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Finance: A brand new way to develop a market

THE ANNOUNCEMENT this month by Unilever, the international consumer goods company, of plans to reduce its portfolio of 1,600 food, toiletries and household products to a core of 400 "power brands" would appear to put a significant question mark over marketing's love affair with branding.

If a company that includes Dove soap, Lipton's tea and Magnum ice creams among its assets thinks it can enhance earnings through reducing its number of brands, that suggests those who advocate brand development as a key strategy have some explaining to do.

But this is not the whole story. As the world is getting smaller, so is the number of brands. Even the most intrepid holidaymakers are likely to encounter many more familiar names than they did a few years ago as the likes of McDonald's and Starbucks coffee follow such long-established super-brands as Coca-Cola and Disney in colonising continents. Unilever wants to bring its international ice cream operations under a single brand emblem and allow local names to continue.

And as if to prove that marketing people should never be written off, just as it seems the rise of global brands would mean the elimination of all but a handful of big names, along comes another development: co- branding.

This is the name for what happens when your cereal packet suddenly starts advertising the latest blockbuster film, or your new credit card bears the logo of a well-known charity or your favourite football team. Perhaps the most telling use of the concept is in the computer industry, where manufacturers of the hardware state emphatically on packaging and advertising how their products use Intel chips and Microsoft operating systems. The list of examples of co-branding grows by the day, with such arrangements as the link-up between the Tesco supermarket group and Esso for 24-hour convenience shops at service stations and the appearance of the Lycra trademark on all kinds of garments which are required to stretch.

Bob Boad, senior trademarks adviser to BP Amoco, says: "Brand owners have found many ways in which co-branding may be turned to advantage." In the book Co-branding, the Science of Alliance (Macmillan) he edited with Tom Blackett, of brand specialists Interbrand, he writes: "For established brands it offers the opportunity to create an entirely new income stream or to boost sales of existing products. For new brands it may bring immediate credibility in a normally sceptical marketplace."

He points at how Ford motor company introduced a special edition of its Explorer sports utility model in the US featuring the brand of the outdoor clothing company Eddie Bauer. The co-branded version reportedly sold "head and shoulders" more than similarly equipped models without the logo that cost less.

And the team-up of Weight Watchers and Heinz for a range of calorie- controlled food products opened a new market. Getting entry to the highly competitive prepared food sector would have involved substantial investment and significant risks for Weight Watchers without the involvement of Heinz.

Mr Boad is keen to emphasise that co-branding is not without its problems. "Co-branding - like marriage - is not something to be entered into unadvisedly, lightly or wantonly," he says. "It is a very serious business enterprise involving key assets of the partners concerned."

Jan Lindeman, a director of Interbrand's brand valuation practice, touched on the potential financial rewards and additional benefits, such as one company's strong reputation being transferred to its partner, but added: "The transfer of brand equities [ie distinguishing qualities of the brand] and increased awareness can have a significant negative impact if one of the co-operating brands faces serious quality problems or disasters such as pollution or poisoning. The deterioration of one of the co-branding partners can affect ... the brand of the other partner."

The Interbrand team believes companies planning to engage in such activities will increasingly adopt more systematic processes for identifying brand partners.

It might be a little hard to believe in those obvious sales initiatives whereby snacks or breakfast cereals promote the World Cup or some other matter of limited life, but the team says it is convinced co-branding in its "purest" form has at its core the exchange of values or reputation attributes "to create a new reality whereby both brands are perceived to be better as a result of the initiative".

The Trader is on holiday