American Icons Are Feeling the Blues
They defined consumer taste in the 20th century. They contributed to American soft power for decades. But today, these iconic brands no longer attract young Americans. Do they know how to bounce back?
Last summer Americans were dumbfounded when they found out that the most "American-made" car of 2015 was a Toyota. The Camry dethroned Chevrolet and Buick in Cars.com's respected ranking. This reflects global production, but more importantly, it reflects the public’s lack of interest in national brands. "What does the USA stand for? Certainly not what it did post World War II when many of these brands took off," states Kate Newlin, a brand specialist from New York, on her blog.
Even at home, these symbols of the American way of life are no longer "all the rage," victims of a transforming society. Most importantly, the national brands have been unable to please millennials. This group of 73 million 18-34 year olds, the largest demographic in America according to Pew Research, does not respond to traditional marketing. Demanding, keen on digital technology, seeking innovation, mobile to the point of nomadism and resistant to the presumed charms of property — they are far from being captive to the brands that covet their impressive buying power: $180 billion. These young consumers expect personalized service, which is hardly compatible with the business models of the giant brands. Volume is the obsession of the big brands, as they are obliged to provide one-size-fits-all products to conserve efficiency. Coca-Cola must deal with bottlers who are interested in a standardized product, and McDonald's must work with franchises that want to maximize sales of classic orders. The big brands are unable to respond quickly to the public’s increasing need for differentiation. The numerous immigrants who are modifying the face of America, many of them young, are also imposing their consumer habits on the country. Many of them, like African-Americans, are bigger fans of mineral water than Coca-Cola or Fanta, which is also better for one’s health.
Seriously questioning themselves, and battered in the stock market because of competition from new smaller and more agile competitors, the large brands are sacking their directors, cleaning up their numerous outposts and laying off employees left, right and center. What follows is a close-up on the decline of a part of the American empire.
McDonald's: Big Mac Is a Big Flop
Last Jan. 22, CNN's "Money" rolled out a chilling strip on the bottom of the screen: "McDo, McDead?" The company has had an avalanche of problems to solve since Steve Easterbrook, the new owner, came aboard in March. Domestic sales have been on the downturn for the past three years, and the company’s reputation in Asia has been tarnished by health scandals in China and Japan. The new owner is not even a pureblood American! While Don Thompson, his predecessor, was a pure product of America and McDonald's culture, Easterbrook is originally from Britain and was chosen because he successfully re-launched the English branch. It's now up to him to lure back the millennials who have chosen Panera Bread and Chipotle over McDonald’s. At 48 years old, Easterbrook does away with tradition. Not only did he propose an "XXL" size burger, he is also introducing local tastes to the menu — mozzarella sticks in Wisconsin and lobster rolls in New England. Are these changes sufficient to erase the image of McDonald’s as junk food? To cut short the critiques about fast food's cheap image, he is testing table service in about 50 restaurants. Ray Kroc, founder of McDonald's, would have difficulty recognizing his creation!
Kellogg's: Breakfast's Big Loser
Kellogg's is another victim of the era of food anxiety, to use the appealing expression of consultant Kate Newlin. Since the heavyweight was founded in 1906 in Michigan, America's morning rendezvous with their cereal seemed unchangeable. This is untrue. Youth have now turned to smoothies and yogurts. Cereal isn't traditional for Latinos and Asians. This is a big problem for Kellogg's, as cereal represents 40 percent of their American revenue. Sales linked to breakfast foods are dropping 6 percent each year. How can they bring back their success with cereal? Must one add protein to Special K as per the trends of the moment? Or rebrand it as a diet cereal? Must they introduce cereal packets adapted for children’s lunchboxes, while they too prefer different tastes? It's a real headache. One initiative at least has reached a consensus: Artificial ingredients will be banned from cereals by 2018.
Coca-Cola: Sick of an Overly Sugary Diet
Sugar poses a problem for Coca-Cola. Even Diet Coke, whose sales plunged by 6 percent last year, no longer helps the company in an industry overwhelmed with new dietary obsessions. The Atlanta heavyweight is less well positioned than PepsiCo in regards to water and juices. Coca Cola depends more on sodas, which are declining in the American market for the 11th consecutive year. As a result, the corporation is testing small innovations in its French affiliate by sprinkling Coca-Cola Life with stevia, a natural sweetener, and is rebranding itself with a theme guaranteed to appeal to millennials: less calories. This summer, Coca-Cola acquired the organic California juice company Suja. To compensate for problems stateside, where sales currently make up 47 percent of revenue, Coca-Cola is increasing business in Africa, the Middle East and India, as these regions are not yet worrying about their waist sizes.
Walmart: The Hated Idea of a Department Superstore
When the world’s No. 1 mass distribution retailer Walmart coughs, it's America that gets sick — at least up until recently. Decried for its low salaries and anti-union position, the country’s largest private employer increased the salaries of half a million of its workers in the spring to fix its image as a bad boss. The situation is serious: six consecutive trimesters of a downturn in sales, a steady American market and a more profound decline in food sales. It’s never been seen before! Walmart is in a tight spot. On one hand, discounters (Costco, Dollar Tree, Dollar General) have forever been more aggressively pursuing lower prices. On the other hand, in the more high-end fresh products and prepared meals market, Kroger and Safeway are doing much better than Walmart. Amazon's rivalry on the Internet doesn’t help either. Ever since he took the reins in February 2014, Walmart CEO Doug McMillon is fighting to reverse these trends with massive investments in online distribution, recruitments from eBay and the addition of smaller stores in downtowns. His efforts are beginning to pay off.
The Gap: The ‘60s Rebel Is Out of Style
We're far from the time when the Gap defined style — thanks to the black turtleneck worn by Sharon Stone with a Valentino skirt for several hours during the Oscars! That was 1996, when the brand — born in 1969 in San Francisco — was living a carefree youth, before the arrival of fast fashion (Zara, H&M) and cheaper brands (Forever 21, TJ Maxx). Its impossible-to-replace canvas khakis and 11 styles of jeans no longer hold the same appeal they once did. In North America, sales are disappearing. Art Peck, director since February, decided to close 675 stores. Once restructured, the Gap will have only 40 percent of the locations it had at its peak in 2000. The brand is now copying its rivals' methods, accelerating production and replenishing stock. A new golden retail rule, tested at Old Navy: Produce a collection in 15 weeks, instead of 45 weeks as before.
Abercrombie & Fitch: A Beautiful and Beastly Strategy
This large brand presented the results of its second trimester at the end of August without a CEO. It hasn't found a successor to Mike Jeffries, who left in December. The Ohio company, founded in 1893, had been the height of popularity for adolescents up until three years ago, thanks to a rebranding effort initiated at the beginning of the ‘90s that involved overpriced sweatshirts and T-shirts with oversized logos, dimly lit stores with omnipresent music and wafting perfume, and salespeople who were more sexy than helpful. But the concept fizzled out. Between employees suing for discrimination against their appearances, and "logo fatigue," the brand reported nine consecutive months of low sales and lost a third of its value in a year. It's now up to Club Monaco, Ralph Lauren and Lucky to work on a coherent project.
Mattel: One Blonde's Curse
In September 2014, Mattel ceded its place as world toy leader to Lego. The California company, whose shares dropped by 40 percent in 12 months, is now less valuable than its rival, Hasbro. Mattel is at its lowest point in its 66-year history. The brand is straining to innovate beyond Barbie (which generates 15 percent of its revenue), and its overpriced early childhood Fisher-Price toys. Until now, products related to Disney films have stimulated sales, but in 2016 Mattel will cede this license to Hasbro, which is already profiting from this juicy agreement with Star Wars, Jurassic Park and X-Men products. In January, Christopher Sinclair replaced Bryan Stockton as CEO. Will this PepsiCo graduate be able to apply the formula that found him success in agribusiness to toys?
MTV: Aging at High Speed
MTV put up its antenna in 1981 with the Buggles' “Video Killed the Radio Star,” both an observation and a program. Now, as The Limousines sang in 2010, Internet has killed the video star. Introducing itself as the "channel of a generation," MTV no longer draws youth viewings. The MTV Video Music Awards loses 30 percent of its audience each year! It's difficult for a cable station to fight against YouTube and free music. Viacom's affiliate has tardily entered social networks in an attempt to conquer 18-49 year olds (who make up 87 percent of its public). The first episode of the horror series Scream, inspired by Wes Craven's films, attracted 5 million viewers in June thanks to Twitter and Snapchat, which were skillfully used as reps for the premiere. For all of the struggling brands, social media is now unavoidable if they want to reach millennials, who are resistant to traditional ad campaigns.
Last summer Americans were dumbfounded when they found out that the most "American-made" car of 2015 was a Toyota. The Camry dethroned Chevrolet and Buick in Cars.com's respected ranking. This reflects global production, but more importantly, it reflects the public’s lack of interest in national brands. "What does the USA stand for? Certainly not what it did post World War II when many of these brands took off," states Kate Newlin, a brand specialist from New York, on her blog.
Even at home, these symbols of the American way of life are no longer "all the rage," victims of a transforming society. Most importantly, the national brands have been unable to please millennials. This group of 73 million 18-34 year olds, the largest demographic in America according to Pew Research, does not respond to traditional marketing. Demanding, keen on digital technology, seeking innovation, mobile to the point of nomadism and resistant to the presumed charms of property — they are far from being captive to the brands that covet their impressive buying power: $180 billion. These young consumers expect personalized service, which is hardly compatible with the business models of the giant brands. Volume is the obsession of the big brands, as they are obliged to provide one-size-fits-all products to conserve efficiency. Coca-Cola must deal with bottlers who are interested in a standardized product, and McDonald's must work with franchises that want to maximize sales of classic orders. The big brands are unable to respond quickly to the public’s increasing need for differentiation. The numerous immigrants who are modifying the face of America, many of them young, are also imposing their consumer habits on the country. Many of them, like African-Americans, are bigger fans of mineral water than Coca-Cola or Fanta, which is also better for one’s health.
Seriously questioning themselves, and battered in the stock market because of competition from new smaller and more agile competitors, the large brands are sacking their directors, cleaning up their numerous outposts and laying off employees left, right and center. What follows is a close-up on the decline of a part of the American empire.
McDonald's: Big Mac Is a Big Flop
Last Jan. 22, CNN's "Money" rolled out a chilling strip on the bottom of the screen: "McDo, McDead?" The company has had an avalanche of problems to solve since Steve Easterbrook, the new owner, came aboard in March. Domestic sales have been on the downturn for the past three years, and the company’s reputation in Asia has been tarnished by health scandals in China and Japan. The new owner is not even a pureblood American! While Don Thompson, his predecessor, was a pure product of America and McDonald's culture, Easterbrook is originally from Britain and was chosen because he successfully re-launched the English branch. It's now up to him to lure back the millennials who have chosen Panera Bread and Chipotle over McDonald’s. At 48 years old, Easterbrook does away with tradition. Not only did he propose an "XXL" size burger, he is also introducing local tastes to the menu — mozzarella sticks in Wisconsin and lobster rolls in New England. Are these changes sufficient to erase the image of McDonald’s as junk food? To cut short the critiques about fast food's cheap image, he is testing table service in about 50 restaurants. Ray Kroc, founder of McDonald's, would have difficulty recognizing his creation!
Kellogg's: Breakfast's Big Loser
Kellogg's is another victim of the era of food anxiety, to use the appealing expression of consultant Kate Newlin. Since the heavyweight was founded in 1906 in Michigan, America's morning rendezvous with their cereal seemed unchangeable. This is untrue. Youth have now turned to smoothies and yogurts. Cereal isn't traditional for Latinos and Asians. This is a big problem for Kellogg's, as cereal represents 40 percent of their American revenue. Sales linked to breakfast foods are dropping 6 percent each year. How can they bring back their success with cereal? Must one add protein to Special K as per the trends of the moment? Or rebrand it as a diet cereal? Must they introduce cereal packets adapted for children’s lunchboxes, while they too prefer different tastes? It's a real headache. One initiative at least has reached a consensus: Artificial ingredients will be banned from cereals by 2018.
Coca-Cola: Sick of an Overly Sugary Diet
Sugar poses a problem for Coca-Cola. Even Diet Coke, whose sales plunged by 6 percent last year, no longer helps the company in an industry overwhelmed with new dietary obsessions. The Atlanta heavyweight is less well positioned than PepsiCo in regards to water and juices. Coca Cola depends more on sodas, which are declining in the American market for the 11th consecutive year. As a result, the corporation is testing small innovations in its French affiliate by sprinkling Coca-Cola Life with stevia, a natural sweetener, and is rebranding itself with a theme guaranteed to appeal to millennials: less calories. This summer, Coca-Cola acquired the organic California juice company Suja. To compensate for problems stateside, where sales currently make up 47 percent of revenue, Coca-Cola is increasing business in Africa, the Middle East and India, as these regions are not yet worrying about their waist sizes.
Walmart: The Hated Idea of a Department Superstore
When the world’s No. 1 mass distribution retailer Walmart coughs, it's America that gets sick — at least up until recently. Decried for its low salaries and anti-union position, the country’s largest private employer increased the salaries of half a million of its workers in the spring to fix its image as a bad boss. The situation is serious: six consecutive trimesters of a downturn in sales, a steady American market and a more profound decline in food sales. It’s never been seen before! Walmart is in a tight spot. On one hand, discounters (Costco, Dollar Tree, Dollar General) have forever been more aggressively pursuing lower prices. On the other hand, in the more high-end fresh products and prepared meals market, Kroger and Safeway are doing much better than Walmart. Amazon's rivalry on the Internet doesn’t help either. Ever since he took the reins in February 2014, Walmart CEO Doug McMillon is fighting to reverse these trends with massive investments in online distribution, recruitments from eBay and the addition of smaller stores in downtowns. His efforts are beginning to pay off.
The Gap: The ‘60s Rebel Is Out of Style
We're far from the time when the Gap defined style — thanks to the black turtleneck worn by Sharon Stone with a Valentino skirt for several hours during the Oscars! That was 1996, when the brand — born in 1969 in San Francisco — was living a carefree youth, before the arrival of fast fashion (Zara, H&M) and cheaper brands (Forever 21, TJ Maxx). Its impossible-to-replace canvas khakis and 11 styles of jeans no longer hold the same appeal they once did. In North America, sales are disappearing. Art Peck, director since February, decided to close 675 stores. Once restructured, the Gap will have only 40 percent of the locations it had at its peak in 2000. The brand is now copying its rivals' methods, accelerating production and replenishing stock. A new golden retail rule, tested at Old Navy: Produce a collection in 15 weeks, instead of 45 weeks as before.
Abercrombie & Fitch: A Beautiful and Beastly Strategy
This large brand presented the results of its second trimester at the end of August without a CEO. It hasn't found a successor to Mike Jeffries, who left in December. The Ohio company, founded in 1893, had been the height of popularity for adolescents up until three years ago, thanks to a rebranding effort initiated at the beginning of the ‘90s that involved overpriced sweatshirts and T-shirts with oversized logos, dimly lit stores with omnipresent music and wafting perfume, and salespeople who were more sexy than helpful. But the concept fizzled out. Between employees suing for discrimination against their appearances, and "logo fatigue," the brand reported nine consecutive months of low sales and lost a third of its value in a year. It's now up to Club Monaco, Ralph Lauren and Lucky to work on a coherent project.
Mattel: One Blonde's Curse
In September 2014, Mattel ceded its place as world toy leader to Lego. The California company, whose shares dropped by 40 percent in 12 months, is now less valuable than its rival, Hasbro. Mattel is at its lowest point in its 66-year history. The brand is straining to innovate beyond Barbie (which generates 15 percent of its revenue), and its overpriced early childhood Fisher-Price toys. Until now, products related to Disney films have stimulated sales, but in 2016 Mattel will cede this license to Hasbro, which is already profiting from this juicy agreement with Star Wars, Jurassic Park and X-Men products. In January, Christopher Sinclair replaced Bryan Stockton as CEO. Will this PepsiCo graduate be able to apply the formula that found him success in agribusiness to toys?
MTV: Aging at High Speed
MTV put up its antenna in 1981 with the Buggles' “Video Killed the Radio Star,” both an observation and a program. Now, as The Limousines sang in 2010, Internet has killed the video star. Introducing itself as the "channel of a generation," MTV no longer draws youth viewings. The MTV Video Music Awards loses 30 percent of its audience each year! It's difficult for a cable station to fight against YouTube and free music. Viacom's affiliate has tardily entered social networks in an attempt to conquer 18-49 year olds (who make up 87 percent of its public). The first episode of the horror series Scream, inspired by Wes Craven's films, attracted 5 million viewers in June thanks to Twitter and Snapchat, which were skillfully used as reps for the premiere. For all of the struggling brands, social media is now unavoidable if they want to reach millennials, who are resistant to traditional ad campaigns.
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