Who says you can’t have it all?

Chris Anderson of The Long Tail fame argues today that in the end niche brands are where consumers are headed, and that big is usually equated with bad. The two examples he provides are Converse, which is now a wholly owned subsidiary of Nike, and Scharffen Berger, a small chocolate company that was bought out by Hershey.

Back to candy. Hershey has just launched AllChocolate.com, which is built around the high-end boutique brands of its Artisan Confections subsidiary, such as Dagoba Organic Chocolate, Joseph Schmidt, Cacao Reserve and Scharffen Berger. Hershey is mentioned as a “sponsor” of the site, but the connection isn’t drawn much more explicitly than that.

It is a testament to the inversion of power in the marketplace that for the influentials Hershey is trying to reach, an artisinal Berkeley chocolatier such as John Scharffenberger apparently has more brand power than America’s largest candy company. But that’s exactly the conclusion Anheurser Busch came to when it created Long Tail Libations. Niche brands rule!

Isn’t it the case, though, that these companies aren’t exchanging their mainstream brands in exchange for niche brands, but rather are simply trying to add to their bottom line by branching out into more profitable products? Granted, if Hershey slapped their own brand on Scharffen Berger chocolate, its esteem would drop in the marketplace. At the same time, Hershey almost certainly makes more money on Kit Kat bars than they do on all of their boutique chocolate brands combined.

The same can be said for Nike. Nike is considered one of the strongest corporate brands around. Converse just happens to be popular with people who generally dislike Nike as a brand, so it enables Nike to bring in revenue from an even wider group of people.

Big companies aren’t abandoning their mainstream brands in favor of niche brands, rather they’re buying them or creating them in order to augment the bottom line.

6 thoughts on “Who says you can’t have it all?

  1. Co-opting is nothing new. This may be somewhat skewed in that Nike and Hershey don’t want the niche brand associated with the dominant one. They paid for the anti-establishment/street cred and don’t want to devalue it.

    And A-B didn’t buy Red Hook, they have a distribution agreement with them. Mmmm, the brewery just a bike ride away, too.

  2. See also Celestial Seasonings being acquired by Kraft… We can probably go back well beyond Ford acquiring Lincoln, except that the relative power and position of those brands is before our memories.

    I think that the interesting thing about brands is that their value largely exists between the customer’s perception of the process that leads to a product and the actual process that leads to the product. The Dallas Food look at what makes up Noka chocolates is a perfect example, but how many people have blind-tasted Scharffen Berger against Hershey’s bar chocolate and could tell you the difference?

  3. Well, hopefully Hersey won’t be moving the boutique makers off-shore as well.

    In any case, is this supposed to be new? Haagen Daz and Ben-and-Jerry’s used to be “boutique” ice cream makers (not that their purchase by larger companies did anything for the quality of their products).

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