CSN EXCLUSIVE: The Calculus of Balancing Brands Post-Merger
NATIONAL REPORT — Several months after Maverik — Adventure's First Stop completed its acquisition of Des Moines, Iowa-based Kum & Go, rumors circulated that the newly doubled-in-size company had decided to phase out the Kum & Go brand over time, allowing the chains to unite under a single banner.
Maverik has only confirmed that it will rebrand Kum & Go stores in Utah and the Intermountain West region, with decisions regarding other locations yet to be made. But in an acquisition of this size, is rebranding an inevitable outcome?
Not necessarily, according to Lesley Saitta, a Convenience Store News Top Women in Convenience Woman of the Year in 2017 and cofounder/chair of business transformation firm Impact 21, a W. Capra company. Upon a major acquisition such as the Maverik-Kum & Go linkup, it's most common to take a customer-first approach and use focus groups, market surveys and other methods to determine the strength of each brand by market, or even by store, she said.
"It is critical to fully understand what the impact of changing the name of a brand will be, as well as any ancillary offers such as loyalty programs, foodservice offers, unique proprietary products, etc.," Saitta told Convenience Store News. "Changing a brand name is not just about changing the sign on the front of the store."
[Read more: Maverik CEO Steps Down]
Shortly after Kum & Go and its sister company Solar Transport, a tank truck carrier and logistics provider, changed hands, Maverik CEO and Chief Adventure Guide Chuck Maggelet appeared to be considering all options. He shared with NACS that he thought it possible to bring the positives of Maverik to Kum & Go stores without necessarily rebranding, while continuing to evaluate future changes.
Synergies and operational efficiency are clear benefits to rebranding an acquired chain, but retailers in the position of making such a decision must weigh the benefits against the potential of losing the chain's existing customers, who may be attached to certain offers. The way Saitta sees it, the goal should be to preserve all the business of the acquired stores while improving them — whether or not they are eventually rebranded.
"For instance, you can add a new, enhanced loyalty program to these stores and/or improve their existing one so that you might attract new customers. You can install new equipment or do any needed upgrades to make the stores more attractive to specific segments of customers. The list is endless on the things you can do to enhance sales," she said.
At the same time, understanding which customers are loyal and why, and what is important to change vs. not change, is mandatory.
"By and large, customers often say they come to a store either because the [customer service representatives] know them [or] they get something there they can’t get anywhere else," Saitta said. This can include products, promotions, loyalty rewards, clean restrooms and more — "you name it."
What Goes Into a Rebranding Decision?
Maverik's purchase of Kum & Go isn't the only major deal in recent years, but they haven't all resulted in rebranding. Irving, Texas-based 7-Eleven Inc. continues to operate 7-Eleven, Speedway and Stripes stores under their own names, although they share certain products and promotions.
7-Eleven's highly franchised business model is one reason for the lack of banner change; technology and strong branding also played a role.
"These acquired companies for 7-Eleven were strong brands with lots of stores in their respective geographies, and had similar technology infrastructures and operating models — so 7-Eleven now manages them as a unit under their newly formed 'Corporate Stores Operations Unit,'" Saitta said. "Much work has been done to ensure the entire company-operated umbrella at 7-Eleven operates as a unit and can explore even more synergies."
[Read more: Maverik Debuts First Rebranded Kum & Go Location]
The level of difference between operating models and stores can also drive up the cost to rebrand, making it too expensive to be worth it.
"Sometimes, there are other priorities that need to be worked out first. So, even though there are incredible economies of scale to be had by consolidating brands, sometimes the return just doesn’t justify it until other changes are made," Saitta said.
The buyer and its long-term strategy also affect whether or not a rebrand makes sense. A convenience retailer, a major oil brand or a private equity group may all have different priorities and goals.
"Different buyers acquire stores for different reasons and this may influence their willingness to spend a lot of money in rebranding, unless there is a significant positive impact on returns for doing so," she added.
Brand strength in a specific geography, unique or differentiated offerings, brand relationships and loyalty/digital programs are some of the strongest factors in determining whether multiple brands can work post-merger.
"Whether or not the stores will see an uptick in sales or profits through a rebranding effort is a critical decision for retailers to make. From a sales perspective, does the new brand bring a stronger market presence, a stronger loyalty program, a differentiated food offer or something else that will retain the old and gain new customers?" Saitta posed. "Are there enough synergies in the technology stack, buying power with combined category management and assortments, merchandising programs, promotional spending, etc.? It's either a customer-facing revenue generator or a backend synergy/economies of scale opportunity, or hopefully both."
When working with retailers that either were acquired or did the acquiring, the Impact 21 team has found there is no cookie-cutter approach that suits all cases.
Whatever path a company chooses after an acquisition, they should be mindful that equally important to what happens next is how it happens. "Any strategy you have is only as good as your execution of that strategy," Saitta said.
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