 "Essar-Rosneft acquisition")
When Rosneft acquired Essar Oil early this month through a consortium, most believed that the Russian oil major would lose no time losing the beleaguered Essar label for its Indian businesses. But surprising many, Rosneft has stuck with the Essar moniker, even reiterating that it has every intention of continuing to do business under the old name. However, experts believe that it is just a matter of time before the Russian fuel retailer reasserts its identity.
The $11.9 billion Essar-Rosneft deal included the acquisition of the 3,500-strong Essar branded fuel retail network in the country, which presents a point of direct engagement between the brand and its customers. Rosneft is an unknown name in this space and that is why it could be looking to piggyback on the Essar brand recall say, experts. While that may be so, the verdict from brand experts is unanimous: The Russian company’s decision to keep its Indian identity is a good move, but a transition from Essar brand to Rosneft is only a matter of time.
So far, the company has not mentioned any plans of changing the company name from Essar Oil to any other. Essar has the largest private sector fuel retail network and Rosneft would want to leverage the familiarity that people have with the brand name as it embarks on its Indian odyssey. Rosneft is also expected to pay Essar Group licensing and branding fees, the amount of which has not been disclosed.
Brand experts believe the Russian company will take some time to establish its name in the country. “Although Essar does not have a very wide network, it does have brand identity better than Roseneft, which will have to start from zero if they choose to not use Essar brand. There is no recognition for Rosneft in India at present,” said Bharat Bambawale, a Mumbai-based brand consultant.
According to Brand Finance India 100: India’s Most Valuable Brands, released in 2015, Essar, valued at $2,747 million, was number 11 on the list. Interestingly, rival Bharat Petroleum with a much larger fuel retail network ranked nineteenth.
Retaining the Essar label could also be a move to assuage the fears of employees. The deal that has been a long time in the making has rattled many and Ambi Parameswaran, founder Brand Building.com said, “It could be that reasons such as not wanting to upset employee sentiment or (a desire to) not show that a Russian (company) is taking over an Indian (company) are why Rosneft is continuing to use the Essar brand name.”
Rosneft may have multiple justifications to stay with the Essar branding, but most expect it take the plunge eventually. “It is about the interface, you would want to build on and continue with as part of the deal announcement. However, I see this as a temporary thing. There would most likely be a gradual transition to the Rosneft brand,” brand consultant Harish Bijoor said.
According to the company’s 2016 annual report, the Rosneft filling station brand is one of the leaders in Russia in terms of recognition and perception of fuel quality. Clearly, in Russia, the state-owned oil giant is all powerful, but the brand faces a perception risk in many other countries where its ties to President Vladimir Putin put it at a disadvantage.
It is this perception that Rosneft is probably hoping to change before it slips out from under the Essar skin. Parameswaran says, “A gradual shift cannot be completely ruled out where Rosneft would initially continue with only Essar then have a double branding like Rosneft- Essar and eventually drop Essar completely. If Rosneft has a strategy to run different brands in different countries, in that case, it can continue with Essar. But overall it does not make sense to keep both brands alive,” he said.
There is at least one example of a brand transition that Rosneft has undertaken. In its 2016 annual report, the company said that to ensure the uniformity of the brand 17 filling stations in Tula and Moscow switched over from the TNK brand to Rosneft. The transition will continue through 2017 the company stated.
In India, there is a high likelihood that Rosneft will attempt a complete makeover a few months down the line. Bambawale points out a transition, if attempted, will need work on changing perceptions. “The negative perception if any (of Russian brands) can be addressed by re-establishing itself by highlighting certain attributes like service and availability, which would create a positive impression among consumers,” he said.
There is another lens through which the Rosneft-Essar brand exchange is being viewed too. How could Essar, a home grown brand allow a Russian company use of its name? Notwithstanding the controversies that have plagued the company, experts believed that the company could have leveraged the brand name for other businesses. “Since Essar is into ports, steel, shipping and such businesses the Ruias should use the brand,” Parameswaran said. It is rare in India, where a brand name which also symbolises a conglomerate is being used by another unrelated company to sell a different set of products.
However, not all see this as a big deal. Bijoor says, “The businesses Essar operates in are outside the consumer interface. It is B2B in nature, whereas fuel retail is B2C in nature, so it works for them as well.”
Oil trail
- The biggest players are: Indian Oil with 26,212, Bharat Petroleum with 13,983 and Hindustan Petroleum with 14,412 outlets
- Essar Oil is the largest private sector fuel retailer with 3,500 outlets; it is present across the country, except J&K and Himachal Pradesh
- Reliance Industries is the closest private sector competitor with 1,400 outlets, which it is in the process of restarting
