Brand Portfolio Management, Basic Principles
and Recent Trends shown in context of
Unilever, a consumer goods company

Diplomarbeit

Frank Piotraschke

Table of Content

1 Abstract ... 2

2 Introduction ... 1

2.1 Aims and Objectives ... 1

2.2 Limitations ... 2

3 Literature Review ... 3

3.1 Branding ... 3

3.2 Brand Equity ... 4

3.3 Brand Portfolio Management ... 8
3.3.1 Brand Portfolio ... 8
3.3.2 Product-defining Roles ... 10
3.3.3 Portfolio Roles ... 12
3.3.4 Brand Scope ... 15
3.3.5 Portfolio Structure ... 16
3.3.6 Brand Portfolio Objectives ... 18
3.3.7 International Brand Portfolio Management ... 19

4 Market Analysis ... 21

4.1 Research Methodologies ... 21

4.2 Unilever-Case ... 23
4.2.1 Marketing Analysis of Unilever ... 24
4.2.2 Why did they do it? ... 26
4.2.3 How did they do it? ... 27
4.2.4 Were they successful? ... 32
4.2.5 Financial Analysis ... 33
4.2.6 Qualitative Analysis ... 39

4.3 Observation of Market Performers ... 42

5 Findings, Recommendations and Conclusion ... 44

5.1 Findings for main aims ... 44
5.1.1 Does the application of brand portfolio management in a company improve the financial performance? ... 44
5.1.2 Does the introduction of brand portfolio management in a company simplify the brand architecture from the perspective of different stakeholders? ... 44

5.2 Findings for objectives ... 44
5.2.1 International fast moving consumer goods companies focus their brands on international markets ... 45
5.2.2 Small or unfitting brands got sold or disinvested ... 45
5.2.3 Brand portfolios were reshaped and restructured ... 45
5.2.4 Brand portfolio structure was clearer after campaigns ... 46
5.2.5 Restructuring programs caused high one time costs ... 46
5.2.6 Restructuring programs saved revolving annually costs ... 46
5.2.7 Restructuring programs did not meet their financial objectives ... 46

5.3 Reliability, validity and generalisability of the findings ... 47

5.4 Recommendation ... 47
5.4.1 Academic ... 47
5.4.2 Managerial ... 47

5.5 Conclusion ... 47

6 References ... 49

1 Abstract

This paper argues that brand portfolio management is an inevitable discipline in marketing and has to be applied in the business practice. It presents the current literature about this topic, beginning with the general branding theories, covering basics and first approaches to brand portfolio management, and also takes the international focus on brand portfolio management. It shows a case-study of the fast moving consumer goods producer Unilever. Its “Path to Growth” strategy, where Unilever went through the biggest restructuring efforts in its history, is presented and analysed. The Unilever “Path to Growth” strategy, was a five year restructuring plan launched in 1999, in which Unilever sold an disinvested many established and smaller brands, cut substantial amounts of costs, laid off thousands of employees and restructured their brand portfolio considerably. The weaknesses and the benefits of “Path to Growth” are shown, and also brand portfolio management in general is described in this context. The Unilever case is analysed in detail. The motivations for brand portfolio management in general, and the specific restructuring campaign are shown and explained. Financial and qualitative analysis is taken. The outcome of the restructurings is evaluated and conclusions are taken. Recommendations for further studies are made and an outlook is given.

2 Introduction

Branding and Brand Management has become one of the major management priorities in companies throughout the last decade. Managers have realised that brands are one of the most valuable intangible assets a company owns (Keller, 2006). Brands serve as product markers, as differentiating element for customers. This fact and its outcome were subject to various academic researches in the past. In recent years, a relatively new part of brand management becomes more prominent. Brand portfolio management displays the approach of managing more than one brand in a company. It sees the amount of brands in the respective company as a portfolio. A portfolio, in general, is “a collection of work and resources that are managed as a group in a way that maximises the total business value” (Ten Step, 2007).

So, brand portfolio management takes the focus on managing the brands as a group. As many companies today have very many brands on their balance sheets, this is an approach that can be comprehended. The main aim is to receive something more by managing the brands as a whole, rather then managing all the brands singly. This should not mean that a company now only needs one brand portfolio manager rather than different brand or product managers. It is more, that a brand portfolio needs a centralised steering, that a central unit or person, depending on the size of the company, looks for common objectives, brand associations and identities.

2.1 Aims and Objectives

This work is focusing mainly on the application of brand management theory in practice. The main theories are presented, and a case study is worked with the example of Unilever, a fast moving consumer goods company that went through a big brand portfolio and general restructuring strategy campaign. Therefore the main aims and different objectives of this paper that are researched are:

Aim 1: Does the introduction of brand portfolio management in a company improve the financial performance?

Aim 2: Does the application of brand portfolio management in a company simplify the brand architecture from the perspective of different stakeholders?

Besides these two main aims for this work, different objectives are followed.

• 
  Objective 1: Do International fast moving consumer goods companies focus on specific markets?
  
• 
  Objective 2: How does their brand portfolio look like in terms of size and structure?
  
• 
  Objective 3: Did the companies take the effort to restructure their portfolios?
  
• 
  Objective 4: What was the outcome for the quality of the brand portfolio?
  
• 
  Objective 5: What were the financial costs for the restructuring?
  
• 
  Objective 6: What were the financial benefits of the restructurings?
  
• 
  Objective 7: Did the programs meet their own financial objectives?
  

These are the main aims and objectives. To measure them, especially the aims, different measures will be identified. The financial measures are mostly set by the companies themselves to measure their success. The financial perspective is used here, because in business practice, all marketing theories and approaches that are applied are also measured from a financial view. The measures for aim 2 can be seen in section 3.3.6.

2.2 Limitations

The limitations of this work are based on the research material. It is based, as section 4.1 describes, on secondary data material and literature like journal articles and books. So the findings are sometimes assumptions based on secondary research.

3 Literature Review

In the following chapter the different opinions and theories of branding are presented. The terms brand equity and brand portfolio management are described and also a brief look on the history of branding and brand management is given. Due to the substantial amount of literature sources about branding, the focus is mainly on brand portfolio management.

3.1 Branding

The word “brand” comes from the Germanic word “brandr” “which describes the “mark made by burning with a hot iron” (Jevons, 2005). This is noted first in the year 1552 and is traced by the Oxford English Dictionary. However, as this describes more the basic action of dividing something from something else (Cattle, Sheep etc) it is transferable to the marketing meaning of branding.

The first often citated definition of a brand in a marketing context by the American Marketing Association was made in 1960 which is “a name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors” (American Marketing Association, 1960). Although this definition is highly recognized by most leading authors, who adopted it and only slightly changed it. (e.g. Kotler, 1996, pg 556 and Aaker, 1991), it was criticised for being too “product oriented, with emphasis on visual features as differentiating mechanisms” (Wood, 2000; Arnold, 1992; Crainer, 1995). A more customer orientated definition chose Ambler. He defines a brand as “the promise of the bundles of attributes that someone buys and provide satisfaction … The attributes that make up a brand may be real or illusory, rational or emotional, tangible or invisible.” (Ambler, 1992; Wood 2000). This definition explains that the whole brand is influenced and more or less created by the marketing mix¹. An even more customer focussed definition is given by Brown. He sees, like many other Authors in branding (de Chernatony and McDonald 1992, Wolfe 1993, Sheth, 1991, Alt and Griggs 1988) more the psychological value of brands in the minds of customers. A brand is in his terms “… nothing more or less than the sum of all the mental connections people have around it” (Brown, 1992). A more detailed explanation of the value of branding is given in section 3.2.

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1 Definition Marketing Mix: those controllable marketing variables - product, place, price, and promotion - that the enterprise makes use of to satisfy the demands of the target market and that together comprise the enterprise′s marketing effort (Sexty, 2001)