Brand Failures

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here are numerous examples of Brand Extension Failures. They are:

1. Coke's launch of Black Cherry Vanilla Coke and Diet Black Cherry Vanilla Coke failure miserable

2. Pepsi's Cafechino looks like a disaster in India as very people have actually gone for it

3. Virgin: The company was able to stretch its considerable brand equities from the entertainment to the travel industry. Virgin Airlines is a success. But does anyone remember Virgin cola? Virgin vodka? Virgin jeans?

4. Ready-to-eat pizza from Amul, India

5. Dulux paints with a unique selling proposition of 7-day fragrance

6. GPI, impressed by the rising working women population and their increasing smoking habits, launched "Ms" cigarettes amidst much fanfare, exclusively for this segment. You know where Ms is today -- nowhere in the market! The company lost out heavily in ad and promotion expenses, not to count the lost (wo)man-hours. GPI did not bother to research the smoking habits of Indian women. Our women actually prefer popular men's brands!

7. Ponds Toothpaste had been a dismal failure.

Learning: The key to successful brand extensions: the determination that the proposed extensions are consistent with core brand values. Brand extension ideas should not emanate from management's point of view, but from the consumer's.

Why HLL's power brands failed

On 11th Feb 2005, FMCG major Hindustan Level Ltd, reported its fourth quarter and full year profits. The net profit for the fourth quarter fell to Rs 333.67 crore (Rs 3.33 billion) from Rs 494.72 crore (Rs 4.94 billion) last year.

The net profit for the full year fell to Rs 1,197.36 crore (Rs 11.97 billion) from Rs1771.79 (Rs 17.71 billion) last year.

The management has attributed the fall in profit to initiatives taken by the company to counter competitive moves in laundry and hair care segments, supply chain restructuring in the foods division and increased advertising and promotional spend.

This the management felt drove down profitability. In this article I will try and look at the reasons for the drop in the financial performance of HLL [ Get Quote ] in the last few years.

The Price Game

Sometime in the middle of March last year, Procter and Gamble decided to abandon its premium positioning strategy through which it extracted a price premium for what it thought was a superior product.

P&G decided to cut prices of Ariel and Tide, its detergent brands.Within two days, HLL followed suit and cut prices for Surf Excel. This sudden cut in prices shocked the industry.

P&G's decision to cut prices and HLL's decision to follow it, hit HLL's profit margins.

HLL's strategy over the years has constantly been to jack up margins. The management graduates who run the company probably forgot a basic lesson in economics.

When a company makes 'abnormal profits', new competitors enter the arena and drive away margins. Over the last few years, sales of HLL have stagnated and the company has been maintaining its margins through cost cuts.

Cost cuts can be taken only till a certain level, beyond, which the quality of the product starts to suffer. HLL may already have reached that level.

Several lower priced brands have started attacking HLL on the price front. The first among them was of course Nirma. 

Kanpur Trading Corporation's Ghadi detergent is the biggest brand in UP and adjoining markets. Ghadi is one of the fastest growing brands in the detergent sector.

Cavin Care in south India [ Images ] is also giving HLL a run for its money. AMUL has forced HLL to limit its presence to the bigger cities in the ice cream market. (Amul ice cream on the other hand is sold in more than 1000 towns and cities across India).

A big reason for the success of these brands has been their ability to build their presence through the regional television channels in a cost effective way.  A decade and a half back these brands could not think of advertising on television....
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