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INTRODUCTION
With increasing frequency, companies are undertaking
brand alliance partnerships. This is where two different
companies pair their respective brands in a joint
marketing effort (Kapferer 2008). Co-branding in particular
is often used as a strategy to establish a competitive
advantage. It can strengthen the brand portfolio, leverage
established brand equity, provide a mechanism for the
brand to enter future growth categories and reach important
consumer segments. Co-branding has demonstrated
its place as a competitive advantage as reflected by the
Interbrand top 100 listing the most valuable global brands
(Uggla and Åsberg 2010).
The Nestlé Company knows this well and has made
great strides to capitalize on the merits of solid brand
alliance efforts. Good Food, Good Life sums up Nestlé’s
philosophy as it creates inroads with nutrition and health.
Today Nestlé is evolving with brand alliances while
remaining loyal to its heritage as it develops from the
world’s leading food company into the world’s leading
food, nutrition, health and wellness company in established
and developing markets (Nestlé Management
Report 2003).
BRAND ALLIANCE CONCEPTS
Branding
A brand is defined as a combination of name, symbol,
term and/or design that identifies a specific product (Ferrell and Hartline 2010). A brand gives a product a unique
identity that differentiates the product from other competing
products in the marketplace. It lessens the risk of
purchasing the product in the minds of customers and also
signifies quality. Customers remain loyal and committed
to a brand as long as the perceived value creates a sense of
satisfaction and benefit. For the company, a brand becomes
an asset that can be leveraged to gain a competitive
advantage in the marketplace (Armstrong and Kotler
2011).
Brand Alliances
A brand alliance can be defined as a cooperative
association between two or more companies based on
joint branding strategies. Brand alliances can result in
co-brands, co-opetition, new brands or joint ventures to
name a few (Ferrell and Hartline 2010). Co-opetition
occurs when competitors co-operate to achieve mutually
beneficial goals (Kotzab and Teller 2003). New brands
often come from two companies collaboratively entering
a new product category (Armstrong and Kotler 2011).
Joint ventures are created when two companies pool
resources to form a new company with shared ownership
(Grewal and Levy 2010).
A key factor in the success of any brand alliance is
selecting the right partner. Although selecting the right
market, product, and adapting to local preferences are
worthy of notation, successful brand alliances are premised
on a natural fit between the companies and their
brands. This is particularly the case for co-branding where selecting the right partner maximizes exposure in the
target market (Dickinson and Heath 2006). Co-branding
will be explored more in depth given the increasing use of
this brand alliance strategy to reach developing markets.
Co-Branding
Co-branding is using two or more brands to promote
one product. This form of alliance tends to leverage the
brand equity strength of multiple brands to create distinctive
products with distinctive differentiation (Ferrell and
Hartline 2010). For example, Figure 1 shows a VISA
credit card co-branded with Citibank and Jet Airways.
Co-branding can increase awareness of the lesser known
brands: Having a more recognizable brand appear on the
same product or service can serve as an endorsement from
the established name (Keller 2008). Co-branding can be
communications-based, product-based, have multiple
sponsors or be based on two brands from the same
company (Kotler and Keller 2009).
Communications-based branding is used to promote
products or events. One brand may be used to endorse or
recommend the other for the mutual benefit of both
(Jobber 2007). Product-based branding can work as
ingredient-based where one brand is a component in the
manufacture of the other. It can also take the form of
parallel co-branding where two independent brands work
together to create a combined brand product. Brand
licensing is also possible, particularly in developing
markets where one company allows another company to
use its brand name, logo, or symbol on a non-competing
product for a fee (Ferrell and Hartline 2010). The licensing
company receives payment while the licensee uses the
brand equity of the licensing company to increase
awareness and sales.
Domestic versus International Co-Branding
Some brands are considered global as the product is
ubiquitous in its functionality. Such is the case with cars, furniture, and computers. Other product categories thrive
on differentiation as variety is inherent in the manufactured
goods. Health and food products are among those
that vary significantly by item and by geographic location.
Opportunities to develop various branding strategies are
more abundant for these products. However, introducing
an established brand from one market to a developing
market does not necessarily mean it will be received.
Domestic brands may have little to no value in developing
markets thus a co-branding strategy may be essential to
gain access or build primary demand for the entering
product. As will be discussed below Nestlé has capitalized
on this approach in a number of developing market
ventures.
Co-Branding Opportunities and Risks
Successful co-branding only happens when both
brands add value to the alliance. This value prospective is
gauged by analyzing how the brands will complement
each other with potential customers (Batra, Lenk, and
Wedel 2010). Research suggests that consumer attitudes
do not change much when strong brand names co-brand as
compared to lesser-known brand names (Uggla and Åsberg
2010). However, attitude is just one aspect of measurement.
The true benefit of co-branding can be assessed by
examining revenues, profits and market share (Keller
2008). Other advantages of co-branding include easier
access to retailer shelf space via the already established
brand, sharing promotional costs and extending consumer
segment reach.
Co-branding also has inherent risks. It can have a
dilutive consequence as the benefit of one product brand
is divided between two separate brands or companies. It
could be worse if the co-branded product is negative for
one, as it could reflect negatively on the other brand as
well. More specifically, co-branding poses the threat of
making one brand look weak due to the fault or negligence
of the other (Kahuni, Rowley, and Binsardi 2009). Many
times, co-branding results in new ideas for products or
services, which leads to the entrance of new competitors
who combine the features of both brands into one.
Co-branding can also result in confusing consumers with
new products or services if the two partnering brands are
not perceived as having a natural fit (Helmig, Huber, and
Leeflang 2008).
BRAND ALLIANCE CASE: NESTLÉ
Company Background
Nestlé is the world’s leading nutrition, health and
wellness company headquartered in Vevey, Switzerland.
It is ranked 44 in the 2010 Fortune top 500 list of global
companies. Its vision of nutrition, health and wellness
involves the concept of 60/40+ whereby the company aims to make products that achieve at least 60% consumer
taste with the added ‘plus’ of nutritional advantage. Nestlé
was founded in 1866 by Henri Nestlé. Today Nestlé
manufactures over 10,000 different products and employs
some 250,000 people. It sells over one billion products
every day to people in 130 countries across the world. It
also invests approximately US$1.4 billion in research and
development every year.
“Henri Nestlé endowed his company with the symbol
derived from his name. His family coat of arms, the nest
with a mother bird protecting her young, became the
company’s logo and a symbol of the company’s care and
attitude to life-long nutrition. Nestlé’s nest represents
nourishment, security, and sense of family that are so
essential to life”
Nestlé is built on the foundation of several hundred
strong brands under its portfolio which range from categories
like bottled water, baby food, and chocolate confectionaries
to pet care, nutrition and health. Figure 3
shows some of the more recognizable beverage brands.
Nestlé’s product and brand portfolio exhibits strong mar-
FIGURE 4
MILO
ket positions, often leadership. It is focused and at the
same time diverse: focused in that 75% of sales are
accounted for by 30 brands; diverse in that Nestlé has
strong local brands in a variety of categories.
Nestlé takes pride in its brand portfolio. Brand management
is thus an integral part of the company’s marketing
efforts. The company employs a number of successful brand alliance concepts. These concepts are elaborated
with examples below.
Communications-Based Co-Branding
The National MILO® Marathon (in Manila, Philippines)
is a perfect example of communications-based cobranding
in a developing market. In this case promotional
efforts are shared by two organizations to bring greater
attention to the branded event. Nestlé MILO® is a chocolate
malt energy drink fortified with vitamins and minerals.
Its nutritional content is focused on giving confidence,
energy and spirit for active living. The National
Marathon started in 1974, but ten years later MILO®
succeeded in popularizing running as a sport, with a
growing number of runners participating in the MILO .
The National MILO® Marathon has become the biggest
running event in the country attracting runners of all ages.
For the 2009 annual event, the organizers had two venues
and over 40,000 runners registered. A large number of
young runners do not have shoes, so in 2011 the MILO®
Marathon will distribute running shoes to thousands of
underprivileged school children. The organization will
use a portion of the registration fees to help fund the project. Sales at Nestlé Philippines have grown at a steady
4% for the last 10 years showcasing the success of
Nestlé’s association with the MILO® Marathon. This
growth also shows that Nestlé selected the right product,
market and partner for this brand alliance effort.
Product-Based Co-Branding
Sometimes two businesses work together in a brand
alliance to co-brand a product manufactured by one of the
companies with at least some component product from the
other. This was the case with Nestlé and General Mills.
However, some history on how the ingredient-based
co-branding partnership emerged is in order. On August
19, 1999, Nestlé USA and The Pillsbury Company formed
a 50–50 joint venture comprised of the Nestlé USA
novelty ice cream business and Pillsbury’s U.S. Häagen-
Dazs frozen dessert business. The alliance did not include
international operations or the Häagen-Dazs U.S. shop
system. This joint venture was named Ice Cream Partners
USA and provided an opportunity for significant incremental
growth from the combination. Each brand represented
a distinct segment of the ice cream category.
Häagen-Dazs is perceived as super premium packaged ice
cream and Nestlé has a unique novelty line.
At the end of 2001, Nestlé USA acquired the remaining
fifty percent ownership stake in Ice Cream Partners
USA from General Mills. This acquisition was made
possible through General Mills’ acquisition of Pillsbury,
which triggered a change of control provision in the joint
venture agreement. Nestlé now holds a 99-year license for
use of the Häagen-Dazs brand in the U.S. This also
includes the licensing agreement with Pillsbury for Häagen-
Dazs products in Canada. As of today, Nestlé still holds
alliances with General Mills through co-branded products.
For example, Nestlé is involved in an ingredient
co-brand with Pillsbury® Deluxe Chocolate Brownie
Mix that uses Nestlé’s chocolates. With this, Nestlé demonstrated
the importance of selecting and implementing a brand alliance strategy that helps the company grow in the
long run.
Same-Company Based Co-Branding
A same company co-branded product is created when
a company making two different product brands bundle
the brands together to make a new product (Wright,
Frazer, and Merrilees 2007). The Dibs® bite-sized ice
cream snack is an example of this with Dreyer’s Grand Ice
Cream and Nestlé Crunch Bars.
In 2005, Dreyer’s Grand Ice Cream introduced Dibs®
bite-sized ice cream snacks. The line sold nearly $40
million in its first six months to become the #13 top
novelty brand (Reyes 2006). In 2006 Dreyer’s became a
wholly-owned subsidiary of Nestlé and no longer a publicly
traded company. At this time, Nestlé led novelty
desserts with four brands and a 16.6% market share
(Reyes 2006). For this same company co-branded effort,
Nestlé selected the right product mix as evidenced by its
sustainable market share.
Multiple Sponsor Co-Branding
Co-branding arrangements can involve two or more
entities to bring greater distribution and sales for each
sponsor. In June 2010, Nestlé Waters brand Perrier completed
33 years as the prominent sponsor at the French
Open tennis championship Roland Garros. Perrier and the
French Tennis Federation renewed its partnership this
summer for another five years. The partnership dates back
to 1928, but the first contract was signed in 1978. At the
time, the alliance concentrated on the exclusivity of the
tournament and Perrier cool boxes on the court. Later on
the sponsorship changed to focus on the Perrier brand
alone, where visibility was seen by tennis fans in the
player’s rest area and marked on the umpire’s chair in
1996.
However beyond
this brand visibility that
helps maintain the
international recognition
of Perrier, Roland
Garros is a huge sales
opportunity. During the
tournament, around
57,000 bottles of Perrier
are sold to the public.
This translates to
30,000 liters and an
extra 18,000 liters for
the organization and
players. The French
Open is one of the four
major tennis tournaments and Perrier will continue to
benefit from this relationship as a result of selecting the
ideal brand alliance partner.
Co-Opetition
Nestlé and Coca-Cola also developed a unique
co-branding relationship. Nestea is a trademark of Nestlé
and is distributed under license by Coca-Cola. Nestea is
related to co-branding as it is a perfect example of coopetition
which describes the combination of competition
and cooperation (Kotzab and Teller 2003). Being late
entrants in the iced tea beverage industry, Nestlé and
Coca-Cola decided to unite against Unilever’s marketleading
Lipton brand. Nestlé created and marketed the
product while Coca-Cola managed product distribution.
In this way both companies benefited from the expertise
of the other without compromising the sales of other
competing brands.
New Brand
One of Nestlé’s most innovative and successful cobranded
products includes creating the new brand, Innéov
with L’Oréal. In 2002, Nestlé and L’Oréal formed a 50–
50 joint venture to begin to develop what they called a “functional food” (Charles 2002). Innéov is a nutritional
supplement for cosmetic purposes taken orally, with the
purpose of protecting, correcting and stimulating skin,
nails and hair cellular processes. Examples of Innéov
products are shown in Figure 9.
Innéov is one of the first major brand alliances between a food and a cosmetics company. The product
benefits from the nutritional research of Nestlé and the
dermatological research from L’Oréal. Innéov is based in
France and launched in pharmacies in November 2006.
L’Oréal did the marketing due to its current expertise in
promoting cosmetics. This new brand shows that Nestlé
selected the right product and the right partner to enter an
industry that makes food for the skin rather than food for
consumption.
Joint Venture
On Feb 8th 2010, Nestlé announced that it will set up
a joint venture company (JVC) with Yunnan Dashan
Drinks Ltd., with Nestlé holding 70% of the share and Mr.
Shan, Dashan’s founder and General Manager holding
the remaining 30%. The name of the new company will
remain unchanged. After the setup of the JVC, YUNNAN SPRING will continue to be manufactured as a high-end
product. In the meantime, a small portion of products will
also be sold under a Nestlé brand in three years.
As to the setup of the JVC, Nestlé clearly expressed
that Dashan is a well-known brand in Yunnan and the first
priority of cooperation is to ensure the sustainability of
Dashan’s business. The ultimate goal is to benefit consumers.
Using its expertise in product research and development,
and marketing, Nestlé hopes to propel the continuous
development of Dashan while at the same time spur
growth of its own regional water brands. The joint venture
shows Nestlé’s reach into developing markets is enhanced
by a brand alliance with an established company in the
new market segment.
CONCLUSION AND SUMMARY
A brand alliance can be thought of as a cooperative
marketing activity involving the combination of two or
more individual brands. Co-branding could be represented
physically by using two or more brands on a product
(e.g., Pillsbury Brownies with Nestlé chocolate) or
symbolically by associating brand names, logos or other
brand assets in marketing communication efforts.
Co-branding leverages brand name recognition however,
the effects of multiple brand alliances on consumer
evaluations of the individual brands are still not well
understood (Voss and Gammoh 2004). It is known that
various forms of brand alliances can enhance brand equity,
sales growth and market share.
Nestlé has had several success stories in brand alliances.
The MILO® Marathon continues to have strong
brand association. The new brand venture with L’Oréal
also stands out as Innéov has confirmed its number one
position in oral cosmetics in Europe. Nestlé’s joint venture
with DaShan also shows promise in giving Nestlé
access to a developing market. However, not all brand
alliances end with mutually beneficial results. Thus caution
must be exercised when two companies consider a
brand alliance to gain a competitive advantage.