Hits & Misses

From the November issue of Business 2.0 Magazine: Company bets that paid off and those that bombed.

By David Jacobson, Business 2.0 Magazine

(Business 2.0 Magazine) -- [HIT] Hall of Fame game. When launching a new version of your star product into a sluggish market, you can't afford to be subtle. So as Electronic Arts (Charts) prepared to debut Madden NFL '07 - with buyers thought to be waiting for new hardware from Nintendo (Charts) and Sony (Charts) before splurging on updates - it called an all-out marketing blitz, including a "making of" TV show on Fox Sports, an MTV special featuring bands whose music can be heard in the game, and promotions with Topps and Snickers. EA also mobilized the fan base by declaring its Aug. 22 rollout date a holiday, drawing thousands to Madden, Miss., for a parade with NFL stars. Final score? A record first-week performance: Unit sales beat last year's by 12 percent, and the $100 million take matched the opening-week U.S. box office of Hollywood hit The Da Vinci Code.

[HIT] Secret to success. To 2006 buzzwords like "long tail" and "truthiness," add "discoverability." That's the strategy employed by Reef to market its latest innovation: a sandal with a built-in bottle opener. The concept came from a seaside camping retreat in Mexico, where company execs found themselves unable to open their brews. When the Fanning arrived last year, it was an inside joke for the company's core market, since it's named after beer-loving pro surfer Mick Fanning. But at mainstream venues like Macy's (Charts) and Nordstrom (Charts), Reef made no mention of the bonus feature. "We were going after the discoverability aspect," says Reef's Lindy Williams. Thanks to word-of-mouth buzz, which yielded mentions in Maxim and on The Tonight Show, Reef has sold 1.6 million Fannings, making them the company's top-selling footwear.

[MISS] Corn dogs. A few months ago, with oil prices soaring, ethanol companies looked ready to shift into high gear. But lately their stock has been stuck in reverse. Since their IPOs in June, No. 2 U.S. producer VeraSun Energy (Charts) has seen its shares fall by a third, while those of No. 4 Aventine Renewable Energy (Charts) have dropped by half. As Goldman Sachs (Charts) put it in a recent report, "Many investors are ... concerned that ethanol is nothing more than a politically motivated, media-hyped, high-oil-price-inspired fad." Though some see a refinery building boom leading to oversupplies, Goldman's analysts are long-term bulls, expecting demand to rise 14 percent annually through 2012. Still, the short-term outlook seems to be holding sway, causing No. 3 producer Hawkeye Holdings to scuttle plans for a $325 million IPO in September.

[HIT] Cuckoo for cocoa. The nutritional case for dark chocolate is complex: Substances in cocoa beans called flavanols could offer cardiovascular benefits, yet chocolate bars are loaded with calories, sugar, and fat. But the marketing case is sweet and simple: After touting flavanols on their packaging, Hershey and Mars are enjoying booming sales. Hershey (Charts) calls dark chocolate a "major growth platform" and says sales of its Special Dark bars have grown 37 percent this year. Privately held Mars, while declining to reveal specific numbers, claims to be reaping the benefits of a decade spent funding "cocoa science research." Mars has even ventured into the health-food aisle with CocoaVia, a line of dark chocolate products with cholesterol-lowering plant sterols added to bolster its health claims. But it may also be going beyond the bounds of credulity: In October, Mars expanded CocoaVia to include milk chocolates with the same flavanol and sterol levels as the dark product, but with more calories, cholesterol, and sugar.

[MISS] Fall from grace. It's been four years since the Segway personal transporter failed to live up to its world-changing hype. Now, adding injury to the insult, the company has recalled every Segway ever sold to fix a software glitch that "can unexpectedly reverse the direction of the wheels, which can cause a rider to fall." To its credit, the company discovered the problem while testing a "cross-terrain" model scheduled for release this fall. But the recall also revealed a rather embarrassing detail: the fact that only 23,500 of the scooters have been sold since their 2002 debut - a far cry from the 50,000 to 100,000 units that the company had predicted it would sell in the first year alone.  Top of page

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