What Happens to Struggling Brands Inside a Conglomerate? Jell-O and Kool-Aid Are About to Find Out

Analysts predict they will be spun off

Not even the Kool-Aid Man can help. - Credit by Getty Images
Headshot of Diana Pearl

Throughout the second half of the 20th century, Jell-O and Kool-Aid were omnipresent on American pantry shelves. But in 2019, the story for both brands is a bit different: they carry more nostalgia value than modern consumer appeal.

Late last week, Kraft Heinz’s stock fell by 20 percent after the company shared that it had written down the value of its brands by $15.4 billion and had been the subject of an SEC investigation, according to the Wall Street Journal. Kraft Heinz also announced that it was considering plans to sell off the brands in its portfolio that have “no clear path to competitive advantage” in the marketplace, according to Kraft Heinz CFO David Knopf.

Jell-O and Kool-Aid are likely two of the brands Knopf is referring to. In today’s health-conscious, sustainability-savvy world, both feel a bit like a relic of another era. Now, Kraft Heinz is faced with the challenge of reinvigorating a brand that seems not to have a place in today’s consumer appetites—and that’s a task that will require much more than inventive marketing.

“None of these brands have easy fixes, and unfortunately, by the time they get to this stage, it’s not a question of better advertising,” said Allen Adamson, co-founder and CEO of Metaforce. “It’s often rooted in what the product does and how it works and changing that is never easy. They’re fighting against longer-term trends in how people shop, how people eat, what beverages they choose.”

What Kraft Heinz could do is make a real effort to change up these brands and the products they carry. The key, Adamson said, is to identify why people are no longer connecting with your product. “The unfortunate fact is that brands were often created to solve a problem for consumers,” he said. “Sometimes those problems no longer exist or are no longer relevant. You have to reinvent what the brand does and what it delivers.”

Jell-O, in particular, faces a unique challenge. It is essentially the only major player in its category, but the lack of competition is telling—it’s simply a product of another time. Deb Gabor, CEO of Sol Marketing, who called it a “food of bygone days,” adds that another odd stacked against the brand is its association with its once-longtime, now maligned spokesperson, Bill Cosby.

Kool-Aid, meanwhile, may exist in a more thriving category—juice and fruit-flavored beverages—but its sugar-heavy formula is the antithesis of what’s popular in juice today: healthy smoothies and juices filled with natural ingredients.

Both represent a unique situation, where the brand equity that’s been built up over years and years in business (Jell-O was founded in 1897; Kool-Aid in 1927) almost acts as a disservice—even with a brand asset as iconic as the Kool-Aid Man. “These brands have such iconic equity, that is so hardwired and so linked to the past,” said Adamson. “Getting people to reimagine it is sometimes harder than just launching a new brand and starting over again.”

Gabor said that if Kraft Heinz wants to breathe new life into these brands, research is paramount to deciding whether or not it’s worth it.

“The investment in building new products that deliver on the brand promise while still being relevant for consumers today is a massive undertaking for companies,” she said. “If they’re even considering doing any kind of reinvention, I recommend that they first do some examination. Think: How strong is the brand equity? Do the positive associations of the brand carry over to who they think their ideal customer is today? Who would this reformulated, new and improved product be for? Could we actually make an impact based on the environment and the competition?”

It’s not impossible. Gabor points to Snapple, which was faced with a customer base that was starting to shy away from sugar-heavy beverages about a decade ago. “They reformulated the brand to be all-natural,” she said. “It was still sweet, it was still sugary, but what was relevant to consumers at that time was that if you were still going to choose a bottled tea [or juice] brand, this one was all-natural. That was one of the ways it was able to reinvent itself.”

However, doing this is much more difficult in food than in other sectors, like fashion—Gabor notes the resurgence of 1980s favorite shoe Tretorn gym shoes as an example. Adamson said: “Food has to have a story, and increasingly all food needs an authentic story about where it’s grown and how it’s made. You can’t make it up.” That sort of story isn’t something that comes naturally to a major conglomerate like Kraft Heinz.

To survive, the best bet may be just what Knopf alluded to: selling off the brands. Adamson said that sort of brand transformation is often more difficult for a legacy brand to undertake than it is a more entrepreneurial-minded competitor.

“The challenge for [companies like] Kraft Heinz, Procter & Gamble and Unilever is they know how to do big,” he said. “They don’t do small well. They don’t do entrepreneurial well. They don’t have the internal skill set and their investors don’t have the patience.”

But another company—one that’s perhaps a bit scrappier and operates on a smaller scale, could. As Adamson said: “The best thing they can do is spin it off to smaller companies who can try to be more entrepreneurial and reinvent them.”

@dianapearl_ diana.pearl@adweek.com Diana is the deputy brands editor at Adweek and managing editor of Brandweek.