global branding chances and risks for a transnational company.pdf

Global BrandingChances and risks for a Transnational company

Roma, May 7th 2008

Mara PANAJIA

1. Who’s Henkel

2. Globalization: a road map on “Global Branding”

3. Two Examples

4. Conclusion

AGENDAAGENDA

A more than 130 years old, German “family owned”,

chemical company, making business in 125 Countries

with more than 50.000people employed and 10.000

products.

WhoWho’’ss

Henkel Headquarter Henkel Headquarter DDüüsseldorfsseldorf--HolthausenHolthausen

Henkel WorldwideHenkel Worldwide

• Sales 13,074 mill. euros • 125 countries• 52,300 employees

Fiscal 2007Fiscal 2007

Sales

13.1 bill. €Operating profit(EBIT)

1.3 bill. €

Organic sales growth

+ 5.8 %Net earnings

941 mill. €

Earnings per preferred share

+ 7.5 %

Return on capitalemployed (ROCE)

+ 15.4 %

OurOur VisionVision

Henkel is a leader with brands and technologies that make people's lives easier, better and more beautiful.

Three Areas of CompetenceThree Areas of Competence

Quality with Brands & Technologies

Laundry & Home Care

AdhesivesTechnologies

Cosmetics/Toiletries

1. Who’s Henkel


3. Two Examples

4. Conclusion

AGENDAAGENDA

GLOBALIZATION: GLOBALIZATION: necessarynecessary??

Technologies

Businessnecessity

Globalization

Business opportunity & economies of scale

Laundry & Home CareCosmetics/ToiletriesConsumer Adhesives

A A „„Road Road MapMap““ On Global BrandingOn Global Branding

ConflictingMarketing Targets

• Market Penetration• Economies of Scale

Market Penetration:Market Penetration:

Objective: Increase of sales and Market Share

How:maximizing penetration (reaching as many households as possible)maximizing loyalty (keeping as many households as possible) closing „white (regional / local) spots“

THE „OUTSIDE-IN“ VIEW (Consumer Orientation)Need for differentiation

EconomiesEconomies of of ScaleScale::

Objective: Profit increase

How:maximizing cost efficiency through integration (in design / advertising / brand / production/ ...... etc.)minimizing diversity (e.g. going for the smallest number of brands and SKUs as possible)Applying Euro learnings (knowledge transfer)

THE „INSIDE-OUT“ VIEW (Company Orientation)

Need for standardization


Basic Strategies of Euro-pean Marketing Operations

• Standardization• Differentiation



HowHow to to MakeMake thethe Right Right ChoiceChoice??

There is a perceived dilemma between standardization and differentiation - entailing different branding strategies.

In order to obtain further evidence in favor of one of thealternatives we look at:

» the CONSUMER» the TRADE» the COMPETITION

ConsumerConsumer::

Purchasing Habits– normal powder vs. compact powder– powder vs. liquid detergent– bleaches (Northern Europe vs. Southern Europe)– fabric softeners

Usage Habits– washing temperatures– washing machine equipment– fragrance preferences– per capita volume– dryer‘s penetration

Need for differentiation

NO EURO/GLOBAL CONSUMERS!

TheThe European Trade:European Trade:

Euro Accounts represent 50% of turnover

Top 10 trade between 50% (I) and 90% (F) of retail turnover

Acquisitions and fusions

Need for standardization

CompetitionCompetition::

Different importance of Private Labels in various European countries

In Western Europe: 5 competitors with more than 33 HDD brands

In no (!) European core country (i.e. UK, E, F, I, D) same top 3 competitors

Need for differentiation






ConflictingMarketing Factors

• Consumer• Trade• Competition

Branding Branding StrategiesStrategies::TheThe Big Big SoapersSoapers

• Globalmove towards a reduced portfolio of global brands with identicalfeatures to maximize efficiency (globally fixed strategy)Example: P&G / Lever

• Multinationalexploit existing local brand heritages to secure current marketpenetration (locally fixed strategy)Example: Benckiser

• Transnationalmaintain a balanced portfolio of global and local brands to exploiteconomies of scale while securing market penetration; migrate towardsa global portfolio (glocally adaptive strategy)Example: Henkel




Henkel Strategy• Euro-Model• Euro-Organization• Euro-Systems• Euro-Culture



ConflictingMarketing Factors

• Consumer• Trade• Competition

Branding StrategiesBranding Strategies

Standardization

Differentiation

Roll-out of concepts/speed

Low-cost-production

Lowcomplexity

Regionalmarket

penetration

Close toconsumer

FlexibleresponseGLOBAL

think

LOCALact

GLOCAL

TheThe Henkel Henkel StrategyStrategy::„„GlocallyGlocally AdaptiveAdaptive““

Grow existing global brands.

Maintain existing national brands - strive to globalizewhenever appropriate (adaptive).

Create economies of scale with existing brands bysuccessively harmonizing technical product features(adaptive).

Build new global brands.

1. Who’s Henkel


3. Two Examples

4. Conclusion

AGENDAAGENDA

1. Convergence Plan of Hand Dish Washing Category

2. Nelsen acquisition from P&G in Italy

TWO EXAMPLES:TWO EXAMPLES:

WhyWhy HDW HDW categorycategory::

Fully penetrated in all western countries (>90%);

Huge business dimension;

Despite of being a quite “simple” and “standardized”

product, consumer’s habits differ from country to country;

Battlefield for all international players (Henkel, Colgate, RB,

P&G, Unilever).

Henkel HDW-brands are to a great extend acquired brands

with different histories.

All brands have already a patrimony in degreasing, so it

has been chosen as common positioning for the brands.

Since this proved to be feasible, it is felt possible to

converge the different elements of the marketing mix to

achieve a more efficient steering of Henkel’s HDW category.

CONVERGENCE PLAN HENKEL HDW CONVERGENCE PLAN HENKEL HDW Background and general objectiveBackground and general objective

CONVERGENCE PLAN HENKEL HDW CONVERGENCE PLAN HENKEL HDW Ex ante portfolio situationEx ante portfolio situation

Harmonize as much as necessary, as less as possible.

“Avoid harmonization simply for pleasure to fulfill with crosses Excel sheets”

G. Archi – Henkel International Management Conference ‘03

CONVERGENCE PLAN HENKEL HDW CONVERGENCE PLAN HENKEL HDW PhilosophyPhilosophy

Alignment of the different European Brands towards one “Euro-Brand” on the base of the HDW Positioning System.

This has been done by:

taking from already existing country solutions (i.e. Vinegar)

development of new “Euro- solutions”

National brand names didn’t have to change!!!

CONVERGENCE PLAN HENKEL HDW CONVERGENCE PLAN HENKEL HDW StrategyStrategy

OLD NEW

CONVERGENCE PLAN HENKEL HDW CONVERGENCE PLAN HENKEL HDW European Core Variant PortfolioEuropean Core Variant Portfolio

Standardized Differentiated

Brand Name XSubname XConcept XPay off XPositioning XCommunication XProduct Texture (additional RW) XAesthetics

- bottle shape X - logo X - lettering X - caps X - background X - key visual X - colour of the product X

Formula - base X - perfume X - active ingredient content X

Format XAbsolute Price level X

Convergence of the differentnational brands into a

EURO-brand respectinglocalities.

CONVERGENCE PLAN HENKEL HDW CONVERGENCE PLAN HENKEL HDW Standardization Standardization vsvs DifferentiationDifferentiation

1 2 3 4 5 6

100

100

100 120 123 133162

111120

123130

109115

125139

145

146

146

NES

C1

C2

CONVERGENCE PLAN HENKEL HDW CONVERGENCE PLAN HENKEL HDW Financial Development HDW CategoryFinancial Development HDW Category

Source: internal figures – index 100 year 1

Launched by Melli family (local entrepeneur);

positioning: -> FAST & EASY CLEANING-> MILDNESS

1968

Acquired by Procter & Gamble

positioning: -> GREASE CUTTING POWER-> MILEAGE (value for money)

1989

NELSEN ACQUISITION IN ITALYNELSEN ACQUISITION IN ITALYNelsen history Nelsen history

10,9

6,2

0,0

2,0

4,0

6,0

8,0

10,0

12,0

'83 '84 '85 '86 '87 '88 '89

Nelsenbrand

Corevariant

Just one SKU, the Core variant. Value market share constantly declining.

NELSEN ACQUISITION IN ITALYNELSEN ACQUISITION IN ITALYMelliMelli Family Age Family Age

Source: Nielsen/IRI Audit

Top result in 1997, then decline for both Core and Perfumedvariants, while Concentrated disappear.

14,9

12,8

11,7

9,7

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00

Nelsen brand

Core variant

Perfumed

Antibacterial

Concentrated

NELSEN ACQUISITION IN ITALYNELSEN ACQUISITION IN ITALYP&G Age P&G Age

Source: Nielsen/IRI Audit

Market share poorly reactive to ADV investments-> limited potential for such a positioning?

4.058

457

3.101

1.9942.218

14,612,9

14,3 14,9 14,9

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

1995 1996 1997 1998 19990

2

4

6

8

10

12

14

16

18

Mediainvestments

Mkt. share

SOV 22%SOV 28%

SOV 42% SOV 49%

SOV 6%

NELSEN ACQUISITION IN ITALYNELSEN ACQUISITION IN ITALYP&G ADV Investments P&G ADV Investments

Source: Nielsen NASA/IRI Audit

Why P&G sold Nelsen Why Henkel bought Nelsen

Focus on global brands(DAWN for hand dish).

Focus on concentratedproducts (whilst Italianmarket is 96% diluted).

No alignement to Euro-pean price harmonization.

LACK OF STRATEGIC FIT

To reach 2nd positionin the Italian market andreinforce leadership in Europe

Henkel’s competence inboth diluted and concentrated

products.

STRATEGIC FIT!

NELSEN ACQUISITION IN ITALYNELSEN ACQUISITION IN ITALYStrategic IssuesStrategic Issues

Manage two brands in the market (Nelsen and Dixan Piatti).

Increase the brand profitability at Henkel’s standards.

Reach a continous and profitable growth for the HDW business in Italy, using Henkel know how.

NELSEN ACQUISITION IN ITALYNELSEN ACQUISITION IN ITALYChallenges for Henkel Challenges for Henkel

Superior aesthetics (new perfumes, PET bottles, labels)

Superior performance (SAS vs LAS)

New size 1250 ML

Positioning: superior degreasing + easy dry

Innovation: Active Coal, Fruit Acid

NELSEN ACQUISITION IN ITALYNELSEN ACQUISITION IN ITALYThe new Marketing MixThe new Marketing Mix

12,8

14,9

14,614,9

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

P&GSource: IRI Audit Tot.Italy w/o Discounts

NELSEN ACQUISITION IN NELSEN ACQUISITION IN ITALYITALYM/S DevelopmentM/S Development

20,4

19,919,1

17,6

15,8

12,813,5

14,914,6

14,9

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

P&GSource: IRI Audit Tot.Italy w/o Discounts

Henkel

NELSEN ACQUISITION IN NELSEN ACQUISITION IN ITALYITALYM/S DevelopmentM/S Development

1. Who’s Henkel


3. Two Examples

4. Conclusion

AGENDAAGENDA

TAKETAKE--AWAYAWAY

There is not a single answer to the dilemma between standardization and

differentiation. Standardization has to be an opportunity, not the objective!

When dealing with standardization of existing mixes, never change more

parameters than absolutely necessary at the same time a brand is much

more than the sum of its elements, so it has to be managed very carefully

Do not preclude local possibilities in the name of standardization and

harmonization (see Nelsen case)

In FMCG markets we are still very far from a global consumer: local

identities are still predominant and in same cases stronger and stronger!

Thank you!

global branding chances and risks for a transnational company.pdf

Education

iri audit

pean marketing

road road

market penetration

consumer trade

market penetration

road map

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