Mark Ritson: What’s in a name? Quite a lot for a global company with assets of $15bn and spanning 9,000km

BHP Billiton has been a tale of woe from the beginning.

Ritson featured image

First we had the decline of the once mighty mining giant. From its zenith in late 2010, BHP’s shares have been in a gradual, but incessant, freefall thanks to declining commodity prices for aluminium, nickel and silver. In August, the company finally made its big move and announced that it would demerge most of these mines into a new company and focus BHP’s future around the five pillars of iron ore, copper, coal, petroleum and potash.

But the announcement was badly handled, with investors confused about the implications of the move and angered by a public listing in Australia and South Africa but not London – making life tricky for those based in the UK. Eventually BHP acknowledged the need for a London listing too, but the mutterings had begun and the company’s share price continued to tank.

The uncertainty continued last month with CEO Andrew Mackenzie bemusing analysts at an investor briefing with his ‘have your existing cake and eat your new cake too’ approach to demergers. Quizzed about the potential of the soon-to-be-spun-off company, he described the assets as “high quality” before catching himself and adding but “not at the scale of those that remain in our core business”.

The entire saga has also been exacerbated by the lack of a brand name for the new $15bn company with journalists and analysts uniting around the name ‘Crapco’. Unlike brand centric businesses such as fashion, FMCG or consumer tech where brand equity can represent significantly more than half of a company’s total market capitalisation, the relative value of branding to mining companies is negligible. But it’s clear that while a brilliant brand strategy will hardly make a mining company successful, the lack of one could spell its undoing.

Here again there was a potential snag. Coming up with a brand name for any new global company these days is hard work. Most globally applicable names are long gone and that usually results in one of two equally unpalatable options. First, a demerged asset takes its former corporate brand identity and refashions it to represent an associated variant with a new unique name. In the medical industries, for example, both Abbott and Baxter have spawned smaller independent companies that still carry a genetic link to their parents in the form of AbbVie and Baxalta respectively. That option was a non-starter for BHP because the new company it is creating should stand alone and have no link to the mothership.

A second option was to commission a branding agency to come up with a latinised or ‘bullshit’ name, as we say in the industry.

That was the decision Australian steel producer OneSteel made when it rebranded as Arrium in 2012. It is ownable and has a vaguely metallic feel, but the lack of heritage and the bemused reaction from those within the company who go to work each day at an anonymous, identity free organisation speaks volumes about the danger of taking this path.

To make matters worse the BHP spin-off would need a name that encompassed assets located across a 9,000km span from Western Australia to South Africa. Add to that the hopeless branding abilities of most senior Australian executives. As one cynical British analyst (me) explained to the Australian Financial Review last week: “Given there are lots of Australians involved, they will probably fuck it up.” It was not looking good for the company formally known as Crapco.

But much to my surprise BHP has come up with a bit of a winner by calling the company South32. It’s a fully ownable name thanks to the combination of letters and numbers and it draws its reference from a direct aspect of the new company’s history: the 32nd parallel that runs directly across many of its mines in both the African and Australian land masses.

Whether the clarity on brand names will aid the new entity and its struggling parent brand is another matter. But at least there is clarity where once there was confusion, and the brand name South32 and its rather fetching yellow logo where once there was Crapco and nothing else.

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Comments

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  1. Al King 17 Dec 2014

    BHP also stands for Bottom Hole Pressure. Id have gone with that.

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