Don DeNovellis is riding high on the power of branding. As CFO of $250 million Ekco Group Inc., DeNovellis recently helped mount a successful turnaround at the Nashua, New Hampshire-based company following its record loss of $30 million.
Last year, the provider of kitchenware and bakeware, animal products, and cleaning products sizzled, its net income rising to $6 million on sales of $207 million. How did it do it?
“After the huge losses, the easy thing would have been to fire people and cut down on advertising,” the 53-year-old DeNovellis says. “We did just the opposite, allocating more than $10 million toward incremental promotions, advertising, and product development to build our best asset — our brands.”
Ekco’s brand image in the marketplace was as a reliable, low-cost supplier of culinary tools. This perception limited its products, however, to primarily low-cost retail outlets like Kmart. The company’s new chief executive officer, Malcolm L. Sherman, the former president of Zayre Stores brought in to spice up the company’s fortunes in late 1996, gave DeNovellis a mandate to improve the top line by enlivening its brand. “As a housewares company, our brand is everything,” says Sherman. “I wanted to expose Don to the drivers of our business. I wanted him to know the value of our products and the risk — the financial consequences — of mismanaging the brand.”
Sherman sent DeNovellis to the company’s Chicago production facility to see how the other half lives. “For 16 months, I was married to the senior marketing and sales executive,” DeNovellis says. “I watched him operate day in and day out. And I was his fulfillment guy. I ran the factories, warehouses, and distribution. When I came back to New Hampshire, I understood like I never did before what the hell brand equity was all about.”
The newly forged alliance led to the introduction of 350 new products in 1997. To penetrate the upscale marketplace, Ekco acquired the rights to use the Farberware brand, a supplier of high-quality cookware, and introduced a new brand, Via, which manufactures decorative teakettles and other products. The company doubled its advertising budget, nearly doubled its inventory, and invested heavily in a redesign of its packaging — all on the heels of the worst loss in its history.
Most important, DeNovellis communicated Ekco’s new brand image — as a supplier of a wide variety of quality kitchen products — to Wall Street. “I told the analysts we were not going to hunker down and take out the machetes, but that we would unleash our potential by redirecting our brand image and investing in that strongly,” DeNovellis says. “They trusted that vision and, evidently, are happy with our progress.”
Like DeNovellis, many other CFOs are realizing that brand management is not just for Coca-Cola, Nike, or McDonald’s anymore. In this era of revenue growth and global expansion, brands are one of the few “unopened closets of value,” says Eric Almquist, a director with Mercer Management Consulting Inc., Lexington, Massachusetts. In addition, brand equity has captured the full attention of finance’s main audience. “Five years ago, Wall Street’s focus was on numbers and not too much on strategy,” says Edwina “Wina” Woodbury, executive vice president of business process redesign at Avon Products Inc., a New York-based direct seller of beauty and beauty-related products. “Now the bulk of their scrutiny is on brands, especially where you’re positioning your brand for the future.”