24/7 Wall St. has created a new list of brands that will disappear, which includes Sears (NASDAQ:SHLD), Sony Pictures (NYSE:SNE), American Apparel (NYSE:APP), Nokia (NYSE:NOK), Saab, A&W All-American Foods Restaurants, Soap Opera Digest, Sony Ericsson, MySpace (NYSE:NWS.A), and Kellog’s Corn Pops. (NYSE:K).
Each year, 24/7 Wall St. regularly compiles a list of brands that are going to disappear in the near-term. Last year’s list proved to be prescient in many instances, predicting the demise of T-Mobile among others. In late May, AT&T (NYSE:T) and Deutche Telekom announced that AT&T would buy T-Mobile USA for $39 billion. The deal would add 34 million customers to the company and create the country’s largest wireless operator.
Other 2010 nominees – including Blockbuster – bit the dust, while companies, such as Dollar Thrifty are on the road to oblivion. Last September, after finally giving in to competition from Netflix and buckling under nearly $1 billion in debt, Blockbuster filed for Chapter 11 bankruptcy protection. In April of this year, Dish Network acquired the company for $320 million. Car rental chain Dollar Thrifty is still entertaining buyout offers from Avis and Hertz. On June 6, the embattled company recommended that its shareholders not accept Hertz’s recent offer, valued at $2.24 billion, or $72 a share. Meanwhile, on June 13th, Avis Budget announced that “it had made progress in its discussion with the Federal Trade Commission regarding its potential acquisition” of the company. Although Dollar Thrifty can remain choosy, a sale is a matter of when, not if.
We also missed the mark on a few companies. Notably, Kia, Moody’s, BP, and Zale appear to be doing better than we expected.
Brands that have stood the test of time for decades are falling by the wayside at an alarming rate. For instance, Pontiac, a major car brand since 1926, is gone, shut down by a struggling GM. Blockbuster is in the process of dismantling, after it once controlled the VHS and DVD markets. House & Garden folded after 106 years. It succumbed to the advertising downturn, a lot of competition, and the cost of paper and postage. Its demise echoed the 1972 shutdown of what is probably the most famous magazines in history: Life. That was a long time ago but serves to demonstrate that no brand is too big to fail if it is overwhelmed by competition, new inventions, costs, or poor management.
This year’s list of The Ten Brands That Will Disappear takes a methodical approach in deciding which brand would walk the plank. The major criteria were as follows: (1) a rapid fall-off in sales and steep losses; (2) disclosures by the parent of the brand that it might go out of business; (3) rapidly rising costs that are extremely unlikely to be recouped through higher prices; (4) companies which are sold; (5) companies that go into bankruptcy; (6) firms that have lost the great majority of their customers; or (7) operations with rapidly withering market share. Each of the ten brands on the list suffer from one or more of these problems. Each of the ten will be gone, based on our definitions, within 18 months.
All-American Food Restaurants. A&W Restaurants is owned by fast food holding company giant Yum! Brands (NYSE: YUM) which has had the firm for sale since January. There have been no buyers. The chain was founded in 1919. The size of the company grew rapidly, and immediately after WWII 450 franchises were opened. The firm pioneered the “drive in” fast food format. A&W began to sell canned version of its sodas in 1971 – the part of the business that will survive as a container beverage business which is now owned by Dr. Pepper/Snapple. The A&W Restaurant business is too small to be viable now. It had 322 outlets in the U.S. and 317 outside the U.S. at the end of last year. All were operated by franchises. By contrast, Yum! flagship KFC had 5,055 stores in the U.S. and 11,798 overseas. Two massive global fast food chains are even larger. Subway has 35,000 locations worldwide, and McDonald’s has nearly as many. A&W does not have the ability to market itself against these chains and at least a dozen other fast food operations like burger King. And, A&W does not have the size to efficiently handle food purchases, logistics and transportation costs compared to competitors many times as large.