Hindustan Unilever Ltd (HUL) unveiled its power brand strategy in 2001 when the company was under the stewardship of M.S. (Vindi) Banga and completed the process a few years ago. Essentially it meant HUL would prune some of its brands and concentrate its resources and energy on a clutch of core brands, which could show the greatest growth and potential to take market share. Here Nitin Paranjpe, HUL’s Managing Director and CEO, outlines the logic and reasoning of the power brand strategy which, he says, has been misunderstood to some extent.
I will give you a point of view with a few pieces of logic on why the power brand strategy is right. One from a consumer standpoint and the other from a business’ perspective — this will give you an indication that the strategy is the rig ht direction.
From 1991, we have seen a dramatic change in the cost of media and in the cost of building brands. There has been a proliferation of brands but the cost of building a brand has gone up dramatically. There are so many brands in the market and just because you have launched a new brand it doesn’t mean it will succeed. Not only is it more expensive to break through the clutter, it is becoming tougher too. From an economic standpoint, more the number of brands, higher the investments and greater the difficulty to manage. Fewer and stronger brands allow for scale and the ability to concentrate and focus resources — be it technology, innovation or advertising. That’s the economic logic why fewer and bigger brands will help create competitive advantage.
From a consumer point of view, I ask myself the question, how can brands build a meaningful relationship with you — where it makes a difference to your life, where you relate to it — and not run the risk of being mere names or commodities? How many such brands are there likely to be in your life? You can’t have a hundred brands which will be relevant and meaningful to you, just like you can’t have a hundred friends around you. You can’t manage hundred relationships in your life; you will be able to manage only 10-15 dear friends — people who really matter. The rest are acquaintances.
Consumers may flirt with some brands, but in the end will come back to a few trusted brands with which they have a long lasting relationship. So, consumers will start narrowing choices.
The third reason is if you look at consumer benefits and propositions, you will need a brand to occupy each one of the benefits. The truth is that consumers will start moving from functional benefits to emotional and social benefits and when you start moving from category-specific functional benefits to broader emotional spaces then there can’t be a hundred emotional spaces.
There can only a handful and therefore it is possible for a handful of brands to do that. A good example of this is the positioning of the detergent powder, Surf on the ‘dirt is good’ platform. There can’t be a hundred but maybe 30-40 brands which will allow you to address every consumer benefit space.
Making the right choice
That’s the philosophy and rationale behind the power brands. The mistake that people make sometimes is to assume that if we have 30 power brands we would not have a thirty-first. Having a fixed number is not the objective. Whenever there is a genuine reason for a brand to be ushered in we will have it. Pure-it, our water brand, is a good example. So is Ayush, which wasn’t there when we started the power brand strategy. It is okay to have a combination of power brands that are global in nature with some local brands and the only criteria for the local brands to survive is if there is a consumer logic and a portfolio fit in the market. That’s really how I see power brands.
In this process, in some cases we did very well and in some others we didn’t. And where we didn’t do well, we lost some consumers along the way. That does not detract from the strategic rationale and philosophy behind the power brand strategy.
Some people say that we have lost market share in some brands, so the strategy has failed. But I make the distinction — is the idea faulty or was it an execution failure. We shouldn’t throw the baby out with the bath water; we should have the ability to distinguish between the two.
6 months ago