Brand Rationalization Strategy: Nestle USA

1. BRAND RATIONALIZATION STRATEGY
Nestle USA
SUBMITTED BY: ANJALI AGRAWAL

2. 2
TABLE OF CONTENTS
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3
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PROBLEM
STATEMENT
BROAD
APPROACH
KEY
CONSIDERATIONS
DETAILED
APPROACH
NESTLE USA
BRAND PORTFOLIO
OVERALL
STRATEGY
RECOMMENDATIOS
ASSUMPTIONS &
REFERENCES

3. PROBLEM STATEMENT
Our client Nestle is a global consumer packaged goods (CPG) company co-headquartered in Vevey,
Switzerland. Its products include food, beverages, cleaning agents and personal care products. One of the
oldest multinational companies, its products are available in around 180+ countries. For this case, we’re
focusing on only Nestle’s US business.
Nestle USA owns over 2000 brands. Recently, it is looking to shed half of its brands in an effort to boost
growth, simplify its operations, be more nimble, and cut costs.
How would you decide which brands to eliminate in order for Nestle to reach its growth targets?
What are the additional considerations that the client should be aware of?
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4. 4
BROAD APPROACH
BRAND AUDIT
Qualitative analysis of all
brands in terms of market
share, contribution to profit
and sales
MAP CUSTOMER’S
NEED STATES
Customer centric analysis
by segmenting markets
based on consumer needs
BRAND POTENTIAL
Quantitative analysis of
brands using GE McKinsey
matrix and evaluation on
parameters of scale, power,
growth potential
CONSOLIDATE
Consolidation of results from
three previous steps providing
a multi–dimensional view of
complete portfolio and
deciding which brands to
shed
LIQUIDATE BRAND
After identifying all the
brands to shed, decide
which brands to merge,
sell, milk, or kill
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5. KEY CONSIDERATIONS
FOCUS ON BIGGER PICTURE: First priority should be to get managers at all levels to see the bigger picture.
Brand managers, whose careers are wrapped up in their brands, never take easily to the idea of shedding their brands.
At times, there can be pressure from top level to retain brands for sentimental or historical reasons. So, brand
rationalization programs have often become so bogged down by politics and turf battles that companies are paralyzed by
the mere prospect.
BRAND LEVEL PROFITABILITY DATA: In order to carry out the quantitative analysis, the availability of brand
level profitability becomes very critical. In order to calculate profitability, fixed and shared costs must be assigned to each
brand. At times, it becomes a complicated task resulting in long and bitter debates among managers.
ORGANIZATIONAL STRUCTURE: Companies must also make organizational changes to adapt brand portfolios
quickly to shifting trends, competitive responses, mergers, and new-product launches. A central authority i.e. role of
Portfolio Manager becomes crucial as to ensure every brands is fulfilling its part in the portfolio strategy without
handcuffing the individual brand managers.
WAY OF LIQUIDATING A BRAND: Every brand to be liquidated should be properly disposed so as to ensure they
do not return as rivals. The liquidation plan should be documented and distributed throughout the organisation to prevent
confusion about the future of any brand. Companies must prepare for the organizational consequences i.e. the future of
the brand managers whose brands are being liquidated. 5
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6. 6
DETAILED APPROACH (1/3)
BRAND AUDIT: First step in brand rationalization process requires senior marketing executives and brand managers to prepare a brand
audit sheet for last financial year. This is a quantitative analysis providing a bigger picture in terms of overall brand portfolio and
comparative performance of all brands. To complete this step, the availability of brand level data becomes imperative. This sheet makes
the need to prune brands apparent and serve as a springboard to the next step.
Brand Market share % of sales % of profits
Brand Position (low, mid, premium segment) Market Position (Dominant, Strong, Weak, Not Present)
Region 1 Region 2 Region 3 Region 4 Region 5 Region 1 Region 2 Region 3 Region 4 Region 5
A
B
years and the future brand potential. This would require market research on upcoming trends and
how customer preferences will shift and the ability of brand to cater to these changes. It is a
qualitative analysis incorporating the GE McKinsey 9 box matrix (shown on the left). Here we
need to map all the brands into one of 9 categories on the basis of its potential and its competitive
position. Apart from identifying the brands to shed, this analysis will provide roadmap for devising
strategy for brands which will be continued. The 3 parameters on which brands are evaluated are:
BRAND POTENTIAL: Brand audit is a snapshot of previous year, we also need to take into account the growth of brand over past five
SCALE POWER GROWTH
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7. 7
DETAILED APPROACH (2/3)
MAP CUSTOMER’S NEED STATES: This step focuses on customer’s point of view which involves evaluating brands by scrutinizing
"need states” i.e. the intersection between what customers want and how they want it. It segments the customer on the basis of needs
and then evaluate the share of profits for each brand in a particular segment. It is a product category wise analysis of all brands in the
portfolio and also reveals attractive opportunities for brands to target. This map helps in making a final decision for critical brands by
providing a providing a customer centric view. This approach to segment
markets based on consumer needs rather than by price or
product features allows to both prune portfolios and take on rivals
more effectively. An illustration for processed foods category is
shown on the left.
CONSOLIDATE: Till now we have analyzed all brands three
ways: quantitatively, qualitatively and customer centric approach.
The most important characteristic of this analysis is - multi
dimensional approach. To proceed further, we need to decide
which brands we would shed by consolidating the results from
three previous steps.
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8. 8
DETAILED APPROACH (3/3)
LIQUIDATE BRAND: After deciding which brands to shed, the next step is to bucket brands on the basis of methodology of disposal.
MERGE SELL MILK KILL
Merge when brands occupy
niches that might grow in future.
To migrate customers from one to
other, advertising the change and
promotions is done. When two
brands are equally strong, more
gradual migration strategies are
adopted. Initially, use both
brands, either as a dual brand or
by making one a sub-brand of the
other for a while before dropping
the weaker of the two.
The brand that are profitable
but doesn’t fit in with corporate
strategy should be sold. In
such scenarios, the market
value of brand is greater than
the value the company places
on it, making it a good
candidate to put up for sale. It
is suggested to create legal
safeguards to ensure that the
sold brands do not return as
rivals.
The brands that are popular
with consumers and selling
them is not possible because
of either strategic or
sentimental reasons. The
company can milk the brands
by sacrificing sales growth for
profits and stop the marketing
and advertising. As sales slow
down, maximize profits from
these brands until they are
ready to be dropped entirely.
The brands for which we
have had trouble getting
shelf space and buyers can
be killed right away. To
retain the brand customers,
offer samples of other
brands or discounts. But it’s
crucial to retain the legal
rights to the deleted brand
names because dead
brands can return to haunt
as in the case of P&G.
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9. 9
NESTLE USA BRAND PORTFOLIO
5 BAKING
CHILLED & FROZEN HEALTH SCIENCE PET CARE WATER
COFFEE INT’L BRANDSICE CREAMBEVERAGES
 Nestle Toll House
 Libby’s Pumpkin
 Carnation
 La Lechera
 Abuelita
 Nesquik
 Milo
 Nido
 Abuelita
 Nestle Hot Cocoa
 Ovaltine
 Buitoni
 Lean Cuisine
 Freshly
 Sweet Earth Foods
 California Pizza Kitchen
 Hot Pockets
 Outsider’s Pizza
 Tombstone Pizza
 DiGiorno
 Jack’s Pizza
 Stouffer’s
 Wildscape
 Nescafe
 Coffee mate & natural bliss
 Nespresso
 Blue Bottle
 Nestle Starbucks Alliance
 Chameleon Cold Brew
 Haagen-Dazs
 Outshine
 Skinny Cow
 Dreyer’s
 Drumstick
 Nestle Ice Cream
 Acqua Panna
 Poland Spring
 Ice Mountain
 Deer Park
 Arrowhead
 Perrier
 Ozarka
 Sanpellecrino
 S.Pellecrino
 Zephyrhills
 Ready Refresh
 Maggi
 Carlos V
 Milo
 Abuelita
 Nido
 La Lechera
 Gerber
Nestle USA brand portfolio is catering to 9 product categories. Below is the list of major brands in each category:
 Alfamio
 Arginaid
 Benecalorie
 Boost
 Compat
 DiabetiShield
 Glytrol
 Nutren
 Replate
 Prometheus
 Impact
 Tolerex
 Vivonex
BABY FOOD
 Purina Pro Plan
 Purina Dog Chow
 Friskies
 Beneful
 Purina ONE
 Alpo
 Beggin
 Bella
 Just Right
 Honest to dog
 Frosty Paws
 Moist & Meaty
 Prime Bones
 Deli Cat
 Beyond
 Muse
 Tidy Cats
 Scamp

10. 10
OVERALL STRATEGY
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Qualitative Analysis:
Brand Potential
List of brands to shed
Focus on
bigger picture
Brand level data
Portfolio Manager
& strategy
Organizational
consequences
POINTS TO REMEMBER

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RECOMMENDATIONS
7 In order to perform the quantitative analysis
as outlined in the strategy, data at brand
level is needed which is not available in
public domain. However, brands can be
mapped to GE McKinsey matrix and
customer’s needs state framework as per
the information available in public domain.
For more accurate results, brand
architecture document will be required.
Since, it is difficult to perform this analysis
on over 2000 brands in this short period of
time. So, I have prepared a sample
qualitative analysis (on the left) of 20
brands of Nestle USA.
This analysis is done by referring to
investor reports and news articles
PROTECT POSITION
Milo, Nescafe, Gerber
Nestle Waters
INVEST TO BUILD
Purina, Coffee mate
S.Pellecrino
BUILD SELECTIVELY
Atrium, Herta,
Sweet Earth
BUILD SELECTIVELY
FitKitchen, Lean cuisine
PROTECT
SELECTIVELY
DiGiorno, Pure Life
SELECTIVELY
HARVEST
PROTECT & REFOCUS MANAGE FOR
EARNINGS
DIVEST
Stouffer’s, Thomy,
Ice-cream, Skin Health,
Hot Pockets
BRANDPOTENTIAL
COMPETITIVE STRENGTH
low
low
medium
high
high
medium

12. ASSUMPTIONS & REFERENCES
THANK YOU 12
ASSUMPTIONS:
1. The organization has well maintained data warehouses to retrieve brand level sales, profits data and well defined brand architecture
2. The organization has processes in place to provide new roles for the teams of brands being shed ensuring a smooth transition
3. The organization will reinvest the funds and management time they have freed either into the surviving brands or into launching new
ones and taking over other brands which would avoid stagnation and keep the managers motivated
4. The organization has expertise in executing brand deletion strategy otherwise it may backfire and would not achieve stated objective
REFERENCES:
1. https://www.nestleusa.com/brands
2. https://www.nestle.com/sites/default/files/asset-library/documents/library/presentations/investors_events/investor-seminar-2019/water.pdf
3. https://www.nestle.com/sites/default/files/asset-library/documents/library/presentations/investors_events/investor-seminar-
2019/petcare.pdf
4. https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/annual_reports/2018-annual-review-en.pdf
5. Making brand portfolios work: McKinsey Quarterly
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