Buffett advised, "Buy commodities, sell brands." The new model is "Buy brands, sell commodities." Stanley is the case-study.
That was how Warren Buffett explained the success of Berkshire Hathaway’s acquisition of See’s Candies. See’s was a California manufacturer with regional distribution, a great reputation, and a loyal following when Berkshire bought it. The appeal of the deal was in the integrity of the See’s brand and what Buffett referred to as “uncapped pricing power.” Buffett continued to raise the price and increase profits without diluting its brand equity or reputation.
Today’s holding companies, or platforms as the Authentic Brand Group refers to itself, have flipped the script and turned the model into, “Buy brands, sell commodities.”
Just look at Stanley.
An iconic 100-year-old company and a storied brand with a reputation for “Built for Life” performance and durability is now known as a fast-fashion accessory with all the related insta-addiction trends, hype garbage, and unsustainable consumerism that comes with it.
- Why Does Anybody Need 37 Stanley Cups? (WSJ)
- The Big Problem with The Giant Stanley Cup (Wired)
- Why White Girls Love Stanley cups (Salon.com)
- Middle schoolers are being bullied for not having Stanley tumblers (NY Post)
- Do Stanley Cups Have Lead in Them? (NBC)
And here’s the classic sign that the brand has entered commodity land, comparison:
- Stanley Tumblers Leak Too Much. These 4 Dupes are Superior (NY Times)
But pre-teen and teen white girls don’t read or care about these media sources. They are on social media, for fashion and FOMO, not for function or sustainability tips.
You know who does read these media sources? Stanley’s former customers, who now equate Stanley to, as Wired puts it, “…a symbol of social-media-fueled overconsumption.”
The tragedy is that a big part of the original appeal, for everyone, was the brand’s reputation and integrity. Now, that is gone, and with it, eventually, the pricing protection it enjoyed…from brand to commodity.
Sales have increased 10x but at what long-term cost?
Remember Merriam-Webster dubbed “authentic” as 2023’s Word of the Year, “…driven by stories and conversations about AI, celebrity culture, identity, and social media.” Interest in the term was so high last year because “Authentic is what brands, social media influencers, and celebrities aspire to be.”
People pay premiums for authentic brands. When authentic brands, or its owners, sell their souls for fickle FOMO fashion trends, that authenticity, that brand equity is almost impossible to earn back.
Ironically, the Authentic Brand Group (https://corporate.authentic.com/) is the poster child for the current brand raider syndrome. ABG buys strong brands in distress from contemporary market forces and tries to milk the brand for everything it can before, ultimately, putting it to rest.
Its most recent example is the implosion of Sports Illustrated. After getting caught publishing AI-written content under the bylines of fictional reporters, ABG laid off SI’s entire staff.
ABG was previously called out in the surf world for mass layoffs and anemic pro-sponsor contracts following their acquisition of Quiksilver, Billabong, Roxy, RVCA, DC Shoes, Element, VonZipper, Honolua, and Boardriders. With Surfer asking, “Is the surf industry dead?”
What does this have to do with B2B SaaS? People pay premiums for authentic brands. A strong POV, identity, service to the community, and attention to every other touchpoint in the category’s orbit ultimately protect pricing power and keep you out of the commodity and comparison game.
From pre-seed to pre-IPO, we've worked with leadership teams on up-market initiatives and down-market focus, teams in need of post-merger/acquisition alignment, teams that were growing fast and teams that were "restructuring," teams that were pivoting their focus, teams transitioning from a service model to a SaaS model, and teams on the hunt for their next round. In the last 26 months, DRMG clients have raised $96 million. We can likely help your team, as well.Read More →
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