The Powerful House of Brands Strategy

The Powerful House of Brands Strategy

Picture yourself in a grocery shop pushing around a shopping cart full of all the good stuff. You pick up a Dairy Milk chocolate bar, a few Pringles crisps containers, some Lurpak butter pats and Tropicana orange juice. It seems like an ordinary enough shop, right?

But did you know that every single one of those products belongs to the same parent company? That’s the brilliance of the “house of brands” strategy.

A house of brands is a corporation with multiple individual brand names under its operation and ownership rather than just one unified corporate brand. Each brand will have its unique identity, personality, product line(s), marketing initiatives, and target audience(s).

Otherwise known as Unilever or Procter & Gamble – giant conglomerates that have their name on everything they sell; whereas with this model (house-of-brands), the company remains largely invisible while its stablemates take centre stage.

So, who is behind those famous snacks and spreads I mentioned earlier? It’s Mondelēz International which employs strong house-of-brands tactics here.

The World's Preeminent Snacking Powerhouse

Kraft Foods Inc., or Mondelēz, a snacks company, might be unfamiliar to you by name. This brand is known for its brands, which were divided into two separate businesses in 2012: Mondelēz International and Kraft Foods Group.

The latter became the “preeminent snacking company” in the world – companies that are part of its portfolio include:

• Cadbury (a British chocolate maker established in 1824)
• Milka (a Swiss chocolate Alpine brand)
• Oreo (the best-selling cookie globally)
• belVita (breakfast biscuits and bars rich in nutrition)
• Trident (worldwide leader in chewing gum sales volume)

They have over 50 snack brands in over 150 countries, earning $26 billion annually.

In other words, through its various brands under one corporate umbrella, Mondelez represents an excellent example of how powerful a successful implementation of such a strategy can be concerning brand architecture. By doing so, they can still recognise each heritage background, history identity, customer base, etc., while streamlining operations behind one joint organisation.

The Advantages of a House of Brands

So why do businesses choose a house of brands strategy instead of a single brand? Well, this is because:

1. Wider Audience Reach

If each brand is designed for a different segment, the parent company can reach more people and meet various needs. For example, Mondelēz alone produces chocolate bars for connoisseurs, snacks for health-conscious individuals, affordable food items for those on a budget, and treats for those seeking indulgence.

It is impossible to serve such an extensive market under one name without losing focus or confusing customers. A multi-brand approach allows customisation at the level of individual offerings.

2. Safeguards against Brand Disasters

Occasionally, some companies experience PR nightmares, product recalls or social media backlashes that taint their reputation in the public eye (think Ratners Jewellery disaster 1991). However, the corporation may suffer significantly if everything falls under a single brand.

However, with a house of brands concept, negative fallout can be contained primarily within affected brands, not adversely affecting other portfolio parts. After all, why would anyone stop buying Oreos just because Ritz Crackers had severe problems?

3. Encourages Creativity

It’s no secret that large enterprises are typically slow-moving beasts lacking agility in innovation or adapting to changing environments. This is where having multiple brands becomes extremely valuable.

Each team behind every individual brand can keep close tabs on its own market space, clientele base and product development roadmap, among other things, thereby allowing them to come up with new offerings quickly through different design iterations while responding to packaging materials ideas which are driven by latest trends without having to worry about being bogged down by slow-moving corporate machinery.

Indeed, not all innovators are giants, but at least Mondelēz’s vibrant approach towards creating an array of options does provide the necessary vehicle and framework for innovation within such organisations.

Building and Managing a House of Brands

Building a victorious house of brands may sound like a good idea, but executing it takes time. Several factors and considerations contribute to the success of this brand architecture:

Strategy for Acquiring Brands and Portfolio

Usually, a house of brands is developed through acquisitions rather than starting new ones from scratch.

Mondelēz created its massive portfolio by buying up large snacking companies and brands such as:

1. Nabisco (Oreo, Chips Ahoy, Ritz, Premium Saltines) in 2000
2. Cadbury (Dairy Milk, Crunchie, Bournville) in 2010
3. A part of United Biscuits (BN, Delacre) in 2014

This strategy involves merging with or acquiring other firms to gain customers, production facilities, and popular products quickly and build an extensive range of brands within a short time frame.

What matters most is how these brands are managed; each should be assessed frequently depending on its performance vis-à-vis other labels under the same house. Those who do not perform well should be dropped while continuing to invest more resources into nurturing those who stand out.

For instance, Mondelēz divested some less profitable lines, such as Pillsbury, Plasmon, and Velveeta, and almost all their low-end private label business to concentrate better on higher growth margin snacking businesses.

Brand Management And Organisational Structure

When dealing with many different types of products, it becomes imperative to have robust internal systems capable of efficiently managing them; otherwise, chaos will ensue. Therefore, strong organisation structures backed by appropriate operating models are needed, and brand managers should feel empowered enough to drive growth as healthy product strategies within their respective areas.

However, some level of corporate centralisation must also exist, which still allows for oversight alignment between units and shared assets/resources utilisation – too much independence leads to duplication, inefficiencies and disoriented teams. At the same time, a heavy-handed centralised approach kills agility by overwhelming local staff with bureaucracy, thereby stifling individual brands’ uniqueness.

Mondelēz operates using what can be described as a hybrid central/regional operating model; at the corporate headquarters level, overall brand strategy, product innovation priorities, marketing strategies, and financial management are set, but most tactical executions/implementations happen at the market team levels within geographic regions or even specific single brands groups which have deep understanding about consumers’ tastes needs wants in those particular places due to various cultural nuances thus this structure ensures global coherence without sacrificing local relevance.

Production And Supply Chain

Consolidating production facilities and supply chains is another operational efficiency that houses of brands seek to exploit.

Often, similar brands regarding ingredients used, manufacturing processes followed, and distribution channels employed can be batched together to share standard production lines/logistics networks – this enables optimal capacity utilisation by achieving economies of scale while driving down costs per unit produced.

For instance, Mondelēz runs less than 20 global production “nodes”, which make a huge variety of snack products; all these goods are then transported through shared supply chains across different markets where the company operates geographically.

At their plant in Curitiba, Brazil, Club Social crackers, Trident gum Halls cough drops, and Belvita breakfast biscuits are made under one roof before being distributed via the same network. In contrast, Skarbimierz Poland factory serves entire Eastern Europe chocolate bars, cookies, etcetera from almost all of its portfolio.

Indeed, iconicizing famous worldwide labels involves operational excellence, supply chain management skills, and effective marketing strategies.

Every brand in a company of brands requires its unique positioning, customer profiles, marketing strategies, packaging, advertising campaigns, etc.

Although Oreo biscuits and Cadbury chocolate bars are part of the same corporation, they represent entirely different brand personalities with divergent target markets and promotional approaches. Oreo builds on fun and playfulness meant for children and families. At the same time, Cadbury embraces itself as deeply rooted in history, thereby providing high-quality indulgence products that mainly target adults who aspire to such a lifestyle.

The head office sets the overall vision for the umbrella brand and marketing budgets and outlines more significant campaign concepts. However, execution is left up to individual brands’ teams or regional marketing units, which are best placed to adapt them according to specific localities within their territories, which may be driven by local cultures or even shifting global consumer needs patterns over time.

This combination of centralised strategy and decentralised implementation enables worldwide house-of-brand leaders like Mondelēz to operate at massive scales without losing touch with distinctive brand characters.

Real-World House of Brands Examples

If we want to understand this strategy better, we need to take a look at some real-world examples of modern houses of brands in different industries:

Procter & Gamble

Very few companies use the house of brands model across a wide range of products as P&G does with consumer packaged goods. In Cincinnati alone, this giant has over 65 individual brands, including supplies, personal care items, shaving cream, and baby diapers.

Some well-known names in P&G’s house are Tide detergent, Charmin toilet paper rolls, Gillette razors and Pantene shampoo bottles. Indeed, it is quite probable that several P&G products are sitting around your house without any indication on their packaging that would connect them back to one company.

Anheuser-Busch InBev

The biggest beer maker in the world has built up a massive portfolio of more than 500 beer brands through strategic acquisitions and a skilful house-of-brands strategy. While they do produce a few flagship corporate lagers like Budweiser and Corona, much of their attention is focused on creating separate personalities for brands such as:

• Beck’s (German premium lager)
• Stella Artois (Belgian pilsner)
• Hoegaarden (Belgian wheat beer)
• Leffe (Belgian abbey ale)
• Bud Light (American light lager)
• Michelob (American speciality lager)

By maintaining these brands as distinct entities and capitalising on their unique heritage/origins, AB InBev can divide the market and serve various consumer tastes/segments. Clever marketing campaigns like the Dilly Dilly medieval ads for Bud Light epitomise this brand-centric philosophy.

Yum! Brands

While maybe not a household name itself, the company Yum! Brands is the mastermind behind some of the world's biggest quick-service restaurant chains:

• KFC (The original chicken QSR giant)
• Taco Bell (Pioneer of Mexican-inspired fast food)
• Pizza Hut (Globally beloved pizza delivery brand)

Each brand is under the Yum! Umbrella operates as an entirely separate entity with its look, menu, target market, and brand identity. In essence, Yum! It owns multiple houses containing its distinct family of menu items, store concepts, and customer experiences.

The parent corporation provides centralised strategy, advertising, and oversight while empowering franchisees and brand leadership teams executing locally across 145+ countries. This model of an overarching house of brands has fueled massive global expansion for Yum! as a $49 billion corporate entity.

The Risks and Downsides

For all its potential advantages, the House of Brands model certainly isn't a silver bullet solution. There are valid critiques and risks that corporations need to manage carefully:

Complexity and Lack of Focus

Overseeing a massive portfolio of disparate brands is incredibly complex from an operational, marketing and management standpoint. It requires robust processes to avoid brands cannibalising each other or drifting into misalignment.

There's also the risk of losing strategic focus by being too thin across many brands, product lines, and customer segments. Companies can quickly lose their way without very disciplined portfolio management.

Disjointed Brand Architecture

Over time, a house of brand structure can feel like a messy, stitched-together jumble of incongruous brands if not carefully curated. This diffuse, centrifugal force makes cultivating a cohesive corporate brand identity, culture and ethos challenging.

Competitor corporations with more centralised branded houses may have more potent brand awareness and precise strategic positioning in the marketplace.

Alienating Potential Synergies

By vehemently keeping brands separate, you inherently make leveraging skills, production synergies, innovation and marketing efforts across brands more challenging. Potential complementary benefits and efficiencies are lost.

Corporations have to be pragmatic about when to mash brands together (like Nissan and Infiniti in the automotive world) versus keeping them strictly distinct.

Higher Marketing and Operational Spend

It costs more money to market, produce, and operate dozens of distinct brands than a more streamlined branded house approach. Some of those costs and redundancies can be offset through scale, but having so many cooks in the kitchen is inherently more expensive.

That higher overhead makes the house of brands model more suitable for massive, cash-rich corporations rather than leaner, scrappier brands or sectors.

The House of Brands' Future

Though some doubts are valid, the House of Brands architecture remains a compelling strategy used by leading companies in almost every industry today. Brand identity is everything in a world flooded with product choices and possibilities.

The House of Brands model is far from being out-of-date; it may become more common Brandsver before as we move into the future. Companies can stay nimble while simultaneously creating operational efficiencies and marketing power within one corporate entity.

Expect advanced brand portfolio management techniques and digital-first brand activation strategies to become standard practice across industries. They’ll aim to find the best to differentiate between various brands while retaining centralised core assets/capabilities.

Thus, when you open your pantry or fridge door next time only to find yourself staring at seemingly unrelated items — don’t be shocked! It’s another example of how houses of brands are behind the scenes, driving some giant multinational corporations silently.

FAQs on House of Brands Strategy