issues such as race relations. But he resists pressure to modernize the illustration style. Just as vigorously, he defends Archie's apple-pie image and his trademarks. Silberkleit has gone to court to shut smutty Web sites that used names of Archie characters in their domain names. He was no less forgiving when Melissa Joan Hart, star of the TV version of Sabrina the Teenage Witch, which is based on an Archie character, posed nearly topless for Maxim magazine in 1999. Silberkleit faxed Hart and Sumner Redstone, head of Sabrina licensee Viacom Inc., to express his outrage and exact a public apology from Hart. "Our brand has always been about entertainment that is clean and suitable for kids," says Silberkleit.

SEEK GOOD PRESS

Back in the 1970s, Kryptonite had the brand thing all locked up. Its unique, "U-shape" bicycle lock, protected by patents, was reputed by cyclists to be the toughest lock around. But by 1994, most of the patents were expiring. How did Kryptonite keep its brand out front? With publicity. Lots of it.

That year, to promote its line of locks in New York, then-CEO Michael Zane locked up his own bike on the city's mean streets. For 48 hours, he sat in a stakeout van with a New York Post reporter, watching several would-be thieves fail to snap the Kryptonite. The $30-million, Canton (Mass.) company, has been hyping itself shamelessly ever since. Its surveys, such as Top Ten Worst Cities for Bike Theft, regularly get ink. Last February, Kryptonite executives donned war paint and kilts to dole out bonuses to celebrate banner sales, and got themselves a writeup in the Boston Business Journal.

Tacky? Perhaps, but it seems to work: Sales have grown by an average of 12% a year, and the company continues to outpace huge rivals such as Master Lock Co. and Yale. "We're not bashful," says CEO Gary Furst. "We know how to make impressions." Great marketing, to be sure. But it doesn't hurt if the product behind the brand is pretty good, too. By Ellen Neuborne


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