Paula Deen’s celebrity brand is in freefall

The reputation of Paula Deen, the 66-year-old celebrity chef from Savannah, made famous by her show on The Food Network that began in 2002, has been spiraling downward since court documents revealed Deen responded to an attorney’s question in deposition last month that she has used the N-word. "Yes, of course," Deen said, adding, "It's been a very long time."

Deen was being deposed as a result of a discrimination lawsuit filed last year by a former employee who managed Savannah’s Uncle Bubba's Seafood and Oyster House, owned by Deen and her brother. The complainant, Lisa Jackson, says she was sexually harassed and subjected to a hostile work environment, rife with racial innuendo.

During the deposition, Deen was probed repeatedly with questions about her racial attitudes. At one point she responded about jokes that target minority groups: "I can't, myself, determine what offends another person."

The Food Network, the engine that created Paula Deen, Licensor, dropped her program on June 21st. That has been followed by long series of defections, most recently topped by Walmart.

Deen is scrambling to repair the damage to her brand, which now has cookbooks (see Amazon reference below), a cooking magazine, cookware, foods, furniture, cruises, etc.

At the Paula Deen Store, readers can see how she has parlayed her popularity into becoming a busy licensor. Categories of merchandise licensed by Paul Dean include: Baking, Books, Collectibles, Cooking Tools, Dishes, Gift Ideas, Glasses, Housekeeping, Knives, Pantry & Food, Pots & Pans, Storage, and Tablewear.

To be sure, damage control efforts are underway, as Deen has apologized, twice on tape and once on live TV (that she has had to do it three times demonstrates how well it is working) and has recently been consulting with Jesse Jackson on how to salvage her reputation. Amazon reports her new cookbook is number one in their pre-sale titles, and it appears Paula Deen cruises continue to sell out.

As IP Value Wire has reported in the past, public companies more often than not recover completely from reputation hits, and their damage control measures affect the timing of that recovery. Celebrity brands, however, are much riskier. The foundation of their business is their celebrity, subject to the whims of a fickle public. A lost retailer is likely to never return. A retailer with the heft of Walmart cannot be replaced.

Unreported and under-appreciated thus far is the damage to licensees.  Inventory, supplier agreements, contract minimums, etc., are now looming financial problems. Valuation analysts have a difficult time creating virtual scenarios that cut this deep, let alone assigning risk factors to these scenarios.