For many start-up alcohol companies the question of whether to build a “branded house” or a “house of brands” is a critical one to answer for their company and brand’s future success.
Whether you plan on launching just one product or dozens, considering your company’s strategy for brand architecture and how it will evolve over time is a critical first step to ensure your brand’s success and ultimately, its strength in the market.
The “Branded House vs. House of Brands” comparison refers to the two primary ways of structuring a business’s brand(s) and products. Crafting the right brand architecture for your organization is a strategic necessity and when planned correctly it will provide many benefits.
4 Benefits of a Clear Brand Architecture
- Improves the cost effectiveness of your brand and marketing investment.
- Aligns brand positioning and value propositions appropriately with market segments.
- Provides clarity and consistency to your brand vision and marketing efforts.
- Creates a clear decision making framework for launching new products, and updating existing products, allowing you to be more nimble and dynamic.
House of Brands Strategy
This is a multi-brand strategy. In this brand architecture, all the products produced by your company bear their own unique brand names as opposed to your company name.
Most established alcohol beverage companies have historically operated as a house of brands. (e.g. Brown-Forman owns Jack Daniel’s Whiskey, Herradura Tequila and Finlandia Vodka. These are all stand-alone brands within their respective alcohol categories.)
Organizations that follow this model are marketing-driven organizations in which each separate brand is supported by a marketing staff and a substantial marketing budget. The advantage of this model is the ability to create numerous, strong, independent brands that each stand credibly within their own category unfettered from your other brands.
4 Reasons to Build a House of Brands
- If any issues arise with one of your products the other products remain largely unaffected.
- You can launch more niche focused brands that can live apart from the parent brand allowing you to craft your messaging specifically for each segment.
- Creating separate brands allows for premium and value products to live separately from one another. Your value brands won’t detract from the quality or reputation of your premium brands.
- If your growth model or exit strategy includes selling portions of your portfolio, creating different brands allows you to sell a brand vs. the entire company to reposition or raise capital.
The downside of the house of brands architecture is the significant resources required to support such an approach. Few organizations have the marketing talent and financial resources required to make this type of approach successful.
Branded House Strategy
This is a single brand strategy. With this brand architecture, your company is the brand and acts as an umbrella encompassing all your products wrapped into a single identity. Two well-known examples are Virgin and Apple, but many successful craft producers have also chosen the branded house architecture due to its simplicity and cost effectiveness.
Organizations that follow this model need to ensure their company presents itself as a brand, not a financial holding company. In addition, the brand should provide an overarching reassurance to customers by standing for something such as quality, innovation or some other admirable attribute. Ideally, the brand should fulfill a customer need, take a leadership role in a category or stand for values that resonate with the target consumer. Using a branded house strategy allows for an equity transfer by lending credibility and quality assurance across all your product offerings.
4 Reasons to Build a Branded House
- You have a more limited branding and marketing budget. Building a branded house saves significant capital that would otherwise be spent on developing and marketing multiple brands.
- You want a simpler model to build, follow, and control. (Your products will all share the same budget, customer, and market position.)
- It simplifies your communication policies, centralizes your branding strategies and is a great way to create consistency in your image.
- New products and line extensions can be launched far more quickly since the brand is already established and they’ll carry the prestige already associated with your brand.
The downside of the branded house architecture is that it can diminish your flexibility and ability to adapt to changes in the market — you can stretch a specific positioning only so far to fit different products. It is also more difficult to transition a product out of the branded house and into a stand-alone brand, either for market reasons or to sell the brand. In fact, selling the brand will more than likely require the sale of your entire portfolio of products since they all share the same brand name. You will be starting over if you want to continue in the business.
Which Strategy is the Best?
Both strategies have pros and cons. Choosing the correct one for your company depends upon market scenarios as well as your long-term plan. The key is knowing your market, your product and your capacity to manage your products and brands. There is no question that choosing and establishing a clear brand architecture strategy that fits your company best will lay a strong foundation for future success.
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