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Global portfolio strategy

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Global portfolio strategy

For the last few years big groups have been carrying out a policy of stuffing their portfolios with additional brands, either through acquisition or partnerships, at the same time as extending the product range of some of their brands. Nestlé has become the world’s number one food processing company thanks to its acquisition of Carnation and Stouffer in the USA, Rowntree in the UK, Buitoni-Perugina in Italy and Perrier in France.

Philip Morris is another busy company; its foodstuffs division is made up from Kraft (cheeses), General Foods (coffee, cornflakes, confectionery, chocolate) and Jacobs-Suchard (coffee, chocolate).

In the mineral water market, outside Evian and Badoit, the Danone group, which already owns Volvic, has bought La Salvetat, a sparkling mineral water spring. Kraft General Foods owns three strategically important chocolate brands: Milka, Suchard and Côte d’Or.

This trend towards company size growth is partly motivated by the gains that can result from joining forces in research and development, logistics, manufacturing, distribution and sales. Another reason is due to the levels of financial and human resources that are now necessary to compete on the world market. A third reason is the desire to buy a dominant position and be able to restrict the market to a duopoly or an oligopoly. A final reason is to be able to resist the pressure exerted by the concentration of distributors.

It is worth remembering that besides this quantitative aspect, the idea of a portfolio implies a global vision of the competition in a market or category. A portfolio also forces the relationships between one brand and the others in the portfolio to be considered, the idea being that a brand’s value can be enhanced by belonging to a larger portfolio. There are several decision grids, the most famous being the Boston Consulting Group’s.

Hence at Pernod-Ricard one speaks of growth products (Clan Campbell, for example), contributors (Ricard, Pastis 51, Orangina) and the famous cash cows. To these can be added the concept of a ‘strategic brand’: Pacific, a non-alcoholic aniseed drink, may not be financially interesting but is vital for the longterm prospects as it accustoms future customers to the aniseed taste.

Unisabi (Mars) control half the cat food market thanks to a portfolio that is made up from the following brands: Ronron, Kit-e-Kat, Whiskas and Sheba. These can be classified into strategic, value and tactical brands. Whiskas is strategically aimed at being the invincible brand in the market, with the biggest range, large profits, central consumer benefit (best nutrition) and the most expensive advertising campaign.

Sheba is a value brand: its market share in money is three times as much as its market share in volume. Sheba, a high-quality product, is targeted at the most dedicated owners. Ronron is a buffer brand, low in price and hardly given any advertising support; it is there to counterattack the distributor own brands. Strategic, niche and tactical brands can also be distinguished in the Heineken Breweries.