Companies

Why Thomas Cook chose to acquire the brand from UK entity

Forum Gandhi Mumbai | Updated on December 05, 2019 Published on December 05, 2019

Madhavan Menon, Chairman and MD, Thomas Cook India

For Madhavan Menon, Chairman and Managing Director, Thomas Cook India (TCIL), it was a choice between having to create a new brand and acquiring the existing brand from the troubled Thomas Cook UK.

Earlier this week, Menon announced that the Indian company had decided to buy the existing brand for about ₹14 crore, instead of having to create a new one.

Smart move
  • Thomas Cook brand has a legacy of over 138 years in India
  • TCIL already held a contract till 2024 for the brand licence
  • TCIL generates ₹300 crore a year; the ₹14 crore paid to Thomas Cook would not be disruptive
  • Stakeholders, customers and experts were consulted before move

TCIL was previously contracted to pay an annual brand licence fee of ₹2 crore to the UK firm until 2024 for use of the brand name. “We knew that even if other brands wanted to bid for it, they wouldn’t be able to touch it till 2024,” Menon told BusinessLine.

The 178-year-old British tour operator Thomas Cook declared bankruptcy on September 22. Thomas Cook India is an entirely different entity since August 2012, when it was acquired by Fairfax Financial Holdings, a Canada-based investment company.

Brand transition

While the news about Thomas Cook UK hit the headlines only in September, Menon caught a whiff of it over six months ago, and prepared the company for a possible gradual brand transition. But eventually, for Menon, the Thomas Cook brand had a legacy of over 138 years in India, brand recall, recognition, awareness and trust among its Indian customers.

“It didn’t make sense to let go of something so powerful,” he explained. “Any brand change can be traumatic.”

TCIL did a dipstick survey among its stakeholders and customers and consulted experts before taking this decision. The company also took a learning from Sterling Holidays — a subsidiary of TCIL — which worked well for the company.

From a business perspective too, it was important. Abraham Alapatt, President, Group Head - Marketing, TCIL, explained that TCIL generated ₹300 crore every year, and so ₹14 crore would not disrupt the business. “We would have spent ₹20-30 crore every year for the next three or four years if we had gone with new branding,” he said. Now, that money could go straight back into the company’s bottomline.

“We are happy from both aspects that we’ve mitigated the risk of a brand change. It’s a calculated risk,” Menon said. However, “that doesn't mean that we won’t examine the options for refurbishing the brand and its image.”

The downfall of TCUK

The biggest mistake of the British brick-and-mortar Thomas Cook was to compete with Expedia, an online travel agency (OTA). “OTAs have money to splash, you cannot compete with them, you’re answerable to your investors,” Menon explained.

He further added that TCUK lacked the awareness of the markets in which it operated. The other thing which didn’t go well for it, according to Menon, was that it integrated companies and geographies. Lastly, he believes that the company should have been managed better, “same was the case with Cox and Kings and Jet Airways.”

Speaking about the demise of Cox and Kings and Jet Airways, he said it has created a lot of mistrust among customers and “damaged our performance in 2019”. The company hopes to get a good chunk of the market share of Cox and Kings.

For now, according to Menon, over FY20 and FY21, TCIL will focus on organic growth and the slow transition of the brand. The Indian market is now largely targeting the millennials; TCIL too aims to target them.

Currently, TCIL gets 30 per cent of its revenues from its holiday business. “Our objective is to take it up to 50 per cent by FY21,” Menon said.

Published on December 05, 2019
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