By Michael Wood, co-founder and director of Aperio, a business consulting company focused on accelerating growth of FMCG brands in South Africa and Sub-Saharan Africa
While some brands might not seem attractive at first glance they could be a potential source of future growth or revenue. Typically if a brand doesnt quite fit in, it is treated differently than priority brands and most likely ends up as the orphan in the family. Before offloading or side-lining an orphan brand it is worth examining whether it might in fact have the potential for growth.
What makes a brand an orphan?
- Revenue size relative to other brands: a R1 Billion brand and a R50 Billion brand get a different level of focus and attention
- Strategic fit: for example a non FMCG brand in an FMCG company doesnt always fit.
- Different growth drivers: brands that are seen to have a wrong strategic fit have growth drivers that are different to those of the mainstream business, as a result brand managers dont understand it and mismanage it.
- Route to market: if a brand needs a different route to market to reach consumers than the mainstream business, this can make it an orphan in your stable.
- Levels of profitability: it makes less money or margin than other products.
- High operating costs: lower margin products struggle in structures that run at high operating costs, alternative route to markets would make sense for these brands.
Whilst these brands they may not seem attractive they could be a potential source of growth or revenue for the business.
What would happen if you put your best brand manager on these brands? What would happen if you brought innovation into this category? What is the size of the business potential? If you treated it differently would it grow?
Is this a brand that will always be small or is there an opportunity to make it big in terms of the end goal? If there is, it is about finding the right strategy to manage the brand. If there isnt then you need to question why you are holding onto that brand and does it make sense to sell it, stop it or outsource it.
Outsourcing a brand can be very effective where the orphan is able to get the loving care and attention it needs to succeed. The reality is that most companies chug along with these orphan brands without finding the right solution.
Managing the orphan brand
Nestle is a company that manages brands strategically and seems to have got it right in terms of how they manage their brands. They have strong local teams in country which manage big brands that are relevant to local consumers. They have a different team that manages smaller international brands that are typically imported into market (potential orphans). Lastly if they have brands or businesses that do not fit into either model and need a different route to market, they either outsource or do a Joint Venture (JV). For example, the Nestle Water JV with Clover who has a similar market, route to market and distribution channels for the brand. This way Nestle manages all their brands in the portfolio with just the right attention each one deserves.
Understanding the brands strategic fit to your companys overall goal is a critical decision, for example GlaxoSmithKlines focus on Consumer Healthcare globally meant that its Lucozade and Ribena brands didnt fit in. As orphan brands in their stable, GSK took the bold decision to sell the business to the Suntory Beverage & Food Ltd (SBF) drinks company and focus on their core.
In conclusion, understanding the true potential of orphan brands and then finding the right home for them can give these brands the opportunity to grow and flourish in the right environment.
For more information go to www.aperio.co.za
About The Author:
Michael Wood is co-founder and Director of Aperio, a business consulting company focused on the FMCG space in South and Sub Saharan Africa. Michael has many years international experience where he held the positions of Marketing Director, Sales Director & Managing Director with the Gillette Company and Procter & Gamble
Aperio is a business consulting company focused on accelerating growth of FMCG brands in South Africa and Sub-Saharan Africa. Aperios consulting ranges from developing and implementing business building strategies, advising on launch or expansion plans, conducting brand health interventions, rejuvenating orphan brands or implementing growth strategies for Africa. Some of its clients are Danone, Diageo, Kelloggs, Royal Canin, GlaxoSmithKline, Mars, Wrigley.
Aperio has a team of 30 highly capable, multi-functional consultants with significant multi-national FMCG experience. Aperios consultants have worked within major multi-nationals including P&G, Gillette, GlaxoSmithKline, Tiger Brands, Simba, Nestlé, SuperGroup and Coca Cola.
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