Hits & Misses
(Business 2.0) – [MISS] The burghers are revolting! With its arch, ad-driven revamp, Burger King has climbed back atop its throne, with U.S. same-store sales rising 9 percent in the past two years. Yet the enlightenment of the monarchy isn't sitting well with its subjects: After a period of unrest, Burger King has reportedly "severed relations" with the group that represents the owners of 90 percent of the chain's 7,600 U.S. outlets. The company claims the franchisees are refusing to support key initiatives such as late-night hours and value menus; as a result, it withheld its $1 million annual subsidy to the group. Industry consultant Ron Paul says the feud may squelch the chain's long-rumored plans for an IPO: "It's never good when you're not getting along with your own franchisees. This is a red flag."
[HIT] Near beer. After 20 years on the market without a redesign, Seagram's wine coolers were looking like a guy with George Michael's three-day stubble and Don Johnson's white coat. Sales growth had come to a halt as consumers opted for hipper "malternatives." After conducting dozens of focus groups, Seagram's marketer, United States Beverage, finally stumbled onto the problem: Cooler drinkers wanted "something that would allow them to fit in." The solution? A container that looks more like a beer bottle. Last year Seagram's introduced a rebranded line called Cooler Escapes with a narrower head, and so far the makeover is working: The beer-esque bottles with such nonbeer flavors as Green Apple AppleLicious have led to double-digit sales growth, helping Seagram's capture an estimated 36 percent of the $230 million category.
[HIT] Make it Greatyear. How to revive a 107-year-old brand? Go where the margins are. The strategy is working for Goodyear, which, after losing $2 billion between 2001 and 2003, just reported its best quarter in seven years, with sales reaching a record $5 billion and profits nearly tripling to $142 million. CEO Robert Keegan turned things around by focusing on the lucrative tire-replacement market, marrying a 50 percent increase in ad spending to the rollout of high-end products with catchy names like SilentArmor and Fortera TripleTred.
[HIT] Making free pay. In a Netflix- and TiVo-obsessed on-demand world, how has Comcast kept its customers' attention? Two words: easy and free. Comcast met its target of delivering 1 billion video-on-demand programs this year a full two months ahead of schedule, a feat it attributes to VOD's ease of use and the fact that 95 percent of the content is free. As a result, the company says the rate at which its customers are dropping pricey digital cable subscriptions has fallen by 30 percent in the past year.
[MISS] Bought shares? Bummer, Dude. As Overstock.com reported a miserable quarter in which net losses quadrupled, CEO Patrick Byrne tried to reassure investors with his polished managerial style. In a note to shareholders, Byrne wrote, "Q3 was rough. My bad." He added that he "bit off" more than his company could chew, and that on the "last bite"--a failed ERP project that blocked new listings for a month--"we choked." Byrne then addressed his lawsuit against a hedge fund and research firm he accuses of driving down Overstock's shares: "Some will criticize me for taking my eye off the ball to pursue a jihad." No word from the courts yet as to whose bad that was.
[HIT] Sales GOOOOOOAL! In October, Major League Soccer's newest team, Chivas USA, finished the season the way it began--by losing. In fact, it ended up dead last at 4-22-6. But off the field, the spinoff of the Mexican club Chivas was the big winner, topping MLS in jersey sales and taking in about $3.5 million in sponsorships from companies such as Honda and Bank of America. Chivas USA figures to face tougher competition next year--its success has caused a flurry of interest from Mexican and European clubs wanting to start new teams to cash in on immigrant loyalties.