Thursday 5 June 2008
Source: Time of India.
Is the 111-year-old Godrej group following in the footsteps of the Tata group to earn royalty from group companies for using the Godrej trademark?
If the latest agreement between Godrej Properties and parent company Godrej Industries is anything to go by, the group could in the future looks at the possibility of charging companies royalty for usage of the Godrej brand.
Godrej Properties has been granted the non-exclusive rights by Godrej Industries to use the recently refurbished Godrej trademark and logo upon a payment of royalty of 0.5% of the former’s gross turnover per annum. On Godrej Properties’ consolidated total income, the royalty payment would come to a little over Rs 1 crore per annum.
Godrej Industries, the listed flagship company of the Godrej group, currently holds 81.4% in Godrej Properties which plans to come out with an IPO. The Godrej brand and trademark are assigned by Godrej & Boyce Manufacturing Co, the holding company of the group, to the Godrej Industries.
There is, however, a question mark on whether royalty payment on the brand would become a policy for other group companies too. According to group sources, the case of Godrej Properties entering into a royalty payment agreement could be an exception rather than the rule. These sources said that policy is unlikely to be rolled out across the group.
The reason being that in group companies like Godrej Consumer Products (GCPL) and Godrej Sara Lee, the respective brands (eg. Cinthol, GoodKnight) are as popular as the mother brand. For Godrej Properties, however, the business relies solely on the Godrej trademark.
One of the key strengths for Godrej Properties is its affiliation and relationship with the Godrej group and the strong equity generated from the Godrej brand name.
This association will not only be useful for Godrej Properties to attract customers, but also in sourcing of land for property development, expansion into new cities, entering into new tie-ups, among others.
For Tatas, profit making companies which use the Tata brand pay Tata Sons a royalty of 0.25% of turnover or 5% of profit before tax, whichever is lower. Those profit making firm within the Tata group, which do not use the Tata brand name directly, such as Indian Hotels Company, pay 0.15% of turnover.
In an initiative for the Godrej, properties has been identified as one of the “hero” businesses.