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Unilever’s object lesson for owners of orphan brands

Posted on: January 16th, 2013 by Will Carter

Bloomberg journalist Matt Boyle just wrote an article on the fate of the Slimfast brand since its acquisition by Unilever over a decade ago ( http://www.bloomberg.com/news/2013-01-14/unilever-s-slim-fast-goes-from-juggernaut-to-afterthought.html ).

This set me thinking about why “orphan brands” cause so many problems for so many businesses, and why CEO’s are sometimes so slow to “put them up for adoption” by someone who will be more able and willing to reinvest some TLC behind them.

Let me say up front that I don’t really buy the lifecycle argument for food brands; steam engines and typewriters had lifecycles, but with very few exceptions, when food brands begin to die, it is simply because their owners have ceased to invest marketing and innovation effort behind them. Witness the reverse example of Lucozade, which most pundits had consigned to the scrapheap of history, until its extraordinary revival as a sports/leisure brand some 30 plus years ago.

Of course orphan food brands become thus neglected for the perfectly understandable and justifiable reason that they cease to be a priority for their owners.  Owners of successful brand portfolios – be they Unilever, Kraft/Mondelez or Nestle- rightly prioritise higher growth drivers, whilst less successful owners often struggle to find adequate monies to support their crown jewels, let alone their “tail” brands; either way, orphan brands are the result.

What is less understandable or justifiable is why they are allowed to stay as orphans if shareholder value could be better served by their disposal.  It’s one thing to let a tertiary brand die quietly if its revival under different ownership would represent direct competition to one’s core business, but often that is not the case.  Too often it is pride, or a fear of being perceived to have failed that makes businesses cling to the sea-anchor of these under-performing orphans long after they should have cut the cord.

Asset disposals need not be complex nor expensive to prosecute and they can prove valuable win-wins for buyers and sellers alike.  Indeed if it makes sense to leave manufacturing with the seller for a period of transitional or even longer-term co-manufacturing, the renewal of commercial focus by new ownership can not only generate disposal proceeds for the seller, but also generate increased volumes and overhead amortization through the supply chain.

All things considered, in today’s difficult trading environment there is much to be said for an active process to encourage the adoption of orphan brands whilst they still retain value!

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