Magazine article Marketing

OPINION: Financial Implications of Brand Consolidation Must Be Weighed

Magazine article Marketing

OPINION: Financial Implications of Brand Consolidation Must Be Weighed

Article excerpt

The financial community has always had an interest in anything that is undervalued, ostensibly because there is no faster way to make money than by buying an undervalued entity and then selling it on at its true value.

The 1980s was the decade of brand extension. Fuelled by the theories of brand gurus such as David Aaker and Kevin Keller, firms were encouraged to stretch their strongest brands into as many categories as possible.

Not surprisingly, the 1990s became the decade of brand consolidation.

Many firms discovered that the combination of global markets and multiple brand extensions created a confusing matrix of hundreds of different brands.

Worse still, many companies discovered that their major competitors in a market were actually other brands that they owned. As a result, companies such as Akzo Nobel and Unilever have embarked upon massive phases of brand consolidation, winnowing them down to a more simple and efficient brand architecture.

The questions facing any potential brand consolidator underpin the need for efficient systems for valuing brands. Which brands should be eliminated?

How should they be eliminated? How much should we expect to sell them for? Companies can fall foul of the brand valuation process. For example, it has been said that when Allied Domecq sold Plymouth Gin to a consortium of private investors including John Murphy, the founder of Interbrand, it undersold it. The new owner turned the brand round and made a packet when selling it on.

Last week the Saatchis' private equity vehicle, Saatchinvest, announced the acquisition of Complan and Casilan, two food supplements, from Heinz. …

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