Signs of life at Motorola?

Last week I saw a TV ad that caught my attention. The ad was for Motorola ’s (MOT) player in the smartphone category: the Q. Even better, the commercial was supporting the Q 9c, their latest product in this competitive field.

The ad caught my attention because I had not seen Motorola supporting one of its products on TV in a long time. I think the last TV commercial I remember was for the launch of their PEBL model, which failed to create any ripples in the market. Not only that: the ad was quite refreshing, light-hearted and, in my view, quite successful in creating rapport with the audience. The ad shows a dude that hits his head and gets amnesia. In an entertaining way, the ad shows how this guy relies on the Q 9c’s advanced features to function throughout the day.

In a category where most of the advertising is directed to the enterprise market, and therefore very business oriented, Motorola retakes the past glories of its “Hello Moto” campaign -a hip, sound take on Motorola that, along with the launch of the RAZR, took the company to a leading position in the cell phone market several years ago-, and uses the platform to position the Q 9c as the smartphone to help the everyday crowd manage their life. To reinforce the cool, casual character of this model, it is referred to, in the best “Hello Moto” fashion, as the Moto Q 9c. Promising!

The same night I saw the Motorola TV commercial, I also caught a Verizon ad featuring the Q 9c as well. I found that encouraging. It seems that Motorola is launching an integrated effort behind this model, and was able to enlist the carriers to support the initiative, which is critical if they're to achieve any success.

The support behind the Moto Q 9c is certainly a step in the right direction for Motorola. If the company is to ever compete again in the mobile market, smartphones is the right place to focus the effort. Smartphones are where the market is going. They are the future of wireless communication. Conventional cell phones are quickly becoming a thing of the past.

Yet, I’d need to see more from Motorola in order to consider the company an investment worth the risk. Motorola’s execution has been extremely disappointing in the last couple of years, and consequently the stock has lost two-thirds of its value in the same timeframe. The share price closed today at $9.13, basically sitting where it was five years ago. These are very good reasons to be skeptical. Motorola still needs to prove that they can pull it off. And they are facing some formidable competition in this segment: Research in Motion’s (RIMM) Blackberry, and the hottest gadget in recent history, the ultra-cool Apple (AAPL) iPhone. Very tough nuts to crack! Nonetheless, it is encouraging to see Moto trying to get its mojo back. Keep an eye on the company. This might be the beginning of the long awaited turnaround for this stock.

Disclosure: I own shares of MOT

Sweet prospects for Starbucks

Last July, Starbucks (SBUX) announced that it had signed a deal with Hershey Co. (HSY) to create a new line of premium chocolate products. This weekend I finally saw on TV the commercial launching the announced Starbucks Chocolate line.

I was pleased with what I saw. The TV ad was very appealing, and highlighted the unique marriage between two indulgent darlings, coffee and chocolate, that only the expertise of Starbucks could achieve. There was an organic, slightly distressed feel to the commercial that connoted craftsmanship and heritage, but with a modern feel. Well done!

This initiative begs the question, though: is this right for the troubled coffee company? Is this in line with Starbucks’ CEO Howard Schultz’ pledge to go back to basics and refocusing on the core business to turnaround the ailing chain?

I attribute Starbucks woes to three factors:

a) The “commoditization” of good coffee. Starbucks not only taught Americans how to drink coffee; it also taught competitors how to prepare it. Now the chain is facing competition from a myriad of different sources, from McDonalds to Dunkin Donuts and convenience stores. All good, tasty alternatives at a far better price. Not only that: those competitors are also talking the talk, proudly touting their own array of exotic variants, from the Costa Rican Tarrazu blend to the 100% Indonesian Arabica decaf brew.

b) The grinding economic situation, that puts consumers in the position to choose between a cup of Starbucks’ double-shot Latte and a gallon of gas.

c) The clear erosion in Starbucks quality, against which Schultz warned and that he is trying to address with his back-to-basics mantra.

In order for Starbucks to return to a path of profitable growth, it will have to address all these factors. I would not worry about the economic situation. Yes, it will be a hindrance for a number of quarters, but sooner or later, things will get better. Actually, rightly leveraged, it could even help, as will be discussed later. It is the other two factors that are fundamental problems that Starbucks will have to address.

Starbucks will have to not only improve its quality: they must also re-build the conviction among consumers that their quality is superior to any other coffee expert wanna-be out there, and therefore, worth the effort and price for a superior experience. Starbucks must re-assert its position as the absolute expert in coffee. A level of expertise and connoisseurship that guarantees that, when looking for the well-deserved, ultimate coffee indulgence, consumers consider Starbucks as the only possible purveyor.

Here is where the chocolate line comes into play and why it makes so much business sense for Starbucks at this juncture. In a tight economic situation, consumers are forced to cut back in superfluous expenditures. Splurging in big-tickets pleasures is out of the question. However, people still want to enjoy and reward themselves. Small indulgences become more important, as consumer cling to the remnants of their standard of life. You might not be able to go to the beach during this Memorial Day weekend, but surely you can afford to go to Starbucks and enjoy the sunny afternoon enjoying a well-deserved Caramel Macchiato, can’t you? I mean, it’s only five bucks versus the hundreds you just saved by staying home, right? You’ve earned it! Or for that matter, you could afford to indulge in some fine chocolates while watching that DVD, couldn’t you?

Ah, the fine things in life. Chocolate is one of them. As with any other product, consumers are nowadays expecting more from it than just the sensorial pleasure (for more on these motivations, see my post “Consumer values to look for”). The assurance that craftsmanship and sophistication bring to the experience is as important as the taste and the texture. Chocolate has joined the pantheon of products in which consumers are looking for, and demanding, a higher level of connoisseurship and artisan mastery. Just ask Godiva.

Starbucks’ introduction into the chocolate category has a double benefit for the company:

a) Starbucks expertise in the coffee business gives it instant credibility to participate in the premium chocolate category with a coffee-based offering. Not only are chocolate and coffee complementary products from the sensorial perspective: they have close affinity as product categories, in terms of their indulgent role in the consumers’ lifestyle. Chocolates is a fitting complement and a natural extension to Starbucks’ core coffee business.

b) By extending its coffee expertise into another category where mastery and premium character matters, Starbucks is just reclaiming those attributes for itself in the eyes of the consumers, which in turn should revalidate the uniqueness of the Starbucks experience and help support their core business.

This is certainly a step in the right direction, and strategically, it surely beats serving breakfast!

Disclosure: I own shares of Starbucks

Winning the online brokers’ war

One of the most competitive spaces right now must be the online brokerage business. It is to be expected: it is an industry with relatively low barriers for entry and a huge potential market. As the stock market is democratized by the power of the Internet and its abundance of quality information, the need for full-service brokers is dwindling. This is not new, and the process has been going on for years now. Yet, full-service brokers still have significant number of customers who the online brokers are constantly vying for. Likewise, new generations of would-be investors join the mass of potential customers each year as thousands of young professionals –with an independent, entrepreneurial mindset- enter the job market and need to decide how to invest their newly acquired disposable income.

Online brokers invest intensely in advertising and promotions trying to gain these available new customers, and of course, steal a few from the competition. This massive investment and ferocious competition keep their margins razor-thin. In this situation, is it wise to invest in an online broker? If so, which one –if any- is poised to win the online broker’s war?

The three frontrunners in this race are Charles Schwab (SCHW), TD Ameritrade (AMTD) and E*Trade (ETFC). Their trading platforms, fees and quality service can be considered quite similar in principle. What will determine then which would a potential customer choose? Here is where building an emotional connection with target customers becomes crucial. In a market where the tangible products or services being offered are quite homogeneous between competitors, creating a sense of rapport and shared values becomes the angle that can make the difference for a consumer.

Each of the three key brokers is trying to achieve this affinity of values in different ways. TD Ameritrade is sticking to Sam Waterston as its spokesperson and trying to leverage the independent spirit of America as their guiding value. This approach, in my view, has limited appeal among young, truly independent investors. It positions investing as a fairly stern, mature and conventional endeavor. That does not resonate well with the right-brained nature of the current generation of customers (for a great book on this, I suggest Daniel Pink's A Whole New Mind: Why Right-Brainers Will Rule the Future).

Charles Schwab hit a home-run with the launch of its “Talk to Chuck” campaign. What a dramatic repositioning for the company! The pioneer of the industry had been losing ground to other online brokers after the retirement of its name-sake founder. The new management at that point lost its sense of direction and tried to take the company to play with the big boys… exactly the opposite of what had made the company successful in the first place! When Charles Schwab returned at the helm, he realized that the company had lost touch with its customers and had created a stodgy and outdated image for itself. “Talk to Chuck” was a vibrant and energetic way of re-humanize Charles Schwab. From the emotional perspective, I think Schwab is in the best position in its history. “Talk to Chuck” is a warm, fun and irreverent campaign that makes the company approachable and dynamic. However, Schwab might be missing an opportunity: their recent commercials are still talking to sophisticated investors. Their strategy is still about switching consumers from the full-service brokers. In its commercials, Schwab’s “customers” invariably explain how the service they got from their previous broker didn’t match their own sophistication and knowledge. This communication may be irrelevant for investors that don’t feel to be as experienced and –dare I say it-… wealthy as the ones portrayed in the ads.

Finally, there is E*Trade. This company was roaring in all its cylinders until it got badly hit by the sub-prime meltdown. Its competitors didn’t wait to take advantage of E*Trade woes, and in just a matter of weeks, they stole thousands of consumers and billions of dollars from the company. Even in the midst of the crisis, E*Trade did not lose sight of the importance of communicating with its customers and the reassuring power of advertising. Despite its hemorrhage of liquidity and its internal shakeout, the company upheld its plans to advertise in the Super Bowl. E*Trade famous “Trading Baby” TV ad was enough to assuage the consumers’ jitters and is credited with stopping the bleeding. In terms of understanding consumer values and position itself as the right complement to their lifestyle, E*Trade does the best job of all three. Their approach is plain, simple and straight-forward. They focus on the simplicity, power and excitement of trading, and are able to let the consumer know that they understand the emotions they are going through in navigating the stock market world: from the father making his first online trade surrounded by his family, to the dude that trades while fragging his friend in "Gears Of War” (very insightful!). These are real people, and E*Trade is there with them. Not above, not ahead, but at their side.

Online brokerage will continue to be an intensely competitive industry in the foreseeable future, and the fierce fight to gain customers will continue demanding huge investments that will keep its profitability in check. Nevertheless, I think E*Trade presents a very compelling risk-reward proposition right now. The stock price is still depressed after the credit crunch scare, even though it showed some strength last week, closing at $4.31. While I think their financial situation is still fragile, management is doing the right things to refocus the business and gain new customers. All reports indicate they keep opening new accounts at a vigorous pace. I am not surprised. I think E*Trade has a strong brand equity and they know how to leverage it among the segment of consumers that represent the highest potential for gains. I think the bottom for E*Trade is in the past, and for the patient investor, this could be a rewarding investment. Something to consider for your portfolio; who knows, soon you may even get to rent your own clown.

Disclosure: I own shares of E*Trade Financial Corp.

When does Green shine as an investment opportunity?

In my previous post “Can we invest in Green?”, I discussed the drivers behind the acceleration of the Green movement, and its value as an investment opportunity. However, I warned that we have to be cautious, really understanding the underlying value of what any particular company is doing to leverage this trend. Paraphrasing the old adage, I indicated that not everything that is Green shines.

Everyone is jumping into the Green trend. Not everyone is doing it right though. Adopting ecologically friendly initiatives cannot be just a marketing plot. This is what is called “green-washing” and consumers see right through it. A company needs to be sincere in its approach. It is a fundamental component of the authenticity consumers are looking for in their dealings with a company (please see my article “Consumer values to look for” for a more detailed analysis on the topic of “authenticity”).

For a Green initiative to be successful -and therefore interesting as an investment opportunity-, we need to look for three key components: a) integrity; b) performance; and c) affordability. Let’s discuss these requirements:

Integrity: There are different levels of features a company can incorporate in a product in order to make it more eco-friendly. Some measures can be limited and represent just a small step in the right direction: for example, a change in packaging, using a little less plastic or incorporating recycled cardboard. Others can represent a radical and thorough re-design of a product or type of products, ensuring that everything in it significantly reduces its impact to the environment. All these steps are good: they all represent progress in the right direction. What is not right, though, is making just a small change and then try to hype it as major breakthrough in ecological responsibility. As indicated, consumers see right through these hypes and judge them as insincere attempts to prey on their genuine concerns. If as a company all you are doing is including 30% recycled post-consumer content in your cardboard boxes, just say it that way, and devote a little corner in you packaging to let consumers know; they will notice it and appreciate it. But don’t suddenly launch a full campaign touting that small change as the new “eco-friendly pack” for your product and thump your chest about how concerned you are about the environment and how seriously you are taking your ecological responsibility. Nah… that does not cut it. It's not authentic. On the other side of the spectrum, the more comprehensive is the change or the innovation, the more evidence consumers can see of a thought-through, purposefully designed product that comprehensively addresses their environmental concerns, then the stronger will be the manufacturer’s grounds to genuinely support the innovation in force and the higher the potential for consumers to pay attention and ultimately adopt the product. This thoroughness in the offer is what we need to look for in considering a potential investment opportunity.

Performance: There is one absolute truth with respect to Green. Consumers are willing to adopt products that are ecologically sound as long as those products perform as well or even better than conventional products. Period. As much as consumers want to do the right thing, they are not willing to wear soiled clothes, or eat tasteless food, or sacrifice aesthetics for the sake of the environment. The brands and products that promise to be environmentally friendly must also provide convincing arguments to make consumers believe they will perform well, and finally, they have to deliver on that promise.

Affordability: Consumers are willing to pay a little more for a more responsible product. But not a whole lot more. The closer the price of the eco-friendly product is to what the consumers are used to pay for that type of product, the higher it is the likelihood that consumers will switch to it. This is no surprise, though. Ultimately, we are playing with the good old value equation. Consumers are willing to pay more for products that have a greater value for them, that is, the ones that solve for a wider range of needs. What is the value of feeling good for fulfilling your responsibility with the planet? Hard to tell, but not that high in the big scheme of things. Yet, at a competitive price, it is a very relevant differentiator, and may tip the market share balance dramatically in favor of the eco-friendly contender. Therefore, look for competitive pricing when gauging a potential investment. The real volume and profit potential will be there.

Good! Now we know what to look for. I have some ideas of my own that I will be sharing in future posts. Do you have some ideas that can enrich this discussion? Your comments are always welcome. Invest well and prosper!

Can we invest in Green?

The Green movement is expanding like a wildfire across America and the world, and many companies are scrambling to jump into the bandwagon. I find it fascinating: the “greens”, (or “tree-huggers” or “environmentalists”) have been out there for decades, warning us about the catastrophic damage our way of life was causing to the planet. Most people would see them as a small group of naïve idealists (or radicals, in some cases) that made some good points, but that for the most part, grossly exaggerated the severity of the situation. As such, they were mocked and not taken very seriously. Now, they are not alone. Now, more and more people are becoming conscious about the environment and actively doing something about it. Green is quickly becoming mainstream.

What has changed? What made everyone suddenly pay attention? Most importantly perhaps, is this for real? Or is it just another fad like the carbs craze that will just fade away when consumers find another cause to embrace?

Believe it or not, the carbs craze and the green movement are related. They are expressions of the same set of values that are shaping society today. Paul Ray, in his book “The Cultural Creatives: How 50 Million People Are Changing the World”, coined the concept that has now been adopted to explain this set of values: LOHAS or Lifestyles of Health and Sustainability. LOHAS is described as “…a market segment focused on health and fitness, the environment, personal development, sustainable living, and social justice.” (http://www.lohas.com/). It sounds like a pretty hefty segment, doesn’t it? How is health and fitness related to social justice?? I addressed that in my post entitled “Consumer values to look for”: it all boils down to the pursuit of transcendental satisfaction. Inwardly driven consumers who look for holistic well-being: mind, body and soul. Consumers today demand more than the satisfaction of mere functional needs. A cup of coffee is not just a cup of coffee anymore: it must be an indulging, deeply satisfying sensorial experience that also makes them feel good because is healthy (cue in organic), allows them to help fellow human beings (enter Fair Trade) and fosters a pleasant, safe and clean environment they can enjoy (mix in sustainable and ecologically sound). Yeap, all that in a cup of coffee… or a shirt… or a car.

OK, but is this for real? There are a number of factors that tell me the underlying values behind this trend are not a short-term fad, but a new set of core principles and beliefs that are taking hold and truly dictating the way we run our lives. These principles are becoming the frame of reference in the decisions of what we buy. Some of the expressions may be temporary (like the carbs madness), but the values are here to stay. Some of those determining factors I referred to are:

Inward-driven mindset: As covered in depth in my post “Consumer values to look for”

Connected globalization: Globalization is not just an economic phenomenon, but a social and cultural one. We just can’t escape the world anymore. Technology and instant communications make us witnesses of the limitations and struggles of people around the world to survive and prosper. We can’t ignore it any more than we would ignore our next-door neighbor going through hard times. A good book on this topic is Tom Friedman's The World Is Flat 3.0: A Brief History of the Twenty-first Century

Scarcity: We are finally realizing that natural resources are truly limited, and that the competition for them is increasing. This is affecting us all through increased cost of living and eroded quality of life.

Global warming: “- So, you were not kidding! It is for real, then??!!” Thank you, Mr. Gore.

Accessibility: I would dare to bet this is perhaps the most important factor in the change of attitude. People are doing something because now they can. Information, availability and cost make taking the right decisions easier and affordable.

Now that we’ve discussed the Green trend with some detail, let’s try to answer the pivotal question of this post: can we invest in Green? The answer is a categorical yes… but we have to be cautious: not everything that is green shines. In future postings, I will be covering companies that I think are doing a great job in understanding and embracing this new set of core values in their product portfolio and communications, and because of that, will capitalize on this trend and generate significant value for their shareholders.

“Monkey wants my burger!” So do I…

I think we are looking at a tasty opportunity here. A few months ago, I started to see on TV some clever –and quite appetizing!- commercials from what for me was a little known restaurant chain: Red Robin Gourmet Burgers (RRGB). These commercials caught my attention. I had seen Red Robin restaurants here and there when travelling around the country, but I had never had any interest in visiting one of them. I didn’t know what they were about, so I assumed they were just another one of those fast-food joints that dot our malls and commercial areas. Likely, nothing special. Suddenly, I see this fun and irreverent TV spot that describes a rather interesting gastronomic offer: the Banzai Burger. A burger with, among other things, teriyaki sauce and grilled pineapple. Well, there’s a thought! And this burger was offered by a restaurant that claimed to specialize in a concept that I found rather captivating: gourmet burgers. See, if you are like most Americans, it’s likely you’ve been embarked for a good part of your life in an inspiring and not quite yet fulfilled search: the quest for the perfect burger. I know I am! And what I know is that I usually go from disappointment to disappointment in that quest. Burgers are mainly the monopoly of the dull fast food chains, which seem to make a very deliberate and concerted effort to ensure that the burgers they serve you are as underwhelming as possible and as distant from the mouthwatering ones they show in their advertising as they can. Most casual restaurants also include burgers in their menus, but apparently consider them the undeserving underlings of their gastronomical line-ups: “Burgers? Please!! Just toss in a mundane beef patty with some lettuce and tomato in a bun, plenty of greasy fries and call it a day”. Have you noticed that, even though at some of restaurants they even ask you how you want your meat cooked, you invariably get it in just one way: burned, dry and tasteless. In this context, here it comes this restaurant chain, Red Robin, that seems to understand that there can be creativity behind the way to prepare a burger, and that also understands that there are people –lots of people- who are willing to pay a premium for a great burger experience. In my case, the advertising worked and, intrigued, I decided to pay them a visit. Now, as I have indicated before, good advertising is not the only condition to profile a potential great investment. The company has to deliver on its promise. And this is exactly the reason why I decided to write a posting about Red Robin. During my visit, they delivered in spades. The Red Robin restaurant created a great impression from the moment we stepped in: the place just emanated this fun, positive and optimistic energy. The decoration was quite lively, but not loud. The place was just fun, modern and clean. Even though the place was packed –good signal!-, we were promptly taken to our table. Our waitress, Samantha, was young, outgoing and very well trained. When she knew this was our first time at Red Robin, she took us through the menu with excitement and conviction, and offered to bring an order of their famous steak fries for us to try, which she later did along with a side of Ranch sauce that, according to her, most people enjoyed with the potatoes (they were great indeed!). The menu was a burger-lover’s dream: alluring burger creations that make taking a decision an unduly tough process. Even the drinks were intriguing and different. After we ordered, and during our meal, Samantha was always attentive, making sure that our experience was great. I can go on and on, but let me just summarize it this way: I was genuinely impressed with Red Robin. The whole experience was just great. But what I found more striking was not the quality of the food –which was superb-. It was the people. The Red Robin people were really charged up. Their service was caring and genuinely warm. And that is gold. For me, the attitude and disposition of the employees in a Company is one of the best indicators of its future and potential, for at the end it is people who can create and build success. It is the cook making sure that the burgers are well done and tasty; it is the server taking care of the customers so they feel comfortable and welcomed; it is the managers, keeping the environment fun and exciting. That is what I witnessed at Red Robin.
Red Robin has a lot of room to grow: currently they have around 380 restaurants in the US and Canada, far from saturation. This shrewd advertising campaign is going to dramatically raise the awareness and interest in Red Robin among the huge segment of casual diners in the US, and those who visit will not be disappointed by the great experience offered by the restaurants. This is, in my view, the start of a great investment story. Get in before the monkey takes your burger!

General Motors: Like nothing else...

To close this series of postings on General Motors (GM) and its potential as a long-term investment, I want to briefly cover the last great example of sharp marketing in GM’s portfolio: the Hummer.
When Hummer was finally made available to the mass consumer market with the introduction of the H2 model, GM was capitalizing on two key equities the brand had already developed. The first one was the mythical, larger-than-life personality the humvee had built through its successful performance in the armed forces. The second: the mystique created by its rare appearances in civil society as a coveted symbol of power and exclusivity for a handful of players able to foot the $100K+ tab for the privilege of flaunting an original Hummer (later dubbed the H1). Marketed as a luxurious, yet rugged and masculine vehicle, the success of the H2 was immediately obvious, and very quickly the Hummer made its presence being felt in the national highways. The H2 made many drool and a few others mad: the huge, powerful vehicle launch came to be at a very inconvenient time, exactly when the price of oil started to climb. Many would-be Hummer owners hesitated to commit to this gas-guzzler’s unquenchable thirst, and the fewer that embarked on it, were stung by guilt. It didn’t help that he Hummer became the preferred target of the green crowd, who heavily criticized the wasteful fuel consumption of the Hummer and the frivolity of those who would buy this all-terrain behemoth just to take it from their driveways to the office and back. GM’s reaction was quick and brilliant: the H3 was born. What made H3 such a masterful move was GM’s ability to position it as a smarter, more nimble Hummer, without undermining at all its powerful and virile image. The H3 preserved the rock-climbing, trail-blazing, river-crossing, neighbor-impressing capabilities of the Hummer proposition, at a far more acceptable price and fuel-consumption levels. GM’s message: indulge! GM got it right, and they’ve continued supporting the Hummer on an ongoing basis with enticing communications that pay off the emotional driver behind the desire for such an unstoppable all-terrain: facing a fairly routinary, structured and all-too-convenient life, sub-urban consumers dream with the freedom and the challenge of overcoming every obstacle in a boundless discovery of new, remote places… of course, in the comfort of leather seats and a top-notch audio system. It’s all about personal power. The amazing array of exciting TV commercials and print ads developed to support Hummer is mind-boggling. Every single one conveys exactly the same message: an extraordinary vehicle that will negotiate any obstacle to take you anywhere you want to go. But it is brilliantly done by molding the message to address –and feed from- vastly diverse lifestyle and value contexts, so as to be relevant to different consumer segments. From the promise of transferring your strong and daring video game self into the real world, to nurturing your subconscious desire to transcend through heroic deeds: it all is possible with a Hummer. The relevance and quality of Hummer’s positioning and support is evidence of GM’s ability of not only obtain in depth consumer insights, but most importantly, leverage them and translate them into relevant product propositions. And that exactly is the key to build long-term leadership and growth… like nothing else.

General Motors: An Innovations Revolution

In this third installment of my analysis of General Motors’ (GM) rise as a marketing powerhouse, I want to refer to yet another pillar of GM’s resurgence: its Chevrolet division. During the last couple of years, GM has been engaged in an exciting turnaround of its once flailing Chevrolet division. Chevrolet has always been GM’s workhorse. Considered its “popular” brand, that is, the brand targeted at the mass, mid-priced segment, Chevrolet cars had been, at best, uninspiring. There was not a clear position for Chevrolet. The brand churned a massive number of styles, very much unrelated except for one thing: their lack of character –and, some would add, quality. In a very typical mistake made by many corporations, GM at some point considered that the middle-class consumers need for an affordable, no frills car meant that its customers could forego style and the fundamental drive to fulfill significant emotional needs within a mainly rational choice. Toyota and Honda did not make the same mistake, and their respective Camry and Accord models thrived by offering consumers affordable style, durability and reliability. In my view, GM learned the lesson, and took the initiative of carefully re-evaluating Chevrolet’s personality. GM addressed two fundamental questions: what was the brand to stand for? and, consequentially, what kind of cars should be developed and marketed under the Chevrolet brand name? I think GM cracked the code: if I had to summarize the chosen positioning for Chevrolet, I would define it as “the smart choice”, underpinned not by low price, but as technology-driven efficiency. A mindful brand that pursues innovation as a way to provide the best overall value to today’s conscientious consumer. The first step was to resuscitate a model that was pretty much written off: the Malibu, and make it the unquestionable flagship for the brand. Malibu provides Chevrolet with a clear focus and a base personality the consumers could first identify, and second, relate to. The Malibu was completely re-engineered. A generous dose of stylish design and technical performance to match its adversaries made the Malibu a remarkable contender in the leading mid-price category. But the real breakthrough was in also positioning Chevrolet as the innovator in fuel-efficiency and alternative energy vehicles, spearheading and bringing to market GM’s innovations in that area. Once again, this move fully pays off the brand’s chosen positioning: technology-driven efficiency. Please notice that Chevrolet’s innovations are not about performance, comfort or luxury. No frivolous (although nice!) heated windshield cleaning fluid here: it’s all about efficiency, lower costs and lower consumption of limited resources. It's what Chevrolet refers to as Fuel Solutions. Eureka! In one swap, Chevrolet is covering two relevant, very real and closely linked concerns of today’s consumers: a) the personal, financial concern with the rising costs of energy, and with it, b) the awakening to the reality that natural resources are indeed finite and that it's everyone's responsbility to do their part to conserve them. This is the drive behind the surging interest for sustainable and ecologically sound products.
General Motors has vigorously driven this positioning for Chevrolet. It started with their FlexFuel vehicles, uniquely suited to consume E-85 ethanol fuel, and taken to new heights with the much touted and highly anticipated Chevy Volt, a long-range –and cool looking!- electric vehicle slotted for launch in 2010. I am particularly impressed by the iconic system developed to represent this approach, whereby a very clever representation of each of the alternative-fuel types Chevy is offering or working on are shown under the theme “Gas-friendly to gas-free”. The vitality, breadth of innovation and commitment this simple array projects give Chevrolet instant credibility and appeal.
Once again, Chevrolet represents yet another proof of General Motors marketing prowess. I can see no flaw in their approach, and compared to the endless shots of fast cars running on smooth roads that are the staple in car advertising, GM is developing brands with real souls and personality. Consumers are paying attention. Your investment portfolio should too.

GM: renewing heritage

In this series of postings, I am discussing the various signals I am seeing that, in my view, point to a rebirth of General Motors (GM) as a leader –beyond sales volume- in the automotive industry, and therefore, profile the Company as an attractive investment. In my previous posting "Full speed for General Motoros", I explained why I think the work behind Cadillac is just right. Now, I’d like to turn my attention to another treasure been dusted by GM off from the antiques coffer: Buick. Support behind Buick is not new. Since several years ago, GM has been trying to rejuvenate this brand, but its efforts had been, at best, tepid and somewhat erratic. What was Buick? A family car? The launch of the Rendezvous seemed to suggest that. A sports car? Tiger Woods took a few swings at it. It feels like GM knew there was valuable heritage in that brand, but was not finding the right way to unleash it in all its full potential. Then Lacrosse and Lucerne made their debut. Mmmh… I am sure Buick dealers started to see a slightly different type of crowd asking about these models. Sleek, with an abundance of features, nicely appointed, yet with the promise of a brisk, fulfilling driving experience. A true sub-premium offering was born. GM had found the sweetspot for Buick. An elegant, pleasant, smooth experience but with the impetus of a thoroughbred. Beatiful!! Actually, not a bad positioning, is it? And hence “Drive beautiful” was coined. A great product vision does not need much explanation. Once you hit the “big idea”, the way forward becomes clear. The right concepts and communications just flow out of this big idea. And “Drive beautiful” has engendered a series of great Buick models that completely belie the previous perceptions of Buick as a stodgy, old and declining brand. The latest addition to the family is the Enclave, a bold yet sophisticated SUV experience. Buicks are beautiful, paying off a concept that is absolutely in tune with today’s inward-looking consumer, who gives special value to aesthetics, harmony and a personal sense of pleasure. Buick is then yet another great proof of General Motors promising revival.

Full speed for General Motors

I am excited about the prospects for General Motors (GM) as a great stock for long-term investment. I see several of its divisions powering ahead with all cylinders running. And consumers are paying attention. I will be covering the different signs I am seeing about GM getting it right in a series of postings, just because there is much going on and much to discuss. I can’t avoid drawing a historical analogy to 1941: it seems that the relentless expansion from Japan’s Toyota may have finally awakened a sleeping giant.

To start this series of posting, let’s focus on GM’s efforts in the top end of the market, the luxury segment, where its lunch has been eaten for way too long by European, and moreover in recent years, by the Japanese offers represented by Infiniti, Acura and the indisputable leader, Lexus. A few years ago, Cadillac initiated an extremely well orchestrated effort to revive a brand that at that time, in the mind of the consumers, only stood for 30-mile-per-hour seasoned seniors indulging in their golden years. A complete re-design of Cadillac’s line and an energetic, cool campaign started changing those perceptions. The effort reached its pinnacle with the launch of the Cadillac Escalade, that immediately became the gold standard for SUV opulence and coolness among the young crowd -by the way, quickly displacing the then heavyweight champion, the Lincoln Navigator-. GM continues to support the brand, and the latest campaign around the Cadillac CTS is the best yet. It is great how, in its commercials, the perfectly targeted spokespersons, exuding a cool, unpretentious confidence, go in a rather matter-of-factly way over the features of the car. Yes, they are the features to be expected from a luxury car… but the difference in Cadillac, what is really important is that when you turn the car on… it will return the favor. This is a brilliant, insightful, and totally relevant way to speak to the affluent young professionals in their own language. What is most impressive is how compelling and personal the message is, and how precise it is at capturing the sensual nature of the pleasure associated with driving a powerful and luxurious car. GM dismisses the conventional and undifferentiating car talk, which everyone else claims time and time again –yeah, yeah, exciting, exhilarating… ho-hum-, and engages the luxury consumers in a peer-to-peer dialogue, reaching deep inside at their truest emotions and desires. The message is targeting the soul, not the brain. The campaign is superbly produced and the talent is spot on for the message. I can only see Cadillac comfortably expanding the space it occupies in the luxury segment. And that is high-octane fuel for GM’s growth.

Java energy, Monster profits

When driving by a gas station the other day, I saw a sign announcing the latest hit on one of the most amazing success stories in the last years. Hansen Naturals (HANS) has been riding wild on the base of its very successful line of energy drinks, Monster. The sign that I saw advertised the latest addition to their Monster product range: Java Monster. In my view, a stroke of pure genious. Energy drinks as a category has seen double-digit growth in the last years, ever since Red Bull was introduced in the US several years ago. Hansen Naturals was able to take the lead in the category through a shrewd mix of great, cutting-edge products, aggressive distribution, and a vigorous line-extension strategy. Much has been said about Hansen Naturals and the wild increase in its share price. Many have questioned its valuation. The stock reached an all-time high north of $68 in early November, just to fall back to around $40 after what some considered a soft quarter. Yet, the share price has recovered to $49 in just a few weeks. The growth story behind Hansen Naturals is far from over. This latest introduction of Java Monster is just one more indicator of the firm grip the management has on its consumers' trends and lifestyles. Uniting two of the most relevant staples in today's Gen-Yers (energy drinks and coffee) in one product is quite smart, and as mentioned, it only demonstrates that Hansen Naturals is way capable of keeping its finger in the pulse of this important segment, and that it has the creativity and the executional drive to decisively act on the insights. As long as Monster continues to show such a proactive and vibrant vitality, profits will folow. And so far, it seems there is plenty of energy behind Monster.

Fat profits with Alli

Glaxo SmithKline (GSK) has recently launched a new weight loss drug named Alli. Alli is more than a drug: GSK has designed a whole program around Alli, and in a very honest way, warns the public that losing weight with Alli requires discipline and commitment. This is, for me, the key to its incipient success. Obesity is a serious pandemic in America, and consumers are worried about their weight. But they are exposed to a constant barrage of weight loss products offerings of dubious procedence and even more questionable effectiveness; products that offer magic formulas to lose weight while you keep eating like a Roman emperor and spend your weekends watching TV in the comfort of your couch. A combination of skepticism and desperation grasp over-weight consumers who know they need help, yet feel they are victims of unscrupulous scammers who prey on their weakness: what to believe? Who to trust?. So, when a reputable, Big Pharma company like Glaxo SmithKline finally comes to the rescue and launches a weight loss program, consumer will listen... and buy. This a serious Company that can be trusted. GSK has launched Alli in a quite vigorous way, and it's diffcult to miss their very well done TV commercials and their aisle displays at key retailers like Wal-Mart and Walgreens. Awareness of the new proposition must be high, and I assume some robust trial has ensued. I think Alli is a great initiative from GSK; in my view, this business will turn into a gold mine for this Company.

At $53, GSK share price is a little depressed right now as collateral damage of the sub-prime-driven market turmoil. It looks like a good opportunity to fatten up your portfolio.

Disclosure: I own shares of Glaxo SmithKline

Coke is it!

I used to be an avid Pepsi drinker. For me, Coke was a fairly standard, no-frills kind of drink. However, during the last couple of years I've seen with growing admiration the dramatic push The Coca-Cola Company (KO) is making in terms of innovation and outstanding product quality. First it was Coke Zero. Although skeptical at the beginning, it took me a couple of months to try this product; I mean, what could be so different from Pepsi One, anyway? Boy, was it different!! The first taste made me a convert. What a product!! Refreshing, flavorful and yet quite light. This successful introduction was followed by Coke's latest brilliant moves: the launch of Diet Coke Plus -Diet Coke with added vitamins and minerals-, and the acquisition of Glaceau, the manufacturer of the wildly successful VitaminWater line. Both initiatives strongly position the company to fully leverage the already robust -and still growing- consumers demand for healthier, balanced products that support their quest for overall well-being. In the best tradition of a consumer goods leader, Coca-Cola is strongly supporting both products with integrated marketing campaigns across several mediums. Perhaps the best example of advertising at work is VitaminWater. After just a few weeks of closing the Glaceau deal, Coca-Cola launched a vibrant, massive multi-media campaign to support VitaminWater, reinforcing its positioning as a hip, alternative brand for the in-crowd.

All this activity has not gone unnoticed in Wall Street. Coca-Cola share price has increased from around $44 in October 2006 to $54 in late August. While at 24 times trailing earnings the stock is not exactly cheap by historical standards at this point, I think Coke's portfolio strategy is definitely working. The Company is asserting its leadership position in the beverage market through a demonstrated understanding of what the consumers want and, most importanttly, where they are going in terms of priorities and needs. Growth at Coke can only bubble up.