Branded Products.

Mixing quality with mission

What's the difference between a candy bar and a bottle of barbecue sauce if both carry a nonprofit's logo? It's more than you may think.

Branded products are not to be confused with standard fundraising sales, in which a nonprofit buys candy bars with its logo on the label in bulk for 25 cents and then sells them for $1. Companies that offer these products to nonprofits have become very sophisticated and have gone far beyond the standard products.

Products that are available from companies specializing in sales to nonprofits run the gamut from color-coded socks (coded by the pair and family member) from I.M.Sox to custom board games from the Pride Distributor, to pizza making kits from Joe Corbis, Inc.

The list doesn't end there: Think of any promotional items you've ever seen -- T-shirts, pens, beach towels, luggage, whatever -- you could put your logo on it and sell it.

One of the more unusual products sold by a nonprofit is Governor Action Figures. Ventura for Minnesota sells Jesse Ventura Action Figures and donates the proceeds to charities in Minnesota.

A often-cited 1997 study by Cone Communications and the Roper Group found that 76 percent of consumers would switch to a brand or product that supports worthy causes, provided that the price and quality were comparable with similar products on the marketplace. This was up from the 66 percent who responded this way in a 1993 study.

So what does this tell you? You should go out and establish a brand?

Maybe.

Be careful. There's a lot to consider before you do.

Urban Produce, Inc., a group that works to empower at-risk youth from the inner city of Grand Rapids, Mich., sells City Kids BBQ sauce. "We teach the kids entrepreneurship," said Steve Faber, director of the program. "And they wanted to develop a retail product." Part of the reason barbecue sauce was chosen was because it is associated with an urban environment, he said.

"It's tough to be competitive, said Faber. "We don't have the name or capacity of a Kraft." But they did learn to compete, and they did learn retail techniques. For instance, they were having difficulty competing with mid-priced sauces, so they upped the price -- on the same sauce -- and now are finding more success.

When they started selling the sauce, the kids were involved in choosing the product, tasting it and naming it. The project was used as a teaching tool, and the kids were actually brought in on most of the early activities. Now, however, the project is managed by adults, although the kids still sell the sauce at local events and demonstrate it in stores.

Is the sauce a success? "Yes. It has been successful. It is a great teaching tool, teaching the kids about business and retailing," said Farber.

Is it a financial success? Not really. It brings in about $1,000 a year. And there are soft costs involved that probably more than offset this profit. Nonetheless, the sauce has been around for five years.

Pain relievers

The Arthritis Foundation (AF) a few years ago came out with a true branded product, Arthritis Foundation Pain Reliever. McNeil Consumer Products, a unit of Johnson & Johnson, had been a supporter of the Arthritis Foundation for years. Working off that good relationship, McNeil approached the foundation with the plan: McNeil would market and distribute the product with the AF brand. The foundation would use the profits for research. McNeil guaranteed a minimum annual payment, and the foundation bore no financial risk.

But the foundation got much more than money, although the money it did get -- $2 million a year -- was nothing to sneeze at. It also got a big boost in membership because of the increase in consumer awareness for the organization, Plus, it got the opportunity to get its message out, because it put a flier in every box.

While it was a very good deal for the foundation, it was also a very good deal for McNeil. Establishing a brand is a lot simpler when the name of a big nonprofit, one that is recognizable to anyone, is used. A lot of the marketing costs that would be incurred in launching a new brand just aren't necessary.

This was a situation in which everyone won, said Don Riggin, former CEO and president of AF. "We won. We got our message out. McNeil won. It sold its pain relievers. And, the public won. They got not only information they needed, but the pain reliever they wanted."

The obvious question is why they don't sell these pain relievers any more. According to Riggin, McNeil pulled the plug after two and a half years "because they felt that we never got a significant piece of the marketplace." The problem was complicated because it was a time when a lot of pain reliever products like ibuprofen were coming off their patents and could be sold generically by anyone.

But, Riggin called it an unqualified success. He would have loved to replace it with something else. While he was looking for that replacement, he said the first question he always asked was, "Will it help us in the accomplishment of our mission?" He believes that pain relievers did. According to Riggin, "If it doesn't help you accomplish your mission, if you're only doing it for the money, then walk away."

One nonprofit very active with branded profits is the Veterans of Foreign Wars (VFW). One of its products was VFW-brand coffee, with Tetley manufacturing and distributing the product. Tetley got a good deal because it didn't have to pay for shelf space, instead soliciting it from stores in the spirit of charity. And there are a lot of VFW supporters who bought the product. It was planned as a two-year deal, but after 18 months they ran out of product. And it worked, netting seven figures a year in income for the VFW.

While the coffee was a success, nonprofits have to be careful before embarking on a project like this, cautioned VFW Vice President Ron Browning. "We tried not to accept much risk in this deal, and we didn't. But there are soft costs, and lost opportunity costs that you have to watch out for, so you have to be careful."

For instance, if your product is going to bring in $75,000 a year, but you have to assign a staff person full time, it might not be profitable. And, how about negative reactions to the product? Not everyone is going to like a particular product, and that can cost you.

The coffee project started when, according to Browning, Tetley approached the VFW with the idea. Coffee is a product that has long been associated with the military. "Anyone who ever called himself a GI would understand the connection," said Browning.

Besides the cash, there was at least one other benefit: It got VFW into the retail world, and taught it how that world works. Since then, the organization had a short-lived venture with a nonalcoholic beer and also got into phone cards.

"Phone cards are generally not a successful enterprise in themselves for large groups. Customer service problems arise, and they must be dealt with," said Browning. Phone cards do work well for smaller groups, such as churches and schools, where customer service issues can be deflected to the cards' provider.

While it does not try to sell them at a profit, the YEW uses phone cards for fundraising, soliciting contributions by buying phone cards for overseas service people.

Browning said that through this program, VFW gave away 1.4 million phone cards last year. This is a program they are very proud of, and one they're going to keep doing. But, Browning advised, "Don't get lost in 'me too' stuff." If the only reason for doing a product is to earn money, he said not to do it. Like the Arthritis Foundation, he said an organization should look for a product that enhances its mission.

Again, the question is, if this product was so successful why stop?

"VFW Coffee was never designed to be a strong seller in a competitive market. It was always planned to commemorate the anniversary of World War II and to run for a limited life," according to Browning.

A different take on the branded product is the certified product. As the American Heart Association will lend its certification to certain foods, a nonprofit called Transfair will certify that a product has been produced according to certain fair trade standards.

For example, coffee is a product to which this group lends its certification. Traditionally, according to Seth Petchers, certification manager with Transfair, individual farmers are too small to sell their beans to wholesalers, so middlemen, called "coyotes," will buy their beans at below market prices and resell to distributors at big profits. Transfair will pay these farmers directly through co-ops, seeing to it that the farmers earn a living wage and are treated fairly, and then certify the coffee as meeting fair trade standards.

Fair trade coffee is sold by such retailers as Starbucks, Peet's, Green Mountain Coffee, Blue Mountain Coffee, Texas Coffee Roasters and many more. In the United States, Transfair certifies coffee and tea. In Europe, it also certifies honey, chocolate, sugar, and orange juice.

Probably the most famous nonprofit-branded product is the Girl Scout Cookie. According to Alexis Ramiar, a media consultant with Girl Scouts USA, these are not typical branded products because they are sold only once a year, in an annual campaign. Local councils will take orders from customers ahead of time and send the orders to Girl Scouts USA. Two different bakers make the cookies, which are then delivered back to the local councils. Councils pay the bakers' fee plus 1.5 cents per box to the Girl Scouts as a licensing fee. The local councils then charge whatever they want, so prices vary.

Ramiar said that because people can't just go to the store and buy Girl Scout cookies like they can Oreos, they are not directly competitive in the marketplace.

But there's no denying that Girl Scout cookies are successful from a financial point of view. And from an educational point of view, they are used in teaching values to the scouts, as well as the basics of retailing. So they do enhance the mission of Girl Scouts.

With these successes, and with the advantages that a nonprofit will bring to the retail counter, it is surprising that more nonprofits don't have branded products. If an organization employs a little bit of caution, they can really be a big success.