Change of prescription

The merger of Glaxo Wellcome and SmithKline Beecham could result in upheaval for design groups working on the companies’ brands.

Like the merger of any two business giants, the one proposed by Glaxo Wellcome and SmithKline Beecham has left an air of uncertainty amongst its staff and suppliers. This anxiety could linger until the end of the year.

For designers, it seems things will either remain unchanged or there will be a complete overhaul. It is too soon to say, but any review of strategic interests or a restructure of core business is also likely to affect brands.

The creation of the combined multinational Glaxo SmithKline, valued at around £115bn by the London Stock Exchange, is not unexpected. Furthermore, it comes at a time of frenetic mergers among pharmaceuticals groups, creating opportunities for brand consultancies to relaunch groups like Aventis, (formerly Rhone-Poulenc/Hoechst).

Pharmacia & Upjohn’s proposed merger with Monsanto, Pfizer’s proposed merger with Warner Lambert, and Reckitt & Colman’s merger with Benckiser all create the need for design consultancies to develop both corporate identities and extensive catalogues of consumer healthcare brands.

Glaxo Wellcome chairman Sir Richard Sykes, who becomes non-executive chairman of Glaxo SmithKline, together with SmithKline Beecham chief operating officer Jean-Pierre Garnier, will chair an integration planning committee which will consult on how to merge the groups, and ultimately oversee the appointment of a new corporate identity and any joint brand strategy.

A SmithKline Beecham spokeswoman says: “We have already chosen the name Glaxo SmithKline for the new business, and we are very proud of how important both brand names are. But we have not started designing the new identity yet. It will take until after the summer to obtain shareholder approval for the deal.”

She denies the group intends to sell off its nutritional brands, such as Ribena, Lucozade and Horlicks, and says she does not know what prompted speculation to this effect by the City. She maintains that consumer goods, such as over-the-counter medicines and pharmaceutical products, will look to benefit from SmithKline Beecham’s expertise in consumer healthcare branding.

“It was clearly stated today by our senior managers that we will not be selling them off and nutritional products will remain part of our portfolio. We also recognise the importance of brand-building, and SmithKline Beecham will be important in building the pharmaceutical brands of Glaxo Wellcome,” she adds.

But all this is far from certain. If the group were to sell the SB nutritional brands as speculated, packaging design groups like Dohm Puzey (C-Vit drink), PI Design International (Horlicks) and Ziggurat (Ribena Twist) could be some of the first to be affected.

And things could possibly go further still. A global pharmaceutical business analyst at a rival healthcare group says that if a merged Glaxo SmithKline plans to sell its nutritional brands as predicted, it might look to sell off a whole stable of its over-the-counter brands, unless they are strategically important for the newly-merged company.

These brands mainly belong to SmithKline Beecham, one of the largest employers of packaging designers, and account for 30 per cent of its product sales. However, this figure would not be as prominent in an expanded operation. Glaxo Wellcome’s interest in consumer products is a very small 1.1 per cent of its product revenue.

“Glaxo Wellcome and SmithKline Beecham might be tempted to form a new, trimmed down operation for its over-the-counter products, and then float it off. In this scenario, the consultancies working with these brands might well come up for review,” he adds.

“It might look to focus on prescription products, which would call for less design and packaging spend. Marketing would probably be focused on influencing health professionals like GPs, rather than consumers,” he adds.

SmithKline Beecham purchasing director David Loesby is uncertain how the merger would affect the design roster. “I am not expecting any guidance or feedback until later this week,” he says.

As for prescription products, one industry source identifies product clashes (hence possible rationalisation) in Glaxo SmithKline’s competing treatments for cancer and herpes, and in anti-depressants. SB’s Kytril, Paxil and Famvir brands come up against GW’s Zofran, Welbutrin and Valtrex, for example.

A third complication is that Glaxo SmithKline intends basing global operations in the US, and this could potentially have consequences for UK design groups.

Richard Watson of client-consultancy matchmaker Global Design Register says he is concerned that shifting the UK powerbase to the US could well be a cause for some concern. Whether or not consumer brands and associated packaging are affected depends very much on board level decisions made over the next six months, and how the two corporations are stitched together.

This will not only determine which brands, if any get put up for sale, but also which continent will reap the most rewards from the relaunched super group’s design requirement.

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