SBHD: A swift adoption pays dividends for a brand seeking a new home.
It is the business equivalent of being an enforced orphan. Your parent has lost interest and decides he doesn’t want you any more. So you have to perform in an attempt to attract a foster parent with a view to a more permanent adoption.
For Golden Wonder, Homepride, Courage, SmithKline Beecham’s consumer drinks division and Colmans of Norwich it will be a familiar feeling. All are for sale and observers are predicting they will be joined by a growing band of orphaned brands as more fmcg companies rationalise portfolios created in a different economic climate.
“Fmcg companies have arrived in the mid-Nineties with large, fragmented and often locally-oriented brands and have embarked on a realignment into more international brands,” says Coopers & Lybrand principal associate Chris Mole. “In the process there will be brands that do not survive but they may well have not survived anyway in an environment where branded life has become much harder.”
The upside of the deal is that if you have an unsupportive parent unwilling to give you enough pocket money for investment then you could well be better off as part of a caring adoptive family with greater shared common interests.
The danger, though, is that without a swift adoption you can lose faith and allow disillusionment to set in. Short-term needs replace long-term strategic marketing plans as companies withhold investment and marketing departments get nervous about their future.
In the worst-case scenario headhunters move in on the better staff; it becomes impossible to plan strategic ad campaigns and the brand image becomes compromised. A lack of marketing direction can quickly lead to a brand withering on the vine.
“It is always an enormously sensitive task for the management of both the parent and the subsidiary,” says Interbrand European chairman Paul Stobart. “The management must assert strong brand management and focus on marketing.
“But often the management of the parent company is so focused on financial engineering and rationalisation that it forgets the commercial reality of trying to sell brand values, which will decline without the necessary support. If I were a competitor that is exactly when I would attack and take advantage of a brand being sold.
“Company or brand sales can lead to enormous change in the market. Retailers get confused about distribution and the whole thing can snowball,” adds Stobart.
The ideal scenario is to have a purchaser in place before announcing a sale. But recent examples, including Golden Wonder, which is being sold to finance Dalgety’s £440m takeover of Quaker’s petfood business, have had a “For Sale” sign nailed to their door before a suitor could be landed.
Courage, too, was put up for sale without a deal being done. Its parent Foster’s told Australian analysts last November that Courage in the UK was like a “black hole” in the beer giant’s accounts – which sparked speculation that a sale was on the cards. A cloud has hung over the company’s marketing strategy ever since and will remain until a deal is struck, with Scottish & Newcastle – the current fav-ourite – and or another buyer.
“There will be an increasing number of unstable brands, management changes and ad agency moves,” predicts Stobart of the general market.
BMP DDB Needham resigned £8m of Courage business last month under pressure to work on the Anheuser-Busch account picked up by DDB Needham in the US. If the future ownership of the Courage brands had not been so uncertain, the London agency might have fought harder to keep the account.
One senior agency source confirms Courage marketing director John Nicolson has had to put off strategic decisions because of the uncertainty. “Scottish & Newcastle is a strong, independent-minded marketing group, which has its own views about marketing after a takeover. Why would Courage bother spending large sums in the knowledge that a takeover is imminent?”
However, Courage has made some strategic marketing moves since November, taking forward the John Smith’s bitter brand with the launch of John Smith’s Extra Smooth and recruiting Rainey Kelly Campbell Roalfe to handle Miller Pilsner ads.
The “limbo” view is disputed by Grant Duncan, deputy managing director of GGT, which handles the advertising account for Holsten, Courage’s premium packaged lager. “I don’t think marketing is in limbo. If Courage was taken over by Scottish & Newcastle, for example, S&N may not have the depth of resources to take over the running of the brands immediately.
“It would want to operate the brands with the same structure for some time as it looked at integrating the businesses. It really is business as usual at Courage,” adds Duncan.
Timing becomes everything. A prolonged sale fuels uncertainty. Observers suggest that a deal for a mid-size firm or brand should be struck within four or six weeks of an announcement. Colmans and Courage are both well past the six-week mark, whereas Golden Wonder has just hit it.
The clock is ticking.