Case Analysis: Brands Are Not Holy Cows
Whatever is the business strategy and its resultant brand implications, there are ways to go ahead in a manner that will result in committed action across all stakeholders
Last fortnight we saw why a logo should not change. But then, in Part 1 of the case study, Vinayak Morro had not placed all his cards on the table. This time, we see he has an agenda and a variety of strategic shifts with which he justifies changing the brand logo – ranging from making it modern for the youth segment, aligning the logo with the acquiring company’s logo, expanding the offering from pure vegetarian to non-vegetarian supermarket chain to target new consumer segments and infusing the brand with his personal values of progress and freshness.
Are Vinayak’s reasons right or wrong is difficult to decide within the given information here. But it is easy to understand the confusion that the team Farm-O-Maid is going through. As is often the case in acquisitions, the intent and strategy of the new owner is being second guessed through his discreet and disjointed utterances. While it makes for good coffee machine conversations, it doesn’t behoove well for getting the alignment of FarmO’s people with the new owner; also, it is not being understood by the FarmO’s employees that the new owner cannot layout all the strategy cards on the table for reasons of competition. And it is also quite possible that Vinayak’s success formula may not be right for Farm-O-Maid.
–What could be Vinayak’s business strategy for the acquired Farm-O-Maid brand?
–Within that business strategy, what should be the correct steps for the brand strategy?
–How do you put the brand strategy into action?
A business is acquired at a financial cost, which is often huge and the price paid for acquiring the business not only takes into account current state of business but its future potential as well. A new owner may view the acquired business to complement his current portfolio and fill a gap in product / service or help expand the business in new geographies or add a completely new set of consumers to its business via its positioning or acquire the existing distribution and channel of the bought business or to block the competition or sometimes to simply buy market share and get critical business size.
Whatever be the objective behind an acquisition, there is a future utility and purpose that the new owner attaches to the acquired business that has to be justified for the price paid for the acquisition. The future benefit in terms of increase in market share, increase in profitability, geographic expansion, addition of new consumer segments are all translated into future cash flows that are worked out at current prices to arrive at the acquisition price of a business.
What could be Vinayak’s business intent behind acquiring Farm-O- Maid? It could be to complete the retail portfolio of his current business by adding the loyal brand franchise of Farm-O-Maid resting on its proposition of pure, hygienic and vegetarian. OR it could be to expand the Farm-O-Maid supermarkets nationally by aggressively adding new stores. OR utilise the loyal brand franchise of Farm-O-Maid and expand it to new categories to attract new consumer segments. We should not judge the validity of any of these strategies in absence of data on the business environment, competitive scenario, and situation at Morro’s own business. However, the implications of any of these business strategies on the brand Farm-O-Maid must be examined.
If the strategy is to complete the Morro group portfolio by adding the complementary Farm-O-Maid brand, then the brand Farm-O-Maid must be left as is and not tampered with. A strong brand is acquired for its uniqueness and sharpness in proposition that leads to its loyal, and often fanatic, following and that must not be tampered with to straightjacket it with the mother corporate brand values and ways of working. This is often the mistake made in acquisitions – a strong local brand is acquired for its uniqueness and is gradually changed in small steps to fall in line with the mother brand architecture, values, standards and ways of working and the end result is diluting the original strong brand into a brand that neither resembles the big mother brand nor its original strong, unique brand. In such cases, the acquired brand’s team and their ways of working with the brand must be left as is to retain the brand’s originality and strength.
If the strategy is to expand the Farm-O-Maid chain of supermarket nationally by aggressively adding new stores, then regional appeal of Farm-O-Maid brand in new geographies must be ascertained before investing in expensive retail stores expansion. The brand attractiveness of Farm-O-Maid must be ascertained granularly state by state so it is known that in which states it is likely to succeed as is and in which states the brand needs some changes for success.
In this way, we can assess the trade-off between the business gains from the expansion and modifications that needs to be done in the brand Farm-O-Maid. Some states where much change is required in the brand Farm-O-Maid to succeed, it may result in FarmO losing its original positioning and character; in that case, those states must be dropped from the geographic expansion list to retain the originality and uniqueness of Farm-O-Maid positioning that got its loyal clientele in the first place.
If the strategy is to utilise the loyal brand franchise of Farm-O-Maid and expand it to new categories to attract new consumer segments, then the issue needs studies and deep deliberation before doing so. A detailed brand equity study of Farm-O-Maid brand must be done to ascertain brand associations, personality, values and more importantly, the elasticity of the brand to expand its positioning. Is the brand’s vegetarian offering extending its values of purity, wholesomeness and trust to non-vegetarian offering OR the vegetarian offering puts boundaries to the brand positioning that cannot be extended to non-vegetarian offerings?
Another important aspect is the cost-benefit analysis of acquiring new non-vegetarian consumers versus losing a part of the loyal vegetarian consumers – most likely Jains. The business imperative may dictate expanding the brand’s offering to attract new segments but it must be seen whether current brand’s equity can take that stretch in expansion of its benefits and offering. And, with the expanded brand offering and positioning, how unique will Farm-O-Maid remain versus its competitors. This is important. This balance can only be derived at through proper brand qualitative and quantitative studies and detailed deliberations with all stakeholders, especially the employees of the acquired brand. Often, the short-term gains in acquiring new consumers by expanding the positioning are offset by losing existing loyal consumers who do not see the brand standing for the proposition they liked earlier. And vegetarian and non-vegetarian issues are emotive ones in India and must be handled with care.
Whatever is the business strategy and its resultant brand implications, there are ways to go ahead in a manner that will result in committed action across all stakeholders. First, there should be no room for guess-work and speculation about the business strategy for the acquired brand. The business strategy and the role to be played out by the acquired brand must be outlined as much as is feasible by the new owners, Vinayak here – given the competitive or confidentiality sensitivities. Second, such strategy articulation should be calibrated for different levels of the organisation - more detailed for senior management who have a larger stake in the brand and will contribute significantly to the transition process and less detailed, on a need-to-know basis to middle and junior echelons of the acquired company. All coffee machine speculations must be killed and instead, timely and planned meetings, town halls are required to communicate the business and brand strategy.
Only when the existing brand custodians know where they stand and what role they have to play in the transition can they be motivated to think and plan for coherent actions across the organisation. Communication, Communication and Communication early on is the key to success to realising the true potential of acquired brand.
Third, after aligning and communicating the business and brand strategy, the actions must be rolled out across a 30, 60, 90, 120 and 240-day plan, so that everyone is clear about the action plan, their role in it and the expected outcomes. Clear milestones must be laid out for these action plans so that their deliverables can be tracked. To make this process more effective, cross-functional teams from both Morre Markets and Farm-O-Maid must be constituted that will monitor business and brand integration. Both parties must feel involved and respected equally in the process.
The key lies in ensuring successful brand integration, and not disintegration. Vinayak could be missing this point.
This article was published in BW Businessworld issue dated 'Dec. 12, 2016' with cover story titled 'India's Super Rich 2016'
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.
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