WASHINGTON DC — For just about any CPG baking company, the brand is everything. How a company builds, develops and maintains that brand is critical to the course of its business.
During an Emerge CPG webinar, Fred Richards, founder of The Hive Principle, outlined the key components of brand architecture and how those components can successfully build off one another.
By “architecture,” a company should consider how a brand is built, how it functions and what it stands for. According to Richards, building an architecture for a brand is the most practical way to manage the perception of a business, its growth potential and the relationships that exist within the business itself.
“You should be able to understand, on a page, who owns what — and why — and what the relationship is to each product offerings,” Richards said. “It’s as basic as that.”
While the concept may be simple, there are a host of factors to consider for ensuring a company — especially a commercial bakery producing a multitude of SKUs — designs an architecture that perfectly suits its brands. And with a host of architecture styles to choose from, the process to achieve the right one can have several layers to it.
“Understanding, visualizing and explaining your brand architecture can actually help you manage your portfolio more effectively,” he said. “It helps you document who you are, why you’re right — and your offerings are right — for your consumer and how your marketing design strategy will play out across the portfolio.”
This is especially important for companies who are selling products into multiple categories. In that respect, a clear brand identity is critical for creating perceived value across those categories.
“If you’re an early-stage CPG brand, and you have six SKUs, you want to be able to solve for those six SKUs while keeping an eye on your product development where even more products might be in the pipeline,” said Julie Pryor, Emerge Network CEO and host of the webinar.
Richards noted that there are four key components to a brand architecture: master brand, sub-brand, parent brand and umbrella brand.
The most common master brand would be Apple, whose products have the “i” commonality with the iPhone, iPad and so on. A sub-brand concept would pertain to the auto industry, with a make-model architecture. Meanwhile, Mondelez International represents a parent brand, where each product portfolio lives in its own right. Lastly, a prominent umbrella brand is Coca-Cola, which endorses the beverage brands it owns.
Then there are three types of architecture: branded house, endorsed brand and a house of brands. While a branded house looks something like FedEx, then Proctor & Gamble is an illustration of a house of brands. Each type has its own pros and cons, depending on a company’s strategic goals.
A branded house comes with strict brand standards for aspects such as color, typography and message. That’s great news for a company seeking solid brand recognition regardless of the category, market or region. However, that rigidity is restrictive and could leave little room for adjustment should the brand wind up with something negative associated with it.
A branded house must be built with some element of flexibility, and it must know its core consumer and need state beyond a shadow of doubt.
“Understanding, visualizing and explaining your brand architecture can actually help you manage your portfolio more effectively." —Fred Richards | founder | The Hive Principle
“Knowing your core consumer is critical because they might shift a little over time or there could be market shifts like we’re seeing now with people for more value across commodity items,” Pryor said. “You have to stay true to that consumer and understand if they’re looking for a more premium product in a certain category or if you’re in a more commodity-driven space where people aren’t willing to spend as much for certain products.”
It’s also important to realize that, in a branded house, there is not a deep relationship between the consumer and the brand’s owner.
“Most people will not understand how those types of brands — Google, for example — sit inside a larger portfolio,” Richards said.
In an endorsed brand strategy — as with Nestle, for instance— there’s a high level of complexity that comes with it.
On the positive side, each product lives on its own from a P&L standpoint, and it has control over how it functions in the market and serves its category.
“They have their own identity systems,” Richards said. “And they understand them, even when there are many versions of the Nestle logo, for example, depending on the category the product is talking to.”
That can get a little complicated, however, if several products in the portfolio are going to market at the same time. But the biggest downside is that if one brand in the portfolio suffers, they may all suffer equally, especially if the endorsing brand is the one taking the hit.
The house of brands strategy brings quite a bit of power that allows a company greater distinction between brands, as well as flexibility in how they are developed, as seen with how Skittles and Snickers are two of the world’s top brands, both living in the Mars house.
The downside is that it’s very difficult to manage each brand in the portfolio as its own entity.
“It’s not only about the complexity that comes with how to manage all of them individually but also, internally, the cost of managing these things,” Richards suggested.
For example, Mars, which employs nearly 125,000 associates globally, has brands that make both pet food and candy.
“Do customers know — or care?” Richards asked. “And if they do understand that, will they think of your brand as a holding company?”
In that case, the umbrella strategy like that with Coca-Cola might is a good one to employ.
No matter what brand architecture strategy a company chooses, it’s important to think about those tactical considerations for positively building that brand awareness.
The most important lesson, Richards said, is to understand that the best brand architecture cannot be replicated. For it to function at its best, it has to be specific to its brand and core demographic.
“Some people want to copy other people’s business or architecture and say, ‘Well if it’s good for the goose, it’s good enough for the gander,’” Richards said. “I disagree with that. You have to really understand the core strategy components, like why you went to market in the first place and what keeps you awake at night.”
This webinar is part of the Emerge CPG Lunch and Learn series, available to members of the Emerge network, which is designed to help early-stage CPG founders become healthy trading partners and accelerate growth. For more information on joining Emerge and other upcoming events, visit www.emergecpg.com.
