Why Did Unilever Reduce Its 1,600 Brands to 400?

As early as 1999, Unilever operated in about 150 countries worldwide and had as many as 1,600 brands, making it one of the world's largest FMCG companies. Why did Unilever have so many brands? And why did it later reduce its brands from 1,600 to 400? Source: Economics Around You (ID: jjchangshi) Why did Unilever have so many brands? The reason is that during rapid expansion, companies continuously extend product lines, expand balance sheets, and increase the number of brands to seize more opportunities. When a company is in a period of steady growth or decline, many of its brands suffer from insufficient market presence, vague positioning, and high maintenance costs, which reduce the company's brand profitability. Additionally, when a company has too many brands, it becomes difficult to maintain focus. At this point, it is necessary to streamline the brand portfolio, re-select and integrate brands according to new positioning and new customer groups—selling off, canceling, transferring, or merging as appropriate. Unilever did exactly this. To address declining sales and profits, starting in 1999, Unilever began implementing a divestiture strategy globally. Unilever conducted an internal audit and found that over 90% of its profits came from 400 of its brands, while most of the other 1,200 brands were either loss-making or marginally profitable. Subsequently, Unilever took a series of measures:

First, it exited non-core businesses and focused on advantageous product lines such as home and personal care products, and food and beverages; Second, it merged its 14 independent joint ventures into 4 holding companies, canceled plans for 55 factories, and significantly reduced operating costs; Finally, to focus more on core brands rather than loss-making or marginally profitable ones, Unilever streamlined its brand portfolio, ultimately selecting and retaining 400 core brands out of 1,600. After a period, the retained 400 brands all became highly competitive in the market. By implementing this strategy, Unilever optimized its brand portfolio, allowing it to focus more on the retained 400 brands. The released resources enhanced the competitiveness and attractiveness of the retained advantage brands, and sales of core brands increased significantly. -01- What is a product portfolio? Almost every marketer dreams of creating a blockbuster product, hoping to impress everyone with a single product. Unfortunately, this is just a pipe dream. Because even if a similar blockbuster exists, it is often just one explosive product within a series, and the dream of conquering the market with a single product is hard to achieve today. Companies face customers from different regions with different needs and purchasing preferences, which objectively requires them to build a structured portfolio of multiple products on the product and service side to effectively meet customer needs and maximize company profits. Therefore, one important issue companies face is: how to manage the product portfolio. So, what is a product portfolio? The products a company decides to produce or sell should be based on customer needs. The number of different customer needs determines the number of different products. As a product's market share increases and the category matures, the customer base it serves becomes broader. For example, BMW initially had only the 3 Series, but now it ranges from the top-of-the-line 7 Series to the 5, 6, 4, 2, and 1 Series, and later introduced sub-models like the i3, i8, and i6. In other words, a single product line evolves into multiple product lines, each with multiple sub-models, and each sub-model has different styles, colors, and engine displacements. This structure is what we call a product portfolio. The formation of a product portfolio is a process where a company uses a portfolio to cover all the market segments it wants to target, in order to meet increasingly segmented customer needs. We can understand the evolution of a product portfolio as a response to changes in consumer market segmentation and purchasing preferences. -02- Product Map When making product decisions, companies face a wide variety of products and market segments, while also considering factors such as product line width, length, and consistency. Therefore, companies need to solve the problem of how to choose their products clearly and accurately in a complex situation, so as to compete with competitors and meet customer needs appropriately. The product map is an effective auxiliary tool for product decisions. It is simple to operate: based on the main characteristics of products in the market and product categories, place your own and competitors' product lines on the same map, and then divide them into different small spaces according to the product portfolio (see Figure 9-1). Figure 9-1 From customer value propositions to forming a product map According to the function and value positioning of products, companies can divide their product portfolio into the following four categories. Basic products: The most important core products in the portfolio. For example, every cosmetics company has a main product that covers the basic functions needed by its core customers, is affordable, and is acceptable to the public. Value-added products: These products usually come with additional services related to product functions. For example, Starbucks not only provides basic coffee beverage services but also offers value-added services such as office work, meetings, and music appreciation, making it a third space for learning, working, and living. These products better leverage the core functions of the product by providing value-added services, allowing customers to use the product at lower cost and higher efficiency, while lowering the barrier to use and expanding the customer base. Therefore, value-added products often bring new value and new revenue sources to the company. Enhanced products: Compared to value-added products, enhanced products do not provide much additional value but rather amplify and upgrade the core functions of the basic product. For example, a certain cosmetic has basic sun protection with an SPF of 15, but in some special environments, consumers may need a product with SPF 50 or higher. Extended products: These products are not directly related to the company's core products but are closely related to the brand, customers, and customer relationship cultivation. For example, Caterpillar's basic product is excavators, value-added products are remanufacturing, finance, leasing finance, and value-added services, enhanced products are high-horsepower excavators for ice construction, and extended products are Caterpillar boots, clubs, protective clothing, and outdoor apparel. An important decision in product management is determining the role a product plays in competition. Let's assume an airplane-shaped product portfolio (see Figure 9-2): the nose is the head product, the wings are the wing products, the fuselage is the fuselage product, and the tail is the tail product. Figure 9-2 Airplane-shaped product portfolio Head products are often the highest-priced, most powerful, and highest-end brand image products in the portfolio. Their main mission is to define and represent the company's brand image and set an overall positioning for the price, usage scenarios, and appeals of the company's overall brand products. For example, iPhone Pro, Huawei Mate 30, Samsung S20 Ultra, and BMW i8 are typical head products. Their production capacity and sales volume are not large, but consumers may learn about the series through these products. Fuselage products, or main products, are the main source of sales and profits for the company. Similar to the core and basic products mentioned earlier, they meet the needs of the most important customers in the market. For example, for BMW, the 3 Series is its fuselage product. Wing products are developed to respond to competition and play a protective role. For example, when a company launches its main product, it may face the problem of competitors launching low-priced products at the same time, which could collapse the price system of the main product. At this point, the company can launch low-priced products to counter or contain competitors, or launch special-feature products to handle special occasions and events. Therefore, wings are used for competition, containment, or to occupy shelf space of distributors and customers, and companies can place multiple types of products in this space, giving them flexibility. Tail products are the company's reserve products, developed as a reserve for next-generation products. They are more of a role-playing product. Companies have products that play different roles: some lead the brand, some generate profits, some respond to competition, some counter low prices, some occupy distributor shelf space, and so on, forming a product portfolio. -03- Cut off the ineffective stuff Diverse consumer needs require companies to launch diverse products. However, in product portfolio management, companies easily fall into a trap: having too many product brands. For example, Unilever had as many as 9,000 brands at its peak, and each brand had different products. But among these 9,000 brands, fewer than 80 contributed 90% of profits. At this point, the wisest decision is to cut off the ineffective stuff. This creates an interesting phenomenon: during rapid market growth, brand managers and marketing directors apply for many resources, launch new brands frantically, and try to have products in every market segment, unwilling to miss any opportunity to fill the product map. This leads to a brand explosion and product line explosion when the economy is good. This is why Unilever had 9,000 brands, and why General Motors and Ford had hundreds of brands. However, when the economy declines, market growth stagnates, or consumer demand stalls, companies need to do more subtraction. Reduce the number of brands and focus limited resources on a few important product brands. Coca-Cola's category and brand management is classic. In the carbonated beverage market, Coca-Cola's main product has always been the red can Coca-Cola. Despite the test of time, it has never blindly followed diversification. Due to this good category management, its loyal customers have grown, and its brand equity has steadily increased. Excessive product diversification dilutes and weakens consumers' perception of the main brand. Therefore, Coca-Cola's brand design is wise and cautious, with the red can packaging as the core and classic, and core values such as family and happiness are closely integrated into its main products, effectively and cautiously extending its product line. For example, it developed the low-calorie market by launching low-sugar Coke series; for the emerging non-carbonated beverage market, it launched juice series, mixed juice series, and water series. Tips will be paid 400-2000 yuan once adopted.