Co-branding – Innovating through committed partnerships

The growing number of gourmet coffee shops in South Africa, elevating the quality coffee consumption experience, must surely begin to redefine the ‘at home' coffee brewing opportunity in South Africa. It would be reasonable to expect that in the not-too-distant future, we will begin to see committed initiatives by leading coffee brands to team up effectively with electronics manufacturers to create a home brewing station, linking the coffee and appliance as part of a single system, offering greater variety and hence choice to consumers.

Whilst there has been an earlier local initiative through a partnership between the House of Coffees and Russell Hobbs to deliver the Uno machine and complementary House of Coffee pods to market, this venture hardly seems to have made a ripple compared to the sensational results from similar earlier ventures, particularly in Europe and more recently in the USA. And it's not for lack of potential consumers in this market, judging by the growth in gourmet coffee consumption, but rather the lack of effective marketing clout and commitment to building a new segment. Changing consumer behaviour is always a very difficult task and requires substantial commitment and investment. It is not for the faint hearted; those who hang in for the ride invariably accrue heavy financial losses before they begin making profits.

Working together for greater advantage

A significant success story is the teaming up of Sara`Lee with Philips Electronics for the introduction of the Senseo home-brewing system. The collaboration between Philips and Douwe Egberts to develop and effectively market the SENSEO in home coffee system is another fine example of a growing trend where companies work together to leverage complementary capabilities that allow them to keep ahead of their competitors.
The coffee maker combines an integrated brewing system from Philips Electronics with high quality coffee pods from Sara Lee's Douwe Egberts brand, one of Europe's premiere coffee brands. Over 10 Million Senseo machines were sold within four years of the launch. Whilst many others have followed Senseo's pioneering spirit, including Kraft through Tassimo, (http://www.tassimo.com) and Proctor and Gamble in conjunction with Black & Decker, featuring Folgers and Millstone coffee pods, (http://www.homecafe.com), Senseo has maintained the leading edge. One of the reasons for Senseo's success relates to the chosen branding strategy.

Instead of bringing in two constituent brands (Philips and Sara Lee) to create a third brand (Senseo), the alliance team introduced a co-branding strategy, leveraging the equity in the Douwe Egberts brand to give credibility to the new composite brand, Senseo, forming a separate and unique product, thus ensuring single-minded focus.

Commitment is crucial

The attitude of management at Sara Lee was one of commitment, viewing Senseo as a strategic investment brand, which is another factor contributing to Senseo's resounding success. Do a web search on Senseo and you'll find a dedicated brand website (http://www.senseo.com), together with a substantial range of coffee pods, as well as fully supported and dedicated Senseo online stores, providing sufficient choice for consumers to unleash the ‘home' barista in them. Key in Uno, or Café pods for a local search and you will find information on Fiat, and absolutely nothing on the House of Coffees or the Uno home café system.

Creating an overall identity that transparently links the coffee and appliance as part of one lock-and-key system, and building consumer intimacy around this, was a crucial building block to success, something from which our local equivalent can learn. Not only has this alliance brought an innovation to consumers, it has also given Philips a chance to boost its brand by partnering with a reputable multinational, whilst Douwe Egberts has benefited from creating a new segment within coffee. Simply cribbing a great idea is not enough.

In for the long haul

You have to ensure that both partners are aligned behind the collaboration, that the key people involved in managing the collaboration have the personal skills to make the collaboration a success, and that a sound co-branding strategy exists for the new product. In addition, there must be a commitment in funding that allows the partners to fully exploit the new product to the target market, creating demand and thus ensuring trade support. Creating a new category through shifting consumer behaviour requires a long-term commitment and an investment strategy to match. In the USA alone, for every dollar Procter & Gamble Co. and Sara Lee have reaped selling coffee for their "revolutionary" single-cup systems, they have spent three on marketing. Locally the ‘pod' concept appears to be all but dead – past stockists of the system no longer carrying stock, making it almost impossible for early adopters and the early majority to enter the category. Variety and ease of availability are issues, with only three variants of pods available, whilst overseas Senseo loyalists are spoilt with a range of choices, from the basic ‘roasts' through to flavours such as Cappuccino, Mocha and Vanilla.

Invariably there will always be issues around the area of intellectual property, and financial arrangements. In the case of the Senseo collaboration, it was agreed that Philips would hold the intellectual property for the coffee machine, whilst Douwe Egberts would retain it for the coffee. And in order to ensure that Philips were aligned to view Senseo as a longer term proposition, Douwe Egberts allowed Philips a share of royalties in the Senseo coffee brand.

As Philips and Douwe Egberts have shown, with trust, commitment and co-operation, almost anything is possible!