RTG Holdings, the franchisee of popular bubble tea brand Gong Cha, has unveiled its move to rebrand all existing 80 Gong Cha outlets to "LiHo", which is Hokkien for "How are you?". This was after the company decided not to extend its agreement with franchisor Royal Tea Taiwan, who sold its business to Gong Cha Korea.
According to an article on The Straits Times, around SG$1 million has been spent on the rebrand, including the renovating the new LiHo outlets. Currently, more than 30 Gong Cha outlets already being converted. Gong Cha was introduced to Singapore in 2009, and brings in SG$30million in revenue annually, according to ST.
Marketing has since reached out to RTG Holdings for comment.
In a conversation with Marketing, Lau Kong Cheen, deputy CEO at A.S. Louken, said that the rebranding of Gong Cha seems inevitable as it is not renewing or extending the contract with the master franchisor.
“This is a rather common problem for businesses which either franchise or license a brand. The only thing the company can do now is start a new brand," he said. The rebranding, is as such, done to ensure RTG Holdings is not violating any trademark and intellectual property issues, Lau explained.
He also added that brands generally choose to undergo a name change due to the company being restricted from using the existing brand name. Other reasons could include when the brand faces a non-reversible bad publicity or when a brand is hit with a drastically bad association.
Nevertheless, brands that do well and that generate revenue have equity. This is something RTG Holdings needs to leverage on, in a bid to transfer the equity over the new LiHo brand, Lau added. The company needs to actively elicit customer loyalty, and invoke a sense of preference in customers.
But regardless, Gong Cha fans are in for a surprise, Lau said, adding:
Just imagine if your close friend had a total makeover, plus change of wardrobe. You would definitely take time to adjust to him or her despite them being the same people.
"This is similar to brands assuming a new identity - such as Gong Cha now being known as LiHo,” Lau said.
“Despite having similar menu and products with very similar taste, the identity and concept of the brand, plays a strong role in invoking a sense of emotional experience. After all, some people claim that ‘tea is tea’,” Lau explained.
Lau added there are certainly different brand strategies that could make the transfer of equity smoother. Evoking a sense of familiarity is one as human behaviours are often influence by this.
However Dinesh Sandhu, managing director of DIA Group, said LiHo doesn't need to evoke a sense of familiarity because it would be seen as a "copycat" brand - a localised version of the original.
He added that LiHo will no doubt be subjected to higher levels of scrutiny, given the high benchmark already set by Gong Cha. To counter this, the brand now needs to innovate with new flavours.
"Gong Cha had a nice loyal group of fans and consumers. There will no doubt be a drop off. Some consumers who aren't aware of the change might simply think the brand has shut down in the market. Others will constantly be comparing the two," he added.
Agreeing with Sandhu is Nick Foley, president, SEA and Japan, Landor Associates. When it comes to positioning a brand, he explained that marketers have three primary choices - creating a new position, deposition a competitor, or re-positioning their own brand.
In the short term brands also need to be relevant in the minds of their target audience. This is while being different from their competition. Meanwhile, in the longer term, brands need to be held in high esteem by their customers and enable them to develop a thorough knowledge of the brand’s offer.
"LiHo may well be different to its competition, but it will take time to build the level of esteem that Gong Cha had. This is a brand that Singaporeans have had a bond with for many years and it’s going to take some time for them to develop the same affinity with the new brand," Foley said.
Another challenge the brand can potentially face is the lack of association with Taiwan. This is because consumers know that bubble tea was invented in Taiwan.
"LiHo is a newly created local brand, with no visible links to Taiwan. Hence the perception by Singaporeans may be that the new brand lacks authenticity. Suffice to say, there is considerable risk in convincing consumers to switch to LiHo and pay the Gong Cha premium for it," Foley explained.
Hence, LiHo will need to quickly drive relevance with its core customer base. It needs to show consumers that aside from the change in name, little else has changed. One brand he felt managed to do this successfully was Ce La Vi, a landmark restaurant located on top of Marina Bay Sands, which was previously known as Ku De Ta. Similarly, the reason for the change was a commercial one. LVMH Capital, which had acquired Ku De Ta, could no longer use the name, so changed it to Ce La Vi.
"Consumers were initially surprised by the move, however, once they realized a number of factors remained the same, patronage continued. This is the most likely scenario for LiHo," Foley added.
Meanwhile in Malaysia, earlier this year, franchisor La Kaffa International and Loob Holdings got into a heated dispute over giving up hold over the Chatime franchise.
In a press conference, La Kaffa said it will take on all management duties of the 165 Chatime stores in Malaysia. According to media reports, CEO of Loob Holding’s Bryan Loo said La Kaffa would take over the business operations going forward. Loo saying that there were “disputes over business and operational matters". This saw the Loob Holdings launching a new brand named Tealive.