The potential break up of Fortune Brands will unlock tremendous brand value. The brands in this company’s portfolio have little relationship with the parent company or each other; they simply happen to be owned by a single holding company. Fortune Brands today is a prime example of how a poor brand architecture strategy actively diminishes value. The value Fortune Brands brings as a holding company is questionable. The Moen faucet business is completely different than the business of manufacturing and marketing Titleist golf balls. A single company cannot be equally excellent at both. Activist investor William Ackman who is pushing for the break up is correct that the company is worth more in pieces than it is today.
Break It Up Further
The current thinking is that Fortune Brands would retain its alcoholic beverage business and spin off the golf business (that includes Titleist, Foot Joy, Pinnacle and Scotty Cameron) and the home improvement business (including Master Lock, Moen, Aristokraft Cabinets, Fypon, and Simonton Windows among others). Yet, this is probably not enough. Some of the brands in the spun-off divisions are probably worth more sold as individual brands to specialty companies. There isn’t a logical reason why the same company should sell padlocks and kitchen cabinets.
Trim the Spirits Portfolio
Furthermore, Fortune Brands should take a careful look at the business it plans to keep. Their current brand portfolio contains some extremely well-known and profitable brands and brands with great growth potential. At the same time, this list contains a number of niche products that are not at the top of their category in terms of market share or potential. Fortune Brands can shed the weaker brands to focus time, money and resources on the brands that can profitably grow in the future. Which brands would you trim from this list?
El Tesoro de Don Felipe
Starbucks Coffee Liqueur (they might want to watch out for this license–see what happened to Kraft!)
More on Brand Architecture:
What is Brand Architecture
Approaches to Brand Architecture
Brand Architecture: Strategic Considerations
General Motors: A Reorganized Brand Architecture for a Reorganized Company