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The challenge for brands.

The days of brands are not over. But the need to articulate the quality and value of a brand has never been greater.

It is my firm belief that the two main assets of any corporation are its people and its brands. While I believe that Seagram has many of the best, most talented, and dedicated people in the world, for purposes of this article I will focus on brands and their value in the marketplace.

There has been much debate, particularly since "Marlboro Friday," about the importance and future of brands in the value-conscious '90s. With a wide brush, many so-called experts are currently touting the demise of brands. Judging from the reaction of some analysts, one could believe that consumers are forsaking their favorite brands in droves.

I differ with that current wisdom. At Seagram, we are a company that believes in brands. More specifically, we believe in premium brands. That may sound ironic to some in light of today's marketplace, but we do not believe so.

Seagram's definition of a premium brand is that it must command consumer loyalty by delivering quality and value and represent the best in its respective category. Too often, products that are sold on price alone are mistaken for brands. Therefore, we add the word premium to define our meaning and our strategy.

We do not believe the days of brands are over. The challenge, however, is for brands to mean something different; to stand apart in a category and demonstrate discernibly superior quality and imagery. The need to articulate the quality and value of a brand has never been greater. A brand's credentials must be clearly understood by consumers. Importantly, those credentials have to translate into added value, which in turn allows for a premium to the selling price.

The mere mention of individual brand names conjures up certain images and qualities: Coca-Cola, Nabisco, Louis Vuitton, Hermes, Channel, Ralph Lauren, Rolex...the list is too long to mention them all. However, what all these brands have in common is that they have endured for decades. One, Martell, which was purchased by Seagram in 1988 because of its premium brand value, has been in the market since 1715. The continued strengths of these brand names clearly demonstrate the value of established brands and, I venture to say, they will endure certainly for the foreseeable future.

The family of brands within The Seagram Spirits And Wine Group reads like a Who's Who of renowned premium beverage alcohol brands. We produce and market many of the finest in the world.

Chivas Regal, the world's leading premium whisky, The Glenlivet Single Malt Whisky, Martell Cognacs, Mumm and Perrier-Jouet Champagnes, and Crown Royal Canadian Whisky are just a few of our recognized and respected beverage alcohol brands sold the world over. Their quality and taste are no accident. These brands, along with many of our others, sell at a premium because of the skills artfully employed by each distiller or wine maker, and the image identified with the consumption of these brands.

We annually spend in excess of half a billion dollars around the world to advertise our brands in order to communicate their personalities and to remind consumers of their inherent quality and traits.

In the case of Chivas Regal, we implemented a global advertising campaign to promote a similar image for the brand worldwide. While the particular imagery depicted in an advertisement may vary from country to country, the overall impression remains the same, as does the tag line, "There will always be a Chivas Regal."

This unique campaign enhances the superior quality of Chivas Regal as a premium Scotch whisky second to none. The advertising elicits emotional imagery that the consumer automatically identifies with the brand and the label.

A Focused Approach

Because of its image, Chivas Regal is well-positioned to maintain its lead over other premium whiskeys in its category. The challenge of the premium brand is to maintain the advantage upon which the loyalty is based. If the advantage can be duplicated, the brand will be tested. If the advantage can be surpassed, the brand is sure to struggle.

The Seagram Spirits And Wine Group offers a focused portfolio of premium brands. Consistent with our commitment to maintain a focused approach, we sold seven distilled spirits brands in the U.S. that we felt did not fit with our long-term strategic goals and objectives. Those brands may have been profitable in the short term but, over time, will never achieve the image or level of profitability that we at Seagram demand.

Our faith in brands, as opposed to commodities, remains undiminished, and we apply that belief equally to our non-alcohol brands.

When Seagram purchased Tropicana Products Inc. in 1988, the same week we bought Martell, we acquired the most clearly branded juice beverage in the U.S. and one of the country's best trademarks. We viewed this purchase as an opportunity to expand Tropicana's franchise geographically, as well as to use that name recognition to create other new brands.

Notwithstanding the current thinking, I am pleased to say that we have been successful in both efforts. Tropicana continues to gain share in the U.S., where it is the leading juice in value terms, and has been able to achieve a No. 1 position in many of its new international markets.

Those who are not familiar with the superior taste and consistent quality of Tropicana Pure Premium orange juice misleadingly classify orange juice as a "commodity" product. This opinion is easily challenged by the commanding share of the ready-to-serve category of orange juice that Tropicana maintains. While there will always be a group of consumers who make a purchase based solely on price, Tropicana has convinced and retained millions of loyal consumers of its intrinsic characteristics.

Quick and Aggressive

And, consumers continue to be convinced. Last year, Citrus Hill orange juice was pulled from the market and Tropicana was able to capture the majority of those consumers. They were converted to our brand, as opposed to private labels, primarily as a result of Tropicana's quick and aggressive marketing efforts. This demonstrates how a recognized category leader can continue to capture additional share and disprove the notion that it is just a commodity.

In addition to advertising and marketing investment, how can established brands continue to show vitality and strength in the market? New product development and line extensions are how Seagram continues to be an innovative force and a leading marketer of brands.

The spirits business is unlike the non-alcohol beverage industry in many ways, one being that the development time for new products is generally much longer. One of Seagram's most notable new products may not seem very new. It is Captain Morgan Original Spiced Rum, first introduced into test markets in 1983. That brand has become a tremendous success, yet it will achieve the celebrated level of one million cases not after one or two years, but after 11 or 12 years.

The success of this product led us to introduce late last year Captain Morgan Original Coconut Rum into test markets. Those initial markets are now being expanded due to early signs of that new brand's strength. This introduction is a relatively new innovation in the spirits industry because it is a line extension in a traditional category rather than an entirely new product.

Opportunity to Leverage

Line extensions offer a unique opportunity to leverage a brand asset. It is important, however, that line extensions add value to the parent brand as opposed to only borrowing from the original.

Too many, and especially the wrong kind of line extensions, risk diffusing and ultimately harming the original franchise of the parent brand. Captain Morgan Coconut brings the consumer an exciting new flavor and it delivers the message that Captain Morgan represents flavor innovation and quality, thereby adding to Captain Morgan's unique position in the rum category.

An entirely new brand that we have introduced is Godiva Liqueur. Through our agreement with Godiva, another great brand that is the premier name in chocolate, coupled with Seagram's expertise, we have produced the definitive brand of chocolate liqueur. We expect favorable results from this brand and early indications are that it is a winner.

As mentioned earlier, the acquisition of the Tropicana trademark allowed us to leverage the recognition of that brand into new brands and businesses. The first such significant effort was a brand called Tropicana Twister and it has been an enormous success. Retail sales of Tropicana Twister today approach $250 million, and will continue to grow.

Similarly, Tropicana is introducing two new grapefruit juices under our Pure Premium banner. We have also recently launched nationally Grovestand, the closest yet to fresh squeezed orange juice to enhance our Pure Premium and Pure Premium HomeStyle labels.

Enduring market leadership can only be earned through brand value, by reinforcing the special value of a brand. As long as brands remain relevant to the wants and needs of consumers, maintain the level of quality and image, and receive strong marketing support, they will continue to thrive and lead the market.

Edgar Bronfman Jr. is President and Chief Operating Officer of The Seagram Company Ltd., a leading worldwide producer and marketer of distilled spirits, wines, fruit juices, coolers, and mixers. He has senior executive responsibility for the day-to-day operations of the global beverage company, and holds the same titles with Joseph E. Seagram & Sons Inc., the corporation's U.S. subsidiary. He is also a Director of E.I. du Pont de Nemours & Co., in which Seagram holds an approximate 24.4% interest.
COPYRIGHT 1993 Directors and Boards
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Building Brand Strength
Author:Bronfman, Edgar M., Jr.
Publication:Directors & Boards
Date:Jun 22, 1993
Previous Article:Of brand value and ballyhoo.
Next Article:A CEO's role in brand building.

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