Branding values – All change for Barclays, Nissan and Hermes

21st March 2012

So when three major organisations decide to play around with branding, it's opportune both to see what difference that makes to investors and whether having a "respected" brand is any guarantee of equity market success.

Barclays

First a brand that will disappear. Will anyone shed a tear for Barclays Capital?  The investment banking arm of Barclays Bank, known to most market participants as BarCap, is to go in a Barclays branding bonfire. Out also go Barclays Wealth (for high net worth individuals) and Barclays Corporate (which promises "innovative customer-driven solutions" in cash management, trade, deposits, liquidity and risk management).

BarCap had become a toxic brand, associated with chief executive Bob Diamond and the mega-bonus issue. The other two had to go to divert attention from BarCap.

Barclays sees it differently. It said: "We believe that we can better serve clients by bringing them the best of Barclays from across the entire organisation. We can do that more easily and more efficiently by bringing divisions together under one brand."

Tainting the totality

Ditching a damaged brand and subsuming into a retail name brings the danger that the whole organisation will become tainted. Barclays will no longer be able to separate investment banking from the high street branches.  But if the bank decides to rein in the bonuses, then it could work in favour.

The second danger with a rebrand is that commentators and clients ignore the change. With BarCap due to become the Investment Banking division of Barclays, what are the odds that the old name stays current, if only to avoid an unwieldy new title.

The name change had little effect on investors – the shares slipped 1p to 245p.

First car memories

For readers of a certain age, the Datsun car brand will bring back memories. They may not be sparkling. The Datsun Cherry was that cheap car bought third or fourth hand for under £1,000 by a generation of 1970s and 1980s first car buyers. As a driving experience, it was only a notch or two up from British Leyland's notorious Morris Marina.

"It is ironic, as Nissan spent 10 years in the 1980s trying to get rid of Datsun," said Jay Nagley, at consultancy Redspy Automotive.

But Datsun nostalgics will have to travel to see the revitalised brand. It will start in  developing countries including India. Many motor manufacturers rebadge for India and other markets, often in joint venture deals. For instance, Suzuki in India is known as Maruti Suzuki.

Nagley adds: "It's becoming quite common for car makers to develop low cost brands. Renault has been successful with Dacia, Volkswagen with Skoda. Nissan wants to create a low cost brand without giving Nissan cars a low cost image."

Nissan, whose shares were unchanged on the branding news, says it will not use the Datsun badge in developed country markets. The move enables Nissan to show how it has moved so upmarket that it needs a different name for its budget range.

Made – proudly and prominently – in China

Many UK goods do not have a "Made in…" label to indicate manufacturing origin. The "Made in China" tag does not scream class. But now posh scarf maker Hermes has launched Chinese luxury label Shang Xia to shout that China has skills in upmarket design and fabrication rather than a concentration on churning out cheap goods. According to The Financial Times, Hermes is opening a Shang Xia store in Paris where it will showcase the best of Chinese.

An emphasis on quality – if not at the level of selling £9,000 necklaces – makes sense for China which risks poorer countries in Africa and Asia undercutting it on low quality mass market items as its own living standards improve.

The article quotes Jerry Clode of brand consultants Added Value saying the strategy of "embedding 5,000 years of continuous culture and avoiding negative perceptions of a Chinese brand" could work.

Three companies and three strategies – retreat, change and advance. But the problem with the most admired organisations is that too few offer investment opportunities.

Investing in the best brands

Brand Index offers a selection of top tens across a number of sectors. The UK top ten includes Amazon, Apple and Google – all of which some investors may consider over-priced or unlikely to gain more. The UK list also includes the uninvestable John Lewis, BBC, Waitrose, Cathedral City (a cheese brand) and Money Saving Expert. This leaves just Sainsbury and Marks & Spencer.

More interesting are the "UK Improvers", a list that takes in BP and British Airways (both recovering from previous problems), Eurostar (bouncing back after difficulties) and cheese-slice champion Kraft (which now owns Cadbury).

The US top list is led by foot-long sandwich retailer Subway, and takes in two TV stations and breakfast serial Cheerios. But – at least until the Greg Smith letter – there was Goldman Sachs on the improvers' table, just a place or two below iPad and iPhone.

If these surveys really reflect brand values, then investors will have to decide if they have any value for them in future decisions.

 

More on Mindful Money

The future of brands

Israel’s high tech future

Saab and HMV: What went wrong?

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