Branding and buyouts: Brand Union's Toby Southgate on corporate takeovers, Tesco’s farms and Tesla’s higher purpose

Will Railton
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Our estimate is that only about 10 to 20 per cent of M&A actually delivers its promised value, says Southgate

Perceptions of brands change over time,” says Toby Southgate, worldwide chief executive of Brand Union. “And building them takes a long time. It’s not about the final push over the line.” 

A consultative arm of WPP, Brand Union specialises in brand strategy, and has shaped the identity of some of the world’s biggest names, including Vodafone, Absolut and Durex.

One of its most recent successes was launching Flonase in the US last year – a prescription-only allergy relief medication whose patent was expiring. Having worked on the account for five years, Flonase wrestled a 24 per cent share of the market from Nasacort, despite the fact that all the advertising, promotion and in-store activity occurred just three months prior to the launch.

This is because, for Southgate, branding is far more than a logo. “Brand strategy is a function of, and is closely connected to, business strategy,” he says. “It’s not about execution or communication necessarily, but growth, direction and protection for businesses.”

Mergers and acquisitions

We meet two days after Japanese telecoms group SoftBank’s £24.3bn takeover of ARM is announced – I ask him how the UK chip designer’s brand will be affected.

“M&A is dangerous in any category,” he says. “There are two great challenges to any corporate takeover. The first is how to retain the acquired firm’s culture after a major transformation or change in ownership. The second is about defining ambition. M&A is primarily driven by economics, and most of it fails to deliver the value it promises. Brand, business strategy and the way that organisations communicate are all impacted.”

The culture at the acquired firm can, unsurprisingly, be sacrificed with little thought. “There’s a misguided view to culture. It’s tough to measure and value financially, but it lies at the heart of a firm’s success. Do people inside an organisation really understand what they’re there to do, and the value of the business? If the answer is yes, you have a strong culture. If those people choose to support that ambition and direction, it is even stronger. We would call that ‘internal engagement’ or ‘brand inspiration’. I wonder how the 4,000 employees of ARM feel. Who do they work for now?”

Read more: PM’s takeover test may do more Arm than good

Southgate raises the recent purchase of Dollar Shave Club – a disruptive, US direct-to-consumer subscription razor manufacturer and delivery service bought by Unilever for $1bn last week. “It has just sold to the sort of company it has spent the last five or six years saying is ripping consumers off, and has taken very explicit pot shots at with its marketing.” If the independence of the brand is preserved, and Dollar Shave Club continues to be readily accessible at a different price point to other products offered by Procter & Gamble’s Gillette, then it could scale more effectively, he says. “But if Unilever strips the brand, or alters it, maybe consumers will react differently.”

Polling power

Based in New York, Southgate has experience of how each presidential hopeful’s brand is being received. So who has the better brand – Trump or Clinton?

“Michael Bloomberg,” he says, with little hesitation. “Clinton has the better brand in New York. But in other areas of the US, where the demographics are different, people are more sold on Trump’s promise to ‘make America great again’.”

He suspects that political polling is being hampered by the same inaccuracies he faces when trying to gauge consumer opinion for a client.

“When asked who they’ll vote for, a lot of people will say Clinton, but if you ask who is going to win, you might get more of a reading on people’s true beliefs. People don’t always tell the truth when they’re being polled. It’s the same when we use focus groups. The answers you get in a quantitative interview are not necessarily accurate; you would share the information, but you would layer key findings or points of information on top of it to drive strategy.”

Read more: Why it's time to start taking Donald Trump seriously, part two

Britishness and Brexit

I ask whether Britain’s independence from Europe will strengthen the idea of “Britishness” leveraged by UK brands.

“There’s an opportunity for independent British brands, I’m sure. Jaguar Land Rover and those which connote the luxury, history and prestige with which Britishness has become associated – and which have enjoyed a resurgence on the world stage – could potentially strengthen that.

But the heritage needs to be authentic.” He mentions Tesco, which has been blasted recently for branding some of its fresh produce with the names of farms which don’t exist. “It’s disgusting brand behaviour,” says Southgate. “It’s as bad as sticking a £350m figure on the side of a bus and promising that amount will be saved if the UK left the EU.”

Which brand impresses him most? “Tesla Motors. Its product launches have broken records in terms of order numbers and deposits taken, which is disrupting a very established model of automotive marketing, sales and distribution. And Tesla’s brand is not necessarily about cars, or a wonderful, disruptive product. It’s about fundamental progress for the world.”

Does this commitment mean that consumers are more likely to forgive Tesla when things go wrong, as with the car crash in May which turned attention to the safety of the firm’s semi-autonomous technology?

“If a brand’s purpose and ambition is of a very high order, people are more willing to accept wrinkles, challenges and accidents along the way. Of course, chief executive Elon Musk is well-versed in drawing comparisons with accident rates in the rest of the industry. And the data stands up when compared with the track record of more conventional vehicles.”

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