The consortium consisting of Unilever, Bass, Cadbury-Schweppes and Kimberly- Clark, which between them account for about 18 per cent of ad spend on UK television and a large number of consumer goods on supermarket shelves, last week announced a pilot program to share market research and to explore joint marketing initiatives.
A source within one of the participating companies said the scope of the exercise will be broadened in the next year to include "areas of mutual interest and concern" if the pilot proves successful in adding value to each company's products and the managements get along with one another.
"We are going in with an open mind. If we see opportunities to strengthen our position on the sales and marketing side, we will pursue them," said the source.
The group of four, known as the Consumer Needs Consortium, was put together by Unilever. While they are all heavily involved in the consumer goods market, there is little direct competition between their brand portfolios.
Unilever produces such household staples as Persil soap powder and Bird's Eye and Wall's frozen foods; Cadbury-Schweppes is the UK market leader in chocolate and mixer drinks; Kimberly-Clark makes Kleenex tissues and sanitary products; Bass has an extensive portfolio of beer and spirits brands.
Phil Barden, director of the consortium, said last week that its ambitions were limited to sharing marketing information and possibly doing joint promotions. "The participants will remain separate entities with their own trading relationships," he said.
Mr Barden added that the results would be reviewed in the first part of next year to determine whether the project could be expanded. "I am not going to speculate on the agenda," he said.
Industry analysts believe almost any clubbing together of branded goods companies would improve their profitability, but are particularly excited by the possibilities of this tie-up. They point to the reverses suffered by consumer goods brands at the hands of the supermarket groups, which have extracted ever deeper discounts on branded products and have boosted profits with similar-looking own-label brands.
They also see benefits in the companies pooling media buying power. Unilever owns its own media buying arm, Initiative Media. If its consortium partners were to funnel advertising spending through this agency the buying power would be large enough to compete with Zenith, the market leader, and would drive down the cost of a 30-second ad for consortium members.
"It is impossible to detect any downside to this arrangement," said Tom Blackett, deputy chairman of Interbrand, the branding consultants, who have worked on a number of the brands involved in the consortium. "It will lessen the influence of retailers in price negotiations and allow the companies to extract better terms from ITV and Channel 4 for airtime rates."
Mr Blackett said the initiative could spur other large consumer goods companies such as Proctor & Gamble, United Biscuits, M&M/Mars, Grand Met and Heinz to form similar alliances.
Supermarket executives are sceptical. Steven Cain, marketing director of Asda, said there is little coordination even between brands owned by the same company in sales negotiations with retailers: "It is difficult enough to tie together group buying agreements within just one company. With four it will be impossible."Reuse content