Netflix is the new LaCroix - and they tell the same cautionary tale about business strategy
- Netflix and LaCroix are both first movers.
- They have - or had - done well by becoming synonymous with their spaces.
- But things are no longer chill for these byword brands. The fizz is going flat.
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First mover advantage only goes so far.
In the management universe, early entree into a previously unknown space is prized. It is the stuff of blue oceans and blind alleys. The advantage can make you a ton of money, scale a company to tremendous size, and maybe even kill a beloved industry. (Sorry, Blockbuster.)
But, to get a little awkwardly Buddhist for a second, the first noble truth of business is that life is change. Even if you summon a market into existence, it's not your choice that it stays yours, or even remains profitable.
That choice is the customer's.
Such is the story of two mighty, hip, and for at least a moment, quintessentially American brands: LaCroix, owned by, suitably enough, the National Beverage Corp., and Netflix, which, at least until the last year or so, likely owned your couch.
"Stranger Things" is, of course, pamplemousse. But Reed Hastings' prized grapefruit is, quite clearly, beginning to feel the squeeze.
LaCroix soared to great heights, driven by the American thirst for guilt-free refreshment. (So long as it wasn't making false claims.) But bubbles, especially ultra-fizzy ones, tend to burst. A zillion other seltzer brands jumped into the space, with a spate of trend stories following them, including on this very website. It's the summer of seltzer! But National Beverage is getting creamed.
So to is, perhaps surprisingly, Netflix. The US subscriber base fell by 130,000 last quarter, well behind the estimated 300,000 or so additions. "This is an unprecedented miss," analyst Mark Zgutowicz wrote in a research note, and "competition is on the horizon."
The barbarians are at the gates, in both cases, with a mixture of startups sprouting up and giants lumbering daintily into the space. For LaCroix, it's Bevi and Spindrift and Bubly, new from Pepsi. For Netflix, it's Hulu, HBO, Disney, and soon NBCUniversal. The first mover supplies the proof of concept, but it can't possibly own it.
LaCroix may be in a worse position to retake its lead than Netflix, since there's less room for its seltzers to distinguish its product offering, unless it wants extend into the fashionable alcoholic seltzer space. (Grapefruit beer, but lighter?) Netflix has a creative problem demanding creative solutions. But with "The Office" and "Friends" on their way out, what could be new on the shelf after "Stranger Things" and "The Crown"?
Without more exclusive, tentpole content, Netflix's fizz is slated to go even further flat.