In the frenzied world of beverage marketing, a contamination scare can quickly turn today’s top drink into tomorrow’s sour aftertaste. So even as South Beach Beverage Co. works overtime to solidify its SoBe brand as a big-time name in health drinks, it faces a second challenge that is almost as important. It is investing heavily to make sure the new name isn’t ever besmirched by a tainted-product case.
“We’re a virtual company with one asset: our brand,” explains Norm Snyder, CFO of South Beach, based in Norwalk, Connecticut. “We don’t own bricks and mortar or machinery or hard assets. My mission, in effect, is to protect our brand promise of quality.” So his department spends heavily on quality control, for example, working with a flavor house and co-packers to analyze each batch of SoBe. “It’s expensive, but given the risk to our brand, well worth it,” he says.
SoBe, with $170 million in 1999 revenues and its sights set on topping $250 million this year, competes among healthful refreshment beverages, a product category that has seen more than its share of broken brand promises. In 1996, Odwalla Inc. was at the center of a case of E. coli contamination. More than 60 people became sick and 1 person died from drinking the Half Moon Bay, California, company’s unpasteurized apple juice. And who can forget the shock a decade ago to Perrier, after reports of trace amounts of benzene in bottles of its water turned that drink into a pariah almost overnight?
Certainly, there is much good derived when a company cultivates name-brand status for a product: that intangible quality whose value is realized when consumers loyally order a “Coke” or “Kleenex” or a “Dell.” But with that brand recognition comes an additional risk that is not experienced by the companies trafficking in nonbranded items. With the wrong kind of publicity, your brand becomes a target. And it is in finding ways to reduce this risk that many CFOs — already increasingly active in the brand arena — are leading the charge.
The downside of branding is often ignored in a hot new product’s rush to capture market share. Typically, says brand guru Duane E. Knapp, president of BrandStrategy Inc., in Seattle, and author of The Brand Mindset, brand equity managers are frequently sales and marketing executives who focus on short-term growth, and can miss long-term risks from misdirecting the brand asset. “Focused on quarterly revenues,” he says, “they may unknowingly sacrifice the integrity of the brand for quick financial gain.”
In Good Hands with Deerbrook
Who better, then, to oversee brand risks than the CFO, or a corporate risk manager reporting to the finance chief? “As a company’s financial adviser, the CFO should be focused on growth that delivers against the brand promise, and not growth for unit sake,” Knapp explains. Raymond Perrier, global director of brand value management at New Yorkbased consulting firm Interbrand Inc., agrees, arguing that “the CFO must live the brand in every decision” — especially about how to reduce brand volatility.