Gunns Limited may soon be no more.
The company isn’t collapsing. Following reports yesterday, the Tasmanian timber company has conceded it is considering a name change. In this, it follows more than 30 listed Australian companies that have rebranded in just the first four months of 2012.
Gunns (ASX: GNS) has a bad reputation, built up over years of heated confrontations with activists, politicians and the general public in the forests of Tasmania. The company has been in a trading halt for one day shy of a month, after losing a key potential investor. It is yet to secure funding for its controversial pulp mill project.
In the past year, the company has lost 70% of its value on the ASX, but its woes are not of recent making. In fact, recent years have seen it improve its social and environmental practices. According to founder and managing director of marketer Brand Intellect, Simon Rowell, this makes it a textbook case for the types of companies that consider a name change.
“I would be recommending that this is the move they make, especially if they’re looking to change practices and create a new start from the organisation, and get away from old connotations,” he says.
But there are other views. Mark Ritson, a marketing professor at Melbourne Business School, says if Gunns were to change its name, it would be a “demonstration of the usual Australian naivety when it comes to branding”.
Both experts agree there are examples of companies that have rebranded successfully. An example cited by both is consulting company Accenture, which rebranded from Andersen in 2001 following a public falling out with accountancy firm Arthur Andersen, (which itself collapsed in the same year). Other famous examples include tobacco company Phillip Morris, which renamed itself Altria Group to distance itself from the tobacco lawsuits, and mining company BHP, which added the word Billiton to its title after a merger.
While consumers are often sceptical of corporate rebrands, Rowell says it can work to improve a company’s reputation.
“If you do it correctly, it provides an opportunity to reposition and to say ‘This is what we were, and this is what we are moving forward.’ It’s easier to do with a new brand.”
He says companies are generally reluctant to rebrand because their reputation is tied up in their name. Consumers develop an awareness and understanding of a brand, which is generally a good thing to have.
“But, when the historical legacy issues behind the brand start to hurt the company’s present potential, it is an opportunity to look at changing it.”
“It costs more. You restart at zero, and you have to spend time, effort and money, but sometimes it’s easier to build up a positive perception in a new brand.
“But, of course, it is a last resort.”
Even so, Ritson thinks Australian companies are far too willing to change their name, and are “notorious” when it comes to branding. “We don’t have a single global brand,” he says. “It’s terrible – we have no real skills in brand management, and that’s affecting all our large listed companies.”
Name changing can harm companies in a number of ways.
Firstly, he says, it’s hard to find a new corporate name that doesn’t have connotations in another language, that isn’t held by another company and that has open web rights.
“For example, Mondelez [which Kraft is naming part of its business] has unfortunate connotations in Russian,” he says. (It is similar to the Russian word for oral sex.)
“If you change the name you risk having a stupid connotation.”
Another minefield, especially for high-profile companies, is the media attention changing a name will attract. For example, the media had a field day when accounting firm PricewaterhouseCoopers considered renaming itself “Monday”.
“[The media] will make you look foolish,” he says. “It plays as a waste of time and money, as a pointless exercise, and earns you enormous amounts of negative attention.” Very quickly, the new name could become associated with inefficiency, bad decision-making and superficiality.
And lastly, changing a name is expensive. For a mid-size company such as Gunns, he says, it’s likely to cost upward of $5 million, when new building signage, stationery, advertising and web rights are taken into account.
Unlike Rowell, Ritson sees little value for Gunns in changing its name.
“There are some understandable reasons why Gunns would like to change their name… they might want to change their heritage or links to past performance. But any advantage of that is outweighed.”
“A company like Gunns can’t afford the cost or negative publicity.”
Gunns has lodged a trademark application for the name, Enpax Australia, and is also reported to be considering moving its headquarters to Melbourne.