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February 19, 2007

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BWJones

Well, as I sit here sipping my Blue Moon Belgian White Ale (subsidiary of Coors), you could color me surprised as I had no idea that both Scharffen Berger and Converse, both brands I purchase, were owned by Hershey and Nike respectively. Reminds me of a conversation I had back in 1986 with some fellow punk rockers when I said "with all of these big corporate mergers, it's getting harder to be cool...."

Timothy

In some ways this relates to the thesis of Heath and Potter's 2004 "Nation of Rebels," namely, that positional goods (the opposite of network effect goods, their value increases as fewer people use them) cannot be made widely available in an "age of abundance.” In their eyes, this drives all kinds of counterculture behavior - competitive consumption by another name. But it would also drive the brand fragmentation that Chris describes.

Here's the Amazon link.

Aayush Iyer

Funny though that now people will know their Converse\Nike connection a lot better :)

What I'd like to know is if the niche brand works in developing markets. In places like India, the Nike and Adidas still do a LOT better than Niche brands. Does it take time for perceptions and taste to come from individual qualities instead of the giant brand image?

worth

Aayush, what people look for first is a product or service that they don't believe will betray them. That's why brands arose in the first place - names you could trust. In the U.S., that is now taken for granted and people feel safe branching out from the well-known names. In India, that may not be the case yet, so people are going with the brands they can trust. I would bet that an artisan in India could sell more shoes for more money online to American customers than they could in their own backyard, since we take the quality for granted and would be taken by the novelty of wearing shoes that no one else has.

Jed Christiansen

Another Nike subsidiary that is not incredibly obvious is Cole Haan.

This concept has been in practice for a while. Black & Decker bought a small company back in 1960. In 1992, they wanted to start a line of professional tools, but with Black & Decker's poor reputation in the marketplace, they had to keep the new line very separate and distinct. Suddenly, the company bought in 1960 had it's name resurrected, and the legend of DeWalt tools begun.

DeWalt immediately garnered a great reputation, and the fact it was owned/operated by Black & Decker simply wasn't advertised. It worked for them!

Ehren Cheung

Excellent post. I think the niche brand idea can also be applied to Flickr and Yahoo. It is also one of the reasons why when Yahoo acquired Flickr, there was no rush to fully integrate and embed the Flickr users into the Yahoo portal of applications. I know of a number of people, myself included that were initially fans of Flickr only to be severely disappointed when Yahoo acquired the Canadian startup. Even to this day, Yahoo continues to struggle with the idea of getting rid of the Flickr name to push forward its own name, but in my opinion that'd be silly considering Flickr is renowned in the realm of photography whereas Yahoo Photos lacks that reputation.

Jason Falls

Another good example of a niche brand's purchase being handled correctly (disclosure-I work for the ad agency for said brand) is Maker's Mark. Beam Brands owns it, but allows it to continue it's folksy, among friends marketing strategies much to the corporation's delight. Few folks outside the spirits industry even realize it's a Beam product.

BillyG

Converse is a division of Nike? Damn...

Vincent LaConte

Seems to me the medium-term trend is definitely towards consolidated ownership, but conversely (no pun) disaggregated brands.

Marty Neumeier has the definitive word on this strategy in "The Brand Gap" and "ZAG" -- building a "house of brands" (rather than a "branded house"), one must be careful to avoid/minimize cross-brand contamination.

Yet another example of the many tiny forces working in concert against big companies getting "too" big.

David

And Starbucks owns Seattle's Best Coffee. I guess the best strategy is to own all the major brands and all the niche brands, so no matter who consumers buy from you win.

crypt0

I don't think this is a niche brand vs a major brand type of thing. It's about what the brand represents and stands for. Hershey's doesn't stand for high end chocolate, so it would be suicidal for them to try to make it so. It's not that niche brands are winning, it's just they stand for something DIFFERENT than major brands.

Mary Warner

For a good discussion about the psychology of how people relate to brands, especially niche brands, check out Alex Wipperfurth's book "Brand Hijack."

Did you know that Unilever owns both Dove and Axe? I have to credit an unknown blogger for this piece of news. Dove has the Campaign for Real Beauty, while Axe promotes sex-crazed women. How's that for keeping brands distinct?

Dick Rowan

I see all brands as pre-packaged decisions. Big brands are big packages that help us make broad decisions about a product category or manufacturer. For example, “You can’t go wrong buying a Toyota.” The assortment and variety possible only in niche brands provides us with more personal decision packages (but not really personalized).

I think the larger point is that most of us can't keep up with the changing business structures or corporate shenanigans behind our brand choices. Expectations for corporations are low. Products rule.

Elvis

Maker's Mark is owned by Jim Beam? Damn, another one bites the dust.

As an example of how NOT to do it, GM buys Saab and promptly replaces their quirky, distinctive cars with rebadged Chevys.

Joel

Very good point. Also consider Chipotle's (the burrito restaurant based on the Subway-made to order concept. McDonald's purchased it a few years back and has not at all tried to co-brand the companies. As a matter of fact, they have not marketed the purchase at all. Doing so would harm both the Chipotle's brand and perhaps even McDonald's brand. No one wants their healthy burrito to be owned by a fatty multinational corporation.

David

It's like there's a whole new positioning strategy. Stealth branding.

Shahar Even-Dar Mandel

Earlier today I tried sending a trackback to this post, but somehow failed, so here is a link instead

doug

One of my favorite quotes in this vein is from the memoir of the owner of Sterling winery after they sold out to Heublein brands. Heublein wanted them to buy much larger volume tanks to achieve economies of scale. Sterling responding by saying "we like to keep our reds separate from our whites."

coloncleanseMike

I agree in regards to the vegetarian shoes comments... Increasing awareness through popular brands "is" a good thing indeed.

rob

I agree with the sentiment that it is not an "either-or". Niche brands and mass brands will always co-exist. What is exciting is that niche branding is ever more possible as branders can cost effectively communicate with "networks of interest." No doubt, the big brands are working this angle (e.g.P&G is a data-mining and social networking leader)but the playing field is somewhat more level....us wee folks can get consumer awareness, interest, trial and purchase through target means....that still costs serious dollars, just not has much as before and not simply through guerilla tactics. The landscape has changed. We can use and afford many of the same tactics as the big guys.

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Heublein wanted them to buy much larger volume tanks to achieve economies of scale. Sterling responding by saying "we like to keep our reds separate from our whites."Dove has the Campaign for Real Beauty, while Axe promotes sex-crazed women. How's that for keeping brands distinct?
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baby

Ah, man, did you have to go and ruin my love for Converse like that? I have never bought a Nike shoe in my life. I probably never will. Although, I have bought adidas once... and probably will again. The truth is, I just don't like Nike. I never even knew about the sweatshop issues back in the day. I just don't like 'em. But I love my Converses, and now you say I can't like them anymore? Suddenly the brand HAS lost coolness. Shucks!
I think niche brands work well in bigger markets – very well. HP tried to keep the Compaq name brand, but it didn't work. Personally, I love indie, and so am very happy when brands stay as they are even when bought out by big companies. What often used to happen in the past was that the 'big' company would try and 'improve' on the product. It never worked! Besides, one of the other reasons why I think big companies keep the 'niche' brand, is because the company is so big they have to differentiate between products in some way. If changed the converse name into Nike, it would get a little confusing when you are looking for a specific style or shoe. The chocolate company is a good example of this.

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Yes! For example I'd love to have WDFA work on something more adult or just different, even if (semi-)low-budget, that would be released as a Touchstone or Miramax picture instead of as the latest "Disney Classic".

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