IIBMS-Marketing Management

IIBMS-Marketing Management



The Indian Institute of Business Management & Studies


SUBJECT: Marketing Management


Note: Solve any 4 Cases Study’s


CASE: I    Managing the Guinness brand in the face of consumers’ changing tastes         


1997 saw the US$19 billion merger of Guinness and GrandMet to form Diageo, the world’s largest drinks company. Guinness was the group’s top-selling beverage after Smirnoff vodka, and the group’s third most profitable brand, with an estimated global value of US$1.2 billion. More than 10 million glasses of the popular stout were sold every day, predominantly in Guinness’s top markets: respectively, the UK, Ireland, Nigeria, the USA and Cameroon.


However, the famous dark stout with the white, creamy head was causing some strategic concerns for Diageo. In 1999, for the first time in the 241-year of Guinness, sales fell. In early 2002 Diageo CEO Paul Walsh announced to the group’s concerned shareholders that global volume growth of Guinness was down 4 per cent in the last six months of 2001 and, more alarmingly, sales were also down 4 per cent in its home market, Ireland. How should Diageo address falling sales in the centuries-old brand shrouded in Irish mystique and tradition?


The changing face of the Irish beer market


The Irish were very fond of beer and even fonder of Guinness. With close to 200 litres per capita drunk each year—the equivalent of one pint per person per day—Ireland ranked top in worldwide per capita beer consumption, ahead of the Czech Republic and Germany.


Beer accounted for two-thirds of all alcohol bought in Ireland in 2001. Stout led the way in volume sales and accounted for 40 per cent of all beer value sales. Guinness, first brewed in 1759 in Dublin by Arthur Guinness, enjoyed legendary status in Ireland, a national symbol as respected as the green, white and gold flag. It was by far the most popular alcoholic drink in Ireland, accounting for nearly one of every two pints of beer sold. Its nearest competitors were Budweiser and Heineken, which held 13 per cent and 12 per cent of the market respectively.


However, the spectacular economic growth of the Irish economy since the mid-1990s had opened up the traditional drinking market to new cultures and influences, and encouraged the travel-friendly Irish to try other drinks. Beer and in particular stout were losing popularity compared with wine or the recently launched RTDs (ready-to-drinks) or FABs (flavoured alcoholic beverages), which the younger generation of drinkers considered trendier and ‘healthier’. As a Euromonitor report explained: Younger consumers consider dark beers and stout to be old fashioned drinks, with the perceived stout or ale drinker being an old, slightly overweight man and thus not in tune with image conscious youth culture.


Beer sales, which once accounted for 75 per cent of all alcohol bought in Ireland, were expected to drop to close to 50 per cent by 2006, while stout sales were forecast to decrease by 12 per cent between 2002 and 2006.


Giving Guinness a boost in its home market


With Guinness alone accounting for 37 per cent of Diageo’s volume in the market, Guinness/UDV Ireland was one of the first to feel the pain caused by the declining popularity of beer and in particular stout. A Euromonitor report in February 2002 explained how the profile of the Guinness drinker, typically men aged 21-plus, was affected: The average age of Guinness drinkers is rising and this is bringing about the worrying fact that the size of the Guinness target audience is falling. The rate of decline is likely to quicken as the number of less brand loyal, non-stout drinking younger consumers increases.

The report continued:

In Ireland, in particular, the consumer base for Guinness is shrinking as the majority of 18 to 24 year olds consistently reject stout as a product relevant to their generation, opting instead to consume lager or spirits.

Effectively, one-third of young Irish men and half of young Irish women had reportedly never tried Guinness. A Guinness employee provided another explanation. Guinness is similar to coffee in that when you’re young you drink it [coffee] with sugar, but when you’re older you drink it without. It’s got a similar acquired taste and once you’re over the initial hurdle, you’ll fall in love with it.

In an attempt to lure young drinkers to the somewhat ‘acquired’ Guinness taste (40 per cent of the Irish population was under the age of 24) Diageo had invested millions in developing product innovations and brand building in Ireland’s 10,000 pubs, clubs and supermarkets.


Product innovation


Until the mid-1990s most Guinness in Ireland was drunk in a pint glass in the local pub. The launch of product innovations in the form of a new cooling mechanism for draft Guinness and the ‘widget’ technology applied to cans and bottles attempted to modernize the brand’s image and respond to increasing competition from other local and imported stouts and lagers.


‘A perfect head’ for canned Guinness

In 1989, and at a cost of more than £10 million, Guinness developed an ingenious ‘widget’ device for its canned draft stout sold in ‘off-trade’ outlets such as supermarkets and off-licences. The widget, placed in the bottom of the can, released a gas that replicated the draft effect.

Although over 90 per cent of beer in Ireland was sold in ‘on-trade’ pubs and bars, sale of beer in the cheaper ‘off-trade’ channel were slowly gaining in importance. The Guinness brand manager at the time, John O’Keeffe, explained how home drinkers could now enjoy a smoother, creamier head similar to the one obtained in a pub thanks to the new widget technology:

When the can is opened, the pressure causes the nitrogen to be released as the widget moves through the beer, creating the classic draft Guinness surge.


Nearly 10 years later, in 1997, the ‘floating widget’ was introduced, which improved the effectiveness of the device.


A colder pint

In 1997 Guinness Draft Extra Cold was launched in Ireland. An additional chilled tap system could be added to the standard barrel in pubs, allowing the Guinness to be served at 4ºC rather than the normal 6ºC. By serving Guinness at a cooler temperature, Guinness/UDV hoped to mute the bitter taste of the stout and make it more palatable for younger adults, who were increasingly accustomed to drinking chilled lager, particularly in the summer


A cooler image for Guinness

In October 1999 the widget technology was applied to long-stemmed bottles of Guinness. The launch was supported by a US$2 million TV and outdoor board campaign. The packaging—with a clear, shiny plastic wrap, designed to look like a pint complete with creamy head—was quite a departure from the traditional Guinness look.


The objective was to reposition Guinness alongside certain similarly packaged lagers and RTDs and offer younger adults a more fashionable way to drink Guinness: straight from the bottle. It also gave Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness, which could be kept for only six to eight weeks and took two minutes to pour. The RTDs, by contrast, had a shelf-life of more than a year and were drunk straight from the bottle.


 However, financial analyst remained sceptical about the Guinness product innovations, which had no significant positive impact on sales or profitability:


The last news about the success of the recently introduced innovations suggests that they have not had a notably material impact on Guinness brand performance.


Brand building


Euromonitor estimates that, in 2000, Diageo invested between US$230 and US$250 million worldwide in Guinness advertising and promotions. However, with a cost-cutting objective, the company reduced marketing expenses in both Ireland and the UK up to 10 per cent in 2001 and the number of global Guinness agencies from six to two.


Nevertheless, Guinness remained one of the most advertised brands in Ireland. It was the leading cinema advertiser and, in terms of advertising, was second only to the national telecoms provider, Eircom. Guinness was also heavily promoted at leading sporting and music events, in particular those that were popular with the younger age groups.


The ultimate tribute to the brand was the opening of the new Guinness Storehouse in Dublin in late 2000, a sort of Mecca for all Guinness fans. The Storehouse was also a fashionable visitor centre with an art gallery and restaurants, and regularly hosted evening events. The company’s design brief highlighted another key objective:

To use an ultramodern facility to breathe life into an ageing brand, to reconnect an old company with young (sceptical) customers.

As the Storehouse’s design firm’s director, Ralph Ardill, explained:


Guinness Storehouse had become the top tourist destination in Ireland, attracting more than half a million people and hosting 45,000 people for special events and training.

The Storehouse also had training facilities for Guinness’s bartenders and 3000 Irish employees. The quality of the Guinness pint remained a high priority for the company, which not only developed pub-like classrooms at the Storehouse but also employed teams of draft technicians to teach barmen how to pour a proper pint. The process involved two steps—the pour and the top-up—and took a total of 119.5 seconds. Barmen also needed to learn how to check that the pressure gauges were properly set and that the proportion of nitrogen to carbon dioxide in the gas was correct.





The uncertain future of the Guinness brand in Ireland


Despite Guinness/DUV’s attempt to appeal to the younger generation of drinkers and boost its fading image, rumours persisted in Ireland about the brand future. The country’s leading and respected newspaper, the Irish times, reported in an article in July 2001:

The uncertainty over its future all adds to the air of crisis that is building around Guinness Ireland Group four months ago…The review is not complete and the assumption is that there is more bad news to come.

In the pubs across Ireland, the traditional Guinness drinkers looked on anxiously as the younger generation drank Bacardi Breezers, Smirnoff Ices or Californian wines. Could the goliath Guinness survive another two centuries? Was the preference for these new drinks just a fad or fashion, or did Diageo need to seriously reconsider how it marketed Guinness?


A quick solution?


In late February 2002, Diageo CEO Paul Walsh revealed that the company was testing technology to cut the waiting time for a pint of Guinness from 1 minute 59 seconds to 15-25 seconds. Ultrasound could release bubbles in the stout and form the head instantly, making a pint of Guinness that would be indistinguishable from one produced by the slower, traditional method.

‘A two-minute pour is not relevant to our customers today,’ Walsh said. A Guinness spokeswoman continued, ‘We have got to move with the times and the brand must evolve. We must take all the opportunities that we can. In outlets where it is really busy, if you walk in after nine o’clock in the evening there will be a cloth over the Guinness pump because it takes longer to pour than other drinks. Aware that some consumers might not be attracted by the innovation, she added ‘It wouldn’t be put everywhere—only where people want a quick pint with no effect on the quality.’


Although still being tested, the ‘quick-pour pint’ was a popular topic of conversation in Dublin pubs, among barmen and customers alike. There were rumours that it would be introduced in Britain only; others thought it would be released worldwide.


Some market commentators viewed the quick-pour pint as an innovative way to appeal to the younger, less patient segment in which Guinness had under-performed. Others feared that the young would be unconvinced by the introduction, and loyal customers would be turned off by what they characterized as a ‘marketing u-turn’.




1.                  From a marketing perspective, what has Guinness done to ensure its longevity?

2.                  How would you characterize the Guinness brand?

3.                  What could Guinness do to attract younger drinkers? And to retain its older loyal customer base? Can both be done at the same time?





CASE: II    The grey market




The over-50s market has long been ignored by advertising and marketing firms in favour of the market. The complexity of how to appeal to today’s mature customers, without targeting their age, has proved just too challenging for many companies. But this preoccupation with youth runs counter to demo-graphic changes. The over-50s represent the largest segment of the population, across western developed countries, due largely to the post-Second World War baby boom. The sheer size of this grey market, which will continue to grow as birth and mortality rates fall, coupled with its phenomenal spending power, presents enormous opportunities for business. However, successfully unleashing its potential will depend on companies truly understanding the attitudes, lifestyles and purchasing interests of this post-war generation.


Demographic forces


Following the Second World War many countries experienced a baby boom phenomenon as returning soldiers began families. This, coupled with a more positive outlook on the future, resulted in the baby boom generation, born between 1946 and 1964. Now beginning to enter retirement, this affluent group globally numbers approximately 532 million. In Western Europe they account for the largest proportion of the total population at 14.9%, followed closely by 14.2% in North America and 13.5 % in Australia.


Table 1: Global population aged 45-54 by region: baby boomers as a % of the total population 1990/2002


Baby boomers as a % total population



% point change

Western Europe





North America








Eastern Europe








Latin America




Africa/Middle East









The grey market is big and getting bigger. Between 1990 and 2002 the global baby boomer population increased by 41%. The rate of growth is predicted to decrease to 35% between 2002 and 2015. Particularly noteworthy is the predicted increase in the proportion of baby boomers in many Western European countries, such as Austria, Spain, Germany, Italy, and the UK. In developed countries, according to the United Nations, the percentage of elderly people (60+) is forecast to rise from one-fifth of the population to one-third by 2050. The growth in the elderly population is exacerbated by falling fertility rates in many developed countries, coupled with a rise in human longevity.


The influences and buyer behaviour patterns of baby boomers


The members of the baby boomer generation are quite unlike their more conservative parents’ generation. They are the children of the rebellious ‘swinging sixties’, growing up on the sounds of the Beatles and the Rolling Stones. Better educated than their parents, in a time of greater prosperity, they indulged in more hedonistic lifestyle. It has been said that they were the first ‘me generation’. Now, in later life, they have retained their liberal, adventurous and youthful attitude to life. Aptly termed ‘younger older people’ they abhor antiquated stereotypes of elderly people, preferring to be defined by their attitude rather than their age.


Baby boomers are also tend to be very wealthy. Many are property owners and may have gained an inheritance from parents or other relatives. They have higher than average incomes or have retired with private pension plans. With their children having flown the nest they have greater financial freedom and more time to indulge themselves. Having worked all their lives, and educated their children, many baby boomers do not believe it is their responsibility to safeguard the financial future of their children by carefully protecting their children’s inheritance. They are instead liquidating their assets, intent on enjoying their later life to full, often through conspicuous consumption.


Based on research conducted by Euromonitor, the main areas of expenditure in the baby boomer market are financial services, tourism, food and drink, luxury cars, electrical/electronic goods, clothing, health products, and DIY and gardening.


Table 2: Global population aged 45-54 in thousands by country: developed countries 2002-2015






%change 2002/2015


























New Zealand

















































































Figure 1 Global Baby boomer market: % analysis by broad sector 2002 (% value)


Note: sectors valued on the basis of estimates by senior managers in major companies in each sector, consumer expenditure and industry sector data.


Unsurprisingly the financial sector is the largest in this market. Baby boomers are concerned with being financially secure in their retirement. An ageing population, coupled with a rise in human longevity, is giving rise to a pensions crisis across Western Europe. Baby boomers are therefore right to be preoccupied with how they will maintain their lifestyle over the long term. They are actively engaging in financial planning, both before and after retirement. Popular financial service products include endowments, life insurance, personal pensions, PEPs and ISAs.


Baby boomers have adventurous attitudes with a desire to see the world. In their retirement foreign travel is a key expenditure. Given their greater levels of sophistication and education, baby boomers are much more demanding of holidays that suit their lifestyles. This group is very diverse, with holiday interests ranging from action-packed adventures to culturally rich experiences.


Baby boomers want to maintain a youthful appearance in line with their youthful way of living. Fear of becoming invisible is a genuine concern among older generations. This image conciousness is reflected in their spending on clothing, cosmetics and anti-ageing products. Luxury cars also a key status symbols for this group.


The home is another area of expenditure. Once children have flown the nest, many baby boomers redecorate the home to suit their needs. Electrical and electronic purchases are key indulgences among these technologically savvy consumers. Gardening is another pastime enjoyed by older generations. Health is also a priority. Baby boomers invest in private health insurance and over-the-counter pharmaceutical products to maintain their healthy lives.


Business opportunities

The sheer size of the grey market, which is getting bigger in many countries—characterized by consumers with disposable income, ample free time, interest in travel, concern about financial security and health, awareness of youth culture and brands and desire for aspirational living—makes this market enormously attractive to many business sectors. Pharmaceuticals, health and beauty, technology, travel financial services, luxury cars, lavish food and entertainment are key growth sectors for the grey market. However, successfully tapping into this market will depend on companies truly understanding the attitudes, lifestyles and purchasing interests of this post-war generation. Communicating with this group is a tricky business, but, done right, it can be hugely rewarding.


When targeting the older consumer it is important to target their lifestyle and not their age. Older people do not want to be reminded, in a patronizing way, of their age or what they should be doing now they are a certain stage in life. With an interest in maintaining a youthful way of life these consumers are interested in similar brands to those that appeal to younger generations. The key for the companies is to find a way of making their brands also appeal to an older consumer without explicitly targeting their age. One tried-and tested method of targeting this group is to use nostalgia. Mercedes Benz used the Janis Joplin song ‘Oh Lord won’t you buy me a Mercedes Benz’ to great effect despite the obvious irony in that the song was written to highlight the dangers of materialism! Volkswagen’s new retro-style Beetle has also been popular among this group. In the tourism sector Saga Holidays, the leader in holidays for the over-50s, has changed its product offering to reflect changing trends among this group. In line with the more adventurous attitudes of many older consumers it now offers more action-packed adventure holidays to far-flung destinations.


More recently, Thomas Cook has rebranded it over-50s ‘Forever Young’ programme to reflect the diverse interest of its target customers. Its new primetime brochure targets five distinct groups with the following holiday types: ‘Discover’, ‘Learn’, ‘Relax’, ‘Active’ and ‘Enjoy Life’.



The over-50s represent the largest segment of the population across Western developed countries. This affluent market is big and getting bigger. Having ignored it for so long marketers are finally beginning to see the enormous opportunities presented by the grey market. But conquering this market will not be easy. The baby boomer generation is quite unlike its predecessors. With a youthful and adventuresome spirit these ‘younger older people’ want to be defined by their attitude and not by their age. Only time will tell whether today’s marketers are up to the challenge.



1.                  Why is the grey market so attractive to business?

2.                  Identify the influences on the purchasing behaviour of the over-50s consumer.

3.                  Discuss the challenges involved in targeting the grey market.


CASE: III   Nivea: managing an umbrella brand


‘In many countries consumer are convinced that Nivea is a local brand, a mistake which Beiersdoft, the German makers, take as a compliment.’

(Quoted on leading brand consultancy Wolff-Olins’ website,


An ode to Nivea’s success

In May 2003, a survey of ‘Global Mega Brand Franchises’ revealed that the Nivea Cosmetics brand had presence in the maximum number of product categories and countries. The survey, conducted by US-based ACNielsen, aimed at identifying those brands that had ‘successfully evolved beyond their original product categories’. A key parameter was the presence of these brands in multiple product categories as well as countries.


Nivea’s performance in this study prompted a news article to name it the ‘Queen of Mega Brands’. This title was appropriate since the brand was present in over 14 product categories and was available in more than 150 countries. Nivea was the market leader in skin creams and lotions in 28 countries, in facial cleansing in 23 countries, in facial skin care in 18 countries, and in suntan products in 15 countries. In many of those countries, it was reportedly believed to be a brand of local origin—having been present in them for many decades. This fact went a long way in helping the brand attain leadership status in many categories and countries (see Table 3).


Table 3  Nivea: market positions



Skin care

Baby care

Sun protection

Men’s care


























































The study covered 200 consumer packaged goods brands from over 50 global manufacturers. The brands had to be available in at least 15 of the countries studied; the same name had to be used in at least three product categories and meet franchise in at least three of the five geographical regions.


In its home country Germany, too, many of Nivea’s products were the market leaders in their segments. This market leadership status translated into superior financial performance. Between 1991 and 2001, Nivea posted double-digit growth rates every year. For 2001, the brand generated revenues of €2.5 billion, amounting to 55 per cent of the parent company’s (Beiersdoft) total revenue for the year. The 120-year-old, Hamburg-based Beiersdoft has often been credited with meticulously building the Nivea brand into the world’s number one personal care brand. According to a survey conducted by ACNielsen in the late 1990s, the brand had a 15 per cent share in the global skin care products market. While Nivea had always been the company’s star performer, the 1990s were a period of phenomenal growth for the brand. By successfully extending what was essentially a ‘one-product wonder’ into many different product categories, Beiersdoft had silenced many critics of its umbrella branding decision.


The marketing game for Nivea


Millions of customers across the world have been familiar with the Nivea brand since their childhood. The visual (colour and packaging) and physical attributes (feel, smell) of the product stayed on in their minds. According to analysts, this led to the formation of a complex emotional bond between customers and the brand, a bond that had strong positive under-tones. According to a my article, Nivea’s blue colour denoted sympathy, harmony, friendship and loyalty. The white colour suggested external cleanliness as well as inner purity. Together, these colours gave Nivea the aura of an honest brand.


To customers, Nivea was more than a skin care product. They associated Nivea with good health, graceful ageing and better living. The company’s association Nivea with many sporting events, fashion events and other lifestyle-related events gave the brand a long-lasting appeal. In 2001, Franziska Schmiedebach, Beiersdoft’s Corporate Vice President (Face Care and Cosmetics), commented that Nivea’s success over the decades was built on the following pillars: innovation, brand extension and globalization (see Table 4 for the brand’s sales growth from 1995-2002)


Table 4   Nivea: worldwide sales growth (%)

Sales Growth









In Million €









In per cent










Innovation and brand extensions


Innovation and brand extensions went hand in hand for Nivea. Extensions had been made back in the 1930s and had continued in the 1960s when the face care range Nivea Visage was launched. However, the first major initiative to extend the brand to other products came in the 1970s. Naturally, the idea was to cash in on Nivea’s strong brand equity. The first major extension was launch of ‘Nivea For Men’ aftershave in the 1970s. Unlike the other aftershaves available in market, which caused the skin to burn on application, Nivea For Men soothed the skin. As a result, the product became a runaway success.


The positive experience with the aftershave extension inspired the company to further explore the possibilities of brand extensions. Moreover, Beiersdoft felt that Nivea’s unique identity, the values it represented (trustworthiness, simplicity, consistency, caring) could easily be used to make the transition to being an umbrella brand. The decision to diversify its product range was also believed to have influenced by intensifying competitive pressures. L’Oreal’s Plenitude range, Procter & Gamble’s Oil of Olay range, Unilever’s Pond’s range, and Johnson & Johnson’s Neutrogena range posed stiff competition to Nivea.


Though Nivea was the undisputed market leader in the mass-market face cream segment worldwide, its share was below Oil of Olay’s, Pond’s and Plenitude’s in the US market. While most of the competing brands had a wide product portfolio, the Nivea range was rather limited. To position Nivea as a competitor in a larger number of segments, the decision to offer a wider range inevitable.


Beiersdoft’s research centre—employing over 150 dermatological and cosmetics researchers, pharmacists and chemists—supported its thrust on innovations and brand extensions. During the 1990s, Beiersdoft launched many extensions, including men’s care products, deodorants (1991), Nivea Body (1995), and Nivea Soft (1997). Most of these brand extension decisions could be credited to Rolf Kunisch, who became Beiersdoft’s CEO in the early 1990s.  Rolf Kunisch firmly believed in the company’s ‘twin strategy’ of extension and globalization.


By the beginning of the twenty-first century, the Nivea umbrella brand offered over 300 products in 14 separate segments of the health and beauty market (see Table 5 and Figure 2 for information on Nivea’s brand extensions). Commenting on Beiersdoft’s belief in umbrella branding, Schmiedebach said, ‘Focusing your energy and investment on one umbrella brand has strong synergetic effects and helps build leading market positions across categories.’ A noteworthy aspect of the brand extension strategy was the company’s ability to successfully translate the ‘skin care’ attributes of the original Nivea cream to the entire gamut of products.


Table  5   Nivea: brand portfolio




Nivea Bath Care

Shower gels, shower specialists, bath foams, bath specialists, soaps, kids’ products, intimate care

Nivea Sun (sun care)

Sun protection lotion, anti-ageing sun cream, sensitive sun lotion, sun-spray, children’s sun protection, deep tan, after tan, self –tan, Nivea baby sun protection

Nivea Beaute (colour cosmetics)

Face, eyes, lips, nails

Nivea For Men (men’s care)

Shaving, after shaving, face care, face cleansing

Nivea Baby (baby care)

Bottom cleansing, nappy rash protection, general cleansing, moisturizing, sun protection

Nivea Body (body care)

Essential line, performance line, pleasure line

Nivea Crème

Nivea crème

Nivea Deodorants

Roll-ons, sprays, pump sprays, sticks, creams, wipes, compact

Nivea Hand (hand care)

Hand care lotions and creams

Nivea Lip Care

Basic care, special care, cosmetic care, extra protection  care

Nivea Visage (face care)

Daily cleaning, deep cleaning, facial masks (cleaning/care), make-up remover, active moisture care, advanced repair care, special care

Nivea Vital (mature skin care)

Basic face care, specific face care, face cleansing products, body care

Nivea Soft

Nivea soft moisturizing cream

Nivea Hair Care

Hair care (shampoos, rinse, treatment, sun); hair styling (hairspray and lacquer, styling foams and specials, gels and specials)



Figure 2   Nivea Universe






































The company ensured that each of its products addressed a specific need of consumers. Products in all the 14 categories were developed after being evaluated on two parameters with respect to the Nivea mother brand. First, the new product had to be based on the qualities that the mother brand stood for and, second, it ha to offer benefits that were consistent with those that the mother brand offered. Once a new product cleared the above test, it was evaluated for its ability to meet consumer needs and its scope for proving itself to be a leader in the future. For instance, a Nivea shampoo not only had to clean hair, it also had to be milder and gentler than other shampoos in the same range.


Beiersdoft developed a ‘Nivea Universe’ framework for streamlining and executing its brand extension efforts. This framework consisted of a central point,  an inner circle of brands and an outer circle of brands (see Figure 2)

The centre of the model housed the ‘mother brand’, which represented the core values of trustworthiness, honesty and reliability. While the brands in the inner circle were closely related to the core values of the Nivea brand, the brands in the outer circle were seen as extensions of these core values. The inner-circle brands strengthened the existing beliefs and values associated with the Nivea brand. The outer circle brands, however, sought to add new dimensions to the brand’s personality, thereby opening up avenues, for future growth.


The ‘global-local’ strategy


The Nivea brand retained its strong German heritage and was treated as a global brand for many decades. In the early days, local managers believed that the needs of customers from their countries were significantly different from those of customers in other countries. As a result, Beiersdoft was forced to offer different product formulations an packaging, and different types of advertising support. Consequently, it incurred high costs.


It was only in the 1980s that Beiersdoft took a conscious decision to globalize the appeal of Nivea. The aim to achieve a common platform for the brand on a global scale and offer customers from different parts of the world a wider variety of product choices. This was radical departure from its earlier approach, in which product development and marketing efforts were largely focused on the German market. The new decision was not only expected to solve the problems of high costs, it was also expected to further build the core values of the brand.

To globalize the brand, the company formulated strategies with the help of a team of ‘international’ experts with ‘local expertise’. This team developed new products for all the markets. Their responsibilities included, among others, deciding about the way in which international advertising campaigns should be adapted at the local level. The idea was to leave the execution of strategic decisions to local partners. However, Beiersdoft monitored the execution to ensure that it remained in line with the global strategic plan.


This way, Beiersdoft ensured that the nuances of consumer behaviour at the local level understood and that their needs were addressed. Company sources claimed that by following the above approach, it was easy to transfer know-how between headquarters and the local offices. In addition, the motivation level of the local partners also remained on the higher side.


The company established a set of guidelines that regulated how the marketing mix of a new product/brand was to be developed. These guidelines stipulated norms with respect to product, pricing, promotion, packaging and other related issues. For instance, a guideline regarding advertising read, ‘Nivea advertising is about skin care. It should be present visually and verbally. Nivea advertising is simple, it is unpretentious and human.’


Thus all advertisements for any Nivea product depicted images related to ‘skin care’ and ‘unpretentious human life’ in one way or the other. The company consciously decided not to use supermodels to promote its products. The predominant colours in all campaigns remained blue and white. However, local issues were also kept in mind. For instance, in the Middle East, Nivea relied more on outdoor media as it worked out to be much more cost-effective. And since showing skin in the advertisements went against the region’s culture, the company devised ways of advertising skin without showing skin.


Many brand management experts have spoken of the perils of umbrella management, such as brand dilution and the lack of ‘change’ for consumers. However, the umbrella branding strategy worked for Beiersdoft. In fact, the company’s growth was the most dynamic since its inception during 1990s—the decade when the brand extension move picked up momentum. The strong yearly growth during the 1990s and the quadrupling of sales were attributed by company sources to the thrust on brand extension.




1.                  Discuss the reasons for the success of the Nivea range of products across the world. Why did Beiersdoft decide to extend the brand to different product categories? In the light of Beiersdoft’s brand extension of Nivea, critically comment on the pros and cons of adopting an umbrella branding strategy. Compare the use of such a strategy with the use of an independent branding strategy.

2.                  According to you, what are the core values of the Nivea brand? What type of brand extension framework did Beiersdoft develop to ensure that these core values id not get diluted? Do you think the company was able to protect these core values? Why/why not?

3.                  What were the essential components of Beiersdoft’s global expansion strategy for Nivea? Under what circumstances would a ‘global-strategy-local execution’ approach be beneficial for a company? When and why should this approach be avoided?



CASE: IV   Pret a Manger: passionate about food




Pret a Manger (French for ‘ready to eat’) is a chain of coffee shops that sells a range of upmarket, healthy sandwiches and desserts as well as a variety o coffees to an increasingly discerning set of lunchtime customers. Started in London, England, in 1986 by two university graduates, Pret a Manger has more than 120 stores across the UK. In 2002 it sold 25 million sandwiches and 14 million cups of coffee, and had a turnover of over £100 million. Buckingham Palace reportedly orders more than £1000 worth of sandwiches a week and British Prime Minister Tony Blair has had Pret sandwiches delivered  to number 10 Downing Street for working lunches. The company also has ambitious plans to expand further—it already has stores in New York, Hong Kong  and Tokyo, and has set its sights on further international growth.


Background and company history


In 1986, Pret a Manger was founded with one shop, in central London, and a £17,000 loan, by two property law graduates, Julian Metcalf and Sinclair Beecham, who had been students together at the University of Westminster in the early 1980s. At that time the choice of lunchtime eating in London and other British cities was more limited than it is today. Traditionally, some ate in restaurants while many favoured that well-known British institution, the pub, as a choice for lunchtime eating and drinking. There was, however, a growing awareness among many people of the benefits of healthy eating and a healthy lifestyle, and lunchtime habits were changing. There was a general trend towards taking shorter lunch brakes and, among office workers, to take lunch at their desks. For those who wanted food to take away, the choice in fast food was dominated by the large chains such as McDonald’s, Burger King and Kentucky Fried Chicken (now KFC) while other types of carry-out food, such as pizzas, were also available.


Sandwiches also played an important part in British lunchtime eating. Named after its eighteenth-century inventor, the Earl of Sa

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