Preserving a brand

Amicable Godrej split has a lot riding on it

The Godrej group, over its 127-year history, has developed a remarkably strong brand, by some estimates one of the 10 most recognised and valued in the country. It has grown the value of its products, particularly in consumer-facing sectors over the past decades. But it has done so while struggling on internal coordination and institutionalisation of family control. In fact, there’s no real “Godrej group”, as such, uniting its various enterprises. Efforts such as the creation of a family business board over a decade ago did not quite pan out. In India, as tight leadership from the early founders of a family-owned group gave way to multiple stakeholders with differing visions in subsequent generations, this has often been a recipe for disaster.

However, the split in the Godrej family holdings that has just been announced — which is said to be an “ownership realignment” — seems to be a relatively low-impact and amicable manner of managing such disagreements. It seems that, by and large, the shareholders in the listed Godrej companies would avoid the wealth destruction that previous family disputes have caused. The various listed companies, including Godrej Consumer Products Ltd and Godrej Properties Ltd, will go to one side, run by the families of Adi and Nadir Godrej; their cousins Jamshyd Godrej and Smita Godrej Crishna will take Godrej Enterprises Group, dominated by the unlisted firm Godrej & Boyce. Many were interested, in particular, in how management of the vast land bank in Vikhroli that the latter controls would pan out. This land, an over 3,000-acre parcel that has been in the family for almost a century, occupies an enviable position alongside the Eastern Express Highway in Mumbai.

The family did not address the question of this land’s future directly in its main press release; however, another press release struck a calming note by insisting that Godrej & Boyce, as owner and developer, its subsidiary Godrej Construction, and Godrej Properties as the development manager and marketer, would continue to collaborate on the land. Not all the land is suitable for development, but 1,000 acres of Mumbai land would be enough to cause fatal acrimony in most families. It appears, fortunately, that the Godrej family has avoided that. However, how this land will be developed — and whether the Adi Godrej side of the family has lost out in terms of controlling its value — remains to be seen. Given the size and environmental sensitivity of the land, as well as the scarcity of real estate in Mumbai, there are deep questions of trusteeship and stewardship at stake here that involve not just the family but also the people and government of the city.

Extra value in any development of the land will come, in part, through trust in the Godrej brand name. The broader question, thus, is how both these separated entities — which will, apparently, continue to share the familiar Godrej brand and logo — can manage to retain the aura that the brand has acquired over the past century and more. In concrete terms, how will any one side manage situations in which it feels the other is diluting the shared brand value? In the absence of any clear institutional framework, this will come down to goodwill.