Revived brands to face hurdles
By Brent Felgner -- Home Textiles Today, 12/8/2003 8:02:00 AM
New York — The future of the Pillowtex brands should become clearer before Christmas.
Five months after the defunct mill entered bankruptcy and commenced its liquidation, four separate deals for the brands will be announced over the next two weeks, according to Mary Gleason, president and ceo of Group 3 Design, the brand management firm overseeing the process.
"The negotiations are continuing, and we're still working with retailers and vendors to wrap up the positioning on all these brands. It's just not finalized yet," she said in a telephone interview late last week. "It will definitely happen before Christmas."
Some of the agreements will be completed and announced before others, she said. As the scenario is currently developing, deals will be inked involving Royal Velvet first, followed by Cannon, Charisma and, finally, Fieldcrest.
"We're looking at them as four separate properties," she said. "From the consumers' point of view, they haven't linked some of these brands" to each other.
For example, Fieldcrest appears to have the weakest identity among consumers, Gleason said. "Charisma has an [independent] identify and it has a platform. Royal Velvet has an identity and it has a platform, and Cannon has an identity and a platform," she explained.
Gleason declined to upstage the announcements by tagging the companies likely to land the brands. However, she did offer some insight into the deals' structures.
"They will be traditional licensing arrangements with the vendor community, but retailers are very involved with the distribution," she stated. "Right now, we're not planning any retail direct programs. They will be traditional vendor-based licensing arrangements."
GGST LLC, the successful bidder for Pillowtex's assets, has had the right to market the brands since the company filed and it signed on to be the stalking horse bidder in the liquidation. That effort stepped up visibly, however, following its successful $128 million bid — later reduced to $121 million — during the Oct. 2 auction. The syndicate then named Group 3 Designs to be the brands' manager.
By virtually all accounts, however, whichever companies claim the brands will be walking away with prizes fraught with challenges. Licensees will be immediately called upon to resurrect wounded icons of home décor.
"I don't think you can kill a brand," offered consultant David Tracy, formerly of Fieldcrest. "But right alongside that is the need to put the money and the passion and the marketing talent to go along with that. You can't have some accountant running it sitting in a back room."
To be sure, the winners in the brands race, will need to address a number of issues:
• Can the brands win back the retail real estate they lost before and after the bankruptcy?
• Can the brands get the type of support they need at retail to succeed?
• Will the winning suppliers be able to differentiate the brands from their existing lines to avoid cannibalizing them? Will new design, fabrication and colors shift away from the qualities that built the brands in the first place, and will that be a positive?
• Given the expense of resurrecting the brands and their licensing fees, will expenses combined with retailer demands erode margins?
CHF chairman and ceo Frank Foley, whose company handles a number of brand licenses, noted that there is higher recognition of the brands among the trade than among consumers.
"I also think shelf space is not for free and that when retailers get over the emotional hurdle that the brand is going away and work hard to replace it, it will be very difficult for it to fill the same niche as before," he added. "Brands are about what you do with them and I think they have a challenge there from the point of view of the revenue line."
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