With its future uncertain, ONDP’s prized brand, Zain raises the question whether great brands can outlive the fate of their companies
Scene one
Zain has emerged as the No. 1 Omani brand in BusinessToday’s Best Brand survey replacing Nabil. And this is no flash in the pan – Zain has been the No 1 local brand in four previous BusinessToday surveys. While this may sound a bit incredible today, a couple of months back the brand’s presence was difficult to miss. Zain juices, milk, ice cream and yoghurt stared at you from all the hypermarket shelves; when smiling flight attendants pushed in the food cart on Oman Air, Emira-tes, Gulf Air and Cathay Pacific flights, neatly stacked packets of Zain juices instantly caught one’s eyes. It was a kind of unofficial flag bearer of corporate Oman.
Scene two
Oman National Dairy Products (ONDP), the company, which owns Zain, suffers a 75 per cent of erosion of its capital in May 2006. Estimates peg the figure at anywhere between RO3mn to going upwards of RO7mn. The Capital Market Authority declares a suspension on trading of the scrip on May 14, 2006. Production comes to a grinding halt as banks freeze ONDP accounts. Zain products start vanishing from the shop shelves, unpaid workers are asked to go on leave. The company’s outstanding dues to municipal bodies run into thousands of rials and this could possibly be the end of a blue chip company. The question then is whether great brands survive the collapse of their parent companies? Or is it that their fate is inte-rtwined to the extent that one cannot survive the death of another?
Global pointers
Let’s look at some evidence to get a fix. A recent Businessweek survey of the Best Global Brands lists Coca Cola, Microsoft, IBM, General Electric and Intel as the top five brands in the world. Do these brands necessarily belong to good companies? Going by the Fortune 500 ratings for 2006, it may seem so. Coca Cola is No. 89 on the Fortune 500 list, Microsoft No. 48, IBM No. 10, General Electric No. 7 and Intel No. 49.
A contrarian view holds that the valuation of strong brands may be worth more than the bricks-and-mortar value of a business. Doug Ivester, former president and chairman of Coca Cola, remarked that even if the physical assets of Coca Cola Inc were destroyed, the company would still be able to raise US$150bn if the trademark survived. But the loss of the brand would cripple the company beyond repair. After all brands like Xerox and Google have become generic to photocopying and Internet searches respectively. While this may be true for some products, the similarity cannot be stretched too far. In the long
run good brands need to be backed by
strong companies.
The way out
A Zain thus needs an ONDP, an ONDP that is financially robust, technologically advanced and HR competent. Here are a few possi-bilities that may help revive the beleaguered brand:
- Stakeholders take charge: The major sharehol-ders like WJ Towell, OMINVEST and ONIC Holding can infuse the requisite capital to get the virtuous wheel of production, marketing and cash flow rolling once again. There have been some indications about a couple of the shareholders giving thought to this option.
- The takeover route: With Zain still enjoying top-of-the-mind recall, a takeover of ONDP by a company committed to its revival may prove to be the perfect alchemy. A case in point is Renault’s takeover of Nissan and the latter’s thunderous comeback under the inspired leadership of Carlos Ghosn.
No effort however radical should be ruled out to revive the company, for it would be a shame if Zain dies at the altar of a crippled ONDP. We hope to see Zain in the list of winners when the 2007 BusinessToday’s Best Brands survey results comes in. |
