It is generally accepted that brands are assets, the problem is how we value them. Often the valuation is post some sort of transaction, the business is sold, and the difference between net assets and the sale price is ‘goodwill’, which is code for stuff we do not fully understand, but are confident will generate future cash flow.
Brands fall into that category.
So what happens when a business reliant on a brand goes to the wall?
Does the brand go to the wall with it, or is there brand life after corporate death.
Thomas Cook did a Titanic last month, hit their iceberg after 178 years of trading. It is one of the better known brands on the planet, with irrevocable ties to travel.
Will the receivers sell it off for a token amount, along with the office furniture, or will someone recognise it has a value and buy it from the rubble and rebuild?
The business was founded in 1841 by Leicestershire cabinet maker Thomas Cook, as a means to carry supporters of the temperance movement around Britain to supporters meetings. It soon expanded into escorted tours to Europe, in 1855, the US in 1866, and progressively, the world.
Can such a brand survive the corporate death of its owner is a compelling question. In a world that is commoditising and homogenising, a brand with 178 years of equity hidden deep in its DNA must have some value, too someone?
There have been signs of financial fragility in Thomas Cook for a while, leading to a couple of financial engineering transactions over the past few years. Thomas Cook is, or was, 75% owned by Hong Kong listed conglomerate Fosun. After a dance with bankruptcy in 2011, saved by an injection of capital from shareholders, and some aggressive restructuring, including a sell-off of its plane fleet last year, it seemed to be recovering. Travellers still had sufficient confidence to book with them, only to be stranded by its demise.
There are all sorts of reasons being touted, Brexit stopping people travelling, a hot summer in England, Thomas Cook’s home, so they all went to Blackpool rather than to the Costa Del Sol to harass the locals, and obviously, the internet.
The end however, seemed not to have been expected.
If I ran British Airways, or even Qantas, I would have to be asking myself: what value would a global wholesale travel brand like Thomas Cook add to my portfolio?
It has been reported that Fosun may have bought the Thomas Cook brand from the receivers. Forgive me for thinking that perhaps they were the ones who best understood the brand value, and found an opportunity to capitalise on that knowledge by forcing liquidation and cherry-picking assets.
There are plenty of examples of brands that have experienced a potentially terminal problem and survived. Perhaps the best known are Apple, almost a corpse prior to the return of Steve Jobs in 1997, and Microsoft, sliding down the slippery slope to irrelevance, revived, and currently the most valuable business on the planet, again.
A revival indeed.
Domestically, there are a number of formerly powerful consumer brands that shout for a revival strategy. Meadow Lea, hollowed out and dumped by successive owners in favour of giving retailers a margin boost, Fountain, once Australia’s largest sauce brand by a mile, a shadow of its former self, SPC, a global brand in an earlier time, Rosella, Peters, Dairy Farmers, the list goes on. All have some residual untapped value to be extracted. All it would take is an extended time frame, relatively deep pockets, a clear consumer value proposition communicated consistently, innovation across the brands and operational processes, and the guts to have go.
