Defensive Strategy

The Harry & David Bankruptcy

28 Mar 2011  

Today legendary fruit seller Harry & David filed for Chapter 11 bankruptcy protection. There are two very important branding lessons in this story.

1.  Savvy marketing can create enormous value.

Harry & David does something remarkable: the company gets people to spend $30 for a few pears. A box of 7 to 12 pears currently runs $29.95, so that is about $3.50 each, not including shipping.  This is an accomplishment; think of the margins!

But anyone who has received a box of Harry and David fruit knows that the company isn’t selling ordinary pears; the company is selling incredibly special treats. The pears arrive in a beautiful box with lots of packaging. Each pear is individually wrapped. The shipment comes with a brochure explaining exactly why the pear is so special and amazing. It is well worth the price. 

Harry & David shows how to create value through great marketing.

 2. Short term thinking can ruin brands.

Harry & David is a sad branding story. It once was a fabulous brand. When I was a kid I always hoped that one of my father’s patients would give us a Harry & David fruit-of-the-month subscription for the holidays. Happily, someone usually did. It was an incredible treat.

Over the years, however, the Harry & David has lost much of its uniqueness. Partly this is due to a lack of consistent ownership. The current owner, private-equity firm Wasserstein & Company, acquired Harry & David in 2004. The goal apparently was to fund the acquisition with debt, deliver some quick financial wins and then exit with a stock offering.

With this in mind, Wasserstein gave management some big incentives to deliver good short-term results. Under Wasserstein, the Harry and David team drove sales at retail locations and expanded the product assortment. They also trimmed costs.

Predictably, the brand weakened and the customer experience declined.

One person on Yelp summarized things well: “Once upon a time, a long time ago, Harry and David was unique and good quality – now, it is so overpriced – they have spread themselves way too thin…mediocre merchandise, big price tag with lots of packaging and flash.”

I’m not sure what is next for Harry and David. The brand isn’t going away; today’s news is just a financial restructuring. I’m hopeful that the company will use the opportunity to refocus on its core business and restore the marketing magic.

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