Next venture from Martha Stewart: Groceries
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By Michael Barbaro
International Herald Tribune
Friday, May 4, 2007
The long, fastidious reach of Martha Stewart Living Omnimedia extends into the magazine, television, furniture, bedding, paint, glassware, and even home building businesses.
Now the queen of all things domestic is turning her voracious appetite to perhaps the riskiest industry of all: groceries.
Beginning in 2008, Stewart's name — and reputation — will adorn a line of fresh, refrigerated and frozen foods sold at Costco, the nation's largest warehouse retailer.
The partnership, disclosed Thursday, could test the limits of Stewart's appeal and present a set of perils that her company has never before encountered.
After all, drapes and paints cannot spoil in the refrigerator.
Stewart cooks everything from soufflés to duck breasts on her syndicated television shows but producing a line of packaged food is not exactly in her comfort zone.
So why would Stewart sell frozen dinners at Costco?
One obvious reason would be to try to improve her company's disappointing bottom line. The deal with Costco was announced along with first-quarter financial results that showed a net loss of $11.9 million, wider than the $6.8 million loss in the same quarter last year.
Although revenue rose, because of higher advertising income, to $66.7 million, from $62.1 million in the first quarter of 2006, it was more than offset by costs like investments in Blueprint, a lifestyle magazine introduced last year, and in the marthastewart.com Web site, which was recently renovated.
Martha Stewart shares, which have been closing below $20 since late January, closed Thursday at $18.70, down 5 cents a share for the day.
In a conference call Thursday, Susan Lyne, the chief executive of Martha Stewart Living Omnimedia, called food the "greatest untapped opportunity" for the company.
Food, she said, is the No. 1 area for visits on the company's Web site, which features recipes and cooking tips, suggesting that Stewart's fans trust her on matters of gastronomy.
In an interview, Howard Hochhauser, the chief financial officer of Martha Stewart Living Omnimedia, said the company had "a ton of credibility in food," adding of the new Costco line, "we think this can be pretty big."
For now, the most tantalizing question — what exactly Stewart will cook up for Costco — remains unanswered. Executives at both Martha Stewart Living and Costco said they were still in the testing and tasting phase of their collaboration and had not yet chosen products for the new line.
Based on what Martha Stewart Living executives have said before, the company is expected to favor prepared foods (think of nine-layer lasagna), rather than everyday commodities like a pie crust.
Products in the line will bear two names on the label — Stewart and Kirkland, the name Costco gives to its in-house products. The line is expected to be called Kirkland Signature by Martha Stewart.
Celebrity food lines are relatively rare, but they have succeeded before. Paul Newman's line, Newman's Own, has turned into a major brand over the last 20 years.
Bill Bishop, chairman of Willard Bishop, a retail marketing consultancy near Chicago, said Stewart's wide name recognition — even with its baggage, which includes her stint in jail — would bolster any food line.
"There would be a huge amount of awareness of Martha Stewart at Costco," he said.
Stewart has a habit of succeeding in unlikely businesses. Last year, for example, she signed a deal with KB Home to design suburban subdivisions inspired by her three personal residences. So far, sales of the homes are strong.
Martha Stewart Everyday, her line of bedding, cookware and dishes, is a hit at Kmart. Several months ago Stewart signed an agreement to produce high-end furniture for Macy's.
Costco is an unexpected choice for Stewart, given its exposed-metal-shelves and raw warehouse feel, all a bit at odds with her country-home image.
Hochhauser said the company picked Costco — known for its generous wages and benefits — because the retailer "really respects their employees and customers." |
