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The case discusses Nestle's brand management strategies in detail. Nestle's brand portfolio consisted of worldwide corporate strategic brands, strategic worldwide product brands, regional strategic brands and local brands. The case also explains how Nestle was successful in developing Kit Kat from a multilocal brand to a European brand and finally a global brand.
» Brand management strategies of a large consumer foods company with a global presence and a large portfolio of brands. "Nestle is a brand in its own right. For consumers, relevance of Nestle as a company comes first of all through contact with products that are branded Nestle. If we want to be perceived as the world's leading food company, we have to offer consumers an increasing amount of products that they can identify as Nestle's."
In mid-1988, Nestle SA (Nestle), the world's largest consumer packaged foods company based in Switzerland, acquired Rowntree Mackintosh PLC (Rowntree), in the largest ever acquisition deal of a British company during that time. Rowntree was the world's fourth largest manufacturer of chocolates and confectionery products, with well-known brands like Kit Kat, After Eight, Smarties and Rolo. The deal attracted considerable attention all over the world since several bids2 to acquire Rowntree were rejected. Rowntree claimed that the bids were too low for its valuable, well-recognized brands. In the end, Rowntree was acquired by Nestle for £2.5 billion, two and a half times the pre-bid price and eight times the net asset value of the company. This acquisition made Nestle the largest chocolate manufacturer in the world.
Analysts felt that Nestle had paid £2.5 billion because of Rowntree's brands, not its past financial performance. Industry observers wondered how Nestle would manage Rowntree's brands. Rowntree followed a "one product, one brand" policy. The brands were simply Kit Kat, After Eight, Smarties and Rolo, Rowntree was never mentioned. Moreover, Rowntree's brands were not strongly managed European brands. In fact, according to an analyst3, Kit Kat was one of the worst cases of an over-localized brand of a company across Europe.
In the mid-1860s, Henri Nestle (Henri), a merchant, chemist, and innovator experimented with various combinations of cow's milk, wheat flour and sugar. The resulting product was meant to be a source of infant nutrition for mothers who were unable to breast-feed their children. In 1867, his formula saved the life of a prematurely born infant. Later that year, production of the formula, named Farine Lactee Nestle, began in Vevey, and the Nestle Company was formed. Henri wanted to develop his own brands and decided to avoid the easier route of becoming a private label. He also wanted to make his company a global company. Within a few months of establishing his company, Henri began to sell his products in many European countries. In the initial years, Henri restructured the organization to facilitate research, improve product quality, and develop new products. In 1875, Daniel Peter, Henri's friend and neighbor, developed milk chocolate.
He soon became the world's leading chocolate maker. Later, his company was acquired by Nestle. In 1905, Nestle merged with Anglo-Swiss Condensed Milk Company, a manufacturer of milk-based infant food. During World War I, there was a huge demand for dairy products and Nestle capitalized on this opportunity by executing military contracts of various countries involved in the war. In 1938, after eight years of research, Nestle discovered a soluble powder that revolutionized coffee drinking around the world. The product was launched under the brand name Nescafe and became an instant success. The end of the World War II marked the beginning of a new phase of growth for Nestle. The company added many new products. In its effort to expand its operations further, Nestle merged or acquired several companies. In 1947, Nestle expanded into culinary
products by merging with Alimentana, a Swiss company that produced and sold Maggi soups, spices and other food products in many countries...
Nestle's Branding Strategy
The Nestle brand itself had played a key role in the company's globalization efforts. In 1996, about 40% of the total revenues were generated from products covered by the Nestle corporate brand. Nestle's logo was an important part of the company's corporate identity. The ‘nest' was a graphic translation of Henri Nestle's name, which meant "little nest."...
Internationalizing the "Kit Kat" Brand
When Nestle acquired Rowntree's brands in 1988, the major challenge before the company was managing them. Rowntree had a "one product, one brand" policy. The brands Kit Kat, After Eights, Smarties and Rolo were marketed with no mention of Rowntree. Rowntree's brands were not strongly managed European brands. Before the 1980s, ‘country managers' outside the UK in several European countries managed Rowntree's business. They were free to run their units provided business objectives were met. The orientation at Rowntree was short-term just to meet annual business objectives and country managers added nothing to the overall organization. Even though Kit Kat was a leading brand in UK, it was ignored outside the country. In the early 1980s, Rowntree established Rowntree Continental Europe, which handled business responsibilities outside the UK in Europe. However, this did not benefit Kit Kat, which was launched in Europe by Rowntree Continental Europe as a multi-local brand...
Divesting Non-Strategic Brands
The success of the Kit Kat brand inspired Nestle to think and act ‘globally' i.e. establishing global as well as local brand identity. Nestle had taken a similar approach to several other acquired sub-brands. Moreover, Nestle introduced the Kit Kat brand in several other countries across the globe. Nestle's brand management strategy included the divestment of non-strategic brands. In February 1999, Nestle negotiated the sale of its Findus brand of frozen food to EQT Scandinavia BV...
Case Study: Amitabh Bachchan - Repositioning a Tomorrow's Brand
Amitabh Bachchan, the brand manager of Brand AB is in a dilemma. He understands how important Brand AB is to the industry. He had told an interviewer, "With the change in the country and the economy and the boom in entertainment, I felt the need for a professional attitude towards the entertainment industry. I am no longer an individual but a corporate entity. They have invested money in me as a brand. They can recover the money through whatever the brand can do: act, sing, do a concert, endorse a product." The current situation is clearly showing that Brand AB has now divided itself into two images. Which of these images should ultimately lead to long-term sustenance and growth of the brand and, thus, helping in the growth of the industry? One of the images is that of a father figure, which is a reflection of his core brand value of a Saviour. Brand AB here is a guide of the people leading them towards the success, which he had achieved through lot of struggles. And people believe in this brand because they had seen him succeed starting from a humble background. So Brand AB symbolizes trust, esteem, respectfulness, and love for people all over India. This Brand AB has been built through years and has a rock solid foundation. This image of a father figure induces people to make him play roles he played in films like Khakee, Black, etc., or turn towards the Brand AB whenever there is a need to resurrect a bruised image, e.g., Cadbury after worm controversy, Dabur Chyawanprash to counter flat sales growth, etc. This image of Brand AB gets a boost when we speak of Amitabh Bachchan who has already got a Padma Shri award. People believe, love and respect this image of Brand AB. Another image of Brand AB, which is becoming prominent in the recent times, is that of a brand which is acceptable to young generation. The role in 'Kabhi Alvida Naa Kehna' or the advertisements in which he dances to the tunes of young generation portrays this image. Now this image of Brand AB may be used due to different reasons - it may be due to the threat it is feeling from other young brands, to make itself acceptable to young generation, to stay relevant in recent times. This is not the image of a father figure, guide to the people. This image makes the Brand AB an evergreen brand, where in spite of being aged, he is still young at heart; here Brand AB is more of a friend to the new generation. But this image being a stark contrast to the actual image of Brand AB, there can be a fear of diluting the core brand image or brand value - that of a guide of masses, a saviour. Importance of the Brand AB "Brand Amitabh worth millions of rupees" - this was the heading of a news when Amitabh Bachchan got ill and had an intestinal surgery on November 30, 2005 at Lilavati Hospital in Mumbai. In fact he was in the headlines of all papers and television news. One of the main reasons for this, besides his popularity, is that his illness had put the Bollywood film industry on a crisis. There is a huge commercial side of the Brand Amitabh - Bollywood was not able to have a sigh of relief till he was back in action, as a huge Rs. 270 crores was at stake. Brand Amitabh still sells like hot-cakes in the Bollywood film industry. Chandan Mitra, an eminent journalist and who also has been nominated to Rajya Sabha, has written an article on him with the title, "The Only Real Indian Idol". In 2005, he delivered one super hit (Bunty Aur Babli - Rs. 60 crores), two hits (Black - Rs. 38 crores and Sarkar - Rs. 40 crores) and two semi-hits (Waqt and Viruddh). Some of the other hits of Big B in 2005 have also done decent business in certain quarters. The worth of Brand Amitabh cannot be valued only in terms of money - in fact his popularity is considered more than any of the famous Khan brands like Shahrukh, Salman and Aamir. To analyze the Brand Amitabh, trade analyst Taran Adarsh has recalled the words of the late director Manmohan Desai: "Amitabh
Bachchan is like a Haley's Comet. A person like him comes once in 76 years. It is only he who can survive in spite of all odds." Rise of the Brand AB On October 11, 1942, the well-known poet Harivansh Rai Bachchan and Teji Bachchan (a friend of late Prime Minister Indira Gandhi) were blessed with a baby boy whom they called Amitabh. He completed his school education from Uttar Pradesh - Sherwood College, Nainital. Then he earned an arts degree from Delhi University. He began his professional career as a middle-level executive with a British firm in the east Indian city of Kolkata. But he had acting dreams and moved to Mumbai in 1968. Just like any other newcomer to Indian cinema, he made the rounds of film producer's offices asking for his first role or break. He made his debut in 1969 with the film 'Saat Hindustani'. The film failed at the box office. The fate was the same for his next few movies like 'Parwaana (1971)', 'Reshma Aur Shera (1971)', 'Bansi Birju (1972)', 'Sanjog (1972)', 'Namak Haram (1973)', 'Saudagar (1973)', etc. But there was a small group of people who noticed his potential and became unofficial brand managers of Brand Amitabh - which included legendary Indian film makers like Prakash Mehra, Ramesh Sippy, Manmohan Desai and Yash Chopra, and the screenplay writing duo Salim-Javed. In fact his first big hit came in 1973 with Prakash Mehra-directed 'Zanjeer', written by Salim-Javed. His tall and dark looks gave a new kind of action hero to the people. As it is said, a brand can become popular only when it has contextual relevance. And the image of "Angry Young Man" fighting against a corrupt society fitted exactly with the social and political situation prevalent in the 70s. "This was appropriate at that time, for in the mid-seventies domestic politics was in a period of great turmoil, student unrest was high and the employment prospects for educated young men were bleak at best," as said by Intikhab Virani, Senior Editor at the Indian film trade publication Box Office Today. People could connect to that brand as it was a hopeless era. Values of the Brand AB Brand AB represented a person who has been ill-treated / wronged by the social system and fighting against the system to get justice. In fact a look at all the hit movies of AB would show the same brand image. In the film 'Deewar (1975)', his character turns a Mafia don and smuggler due to injustice done to him in his childhood. In the films 'Trishul (1978)' and 'Laawaris (1981)' his characters were abandoned by his father. In the film 'Shakti (1982)', his character is that of a son of a strict police-officer who does not come to save his kidnapped son. So the brand managers of AB, as mentioned above, used this theme of neglected by society and fighting against it to churn out more hits like 'Sholay', 'Do Anjaane', 'Don', and 'Naseeb', etc. So when we talk of this Brand AB, the core value based on which the brand was created and became successful was that of a "Saviour" - he was a saviour of the neglected masses, by making them fulfilling their aspirations of fighting against a corrupt society. The other values of the brand - toughness, determination, trustworthiness - were all in the outer crust of the brand. Even when we speak of a human brand, the concept of A-R-C (Autonomy, Relatedness and Competence) explains it perfectly. A brand is popular when it applies to human motivation and that's what A-R-C theory explains. Autonomy refers to a person's need to feel that his or her activities are self-chosen. Associated with the fulfillment of this need is a person's perception that he or she is free from any pressure and is able to express him or herself as he or she wishes. Brand AB had that image of selfdetermination - for the first time it gave the people a sense of freedom to make own choices and to protest against being oppressed by the society, express their frustration against the corrupt
society without being pressurized. Relatedness refers to a person's need to feel a sense of closeness with others - and people felt close to the sufferings of the Brand AB, the image of being neglected by the society as they themselves were suffering from the same situation. Competence is about the feelings of effectiveness and achievement in his or her activities. People loved the success and achievement of Brand AB characters while fighting against the corruption. They also wanted to do that and loved to see Brand AB doing the same on-screen. Fall of the Brand AB As is the case of product brands, a human brand should also re-invent with time in order to stay relevant with the changing social and political context, changing mindset of the people. When we talk of photo-copying today, we say Xerox instead of photo-copy. Similarly, Brand AB became so large that film-makers still made the films with that particular brand image of Angry Young Man, instead of re-positioning the brand. Main problem was social outlook of 80s had changed from that of gloom to brightness; it had become an era of achievement and achievers. This was due to the rise of a young Prime Minister Rajiv Gandhi - it was an era of hope, life was more organized, there was an all round development in the society. The image of Brand AB as a person fighting against a corrupt society for social justice was totally out of context. Then being a close friend of Rajiv Gandhi, he joined politics. Because of his huge popularity, he won easily from ancestral hometown of Allahabad in 1984. But in politics, he could not get the guidance of any brand managers, as in case of his film career. He left politics because of controversies; particularly after Rajiv and he were implicated in the infamous "Bofors" case along with the U.K. based Hinduja Brothers. Also the core value of Brand AB - a 'Saviour' of people - got damaged in the process, as he could not be the same saviour of people in real life; on the other hand, his own image got corrupted with 'Bofors' controversy. Instead of fighting against corruption, the Brand AB itself became part of the corruption. Another unsuccessful move was to institutionalize himself with Amitabh Bachchan Corporation Limited (ABCL), hoping to extend the brand over wider areas. But this effort also failed because it again tried to encash the old image of Brand AB instead of adding some new value to the brand. It hosted the Miss World Pageant, in Bangalore, the first of its kind ever in the history of India. The company then came under debt running into crores of rupees. Some analysts reckon that ABCL lost over Rs. 7 crores (Rs. 70 million) in organizing the ill-fated Miss World pageant. ABCL also produced movies like Mani Ratnam's 'Bombay' and Shekhar Kapoor's 'Bandit Queen'. But most of the movies produced under the ABCL banner bombed at the box office. Even his return to commercial cinema, with films like 'Mrityudata (1997)', 'Lal Badshah (1999)' and 'Major Saab (1998)' flopped miserably. One off movie like 'Bade Miyan Chhote Miyan (1998)' was hit mainly because of the presence of younger co-star like Govinda. Re-positioning the Brand AB - Rise Again The Brand AB was recycled with the Indian version of the television show 'Who Wants to Be a Millionaire' called "Kaun Banega Crorepati (KBC)". The show presented the same Brand AB by re-positioning it. The core value of the brand was still the same - he was a 'Saviour', previously he was the saviour of the neglected masses; now he became saviour of people, helping them to achieve and win money. The era of achievers cashed in with 'Achiever' attribute of the Brand AB. Brand AB is an achiever brand in itself - he has achieved fame and has become a superstar, starting from a mere struggler in the film industry. In KBC, he became a guide to the people who wanted to be achievers in life by winning money.
KBC presented AB in classy suits and elegant ties or in traditional Indian attires. He carried both personalities majestically in the show. He spoke brilliantly in both Hindi and English. One of the reasons for this successful repositioning of the brand is Amitabh Bachchan's mass appeal in the role as a classy host. His personality, acting sense, bilingual efficiency (English and Hindi), and magnificent voice gave the audiences a brilliant TV host. During its peak time, the Brand AB was differentiated as relevant to the social, economic and political context. When it lost out on this advantage, the film-makers' hesitance to depart from the proven formula damaged the brand. KBC repositioned the Brand AB from the angry young man fighting against corrupt society, to that of an achiever who, having journeyed from being an unknown common individual to most popular film star of Indian society, is willing to guide people along the path of achievement. Film-makers' responded to this repositioned Brand AB with films like 'Kabhi Khushi Kabhie Gham (2001)', 'Mohabbatein (2000)', 'Khakee (2004)', 'Black (2005)', etc. Current Scenario - Threats There are certain changes in today's society and cinema audiences. First of all, when we talk of Hindi film market of today, there is a substantial rise of the NRI market. Also there is a huge growth of multiplex audiences, as the number of multiplexes in India is growing in an exponential manner. Also the audience is younger. When we talk of the social context, it is the age of young achievers. Especially due to the growth of software business, more and more young people are becoming successful and rich at a younger age. These young achievers are also relaxed and funloving in nature. So the brand of Indian film heroes which is becoming more and more popular today is the Brand Rahul of 'Kuch Kuch Hota Hai (1998)', or the Brand Nicki of 'Salaam Namaste (2005)' - young, fun-loving, relaxed achievers. There are new age heroes who fit this brand image - Sharukh Khan, Hrithik Roshan, Saif Ali Khan. They can connect to the young audiences more spontaneously. All these factors can be a threat to the Brand AB. Change Efforts & Conflicts of the Brand AB Now the Brand AB is again trying to change, as it is trying to connect to younger audience. First hint of this change came with the change in packaging of Brand AB in KBC-2. Amitabh Bachchan appeared in leather jackets and open-necked shirts in KBC-2; spoke Hinglish, the language of the modern generation. Even the advertisements in which he appears tries to showcase the younger side of the brand or the brands endorsed are having a young image in itself. The "Pappu Pass Ho Gaya" ad of Cadbury, the other brands he endorsed like Pepsi, ICICI or Hajmola, etc., point to this direction only. Also the character played by the Brand AB in the film 'Kabhi Alvida Naa Kehna (2006)' - "Sexy Sam" is a colorful but old flamboyant character young at heart; who has aged in years but behaves like a young teenager flirting with the females. But while the Brand AB is trying to again reposition or re-reposition itself, there are certain conflicts, which are becoming prominent. First of all, KBC-2 was not as successful as its first part. Questions are being raised whether there is necessity to go for this change. The brand endorsements of AB are also conflicting - on one side the Brand AB is trying to associate itself with younger brands; on the other hand certain brands like Parker Pens, Reid & Taylor, etc., that he endorses are more related and matching to the actual brand image of Brand AB - that of esteem, trust due to success over a number of years, one who is above the masses. Also this was the reason the Brand AB was used for the polio endorsement of Government of India. The question also being raised is whether today's multiplex audiences go to see movies like Kabhi Khushi Kabhie Gham, Mohabbatein, and Kabhi Alvida Naa Kehna, etc., for Brand AB or
watch young actors like Shahrukh, Hrithik, Abhishek, etc. Also another point with the Brand AB is the over-use of the brand, just like over-cooking a food - this may lead to the loss in the mystique of Brand AB. However, AB justified his huge amount of working to the reason of paying back his debt. He said in an interview, "There was a sword hanging on my head all the time. I spent many sleepless nights. One day, I got up early in the morning and went directly to Yash Chopraji and told him that I was bankrupt. I had no films. My house and a small property in New Delhi were attached. Yashji listened coolly, and then offered me a role in his film 'Mohabattein', after he relaunched ABCL as AB Corp on his 61st birthday in 2003. "I then started doing commercials, television and films. And I am happy to say today that I have repaid my entire debt of Rs. 90 crores (Rs. 900 million) and am starting afresh," he added. But still today, after paying back all his debts, Brand AB is doing the highest number of films and advertisements - the question is whether this is being done in order to stay relevant to the target audience, and if it is to see whether it will work? So all these discussions lead us to the two brand images of AB, which was mentioned at the start. Questions that can be discussed based on this case: After
successfully repositioning the Brand AB once, is there any need to change itself again to the current young image; or the brand image established over the years of evolution is enough to sustain Brand AB in the years to come?
The recent efforts to change the Brand AB - is it a rebranding effort or a re-repositioning effort?
Is there any possibility of dilution of the core brand value due to the change efforts and the conflicts shown in the image of Brand AB as well as over-use of the brand? Discuss where in the BCG matrix Brand AB was and currently where it is, what can be the future position of the brand in the matrix?
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