Investors find gold in product graveyard
‘Zombie’ brands can turn profits pInvestors eye products
1/28/2013Twenty-five years ago, a new kind of sparkling water called Clearly Canadian hit store shelves.
In such flavors as Orchard Peach and Western Loganberry, the drink soon was raking in $150 million a year in sales. But in the face of growing competition, Clearly Canadian began to fade. By the early 2000s it had all but disappeared.
Enter Mark Thomann.
Early last year, the Chicago investor bought the Clearly Canadian name, hired a marketing team, contracted a bottler, and hammered out a distribution deal to get the drinks back into U.S. supermarkets starting in March.
Mr. Thomann is making a bet that enough people remember Clearly Canadian to try it again. He’s one of a growing group of entrepreneurs who specialize in digging through the graveyard of consumerism in search of zombie brands that can be revived.
“We believe we can make Clearly Canadian valuable again,” said Mr. Thomann, chief executive of River West Brands, whose stable of resuscitated brands includes Coleco games and Underalls pantyhose.
Rebooting old names makes sense in a market crammed with products vying for consumers’ attention; building a new brand can cost millions in advertising, and there’s no guarantee of success. But for as little as a $275 fee to the U.S. Patent & Trademark Office, one can buy a brand that, albeit dusty, is already familiar to millions of potential customers.
“It’s very difficult to get a new brand established in today’s marketplace,” said Tim Calkins, a professor of marketing at Northwestern University’s Kellogg School of Management. “So if you start with some brand awareness, it can be an advantage.”
These trademark trolls scour brand-registration databases, clip old magazine ads, and interview consumers about beloved brands of their youth. Such efforts have brought back Polaroid, Eagle Snacks, and Sharper Image in recent years.
Attorney Kenny Wiesen revived Bonomo’s Turkish Taffy because he missed his favorite childhood candy. He discovered the trademark was held by Tootsie Roll, which quit making the thin, chewy bars in the 1980s. It took several years, a lawsuit, and about $100,000, but eventually Mr. Wiesen snagged the Bonomo’s Turkish Taffy brand.
That was the easy part. Mr. Wiesen and a partner then spent several years tracking down the recipe, relying in part on the memories of an 89-year-old candy chemist. Then they had to find a factory to produce it.
The candy finally hit the market in 2010. Today Mr. Wiesen produces about 8 million bars a year distributed to 10,000 stores nationwide. “It’s profitable,” said Mr. Wiesen, of Carle Place, N.Y., who has acquired other brands he wants to bring back, including Regal Crown Sours hard candies. “But it’s not explosively profitable.”
Even as consumers wax nostalgic for foods they ate as kids, that can be a pitfall.
“You have to make the product relevant today,” said Ellia Kassoff, chief executive of candy maker Leaf Brands in Newport Beach, Calif. “I don’t want to sell to the dead.”
Mr. Kassoff bought Leaf in 2011. Last summer, the company reintroduced Astro Pop, a cone-shaped lollipop invented in the 1960s that fell out of production in 2004.
Some other brands Mr. Kassoff has acquired for almost nothing, thanks to a process known as abandonment. Under federal law, a trademark is considered abandoned if it hasn’t been used for three years. After that, anyone can argue they should be able to use it exclusively and receive legal trademark protection benefits that once belonged to the prior owner. But not all companies want to let go.
“Even if they’re not going to use the brands, a company like that doesn’t want anyone else using them either,” said Mark McKenna, who teaches intellectual property law at the University of Notre Dame. “And even though the law seems fairly clear on this point, it’s hard to defeat a huge company.”