VideoDon DeNovellis is riding high on the power of branding. As CFO of $250 million Ekco Group Inc., DeNovellis recently helped mount a successful turnaround at the Nashua, New Hampshire-based company following its record loss of $30 million.
Last year, the provider of kitchenware and bakeware, animal products, and cleaning products sizzled, its net income rising to $6 million on sales of $207 million. How did it do it?
"After the huge losses, the easy thing would have been to fire people and cut down on advertising," the 53-year-old DeNovellis says. "We did just the opposite, allocating more than $10 million toward incremental promotions, advertising, and product development to build our best asset — our brands."
Ekco's brand image in the marketplace was as a reliable, low-cost supplier of culinary tools. This perception limited its products, however, to primarily low-cost retail outlets like Kmart. The company's new chief executive officer, Malcolm L. Sherman, the former president of Zayre Stores brought in to spice up the company's fortunes in late 1996, gave DeNovellis a mandate to improve the top line by enlivening its brand. "As a housewares company, our brand is everything," says Sherman. "I wanted to expose Don to the drivers of our business. I wanted him to know the value of our products and the risk — the financial consequences — of mismanaging the brand."
Sherman sent DeNovellis to the company's Chicago production facility to see how the other half lives. "For 16 months, I was married to the senior marketing and sales executive," DeNovellis says. "I watched him operate day in and day out. And I was his fulfillment guy. I ran the factories, warehouses, and distribution. When I came back to New Hampshire, I understood like I never did before what the hell brand equity was all about."
The newly forged alliance led to the introduction of 350 new products in 1997. To penetrate the upscale marketplace, Ekco acquired the rights to use the Farberware brand, a supplier of high-quality cookware, and introduced a new brand, Via, which manufactures decorative teakettles and other products. The company doubled its advertising budget, nearly doubled its inventory, and invested heavily in a redesign of its packaging — all on the heels of the worst loss in its history.
Most important, DeNovellis communicated Ekco's new brand image — as a supplier of a wide variety of quality kitchen products — to Wall Street. "I told the analysts we were not going to hunker down and take out the machetes, but that we would unleash our potential by redirecting our brand image and investing in that strongly," DeNovellis says. "They trusted that vision and, evidently, are happy with our progress."
Like DeNovellis, many other CFOs are realizing that brand management is not just for Coca-Cola, Nike, or McDonald's anymore. In this era of revenue growth and global expansion, brands are one of the few "unopened closets of value," says Eric Almquist, a director with Mercer Management Consulting Inc., Lexington, Massachusetts. In addition, brand equity has captured the full attention of finance's main audience. "Five years ago, Wall Street's focus was on numbers and not too much on strategy," says Edwina "Wina" Woodbury, executive vice president of business process redesign at Avon Products Inc., a New York-based direct seller of beauty and beauty-related products. "Now the bulk of their scrutiny is on brands, especially where you're positioning your brand for the future."
The attention is well founded. Indeed, according to a study conducted by Corporate Branding Partnership LLC, a Stamford, Connecticut-based consulting firm, when stock markets suffer, companies with strong brand equity suffer less than the weaker brands. Take last October's stock market plunge. During the two-day spiral, companies with "power brands," such as General Electric, Microsoft, and Intel, regained nearly all their losses by the end of the second day. "The weaker brands did not come close to recovering from the first day's precipitous drop," says James Gregory, Corporate Branding's CEO, naming Alberto-Culver and Nucor as laggards. "What that says to us is that there is a powerful link between the strength of a company's brand and the performance of its stock."
That link is driving many CFOs to adopt new roles in brand management. While DeNovellis's foray may be extreme, some financial executives are teaming up with marketing to launch, solidify, or redefine their corporate images. Others are reinventing their traditional investor relations role to include brand communication. "We've got to [be involved]," says John Kriak, executive vice president and CFO of Crown American Realty Trust, a Johnstown, Pennsylvania-based real estate investment trust. "We can no longer think of ourselves as just the backroom boys. We have to be part of the management team that sets the platform for the company to perform. And that includes defining and communicating brand equity, cutting checks to support it, and measuring it for effectiveness."
Outsider Status
Traditionally, the finance department has backed away from brand management. Of the 20 companies contacted for this article, for example, spokespersons for roughly half said that their CFOs had little to do with the subject. And many others were serving in advisory, rather than active, capacities.
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