Feature

Can brand invention lead to a profit?

Is brand invention just a gimmick or can it open up a new world to agencies?

Pick Me...BBH ready meals
Pick Me...BBH ready meals

Last month, Bartle Bogle Hegarty made a statement of future intent by launching two products through its brand invention unit, Zag. Pick Me, a range of ready meals, is being stocked in almost 1,000 Tesco stores, while Ila, a rape alarm, hit shelves at Marks & Spencer.

In the UK at least, this represented a first: though agencies have talked big about branching out into new product development, evidence of serious launches with genuine routes to market have been non-existent.

BBH, however, feels that its product launches will become a source of considerable future revenue. The agency aims to identify gaps in the market and select manufacturing partners with which it will then work to pitch the finished products to retailers.

Neil Munn, the chief executive of Zag, says distribution is key. "It can't just be a case of tactical opportunism," he says. "You need to succeed to justify the investment."

Although he admits Zag is a high-risk business (particularly in a downturn when most agencies are cutting non-profit-making ventures), Munn is confident it will take off. The agency expects Ila to make £25 million per year in retail sales within three years, while it hopes Pick Me will eventually bring in about £10 million per year.

If BBH gets even close to these forecast sales figures, it will have achieved something that few agencies have done before. Even outside the UK, agency brand launches tend to look more like gimmicks than genuine businesses.

Guy Barnett, a founding partner of Brooklyn Brothers, which has its own brand of organic chocolate called Fat Pig, admits the product was first conceived as "a hobby". However, he says that the most important thing now is that it makes money.

"We're in business for profit, so ultimately we'll need to turn Fat Pig into a profit-making resource," he says. "Once we get a profitable business, we'll probably sell it off."

Despite the high risk involved, BBH is not the only agency looking at brand invention as a potential future revenue generator in a market where traditional advertising fees and products are coming under increasing pressure.

James Murphy, a founder of Adam & Eve, says the incentives are clear: "There have been quite a few examples in which agencies have come up with a great idea that they then hand over to a client as part of the original fee, which the client uses to make lots of money out of. If agencies can do it all themselves, they can maximise their revenue even further."

But what about the barriers to launch? David Jago, a head consultant at Mintel, says that even the biggest, most experienced companies can struggle to get a product off the ground. After all, they are advertising and marketing specialists, not product developers or manufacturers.

"You have to be incredibly lucky to get a brand sold in a major supermarket or retailer," he says. "It's getting tougher and tougher, and even when the product is on the shelves, there's real pressure on it to succeed quickly."

Munn expects to know "very early on" whether Zag's first two launches will survive. "It's a high pressure model and there are no guarantees," he says. "There's always a risk, but I think that you need to take risks if you're ever going to fully justify yourself as an agency and a business."

BRAND INVENTION HEAD - Neil Munn, chief executive, Zag

"Strong businesses look to leverage their assets. Providing they have the capabilities to do that, then they can have a successful future.

"In our case, BBH has always tried to be at the forefront of the industry agenda, we have always had a key strategy for growth.

"Achieving success with this initiative is so important, as we're spending our own money, rather than the clients', now.

"It obviously helps that we're independent. We can back ourselves in this, and have the flexibility that perhaps agencies owned by bigger networks can't."

AGENCY HEAD - Guy Barnett, founding partner, Brooklyn Brothers

"The great thing about brand invention is that it gives you the freedom to create, and that's what we all get into the business for.

"It all depends on your agency model, though; you need to have a lot of patience because launching a product can take up to three or four years, whereas creating an ad obviously takes far less time.

"Creating your own products, though, earns you a lot more respect from clients because they know you have the experience of being in their position. They'll know you have that passion and drive that they have too."

ANALYST - David Jago, head consultant, Mintel

"In the current climate particularly, retailers are taking an element of caution. People are sitting back and waiting to see what happens next, although I don't think that this attitude will last too long.

"That's shown by the fact that the number of new products year on year is going up, and it has been for a long time now.

"Products will continue to get launched, even if at first it's 'safer' products, such as new lines or additional flavours to products already in the market so agencies can definitely exploit this."

AGENCY HEAD - James Murphy, founding partner, Adam & Eve

"Brand invention is an interesting area for an agency like ours to investigate, and definitely a profitable one if handled properly. I think it's really important to remember that agencies are creative, but they're also commercial as well.

"BBH has been really savvy in doing this. Obviously it will have partners that it will be able to work with, but if it can get that relationship right, I don't see any reason why it can't work incredibly well indeed.

"Sure it may be a bit of a risk, but every new concept is a risk, and you've got to be willing to take them if you want to get anywhere."