The business of brands is highly competitive and today traditional global brands that straddled the space for years are confronting the emerging digital media, which is asking a lot of questions. The U.K.-based Brand Finance is a leading player in the global measurement and valuation of brands, and in a chat with The Hindu , Brand Finance CEO, David Haigh spoke about the impact of the economy on brands, the changing paradigm and tips on what Indian brands must do to break into the big league. Edited excerpts:
What is the impact of global economic slowdown on brands, and how are they emerging from it?
It depends which sector you are in. If you look at the financial sector, several brands went bust, and disappeared and several of them were weakened dramatically. But over the last 7-8 years, they are gradually coming back. Some of them are quite strong again such as the American Bank brands have rebounded significantly and the U.K. ones are almost back to normal. Brands in many sectors such as hotels and airlines were severely damaged by the fall-out. But, they are also coming back. The world economy is now slowly coming back to health.
China is obviously slowing down and India has been in the doldrums a little bit. But seemingly, led by the U.S., parts of mainland Europe are doing well. One of the interesting things is that M&A (mergers & acquisitions), which went very quiet after the crisis, are coming back very strongly and everyone expects it to continue. Now that the world economy is stabilising barring a few shocks, people are more confident to go out and buy.
What does it take to build a global brand and to pull it off successfully?
The misconception behind brand building is that you need to spend a lot on advertising. Rather, it is a lot about corporate strategy and long-term plans. And, to back it up, it has to be people, R&D and technology. Smart brand-builders spend majority of their time fine-tuning research and development (R&D), technology and ensuring quality.
In reality, managing any brand, particularly a global brand, is very complicated. To simplify it — the brand has to have a personality and a point of difference, which is clear to see. You have to have a good product or service of the right quality for whatever your positioning is and at the right price. Consistency is critical over a period of time.
How important is it to have global brands? Why can’t India have global brands?
There was a view that global brands were good. Unilever, for example, divested a lot of regional brands particularly in India and that, I think, was a mistake. A global brand could be the best solution for some who want to have a global business such as Vodafone, Unilever, HSBC and Shell.
The only Indian global brand I know of would be Tata. It is their corporate ambition and they wish to be a part of the world business across continents.
If you want to have a global brand, you have to have a competitive advantage. So, if you ask where India could be at the top of the table, then it would be something like IT. There are several brands here, which are getting towards being global brands.
Indian companies have successfully acquired some global businesses and global brands. How difficult is the integration process in cross-border deals?
It is always very difficult when one company takes over another or one brand takes over another. There is always a problem of integration and it gets more difficult when different companies in different countries are involved. Quite often when that happens, the acquirer will say ‘hands off’.
If you look at JLR, Tatas have been quite direct at the strategic level but have given quite a leeway at an operational level so as not to change the character of what was an English company. Tatas obviously placed their people there, but had the good sense to not ‘Tata-ise’ it and basically left it as a British company with strong Tata management. I think they did a brilliant job. It is a case study as to how Indian companies can go and develop brands around the world.
How about ethics and how much does it matter when companies are pushing their brands in a highly competitive market?
Obviously a lot. It is all about positioning and differentiation. Some businesses are created to be much more with an ethical or social purpose than others. Other businesses need not send out such a grand vision but then they set out to deliver high quality products consistently and never to short-change customers.
Every category depends on an ethical, honest positioning of the management to deliver what they say they will deliver.
In view of that, what is your view on Nestle’s ‘Maggi’, which had a serious setback in India recently? What happens to a mega brands in such cases?
The high end estimate we put out was that the hit was around $200 million for Nestle. The target consumer is a child and the buyer is the mother. There is a doubt in the buyer’s mind and that scar which will remain for a while.
When it happened, there was a certain degree of not taking it seriously enough and acting quickly enough. Adulterated product was found but they did not immediately deal with it. Ultimately, they had to burn all stocks which they should have done in the first place.
What that means is that when there is something wrong and you know it, don’t deny it. Deal with it fast or you will lose customer confidence. However, the good part with powerful brands is customers pardon companies if they admit their mistake and show visible elements of re-building faith.
Given that they have been a bit slow off the mark to do all that, it would be a harder job than if they had dealt with it straight away. But it is possible that if they do not deal with it properly, there could be terminal damage. At the moment, the jury is still out.
The mushrooming giant new-age tech brands such as Facebook, Twitter and others compete with older, decades-old brands, which have invested millions. How is this dynamic playing out?
All tech brands are similar — a great idea, well executed and if it works for 100 people, it works for 100 million people. If someone thinks of a killer app then they have a good chance of turning that into a strong brand and it happens very quickly if it is really good.
Tech brands are unusual because for most other brands distribution and word of mouth takes decades but with tech brands, people know virtually overnight. But, if someone comes up with a better app or model, they will drive out of the earlier business. The speed of entry and exit is much faster.
One of the fundamentals of strong brand value is future sustainability. For technology, you do not care who created it, you want it just because somebody else has it. In those cases, projecting the future is very difficult. Tech brands have to work very hard to survive one generation of technology.
Traditional brands will continue because the fundamental nature of products does not change. In food brands, you try to build long-term belief in your product and once it is established, brands last long.
What is your advice to Indian companies and promoters to build good brands out of India?
First is to get their trademark and IP (intellectual property) fully secure. Most companies do not do it as they think it an unnecessary expense. The building block for all brands is the IP — do you have your copyright, design, trademark and internet secure. You also have to have a business strategy and have to regard brand management as part of the execution of that strategy. The companies that do really well are those where the CEO gets all that in place.
