Getting in shape

Himanshu Pal, executive director, brand performance at Landor, discusses how brand portfolio optimization helps business grow.

The past two decades has seen enormous business growth in the Middle East, especially so in emerging markets, with companies extending their geographic reach, business size and business verticals in some cases.

As a region that has been continuously growing economically, the GCC (Gulf Cooperation Council) is not an exception to the growth that has attracted many businesses in different industries. While various homegrown companies now have a global presence, such as Emirates Airlines, Qatar Airways and Dubai Ports World, globally significant companies like IKEA, Microsoft, Apple, Nestle and Amazon are not also established in the region.

These companies frequently expand their brand and product portfolios, through organic growth and M&As (Mergers and Acquisitions). This activity can lead to a proliferation of brands in a portfolio. For example, Unilever, which set up its first factory in Dubai in 1971, followed by more factories in other countries in the region such as Saudi Arabia, has acquired more than 30 ice cream brands worldwide since the early 2010s. Each of these ice cream brands developed, marketed and sold its own local flavor.

Managing extended and complex brand and product portfolios like this can come with challenges. Multiple brands in the same space, category or consumer segment often offer undifferentiated propositions, leading to cannibalization and reduced ROI (Return on Investment). Companies, therefore, need to optimize their brand portfolios to clarify the role of each brand and fully monetize these intangible assets, to improve their business performance.

Another consequence of rapid growth is often increased brand and marketing investment, financially straining companies in challenging environments. Often capital and operating expenses are capped, resulting in zero-based budgeting, and shareholders expect faster and greater return on investment, creating a new short-term ROI mindset.

This brings a closer scrutiny to branding and marketing investments, often viewed as costs to a business. The classic 80/20 business case of 20% of the portfolio providing 80% of the growth or revenue no longer makes commercial sense. This new reality is forcing organizations to rethink: Will these brands in the company's portfolio help it reach its growth goals? 

The Covid-19 pandemic and accompanying economic slowdown have forced companies to look inward and question whether their divisions, brands or products are contributing to their strategic goals. strategy&, part of the PwC network, reported in its Global executives survey that, today, the company’s main strategies involve developing new models, rethinking corporate strategy, improving efficiency and driving cost savings. If one compares such a strategy with the one mentioned in the 2009 Recession Survey, involving layoffs and pricing adjustments, one can understand that there has been a major shift in how companies respond to economic turmoil. In fact, by maximizing the power of assets, optimization is becoming a key tool in ensuring a company is properly armed for future growth.

There has been a notable shift in the way businesses respond to economic disruptions, and the optimization of assets has become a crucial tool in ensuring that a company has the necessary resources to support future growth. Unlocking the maximum potential of assets has become a critical strategy for businesses seeking to equip themselves for the challenges of the future.

In 2020, Danish container shipping major A.P. Moller – Maersk undertook a simplification of its global Ocean & Logistics organizational structure. The objective was to streamline the company's international portfolio and enhance its customer-centric culture. As part of this effort, Maersk integrated the Safmarine brand into its operations, recognizing the success of both brands in fostering a customer-focused ethos.

The goal was to leverage the scale and reputation of Maersk while capitalizing on the agility and customer-centricity of Safmarine. Additionally, the company optimized the organizational structure between the parent brand and its ocean carrier company, Hamburg Süd. This optimization helped Maersk to eliminate any possible confusion among customers regarding duplicate offerings, thereby strengthening the master brand.

These four steps will help you determine how to optimize your company's portfolio. 

1. Evaluate the state of today

An optimal portfolio not only provides a stronger brand through equity and perception, but also ensures desired commercial ROI and enables simplified, faster processes. Based on understanding how brands are perceived through the lens of consumers/customers who ultimately contribute to the financial success of the company through their purchases, the competitive landscape for each of the major categories can be assessed.

2. Measure each brand’s equity

Conduct an in-depth analysis of your portfolio. Does each brand in your portfolio offer a unique value proposition or serve a differentiated customer need? Certain brands might need to be updated or retired. Using brand and sales data will help you assess how each asset ‘feels’ today and map the correlation between each brand and the company’s commercial performance.

3. Map out the different potential scenarios

Future-proofed view of the category / sector backed with analytical data on whether the existing brands and the overall portfolio in the current avatar are fit to withstand expected market changes. List all possible scenarios of your future brand portfolio according to the latest trends and macroeconomic conditions, eg retreating from an established market, or expanding into a new line of business. 

4. Quantify the risks

Validation of each scenario using predictive models enables a highly objective measurement of the potential risks of change, the level of investment required and the expected commercial impact on the company's future performance. Informed decisions improve the ROI of every brand investment. In the Middle East region, companies with optimized brand portfolios typically see an incremental growth of 3% to 8%.

The most valuable intangible asset a company owns is its brand. Making informed brand decisions is critical to risk management and business growth. For brand portfolios, the risk of change can and should be calculated. Data-driven analytics ease strategic branding decisions and allow you to define the impact of new brand architectures and update your brand portfolio accordingly, ultimately allowing you to monetize brands as an asset.