Do brands stand tall post-acquisition?

By Shibani Gharat , afaqs!, Mumbai | In Marketing | April 09, 2012
What happens to strong brands after they are acquired? Do they get overlapped by the parent company's persona, or still manage to stand tall? afaqs! finds out.

Three brands - Set Wet, Livon and Zatak - changed hand twice in recent times. In 2010, these three brands, owned by Paras Pharma, were bought over by Reckitt & Benckiser (R&B). However, 18 months later, they changed hands yet again - this time from R&B to the Indian FMCG major, Marico.

Companies taking ove Brands

So what happens when brands are acquired or merged, that too so often? Industry observers opine that usually, in low-to-medium involvement category, the consumer is unperturbed by the change. And, if the brand holds a strong identity, the effect is zero. Unless the company makes an effort to communicate the same, consumers wouldn't even be aware of any such change.

"If the brand is Dettol, how does it matter who owns it," states Anand Ramadurai, head, marketing, MIRC Electronics. In case of FMCG, the relationship between the consumer and the brand ends as soon as it is purchased, unlike a consumer durable where the consumer may have to go back to the company for after sales service.

Anand Ramadurai

Santosh Desai

Partha Sinha

Shouvik Roy

Ambi Parmeswaran

Kamal Basu

However, at times, when the parent company is as strong as HUL, the effect may not be directly on the consumer but it certainly influences the mediating stakeholder - the suppliers, distributors and retailers. The acquired brand's image alters with the new ownership/corporate brand. This may have a long term impact on the way the brand is seen by end users as well.

Santosh Desai, managing director and chief executive officer, Future Brands, agrees. "In case of a relatively strong company such as HUL taking over a brand, there is a positive influence of the company image on the brand in the eyes of the consumer. It also has an impact in the eye of the retailer. The marketing, packaging and distribution of the larger company play a role when it comes to influencing a decision of both the retailer and the consumer," he says.

There will always be an interaction between the parent brand and the acquired brand, irrespective of whether a relatively strong company takes over a brand or vice-versa. Sometimes there could be a clash between the two, whereas there could also be a great compatibility. We have two examples, both from the airline sector, where the interactions between the two brands were totally different.

For instance, in the case of Air Deccan and Kingfisher, the two companies had absolutely different individual philosophies. Kingfisher was known to be flamboyant and luxurious, while Air Deccan, as the first low-cost carrier of India and in contrast to Kingfisher, represented the middle class. Their philosophies clashed and we all know what followed.

In the case of the Air Sahara-Jet Airways deal, the repercussion was totally different. "In case of Jet Airways and Air Sahara, the latter was a much superior brand offering than its original mother brand Sahara. Jet leveraged it to its full potential. The brand was rechristened as Jetlite later and today no one remembers Air Sahara," says Partha Sinha of BBH.

Often, the acquisition happens to kill the competition. In such cases, the parent company tries to push its own brand aggressively and plans a slow death for the acquired brand. However, things could go just the reverse way. For instance, when Coca-Cola acquired the Indian cola brand, Thums Up, many thought the Indian brand would vanish. But, the fact is that Thums Up is still standing tall and is the No.1 brand in the Coca-Cola family.

The category also plays an important role in many cases. Especially in high involvement products, the role of the parent company is immense. It is common knowledge that Thinkpads are not made by IBM anymore. "Good or bad, the image has altered," says Shouvik Roy, director, Elephant.

"In a category like paints, corporate brands are dominant and in such cases, if the product changes hands, it goes without saying that the product brand will acquire the characteristics of the corporate brand," says Ramadurai of MIRC Electronics.

What's important in any merger and acquisition is the smooth transition of an acquired brand into the adopted set up. During mergers and acquisitions, all eyes are on the brand. When managed gracefully, the smooth integration of a brand can play an important role in conveying a company's corporate strategy and intent to consumers, as well as the investors.

"If a company buys a brand, it can let the brand be on its own, rather than forcing the company's name on the brand. There is no need to force a company's name on to a brand unless it adds value to it," says Ambi Parmeswaran, executive director and CEO, Draftfcb Ulka.

He cites the example of DaimlerChrysler. "I feel that was a wrong strategy. The two brands were never able to amalgamate into a single cohesive brand that added value from the perspective of the customer. Daimler only spent time and resources on its core business, the Mercedes brand. There were very few common points between the two brands, which worked against the 'brand combo' and at the end of the day, the merger was in name only," he adds.

On the other hand, Toyota kept the Lexus brand separate and it has worked really well.

"There is always a rub off, whether cultural influence or personality traits," says Kamal Basu, head, marketing, Skoda India. The brand equity is also varied enormously. It is increasingly necessary to synergise the brand's identities keeping value maximisation in mind.

"Take Skoda for example. A lot of people believe that Skoda is a German brand because of the parentage of Volkswagen. But in reality, we are a Czech brand. However, being tagged as German also gives us an advantage because German brands are known for their quality and engineering," adds Basu.

"Finally, the new 'owner' of the product brand can definitely change the image of the brand. That's what marketing is all about in any case, and no brand can perpetually carry the same image unless some effort is made to build on that," postulates Ramadurai.

Every brand undergoes a lifecycle. While acquiring a brand, it becomes important for the company to understand at what life cycle stage it is in. As Devanathan puts in, "It depends on the life cycle of the category in which the individual brand plays, and its own stage within that life cycle."

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