With the UK declining India’s request to deport UB Group chairman Vijay Mallya who left the country on 2 March, lenders to his grounded Kingfisher Airlines may be thinking of newer ways to recover the more than Rs.9,000 crore he owes them.
To be sure, their recovery efforts last fortnight came a cropper. The Kingfisher Airlines brand and trademarks found no takers in an auction held by the lenders on 29 April. Besides the logo, the lenders put on sale its tagline “Fly the Good Times” as well as other trademarks like “Flying Models”, “Funliner”, “Fly Kingfisher” and “Flying Bird Device”.
Lenders failed to attract any bids for the sale of these pledged assets at a reserve price of Rs.366.70 crore, reported PTI. The reserve price of the trademarks was not even a tenth of the price at which they were pledged as collateral for loans from the banks.
An 18 March report in Mint, however, said that the valuation of the Kingfisher Airlines brand, a year after the airline was grounded in 2012, was estimated at just Rs.200 crore and currently stands at less than Rs.100 crore. That’s a sharp decline from the original Rs.4,100 crore valuation assigned to the brand in 2010 by audit and consulting firm Grant Thornton India Llp. The Rs.200 crore and Rs.100 crore valuations were given by an independent valuation firm, RBSA Valuation Advisors Llp.
So was the reserve price just too high for bidders to show any interest in the brand logo and its trademarks? Would the lenders have found buyers at lower price points? In Dheeraj Sinha’s opinion, it’s not a pricing issue. The issue is that you have a tainted brand in a difficult category, says Sinha who is chief strategy officer (South Asia) at advertising agency Leo Burnett.
The category isn’t easy. The airline business is very capital-intensive. This also means that if an investor buys the Kingfisher Airlines brand, he will have to invent a new sustainable business model that reflects the brand. “Why jump through so many hoops in a category that is cyclical and demands huge amounts of cash,” asks Kiran Khalap, co-founder and managing director at Chlorophyll Brand & Communications Consultancy Pvt. Ltd.
Since the airline business isn’t like the fast-moving consumer goods (FMCG) business, where you can source products and market it under any brand, it dramatically reduces the number of people who would be interested in this sale.
However, why the brand did not find buyers stems from a single insight: the brand on sale is Kingfisher Airlines and not Kingfisher. The brand drew and continues to draw its equity from beer and not from the airline. It was the airline that attempted to leverage the goodwill created around beer and the philosophy of “Good Times”, points out Khalap.
The brand value is directly linked to a brand’s performance and what it does for its stakeholders. In that sense, what value can a defunct airline have? Between 1978 and now, Kingfisher beer has been a vibrant brand, having launched eight variants. “So long as Kingfisher beer continues to re-invent itself (Kingfisher Coolers?) in categories relevant to it (not calendars!), the brand will retain value,” says Khalap.
If it’s left unattended for a long time, a brand loses value very quickly. Besides, poor performance of the product or a service, or controversies surrounding it also erode consumer and market confidence in the brand. “In today’s times, a brand is what the brand does. Companies need to keep product and service delivery above par for the brand to get its sheen,” says Sinha of Leo Burnett.
To be sure, while it was in operation, Kingfisher Airlines offered top-quality service. The philosophy of treating flyers as guests, the quality of food and special treatment extended to Business Class passengers made it a much admired airline. So there may be some residual value to what the brand brought to the market.
But for Ambi M.G. Parameswaran, brand strategist and founder of Brand-Building.com, the bigger question is: why did the banks loan money against a brand name? What were they thinking? In a classical case a brand’s value has to stand alone after you strip all the assets off. “So when someone bought Kesh King or Savlon, they bought the brand, and nothing else (if they did, it was valued separately). In FMCG parlance, the brand is the price premium that a consumer is willing to pay over and above the intrinsic cost of making the product,” he says.
Even here there are several caveats: the new owner has to live by the promises of the brand. So Savlon cannot become a super-premium skincare soap, for instance. In the case of Kingfisher Airlines, the brand was synonymous with the man himself. And there lies the problem, concludes Parameswaran.
Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.