Part - II

Previous

Why Companies go for Brand Killing?

The surprising truth is that most brands don't make money for companies. A research shows that, year after year, businesses earn almost all their profits from a small number of brands-smaller than even the 80/20 rule of thumb suggests. In reality, many corporations generate 80 percent to 90 percent of their profits from fewer than 20 percent of the brands they sell, while they lose money or barely break even on many of the other brands in their portfolios. Take the cases of four transnational corporations: -

Diageo: The world's largest spirits company sold 35 brands of liquor in some 170 countries in 1999. Just eight of those brands-Baileys liqueur, Captain Morgan rum, Cuervo tequila, Smirnoff vodka, Tanqueray gin, Guinness stout, and J&B and Johnnie Walker whiskeys-provided the company with more than 50 percent of its sales and 70 percent of its profits.

Nestlé: It marketed more than 8,000 brands in 190 countries in 1996. Around 55 of them were global brands, 140-odd were regional brands, and the remaining 7,800 or so were local brands. The bulk of the company's profits came from around 200 brands, or 2.5 percent of the portfolio.

Procter & Gamble: It had a portfolio of over 250 brands that it sold in more than 160 countries. Yet the company's ten biggest brands - which include Pampers diapers, Tide detergent, and Bounty paper products - accounted for 50 percent of the company's sales, more than 50 percent of its profits, and 66 percent of its sales growth between 1992 and 2002.

Unilever: It had 1,600 brands in its portfolio in 1999, when it did business in some 150 countries. More than 90 percent of its profits came from 400 brands. Most of the other 1,200 brands made losses or, at best, marginal profits.

Next

* Contributed by -
Ashish Bihani & Rahul Sikaria,
I Year, MBA (Global),
Institute of Management Technology, Nagpur.