Marketing’s version of the gold rush is about to hit the drinks industry as Interbrew and Seagram prepare for a possible auction of some of their best-known brands.
Belgian beer giant Interbrew could be forced to sell off big names such as Tennents and Caffrey’s to satisfy the competition authorities, following its £2.3bn buy-out of Bass Brewers. Its recent takeover of Whitbread means its market share will exceed the 30 per cent market share limit, sparking a brand sell-off.
Meanwhile, Seagram’s deal with Vivendi and Canal Plus to create a $100bn (£66.67bn) media powerhouse has raised the prospect of a sell-off of its drinks business. Allied Domecq has been suggested as a likely candidate to take over Seagram’s drinks portfolio, which includes global brands such as Chivas Regal and Martel Cognac, among others.
As brand owners consolidate into ever-larger groups, there is an inevitable residue of brands which just don’t fit. Bass and Interbrew may resist selling off their spare brands to top rivals, which probably have their own bulging portfolios anyway.
The future for the big companies lies in concentrating resources on a handful of top global brands. But this does not mean that the second-line marques – which in themselves can be fairly big sellers – are doomed to a dusty death stacked in a warehouse.
The mega-deals provide rich pickings for the growing band of entrepreneurs who specialise in salvaging the brands that the biggest groups do not want.
John Murphy, former chairman of brand consultants Interbrand and founder of Suffolk’s St Peter’s brewery, will be watching developments with interest.
In 1996, Murphy snatched Plymouth Gin from an indifferent Allied Domecq and set about building it from 7,500 cases in 1995 to 70,000 cases last year, in 25 markets.
The brand had been allowed to slide as it passed through a number of owners, but Murphy was impressed by its history and the resonance it had with an older generation of drinkers. The gin market was also dominated by a small number of large brands and Murphy felt there was room for growth.
Earlier this year, he sold 50 per cent of the Plymouth Gin company to Absolut for £20m. He is now on the hunt for fresh acquisitions.
“A lot of brands die because they are no longer relevant, and one doesn’t want to buy those,” Murphy says. “What you are looking for is something with a point of difference and a heritage.
“A lot of the brands that come up for sale are not particularly differentiated. They are somebody’s version of a better-known product. Nobody in their right mind would want to buy them.”
Murphy does not see any sleeping giants in Interbrew’s newly-acquired portfolio, which includes such old warhorses as Mackeson stout and Bass Ale.
Potential in packaged goods
Packaged goods giants Unilever and Procter & Gamble are likely to provide a happier hunting ground for would-be brand scavengers.
Both companies are pruning their brand portfolios, as they focus their resources on a diminishing number of global power brands.
Unilever is dropping two-thirds of its brands – 1,400 in total – but like any multinational, it would rather kill a brand than sell it to a competitor. It recently de-listed Radion washing powder, rather than offer it to a rival.
At the same time, it has singled out tired brands such as Timotei for fresh investment. A Unilever spokesman says: “Timotei is a good brand that may not have been as well looked after in the past as it should have been.
“It is being given a new lease of life. It still has that cachet with consumers and we are starting to put advertising support behind it.”
He adds: “There is a fine line between killing a brand, selling it off or just keeping it ticking over, with the minimum of support behind it.”
It seems likely that a number of Unilever brands, such as Brut, which since its Seventies’ heyday has increasingly taken a backseat to brands such as Lynx, will come on to the market.
But the buyer will be unlikely to match Unilever for marketing spend – and it will face tough competition for shelf space from the other majors.
The growth of category management, where the multinationals attempt to dominate sales channels in supermarkets and multiple retailers, has made it hard for small suppliers to gain a foothold.
But Karen Wilson-de Rose, sales and marketing controller of Alchemy Partners-backed EMVI, which bought Harmony Hairspray from Unilever three years ago for £25m, believes the situation can be turned to the underdogs’ advantage.
“There is a lot of lip service paid to category management,” she says. “Of course, the major retailers work with the big players on category planning but they don’t like to be unduly influenced.
“There is a human element. The retailers don’t want to be totally owned by the likes of P&G and Unilever. They want to make room for the smaller suppliers, the underdogs.”
She adds: “Companies such as Boots and Superdrug want to give their customers a wide choice and that means making space for smaller or specialist brands.”
Point of difference
For Wilson-de Rose, brand volumes are not as important as a unique selling point. The company looks for brands which have their own niche in the market, however small, and would benefit from the care and attention that a small company can give.
EMVI has just bought the Amplex breath freshener range from Sara Lee, which includes Amplex breath capsules and Gold Spot. The brands differ from other breath fresheners in that they are not confectionery-based.
To keep overheads to a minimum, manufacturing and sales are outsourced. “We look for underperforming brands, but we don’t automatically assume that by taking a brand over it will start to perform better,” Wilson-de Rose says.
“We can’t necessarily afford to spend a lot on above-the-line advertising. But we can spend more time and effort on a brand.
“It may have been the third or fourth brand in the multi-national’s portfolio without anyone handling it full-time, but for us it immediately becomes our number-one brand.”
She adds: “You don’t have an awful lot of time for consumer research before you buy a brand. You have to use your instincts.”
It would be easier to write off brand scavengers as small, niche players trapped in a Seventies time warp, where Harmony Hairspray and Brut are still de rigueur. But as the global consumer goods industry consolidates at an alarming rate, the trade in brands will continue to grow.
And companies such as EMVI and Alchemy, which earlier this year came within a whisker of landing Rover Group and the coveted MG brand, are developing a record for turning base metal into gold.