5 Big Product Flops from Successful Brands
by DailyFinance Staff Aug 21st 2013 1:20PM
Here are the Top 5 failed products from major brands, as compiled by TheDailyMeal.com:
- 3-D Doritos: You may remember these. They came in a lot of flavors but ultimately the company pulled the chips off the shelves after just a few years from their introduction in the mid-2000s.
- Hershey's Swoops: Introduced in 2003, Swoops were thin slices of chocolate that were shaped like Pringles. But Swoops became history just three years later.
- Crystal Pepsi: PepsiCo released this beverage to test markets in 1992 with great results, but a nationwide rollout flopped. The clear version of Pepsi was discontinued just a year later.
- Hula Burger: McDonald's introduced this meatless sandwich in 1962 and replaced the beef patty with a slice of pineapple.
- Life Savers Soda: Developed in the 1980s, customers said the carbonated beverage tasted like liquid candy.
1. J.C. Penney
J.C. Penney (JCP) has been in trouble for some time. Those who still believe in its future as an independent retailer point to the company's ability to get a loan of $2.25 billion from Goldman Sachs and other investors, secured primarily by real estate and leases. That money, optimists claim, will last until recently returned CEO Myron Ullman can turn the company around.
On the other hand, many believe the company cannot come back from the unprecedented sales losses it has suffered. Big-box retailers from Walmart to Target and successful department stores such as Macy's are larger than J.C. Penney and are growing. E-commerce companies such as Amazon and eBay are also gobbling up its market share.
Even in a less competitive environment, a J.C. Penney comeback could not be sustained. For the year that ended Feb. 3, the company reported that comparable store sales dropped 25.2%, revenue fell 24.8 % to $12.985 billion and Internet sales were $1.02 billion, a plunge of 33% from the previous year. While the most recent quarter was considered an improvement with sales down 16.4%, in reality it was nothing more than a brief reprieve. There is absolutely no reason to believe that J.C. Penney's prospects will improve.
Barnes & Noble's (BKS) e-reader was born to struggle. It was launched in October 2009, roughly two years after Amazon's Kindle, which was, and has remained, the market leader. Both products were hit by competition from Apple's iPad before the e-reader business even hit its stride. Adoption of tablets is forecast to grow 69.8% in 2013, while e-readers are expected to drop 27%.
The Nook was thrown a lifeline a year ago, when Microsoft invested $300 million in Barnes & Noble's digital business, but it has been downhill since. Sales at the company's Nook segment, which includes both the e-reader and online books, declined by 26% between the third quarter of 2012 and the third quarter of 2013. The Nook's disadvantage may have little to do with its hardware or software and more to do with size of its online audience. It competes against much larger e-commerce sites that have access to hundreds of millions of new readers. While Amazon has more than 130 million visitors a month according to Quantcast, Barnes & Noble has just over 6 million visitors.
3. Martha Stewart Living Magazine
Martha Stewart Living Omnimedia (MSO) has three divisions: publishing, broadcasting and merchandising. In the five years up to the end of 2012, publishing revenue fell from $179.1 million to $122.5 million. Last year, the division lost $62 million. In the first quarter of this year, publishing revenue dropped from $30.8 million to $24.5 million. The unit lost $990,000 in that period. Because of its troubles, the company tried to sell off smaller magazines. Everyday Food stopped publication as a standalone title with the December 2012 issue. Whole Living was discontinued after the January/February 2013 issue.
The main problem at the company's flagship magazine, Martha Stewart Living, is the precipitous drop in advertising. According to the Media Industry Newsletter, the magazine's advertising pages fell from 1,306 in 2008 to 766 last year. Pages are up to 404 through the first half of this year, but even if the full year runs at this rate, it is not enough. The company does have a good opportunity to retrench.
Two of Omnimedia divisions are doing quite well and could sustain a restructured company. Merchandising had revenue of $11.5 million in the first quarter, and an operating income of $5.7 million. Even the small broadcasting operation made money. The company could move the magazine online to avoid the huge costs of paper, printing, and adding new subscribers. But Martha Stewart Living lost its ability to be a standalone print magazine long ago.
LivingSocial, a daily deals website, has trailed Groupon since it launched, in an industry where even being No. 1 is a tenuous position: The online daily deal industry started to fall apart not long after it was born. Groupon's share price, which topped $26 after its IPO, was trading as low as $2.60 last year. While the stock is up on improved sales, the company remains unprofitable.
The situation is even worse for LivingSocial. AdWeek recently reported that sources would not be surprised if the company "was sold to a larger company or liquidated piece by piece by spring 2014." That is a long fall from the days in 2010 when Amazon confidently invested $175 million in LivingSocial. The e-commerce giant wrote down that investment by $169 million in late 2012. More recently, an Amazon SEC filing indicated that LivingSocial lost $50 million in the first quarter of this year, compared to a profit of $156 million in the same period a year ago.
The biggest competitors to both LivingSocial and Groupon are eBay, American Express and Amazon's own AmazonLocal service. Each has a huge customer base and significant amounts of data about its customers, which they can use to target deals. LivingSocial doesn't stand a chance.(Photo by ASTRID RIECKEN For The Washington Post)
Volvo was never a major player with a large number of models or ultra high-end brands in the U.S. As of April, its market share in America had dropped to 0.3%
The company's models here compete directly with mid-luxury offerings from every large domestic automaker, as well as low-end BMWs, Mercedes and Audis. In the first four months of this year, Volvo sold 19,571 vehicles in the U.S., down 8% -- in an overall market in which sales rose almost 7% to 4,974,000. As a mid-market car company without a broad range of sedans, SUVs and light trucks, Volvo is just too small to have a chance.
Volvo's future is in question elsewhere, too. The company's dealerships in China inflated sales numbers to receive cash incentives from the company that never went to customers, according to Brand Channel. In other words, some of Volvo's dealers committed fraud. China has been the Swedish car maker's home since Zhejiang Geely Holding bought it in 2010.
Except for market leaders like Canon, Sony and Nikon, no one wants to be in the digital camera business anymore. Worldwide unit sales are down 18% in 2012 since their peak in 2010 and are accelerating this year. It is no surprise then that Olympus, which only has 7% market share, has failed to generate a profit from its imaging business in any of the past three years. The magnitude of the decline caught the company's management off guard: Actual sales were less than two-thirds of forecasts.
For the next fiscal year, the outlook is grim. Olympus expects compact camera unit sales to fall from 5.1 million to 2.7 million units worldwide, largely due to the increased adoption of smartphones -- which now include cameras with lenses and chips capable of capturing high-quality images. Based on increased interest in high-end cameras, the company plans to focus on increasing sales of SLR cameras, which accounted for just 35% of its imaging business. Meanwhile, sales of its largest camera segment, compact cameras, will be cut in half. Of concern to investors, the company has pledged to stop issuing dividends until the camera business is restored to profitability.
The champion and protector of the Women's National Basketball Association, David Stern, will retire in February 2014. He has been the all-powerful commissioner of the NBA for three decades. It is hard to imagine how the WNBA could have survived without his support, and that will soon be gone. The league was founded in 1996, and currently has 12 teams. Six teams have disappeared since the league's beginning, and three have been relocated. Attendance has been awful. Average regular season attendance by team per game was only 7,457 in 2012, compared to about 18,000 for the NBA. The WNBA attendance number was below 6,000 in Atlanta, Chicago and Tulsa. Even in New York City, the New York Liberty could not break the 7,000 barrier. Attendance for half of the teams dropped by double digits between 2011 and 2012. Owners have little financial reason to support the league. The Chicago Sun Times reported in 2011 that "The majority of WNBA teams are believed to have lost money each year, with the NBA subsidizing some of the losses." TV viewership is so low it only makes matters worse.7. WNBA
8. Leap Wireless
Leap Wireless International Inc. (LEAP) was the one loser in the recent telecommunications M&A frenzy. AT&T nearly bought T-Mobile, which eventually combined with MetroPCS. Sprint Nextel is being pursued by both Japan broadband firm Softbank and Dish Network. Since the consolidations have created financially stronger companies, Leap is too small to survive. The proof is in its subscriber counts and earnings. Wall Street lost confidence in Leap a long time ago. Its shares are down 90% over the past five years, while the Nasdaq is up by 40%. Leap's management has probably known it needs a partner for some time. It was widely expected that Leap would merge with MetroPCS last year. The T-Mobile/MetroPCS deal ruined that.
In October 2012, Bloomberg BusinessWeek reported, "After reporting net losses for the last six years, analysts are forecasting Leap will remain unprofitable through 2015, according to data and estimates compiled by Bloomberg. It may post a profit of about $43 million in 2016, according to the average estimate." The risk factors disclosed in Leap's annual report read like a road map to Chapter 11. Management warns about the company's ability to build out its 4G network, make debt payments, take on more debt if needed and increase its customer base. Most telling is its subscriber count, which dropped from 5.9 million at the end of 2011 to 5.3 million at the end of last year. By comparison, the new T-Mobile Metro PCS subscriber base is about 43 million, which in turn is smaller than Sprint, Verizon Wireless and AT&T.
While it never had a massive presence in the United States, the niche Japanese automaker has had some success with models like the Lancer and the Eclipse. However, Mitsubishi will soon exit the U.S. market, just as its Japanese rival, American Suzuki Motor Corp., did at the end of last year. Its sales are nose diving. In 2012, Mitsubishi sold fewer than 60,000 units in the United States, down from nearly 80,000 in 2011. That decline was the biggest of any auto brand and has continued this year. In the first four months of the year, sales have fallen by 6.5% to just 20,571 vehicles. The U.S. market share of Mitsubishi was only 0.3% in April. Mitsubishi does not have the advantages of some other companies with low market shares -- it is not a luxury car company like Porsche or Land Rover. The average price for Mitsubishi's seven models is under $25,000. One of the company's weaknesses is this small model lineup. Mitsubishi is further hampered by the public's perception of its products. In the new J.D. Power vehicle dependability survey, it ranked third from last out of 33 brands.9. Mitsubishi Motors
10. Road & Track
Founded in 1947, Road & Track is the oldest and most well-regarded automotive magazine in the country, according to Hearst, the publication's owner since 2011. Road & Track and its better-selling stablemate, Car & Driver, have been among the top brands in the industry for years. However, Road & Track operates in a crowded market, which includes several other large publications and a substantial number of popular car websites. The four dominant magazines have all posted advertising sales drops in the past five years as Car & Driver, Motor Trend and Automobile have each lost hundreds of ad pages. Road & Track has had the worst of it. Ad pages fell from 1,092 in 2008 to 699 last year. Pages are down another 31% to 232 for the first six months of this year, according to MIN.
Car & Driver has an audience of 10.7 million people, which according to Hearst makes it the world's largest automobile magazine brand. Hearst doesn't need to support two slumping car magazines. Since both are based in Ann Arbor, Mich., a consolidation of staffs and subscribers would be a money-saving option.
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