The Real Reason It Feels Tragic When Your Favorite Brand ‘Sells Out’
posted in media on 11/23/16
Do you remember when your favorite band “sold out”? That’s the term of disparagement my friends and I used when musicians scored a big record deal and then proceeded to disavow their indie roots. For some, such growth is the measure of success. But to fanboys like me, when a whale ingests a minnow, that’s not a cause for celebration. It’s a sign that the minnow’s glory days are numbered.
Today, the latest victim in this long-running tragicomedy is Dollar Shave Club, which earlier this year was purchased by Unilever. If you’re like me, you first heard of Dollar Shave Club when you saw its brilliantly self-effacing video in 2012. Within 24 hours, the startup had generated 12,000 orders. Four years later, the company does almost a quarter of a billion dollars in revenue and captured 8% of the market.
How did this feat happen? Razors, creams and gels are now cheaper, superior and more convenient to buy than ever before. That’s because, as a TechCrunch writer reported, big brands lack the incentive to innovate that fuels their smaller competitors, especially those that specialize in retail and cater to consumers.
For example, in 42 of the top 54 food categories over the past five years, big brands have lost market share to small brands. From 2009 to 2013, major consumer packaged goods (CPG) companies surrendered 2.3% of the market to the proverbial little guy. What’s triggering this trend? For one, big CPG is plowing its profits into promotion rather than research. Last year, Unilever spent $8 billion hawking its current wares versus $1 billion developing new ones. For a colossus, enriching shareholders is more important than creating products that delight customers.
Hence the opportunity for innovators like Dollar Shave Club. Whereas Unilever and Procter & Gamble have mastered traditional marketing, they struggle in selling directly to consumers. Realizing this, Dollar Shave Club single-mindedly cultivated relationships with men across the country. Loyalty and happiness, rather than their wallets, was prized above all else.
For Dollar Shave Club, boasting the fanciest technology wasn’t nearly as important as getting into a customer’s bathroom — every month, on autopilot. As a result, as investor Ryan Darnell observed, while Goliaths take to Twitter and Facebook mostly to address customer complaints, Davids like Dollar Shave Club use social media to conduct authentic-seeming conversations with shavers.
No wonder this company commanded a sale price of a cool billion. But for patrons like me, a giant question hangs over the future of our facial hair: Will the virtues that drew people to the quirky upstart in the first place survive submersion into corporate America?
Of course, it’s not just Dollar Shave Club that’s attuned to changes in consumer preferences. Consider the market for craft beer. According to a Business Insider article, “American craft brewers have been the most spectacular economic success story since the Financial Crisis.” Year after year, these businesses have booked double-digit sales gains, including nearly 13% last year.
That kind of growth is hard to ignore for a multinational conglomerate, whose domestic sales have been slumping year after year. For a private-equity firm, that kind of growth is pure catnip. Together, these companies have been binging on brewery buyouts.
But to the home-brewed craft movement, this corporatizing represents nothing less than the decimation of our beloved brews. After all, craft brewers built a thriving niche “by positioning themselves as the underdogs in a war” with Big Beer, as Bloomberg Businessweek puts it. Consider Goose Island Brewery. Goose began as a single brewpub in Chicago in 1988. Twenty-three years later, it was imbibed by Anheuser-Busch InBev. Ever since to connoisseurs, Goose’s barrel-aging operation, which produces exotic ales in wine casks and bourbon barrels, hasn’t tasted quite the same. Similarly, a year ago, another craft icon — Ballast Point — was guzzled by the maker of Corona and Modelo, Constellation Brands. Among beer enthusiasts, Ballast has an avid following. Ballast’s Sculpin rates a “world class” ranking on the BeerAdvocate website, a popular forum for beer lovers.
Constellation’s press release announcing the deal offers two revealing remarks. On one hand, Ballast’s “grassroots approach to innovation” is praised for “engaging beer lovers and home brewers in the [brewing] process.” On the other hand, Constellation promises that its new trophy wife “remains dedicated to the art of making better-quality craft beer.”
Clichéd boilerplate, right? Not to me. For herein lies the problem at the heart of these takeovers: People drink Ballast Point and Goose Island and subscribe to Dollar Shave Club because we enjoy supporting independent brands. Now, when we reach for a cold one or trim our stubble, we’re bankrolling corporate greed rather than a dream from a local brewer. Meanwhile, we suspect we’re not getting the same McCoy that got us hooked in the first place.
It was recently reported that Uniliever is now in talks to buy another indie success story – Jessica Alba’s baby-care startup, the Honest Company. Jess, from one entrepreneur to another: Don’t do it. I built my business on the strength of personal relationships. I tell my staff to concentrate on cultivating these connections, and that money will come later. After all, only by perfecting your brand can you raise your revenue.
Founder and CEO, Global Icons