×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Old names make good business propositions

Old names make good business propositions
Comment E-mail Print Share
First Published: Mon, Apr 23 2007. 02 51 AM IST
Updated: Mon, Apr 23 2007. 02 51 AM IST
Venugopal Nandlal Dhoot’s penchant for old and battered brands is known to the world. Literally. Dhoot’s pursuit of troubled brands—the ones that enjoy a strong equity and high recall among consumers, but are left to languish by their parents, who, for some reason, can’t spend on their upkeep—has taken him around the globe. The chairman and managing director of the Mumbai-headquartered Rs13,000 crore Videocon Group acquired 91.85% of the loss-making Indian business of Sweden’s AB Electrolux in 2005 for around $94 million (about Rs395 crore). With this, he got two more Indian brands, Kelvinator and Allwyn, which Electrolux had acquired when it forayed into India. The deal gave him a head start in many segments of the consumer-electronics business, such as washing machines and air-conditioners, where Videocon did not have a presence.
Then, within a couple of weeks of this deal, Dhoot bought the colour picture tube business of France’s Thomson SA, one of the world’s leading colour picture tube manufacturers, which wanted to exit the space because it didn’t see any future in it, for around $300 million. Dhoot thought the deal would help him “command the complete value chain of manufacturing glass, to picture tubes to television sets” and become a global television manufacturer. He wasn’t wrong: The deal catapulted him to the world’s third-largest manufacturer of colour picture tubes.
Buying brands that seem dead is central to Dhoot’s business growth strategy. He argues that it is easier, both in terms of strategy and investment, to revive such brands than to build new ones. Today, Videocon is a leading consumer electronics player with 17 manufacturing plants in India and six spread over China, Poland, Mexico, Italy and Oman. His interest in old brands still remains strong. Currently, he is pursuing Korea’s beleaguered company, Daewoo Electronics, for its consumer electronics business.
There are many other players like Dhoot in the market. Hindustan Unilever Ltd (HUL), Dabur India Ltd, Marico Ltd, Cholayil Pharmaceuticals Pvt. Ltd and Bungee Ltd are some leading marketers that have bought brands that seemed to be going nowhere. The trend has been largely driven by the parent companies, which have tried to phase out their fringe brands to focus better on their core business. In some cases, the brands have been quite vibrant, like HUL’s hair oil brand Nihar, which was bought over by Marico India Ltd, reportedly for Rs200 crore, last year.
In other instances, the brands, though historically strong, had lost contemporary appeal, like Cuticura (a women’s grooming brand) and Dalda (a vanaspati oil brand owned by HUL), yet were bought in the hope that their old charm could be revived.
The jury, however, is divided on the success of such deals. “A brand may have enjoyed a certain equity among its consumers in the past but if its guardians didn’t invest in keeping it contemporary, then the chances of its revival are quite bleak,” says Harish Bijoor of Bijoor Consults, an independent marketing consultancy. He argues that at times, “reviving an old brand might entail more investments than required for launching a fresh brand”.
Indeed, one could argue that Kelvinator, which was once Indias’s largest selling refrigerator, is no longer among the top-selling brands, despite huge investments in marketing and advertising in the past two years. Dhoot, however, says his decisions to buy old brands have entailed many other strategic gains, like a differentiated brand play, a global presence and manufacturing facilities, along with the strength of the brands.
Observers say that such deals work better when the buyers are clear about why they want a particular brand. “Buying a brand simply because it enjoyed immense consumer attention at some point may not always work,” says Ramesh Jude Thomas, principal executive officer, Equitor Consulting, an independent brand consultancy. “However, a sound business strategy around a strong brand may work well,” he adds. And that’s exactly what Marico did when it bought Nihar from HUL last year. HUL, according to a company spokesperson who did not wish to be named, put brands like Dalda and Nihar on the block because they were no more a part of the company’s core-growth strategy. On the face of it, Marico’s decision to buy Nihar seemed odd because Marico was already the market leader in the segment, with its brand, Parachute, enjoying more than 50% market share. Nihar’s share, on the other hand, had dwindled to 7-8%. Marico, however, argues that it was the perfect decision for them.
“The coconut hair oil segment is one of the fastest growing categories in our portfolio. An additional brand with a strong connect among consumers would have strengthened our presence and we could also leverage our costs across the two brands,” says Milind Sarwate, head, strategy, Marico Ltd.
Apparently, Dabur India’s decision to acquire Balsara’s hygiene and home-care products was also driven by the same approach. Balsara was a known but small player in the oral and household-care segment. Dabur, on the other hand, was looking at an aggressive play in the fast-moving consumer goods space. So, in 2005, it bought out the businesses which comprised brands such as Promise, Babool and Meswak, mosquito repellents such as Odomos and household products such as Odonil and Odopic. Aggressive brand communication and marketing over the past one and a half years have seen the brands making a strong comeback in the market. “Babool, Promise and Meswak together enjoy an 8.5% market share nationally and a 10.5% share in the northern, eastern and western markets as against 7% share before their acquisition,” says V.S. Sitaram, executive director, Dabur India. “Babool, which was a Rs40 crore brand at the time of acquisition, is now a Rs100 crore brand. Similarly, Meswak and Promise have grown to become Rs20 crore and Rs4 crore brands, respectively,” he adds.
While some companies have had a rewarding experience, others like Bungee Group which bought the vegetable oil brand, Dalda, from HUL, and Cholayil Pharmaceuticals which bought Cuticura, have yet to get their acquired brands on track. “Brands go through several stages in their life cycle. They emerge, submerge, merge and then, re-emerge. The process of re-emergence, however, has to be charted out cautiously,” says Jagdeep Kapoor, Samsika Marketing Consultants Pvt. Ltd, a brand consultancy based in Mumbai.
Comment E-mail Print Share
First Published: Mon, Apr 23 2007. 02 51 AM IST
More Topics: Marketing and Media | Campaign |