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Second, companies are using new brands and new products to drive
growth across a range of increasingly mature sectors. The rush to
capture the latest trend often leads to an abundance of brands,
witness GM’s 15 entries in the SUV category.
McKinsey on Marketing 1
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18
Pharmaceutical 78
32
76
15
White goods 60
Manage more 24
than 100
brands
40 25
Beverage
50
Company average is 5
240 brands managed Travel/leisure 60
8
Source: IRI InfoScan Reviews data; J.D. Power and Associates; Evaluate; McKinsey analysis
McKinsey on Marketing 2
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McKinsey on Marketing 3
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Number of brands*
READY-TO-EAT CEREAL CATEGORY
Number of brands
increased by 25
in a declining
category
129
104 18 Per-brand
Number market share
Other 11
of brands Percent
Quaker 17 24 1997 2001 1997 2001
9 8 2.8 3.1
Kraft 17
* Brands with less than 0.5% national market share are not included
Source: IRI InfoScan Reviews data; company Web sites; McKinsey analysis
McKinsey on Marketing 4
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A Portfolio Prescription
With a more crowded playing field and less efficient underlying
economics, manufacturers may find themselves hard-pressed to
resolve these brand-related issues. Companies cannot stop launching
or acquiring new brands, nor should they casually lop off a
significant portion of their portfolio. But they can become smarter
about managing their portfolios – as opposed to individual brands –
in a way that can affect top- and bottom-line growth.
McKinsey on Marketing 5
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BOATING EXAMPLE
6 Leverage
Luxury
1 into new
categories
Reposition brands to
Brand avoid cannibalization Brand
A Divest A
4
Premium
C B
Brand D 2
Mid-price
Extend
Brand into new New Brand D
segments Brand
B
F
3
Brand E Brand E
Consolidate overlapping
Value
brands
Launch or acquire
5 a new brand
Relax/ Family Sports- Perfor- Relax/ Family Sports- Perfor- Relax/ Family Sports- Perfor-
reward first men mance reward first men mance reward first men mance
enthusiast enthusiast enthusiast
McKinsey on Marketing 6
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Does a consumer say, “I want to chew gum?” or does she say, “I want
to freshen my breath?” The former is a narrow view of the category;
the latter recognizes the consumer’s real need, which provides a clearer
view into the interactions of various brands (e.g., chewing gum versus
mints versus breath strips). The categories in which you compete
should include product “substitutes” that offer the same relative
benefits to the consumer.
McKinsey on Marketing 7
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This broader view of the portfolio has the added benefit of helping
you identify new opportunities as well as potential competitive
threats. By looking beyond the “usual suspects,” you can identify –
and attack – opportunities by leveraging existing brands in new
categories or by developing new brands to capture unmet customer
needs.
McKinsey on Marketing 8
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McKinsey on Marketing 9
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McKinsey on Marketing 10
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FOOD EXAMPLE
Prioritizing portfolio moves Portfolio transformation plan
3-year plan
Year 3
100 Year 2
Leveraging Year 1
brand into
Incremental NPV, $ Millions
Brand
new category priorities
Potential value creation
McKinsey on Marketing 11
Overview