The perils of brand extensions - lessons from Kingfisher


In the saga of Kingfisher Airlines that is being played out, there is a live lesson for Brand Owners on straying from the classic brand extension rules.


While many of us in the branding industry were initially sceptical about the Kingfisher brand extension onto an airline, the murmurs were quickly muted with the enormous success the airline seemed to be enjoying. 


The King of Good Times, indeed seemed to have morphed quite easily from the brown bottle to a gleaming Airbus A 300. Literally, since the short red skirts and the bold aircraft livery quickly overshadowed the imagery of the 30 year old beer bottle.


In hindsight, most of us brand sceptics weren't off base. And for the owners of the Kingfisher brand, this should lead to a great deal of soul searching.


First, who are the owners of the Kingfisher brand?


While the media constantly touts Vijay Mallya as the owner of Kingfisher, it is in reality the shareholders of the UB Group. Which leads us to number of interesting questions:


1. On what basis was a brand valued at 4500 crores 'permanently assigned' to the new airline, which in turn  assigned it to its bankers for raising debt? Not only have the share holders of the UB Group been denied a royalty / license fee for a valuable brand that they have invested in over 30 years, they do not even have the powers to determine the usage of the brand or even terminate the brand usage if it is detrimental to the interest of the Kingfisher brand.


Looks like the UB Group shareholders have not just sunk in their money, but have hocked one of their most valuable brand assets into this misadventure.


2. Should there be a takeover of the airline as rumours abound, the brand ownership will obviously also then pass onto the new owners. How will the brand valuation get divided between two completely different owners and businesses? More importantly, if the new owners decide to leverage the brand into further business adventures, what are its implications for the beer brand?


Unravelling some of these scenarios is quite a nightmare and would in itself jeopardize any chances of a quick bail out from a likely suitor.


3. The ills of the airline will no doubt have a negative ruboff on the beer brand. A King in Troubled Times is unlikely to be the most welcome guest around cheery tables.


Besides providing a wonderful opportunity for well focussed rival beer brands to penetrate a hitherto impregnable market.


For the Kingfisher owners, this is likely to be one long hic-cup.


(Ramesh Rao is Managing Director at SCION)