Brand People Failures: Guiltless Gourmet

Helping the competition

Although most people failures are a result of unscrupulous decisions or vicious personality clashes, on rare occasions people let their brands down despite having the best of intentions. This is what happened to Michael P Schall’s brand, Guiltless Gourmet, when he gave away the secrets of his success to his chief competition.

In the 1990s, Guiltless Gourmet was a small business success story which attracted a great deal of attention in its native Texas. The company, which made baked, low-fat tortilla chips, had evolved in the space of five years from being a home-based operation into a US $23 million business with a massive factory.

In addition to media support, the company also had endorsement from such lofty US health authorities as the Center for Science in the Public Interest, which supported claims that the Guiltless Gourmet range was a healthy – indeed ‘guiltless’ – alternative to other snack brands.

As is so often the case, Guiltless Gourmet soon became a victim of its own success. Frito-Lay, one of the largest US companies producing snack-food (and normally of the ‘guilt-filled’ rather than ‘guiltless’ variety) had watched the phenomenal growth of this small Texan company and wanted a piece of the action.

Schall, the owner of Guiltless Gourmet, had worked as a consultant for Frito-Lay, and had even invited the company to acquire the brand. But Frito-Lay hadn’t warmed to that idea. Instead, it wanted to create an entirely new tortilla brand to take on Guiltless Gourmet. And given Frito-Lay’s wellestablished distribution network, it wasn’t too long before its new product – low-fat Baked Tostitos – was available in supermarkets across the United States. Straightaway, Frito-Lay’s offering was chomping its way through Guiltless Gourmet’s market share. Within a year, Guiltless Gourmet’s revenues reduced to US $9 million, and the company was forced to shut down its factory and start outsourcing. Its workforce slimmed down from 125 to 10 employees.

Although it is easy to see this situation as unavoidable from Guiltless Gourmet’s perspective, there are always ways in which a brand can protect itself from outside threats. For instance, some have said that Guiltless should have broadened its product line into other relevant categories or outsourced production at an earlier stage.

There is also the issue of Schall’s decision to work with Frito-Lay as a consultant. When Business Week magazine enquired, Frito-Lay wouldn’t discuss the aborted buy-out nor the suggestion that it may have just been scouting for competitive intelligence. Of course, we can only assume that Frito-Lay are ‘guiltless’ but even they admit that the information provided by Guiltless Gourmet was helpful. ‘Guiltless Gourmet provided us with a great benchmark to get our product better-tasting,’ admitted Frito-Lay spokeswoman Lynn Markley.

Although Guiltless Gourmet’s low fat tortilla chips are still on sale, the future of the brand is still in doubt. Schall still believes the best route may rest with a buyout. ‘Our brand has great value,’ he told Business Week. ‘It would be good to become part of an organisation where that brand can be leveraged.’

Lessons from Guiltless Gourmet

• Be aware that success breeds competition. Guiltless Gourmet’s success within a niche product category was inevitably going to catch the attention of larger rivals.
• Have a Plan B. Brands need to prepare for such an eventuality and have a back-up plan.

People Brand Failures: Hear’Say

From pop to flop

The UK reality TV show, Popstars, was the first programme to document the making of a band from obscurity to pop superstardom. The aim was to create a pop ‘brand’ that would not only be able to sell albums and singles, but also a wide variety of merchandise.

Hear’Say was the end product – consisting of brand members Noel Sullivan, Danny Foster, Suzanne Shaw, Myleene Klass and Kym Marsh. Their first hit, ‘Pure and Simple’, released in March 2001, became the fastest selling single in UK music history, with sales of over 1.2 million copies. The first album, ‘Popstars’, also went to number one and a 36-date tour was sold out.

However, as the memory of the TV show started to fade, so did public interest. The strength of the Hear’Say brand suddenly seemed to be in doubt.

The band’s second album was a complete flop and they started to get heckled at public appearances.
As the band had been completely manufactured (none of the members had known each other before the TV show), relationships within Hear’Say soon broke down. As a result of constant bickering, Kym Marsh left the band at the beginning of 2002.

After she had left, the band made the mistake of holding a supposedly ‘public’ audition for her replacement only to employ one of their dancers, Johnny Shentall. This generated even more bad headlines.

Then, on 1 October 2002 a statement from their record company Polydor confirmed that the band was splitting. The statement explained ‘they felt they had lost the support of the public and Hear’Say had come to a natural end.’

The band members also told the media that they were tired of getting abuse from the public, which made their lives ‘hell’. Suzanne Shaw told The Sun newspaper that their pop brand fell victim to the fickle nature of fashion. ‘It’s like a pair of trainers: one minute they’re in and the next minute they’re out,’ she said.

So while the Popstars phenomenon continued to be a success, spawning shows such as Pop Idol and Popstars: The Rivals in the UK and American Idol in the US, the pop brand it created was on a downward slope almost from its conception.


Lessons from Hear’Say

• Hype can turn against you. At the start of 2001 Hear’Say was the most hyped band never to have released a single. However, the weight of the media interest soon turned against them to crush the brand.
• Have something to unify your brand. The Spice Girls weathered Geri Halliwell’s departure (at least in the short term) by rallying behind the ‘Girl Power’ banner, but as the Guardian reported ‘poor Hear’Say, only in it for the fame, didn’t have so much as a slogan to stand on.’

People Brand Failures: Fashion Café

From catwalk to catfights

Although it eventually proved to be a flop, Planet Hollywood spawned a number of imitators. David Hasselhoff tried to launch a Baywatch Café chain complete with waitresses in red swimsuits. Magician David Copperfield reportedly ploughed millions into a magic-themed restaurant chain which later vanished in a puff of smoke. Steven Spielberg invested in Dive, a submarine-shaped restaurant in Los Angeles with a giant cinema screen, taking diners on undersea voyages. It sank without trace.

One of the most spectacular of these Planet Hollywood-inspired failures was the Fashion Café, launched in 1995 by supermodels Naomi Campbell, Christy Turlington, Claudia Schiffer and Elle MacPherson. However, the chain, with its main branches in London and New York, struggled from the start. The connection between models and food was not an obvious one, and ‘fashion’ was not a theme that made people feel hungry.

As soon as the disappointing figures were in, the drama really started. Elle MacPherson and Naomi Campbell publicly accused founder Tomasso Buti of encouraging them to invest in the chain only to see US $25 million ‘vanish’ from the account books. Then Claudia Schiffer walked out of the venture, blaming ‘old problems’ with Naomi. ‘Instead of promoting our cafés Naomi only thinks about collecting lovers,’ Claudia told Italian newspaper Il Messaggero. ‘We agreed to make more presentations for our group, but Naomi is always on a yacht with some boyfriend.’ Naomi wasn’t slow to respond in an interview with The Sun. ‘Greed is a bad adviser,’ she remarked. ‘Claudia is wrong to leave the business.

And it’s not true that I have abandoned the promotional side.’ The infighting may have helped to sell newspapers but it did nothing for the brand. Although some branches turned an operating profit most failed to cover all their start-up costs. In 1998, three years after opening, it was time to call in the receivers.


Lessons from Fashion Café

• Don’t follow a failing formula. Planet Hollywood was already struggling in 1995 when the Fashion Café was launched.
• Have a logical brand association. Models and food didn’t really gel together.
• Don’t bitch about your colleagues. It will only make the wrong sort of press headlines.

Brand people failures: Ratner’s

When honesty is not the best policy

One of the most popular and influential books ever written about marketing is The 22 Immutable Laws of Marketing¸ written by Al Ries and Jack Trout and first published in 1993. Their fifteenth ‘law’ is ‘the law of candour’. This states that if a company admits a negative aspect about a brand, the consumer will think more highly about that brand because of the company’s sheer honesty.

Ries and Trout say that it goes against corporate and human nature to acknowledge a problem or weakness. ‘First and foremost,’ they write, ‘candour is very disarming. Every negative statement you make about yourself is instantly accepted as truth. Positive statements, on the other hand, are looked at as dubious at best. Especially in an advertisement.’

The authors go on to give a list of companies which have used this honest approach to great effect. They admire, for instance, the strap line ‘Avis is only number two in rent-a-cars.’ They also declare that ‘positive thinking has been highly overrated’:

The explosive growth of communications in our society has made people defensive and cautious about companies trying to sell them anything. Admitting a problem is something that very few companies do.

When a company starts a message by admitting a problem, people tend to almost instinctively open their minds. Think about the times that someone came to you with a problem and how quickly you got involved and wanted to help. Now think about people starting off a conversation about some wonderful things they are doing. You probably were a lot less interested.

Another example given is that of Listerine mouthwash, a brand that successfully deployed the slogan: ‘The taste you hate twice a day.’

However, despite the many successful examples of frank candour, there are times when honesty is not the best policy. Of course, if there is a serious and indisputable flaw with a product then it needs to be recognized and addressed by brand managers, so that they can move on to a more positive message. But if it is only an honest but negative opinion that is being expressed, it usually causes brand damage.

As Ries and Trout themselves acknowledge, ‘the law of candour must be used carefully and with great skill.’ To understand what can happen when great skill is not deployed, you could do worse than ask Gerald Ratner.

During the 1980s he built his Ratner’s business into the world’s biggest brand of jewellery, through a series of publicity stunts and takeover deals. In 1991, however, Ratner managed to destroy his brand in the space of a sentence. In a speech to the Institute of Directors in London, he said the secret to Ratner’s success was that many of its items of jewellery were ‘total crap’.

He also joked that Ratners earrings were likely to last for less time than a Marks & Spencer sandwich. Although the room filled with laughter, Ratner’s investors and customers couldn’t see the joke. Shortly afterwards he backtracked, saying that he was referring only to a very few items, but the damage had been done.

The Ratner’s brand name was now synonymous with ‘crap’ products and a lack of respect for its customers. The company’s share price plummeted from £2 to less than 8p, and consumer confidence sank without trace. Group profits fell from £112 million in 1991 to losses of £122 million a year later.

‘Consumers would have been totally embarrassed and humiliated to have bought its product. It just became impossible,’ says Tom Blackett, group deputy chairman of London-based branding consultancy Interbrand. Gerald Ratner, and his eponymous brand of jewellery, were forced to make an exit. Shortly after he left the jewellery trade, he took part in an interview and appeared to be taking the situation in his stride. ‘Someone said he had met comedians who wanted to be millionaires, but I must have been the only millionaire who wanted to be a comedian,’ he told the interviewer. However, in 2002 Ratner was back on a mission to resurrect the Ratner’s name and create an online version of the brand, called simply Ratners-Online.

‘I didn’t want to use the Ratner’s name but research shows that it is still the best-known name in the jewellery business despite the fact that there hasn’t been a Ratner’s shop for years,’ Gerald told the Evening Standard in 2001. In another interview, for the Guardian, he said the name would provoke curiosity from Web users. ‘We were going to call it something else but thought it was more likely to get hits on the Internet – even from a curiosity point of view.’

Whether this curiosity will be converted into long-term sales remains to be seen. Gerald also needs to make sure that this time he keeps his foot a good distance away from his mouth. ‘It is difficult for me to resist jokes, even if I am the only one that really finds them funny,’ he chuckles. ‘But I really will try.’

Lessons from Ratners

• Think before you speak. It often takes years to build trust among consumers, but as Gerald Ratner proved, that trust can be blown in a couple of words.
• Remember that most dangers come from within. Most brand damage does not arise from product flaws or distribution problems. A lot of it comes from employees or managers who fail to live up to their role as ambassadors of the brand. In service industries, where most employees are interacting with the public on a regular basis, it is especially important to maintain a positive attitude.

Brand people failures: Arthur Andersen

Shredding a reputation

If the Enron scandal proved anything, it was the interconnected nature of the modern business world. After all, Enron had a lot of corporate connections, particularly in its home state of Texas. ‘Within two or three degrees of separation, virtually everybody would have a connection to Enron,’ said Richard Murray, director for the University of Houston’s Centre for Public Policy.

However, while the Enron association has had a negative impact on the Texan corporate community, for those firms directly involved with Enron’s day-to-day business practices, the result has been catastrophic. For Enron’s accountancy firm, Arthur Andersen, the association has proved fatal.

After all, if it was about anything the Enron scandal was about accountancy. Specifically it was about shredding documents relating to Enron’s accounts and concealing massive debts, a fact that immediately implied a considerable element of complicity on the part of the accountancy firm. This complicity was implied further when David Duncan, Enron’s chief auditor at Andersen, appeared involuntarily at the first investigation into the scandal and then refused to speak in order to avoid incriminating himself. Even when Joseph Berardino, Andersen’s chief executive, vigorously defended his firm’s role in the affair, he was unable to undo the damage. Once it was found guilty of deliberately destroying evidence, the firm suffered severe brand damage and the tremors were felt throughout the entire accountancy industry.

Lessons from Arthur Andersen

Understand that businesses are interconnected. No firm is completely immune from other businesses. Andersen and Enron’s actions have been impossible to separate, at least in the mind of the public.

Don’t send mixed messages. As the plot thickened, different versions of events started to emerge from inside Andersen.

Brand people failures: Enron

Failing the truth

Little remains to be said about the rise and scandalous fall of Texan energy giant Enron. In the relatively short space of 15 years, Enron rose from nowhere to become the seventh largest company in the United States, and the most well-known energy supplier in the world. It boasted over 21,000 employees and had a presence in more than 40 countries.

As well as generating energy, the firm also generated a rather healthy brand identity. It won Fortune magazine’s award for ‘Most Innovative Company in America’ six years running, and was also high in the rankings for the same magazine’s ‘Best Companies to Work For’ chart. The company projected an image of being a good corporate citizen and published a social and environmental report which looked at the moves it was taking with regard to the environmental consequences of its business, its employee relations and (most ironically) its anti-corruption and bribery policies.

Over the years, Enron depicted itself as a highly profitable, growing company. Of course, in 2001–02 this turned out to be a lie – one of the biggest in corporate history. The company’s profit statements were proved to be untrue, and it emerged that massive debts had been hidden so that they weren’t evident in the company’s accounts. Enron’s accountancy firm, Arthur Andersen, was involved in the shredding of documents relating to Enron’s accounts, which meant the impact of the scandal was going to be catastrophic for that firm’s reputation as well. As the depth of the deception unfolded, investors and creditors retreated, forcing the firm into Chapter 11 bankruptcy in December 2001. When such facts came to light, Enron executives made matters worse by refusing to testify and arguing that they had no chance of a fair trial.

The Enron scandal also had political implications, because of the firm’s close links with the White House. Enron ploughed millions of dollars into George Bush’s 2000 election campaign. Although Bush was a personal friend of Enron CEO Kenneth Lay, he was quick to distance himself from any direct involvement with the firm.

The long-term effects of the scandal will be felt for years to come, and the Enron name is already beyond repair and forever likely to be synonymous with ‘corporate irresponsibility.’

Lessons from Enron

• Don’t lie. The whole company image portrayed by Enron proved to be a complete fraud. And as soon as one lie emerged, it didn’t take too long before the rest were unravelled.
• Be legal. A rather obvious lesson, but one which is still being broken at every level of the corporate community.
• Be open. Enron managed to make a terrible situation even worse by refusing to acknowledge any wrongdoing after the facts emerged.

Brand People failure: Planet Hollywood

Big egos, weak brand

Celebrity endorsements can help greatly in boosting sales of a product or service. For instance, when Oprah Winfrey recommended books via her branded book club, they were guaranteed bestseller status. Some brands also benefit from having their founder evolve into a celebrity, à la Richard Branson.

Then there are cases of celebrities turning their hand to business ventures. David Bowie lent his name to USABancshares.com, an Internet bank where you could get Bowie-branded cheque books and credit cards. Manchester United’s Sir Alex Ferguson was a shareholder at toptable.co.uk, a restaurant information and booking service. U2 own a hotel and a nightclub. Bill Wyman owned his own restaurant.

One of the most famous of these celebrity-backed ventures was the Hollywood-themed eaterie, Planet Hollywood. Boasting such high-profile investors as Bruce Willis, Demi Moore, Whoopi Goldberg, Arnold Schwarzenegger and Sylvester Stallone, the chain was guaranteed maximum exposure when it launched in 1991. The company expanded quickly and soon had nearly 80 restaurants worldwide. In 1999, however, the company went bankrupt and numerous restaurants were shut down.

‘Planet Hollywood has gone belly up,’ declared wine critic Malcolm Gluck in the Guardian. ‘Cows, vegetarians, food critics and assorted jealous restaurateurs will be rejoicing at the news that the most hyped chain of eateries in the history of cuisine has been roasted alive.’ As soon as the news was out, Planet Hollywood lost even more customers and kept going in only a few of its original locations, with help of new investors from Saudi Arabia who made a relatively modest investment in the company.

So how could a brand that had achieved such exposure flop within less than a decade?

Firstly, the company expanded too quickly, launching new restaurants before seeing a profit in its original venues. The original plan was to open 300 branches by 2003. Another factor was the food. Most people who eat out go because of the food, but Planet Hollywood never advertised this aspect of its business. In order to achieve long-term success, food or drink has to be the theme. Even McDonald’s is about the food, even if it’s the cost and convenience of it rather than the taste.

At best, Planet Hollywood attracted once-only visitors, lured by the novelty factor. ‘The magnet is purely that of being seen at such a place and seeing what other hip characters are there,’ wrote Malcolm Gluck. ‘The hope that one might catch a glimpse of the backers or the backers’ friends or celebrity hangers-on (who flock to the opening because of the chance of publicity and free food and drink but are never seen again).’ But this is not the basis upon which to build a long-term business with repeat custom, which any restaurant must have in order to survive, let alone expand. ‘It is great for tourists,’ said Richard Harden, co-editor of Harden’s London restaurant guides. ‘Or for those who want a day out with the kids. But it is a one-off. A case of “been there, done that”. There is no reason why the public should come back.’

Lessons from Planet Hollywood

• Celebrity isn’t enough. ‘These bozos thought, cynically, it was enough to trade on their Hollywood backgrounds. Bad move, fellas,’ wrote Malcolm Gluck.
• Word-of-mouth is crucial. Word-of-mouth is more important than advertising and media exposure when it comes to eating out.
• The theme should be tied to the core product. Food, rather than an abstract notion of ‘Hollywood’, should have been the theme.