Hits & Misses
(Business 2.0) – [HIT] The power of positive pricing. While U.S. automakers were busy sacrificing profit margins for sales volume in June and July with their employee discount programs, Honda stuck with its sticker prices--and ultimately stuck it to the competition. In August, as waning interest in the promotions led to a 6.8 percent year-over-year sales drop for the Big Three, Honda chalked up a record month. Sales grew by 19 percent over the previous year thanks to solid performance in both sedans and trucks and a 243 percent jump in sales of hybrid vehicles--proof, it seems, that growing numbers of Americans prefer their discounts at the pumps.
[MISS] FCUK off. After a 69 percent drop in operating profits for the first half of 2005, French Connection is giving the finger to its edgy marketing moniker, FCUK. Though it was widely credited for helping the company nearly quadruple earnings during a six-year span, the logo is now being blamed for the slump, with analysts chiding the chain for allowing the idea to grow stale. The company finally decided to reposition itself this fall, but results may not improve right away: Wholesale orders in Europe are down 15 percent, while the glut of merchandise at its own retail outlets has been so severe that the company delayed the release of its winter lines.
[HIT] Mmm, mmm $$$. After years of declining sales, it seemed like Warhol canvases would soon be the only prominent spaces displaying Campbell's condensed soups. But CEO Douglas Conant made it his mission upon his arrival in 2001 to heat up the category deemed too old-fashioned for next-generation soup eaters--and thanks largely to a kid-centric marketing campaign featuring online games like Piping Hot Pinball and Souper Slugger Baseball, he looks to be succeeding. Sales of condensed soup rose 19 percent over the past year, outperforming the growth of ready-to-eat offerings and helping to boost Campbell's quarterly profits by 63 percent to $96 million.
[MISS] The why-pod. Some things, like the bulky, badly designed cadre of pre-iPod MP3 players, clearly need an innovator to come up with a better solution. Other things, however--like the pouring of hot water onto coffee grounds to make a cup of joe--need no such rethinking. Yet this didn't stop Procter & Gamble and Sara Lee, makers of coffee "pod" systems Home Café and Senseo, from spending an estimated $54 million to market the fledgling products. The return on this overcaffeinated investment? Since their release in 2004, pod coffeemakers have taken a paltry 3.5 percent of the U.S. drip coffeemaker market, with each manufacturer ringing up coffee-pod sales of less than $10 million.
[HIT] We can already taste those Cuervo Doritos. Why build your own brand when you can take advantage of a 210-year-old household name? It's a strategy that's working for Justin Havlick, CEO of startup Thanasi Foods. After finding inspiration in a construction worker eating sunflower seeds while wearing a Jim Beam T-shirt, Havlick approached the bourbon maker about a licensing deal for a line of snack foods. A year later, Havlick has a hit on his hands: His $1.39 Jim Beam-soaked sunflower seeds have found their way into 25,000 stores and have already sold 1.7 million bags. But seeds are just the beginning of Havlick's branded-commodity-food strategy: A Jim Beam beef jerky line launched in February will be in 10,000 locations by year's end, and more crossovers are on the way. Havlick says Thanasi is already turning a profit on annual sales of $4 million.
[MISS] Imagine all the ... empty seats. The same thing that did in the Beatles--too much Yoko--has now risen up to bite Clear Channel Entertainment. Clear Channel and its production partners for the Broadway musical Lennon recently closed the much-hyped show after a run of just six weeks. Audiences complained about the lack of Beatles music, while critics decried the whitewashing of Lennon's life, with the New York Times calling it too "Ono-centric" and Newsday stating that it was "filtered through the protective, selective, later-life self-interest of Yoko Ono Lennon." Attendance at the Broadhurst Theater fell to 40 percent of capacity in September, a result that meant the show would fail to recoup its $7 million in production costs.