There's a certain comfort in brand extensions. Consumers are already familiar with the name and have developed (presumably) a confidence in what the brand means in terms of quality, price, etc., making it easier to induce trial.
On the other hand, simply adding additional ingredients to an existing product often means that the item is not radically innovative.
In the end, extensions often bring too little in the way of incremental sales as consumers trade-off within a product line. In the worst-case, a proliferation of items under a single brand only serves to dilute equity and ultimately cause sales to decline.
As a piece on the Brandweek website points out, Kraft Foods has rolled out a large number of brand extensions in recent years with less than spectacular results.
Not looking to continue with a failed strategy, Kraft Foods management, led by chairman and CEO Irene Rosenfield, is in the process of rolling out 80 new products but no one at the company is using the "e" word.
"A line extension is usually a new flavor or size that may create some news but it doesn't grow the business," Bob Becker, senior vice president of new products at Kraft Foods North America, told Brandweek. "We're talking to consumers more than we ever have and we're trying to bring more products that fit with what consumers want. That will help us grow our customers' business [retailers] and ultimately our business."
Last week, Mr. Becker told Crain's Chicago Business, "We are spending much more time and focus on reinventing our iconic brands."
So does reinventing a brand mean that it's not a line extension? The answer from Mr. Becker and Kraft is clearly, "Yes."
A case in point is a new beef frank under the Oscar Mayer label that is made with higher grades of meat and contains no artificial flavors, colors or fillers. The appearance of the hot dog is distinctly different than the original version.
Of course, while Kraft may not be using the "e" word itself it is hard to make the case that the new products are fully brand-extension-free.
Kraft is taking its Crystal Light beverage brand, for example, into the area of functional beverages with products including Crystal Light Focus, Crystal Light Metabolism and Crystal Light On the Go Vitamin Enhanced Red Tea Mix.
Still, the CPG giant seems intent when using a single brand to try and carry it over to other categories rather than cannibalize sales within an existing business.
Tom Chapman, senior partner at Landis Strategy and Innovation, told Brandweek, "The food business constantly has to delight people with new stuff. That's just the nature of that business so product improvement is mandatory. Line extensions probably are too, and category extensions done well are typically the way you make more dramatic changes in your business by either reaching totally new groups of consumers or totally new occasions of use."
Discussion Questions: How critical are new products to CPG and retail growth? Where do you come down on the value (or lack of value) on brand extensions in the new product equation? What are the keys at retail to maximizing new product performance?