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December 2007 - Strategy Magazine
Who to watch

Cult brand growing pains
Eric Petersen strikes a warrior pose to maintain Lululemon's focus under the weight of increased public scrutiny

by Carey Toane
page 26

It's not the kind of press attention they're used to over at Lululemon Athletica, the Vancouver-based "yoga-inspired athletic apparel" company accustomed to charming the stretch pants off the PR machine. Last month, a shareholder commissioned an independent test of the health claims of the retailer's VitaSea garments and sent the controversial results to the New York Times.

The accusations of false advertising around the fabric's benefits knocked the company off balance. After days of swan-diving stocks and general confusion, Lululemon CEO Robert Meers responded to the allegations in a press statement, saying, "We absolutely stand behind our products, our processes and refute any claims in recent press reports to the contrary." At press time, the claims on VitaSea garment tags were hastily covered over in stores, pending scientific evidence requested by Health Canada.

If you're holding your breath for an aggressive, fight-back ad campaign, however, you've come to the wrong retailer. "We have changed the hangtags on VitaSea products, but our marketing tactics have not changed," says director of community relations Eric Petersen. "We will continue to lead with innovative, grassroots, community-based marketing."

Since Petersen joined the Lululemon team in 2004, the company has worked to balance its community-based mass-roots structure with phenomenal growth. While still based in Vancouver, the retailer has come a long way from boardsport retail pioneer Chip Wilson's single boutique/atelier/yoga studio in the Kitsilano neighbourhood almost 10 years ago. The curly A that is the Lulu logo seems to be on hems and cuffs everywhere; even Martha Stewart, more a fan of the brand than an athlete, plugged the line on her show in September. The number of stores has grown from fewer than 15 to 80 by the end of this year, with another 234 estimated by the 2010 Vancouver Olympics - for which Lululemon hopes to be the athletes' unofficial "clothing of choice." Sales skyrocketed 80% in the three months leading up to the July 27 IPO compared to the same period last year, and revenues from the company's stores increased by 98%.

That's where the trouble started, says Rich Price-Jones, creative partner at Toronto's Grip Limited. "None of this would have happened if it was still a private company," he says.

As Lululemon's profile grows, Petersen has stepped in as guardian of the brand. He oversees the work of the community team, which includes branding, PR, web and design, plus supervising an ever-growing number of regional teams. "Sometimes I have to tell people I'm the head of marketing to get them to listen to me," he explains. "But really my responsibility [is] to direct the community relations efforts that we have."

Petersen commissioned Grip to perform a brand audit 18 months ago, which resulted in the development of guidelines around logo use and positioning. Up to that point, marketing materials had varied from store to store. According to the company's internal structure, the HQ, or "store support centre" (SSC), creates customized promotional materials to the stores and helps to facilitate best practices. In turn, the stores, which are organized into approximately 12 regional units, develop their own local events and promotions around SSC guidelines - the most successful of which, such as men's shopping nights during the holidays, are often picked up and spread company-wide.

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