Why Iconic Brands Struggle With Innovation

Emphasising a product’s heritage can be a powerful marketing tool. Think of brands like Coca-Cola or Converse’s Chuck Taylor All Star sneakers.

But the strategy could have a big drawback, according to research . When a brand emphasises its past, customers are less likely to buy its updates and innovations. A food company that heavily promotes its classic recipe, for instance, could have a tough time getting customers to buy a new variation on the product. The reluctance is particularly strong if people think the brand has stood the test of time and is authentic the way it is.

When you change an original product, it challenges why many people like the product in the first place, says Rosanna Smith, an associate professor at the University of Illinois Urbana-Champaign and one of the paper’s co-authors.

“We call it the curse of the original, and the question is how to update a product that is considered an icon without enraging your customers,” says Smith.

The shock of the new

In one part of the study, 418 participants read about a fictional hand-cream company and its top lotion. Participants were either told the company was established in 1917 with “deep roots in the old world French apothecary” or that it was established in 2017. Then the participants were either told the hand lotion was developed when the company was founded or was a new and improved version of the original.

All participants tried the same lotion and rated it on a nine-point scale, with nine being most favourable. When it came to the 1917 company, people rated the classic formula much higher than the new one: The original got a 6.68, while the new one averaged only 6.09. In other words, people didn’t like a venerable brand that tried to innovate as much as a brand that stuck to its roots.

Meanwhile, participants who were told the company started in 2017 rated the original and improved hand creams similarly.

“One big limitation of heritage branding is that it makes it harder to innovate,” says Smith. “But there are ways to lessen the effect.”

Back to basics

For instance, in another experiment, 602 participants read about Fratellino, a fictional Italian-food brand launched in 1911 when founder Martina Fratellino began selling tomato sauce from her front porch. The participants were told the brand would be improving its original tomato-sauce recipe.

The people were then divided into three groups. The control group was told the company was proud to introduce the new formula. The second group was told the new sauce was a bold departure from the original recipe, while the third was told the change was inspired by traditional techniques Martina used to create her tomato sauce in 1911 and that the change was a return to the company’s beginnings.

The authors found that participants in the control group rated the new tomato sauce less favourably than the original, giving it a score of 6.0, compared with 7.2 for the original. Simply doing something novel hurt the tradition-heavy company. The new product did even worse among people who heard that it was a bold departure: The new item got a 5.57, compared with 7.19 for the original.

But in the third group, where the change was framed as grounded in the product’s origins, the scores for the original and new tomato sauces didn’t significantly differ.

“Stressing the connection to the brand’s origins may have made the update seem more authentic,” says Smith.

Gold is one of the market’s go-to hedges in rocky times. Don’t forget that gold miners’ stocks are too.

The stock market’s gains in 2026 belie the rocky macroeconomic picture: elevated inflation, heightened geopolitical tensions, and jitters about the artificial-intelligence trade. That backdrop, in theory, should be the time for gold to shine. Instead, the price of the yellow metal has tumbled more than 5% so far, after last year’s blistering 65% rally. In part, the U.S. dollar’s recovery has stymied gold, which benefited from the greenback’s weakness in 2025.

Even with the precious metal’s recent weakness, gold mining stocks could be the best way to profit from this year’s uncertainty.

Gold miners “are a valuable hedge against macro risks that would likely be damaging for equities,” BCA Research’s Noah Weisberger and Rishabh Shah wrote this week.

Concerns about the Federal Reserve’s next moves to tackle inflation, the increasingly crowded AI trade, and steep valuations for tech stocks are just some of the drivers that could help gold’s price get on even footing— and lead to even bigger gains for miner stocks.

These stocks’ prices tend to outpace gold’s moves, because the companies have fixed operational costs. So when gold’s price rallies, their profit margins soar, and vice versa. For instance, the VanEck Gold Miners GDX +7.39% exchange-traded fund has fallen 11% this year as the metal has slumped.

Now, gold’s price just needs to stabilize to help miners’ stocks take off, and that seems to be happening. The precious metal has recently found support above the $4,000 level, and has stuck in a narrow range since the end of June. But its price rose ever so slightly in July, ending a four-month losing streak for the metal. Technical analysis also suggests that gold is due for a comeback.

Barron’s recently wrote that the pullbacks for both gold miners and the metal itself are overdone. Senior technical analyst Doug Busch noted that the VanEck ETF is on the “verge of a breakout” and has the potential to hit $11o in early 2027, up more than 40% from its current price.

Gold miners also have more than their role as a market hedge going for them. Their fundamentals are solid, too, says Chris Mancini, portfolio co-manager of the Gabelli Gold Fund.

“Precious metals miners are generating substantial amounts of free cash flow given profit margins of over $2,000 per ounce, and are returning this cash to shareholders through buybacks and dividends,” he said in an email.

“Buying the miners is a cheap way to get exposure to the price of gold,” he added. His fund owns Newmont NEM +6.71%, a Barron’s stock pick last year, and Agnico Eagle Mines as top holdings, as well as miners Northern Star Resources, Endeavour Mining, and Kinross Gold K+8.59%.

Miners are better businesses than they used to be, the BCA team added.

“Capex is more disciplined, margins are high and rising…and they are largely independent of the AI story,” Weisberger, BCA’s head of equities, and Shah, a senior analyst, wrote.

That last part is key. AI is disrupting the software industry and many other services and information-oriented businesses, and investors have piled into AI stocks. But ChatGPT, Claude, Grok, and other large-language models aren’t going to replace the need to mine for metals.

“Equity portfolios can benefit from exposure to quality that is uncorrelated to AI risk, and gold miners fit the bill,” the BCA team said.

They recommend that investors buy the VanEck Gold Miners ETF, which owns top miners such as Agnico, Barrick Mining ABX +7.24%, and Newmont.

An important bonus for big gold miners’ stocks is that their valuations are attractive after the gold’s pullback, too. The VanEck ETF is now trading at just a little more than nine times next year’s earnings estimates. That’s a big discount to its five-year average price-to-earnings ratio of 14, according to FactSet.

What’s more, the ETF is currently valued at a more than 50% discount to the S&P 500 SPX -0.17%, which is trading for about 19 times earnings estimates for 2027. Mining stocks have typically traded at just a 25% discount to the broader market over the past five years. So there is significant upside for the group if valuations move back toward normal levels.

One factor that complicates mining stocks as a market hedge, of course, is if stocks bounce back, which has been the case so far in August.

But both the market and economic outlooks remain cloudy, and investors remain nervous about the Fed’s next moves and AI stocks. Gold miners should do just fine, even if the anxious mood on Wall Street persists.

Why Iconic Brands Struggle With Innovation

When a company markets its product’s long, iconic heritage, consumers are reluctant to buy a new variation

The shock of the new

Back to basics