Branding post-merger

After two decades of progress and innumerable calamities, the supermarket category in East Africa is again in flux. This time the highly professional retail brand Carrefour is coolly selecting the best growth opportunities from the wreckage of the supa-duka boom.

Over in UK, German discounters Aldi and Lidl have disrupted that market and forced a bold merger initiative. Asda and Sainsbury’s were facing market share decline, so they have decided to seek competition authority to join forces. This would give them a starting position of 31% market share. Category leader Tesco holds 28%.

I use the words ‘starting position’ advisedly. Too many mergers focus on immediate benefits: cost savings and efficiencies take priority over value creation. But this union of two different brands – one known for value and the other for product quality – will need a marketer’s eye. If it was being conducted in East Africa we might well end up with something called Sainsda – with a mishmash colour scheme; banal mission, vision and values: discombobulated staff and disenfranchised customers. A handicapped beast that the Carrefour crocodile would snap up. So, this story is worth following for the lessons we can learn.

YouGov Brand Index rates Sainsbury no. 2 only to Marks & Spencer; but Asda No.8 of 26 brands.  But detailed analysis suggests opportunities for the two to work together to exploit each other’s differentiation.  Mike Coupe, the Sainsbury’s CEO – now infamous for singing “we’re in the money” to calm his nerves before a TV interview –  is very clear:

“These days many companies operate more than one brand without confusion.”The number of brands, and the way they are linked or not, is governed by what marketers call brand architecture. This is less about messing with logos than about defining a clear business purpose and brand promise for each entity. UK Marketing pundit Mark Ritson claims:

“Combining these two wouldn’t create a supermarket mega-brand with associations of quality and value. It would create a crap Frankenstein’s Monster of a brand – the worst of all things – that would be hunted down and executed by expert marksmen from (the competition)”

Ritson identifies the other big issue as where to draw the line. A house of brands strategy requires market-facing distinctiveness and back of house singularity. But where should one end and the other begin?

“Draw that line too deep into the back of the house, and the synergies and cost savings will not be sufficient to make the company profitable. Draw it too shallow and close to the front of house, and the brands will be undermined, brand equity reduced and ultimately revenues will dwindle.”

 

Chris Harrison leads The Brand Inside in Africa.

www.thebrandinside.com

 

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