2 Brand Strategy Examples of New Category Expansion

2 Brand Strategy Examples of New Category Expansion

How Tommy Bahama and lululemon Conquered Wildly New Categories

Brands build equity and expertise over time, typically starting in one category and expanding into additional, related areas, while bringing along the brand’s core equity elements. In these two brand strategy examples, we’ll see how a brand can (sometimes) expand into surprising new categories.

Tommy Bahama Brand Strategy Example

The first of the two brand strategy examples we will explore is the Tommy Bahama brand, which has expanded to a wide range of categories, and innovated with strong food and beverage performance from its origin in apparel.

The Tommy Bahama brand began with a vacation mindset, evoking an “island attitude” and “one long weekend.”  According to company lore, the Tommy Bahama brand was created in 1992 while the founders were at their Florida vacation homes.  The founders conceived of the fictional namesake, Tommy Bahama, as a man who lives a perfect leisure mindset. 

Initial Tommy Bahama brand product categories in sportswear were “Hawaiian” shirts and khakis, intended to be classy, but relaxed, and silk was a favored material. 

With a starting company motto of “Relax,” the apparel brand represented “the perfect lifestyle, the perfect vacation and the perfect choice in extraordinary clothing. This is the life!” 

Over time, the brand broadened into additional product categories. The Tommy Bahama brand moved well beyond its men’s sportswear core to encompass:

  • Home Stores offering indoor and outdoor furniture in Austin, Woodlands and Newport Beach
  • restaurants and bars
  • beach gear
  • home décor and home entertaining   

In 2003, Oxford Industries purchased the Tommy Bahama brand for approximately $325 million.  In 2003, annual volume for Tommy Bahama was reported at $330 million. 

Oxford Industries owns a portfolio of “brands that make people happy,” including Tommy Bahama (the largest brand), Lilly Pulitzer (the second largest), and emerging brands Southern Tide, The Beauford Bonnet Company and Duck Head. 

In total, Tommy Bahama represents two thirds of Oxford Industries revenues, with revenues of over $650 million in 2021.  

The brand’s apparel lines include Tommy Bahama Collection, Tommy Bahama Relax, Tommy Bahama IslandActive and Tommy Bahama Denim.  The overall positioning of Tommy Bahama is “Long Live the Island Life.”

2 Brand Strategy Examples of New Category Expansion

Brand Strategy Example of Expansion from Clothing to Food and Beverage

The Tommy Bahama island lifestyle is available not just in clothing sold in company-owned stores and outlets as well as other retailers, but also as a restaurant or Marlin Bar experience at several locations, including:

  • California: Palm Springs, San Diego
  • Florida: Jacksonville, Fort Lauderdale, Dania Beach, Coconut Point, Naples, Sandestin, Jupiter, Sarasota
  • Hawaii: Lahaina, Mauna Lani, Waikiki, Wailea
  • Nevada: Las Vegas
  • New York: NYC
  • Texas: Legacy West Plano, The Woodlands

Out of the 159 bricks and mortar locations, the 21 locations that have food and beverage make up a disproportionate 25% of total Tommy Bahama revenue. 

Says Thomas Chub, Chairman and CEO of Oxford Industries:

“The food and beverage locations are an incredible differentiator for the brand that provide a complete aesthetic experience by engaging all the senses and creating an emotional connection with the brand for the consumer. This results in an incredibly strong and loyal following, with a significant increase in the new customers coming into the brand.”

My husband and I recently had the chance to try the Tommy Bahama restaurant experience during dinner with friends at the Tommy Bahama Restaurant in Mauna Lani.  With several good restaurant choices close to the Fairmont Orchid where we were staying, I found the prospect of the Tommy Bahama apparel brand offering a high-quality restaurant surprising.   The Tommy Bahama restaurant experience exceeded our group’s expectations on both service and food, which was particularly impressive in the COVID time. 

The menu items delivered great taste with a twist, for instance, the “World Famous” coconut shrimp appetizer had an appealing coconut flavor, unlike the deep-fried, non-descript taste typically found in coconut shrimp.   The service experience was also excellent– we were seated promptly in a comfortable outdoors corner table.    While online ratings for the restaurant vary between 4 to 5 stars, ours was a 5-star experience.

After this experience with Tommy Bahama, I almost expected to find the brand expanding into additional service categories such as sailings, cruise events and other entertainment venues.  I’m looking forward to visiting the restaurant again, and will check out the Newport Beach Home Store.

lululemon Brand Strategy Example

The second of the two brand strategy examples we will examine is lululemon.  The lululemon brand was created in 1998. 

The first products were “made for women to wear during yoga.”  The first lululemon store in Vancouver Canada was a “design studio by day” and “yoga studio by night.”  The brand became best known for “iconic women’s yoga leggings.” 

According to one source, the “ideal” customer at lululemon is Ocean,  “a 32-year old professional woman who makes $100,000 a year.”  The Ocean target consumer persona is “engaged, has her own condo, is traveling, fashionable, has an hour and a half to work out a day.”

Appealing to Ocean and her lifestyle, the lululemon brand expanded from its yoga origins into a range of “technical athletic apparel for yoga, running, dancing, training…as well as lounge and streetwear.” 

The brand also built a strong sense of community and trust among the core female consumer target. 

A setback in 2013 occurred when lululemon famously experienced a public relations black eye (and disappointed consumers) when it delivered yoga pants that became see-through and didn’t stand up to Ocean’s requirements for performance in yoga’s downward dog.  With a premium price point, customers were expectation high-quality products.

2 Brand Strategy Examples of New Category Expansion

Acquisition as Brand Strategy Example

In 2020, the Lululemon Athletica company acquired the Mirror fitness brand for $500 million, to further expand into athletic gear and devices. 

The Mirror acquisition fit with lululemon’s  “Power of Three Growth Strategy” and vision to be a brand that “encourages people to sweat more.” 

As CEO Calvin McDonald elaborated,

“We believe lululemon has a unique opportunity to push beyond traditional expectations to develop innovative products and become a fully experiential brand that creates compelling experiences for guests who want to completely live into the sweatlife.”

The Lululemon Athletica company grew to $4.1 billion in net revenues for the three quarters ended October 31, 2021.   Direct-to-consumer contributed 42% of net revenues and a disproportionate 88% of income from operations.  The 552 company-owned stores delivered 26% of net revenues and 11% of income from operations.

2 Brand Strategy Examples of New Category Expansion

Brand Strategy Example of Expanding Customer Segments

The most interesting part from my perspective is how lululemon built from its base in women’s apparel with core consumer Ocean to attract increasing numbers of men. 

As of the most recent financial reporting for three quarters ended October 31, 2021, men’s is 24% of the total net lululemon revenues, with women’s at 68% and other at 8%. 

Additionally, men’s is growing faster, with men’s net revenue growth outpacing women’s at 76%, compared to the 2020 period, as contrasted with 47% in women’s.

Men’s portion of the lululemon brand net sales is up from:

  • 21% in 2018
  • 15% in 2015
  • 13% in 2013   

Growing men’s has been a concerted long-term brand expansion strategy.

In 2019, CEO Calvin McDonald acknowledged that lululemon “had very low brand awareness with men” with a goal of doubling business with men.   Company’s brand research found men were very interested in lululemon’s “commuter” products like jogger pants that can be dressed up for an office setting or worn while doing errands.

A male brand persona, named Duke, is the target.  A few years older than Ocean, Duke is described as a “mindful athlete…competitive, well-rounded, and likes a variety of physical activities.” He’s also “someone you’d want to be friends with and someone you’d want your sister to marry.”

Fast forward to 2022, and several male friends of mine wear the lululemon brand as their pant of choice to their offices in New York City. While brand awareness is still noticeably higher among women, lululemon made big increases among men, to get to nearly 80% of the level found among women (not 80% awareness).  

Based on our friend’s recommendations, my husband and I shopped the lululemon store in Kauai, and we were favorably impressed with the pants as a good option for his office environment.  We also liked the free hemming aspect and will be ordering two pairs in his favorite color.

Despite this progress with men, fourth quarter results for lululemon are coming in at the low end of forecast ranges, as the brand reports COVID impacts.

Brand Strategy Examples Show Category Jumps Are Possible

Together, the Tommy Bahama and lululemon brand strategy examples illustrate how a brand can move from its core category into dramatically different categories, and even into new targets. 

At Insight to Action, we recommend a disciplined approach to brand expansion, guided by brand pillars, expansion zones and a brand equity pyramid. Tropicana, for instance, expanded from its 100% juice-based refrigerated Tropicana Pure Premium orange juice to other fruit-based drinks. 

For other brand strategy examples, visit the brand strategy resources page.  Or share your perspective at an upcoming Insight to Action office hours.

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