Sun Tzu and the Art of Extension

So what’s the line on line extensions? I’m asking in the wake of a Natural Products Expo West that sure brought a lot of line extensions but not much in the way of attempts at ambitious breakthroughs. That may be a sign of these times: capital remains hard to come by, investors’ demands that cash not be burned isn’t compatible with bet-the-farm launches and the new administration has ushered in a period of financial and economic chaos that argues for conservatism on the innovation side. After all, if the president himself blithely allows that his actions may be stoking a recession, how good are the odds for cutting-edge innovation that likely commands a premium price and demands a degree of attention from consumers that they may not be willing to spare as they focus on more fundamental issues like the price of eggs, their Tesla’s plummeting resale value and whether their Social Security check is going to arrive on time?

In beverages at Expo, many of the line extensions that came on my radar were in the areas of gut pops and protein, sometimes overlapping with extensions into new formats – say, from ready-to-drink into powder sticks or vice versa. Many were well-crafted and appealing though there was also an element of desperation in some akin to what we saw in recent years when struggling brands extended into energy as a hail-Mary solution to their growth dilemmas. Still, there’s no denying that gut pops (AKA “modern soda”) and protein are trending right now.

Classic marketing dictates that you can’t line-extend your way to sustainable growth, however. If your core brand isn’t healthy, relevant and growing, the extensions are just shuffling the deck chairs, as the thinking goes. As I’ve noted before, Coca-Cola’s one-time “Ayacola” Sergio Zyman derided such efforts as “lazy marketing.” He was referring both to line extensions and new-product launches that distracted from the core brand’s challenges (though of course he did plenty of both, including devising OK Cola and New Coke, which, after it failed, became a temporary line extension on its way into the business case history books).

Still, there are line extensions and there are line extensions. One formative experience in my early days writing about this segment nearly three decades ago was the turnaround of Snapple undertaken by the doughty crew led by Mike Weinstein. The brand had been acquired by Quaker Oats, then still operating independently, and quickly run into the ground, in part because the complacent marketer of Gatorade didn’t understand DSD distribution and the need to keep innovation vibrant. Under Weinstein, a glass-bottle smoothie extension called Whipper Snapple proved to be a key part of the turnaround strategy. But here’s the thing: as a harder-to-produce item packed in an expensive swirl-shaped glass bottle, Whipper Snapple wasn’t necessarily intended to be a longtime topline contributor. Rather, it was intended to confer a quick boost of intrigue and relevance to the stagnant brand to get distributors and retailers behind it again and spark renewed consumer interest. In other words, to put a halo around the languishing core brand. (Another extension called Elements seemed more like a defensive move against an upstart SoBe brand, another legitimate reason to launch an extension. In that great marketing handbook from the fifth century BC, The Art of War, Sun Tzu has a lot to say about line extensions, which he refers to – sort of – during discussions of flank attacks.)

In a recent texting exchange with a friend who’s had an impressive career at both big and small beverage marketers, he said this about extension dementia: “This is how big companies think. Short-term results, minimize risks (so you get that promotion), little regard for the long-term health of the brands they are safeguarding.” He added: “I think that’s a story in and of itself!” Thanks, old pal! I just happened to have a magazine column deadline looming. So this is that story.

I should say here that when I refer to classic marketing, I’m not attempting to invoke an unchallengeable authority. I’m all too aware of how many successful new brands broke those rules in their insurgent days. Social media itself has upended a lot of those rules, with our attention economy tilting brands into a bias toward an “any PR is good PR” stance on their brands. It now seems quaint to think how wary major brands were of launching extensions out of a fear that failure would permanently stigmatize the brand. Those same brands now throw things into the market with willful abandon. Sometimes, those are nominally limited-time tests that, if they pan out, become “permanent” members of the line – “permanent” meaning for a year or two until jaded consumers are ready to move onto something else. Sometimes gravity does reassert itself. I actually for a while believed that LifeAid Beverage had beat the system by launching individual entries like FitAid and GolferAid before adding its “core brand,” LifeAid, a few years later. But that didn’t pan out and it’s now clear that FitAid is the unchallenged core brand. LifeAid itself was just a line extension with a limited role. The company lost some traction on that effort but seems to be doing fine regardless.

So now the gut pop segment is proving the latest frontier in the new-brand vs. line extension debate. I’ve noted here before that extensions into this close-in adjacency by the kombucha marketers themselves had failed as line extensions with names like Health-Ade Pop, and most had returned to the segment with entirely new brands (SunSip in Health-Ade’s case). It wasn’t much different from what happened more than a decade earlier when energy drink marketers like Red Bull and Monster launched energy shots to challenge 5-Hour that never got traction and proved that the shot segment operates by entirely different dynamics than energy drinks. They learned that you can’t line-extend your way into that segment. Maybe a new brand might have had a better shot, as the kombucha players believe with the likes of SunSip, but they no longer seemed to have the heart to play in shots with their core business continuing to ignite. The Ayacola likely would laud that choice. And by the way, 5-Hour’s own effort to extend into canned energy drinks hasn’t proved a slam-dunk either.

Among major brands that are going deep on extensions is Coca-Cola’s Simply juice brand. Give Coke credit for creating, rather than acquiring, a new brand that quickly grew into a billion-dollar contributor to the top line. It’s moved it into close-in adjacencies like zero-sugar entries and lemonade, a move that seems even smarter given the recent challenges of the orange crop. More recently, it’s teamed up with Molson Coors to enter the alcoholic RTD market with the Simply Spiked line. This seemed like more of a stretch to me because a household refrigerator brand you feed the kids doesn’t necessarily connote swingin’ times. But Coke pointed out that Simply’s an established part of the mixer repertoire of many users so it’s just offering a more convenient format for what they’re already doing. Fair enough. We’ll see. But to keep in sync with category trends, the partners lately have offered a Simply Spiked Bold line at 8% ABV that moves it into malt liquor territory, alcohol-wise. This one concerns me more. I think it has real potential to damage the brand. Then just weeks later, Simply veered to the opposite end of the scale as the base for a gut pop called Simply Pop. Can it work? It seems to violate the lesson that the booch marketers learned about extending into gut pops. And its health aura would seem to fight Simply Spiked Bold. From what I’ve heard, it’s been greeted with less than jubilation by retail buyers. Still, Coca-Cola has been a fine-tuned marketing engine. So I need to reserve my judgment. Part of me, though, can’t help but think of that Stephen Leacock character from a century ago, Lord Ronald, who “flung himself upon his horse and rode madly off in all directions.”

Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.