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Monday, May 12, 2008 Updated at 12 May 2008 1:11 Moscow Time

The Moscow Times » Issue 3892 » Business

Vladimir Filonov/MT

An MTS ad from 2000 celebrating 1 million customers.

Rebranding Puts Russian Firms on World Stage

28 April 2008By Tai Adelaja / Staff WriterWhile Russian brands remain less recognized on a global scale than their Western and Chinese counterparts, names such as MTS, LUKoil and Baltika have started to ring a bell on the international stage.

Last week, marketing analysis firm Millward Brown released its third annual Brandz 100 ranking. MTS, Russia's top mobile phone operator, was ranked 89th, making it the first and only Russian brand to appear in the top 100. LUKoil came in eighth on the list of the top 10 international motor fuel brands and Baltika beer was ranked 15th out of the top 20 beer brands worldwide.

The rankings are compiled by comparing a company's earnings, based on its country of origin and market position, with the earnings that come from the company's most loyal customers, which can be attributed to the brand itself.

The ranking shows how much MTS has benefited from its 2006 rebranding, which was widely considered a failure initially. The rebranding of MTS was part of a larger effort by its parent company, Sistema, to develop a recognizable look that would connect all its products -- mobile phones, Internet, digital television and land line services. The company paid Omnicom Group's Wolff Olins consultancy $4 million to develop the brand, which consists of a white egg surrounded by a solid-colored square. The square is a different color for each product. MTS was represented by a white egg in a red square -- a brand the company later discovered was also the logo of the Inskaya Poultry Farm in the Kemerovo region.

The problems with the new MTS brand were not limited to possible challenges of copyright infringement, however. It was also considered inferior to the new brand of rival Beeline, whose rebranding effort in 2005 was largely seen as one of Russia's most successful.

Yekaterina Osadchaya, a spokeswoman for Beeline's parent company, VimpelCom, said the company's new brand -- which features the black and yellow stripes of a bee -- achieved the goal of the rebranding effort: instilling in public consciousness the principles of clarity, simplicity and optimism.

"A successful brand must take on a life of its own," Osadchaya said.

But Osadchaya acknowledged that it was always easy to lose sight of the aims of rebranding, because a company's image is complicated and all-encompassing.

Maxim Stulov / Vedomosti MTS's new logo is similar to the Inskaya Poultry Farm's.

Osadchaya's comments reflect a common misconception among Russian companies about rebranding.

"Rebranding is not a mere change of name or logo. It is a complete change of corporate values, promises, attitudes and feelings about brands and products," said Yelena Georgobiani, a rebranding consultant at media company SPN Ogilvy.

Georgobiani said Russia was caught up in a rebranding fever. "In the past, companies celebrating their 10th or 15th anniversary tried to rebrand, but now every company wants to put on a new face."

Georgobiani characterized this as a tendency to wrongly equate the unveiling of new names and symbols alone with rebranding by companies eager to take part in the trend. Additionally, in a country where property ownership remains remarkably fluid and hostile takeovers common, efforts characterized as rebranding sometimes simply reflect new ownership.

Fresh on the heels of an initial public offering in May, Dixy, a leading retailer of foodstuffs and household supplies, was eager to plow part of the $360 million it recouped into a rebranding campaign, even if the company's idea of rebranding was hazy at best.

Dixy evolved from three regional points of growth -- Moscow in the central region, St. Petersburg in the northwest and Yekaterinburg in the Urals --and has been using a different brand to promote its image in different regions. The company presently sports a bright red logo in the Urals, a yellow one in the central region and a blue one in the northwest.

"Our marketing experts were working to bring all our company symbols to a new, unified standard," said Yaroslav Grekov, Dixy's head of public relations. "This, of course, means that in some regions we will be rebranding our stores and in other regions, we won't."

That effort had to be shelved after a takeover bid by the Mercury Group in December. The company hopes that its new owners will approve the rebranding strategy, but at the moment, the plan is on hold.

Rebranding does not protect a company from problems such as unpaid tax claims or the prying eyes of law enforcement agencies.

Eldorado, a leading electronics retailer whose head office was raided earlier this month, said it was doing all it could to keep its brand name intact, even as authorities press tax-evasion charges.

"Our company's market research since the raid showed that the our brand is still popular with 90 percent of the population," said Ilya Novokhatsky, Eldorado's communications manager.

"Rebranding is too expensive and time-consuming and we have no intention of doing it just because we are having a hard time," Novokhatsky said.

"As long as clients have brand names and attributes that are completely unique and individual, there can never be a conflict of interest."