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S. Murlidharan

S. Murlidharan asks whether cross-branding makes sense other than on costing ground

THE ACC-Gujarat Ambuja saga goes beyond the vexed issue of whether public offer requirement was on or not under the SEBI takeover regulations, though media attention has remained riveted on this facet alone perhaps because it makes a good copy.

Hot on the heels of acquisition of around 14.5 per cent of shares in ACC from Tatas, Gujarat Ambuja is reported to have forged a kind of relationship with ACC that could make brand purists wince even while warming the cockles of cost accountants.

The name of the relationship is cross-branding. With competition hotting up in the cement market, the two companies have sensibly decided not only not to step on each other's toes but also to manufacture on each other's behalf.

Thus ACC, besides manufacturing for itself, also manufactures for Gujarat Ambuja and vice-versa. The cost advantages are obvious.

For one, transportation cost is minimised as a plant in the North caters to the custom of both in the region while the one in West does the same for both in that region.

More importantly, both ensure that their capacities are utilised to the optimum, thus facilitating spread of fixed costs on as many units of production as possible.

The arrangement is an excellent and pragmatic compromise between the theoretically more optimistic and alluring prospect of reaping fuller profits by hogging the entire market and fatalistic resignation to under-utilisation of capacity.

The development, sensible as it is, may not meet with the approval of a dyed-in-the-wool brand guru though. At least, it certainly ought not to.

A brand presupposes uniqueness and boasts exclusivity. But cross-branding strikes at the very root of such uniqueness given the fact that unlike a franchising arrangement in which the brand-owner-franchiser fastidiously insists on adherence to the unique attributes of the brand, cross-branding takes customer loyalty for granted under the implicit and unstated assumption that there is after all very little to differentiate two brands when the customer possibly has no means of telling between the two.

Indeed, the proverbial gullible-customer laps up the product of a popular brand manufactured by a franchisee with as much alacrity as he laps up the same product made by the brand owner himself.

But while such indifference on the part of the customer is understandable, the resultant dilution of the very concept of brand ought to have caused consternation amongst the purists.

But then, this is not the first step in marginalisation of the sanctity of brand nor is it likely to be the last. Over the years, the sanctity of brand has sadly come to be compromised.

The brand gurus did not lose sleep over another disconcerting development as well — celebrities being anointed brand ambassadors of multiple, if not competing, brands.

That promiscuity of the ambassador is inimical to the exclusivity of the brand either did not occur to them or has conveniently been brushed under the carpet.

The progressive dilution of brand has, in fact, fuelled the increasing cynicism of the mysticism of brand.

Nevertheless, as pointed out earlier, cross-branding has a lot to commend itself for. It makes tremendous practical sense.

So what if it, in the process, makes mock of the pretended inviolability or sanctity of the concept of brand and vindicates those who have it that a brand is more about packaging than about the product.

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