Going Where No Fashion Brand Has Gone Before

When brands get hot, one of the first things their owners do is jump onto the licensing bandwagon. For apparel companies, that usually means expanding the brand’s name to watches, eyewear, jewelry and other accessories.

Lately, however, apparel companies have waded into new waters, venturing into entirely different industries to sell energy drinks, bottled water, dolls, surfboards, travel services and cellular phones, among other goods.

Is it a case of too much is too much? Or does more exposure equal a stronger bottom line?

Industry watchers said maybe a little of both.

“There’s always that fear of doing what Gucci or Ralph Lauren did during the ’80s and being everywhere,” said one leading Wall Street analyst who requested anonymity. “As a company, you have to make sure you partner with the right people and have control over design and marketing, or you might end up in a channel of distribution [where] you may not want to be.”

The analyst warned that with traditional line and brand extensions, there is also a chance of companies setting themselves up to be knocked off by counterfeiters. Tommy Hilfiger, Armani, DKNY, Polo and others have been among the victims. There is also the risk of overexposure. Gucci, Polo, Fila and others were knocked off and sold at swap meets during the ’80s. As a result, the exclusivity those brands cherished was sidelined. Fila, a country-club brand, ended up in the urban sector for some time. L.A. Gear Inc. overdistributed and disenfranchised its core customer.

Companies nonetheless are taking advantage of the opportunity to further anchor their brands in the minds of consumers. Some are experimenting with new products to tie in with their brand and company message.

Irvine, Calif.–based Lost Enterprises, which started in surfboards and apparel, recently delved into the energy-drink fad with Lost Energy, a beverage loaded with caffeine, niacin, and vitamins B6 and B12. The drink, which has 200 calories and more than 50 grams each of carbohydrates and sugar per 16 ounces, comes in a decorative can that features a graphic mural design created by Lost designers in collaboration with licensee Hansen Natural Corp. of Corona, Calif.

Going from surf shop to convenience store is a big jump, and being somewhat of a cult brand, Lost took precautions before entering an outside market, said Chief Executive Officer Joel Cooper.

“This isn’t a mass-licensing deal,” Cooper said. “We’re very protective of our brand. We spoke to a lot of our kids and did market research beforehand. We didn’t actively decide to go into the beverage business, but we thought this was supportive of the brand. Hansen’s has co-sponsored a lot of our surf and skate events, and we’ve been able to hook the beverage up with our retail accounts.”

Cooper said Lost Energy has helped the company gain exposure in the Midwest and interior markets, where the company’s sales have lagged behind those of the coasts. The drink can also help boost recognition of the company’s clothing line, he added.

So far, Lost Energy has been a solid venture, said Hansen Chairman Rodney C. Sacks.

“Sales have been above expectation. Lost is credible within the surf/skate market, and we felt it could translate into a good energy drink,” he noted.

Hansen already has a staple energy drink called Monster, skewed toward an older demographic. Associating with a cult brand such as Lost helps Hansen get the 15- to 25-year-old customer and helps Lost expand beyond the surf and skate shops. But both brands have to be careful with distribution. “You have to be selective and careful, or it won’t work,” Sacks said.

Swimwear maker Speedo, a division of Warnaco Swimwear in Los Angeles, also ventured into the beverage market this spring with Speedo Sportswater, a new bottled performance water aimed at taking the brand beyond the pool.

Roger Williams, president of Los Angeles–based Warnaco Swim Group, said getting the Speedo name outside of the sometimes insular swim market could help the company grow the brand into other channels.

The company has a Hummer H2 utility vehicle painted with Speedo emblems that travels to professional volleyball events along the California coast to promote the drink and the brand.

“It’s widely diverse,” said Williams of the sports drink. “It’s not like apparel, where your exposure is more controlled.”

The drink is produced by Englewood Cliffs, N.J.–based Fuze Beverage LLC, which, with Speedo, is positioning the product for consumers with an active lifestyle. The water is low-carb and low-calorie and is enhanced with folic acid and electrolytes. It also contains potassium and sodium to help replenish the body after exercise. The 18-ounce bottles come in four flavors: orange passion fruit, fruit punch, lemon and apple star fruit.

“The best opportunity to deliver and break through the clutter [of brands] is with a wellknown trademark that translates with consumers into bottled waters,” said Fuze Chief Executive Lance Collins.

Coming off a big Olympic run, Speedo is one company that has no fear of overexposure as it rolls out a new activewear line called Accelerate.

Roxy calling

Huntington Beach, Calif.–based beachwear maker Quiksilver Inc. has also been aggressive with licensing. The company recently launched the second generation of its Roxy cellular telephone, named after its young women’s division and marketed by Irvine, Calif.–based Boost Mobile. The phone, adorned with Roxy emblems, retails for about $300 and features ring-tone renditions of theme songs from movies such as “Charlie’s Angels” and “Buffalo Soldiers” as well as games such as Element Surging Snow Shredder and Etch-A-Sketch. There are also plenty of surfing scenes that can be used as wallpaper.

Mark Fewell, senior vice president of business development for Boost Mobile, said the company’s alignment with Roxy has helped both companies tap into the young women’s demographic. The second edition of the phone will be sold through Quiksilver’s retail network as well as at electronics outlets such as Best Buy.

Fewell said growing a brand outside of the core markets is starting to become more acceptable because brands such as Roxy are marketing lifestyles, not just products.

“A cell phone is like a fashion item these days. It’s a reflection of who you are. You can buy a $50,000 cell phone if you want, lined with jewels. For young women, they identify with Roxy and its freespirit image,” Fewell said.

And Roxy is appealing to a broader demographic as 80 percent of its product is sold away from the coast, he added.

Quiksilver Entertainment Vice President Matt Jacobson said the first deliveries of the phone resulted in overwhelming demand and strong feedback. Now the company has its own travel agency and a long line of accessories, as well.

Caris & Co. analyst Claire Gallacher said Quiksilver’s visibility is nothing to worry about because it is being done thoughtfully. “They do a lot of accessories, and consumers are responding well. Any kind of line extension tends to work as long as they stay in the same demographic,” she said.

Creative challenges

Paul Frank Industries Inc., based in Costa Mesa, Calif., is taking a different approach. The company regularly teams up with brands outside of the apparel industry but looks at these associations more as creative endeavors than as brand-building or profit-enhancing maneuvers. Paul Frank has done programs with Oscar Mayer Ltd. and John Deere Ltd. The company said it sees these ventures as opportunities to do projects with American icons and enhance the creativity of the company.

Paul Frank has also teamed with Pro-Keds and Robert August Surfboards. Most recently, the company worked with El Segundo, Calif.–based Mattel Inc. to create the Paul Frank Barbie, a doll outfitted with Paul Frank red or blue pajamas that bear the company’s ubiquitous Julius chimpanzee icon. The doll hit stores Oct. 1 with a price tag of $59. Unlike regular licensing deals, this collaboration will offer limited distribution and shelf life.

“Paul finds them as challenges. He takes inspiration from them,” said Ryan Heuser, president and co-founder of Paul Frank Industries. “It’s like, ’How do I translate John Deere [tractors] into a belt buckle, or how do I apply Oscar Mayer to a handbag?’ We don’t look at these as means to increase sales volume. It’s a chance to work with great American icons.”

Heuser, however, is very cognizant of the company’s brand image. The company has only struck two licensing deals in the last eight years.

“We’re very much control freaks here,” Heuser said. “We’re brand-sensitive and want to direct our marketing, design and where our store locations are. The last thing we want is to be in the mass market. You see [Nickelodeon cartoon character] SpongeBob in 7-Elevens now. That’s not where we want to end up.”

Expanding the brand

Foothill Ranch, Calif.–based Oakley Inc. is expanding its brand carefully, as well. Oakley, which started as an eyewear company but moved into footwear and apparel during the past few years, is rolling out the Oakley Thump, the first sunglasses featuring a builtin MP3 player. The $395 model stores 128 megabytes of up to 60 songs. The 256- megabyte model, which retails for $495, can store up to 120 songs. Oakley designed the earphones and lenses to flip up and down for use indoors and out. The eyewear is manufactured with a miniature pair of Mylar speakers offering a range of frequency responses, up to the 20 kilohertz limit of human hearing.

When the Thump is rolled out this Thanksgiving, Oakley will hit a new level of distribution. Oakley is selling the item through Circuit City outlets as well as its own company stores.

That doesn’t bother Oakley executives.

“People know us as more than a sunglass company now,” said company spokesman Gar Jackson. “We kind of see ourselves as a technology company that’s unique and makes interesting products.”