How to run a portfolio of brands

“A company like us has to be quite selective,” says Herbie Dayal, chief executive of KMI Brands, which owns toiletries labels such as Derma Mum, Fish and Naked and makes fragrance products under licence for Orla Kiely and Ted Baker.

Dayal has to think carefully when considering which new brands to bring into KMI’s portfolio. He claims that the business gets about 10 approaches a month from designers and retailers that want to get into the lucrative toiletries market, worth £8.8bn, according to Mintel.

With only 23 employees, KMI has to ensure that it makes the best of the brands it takes on or creates itself. With that in mind, it is working with consultancy BDO to decide whether it should “exit” any of its nine brands, as it did last year when the business got rid of five ranges, including Phil Smith haircare products.

Dayal sees KMI as an “early stage” company – one that can create products from nothing, bring them to profit, then consider handing them over to bigger firms that can take them global.

Previously a management consultant, he says: “In that role, you would identify what are your rising stars, what are your cash cows and what are your dogs. That was a way of understanding your choices and where [products] are in their lifecycle.”

Identifying where KMI’s brands are in their lifecycle will no doubt help the business decide which can be nurtured and which should be sold.

“We are good at building things from nothing into something, and then somebody else can take them over at that point,” says Dayal. “Another company could be much better for the brand than we are at that point – and we are free to reinvest and develop new things.”

This year, as well as possibly selling one or two brands, it is also going to develop several of its labels. Derma Mum, the skincare range for expectant mothers, will expand to Derma SOS, designed to appeal to people looking for lotions that can target stretch marks and blemishes. And Ted Baker, for which KMI has produced perfume for 13 years, will expand into lip gloss, false eyelashes and nail polishes.

It will also launch hair products in a joint venture with stylist Scott Cornwall, trying to tap into a gap in the market – salon-style hair dye removers that people can use at home. KMI is in negotiations with retailers at the moment but hopes to launch the brand, Decolour, in May.

With such a wide range of products, Dayal must be careful to make sure that his portfolio remains balanced, and that each brand has its own clear function. So, in contrast to Decolour, which is all about efficacy, it also makes candles and perfume for clothes designer Orla Kiely, which are more about lifestyle.

Working under licence for Kiely and Ted Baker means working closely with them and having a relationship that means everyone’s views are listened to.

“Managing [brands] for other people is quite difficult; everyone has a different view,” he says. “It is not easy and not everyone could do a good job with Ted or Orla. The reason we do is because they feel we have an organisation that listens, understands and wants to do what they do.”

He adds that Kiely is particularly choosy about how her brand extensions are managed. “She has her own attitude and style and she can only work with people who can accept and put up with that – in a nice way,” he says.

Having a close handle on the life of its brands meant KMI demerged with King of Shaves in 2009, the company that Dayal and Will King set up. King of Shaves had taken off, and it made sense to separate the two firms so Dayal could grow his range and King could focus on the shaving side.

“We had King of Shaves, [men’s haircare brand] Fish and Ted Baker. King of Shaves was ours and Ted Baker and Fish were licence agreements,” he says.

“When you have a company and one brand is your baby and that’s where you invest all your money, that automatically means the others are a little neglected. The feeling was we could do better with those other brands as well, rather than just having them as sort of ‘add-ons’.”

Both men are on each other’s boards of directors and Dayal is a shareholder in King of Shaves, but the companies are otherwise separate.

“The question was how to structure and organise ourselves properly,” says Dayal. “Previously, all the guys we worked with had two hats on and it wasn’t particularly focused, so we thought it would be better to [split] and give each company its own resources.”

He credits his time as a management consultant for helping to give him the nous he needs to manage a variety of brands.
“Background experience is great because it helps you in everything you do, it is important you get a good general business understanding,” he says.

However, he adds that when starting KMI, the strategies he learned as a consultant were replaced to a certain extent by action.

“When you start up a business, thoughts really go out of the window,” he says. “It’s more about action. Management consultants are thinkers, analysts, which is very beneficial.

“When you are running a business, especially in the early stages, it is all about getting samples sent out to people, for example, so there is not a lot of thought,” he admits.

KMI had a turnover of £12m in 2010, up from £10.6m in 2009, according to its most recent accounts. However, starting the business in 1993 as Knowledge & Merchandising Inc, required investment from Dayal and King – who then knew little about the shaving market.

“When we did the [King of Shaves] shaving oil, here were two people who didn’t know anything about the industry,” he says. “So if we had come to [an investor] for money, [given the] competitive nature of this business and [the fact that] you don’t know anything, they’d have said no, [as they would have thought] they would lose their money.”

If there is anything Dayal would do differently, it would be to have demerged from King of Shaves earlier. He is open about the fact that it was a “pain” to go through, with all the legal workings and overheads involved, but now the two businesses are separate, more time can be dedicated to each.

King has called KMI “a boutique Procter & Gamble”, and the two companies have certainly experimented with similar things. For example, P&G has its Beauty Recommended online magazine, featuring mainly its brands, such as Max Factor make-up and Olay skincare, from which people can buy products. Similarly, KMI has its online KMI Club, using the acronym to stand for Keep Me Inspired, where all of its products are available to buy.

But Dayal says this is not where sales are really made. Some of its brands have their own websites, which are more popular, such as nakedbodycare.co.uk, popular with so-called “Naked Nutters” – fans of the chemical-free brand.

It is these fans who are helping get the brands through the economic downturn and the price promotion that has come from retailers. Dayal is concerned that constant discounting and deals will eventually mean that products are simply commodities and will therefore just attract discount hunters instead of fans.

“Of course you argue about prices with retailers – we do that with our suppliers, it is normal,” he says. “But making the public expect to have valuable products at a cheap price continuously rather than just for trial means you won’t have valuable products, and that is a problem.”