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6. BRAND PORTFOLIO & ARCHITECTURE
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To Branding website
Contents
Using this guide
Introduction
Checklist
Case studies
© The Chartered Institute of Marketing 2003
6. BRAND PORTFOLIO AND ARCHITECTURE“But surely the more established brands you have the better?”
Use bookmarks in the left-hand panel
to navigate this guide – click on the bookmarks tab on the left of your
screen or [F5].
Search for specific words by using: Ctrl + F (PC) or
Apple = F (Mac).
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6. BRAND PORTFOLIO AND ARCHITECTURE
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Contents
> Using this guide
> Introduction
> Why managaing a brand portfolio isimportant
> Brand architecture
> Brand relationships within a portfolio
> Characteristics of the ideal brand portfolio
> Major mistakes in portfolio management
> Prioritising segments
> Examples of portfolio analysis
> Checklist
> Case studies
Defining brands
Types of brands
How brands work
Brand strategy
Managing and developing brands
Brand portfolio andarchitecture
Measuring brands and their performance
eGUIDE 7
eGUIDE 2
eGUIDE 3
eGUIDE 4
eGUIDE 5
eGUIDE 6
eGUIDE 1
The above ‘offline’ links require all the eGuide pdfs tohave been downloaded from
the Branding website andplaced in the same single folder on your hard disk.
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Using this guide
Navigation
There are a number of ways to make your wayround this guide:
>BookmarksGives a topic overview of the guide – firstselect the bookmarks tab on the left of thescreen (alternatively use [F5] key), thenclick on to a topic to link to the relevantpage.
>Next/previous pageClicking on the left or right of this icon, atthe bottom right of each page, will enableyou to move forward or back, page by page.
>Tool barThe tool bar at the bottom of the screen isanother way to skip through pages, byclicking on the arrows.
>Margin iconsThese icons, in the margins to the left of themain text, link to various types ofinformation. See next page for a completelist of these margin icons.
>LinksClick on a highlighted word to navigate to arelated page – either in the guide or on theWorld Wide Web.
>SearchYou can also search the guides using [Ctrl] + F for PC (or [Apple] = F for Mac) to bring up the ‘find’ dialogue box and thensimply type in your search term and click the ‘find’ button.
>To home pageClicking on this icon, in the top right of everypage, will take you to the home page of thiseGuide.
>To other eGuidesClicking on these icons, to be found on thecontents page and sometimes as a marginicon, will take you to the home page of thatparticular eGuide – if you have downloadedthe relevant pdf and stored it in the samefolder.
>Back to main textClicking the ‘back’ button will return you tothe point in the main text you were directedfrom.
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>To Branding websiteClicking on the ‘@’ icon at the bottom left ofeach page will take you to the home page ofthe Branding website. This link will only workwhen you are online.
Margin icons
We’ve added icons in the margins of the textto highlight particular types of information:
>Case studyThis signals a story that will illustrate theoryapplied in practice. Click on the icon to viewthe example and, once you have finished,select ‘back’ to return to where you wereoriginally.
>ChecklistPoints to a summary page.
>ResourcesLinks through to the online Brand Storesection where you will find further resourceson the topic being discussed.
>FAQsGives answers to frequently asked questions.
>Further detailsIndicates additional material on the samesubject. This information may be locatedwithin the same eGuide; in one of the othersix eGuides (in which case the link will onlywork if the pdfs of the other eGuides havebeen downloaded into the same folder); oron a separate website (in which case the linkwill only work if the pdf is being viewedonline).
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In order to distributeyour investment most
effectively it isimportant to look at the
relationships betweenall the sub-brands and
their strategicimportance in overall
brand building.
© The Chartered Institute of Marketing 2003
6. BRAND PORTFOLIO AND ARCHITECTURE
5
Introduction
“But surely the more establishedbrands you have the better?”The brand portfolio includes all the brands andsub-brands attached to product-marketofferings, including co-brands with otherbrands. In order to distribute your investmentmost effectively it is important to look at therelationships between all the sub-brands andtheir strategic importance in overall brandbuilding. This will help you answer thefollowing questions:
> What is the logic of the structure?
> Does it provide clarity to the customerrather than complexity and confusion?
> Does the logic promote synergy andleverage?
> Does it provide a sense of order, purposeand direction to the organisation?
> Or does it suggest ad-hoc decision makingthat will lead to strategic drift and anincoherent jumble of brands?
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Looking at brands asstand-alone silos is a
recipe for confusion andinefficiency.
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6. BRAND PORTFOLIO AND ARCHITECTURE
6
Why managing a brand portfolio isimportant
“Lack of focus means that energy andresources are dissipated. Focus, in contrast,ensures that people and resources areconcentrated where they can add greatestvalue.” [Fitzgerald, 2001]
Portfolio management will influence thefollowing areas:
Resource
Resources such as R&D and marketing spendneed to be allocated to areas of best return.Each brand requires brand-building resources.Without a clear picture of the portfolio, it willbe harder to identify how best to support thebrands that will bring the best returns. If eachbrand is funded solely according to its profitcontribution, high-potential brands withmodest current sales could be starved ofresources.
Efficiency
Create synergy with your brand portfolio –strong associations can not only benefit all the
brands but also be cost efficient by creatingeconomies of scale in both manufacturing andcommunications. Looking at brands as stand-alone silos is a recipe for confusion andinefficiency. Are there too many or too fewbrands? Could some be consolidated,eliminated or sold?
Growth
Davidson [August 2002 a] identifies six waysin which portfolio management enhancesgrowth:
> Clear prioritisation of future focus by majormarket
> Prioritisation by brand and product
> Concentration of spend on priority market,brands and products
> Operational cost savings through simplifiedbusiness
> Disposal of brands which don’t fit
> Gap filling by product development andacquisition.
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A proper portfolioanalysis can highlightwhich brands are best
suited to extension.
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6. BRAND PORTFOLIO AND ARCHITECTURE
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Leverage
Leverage your brand equity. Leveraging brandsmakes them work harder. A proper portfolioanalysis can highlight which brands are bestsuited to extension, for instance. The moreeffective and powerful your brands, thestronger your leverage and the bottom line.
Clarity
Clarity of product offerings will underpin aconsistent brand identity with all thestakeholders.
Brand architecture
Brand architecture is the way in which thebrands within a company’s portfolio are relatedto, and differentiated from, one another. Thearchitecture should define the different leaguesof branding within the organisation; how thecorporate brand and sub-brands relate to andsupport each other; and how the sub-brandsreflect or reinforce the core purpose of thecorporate brand to which they belong. [Bennie,2000] The following model (Figure 6.1),proposed by Aaker, maps out the differentelements of a brand architecture.
Brand Leadership, pp134-153, for a detaileddescription of the diagram.
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Figure 6.1: Brand architecture
Source: Aaker, D. and Joachimsthaler, E. (2001) Brand Leadership, pp.134-153. London, The Free Press.
PRODUCT-MARKET CONTEXT ROLES> Endorser/sub-brands> Benefit brands> Co-brands> Driver roles
Powerful brands
Optimal allocation of brand-building resources
Synergy in creating> Visibility> Association building> Efficiency
Clarity of offering
Leveraged brand assets
Platforms for future growth options
PORTFOLIO ROLES> Strategic brands> Linchpin brands> Silver bullets> Cash cow brands
BRAND PORTFOLIO STRUCTURE> Brand groupings> Brand hierarchy trees> Brand range
PORTFOLIO GRAPHICS> Logo> Visual presentation
Brand portfolio
BrandArchitecture
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Brand relationships within aportfolio
There are three generic relationships betweena master brand and sub-brands:
>Single brand across organisationExamples include Virgin, Red Cross or OxfordUniversity. These brands use a single nameacross all their activities and this name ishow they are known to all their stakeholders– consumers, employees, shareholders,partners, suppliers and other parties.
>Endorsed brandsLike Nestle’s KitKat, Sony Playstation or Poloby Ralph Lauren. The endorsement of aparent brand should add credibility to theendorsed brand in the eyes of consumers.This strategy also allows companies whooperate in many categories to differentiatetheir different product groups’ positioning.
Case study: Japanese brands
>House of brandsLike Procter & Gamble’s Pampers orUnilever’s Persil. The individual sub-brandsare offered to consumers, and the parentbrand gets little or no prominence. Otherstakeholders, like shareholders or partners,know the company by its parent brand.
Figure 6.2 shows the brand relationshipsspectrum, and there are additional examplesof brand relationships in Figure 6.3.
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Figure 6.2: Brand relationships spectrum
Source: Davidson, H. (2002)
Types of brand
Type 1:Single brand across organisation
Type 2:Endorsed brands
Type 3:House of brands
Individual brands
None
PoloWindowsPlaystation 2Big Mac
PampersViagraAtlanta Symphony Orchestra
Organisation brand
IBMMayo ClinicHarvard UniversityGreenpeaceGoldman Sachs
Ralph LaurenMicrosoftSonyMcDonalds
Procter & GamblePfizerWoodruff Arts Center
Brand
Nestlé
Brand
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6. BRAND PORTFOLIO AND ARCHITECTURE
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Figure 6.3: Brand relationship spectrum
Source: Aaker, D. and Joachimstaler, E. (2000) Brand Leadership, p.105. London, The Free Press.
DellDimension
DuPontStainmaster
Nestea Lotus(an IBM
company)
Touchstone(Disney)
Friends & Family
(MCI)
Nutrasweet(G. D. Searle)
HP DeskJet SonyTrinitron
McMuffin UniversalPictures(Sony)
Lexus(Toyota)
Obsession by
Calviin Klein
Pantene(P&G)
BuickLeSabre
GilletteSensor
DKNY Grape Nuts(Post)
Tide(P&G)
Courtyardby Marriott
Brandrelationshipspectrum
Hotpoint(GE)
Master Brand as Driver
Co-Drivers Linked Name
TokenEndorsement
ShadowEndorser
StrongEndorsement
Not Connected
BrandedHouse
Subbrands Endorsed Brands
House ofBrands
Virgin Levi's(U.S. vs.Europe)
HealthyChoice
Club MedSingles versus
Couples
BMW GE CapitalGE Appliance
Same Identity
Different Identity
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Characteristics of the ideal brandportfolio
There is a clear analogy between managing abrand portfolio and a football team [Davidson,2002 b]. The football pitch is the market map.You have to decide in which areas you willdominate – whether, for example, the midfieldor the flanks. The players, represented bybrands, have to cover the priority areas. Eachwill have a specific role but will still contributeto the team.
The manager will avoid players who duplicate– for example, two small fast strikers – or whodetract from team effort. Some players arestars (superbrands) while others have a morepedestrian role (support brands).
Figure 6.4 illustrates an ideal football teamportfolio – Manchester United playing well. Theshaded areas in midfield, on the flanks andup-front are where they dominate to win.
Companies, unlike football teams, are notrestricted by any fixed boundaries, and mayenter any market they wish. And they are notlimited to 11 products or brands – thoughperhaps they should be.
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Figure 6.4: Ideal brand portfolio
Source: Davidson, H. (2002 b) Accenture presentation.
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The biggest mistake isto allow each brand to
be managed in isolationbecause what is right
for an individual brandmay be wrong for the
portfolio.
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6. BRAND PORTFOLIO AND ARCHITECTURE
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So the ideal portfolio:
>Fits the company’s future vision anddestination
>Prioritises markets and key segments
>Efficiently covers those priority segments
>Ruthlessly prunes out those that do not fit
>Fills gaps through new or extended brandsand acquisitions.
Case study: Allied Domecq
Major mistakes in portfoliomanagement
The biggest mistake is to allow each brand tobe managed in isolation because what is rightfor an individual brand may be wrong for theportfolio in terms of:
>Too many brands in too many segments:there may be too many brands in relation toconsumer needs, retailer space and companyability to promote
>Duplication and overlap
>Gaps in priority market segments
>Inefficiencies in operations and the supplychain
>Diffused and therefore ineffective resourceallocation.
[Davidson, 1997]
To return to the football analogy, this approachwill result in bunching and poor coverage ofthe playing area (see Figure 6.5).
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Prioritising segments
Prioritise in the context of thecompany vision
Jack Welsh of the US company General Electricoutlined the vision he had for GE in 1981:
“We will become number one or two in everymarket we serve and revolutionise thiscompany to have the speed and agility of asmall enterprise.”
Use consistent segment definitionsacross countries
Acquisitions often leave companies with farmore brands than they can profitably handle.Taking a stricter look at marketing resourcesforces companies to look more critically attheir portfolios. There are a number of issuesto address:
>On what basis should brands be invested infor future growth?
>Which should be maintained as local players,which should enter the global arena? And ifthey should, how?
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Figure 6.5: The typical brand portfolio
Source: Davidson, H. (2002 b) Accenture presentation.
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A balanced portfoliowould take advantage of
the relative strength ofeach type of brand to
support others.
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6. BRAND PORTFOLIO AND ARCHITECTURE
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>What can be extended?
>What should be sold off or killed?
Case study: Unilever
Develop a brand framework
Ask six key questions [Bennie, 2000]:
>How do the brands relate to the corporatebrand?
>What do the brands derive from the parentbrand? And what do they give back?
>What role does each brand have in theportfolio?
>Are the different brands and sub-brandssufficiently differentiated?
>Does the consumer understand thedifferentiation?
>Is the whole brand architecture greater thanthe sum of its parts?
Examples of portfolio analysis
Market segment portfolio analysis is a usefulgraphic device for examining the competitiveposition of products, services or businesses indifferent markets. It is useful as the basis fordiscussions about what markets to target andwhere to put resources for the best return.
BCG Matrix
The original model was invented by the BostonConsulting Group. This is a matrix whichrelates relative market share to marketgrowth. A product with a high relative marketshare in a growing market is a ‘star’. A minorproduct in a falling market is a ‘dog’. Inbetween are ‘cash cows’ with high marketshares in mature markets, and ‘problemchildren’ with low shares in fast-growingmarkets (see Figure 6.6). A balanced portfoliowould take advantage of the relative strengthof each type of brand to support others.
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Quantified Portfolio Analysis [QPA©]
It is a useful tool to guide strategic investmentpriorities by market, business unit, channel orbrand because a quantified process (which isincreasingly feasible with modern databasemanagement) helps set priorities objectivelyby using a common scoring system acrossmarkets and countries (see Figure 6.7).
As with the BCG matrix, the QPA also looks atthe market attractiveness but joins it with theinternal analysis of the brand and its strengthin relation to other brands. Both axes consistof a number of criteria, which are given amaximum weighting score based on relativeimportance – refer to examples in Figures 6.8and 6.9. The tables are just an example, thecriteria chosen for each axis will differ byindustry and type of brand. The advantage ofthis system is that it enables all brands to becompared on common criteria, while the needfor quantified scores enhances objectivity.
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Figure 6.6: The Boston matrix – cash management
Source: Boston Consulting Group
Relative market share(ratio of company share to share of largest competitor)
Mar
ket g
row
th(a
nnua
l rat
e in
con
stan
t £ re
lativ
e to
GN
P g
row
th)
LowHigh
Low
High
'STAR'
Cash generated + + +Cash use – – –
_______0
'QUESTION MARK'Cash generated +Cash use – – –
_______– –
'CASH COW'
Cash generated + + +Cash use –
_______+ +
'DOG'
Cash generated +Cash use –
_______0
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Example 1 (see Figure 6.8): Playtex UK
>Reduced range from 70 to 50 products
>Major cost savings in operations and supplychain
>Sales increased 15%, profits 25%.
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Figure 6.7: Brand portfolio analysis matrix
Source: Davidson, H. (2002 b) Accenture presentation.
Relative brand Strength
Mar
ket A
ttra
ctiv
enes
s
High100 66
66
33
0
33 0
High
Medium
Low
FOCUS
Medium
DEVELOP
Low
DEVELOP SELL
EXIT EXIT
ACQUIRE
THIS BOX IS A
COP OUT
CHARGEOR
SELL
Figure 6.8: Example of market attractiveness scoresheet
Source: Davidson, H. (1997) Even More Offensive Marketing.
Criteria
1 Size2 Growth3 Profitability4 Pricing trends5 Competitive intensity6 Failure risk7 Opportunity to differentiate8 Segmentation9 Retail structure
Total
Maximum score
8152010106
109
12
100
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Example 2 (see Figure 6.9): a mergerof two major European healthcarecompanies
>Defined 15 priority market sectors
>A common database developed across 12countries
>Five segments exited and 20 brands sold
>80% of future marketing and R&D spendfocused on eight power brands
>Plants rationalised; fewer in number andbigger in size.
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Figure 6.9: Example of brand strength scoresheet
Source: Davidson, H. (1997) Even More Offensive Marketing.
Criteria
1 Brand profitability2 Relative consumer value3 Relative brand share and trend4 Market sector position5 Sales level and trend6 Differentiation7 Distribution and trade strength8 Innovation record9 Future potential (extendability)
10 Awareness and loyality11 Investment support (advertising , R&D)
Total
Maximum score
1215977
1276
1078
100
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Checklist
Have you:
>Defined the playing field
>Developed a consistent database ofsegments, products and services
>Used a quantified portfolio scorecard toprioritise brands
>Developed a product portfolio which fillspriority segments efficiently
>Decided where to develop, sell, acquire orexit.
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CASE STUDIES1. Allied Domecq: ideal brands
2. The Japanese giants: corporate branding
3. Unilever: portfolio management
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1. Allied Domecq: ideal brands
Allied Domecq Spirits and Wine Ltd is one ofthe largest players in the alcoholic drinksmarket with colossal brands such as BeefeaterGin, Kahlua liquor, Sauza tequila, Tia Mariaand Malibu in their portfolio. The company alsoown a chain of some 3,500 pubs in the UK andthe American fast food giant Dunkin’ Donuts.Their website claims that ‘Allied is aboutbrands and people’ and with some of theworld’s leading alcoholic drink brands and anexclusive database of some three millionconsumers to assist in understanding theircustomers it would be difficult to argue withthe statement.
The Allied portfolio of brands is carefullymanaged for a large company with such a vastrange. Allied have prioritised the area’s thatthey wish to compete in such as high qualityspirits (Courvoisier cognac, Ballantines FinestScotch) and ready to drink cocktails andpositioned their brands accordingly. This hasbeen supported by brand extensions and apolicy of buying individual, cherry picked,brands to strengthen their portfolio; Alliedhave recently produced a new range of Kahluacocktails and purchased brands such as
Malibu, Mumm Champagne and the USdistribution right s for Stolichnaya vodka.
This policy has allowed Allied to manage theirportfolio effectively. They have covered theirpriority areas, maintained a sustainablenumber of brands and have largely avoidedoverlapping and causing cannibalisation.
The strategy seems to be working. In 2001,Allied reported pre tax profits of £236millionover a six-month period, an increase of 16%on the previous year. Allied’s four core drinksbrands, Kahlua, Sauza, Beefeater andBallantines are all the second biggest of theirkind globally and with a vast portfolio ofsecond tier products, a commitment to marketresearch and innovative products such as theirready to drink cocktails, Allied’s focus onportfolio management seems to be paying off.
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2. The Japanese giants: corporatebranding
The concept, practice and techniques ofbranding in the Japanese market aretraditionally very different to their Westerncounterparts. The large, successful brand isking in the Japanese market and, as a result,individual products and lines have often playedsecond fiddle to, or been endorsed by, themore powerful corporate brand. Corporatelogos often feature prominently inadvertisements and the endorsement of asuccessful corporate brand has traditionallybeen very important to new products inparticular.
One reason for this is that frequent purchasingand ever shifting trends in Japanese societyhave shortened the average life cycle of aproduct as new fads and ever increasing benchmarks have resulted in businesses having anecessity for quick model change and newproducts simply to maintain momentum. Thisquick turnover means that, often, a line willnot be in existence long enough to develop abrand identity of its own and so by attaching awell known corporate brand, instant kudos isadded. Examples of this include Sony whose
brand name is attached to many of theirproducts such as the ‘Sony Minidisc’ and ‘SonyWalkman’ and Yamaha who attach their ownbrand name to their lines of motorcycles,musical instruments and sports equipment.
As products have changed quickly, so thediscerning Japanese consumer has come torely on big names of strong reputation whenmaking purchasing decisions. The basic driverof a brand in the Japanese market is successand a large and successful corporate name hasoften become a badge that instantlyauthenticates a new product on the market,reducing the need for individual brands to bebuilt and promoted.
Following the difficulties in the Japanesedomestic economy in the 1990’s, however,practices are beginning to change in Japan. Asthe economy slowed, so businesses foundthemselves able to spend less on productinnovation and instead concentrated onsustaining and promoting established products.Japanese corporations are increasingly takingon a more Western attitude of creating brandsfor individual lines as the product and thecorporate brand are separated. The Playstation2 is an excellent example; the Sony name is
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much less prevalent in the promotion of theproduct than the previous Playstation as Sonyattempts to build a distinct ‘PS2’ brand,separate from the Sony brand itself.
These are interesting times for branding inJapan. Many of the large corporate brands arelong standing and they have built strongreputations of reliability, quality and cuttingedge technology or have come to define aniche market. Whilst the corporate brand hasoften been less important in the marketing ofJapanese products for export, they have beenvital in the domestic market and as they aredistanced from products it remains to be seenhow Japanese consumers will react to a newgeneration of product rather than corporatebrands.
3. Unilever: portfolio management
[© J H Davidson. Sources: Unilever annualreport, Business Week, Advertising Age andMarketing Week.]
Unilever background
Unilever is one of the world’s top three foodcompanies and a major player in detergentsand personal products. It is the world’s thirdlargest advertiser (after Procter and Gambleand General Motors), spending $3664 millionin 2000. Major brands include Lipton’s, Persil,Bird’s Eye, Magnum and Ragu.
Portfolio management objectives
In February 2000, Unilever embarked on a fiveyear global programme to reduce the numberof brands from 1400 to 400 and to concentratemarketing and other investment on ‘Power’and ‘Jewel’ brands. The objective of the ‘Pathto Growth Strategy’ was to use thisredeployment as a means to reduce the costof operations and supply chains; and to investthe savings in additional marketing spend,focussed on brands and market sectors withthe most potential. This would lead toprofitable growth in relatively mature markets.
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Results to date
By 2001, the 400 leading brands accounted for84% of sales and are expected to account for95% in 2004. Growth of leading brands in2001 was 5.3% and operating margin, at13.9%, was a record. Since the inception ofPath to Growth, 59 plants have been closedand global purchasing savings amount to $1.1billion.
Unilever has sold some brands like ElizabethArden, Bestfoods Baking Company andUnipath and merged (Radion merged withSurf) or discontinued (eg Lux Flakes) others.
Criteria for selecting leading brands
Unilever’s exact criteria for selecting 400leading brands from 1400, and the prioritieswithin the 400, are unknown. However typicalcriteria would include:
>Relevance of market segments in whichbrand operates. Are they strategicallyimportant to the company, with good growthand profit prospects?
>Brand sales level, trend, and market share.For example in the USA, Unilever selectedfive ‘Powerhouse’ brands with sales between$300million and $2 billion; and five ‘jewel’brands with sales over $150million forinvestment focus.
>Brand profitability and responsiveness tomarketing spending.
>Brand differentiation and avoidance ofoverlap with other company brands.
>Brand extendibility. Can its franchise beextended into other priority segment orcountries?
Comment
Unilever has made a good start with itsambitious Portfolio Management Programme,but still has some way to go.
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