Since Motley Fool has named 2011 “The Year of the Spin-Off,” we have covered a number of companies who have made a confusing mess of their brands. Corporate spin-offs have led to brand spin-outs for companies like Marathon and Motorola.
Sara Lee is doing it right. The company is keeping its core food business under the Sara Lee name, and is spinning off beverages into a new, yet unnamed company–presumably NOT Sara Lee Beverages. Sara Lee is moving forward mindful of the considerations behind wise brand decisions for successful spin-offs:
1. What drives brand value now and into the future? Which part of the business is most tied to the brand reputation and how does the brand fit with the strategic plans of the parent company and the spin-offs? When AT&T broke up, the brand value was mostly related to the consumer side of the business. The B2B spin-off adopted a new brand, Lucent.
2. What will be the source for future growth? Rebranding can be expensive when you consider things like new signs, repainting vehicles, new uniform, not to mention redoing all marketing communications. These costs should be offset by future profit and volume potential.
3. Brand role should impact spin-off naming decisions. Fortune Brands–another big spin-off this year, is a name closely tied to the liquor business. The golf and home improvement spin-offs need new names.
4. Corporate culture and company structure should not be ignored. The Hanes business had always been run independently, even after it was acquired by Sara Lee in 1979. When it was spun off in 2006, it was easy to leave the old Hanes name and structure in place. Spinning off the beverages business is not so easy. The beverage business was built by disparate acquisition of companies from Holland to San Francisco. This business didn’t have a pre-existing overarching brand or integrated structure.
With these considerations in mind, executives can make wise brand decisions that maximize the value of the parent company and each individual spin-off. Companies can split, but brands cannot.:
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