A large number of famous brand names, from Oxydol to Log Cabin and Vlasic, have become orphaned in recent years as package-goods powerhouses focus their resources on proven players that are No. 1 or No. 2 in their categories. Companies currently looking to weed out their brand portfolio include Clorox Co., P&G and Unilever.
Some smaller marketers hoping to nurse these cast-off brands back to health are finding they don't have the financial wherewithal to pull it off. But larger rivals do: As new owners pledge to support long-neglected brands, competitors are taking the threat seriously. Clorox Co., for example, earlier this month launched an estimated $10 million TV and print campaign and restaged its Clorox 2 brand as "Clorox Bleach for Colors," in part to counter the anticipated challenge from tiny Redox Brands, which purchased P&G's old Biz color-safe bleach brand last year.
"We have to look to build share in this category, especially protecting our share with a new player in this category," said Scott Vogel, VP-general manager, laundry additives at Clorox. "I would always expect a new owner to be looking to build share. They made an investment in this business and share-building would be an obvious thing for them to think about. So we're doubly on guard right now."
Invigorated competition or not, there have been a lot of troubles faced by food industry orphan-brand companies in recent years, including Vlasic Foods International and Aurora Foods (see story, P. 12). That doesn't augur easy times for orphan-brand consolidators in non-food categories.
"It's a tough model," said Burt Flickinger, managing director of Reach Marketing, a Westport, Conn., consulting firm, of the orphan brand rollups and spin-offs. "To make them work right, it's got to be run with an entrepreneurial approach rather than like a big corporation with all the perks."
Adoptive parents aren't daunted. Redox, a Cincinnati startup founded by two former P&G executives and in which P&G holds a minority stake, is one of two new package-goods players to emerge in the past year based on purchases of brands shed by P&G. Redox also bought Oxydol laundry detergent last summer and is looking to acquire as many as a dozen similar brands from P&G, Unilever and others.
The Shansby Group, a San Francisco-based investment company, specializes in buying, rebuilding and reselling small package-goods brands. It bought P&G's Spic and Span and Cinch brands in January and placed them into a new venture, the Spic and Span Co., which also is looking to buy more brands (from P&G and others). The Shansby Group joins other players such as Global Household Brands, formed in 1997 when it bought former Block Drug brands 2000 Flushes and Carpet Fresh.
Gary Shansby, general partner of the Shansby Group, said some orphan brand companies have struggled because they were launched by investors with little package-goods experience and unrealistic expectations.
Mr. Shansby, a veteran of Colgate-Palmolive Co., Clorox and former CEO of household and consumer products company Shaklee Corp., said his group's 14-year track record of buying and reviving brands shows the strategy can work. The Shansby Group has bought, built and resold such brands as Famous Amos cookies and Terra and Garden of Eatin' snacks; its current properties include Cutex Co. and Mauna Loa Macadamia Nut Corp., both of which have plans to increase marketing support and product introductions, he said.
"Clearly you can't just buy the brands and get distribution and hope that they'll do well," Mr. Shansby said. "You really have to give them the marketing and advertising support they need."
P&G spent hundreds of millions of dollars on Spic and Span over the years, Mr. Shansby said, but in recent decades shifted its focus to bigger and more global brands. Spic and Span, Cinch, Oxydol and Biz hadn't had their own brand managers at P&G, or any media support, in several years. They didn't even necessarily get much promotional support, as P&G stopped asking retailers to spend trade promotion funds on many of its smaller brands in 1997.
"We're one of the few groups that goes back and runs these brands in a small-company, entrepreneurial way, the way they were run in the old days by the corporations as they built them," with advertising and trade promotion funding, Mr. Shansby said. Having had experience building both startup brands and reviving older established ones, he said the latter is easier because of the equity that remains from even decades-old marketing support. "You do need good consumer support to reignite the brand," he said. "But you already have a knowledge base that's worth millions of dollars."
One key to orphan brand success can be knowing where to pick a fight, said William Steele, analyst with Banc of America Securities. He cites Chattem Products, an older package-goods company that functions in many ways like an orphan brand company as it acquires unwanted brands from bigger competitors.
Chattem has acquired several topical analgesics, such as IcyHot, Sportscreme, Aspercreme and Capzasin, making it a major player in that category. But last year, Chattem sold its Ban deodorant brand to Japanese consumer products giant Kao Corp. after Unilever roiled the category with a successful extension of its Dove megabrand and P&G and Colgate-Palmolive fought back. Rather than get killed in the crossfire between global titans, Chattem made the right choice in moving on, Mr. Steele said.
Spin-offs of orphan brands are contributing to a two-tiered structure of the industry, as global play ers run larger global brands and nationally based companies focus on regional brands, Mr. Flickinger said.
But the risks in the new order aren't only for the smaller players, he said. Second-tier competitors like Reckitt Benckiser and Church & Dwight may ultimately swallow the most successful orphan brands as they look to gain scale and pose more formidable competition. Though International Home Foods and Vlasic struggled, their brands ultimately ended up back with bigger competitors-ConAgra Foods devoured all of International Home Foods and H.J. Heinz Co., swallowed up Vlasic pickles and Open Pit barbecue sauce.
Even smaller competitors could pose threats to market shares and profits of the bigger players, Mr. Flickinger said. Such smaller brands often are more profitable than bigger ones because overhead is low "and they're typically not under full frontal assault by major competitors," he said. "I think P&G would be happier today in retrospect with [discarded bath tissue] brands like White Cloud and Banner and Solo."