Oprah + Tea: Like 50 Cent + Water or Pharrell + Liqueur?
Would you expect Oprah Winfrey to show up at your local Starbucks (SBUX)? In a way she has.
Last month, the company announced that it was collaborating with the media star on a new brand of chai to be sold loose-leaf and store-brewed by its subsidiary Teavana.
Celebrity endorsements usually involve a famous person directly plugging a particular good. What's less common is a star getting personally involved in the concept and/or design. As with the more traditional form of endorsement, such direct involvement can be a runaway success, a complete flop or something in between. Here are a few recent examples of all three.
Making It Rain
It began as an accidental endorsement. A number of years ago, hip-hop artist Curtis Jackson, better known as 50 Cent, brought a bottle of vitaminwater to a photo shoot for athletic shoe purveyor Reebok. Energy Brands, the maker of the electrolyte-enhanced H2O, was smart enough to realize a good promotional opportunity when it saw one, and it approached Jackson.
But "fiddy" likely would have commanded an awfully high fee to shill the liquid, no matter that he was a fan of the product. So the company offered him an equity stake in exchange for promotional work, and he accepted. The association between artist and company deepened. Before long, 50 Cent had helped develop the grape-flavored Formula 50.
The association with a famous musician, combined with a general trend away from traditional soft drinks, helped boost vitaminwater's profile. Energy Brands attracted the notice of Coca-Cola (KO), which in 2007 paid more than $4 billion to acquire it.
And Jackson's cut? According to Forbes magazine, the savvy musician took home a cool $100 million or so. Not bad for a bit of promotional work.
Skinny Lady, Fat Sale
In the various "Housewives" reality TV shows aired by Comcast's (CMCSA) Bravo TV, it seems all the wealthier-than-thou cast members have product lines. Many viewers don't take those businesses seriously, considering them to be either hobbies or pointless busywork.
But the enterprise founded by ex-"Real Housewives of New York" headliner Bethenny Frankel was no joke. Her Skinnygirl Cocktails, which makes a range of liquor products aimed at women, was bought by booze conglomerate Beam (BEAM) in 2011 in a deal estimated at around $100 million (neither party has disclosed the exact amount).
That was a clever, likely very profitable deal for Frankel, but at the moment it's not looking like a great win for Beam. In fiscal 2013, sales of the Skinnygirl line declined by 26 percent from the previous year, by far the company's worst-performing brand on that basis. Without that underperformance, Beam would have shown better overall top-line growth than the 4 percent (to just under $740 million) it reported for the year.
So far in 2014, young musician and producer Pharrell Williams has had one of the year's big hit songs with his catchy "Happy." But at least one of his outside business ventures hasn't been as successful.
%VIRTUAL-article-sponsoredlinks%Around the time Beam was getting woozy on shots of Skinnygirl, the musician came up with the idea to concoct a liqueur targeted at women. Qream With a Q, a sweet potion in two flavors, had a relatively low alcohol content of 12.5 percent.
Williams developed the drinks in collaboration with global beverage giant Diageo (DEO), a company that's no stranger to working with celebrities. But somehow, this effort didn't gel, and Qream With a Q soon dropped out of the market.
The singer wasn't content. He filed a lawsuit in Manhattan federal court alleging breach of contract by Diageo, claiming that the company "put no effort in producing or distributing" the liqueurs and seeking $5 million in damages. The lawsuit is pending.
Tea for Two?
Will Winfrey's time at the Starbucks tea bar be beneficial for both parties? The media mogul certainly doesn't need any more exposure; from her side, it seems an enjoyable way to indulge one of her interests (she's a devoted tea drinker).
The company is still very strongly identified with coffee, so this deal gives it a good shot at lifting the visibility of the Teavana brand. This should increase customer awareness of the company's non-coffee offerings, and perhaps hook a few customers on those beverages.
After all, if 50 Cent and Energy Brands can score a hit with modified water, it's very possible Starbucks can match that level of success with Winfrey and her chai.
Motley Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Beam, Coca-Cola, Diageo (ADR) and Starbucks. The Motley Fool owns shares of Coca-Cola and Starbucks and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our newsletter services free for 30 days.