Glocal Branding: Towards a Market for Dormant Brands

Includes: CL, GM, KO, LNVGY
by: David Wolf

My entry on glocal brands has sparked some comment, both online and off, particularly the idea that a product brand that has been taken off the market by the company that owns it may well find value not as a global brand, but as one targeted to a specific demographic in a new market. 

GM’s (NYSE:GM) Buick and  Colgate-Palmolive’s (NYSE:CL) Darlie toothpaste were two we talked about, and JP brought up Coca-Cola’s (NYSE:KO) Fanta brand of fruit-flavored sodas, which have pretty much disappeared in the US but have built strong markets in Asia and Latin America. 

The Chinese Horse

As we pursue this, another question comes up: what about the idea of a Chinese company expanding into the US and purchasing - or even licensing - a brand that has a decent base of awareness and possibly some nostalgic value but has grown a bit old, with a view to re-invigorating that brand as its own?

I would bet on it happening, but the record to date suggests that there are some companies who still don’t seem to understand what to do with their brands once they’ve got them. 

Lenovo (OTCPK:LNVGY) chose to drop IBM completely, having failed to figure out how to make the most of its permission to use the brand for five years. 

Nanjing Automobile Corporation [NAC] has picked up MG, but at the moment it seems to be in something of a holding pattern - it is still making the cars and selling them in the UK, sure. But the company is missing an opportunity to begin building excitement among the enthusiast crowd in the US that would go for the MG ragtops.

TCL Corporation controls the RCA brand through its ownership of Thompson, but rather than put the brand to work for TCL's own expansion abroad, the company has decided to license the brand to third parties.

All of which suggests nothing more than what we already know - that Chinese companies are still getting their collective heads around brands, brand value, and how to put both of those to work to address their particular challenges.

But the glocal branding strategy is a compelling option for Chinese companies looking to enter overseas markets - why spend all that money to build brand awareness when you can pick up a familiar brand on the cheap and spend your money on paint and polish?

Brokers and Markets

Setting aside for a moment the still-developing concept of branding in China, what stands in the way of an approach like this is that few Chinese executives have a clear view of what dormant or distressed brands are available, and how they compare with each other. There are people in each market around the world, however, who would be able to identify, assess, and value these brands, who could also help Chinese firms (or, indeed, firms from any other country) acquire them. 

Let’s call this “brand brokerage,” and the people and agencies who do it “brand brokers.” 

Once there is a decent group of brand brokers, a global market in these brands can form, making it far easier for companies who own dormant brands to value them,  and much simpler for others to find and value brands they might acquire, and then purchase them.

This makes acquiring a glocal brand to help drive expansion into a specific market a simple process and a logical part of a local marketing effort. Indeed, if I were a betting man, I would wager that the largest of such brokerages would wind up parts of the world’s major marketing groups - like WPP and Publicis. 

Upsides on the side

There are three significant side benefits to creating a market in distressed and dormant brands: 

First, such a market means that acquiring a brand no longer needs to be a process that involves investment bankers and other middlemen, and will thus drop transaction costs significantly. Even the brokerages are going to be subject to some heavy pricing pressure - especially those that form a part of a larger agency group, who will be pressed to drop commissions in return for broader marketing business.

Second, a market would help companies - and their auditors, investors, and others - understand what their brands are worth. In a world where many firms are seeking to value their intellectual property, dormant brands are like baubles in the attic - beyond the sentimental value, you never have any idea what they’re worth. An open market would take much of the guesswork out of the process. Having a tough year? Unload a couple of brands and pump up the cash flow, or use distressed brands to help the balance sheet a little.

Finally, it would give another option to companies who want to enter a new market. Instead of automatically assuming that a brand would need to be built from scratch - entailing not only more money but valuable time - there is a “build or buy” choice that could be balanced and made with relative ease. 

There would be a number of challenges to this model, but there are many paths to the creation of a brand market that would ease and speed the process of globalization - or “internationalization,” as Chinese companies prefer to say - particularly from the standpoint of growing multinationals from emerging markets.