Alokananda Chakraborty
In an earnings press release last year, food delivery firm Zomato’s management had proclaimed “we love bad news at Zomato”. So, it came as a surprise when earlier this month CEO Deepinder Goyal said in an internal memo the parent company would be renamed ‘Eternal’.
It seems unlikely the firm is trying to shed the Zomato name because it has got embroiled in too many controversies or because its stock market performance has been underwhelming.
So why is Zomato tying to fix it, if it ain’t broke? More importantly, what exactly is it trying to fix?
The name change has nothing to do with bad press and serves a more long-term purpose, according to Goyal. It aims to bring Zomato’s myriad businesses under one umbrella brand. “Eternal, which means forever, defines our mission statement. It puts into perspective the vision we have for ourselves henceforth – to build an organisation that is sustainable and serves a purpose beyond any of our lifetimes,” he said.
His note to his employees explained the move in more specific terms: The corporation is in the process of evolving from managing a single, mostly independent business to managing a number of sizeable businesses. So the brand, Eternal, would now have several enterprises under its umbrella. Goyal also told his team after the Blinkit acquisition that he didn’t want the new team to feel like a step child. Thus, renaming the parent company and treating Zomato and Blinkit on an equal footing under the Eternal umbrella brand made a lot of sense.
And, make sense it did. Zomato’s shares soared by over 15% within an hour of the stock markets opening the day after Zomato’s internal rebranding plan became public. After its bumper debut on the Mumbai stock market last July, Zomato’s shares lost more than 60% of their value on concerns about valuation and growth.
To understand Zomato’s latest move “we also have to understand the difference between rebranding of a consumer facing brand and corporate rebranding”, said Ayushi Gudwani, founder, FS Life, which was known till recently as Fablestreet. “The rebranding of Google to Alphabet, Facebook to Meta, and in our case FableStreet to FS Life, all happened with more brands being launched than the one brand it started with. In such a case, it always makes sense to give a unique identity to the corporate company as a whole.”
Call it umbrella branding or corporate rebranding, Zomato’s latest move ties in well with its desire to be more than a food delivery app.
Over the last year or so, Zomato has invested in digital advertising company Adonmo, food ordering system UrbanPiper, food robotics company Mukunda, fitness platform Curefit, hyperlocal discovery business Magicpin, and logistics firm Shiprocket. Besides, it has acquired grocery delivery outfit Blinkit. The company’s board has also approved the incorporation of a non-banking finance company, which will be a wholly-owned subsidiary of Zomato. The firm is expected to spend `9,700 crore on acquisitions until the end of November 2023.
Now, “a rebranding exercise is a good idea only if a company’s business has changed,” said Mohit Hira, co-founder, Myriad Communications, & venture partner, YourNest Capital Advisors, “…or if the context in which it operates changes.” Goyal can check both the boxes.
But rebranding is never easy — it costs a great deal more to get consumers to remember the new brand, especially if the existing name has huge recall. “Do we refer to Facebook as Meta at all?” asked Hira.
This point is not lost on Goyal. “Zomato remains Zomato. There’s no plan as of now for a formal name change. Eternal continues to be an internal name which helps put all our businesses at equal footing with each other.” So there will be no change in the brand collateral at the moment or the delivery partner gear.
That said, it is difficult to justify such decisions purely from the cost perspective, said Sourav Borah, assistant professor, marketing, IIM-Ahmedabad. “If Zomato rebrands itself as Eternal, all businesses where Zomato has invested such as Blinkit and Magicpin would come together. For consumers, it would send a signal of a common identity. Creating an ecosystem makes sure that consumers relate to brand Eternal and also has a greater switching cost if they wish to move outside of the ecosystem.”
That apart, it also helps in understanding consumers better as now it can run marketing programmes across channels. Imagine having one loyalty card which consumers can enjoy across Eternal. Consumers can use the loyalty points from Zomato to cash in on Blinkit. Firms also have a complete picture of the consumer journey.
“Second, valuation also gets a boost. Not only do you have better assets, the firm has a greater value which it can unlock in future. For most new edge businesses, retaining valuation is a significant challenge,” added Borah.
But questions remain. Since it looks like Eternal will be the name of the parent or holding company, which will include several other companies within it, the issue is, will Zomato continue to exist as a brand or will Eternal kill it. If it’s the former, it doesn’t really impact a consumer. But, if it’s the latter, we’re looking at significant advertising and rebranding investments that may not result in the word ‘Zomato’ being replaced in everyday usage.
In a blog post in 2019, Zomato’s CEO had written that “world class execution is the only way to live through multiplier risks”.
The current transformation will likely put Zomato’s collective execution skill to test.
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