Reviewed by Oct 05, 2020| Updated on
A corporate umbrella is simply a huge brand name that guides the smaller companies under its ownership. The brand provides structure and credibility to the smaller firms without getting involved in the key decisions related to their products and services. Therefore, the subsidiaries handle their distinct operations separately but receive financial backing and support from the parent company.
It is common to see the corporate umbrella approach adopted by numerous brands in order to diversify their reach and earn revenue from different sectors.
Consider the example of the corporate umbrella set up by Unilever Limited. This brand has various sub-brands based on the country in which they are operating and various products in food and beverages stream, such as desserts, ice creams, condiments, teas, and more.
Knorr, Annapurna, Brooke Bond, Lipton, Bru, and Kissan are a few subsidiaries that function under the corporate umbrella of Unilever but work as separate entities and make their own operational decisions.
The primary goal of a corporate umbrella is to provide credibility to smaller brands. This enables smaller brands to reach a larger customer base who were previously unaware of their products and services. Letting the smaller companies utilise the brand value can also create synergies for the corporation.
In exchange for the support and recognition, the large company reaps the rewards when the divisions build their brand equity and monetary status. Then, the divisions don't have to spend a lot on financial and marketing resources to establish a good reputation for their umbrella brand.
Another example, in this case, is the umbrella brand of Pepsico. In addition to managing the soft drink business with Pepsi and Coca-Cola, the brand also takes care of the snack food business produced by Frito-Lay.
It may become tough for the umbrella brand to take care of all the smaller divisions. If one of the subsidiaries fails to raise the sales or becomes a victim of a scandal, it can ruin the image of the brand resulting in lost sales, the decline in share prices, or even lead to a change in the management. The falling reputation of one brand may affect the sales of other divisions' products and services.