GM brand disposal: We would if we could but we can't ~ Brand Mix

Monday, May 5, 2008

GM brand disposal: We would if we could but we can't

Like a patient who's losing too much blood to risk surgery, GM can't get rid of any of its brands at the moment because it's already swimming in too much red ink.

While discussing GM's $3.25 billion Q1 loss, GM President Fritz Henderson suggested that it's the cost of shuttering its brands rather than anything else (like their value) that's keeping him from cutting down the portfolio. (It cost them $1 billion to close down Oldsmobile.) So, instead, GM will continue to shrink the number of models and sell them in fewer and fewer dealerships. Which, I guess, will mean that it's cheaper to close them down in years to come.

In similar circumstances, I have to admit, I did more or less the same thing. I was managing Nestlé's Roast & Ground business, a distant #3 player being squeezed by the combined forces of other mainstream coffee companies (like Folgers and Maxwell House) in a category that was declining thanks to the emerging power of Starbucks.

We had three brands: Hills Bros, MJB and Chase & Sanborn and one obvious option was to focus all our resources against one of these brands and kill the other two. But we couldn't do it. The brands did not fall nicely into different geographies or different price points or any way we could find that would give us a manageable route to transition. By our estimate, we would have lost up to 25% of our sales if we had tried. So we struggled on, withering away, until we finally sold the business.

That wasn't such a big deal for Nestlé. The ground coffee business was a non-strategic part of one business within one division in one geography. Whereas for GM, it's the whole game. Seems like withering away can't be the right path in its case.

1 comment:

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