Smith Bros. hope TV ads can keep revival going

CHICAGO — Television viewers will see something this monththat hasn’t been on the air since “I Love Lucy” was in its first run — a new commercial for Smith Bros. cough drops.

Revived last year, the venerable Chicago-based brand is launching a $3 million advertising campaign as it rolls out a new line of cough drops and wellness products to 40,000 retailers across the U.S. and Canada.

Whether that puts Smith Bros. cough drops, an iconic but long-dormant brand, on the tips of consumers’ tongues, remains to be seen.

“Smith Bros. was the first cough drop in America and a market leader as recently as 40 or 50 years ago,” said Steve Silk, 61, CEO of Smith Bros. “But America hasn’t seen an ad from this brand in decades.”

The Smith brothers, bearded siblings who arguably invented the cough drop in a Poughkeepsie, N.Y., restaurant 167 years ago, are definitely on the comeback trail. Bought out of bankruptcy by a private equity firm four years ago, the company is producing everything from Warm Apple Pie throat drops to cold relief and immune support packets at a retooled Chicago factory.

Smith Bros. sales are projected to reach $3 million this year, and should get a major boost as the retail footprint, product line and visibility ramp up into 2015, Silk said.

“I would expect that next year our sales for the brand would be $10 million to $15 million, which is a whole lot better than where it was a year ago,” Silk said.

Relegated to dollar stores as the brand faded into near-oblivion, Smith Bros. found shelf space at Walgreens for its relaunch, and has partnered with the Deerfield, Illinois-based pharmacy chain for promotions featuring bearded NHL hockey players, with recent events in Chicago, Boston and New York.

Beginning in December, the entire Smith Bros. product line, including new wellness products, will be carried at Target stores chainwide, giving the brand critical mass in the competitive world of cough and cold fighting.

While Smith Bros. has come a long way, its sales are still a drop in the bucket for the U.S. cough drop market, which topped $682 million through the 52 weeks ended Nov. 2, according to IRI, a Chicago-based market research firm. Halls, which is owned by Deerfield-based Mondelez, leads the pack with more than $354 million in sales during the period. Ricola, a Swiss company, is No. 2 in the U.S. with nearly $125 million in sales.

But Smith Bros. is making a serious run at the category leaders with its new television campaign by spending about $3 million over the next three months. Last year, Halls spent $6.5 million and Ricola $3.8 million on television advertising, according to Kantar Media.

The campaign, created by former Grey Advertising executives Steve Hardwick and Robert Skollar, seeks to contemporize the Smith brothers’ history, embodied in the bearded visages that have adorned the company’s products for more than a century. Brothers William and Andrew Smith, who cooked up the cough drop recipe, developed packaging in 1872 with a logo bearing their profiles. Trademarked five years later, the word “Trade” appeared under William’s head, and “Mark” beneath Andrew’s, renaming the brothers for posterity.

While its history gives Smith Bros. a place to start, moving beyond nostalgia is crucial to rebuilding the brand’s appeal, according to Tim Calkins, a marketing professor at Northwestern University’s Kellogg School of Management.

“It’s not enough to just say we’ve brought this brand back to life,” Calkins said. “You’ve got to give people a reason to care that the brand is still available. So they’ve really got to make sure they communicate a benefit about the product that is different and unique.”

The ads will run on cable networks including TNT, TBS, CNN, MSNBC, Fox News, A&E, Food Network and Lifetime. The target audience for cough drops is ages 45 and older, Silk said, but he hopes the campaign will have broader demographic appeal.

Smith Bros. remained a family-owned business until 1964, when it was sold to Warner-Lambert. It was acquired by Chicago-based F&F Foods in 1977, a privately held company that manufactured branded and private label candies, mints and cough drops. By 2009, annual sales of Smith Bros. cough drops had dwindled to less than $1 million, and parent company F&F was placed into assignment for the benefit of creditors, an insolvency proceeding under state law.

In 2010, the assets of F&F were acquired by the current owner, an affiliate of New York-based private equity firm York Capital Management, for about $10 million. The firm invested another $11 million to upgrade the Chicago facility.

Sales, including private label brands, are projected to reach $50 million in 2015, up from $40 million this year, with higher-margin Smith Bros. products accounting for about a fourth of revenue, Silk said.

As the company grows, and grows more profitable, it is increasingly likely that it will be acquired by a larger competitor, Silk said, calling it a “natural evolution” for many private equity investments, including Smith Bros.

“Someday, as we fill in the distribution and we really continue to ramp up the innovation, there’s going to be a big pharma-type company that figures out it can take the brand to a different plateau,” said Silk, who has an equity interest in Smith Bros. “There’s some moment when the brand should be handed off to a larger strategic player in this space.”

When that day comes, no doubt even the stone-faced Smith brothers may crack a smile.