SBHD: As takeovers sweep the UK, brand portfolios are being reshuffled as never before. To succeed in today’s corporate jungle, brand management has to be more than asset manipulation – it has to be an activity that involves the entire firm.
Many reasons have been put forward for the latest takeover boom. Companies are awash with cash, it is said, so they’re using it to buy growth; the corporate pendulum is swinging back from diversification to focus on “core” businesses; there’s a new breed of asset strippers stalking the corporate jungle; or a new generation of board members haven’t been around long enough to remember the mistakes of last time. All of these have an element of truth.
What has been overlooked, however, is that increasingly, M&A activity revolves around brands. Brand portfolios are being reshuffled as never before. In the past few months Quaker has snapped up Snapple, Cadbury has swallowed Dr Pepper, Glaxo has gone after Wellcome, Dalgety has gobbled up Felix and other Quaker pet food brands, while Colgate has acquired American Home Products’ Kolynos (a huge Latin American oral care company), Grand Met’s El Paso, and KKR’s Borden Foods.
Stretch the list back a little further and it includes Rowntree, Terry’s of York, RHM, Lyons Maid, Fisher-Price, JW Spear, SmithKline Beecham brands such as Silvikrin, Vosene, Marmite, Bovril, Ambrosia, Panadol and Andrews, Farley’s, Gerber and Robinson’s baby foods, Phileas Fogg, and Texas Homecare.
If anything the pace seems to be quickening. So much so that a large part of many divisional senior marketers’ time is spent trying to persuade the board that their particular brands deserve investment, while other divisions’ brands are not “core” to the business. It’s not only small brands that are affected. Two Top 100 brands, Golden Wonder and Tetley tea, are both up for sale, and the City is never short of a rumour about who will be next. Usual suspects include United Biscuits, Courage, Heinz and, more recently, Argyll.
But why all this activity? One suggestion: investors are taking a much more critical, ruthless look at their brand portfolios. They are not putting up with fudge any more. Either a brand is a dog, on its way out, or it’s a potential jewel itching to be discovered, honed, polished and fought over.
Understandably, the headlines are made by the hunt for the jewels and the disposal of the dogs. But behind the corporate to-ing and fro-ing there’s a crucial marketing question: what is the fundamental difference between a dog and a jewel? And can dogs be turned into jewels?
Here is one possible answer. Faced with the growth of retailer power and media inflation/fragmentation, it’s not just individual brands that are being found wanting but a whole model of brand management.
This model is taught in nearly every modern marketing textbook. It revolves around a view of the brand as a sort of target. The bull’s eye in the middle is the core product. The concentric rings around it encompass added attributes such as added service elements, positioning, image, and emotional attributes. But the very fact that it can be so neatly encapsulated by a diagram on a single sheet of paper highlights its drawback – it is two-dimensional.
There’s infinite space within that two-dimensional model for marketing departments to explore. But companies have realised it’s the third dimension that really counts. They are allowing the demands of modern branding to reach further and further back through the company into its organisational structure, culture and “core competencies” – even into purchasing policies and the development of proprietary technologies. They also accept that it reaches forward to the distribution channel and the consumer’s total brand experience, including where and how it is shopped and consumed.
If all these factors are aligned and integrated, the various parts of the two-dimensional brand model gel and brands can begin to shine. If not, it’s on its way to dogdom. Turning a dog into a jewel is not a matter of a clever TV commercial, new product launch, or even an integrated marketing campaign. The secret is the culture and the organisational structure of the company behind it.
Suddenly all sorts of people are making this point in different ways. Kevin Thompson at internal marketing consultancy MCA, for example, points out that leading-edge companies
are realising that continuous improvement, internal communications and marketing are all aspects of the same thing: the delivery of brand promise.
In a forthcoming book Chris Macrae of the World Class Branding Network argues brands have become more than unique selling propositions. They are now also unique organising propositions around which a company needs to organise all its processes and resources. If it doesn’t, its brand management becomes disorganised – and dysfunctional.
Meanwhile, McKinsey suggests marketing is moving beyond brand and market share wars to a struggle for “the right to brand” itself. Brands are not only the key to establishing relationships with consumers. Those who win the right to brand gain a pivotal position of power – and therefore profitability – within the supply chain as a whole.
The common thread? That to survive in today’s environment, brand management has to become a three-dimensional activity; one that involves the entire company. This shift lies behind marketing’s current identity crisis, in particular the growing debate about whether marketing is a function or a pan-company process.
When brand management is too important to be left to the marketing department alone, what future for marketing professionals? Judging by some of the radical experiments under way, where strategic marketing “integrators” (often not from the marketing department) are being separated from true specialists (whose sole job is to be at the cutting edge of a sub-discipline such as market research, direct marketing or advertising), many marketers may feel that their horizons are being narrowed rather than broadened. But then, working for a diamond mine is infinitely preferable to being part of a dog that’s about to be put down.