For Godrej Industries patriarch Adi Godrej, it has always been family first. Despite murmurs of a split in the business doing the rounds for a while, the senior-most member of the Godrej family is known to have tried his best to avoid it for as long as he could have. The other stakeholders —cousins Jamshyd Godrej and Nadir Godrej and the next generation (Tanya, Nisa, Pirojsha and Nyrika) — are also known to be extremely professional and have always ensured that their differences never took an ugly turn. The family lunch every Thursday on the Godrej campus has been sacrosanct especially for the three senior Godrejs. But with a split that seems imminent, brand valuation experts fear a dilution in the value of the Godrej brand unless it is managed well.
Family businesses disintegrating when they are into the third or fourth generation isn’t too surprising. When the new generation takes over, some of them begin to spot new opportunities, which the others may not agree with, and that’s when the demand for autonomy comes up. The need of the hour then is to institute a robust central and shared brand governance system — a team consisting of representatives from the divided factions. The Tata Group has done this quite successfully. The brand custodian in case of the Tata Group is Tata Sons, which holds the brand licence, and its various entities pay royalty for using the brand.
"The alleged ownership developments will surely pose challenges for the brand. Technically speaking, a brand’s valuation doesn’t directly get impacted by its ownership pattern and that may be a saving grace for Godrej. There are examples of brands that have a distributed structure of ownership and do well. However, such brands run the risk of underperforming on factors such as internal direction, alignment and agility, as well as on the external aspects of authenticity and coherence,” says Ashish Mishra, managing director, Interbrand India. When business control and brand control are different, the brand may be interpreted differently by various factions, and that could impact brand authenticity and coherence.
Indian family run businesses, from Bajaj to Hero and Kirlorskar, say brand valuation experts, have a history of undergoing brand value depreciation only due to the absence of a central brand governance system. "When brands are not centrally managed and the ownership gets splintered, different businesses begin to use it in their own way, leading to inconsistencies and incoherences. There is a question mark on what the brand stands for, its direction and alignment. These are factors which drive brand value, and when these get incoherent, brand value begins to go down,” adds Mishra.
Godrej is the 10th most-valued brand (₹16,897 crore) according to Interbrand’s list of Best Indian Brands. The Tata Group tops the list with a valuation of ₹78,722 crore.
Splitting the business and creating a strong brand architecture could actually help in unlocking more value, says Raghu Vishwanath, managing director, Vertebrand. He cites the example of Taj Hotels and its various brands such as Vivanta, SeleQtions and Ginger. “Each of these brands are focused on different customer segments. So, there is a value for Ginger as a brand and there is a certain value attached for Taj as a brand. Therefore, what actually happens when you unlock and create a brand architecture is that it can have a multiplier effect. The whole will become more than some of the parts, that’s the philosophy of brand valuation.”
In the case of Godrej, all the brand equity rests with the master brand. "If you build value scientifically for each business vertical then the whole can become much more than some of the parts. If all the three businesses have independent, standalone equity over time then Godrej's equity will be much more than the three entities,” adds Vishwanath.
He also stresses on the need for having a central brand custodian. The concept of having a central brand architecture is actually not new to the Godrej Group. In 2006, the company created a central brand committee, headed by Tanya Godrej. "The brand committee lost its relevance as each of the companies were diligently abiding by the guidelines laid down by the committee,” according to a company insider.
The bone of contention in the Godrej family is not so much about conflicting ideas, but ownership of 3,400 acres of land. Unni Krishnan, founder, Longwealth, believes the battle over land has taken the family's focus from its scarce capital of purpose, philosophy, heritage and culture. “The family seems to have failed to unleash its scarce capital heritage. Had they grasped the nuance of scarce capital, the Godrej Group would have been a $20-billion entity, half the size of the Tatas. Unfortunately, they are busy fighting over a piece of land and as a result the cake isn't as big as it could have been."
Krishnan, who believes that softer invisible aspects such as culture and heritage don’t lend well to division of tangible assets such as land, says while the senior-most Godrej understood the importance of scarce capital, others failed to do so. “Adi has often said that their focus should be on their intangible bank rather than land, and no wonder the businesses where he was on the driver's seat have done better.” Once the division is formalised, Krishnan expects Adi Godrej’s businesses to perform better. “He may pursue the original values and legacy of the group. The split will result in dilution of the Godrej brand and legacy in times to come.”
Interbrand’s Mishra is more optimistic. “The Godrej family, unlike many of the other warring business houses, are known for being ethical, conscientious and are one of the best employers. I won't be surprised if they emerge as exceptions that agree to manage their brand centrally.”