ANALYSIS: Why Unilever B-brands must be cast aside - Shelf space is being squeezed and Unilever intends to concentrate funds on a choice few brands. But how will it decide which of them must go? asks Lisa Campbell

Unilever is clearing its cupboards of unwanted clutter, sweeping aside niche, marginal or non-strategic brands to make more room for core labels. Hundreds of brands from the giant’s 1800-strong portfolio face the chop or a reduced marketing spend as part of a strategy to achieve higher growth.

Unilever is clearing its cupboards of unwanted clutter, sweeping

aside niche, marginal or non-strategic brands to make more room for core

labels. Hundreds of brands from the giant’s 1800-strong portfolio face

the chop or a reduced marketing spend as part of a strategy to achieve

higher growth.



The pounds 48bn company has yet to finalise which brands, from frozen

food to toiletries, will be axed but it is understood several Elida

Faberge brands have already been designated as B-brands to be sold or

put out to pasture (Marketing, June 3).



They include Pears Shampoo, Ponds, Timotei, Addiction, Brut, Lux, and

new launch Fusion.



Meanwhile the company is upping investment in so-called A-brands, which

include Dove, Impulse, Lynx, Organics, Vaseline Intensive Care and

Sure.



Which brands should go?



Leading the initiative is chairman Niall Fitzgerald, who has been

refining Unilever into a more focused beast for some time, reducing the

company’s 57 categories of products to 14 and disposing of non-core

assets such as speciality chemicals.



The company belief was reiterated by co-chairman Antony Burgmans last

month, following a reported fall in sales in the first quarter and a 4%

slide in pre-tax profits to pounds 666m.



’We want to put more energy into the big A-brands, which have the

biggest growth potential. Our efforts are much too diffuse,’ he

stated.



Not that Unilever is in any way a small company. Even now its product

categories cover a vast span: ice-cream, tea-based beverages, yellow

fats, personal wash, fabric wash, mass skincare, prestige products

(Calvin Klein perfumes etc), deodorants, haircare, oral care, household,

frozen foods, culinary and industrial cleaning goods.



So how does a company decide which brands are As or Bs? And how can it

be sure that valuable brands are not thrown out with the rubbish?



According to Alex Batchelor, Interbrand Newell and Sorrell’s brand

valuation director and ex-Unilever marketer, there are four simple

criteria:



- ’How big is the brand? This is measured by things like volume, value

and customer numbers. Once brands get to a certain size they can be

self-sustaining, used for spin-offs or used to fund other things. An

example is Lynx, which is now huge after an investment phase of three or

four years. However, some brands such as Mentadent, never make a return

on investment and in the long term are not worth retaining.



- ’Loyalty. How big is the brand’s following and to what extent would

people search it out, even if it wasn’t supported? As a global player,

Unilever also has to consider how popular the brand is in other

markets.’



- ’Potential. What is its potential for growth outside its core audience

and what is the potential for brand extensions?’



- ’Trends. Should companies ’go with the flow’ or spend time, money and

effort trying to turn around declining brands? Unilever has enough

strong products in its portfolio that it doesn’t need to push water

uphill.’



Batchelor adds: ’You have to keep in mind what economic value can be

derived from a brand, however. You can’t babysit a brand like Pears just

because it has a 200-year heritage and you have an emotional attachment

to it. If there are no unserved or untapped Pears customers, it is

better to refocus your efforts to new and expanding sectors,’ he

says.



Observers agree that choosing which brands must go is tough, with senior

decision-makers often defending a brand they nurtured in the past, or

other staff becoming disgruntled if they feel they are working on a

minor brand.



Often the management time spent turning around underperforming or weak

brands is completely disproportionate to the bottom-line payback. It

would be much better to concentrate on making the profitable brands more

profitable.



Weaker brands can pay off



John Elstan, analyst at West LB Panmure, adds it is important to

maintain a balance.



’It’s a tricky situation. There’s no point in decimating a local brand

just for the sake of purity, but Unilever does need to follow the lead

set by rivals such as Procter & Gamble, Nestle and Danone, and focus

more clearly on core products.’



Potential dangers are that brands which are sold off may end up in the

hands of aggressive competitors, or become runaway successes, making the

previous management look second-rate.



Many argue that reducing marketing spend is not the answer, with

retailers unwilling and unlikely to stock unsupported products.



P&G last rationalised four years ago, ridding itself of brands such as

Insignia and Blue Stratos, to leave a portfolio of around 300 brands

which it supports heavily.



P&G’s personal care marketing director, Nick Hotham, says: ’Our belief

is that our brands are family jewels and we need to find a way of making

them successful over time. We have been criticised in the past for

plugging away at weaker brands, but it often pays off. Olay is now seven

times bigger than it was when we acquired it in 1987 and is now worth

pounds 130m.’



Hotham adds that P&G’s category management programme now helps the

company focus on core competencies by feeding the strong and starving

the weak.



But weaker brands can often thrive in other environments. EMVI is

interested in turning around some of the Elida Faberge brands, having

successfully marketed Harmony which it bought from Unilever last

year.



’We gained a big brand with 90% awareness and have since invested in it

to make it more contemporary and appealing internationally,’ says EMVI

chief executive, Mike Jatania.



Own-label squeeze



’By continuing to dispose of non-core brands, Unilever can focus on big

global brands and reduce marketing, production, storage and distribution

costs. It is increasingly difficult for a global company to manage local

brands,’ he says.



Miners International managing director, Stewart Chambers, agrees:

’Judging whether a brand is an A or B is in the eye of the beholder.

Miners had been regarded as peripheral by its previous owners Max

Factor, Revlon and P&G. It once had an pounds 8m turnover but was left

to do nothing. We’ve supported it and brought it back to having a pounds

5m turnover but this has been extremely time-consuming. Larger players

don’t believe it’s worth the effort.’



The surge of own-label products has also put pressure on secondary

brands, creating another reason to dispose of them and focus on core

strengths and - crucially in this market - new product development.

Recent examples, particularly in the US, show the giants P&G and

Unilever being pipped to the post in NPD by smaller, nimbler players.

Streamlining the portfolio should speed up the traditionally slow-moving

bureaucracy and allow the company to reap the benefits of its pounds

576m R&D budget (2% of worldwide sales).



’It makes sense to dispose of non-core brands. There is increasing

competition for shelf space and retailers are continually asking ’what

does this product add to the category?’’ says Jatania.



Unilever, like its arch-rival P&G, recognises it needs to lose weight to

move quickly and aggressively. The B-brand cull is only just

beginning.



UNILEVER FACTS

Turnover 1998

pounds 27bn

Pre-tax profit 1998

pounds 3bn

Marketing spend 1998 pounds 3.75bn

Adspend

pounds 2bn

Roster agencies

Ammirati Puris Lintas

J Walter Thompson

McCann-Erickson

Ogilvy & Mather