In August 2003, Hindustan Lever Limited (HLL), India's largest Fast Moving Consumer Goods (FMCG) company announced that it would consolidate and rationalize its portfolio of brands. In the process, it planned to prune its brand portfolio down to a few mega brands from its existing 30 power brands, and the rest of the brands would stay as stand-alone power brands.

In FMCG industry, brands play an important role in profitability and growth. How companies manage their brands on one hand and costs on the other is the differentiation between the winner and the loser. But to derive profitability and growth, brands need to be innovative. Innovation may be in the form of new products, new positioning, or new packaging, cost control and volume. But in the 1990s, HLL met with failure in the number of new product launches. Its rural toothpaste, Aim was discontinued in 2001, so was its detergent for washing machines, Revel in 2001. According to Dr. V V L N Sastry, County Head, Firstcall India Equity Advisors Pvt. Ltd., "For profitability growth drivers for any FMCG business would include their existing brands, new products, new businesses and improved or enhanced presence and availability. While for driving efficiency, it needs to look at manufacturing costs, working capital, costs across the supply chain as well as people and indirect costs." FMCG companies are relying more on outsourcing than manufacturing their own products to save costs. However, costs do not limit to manufacturing only. With Stock Keeping Units (SKU) of FMCG companies running into thousands, a majority of the costs of the FMCG companies arise from their supply chain management. Companies, which are efficient in managing their supply chains, are better placed to cut down costs, and pass the cost savings onto the consumers.

Pradeep Chintagunta, Professor of Marketing, Graduate School of Business, University of Chicago, opines, "more importantly it is predictable volumes. This comes about due to sustained repeat purchasing by consumers, which comes from brand loyalty. By having predictable volumes, the firm can lower costs of production. Hence, revenues go up and costs decline resulting in greater profits."

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