Much attention and fanfare has been given to the endless stream of mergers and acquisitions across the CPG landscape. As detailed in HRG’s recent retrospective in ROI-M, 1,600 SKUs have changed hands in a twelve month period from May of last year to March of this year. The list is long and certainly no secret.
The focus of this blog post is on failed relationships – acquisitions that have taken brands backwards rather than moving them ahead. Among the recent acquired brands, one in 10 experienced a decrease in unit movement of 50% or more.
Although mitigating circumstances may have caused a brand to begin a spiral in the wrong direction (competitive repositioning or product introductions, economic conditions, and seasonality), it is my guess that most of the wavering acquisitions suffered from one of the following:
Supply chain disruption
Transitioning brands have potential to create ripple effects across the retail supply chain: from UPC changes and point-of-origin shipping switches to new packaging and/or carton sizes and overstock of the previous stock keeping unit (SKU). There should be well-orchestrated supply chain transference plans and carefully executed logistics established long ahead of physical product movement.
In my opinion, these three situations require volume of promotion be ratcheted upward rather than dialed back: 1) new product introduction; 2) economic downturn; and 3) brand swapping. Knowing that consumers have short attention spans – especially in the case of a brand ownership change – manufacturers must promote relevance of the brand and its uninterrupted availability. If overlooked, some other manufacturer will surely fill the void and gain a larger share of mind…and ultimately share of wallet.
Although not always the case, melding a brand into a pre-existing platform of like products (e.g., women’s health, pain relief, etc.) provides an advantage for the acquiring manufacturer. Not only will the manufacturer be able to leverage other investments in the category, there will be familiarity with the category buyer and general timing of the reviews. Among the most recent brand acquisitions, 11 of the 120 brands impacted two or more categories amplifying the potential for incongruence.
Too often I see acquired brands added to an already overloaded product manager’s desk. This can lead to a lack of attention or missed market opportunities. Although not always the case, brands have a much better likelihood of success when the brand can be granted the tender loving care it deserves. Depending on the size and nature of the acquisition, further infrastructure issues may revolve around internal systems, forecasting, sales training, and customer service. If the acquiring company doesn’t have the internal resources or bandwidth to manage the integration, outside help should be sought quickly before a tailspin begins.
The challenges and opportunities that surface during any brand acquisition are unique to the given situation, but it is imperative that the acquirer follow a methodology to ensure nothing slips through the cracks. HRG’s own Concept through Commercialization™ framework addresses this as part of the “Existing” brand market readiness process.
There are no guaranteed successes when undertaking a brand acquisition, but there are many safe measures that should be taken to avoid becoming part of the 10% that experience declining sales and lackluster market growth.