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.