The End of the Line for Line Extensions?

Personal-Care Brands With Broad Portfolios Finally See Sales Slow

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BATAVIA, Ohio (AdAge.com) -- Al Ries and Jack Trout first railed against the dangers of line extensions in their tome "Positioning" 15 years ago. For just about as long, executives at Procter & Gamble Co., Unilever and many of their peers have been raking in billions of dollars by gleefully ignoring their advice.

Their luck may finally be running out.

Within the past year, some of the most heavily extended personal-care brands in those giants' portfolios -- Unilever's Dove and P&G's Pantene and Olay -- have slowed substantially or even declined in the U.S.

Dove, after years of double-digit growth, had nearly flat sales last year (up 0.2% to $608 million), according to Information Resources Inc. Although the picture is likely brighter in faster-growing untracked channels, such as Costco, where Dove is particularly strong, the slowing has still been pronounced.

Olay, which has had an even stronger run in the U.S. in recent years, ended a long streak of consecutive double-digit monthly sales gains in facial skin care last fall, according to IRI data from Morgan Stanley. Sales growth started slowing in September, then turned negative in February, punctuated by a 15% decline the four weeks ended June 15 vs. a year ago.

And Pantene (the bulwark of P&G's besieged hair-care portfolio for much of the decade, thanks to one successful extension after another) has shown double-digit sales declines for nine of the past 10 four-week periods, per the Morgan Stanley IRI data.

Shaky pillars
The brand's sales and shares have been falling ever since a spring 2007 restage aimed, ironically, at making the brand's increasingly complex "brand architecture" more sensible for consumers. The idea was to visually arrange those 70 or so products into "pillars," or visually distinct lineups to address issues ranging from limpness to sponginess to artificial color. Despite that, Pantene has been losing share fairly consistently since the restage.

Likewise, earlier this year, sibling Olay invested in a TV campaign aimed at driving women to a website, olayforyou.com, to help them decide among the 120-plus products.

That's not to say line and brand extensions haven't worked. Each brand has at least tripled global sales in a decade -- Pantene to more than $3 billion, Olay and Dove to more than $2.5 billion. But those three alone account for more than 250 items in a Wal-Mart supercenter (more than 120 for Olay, 70 for Pantene and 50 for Dove), which raises the question of whether they're staggering under the weight of all those extensions.

Rival megabrands have been coming on strong, too. Since 2003, L'Oréal's $3 billion global behemoth Garnier has moved into U.S. hair and skin care, making life harder for Olay and Dove, as well as $5 billion sibling L'Oréal. Johnson & Johnson's dueling global megabrands Neutrogena and Aveeno also have been taking share through extensions.

All the brands are "starting to look a little more like each other," said Ralph Blessing, a consultant with Arbor Strategy Group, Chicago, and a former serial line extender himself; he managed Unilever's Suave for years. "Everybody's got their aromatherapy line or their curly-hair product."

Future implications
So how long before it all triggers a massive shelf purge à la the early 1990s? The Trout and Ries broadside against line extensions came as P&G, Unilever and others began slashing slower-moving brands and products to concentrate on best sellers and moved to launch more new brands rather than extend old ones. Does the slowing growth of big brands portend similar moves now?

Not according to Unilever Chief Marketing Officer Simon Clift, who nonetheless acknowledged that some brands -- including Dove -- have gotten overextended at times. "The argument for extra sales is very compelling," he said. "But you normally pay for it in the end."

Dove stalled in hair care in the U.S. because it mainly was "just sticking Dove on a bottle of shampoo and expecting it to sell," he said. The hair products have done better of late by linking Dove's moisturizing heritage to issues more relevant to U.S. hair types, such as damage repair, he said, adding that Dove deodorant has done far better consistently.

Given opportunities to extend existing brands and products into new markets -- such as deodorants in Asia -- and that Unilever continues to shed some smaller brands, launching new ones doesn't appear to be in the cards.

The same goes for P&G. "We still have brands that are far more extendable," said P&G Chairman-CEO A.G. Lafley. "And we have others where we may be reaching limits." Olay and Pantene, however, haven't reached those limits yet, he said.
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