One of the wonders of marketing is the continued ignorance of consumers when it comes to matters of brand architecture. Most shoppers remain totally unaware of the ownership of the brands that they consume.
For example, Charles looks down his nose imperiously as he overtakes a Mazda MX6 in his Aston Martin. It never occurs to him that both cars are ultimately made by the same company, Ford. Meanwhile, Tracey is in the Dog and Duck deciding between a Smirnoff Ice and a Baileys, ignorant of the fact the two drinks come from a single source: Diageo.
One of the few occasions when the average consumer is confronted with the realities of brand architecture is when major mergers or acquisitions suddenly alert the media and thus the mass market to brand ownership.
L’Oreal’s successful bid for The Body Shop had a very mixed reception. Most analysts were positive about the addition of a masstige brand with strong equity and its own retail network.
Many consumers, however, were up in arms at the prospect of one of the most ethical companies being acquired by a global corporation with decidedly unimpressive records when it comes to animal testing and sustainability.
It’s not just an unfortunate coincidence that major brand inconsistencies exist in this case between the purchaser and its latest acquisition. While marketers might scratch their heads at two apparently contradictory brands joining forces, investment bankers would nod their heads vigorously. Acquisitional companies often actively seek out brands with different customers, operations and brand associations from their own holdings. So the very things that make the Body Shop acquisition a contentious issue for consumers make it a smart move for investors.
Where a brand manager sees contradictions, an investment banker sees diversification.
Therein lies a problem. Because once the deal goes through, the investment bankers can head off for their next big deal, while the marketers are left with a big brand mess. There can be a massive amount of damaging inconsistent publicity to be nullified after a successful acquisition. To her credit, Body Shop chief Anita Roddick played her usual no-nonsense, media-savvy game by incorrectly labeling the deal a ‘partnership’ and reassuring the media that the brand itself was ‘protected’.
Hopefully her actions will offset some of the damage that has been done to The Body Shop brand by the deal. Six years ago, when McDonald’s took a stake in Pret A Manger for similar diversification reasons, the Pret founders were equally quick to defend the move by announcing ‘We’ll still be in charge – we’ll have the majority of the shares. Pret will continue what it does and McDonald’s will continue what it does.’
Unfortunately, this passionate, brand-centric statement from Pret drew an immediate response from McDonald’s, which announced that this was not entirely true. ‘We have an option to increase our investment and to fully acquire (Pret) over time,’ was its terse, anonymous response.
Usually the problem is amplified when, as in the case of the Body Shop and Pret deals, the acquiring company is also a consumer brand in its own right. The best model when acquiring other brands is the ‘house of brands’ architecture exemplified by Diageo or Procter & Gamble. Both recently made major acquisitions, Bushmills and Gillette respectively, but because of the holding firms’ lack of consumer brand equity, the deals were almost totally ignored by the consumer press.
Fortunately for The Body Shop, general consumer ignorance of brand architecture usually outweighs short- term negative reactions to acquisitions. In a few months’ time, Jenny will be persuading her friends to buy Body Shop soap rather than L’Oreal in total ignorance of the fact that, ultimately, it no longer matters.
30 SECONDS ON … L’OREAL’S BUYOUT OF THE BODY SHOP
– L’Oreal agreed to pay £652bn for The Body Shop. The price equates to 300p a share, 12% more than the retailer’s stock-market price of 268p.
– The Body Shop founder Anita Roddick and her husband, who began the business 30 years ago, stand to make upward of £120m from their 18% stake in the company.
– The Body Shop’s share price rose 27p – 10.1% – following news of its acquisition. Its share price has risen a total of 38% since.
– The Body Shop has branched out since opening its first store in Littlehampton, West Sussex, to run 2085 branches worldwide, including 304 in the UK.
– The Body Shop operates independently within L’Oreal.
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