AERO: RELATED DIVERSIFICATION
Brands that possess strong positive associations with a product category often find themselves in a favorable position when it comes to extending that brand into new markets and reach new audiences. Take the example of Nestlé’s Aero brand – notoriously associated as a unique ‘bubbly’ chocolate bar – which has more recently ventured into the hot chocolate industry by exercising Ansoff’s fourth strategy, ‘related diversification’. Related diversification involves the production of a new category of goods that complements an existing line or current business activity, in order to penetrate a new but related market.
The Aero brand was born into the UK with the launch of Mint Aero chocolate in 1935, before growing internationally with an increased range of flavours, such as milk chocolate, white chocolate and strawberry, in various regions at various points in time – and later in the newer form of ‘Aero Bubbles’. By 2009, value sales of Aero reached £97m in the UK alone, making it the sixth biggest chocolate bar brand behind Cadbury Dairy Milk, Galaxy, Mars, Kit Kat and Flake, according to Mintel.
Despite this strong position, by the mid-2000s Nestlé had foreseen stalling growth opportunity for Aero in the UK due to reduced growth in the chocolate bar market combined with increased competition – leading to decline in sales year-on-year since 2008:
Not content with further profit opportunity coming solely from overseas chocolate bar markets, Nestlé sought to utilise Aero’s strong brand in a new industry in the UK. In identifying a market to target, just like Virgin when approaching its unrelated diversification strategy, Nestlé required not only a market that offered growth potential (and therefore profit potential), but also one in which existing associations were relevant to leverage the brand and create a competitive advantage. For example, using the Aero brand to enter the dog food industry would have been far from suffice since chocolate is poisonous to dogs, and new associations between Aero and dog food would inevitably create challenges when selling chocolate. This explains why Nestlé instead launched dog food through the standalone ‘Bakers’ brand.