The Appeal of Family Brands

Customers frequently perceive family-owned brands as emblems of success and prestige, but this is also because these brands lend themselves to trust. The family name, when used as a brand, serves to reassure the customer. Toyota and Peugeot, for example, have strong brand identities that consumers believe in.

Says Professor Harold James of Princeton University, “Why does Wilkin and Sons—the British jam purveyor—tell you on the underside of the lid, which you can only see when you have bought the product, how many generations they have been in family ownership? This is presumably seen as creating trust, or as a pledge of quality.”

Barbara Spector, for her part, feels that family brands appeal to consumers because they stand for tradition and continuity. “They have a personal identity attached to the name,” she says. “That’s why ad campaigns like ‘S.C. Johnson: A family company’ and the old ads for Wendy’s featuring the late founder, Dave Thomas, have been so successful—and why the newer Wendy’s ads, which veered away from the founder’s vision, have been a bust.”

Passing on the Brand

Founders of family-owned firms tend to be vigorous, innovative individuals. As the creators of new products or markets, they also are prone to view business with long-term vision. But by the second and third generations, their companies may be torn by conflicts between family members, a divergence of individual interests, and a focus on short-term goals. When it comes time to pass the brand to the next generation, the sorts of intrigues and in-fighting reminiscent of a Shakespearean tragedy may come into play.

Thomas Mann’s novel Buddenbrooks traces the rise and fall of a prototypical European family firm. The founder of the family dynasty is relentlessly driven and focused. His son, while capable, proves to be uninspired. The grandson is more focused on his own interests than the firm’s, while the great-grandson’s chief ambition proves to be the dissipation of the family fortune.

According to T.R. Rajan, a management consultant based in Chennai, India, the Buddenbrooks syndrome has its equivalents in many cultures and is seen even outside businesses. “In India,” he says, “we describe the four generation cycle as 'Poor-Miser-Rich-Spendthrift!'”

Nevertheless, Rajan says, many family firms have been highly successful in India. “Barring a few, such as Larsen & Toubro and Infosys,” he explains, “almost all of the business houses that have made great strides in Indian industry are family-managed, in the sense the man at the top is a member of the family that founded the business. And they are very efficiently managed.” Two that come to mind are the Tata Group, founded in 1868, and the global steelmaker Arcelor Mittal.

But even when the family business is successfully passed on to the next generation, there may be a loss of family coherence as the heirs assume control of the company. The corporate culture eventually derives more from the core business than from family ownership. Meanwhile, a brand identity evolves that is quite distinct from that of the family.

And then, as the firm grows, it may become difficult to find within the family the expertise needed to run it. Often a professional manager is brought in. But professional managers are less likely than family members to be passionate about the business. In addition, professional managers must be monitored to ensure they focus on the interests of the company’s owners and not their own.

With the passing of each successive generation, the gap between ownership and management tends to widen, and the idea of selling the company may become more attractive. According to Teresa da Silva Lopes, writing in Global Brands, family businesses excel at creating enduring brands—especially in sectors such as alcoholic beverages and cosmetics—but public companies are better at developing them.

Randall Frost is a freelance writer based in Pleasanton, California. He is the author of The Globalization of Trade. His work has appeared in Worth, The New England Financial Journal, CBSHealthWatch, and a variety of educational publications.