In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
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The Product Portfolio origin story
It all started back in the 1970s, when Bruce D. Henderson, the American businessman, founded the Boston Consulting Group (BCG) in 1963 as part of a bank, The Boston Safe Deposit and Trust Company.
The idea was that determine the share of cash to allocate for each product, also based on how much future cash potential each product had.
Assumptions underlying the Product Portfolio theory
According to The Product Portfolio theory, it’s fundamental to look at cash flows to build up a successful portfolio, and this is based on four primary rules:
- Rule 1: High market shares bring high margins and cash flows.
- Rule 2: Growth requires cash to be maintained.
- Rule 3: High market share will be either earned or bought.
- Rule 4: No product market can grow forever.
Cash cows are products with high market share and slow growth. They generate cash in excess of what it takes to maintain the market share.
According to The Product Portfolio theory, cash should be invested back in cash cows only to maintain them, but most of the excess cash produced by cash cows should be invested in new products (question marks, see below), which have the potential to become cash cows in the future.
Dogs are products with low market share and slow growth.
Pets are those products that don’t have growth potential, and they don’t generate enough cash to be sustained.
As Bruce Henderson explained in his piece, all products either become cash cows or pets.
Question marks are low market share and high growth products.
They require far more cash than they can generate.
Otherwise, they will die. The only way out is if they become stars. Otherwise, they will decay into dogs.
Stars are high-share, high-growth products.
While they are leaders, they generate substantial cash. Yet, they will become large cash generators only when they will turn into cash cows, as their growth rate will slow down.
However, they will have high market shares, thus becoming more stable products, requiring diminishing investments and high cash generation.
The Success Sequence
Bruce Henderson, founder of BCG, in his Product Portfolio, explained how in a successful sequence of cash allocation, stars over time become cash cows.
And the abundant cash generated by cash cows will be invested back in question marks, which will need, over time, to become stars, to trigger a positive loop.
In short, stars become cash cows due to market dominance and saturation, thus creating a condition of a product with a slower growth rate and yet high margins and cash flows.
The cash flows generated by cows will need to get invested back to question marks, that for the time being, will make substantial cash.
To trigger a positive loop, those question marks will need to be turned into cash cows, or else they will decay and turn into dogs.
The Disaster Sequence
Bruce Henderson, founder of BCG, in his Product Portfolio, explained how in a disaster sequence of cash allocation, excess cash from stars is invested in question marks that turn into dogs.
And how excess cash from cash cows invested in dogs turns a negative loop.
In a disaster sequence, the cash generated gets invested inefficiently, thus either using the excess cash from cash cows into products that will turn into dogs.
Or the excess cash from stars into question marks that will decay into dogs.
BCG Business Model
BCG Matrix Examples
The BCG matrix was developed in 1968 by Boston Consulting Group founder Bruce Henderson in a short essay titled Perspectives. At its peak, Henderson’s model was used by approximately 50% of all Fortune 500 companies. Today, it is still one of the most popular product portfolio analysis methods and is a central component of many business school curriculums.
The approach places a firm’s products and/or services into a 2×2 matrix with four quadrants that measure market share and growth rate. Each quadrant is described as follows:
- Question marks – high market growth/low market share products.
- Stars – high market growth/high market share products.
- Dogs – low market growth/low market share products, and
- Cash cows – low market growth/high market share products.
In this article, we’ll explain some BCG’s matrix examples.
Unilever BCG Matrix Example
Unilever is a multinational consumer goods company with hundreds of brands across categories such as ice cream, condiments, beauty products, personal care, and cleaning agents.
Founded in 1929, Unilever is the largest soap producer in the world and among the top 10 consumer packaged goods companies by market capitalization.
Some of Unilever’s food and drink-based brands occupy the question mark quadrant of the BCG matrix.
The company has acquired a few of these brands to better position itself in markets where health-conscious consumers are driving growth.
- Horlicks – a malted milk drink purchased from GlaxoSmithKline Consumer Healthcare Limited (GSKCH) in 2020.
- Olly Nutrition – a vitamin and supplement brand acquired in late 2019.
- Liquid I.V. – an electrolyte drink mix enabling consumers to hydrate faster, and
- SmartyPants Vitamins – another vitamin supplement brand for adults, children, and pets. Unilever acquired SmartyPants in November 2020.
With over 400 brands in its portfolio, Unilever has a number that could be considered stars.
In its Q3 2022 report, the company identified five billion-dollar brands that contributed to 14% growth and accounted for 50% of turnover:
- OMO – the company’s largest laundry soap and detergent brand.
- Rexona – a predominantly Australian deodorant and antiperspirant brand that is also sold in Africa, Europe, and North America under different names.
- Hellmann’s – an American line of mustards, sauces, ketchup, condiments, and salad dressings owned by Unilever since 2000.
- Magnum – an ice cream brand also sold as Magic in Greece.
- Lux – a global soap and feminine products brand.
Over the nine years that the company owned Slim-Fast, consumer weight loss trends shifted away from drink-based shakes toward other techniques such as the 5:2 program.
To focus in areas where it can develop sustainable and competitive businesses, Unilever also sold Spanish personal care brands Royale Ambrée, S3, and Petit Cheri in 2022.
While their respective industries may be relatively slow-growing, Lipton and Dove are two major sources of cash flow for Unilever.
Dove is a personal care brand sold in over 150 countries with revenue of around $5.1 billion across 2021 and 2022.
The brand is also in the top three health and beauty brands worldwide with over 2 billion consumer reach points.
Lipton, on the other hand, is one of 30 tea brands in Unilever’s portfolio that enables it to sell around 143 billion servings of tea each year.
Despite the evergreen popularity of tea as a beverage and $2.26 billion in annual revenue, Unilever announced it would be divesting some of its Lipton tea assets in 2021.
Unilever CEO Alan Jope noted that the sale was part of the “evolution of our portfolio into higher growth spaces.”
To that end, the company has retained its tea businesses in India, Nepal, and Indonesia. It also retained 100% of its ready-to-drink tea products released under a joint venture with Pepsi.
PepsiCo BCG Matrix Example
In the second example, let’s discuss PepsiCo. The company is best known for its soft drink brands, but it also has diversified interests in breakfast foods, snacks, sports drinks, water, iced tea, and various coffee-based beverages.
Let’s take a look at some of these under the BCG matrix.
When Diet Pepsi was launched in 1964, it became the first diet cola to be distributed around the United States.
Initially devised to cater to the dietary preferences of Baby Boomers, the brand enjoyed first mover advantage until Diet Coke was released in 1982.
Despite renewed interest in healthier, low-calorie drinks today, Diet Pepsi’s share of the core U.S. soft drink market has declined from 6.1% in 2004 to 3.8% in 2021.
7-Up Nimbooz is another PepsiCo brand that falls in this quadrant of the matrix.
Launched in 2013 to take advantage of growth in the Indian market, the brand has failed to take market share from the likes of Thums Up, Sprite, and Kool-Aid.
In North America, Gatorade holds an impressive 67.7% of the sports drinks market where it has been a mainstay for around half a century.
Globally, there may be additional opportunities for the brand to cement itself as the market leader.
Mordor Intelligence predicts the global sports drink market to grow at a CAGR of 4.5% between 2022 and 2027.
The research firm believes this increase will be driven by more awareness of the benefits of sports drinks and their ability to act as a convenient food or nutrient supplement.
Consumer health trends suggest that all sweetened cola beverages (including Pepsi) will move to the dog quadrant at some point in the near future. However, this cannot be predicted with absolute certainty.
Pepsi’s failed attempts to move with the times have led to some of its most notable failed brands.
One of these was Crystal Pepsi, a colorless, caffeine-free alternative to Pepsi which was removed from shelves after just twelve months in 1993.
Other failures include spice-flavored soda 7UP Gold and Frito-Lay lemonade, an uninspiring combination of the company’s snack and beverage lines.
One cash cow for PepsiCo is snack brand Frito-Lay with nearly 60% market share in the United States and, in 2020, $4.8 billion in sales.
The brand’s range of convenient and savory snacks is a staple of American pantries and is thus unlikely to decline in popularity any time soon.
Tropicana was also a cash cow with around 44% of the $2.63 billion chilled juice sector in the United States.
The brand’s core product is Tropicana Pure Premium, a pulp-free orange juice that is itself the third most popular food brand in the country.
Despite a high market share and around $3 billion in revenue, PepsiCo sold Tropicana and some other juice brands to focus on more profitable aspects of its business in 2021.
As part of the deal, the company retained a 39% non-controlling interest.
Coca-Cola BCG Matrix Example
Coca-Cola is one of the most recognizable brands in the world, but its true global presence combined with shifting consumer preferences means it does not necessarily dominate every market it enters.
As the soft drink industry undergoes rapid transformation toward healthier alternatives, the question mark quadrant is perhaps the most important to Coca-Cola.
To that end, the company has invested a lot of money in low or no-calorie drinks such as tea and fruit juice.
Diet-Coke is another product that falls within this quadrant.
Despite attempts by Coca-Cola to market it as a healthier alternative, the product has not been able to gain significant traction.
Bottled water is one product that Coca-Cola has been able to move from the question mark quadrant to the stars quadrant.
Brands such as Kinley, Dasani, and Glaceau Smartwater are significant players in the rapidly growing bottled water market.
In the United States alone, sales of the latter two brands accounted for $1.911 billion in sales during 2021.
Coca-Cola Life is an example of one product that falls in the dogs quadrant.
The product, which was a lower-calorie version of Coca-Cola, was made with the natural sweetener stevia.
Critics derided the company for greenwashing, but, in any case, consumers showed little interest in the natural alternative.
The Coca-Cola company has quite a few cash cow products, none more significant than Coca-Cola itself.
Growth is limited since the product is sold in more than 200 countries and territories around the world.
However, the drink remains immensely popular and a market leader despite a decline in global soft drink sales.
Apple BCG Matrix Example
Apple can boast a diverse product line that caters to a wide audience base. Let’s take a look at various Apple products in terms of the BCG matrix.
While Apple has a dominant market share in many contexts, Apple TV and Apple AirPods face strong competition from both established brands and smaller companies.
Apple TV in particular is a reasonable quality product that was simply ahead of its time.
It may become more popular when consumers can appreciate the importance of the fact that it is part of the Apple ecosystem.
The Apple iPhone is a star product that continues to deliver.
With each update, the iPhone seems to set new innovative standards and smash previous sales records. The iPad and Smartwatch are not far behind.
The iPod could be considered an example of a dog product.
While it only took the company five years to sell 100 million iPods, the longevity of the portable music player market was cut short by smartphone innovations and the rise of music streaming services.
In terms of cash cows, the MacBook, iMac, and iPad enjoy relative dominance in their respective markets.
These three products enjoy high brand equity, with devoted consumers more likely to purchase Apple products over comparable (and sometimes cheaper) alternatives.
Nestlé BCG Matrix Example
According to the Nestlé website, the company’s biggest brands are Nescafe, KitKat, Nespresso, Maggi, Toll House, and Milo.
In terms of revenue, the powdered and liquid beverage product category contains the most star brands with $23.976 billion in sales in 2021 alone.
Of the brands we mentioned above, Nescafe, Milo, and Nespresso are included in this category.
But it is Nespresso that warrants a closer look.
The brand can trace its origins back to 1975 when engineer Eric Favre was tasked with finding a way to allow consumers to enjoy quality espresso at home with the speed and convenience of instant coffee.
Nestlé’s eventual pod-based, single-serve coffee system was patented in 1976 with specialized coffee machines developed to match.
Today, around 14 billion Nespresso capsules are sold annually in around 84 countries. Impressively, around 400 Nespresso drinks are consumed every second with 1H 2022 sales of around $3.15 billion.
The company’s line of Maggi soups, noodles, recipe bases, bouillons, and recipe bases is a cash cow.
The brand was developed in Switzerland in 1886 by Julius Maggi who wanted his product to become as ubiquitous as salt and pepper at the dinner table.
Maggi products are available all over the world today, but the brand enjoys particular dominance in the Indian market.
In 2019, the company sold around 264,000 metric tonnes of Maggi products which have been a staple item for Indian consumers since they were first introduced in 1983.
Despite strong competition, Maggi’s range of instant noodles commands 60% of the market in India which is touted as the fourth-largest consumer of such products in the world.
Nestlé EveryDay is a brand of powdered milk or tea whitener that occupies the low market share, high market growth quadrant of the BCG matrix.
This market was valued at $5.35 billion in 2018 with an predicted CAGR of 3.2% to be worth $6.87 billion by 2025.
EveryDay and similar brands EveryDay Lite and Nestlé a+ SLIM are popular in the sub-continent where tea is popular and consumers desire a product that has a longer shelf-life than fresh milk.
However, the market for powdered milk and related products is extremely competitive with companies such as DFA, Fonterra, Danone, and Arla all major players.
While Nestlé has around 41% market share in Pakistan and has also found success in India, the company may find it difficult to increase its presence in the hyper-competitive powdered milk segment.
In 2013, the company undertook a strategic review of around 1,800 businesses to identify poor performers.
One of these was the weight loss brand Jenny Craig which was acquired by Nestlé in 2006 but struggled outside of the United States. The brand exited the European market in 2010 and was sold off completely in 2019.
The company’s ice cream brands have been in a similar predicament.
The size of the market has stagnated somewhat as consumers seek healthier food choices, and in the lucrative Chinese market, Nestlé was also forced to close its Shanghai factory in 2012 after failing to compete with the economies of scale enjoyed by local producers.
In more recent years, Nestlé has struggled to compete with main rival Unilever and its investment in powerhouse ice cream brands such as Magnum and Ben & Jerry’s.
Nike BCG matrix example
Nike is the most popular brand of sports and sports-inspired footwear in the world with a market share of around 27.4%.
Footwear sales comprised around 66% of total company revenue for the fiscal year 2022, equivalent to $29 billion.
The global footwear market is extremely lucrative and one where Nike invests much of its resources into product development.
Some predictions project Nike’s market to grow by 3.8% to be worth $508 billion by 2027.
Some of the best-selling brands in this market include the Nike Air Max, Nike Air Force, Nike Revolution, Nike Air Vapormax, and Nike Air Jordan lines.
Nike sells numerous types of footwear, but the one that earns the company the most revenue is that which is affiliated with NBA superstar Michael Jordan.
The Jordan Brand alone surpassed $5 billion in revenue in 2022 or around 17% of total footwear revenue.
While growth in this market is limited, Jordan’s mystique and the power he lends to the brand have not diminished in the three decades since the first pair of shoes was developed.
The company maintains an interest in the Jordan Brand with frequent releases of new sneakers and, at times, re-releases models that have long been out of production.
Nike’s sports equipment brands could be considered question marks in the BCG matrix.
Despite the global sports equipment market predicted to experience a CAGR of 6.8% between 2023 and 2027, the company’s market growth has been negligible.
However, this increase has been tempered by a 6.6% and 6.7% decline in the North America and Asia Pacific & Latin America regions respectively.
Moving forward, it will be interesting to see how Nike addresses the decline in the United States amidst increased competition from domestic competitors and perhaps an overreliance on growth in the Chinese market.
Nike acquired the Hurley brand in 2002 for an undisclosed amount at a time when the surf, skate, and snowboard culture was at its peak.
However, as interest in this culture started to wane toward the end of the decade, so too did the brand’s profit margins and viability.
When Nike decided not to disclose Hurley’s revenue from 2012 onward, many saw the writing on the wall.
In December 2019, Nike sold Hurley to Bluestar Alliance LLC as part of a broader trend of divestments and acquisitions in the industry.
Similarly, the company’s skateboard division – dubbed Nike SB – and its range of apparel, accessories, and shoes could also occupy this quadrant of the matrix.
Whilst Nike owns the popular Converse brand that is somewhat associated skate culture, Nike the company does not have a strong skateboard heritage when compared to others.
Mondelez International BCG matrix
This BCG matrix case study will look at the American multinational food and beverage company Mondelez International.
Mondelez owns a number of what it calls “Power Brands” which contribute around 70% of the company’s $28 billion in annual revenue. These are often billion-dollar brands with attractive margins that have been a mainstay for over 100 years.
Oreo is one example of a Mondelez cash cow. The cookie is the most popular in the world and is sold in more than 100 countries. In November 2021, the company released a limited-edition Oreo with 16 different Pokémon illustrations as part of a broader push to reach $4 billion in annual sales of the biscuit.
Powered drink mix brand Tang is another cash cow that is sold in over 30 countries. Mondelez does not own the brand in the USA where it is less popular. But in countries such as Brazil, Argentina, and the Philippines where it is adapted to suit local tastes, Tang is a market leader and contributed around $700 million in sales in 2018.
Green & Black’s is a British chocolate company that produces a range of organic food products such as chocolate bars, biscuits, hot chocolate, and ice cream. Whilst the brand has a devoted following, it nevertheless has low growth prospects and occupies a niche market.
Another example of a brand that occupies this quadrant of the BCG matrix is Dream. The brand of white chocolate was first introduced in the United Kingdom in 2001 but is now discontinued. However, it is still manufactured in Australia, New Zealand, and South Africa where its major competitor is the Nestlé Milky Bar.
Dream is relatively unpopular even where it is still available for sale. The Australian chocolate market is expected to experience a CAGR of 7.9% until 2027, but just 9% of consumers prefer white chocolate over milk chocolate.
In 2019, Mondelez reported that 60% of adults and 70% of millennials were skipping traditional large meals in favor of numerous smaller meals across the day. The company also noted that snack choices were based on quality and convenience.
Despite this trend, the company’s Vea brand of all-natural seed crackers, crisps, and crunch bars has failed to appeal to millennial consumers and keep pace with competitors. The brand remained a question mark for two years before Mondelez discontinued it.
The BelVita range of breakfast biscuits is a star Mondelez brand in a ready-to-eat snack market expected to grow at 9.3% until 2026.
BelVita is available in more than 50 countries and the company manufactures over 9 billion of them each year. First introduced in France in 1998, the brand achieved a market-dominant 18% of the health and wellness biscuit market in the United Kingdom by 2015.
In late 2022, consultancy firm Brand Finance ranked BelVita as the fastest-growing food brand in the world. The value of the brand had grown by 62% over the previous twelve months to be worth $1.6 billion.
BCG Matrix and Ansoff matrix
Similar to the BCG matrix, the Ansoff matrix is a prioritization tool that serves to understand whether to leverage existing products and markets or build new products and develop new markets as a business strategy.
Whereas the BCG matrix tries to look at the current company’s portfolio to understand what product might turn into a star, thus, kicking off a success sequence.
Both tools are used in conjunction and can help prioritize a product’s portfolio and inform a company’s business strategy.
These tools can help a company to assess its position in the current market landscape to understand the level of competitiveness and the competitive moats.
BCG Matrix vs GE Matrix
These strategies are based on strong, average, and weak competitive advantage and high, medium, and low industry attractiveness.
Thus, the GE Matrix gives a much more comprehensive understanding of a business landscape compared to the BCG Matrix, which is primarily a prioritization tool for products.
Thus, the BCG matrix is more primitive.
In addition, the GE McKinsey matrix provides concrete instruction on how a business can calculate industry attractiveness and competitive advantage or business unit strength.
Where the BCG matrix does not clarify how market share and market strength should be calculated.
There is one advantage in favor of the BCG Matrix. Its simplicity is also its strength.
The BCG Matrix is a way to develop a mental model around how a business can prioritize product units, thus moving fast from there based on this understanding.
The GE Matrix, on the other hand, with its weights, gives the impression of being more accurate than the BCG Matrix, yet it loses in flexibility.
- The Boston Consulting Group (BCG) matrix, also known as the product portfolio matrix, is a tool used to assess the strategic position of a company’s brand portfolio. The matrix was developed in 1968 by Boston Consulting Group founder Bruce Henderson.
- Back in the 1970s, Bruce Henderson, founder of the BCG consulting produced a cornerstone piece called The Product Portfolio, which would become the foundation of what is also known as the BCG Matrix or Growth-Share matrix.
- The BCG Matrix assumes that the success of a portfolio of business products will highly depend on how the cash will be allocated over those same products. More precisely high market shares products will also bring high margins and cash and vice versa.
- The matrix divides the products into four main categories: cash cows, dogs, question marks, and stars.
- In a success sequence, stars generate cash and over time they will turn into cash cows. Cash cows have low growth but high market share and as such generate large cash flows to be invested in question marks, to turn them in stars, that over time will become cash cows, and trigger again this positive loop.
- In a disaster sequence, the excess cash from stars is invested in question marks that decay into dogs. And the excessive cash from cash cows is invested back into cash cows that over time decay into dogs.
- Coca-Cola is one of the most recognizable brands in the world but is not immune from failed product launches or intense competition. As the soft drink industry wanes and consumers choose healthier alternatives, the question mark quadrant is perhaps the most relevant to the company’s long-term success.
- For Apple, products in the question mark quadrant may become more successful over time since they are integrated with other, more popular products. The iPhone, iPad, and Smartwatch are all products that enjoy tremendous market share, while the company’s laptop and desktop products are considered cash cows.
|Quadrant||Description||Analysis and Strategy||Examples||Real-World Applications|
|Stars||High market growth, High market share||Stars represent products or business units with substantial growth potential and a strong market presence. These units typically require heavy investments to maintain and expand their market share. The strategy is to invest heavily to dominate the market. As they mature, they may move to become cash cows.||iPhone (when first launched), Tesla Model 3||The iPhone initially required significant investment in research, development, and marketing to establish dominance. Tesla’s Model 3 had high growth potential in the electric vehicle market. Both companies invested heavily to capture market share.|
|Cash Cows||Low market growth, High market share||Cash cows are products or units that have a dominant market share in a low-growth or mature market. They generate significant cash flows and profits. The strategy is to milk these units by extracting profits and minimizing unnecessary expenses. The generated cash can be reinvested in stars or question marks.||Coca-Cola, Microsoft Office||Coca-Cola’s core soda products have a stable market share in the mature beverage market. Microsoft Office enjoys a dominant position in the productivity software market. Both generate consistent cash flows.|
|Question Marks||High market growth, Low market share||Question marks, also known as problem children or wildcats, operate in high-growth markets but have a low market share. These units require significant investments to capture market share and become stars. The strategy is to carefully evaluate and decide whether to invest for growth or divest. Some may become stars, while others may become dogs.||New tech startups, Amazon Web Services||Startups in emerging tech fields like AI and blockchain are question marks due to high growth potential. Amazon Web Services initially required significant investment in cloud infrastructure.|
|Dogs||Low market growth, Low market share||Dogs are products or business units with a low market share in a low-growth market. They typically do not generate significant profits and may even result in losses. The strategy is to minimize investment and consider divestment if they cannot be turned around. Resources should be reallocated to more promising units.||Sony Walkman, Blackberry||The Sony Walkman became obsolete with the advent of digital music. Blackberry’s smartphones lost market share to competitors. Both products became dogs and were eventually phased out.|
- Read next: SWOT Analysis.
What is BCG matrix with example?
The Product Portfolio (aka BCG Matrix or Growth-share Matrix) would look at a successful business product portfolio based on potential growth and market shares. As an example, Unilever is a multinational consumer goods company. Some of Unilever’s food and drink-based brands occupy the question mark quadrant of the BCG matrix (Horlicks, Olly Nutrition, SmartyPants Vitamins). Unilever has a number that could be considered stars (OMO, Rexona, Hellmann’s). Slim-Fast diet shakes brand in 2014 as part of a broader strategy to dispose of its non-core assets as a dog into the BCG matrix. Lipton and Dove are two significant cash flow sources for Unilever, thus being the cash cows.
What are the 4 elements of a BCG Matrix?
What is the effectiveness of BCG model?
The BCG Matrix is a prioritization tool to understand how to manage, maintain and grow a portfolio of products to grow a business in the long term and build competitive moats by looking into four key quadrants: question marks, starts, dogs, and cash cows.
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