The larger the number of brands in a company’s portfolio, the greater the overlap of brands on consumer segments, positioning, price and distribution channels. Many brands in a portfolio end up competing against each other rather than against those of the competition. A larger brand portfolio also means lower sales volumes for individual brands as they are divided among the total market.
Brand extensions also tend to take up a lot of a company’s time and energy, as brand managers within the company jockey for ad dollars and other resources. For instance, Diageo sold 35 brands in 170 countries in 1999, but just eight of its brands accounted for 50 percent of its sales and 70 percent of its profits. Unilever had an astounding 1,600 brands in its portfolio in 1999, but more than 90 percent of its profits came from only 400 brands. The rest of the brands posted either losses or marginal profits.
Perhaps this is why some leading companies are choosing to forgo brand extensions for something more experiential — something Trend Watchers is calling "Branded Brands." As empowered consumers are increasingly demanding better products and services, and thereby disproving the notion of brand loyalty, brands are beginning to team up with each other to offer consumers a new type of brand that answers this demand.
It is now no longer surprising to see two, three or four separate brands combine their core competencies to launch a so-called “branded brand.” For instance, Jim Beam bourbon teamed up with Starbucks to launch Starbucks Coffee Liqueur. Philips Sonicare partnered with Crest to launch IntelliClean, a power toothbrush and liquid toothpaste dispensing system. Beer maker Heineken coupled itself to coffee-maker purveyor Krups to come up with the BeerTender, a professional-grade beer tap for the home. Over 1.4 million units of the BeerTender were sold in the Netherlands in less than a year, and now the BeerTender is available for Heineken-owned brands like Amstel and Stella Artois.
These examples are not exercises in brand extension. Rather, they are an indication that brand managers are becoming aware that the consumer is demanding a better experience with the brand, and by bringing different brands and their core competencies to the table, brands are able to enrich this experience.