By Suzanne Vranica
Could there be a sweet byproduct from Mondelez's proposed $23
billion takeover of Hershey?
In a bid to create a confectionery giant, Mondelez International
Inc. offered to buy Hershey Co. for $107 a share, The Wall Street
Journal first reported Thursday, citing people familiar with the
matter.
Not only would the proposed deal bring together some of the
world's most well-known brands such as Oreo cookies and Hershey
Kisses, but it could also be a very convenient way to ditch one of
the worst corporate rebrandings in history.
Hershey promptly rejected the approach, but Mondelez had gone to
certain lengths to try to win over the Hershey Trust, which holds
8.4% of the company's common stock and 81% of its voting power and
would have to approve any sort of deal. Mondelez is offering, among
other things, to rename the combined company Hershey, according to
one of the people.
While the name might seem like a nice concession, it also would
help unburden the snack-food giant from one of the more obscure and
heavily criticized corporate monikers in recent memory.
"It sounds like a great favor, if they can take the Hershey
name," said Scott Lerman, founding partner of Lucid Brands. "The
Mondelez name doesn't have the heritage like Hershey has," he said,
adding that it's "awkward."
The name Mondelez was introduced in 2012 after Kraft Foods Inc.
split into two companies, with the snacks business becoming
Mondelez and a grocery business remaining as Kraft.
The fact that company officials had provided a phonetic spelling
of the name -- mohn -- dah-LEEZ -- when it was introduced should
have been an early warning sign.
It was an odd choice for a company that includes such famous
brands as Ritz crackers and Oreo cookies, and it was widely panned
by branding experts and the media.
A Gawker headline read "Kraft's New Name is Crumbelievably
Stupid," while a Business Insider headline used the word "Madness"
to describe the decision.
"I would put Mondelez up there with some of the worst corporate
names," said Kelly O'Keefe, a marketing professor at Virginia
Commonwealth University's Brandcenter. "It never really resonated
with consumers," he added.
Activist investor and Mondelez board member Nelson Peltz poked
fun at the Mondelez name during the Delivering Alpha Conference in
2013.
"It sounds like a disease," he scoffed.
At the time of its introduction, the company said the name was
meant to connote "the delicious world." It came from combining
"monde," derived from the Latin word for "world," and "delez,"
meant to convey "delicious."
To come up with the name, the company held a contest among its
employees. Mondelez was based on suggestions from an employee in
Europe and one in North America and the name was tested with focus
groups in 28 languages, the company said.
To be sure, corporate naming is a tough business and has become
even trickier with the rise of social media, which has allowed more
people to express their complaints quickly and publicly.
Look no further than visceral reaction earlier this month when
Tronc was introduced as the new name for Tribune Publishing Co. ,
the 150-year-old brand that owns the Los Angeles Times and Chicago
Tribune newspapers.
Still, Mondelez's offer to take the Hershey name flies in the
face of convention. Typically, the acquiring company's name is the
one that carries on. Plus, Mondelez is more than three times the
size of Hershey. But Hershey clearly has a more widely known and
beloved name, according to branding experts.
To be sure, there have been instances where the name of the
smaller company or acquired concern wins out. For example, when SBC
Communications Inc. bought AT&T Corp. in 2005, the combined
company adopted the AT&T name. The SBC name wasn't as well
known as the AT&T brand, which has world-wide name recognition.
Also, Chemical Banking Corp. chose to take the name of it 1995
merger partner, Chase Manhattan, even though Chase was the smaller
of the two.
While taking the Hershey name seems like a slam-dunk decision,
ad experts said that still presents some branding problems.
"Hershey's is hard-wired to mean chocolate, and the question
will be how do they make it stand for not only chocolate but a
whole set of products, " said branding expert Allen Adamson.
Still, Mr. Adamson is in favor of a change.
"It will be easier to make Hershey stand for snack foods than it
will be to make Mondelez stand for anything," he said.
Write to Suzanne Vranica at suzanne.vranica@wsj.com
(END) Dow Jones Newswires
June 30, 2016 16:26 ET (20:26 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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