Overseas companies listing global depositary receipts are tailoring their communications output to appeal to an international audience. Neil Gibbons reports:

Few people have heard of Cherevopets, a city of 300,000 in Vologda Oblast, Russia. But it is from this little-known region that Severstal, the fast-expanding Russian steel company, is transforming the way it projects itself to the outside world.

Severstal is one of the many firms listing American or global depositary receipts (GDR) that has realised the value of rethinking its brand. By revising its visual identity and revamping the way it communicates, it hopes to appeal to a sophisticated international audience.

A clutch of companies, especially from the CIS and UAE, are discovering that their existing domestic brand doesn’t quite play on the world stage. A look and feel that might have served them well in winning over a domestic audience can now, when paraded before international investors alongside global competitors, seem a little – whisper it – parochial.

“Inevitably, the look and feel of a business has a role to play,” says Nick Bastin, a director at London-based financial communications consultancy Capital MSL, which boasts a number of GDR-listed clients. “If a company presenting itself as an international corporate has a crappy logo and website, that doesn’t create the image it’s aiming for. It just doesn’t look joined up.”

According to Graham Marshall, vice-president of the depositary receipt division of the Bank of New York Mellon, the need to update the brand to avoid being perceived as too domestic is “a big issue”, particularly among organisations from emerging markets.

“Their branding science, while not exactly in its infancy, is a bit behind what you might find in the UK and the US,” he says. “Communist countries were not as affluent and consumers had less choice, so companies had less need to single themselves out.”

But Bastin believes they are latching on to the importance of branding.

 “We’re seeing more organisations from these markets prepared to spend money on their brand, including their annual report, website and logo,” he says. “But a lot of these materials are locally produced and designed. They might be done very talented designers but they’re not quite as sophisticated as the products Western audiences are used to. They’re just not at the same level.”

Not everyone agrees that these markets trail the West when it comes to sophistication.

“It’s just that each country has its own cultural traits,” argues Patrick Eastwood, managing director of Pauffley, the agency behind Severstal’s annual report. He believes that communications targetting a domestic audience can tap into that country’s cultural groove – something that appears odd for an international audience unfamiliar with that culture. “When you list a GDR, you have to appeal to a wider audience, which means you need to be less weighted towards one cultural trait.”

Time for a rethink

A London listing is being used by many as an opportunity to reconsider their brand. Marshall has worked with several CIS companies that have updated their identity for their new, wider marketplace.

He cites Sistema, the Moscow-based holding company that’s home to IT and telecoms, microelectronics, insurance, banking, house-building, retail and media concerns. “It has a stable of brands, and it has given them all an egg logo of different colours,” he says. “It helps them to be immediately identified as part of the group, which is useful for a company with which new investors might not be familiar.”

Similarly, Russian bank VTB, responsible for the world’s biggest IPO of 2007, has addressed branding issues with a new visual identity and a change of name. Abbreviating its original title, Vneshtorgbank – quite a mouthful for non-Russian speakers – to the acronym VTB means foreign investors have less trouble remembering the name.

“VTB has introduced a light blue colour palette which looks fresh and modern,” reports Marshall, “and undertook a major branding exercise which centres on a stylised wing design.”

But he counsels against automatically switching to a shiny new ‘international’ look. After all, not every GDR-listed company should seek to fit in with the international herd. He cites the landmark transaction in which MHP Group listed a depositary receipt on the London Stock Exchange – the first Ukrainian company to do so.

“It’s an agriculture business and it’s Ukrainian,” he says. “Its branding isn’t particularly slick or modern but it’s exactly right for that company. Something slick and modern produced by an expensive brand consultancy would seem incongruous, and send out slightly the wrong message.”

The making of a makeover

So how do you set about giving your brand identity a makeover?

In the case of Severstal, the desire to engage with an international audience came from its London listing two years ago. In pursuit of its strategy of aggressive acquisition, the group raised $1 billion for its war chest in November 2006 by listing shares as GDRs on the London Stock Exchange. But before it took the plunge into international ownership, it thought long and hard about the way it speaks to investors.

“It was a strategic decision made early on,” says Dominic Fry of Tulchan Communications, the London-based financial and corporate PR firm that represents Severstal in the UK. “It knew it needed to introduce greater transparency and accountability and it set about doing that with zeal and enthusiasm.”

It helped that, in CEO and majority shareholder Alexei Mordashov, the firm had an enthusiastic communicator who was open to change. Guided by Severstal’s head of communications Vadim Saveliev and Vladislav Piskunov, formerly a manager in the CSR team, the firm set about ‘internationalising’ its suite of communications.

“That meant revamping the annual report, website and brand identity,” says Fry. “The annual report is now published, and the new-look website and brand are close to being unveiled.”

It would be wrong to assume that the transition from a domestic name to a recognised international communicator involves just cosmetic tweaking, though. Companies from certain markets find that they need a change in mindset to appease a more demanding investment community. The watchwords of ‘openness’ and ‘transparency’ may be second nature to those used to a UK listing but they come less easily to some from emerging markets.

“Severstal comes from a media culture very different from the UK,” says Fry. “It’s one in which companies desire greater control over the media, for example. It’s a different cultural approach but one it has embraced. But it’s now behaving in a more open way.”

Report revamp

The annual report is often regarded as the embodiment of a brand and its visual identity and it was this that Severstal looked to first.

“We met members of the Severstal team,” says Pauffley’s Eastwood. “It’s always difficult when you’re used to a dominant logic to approach reporting differently. But they really came to us with open minds. They were keen to change perceptions and wanted to dispel the potential stereotypes that cling to Russian domestic business, the ones in which cynics tar them with a lack of trust. They wanted a report that would shift perceptions and build trust.”

Pauffley’s brief was straightforward and was the same challenge faced by firms, especially from the CIS or UAE, that are elevated onto an international stage.

“What we wanted to do was to instill the annual report with the confidence, gravitas and simplicity with which international businesses communicate,” says Eastwood. “We wanted a design that allowed users to connect more freely with the content.”

According to Fry, the finished product is a success as its style is one with which international audiences identify. “It’s been given a more transparent look and feel,” he says. “It’s more Western in the balance it strikes between data and visual imagery – in the past, the firm’s annual report was data-rich and light on images. Now it includes a chairman’s introduction, a CEO’s statement, a business review and a financial review. And there’s a focus not just on the numbers but on what they mean.”

Eastwood believes that truly international-facing reports have a distinct visual and verbal vocabulary. This includes avoiding photography or a colour palette that obviously refers to one particular country; avoiding references to anything that might offend a large cultural group; and reporting using IFRS in order to be consistent with accepted international standards.

“Severstal is now using the visual and verbal language of an international business,” he says. “Anecdotal feedback suggests investors see the firm standing out as a global player next to competitors in its local market. The annual report has helped people think differently about it.”

Content counts

Both Fry and Eastwood are quick to point out that this is not a triumph of form over content – “The issue is what is disclosed, rather than how,” says the latter. They agree that Severstal made more profound changes to engage with international investor.

“It moved to quarterly reporting and made other reforms,” says Fry. “Following the listing, it took steps to ensure that its governance standards were up to the levels demanded by international investors. For example, it recruited non-executive directors from Europe and the US and now more than half the directors are now non-executive.”

Severstal also brought in Chris Clark as non-executive chairman and restructured itself into three divisions, including an international arm which has already set about acquiring firms in the US. It is now the world’s fourth largest steel producer.

“The transformation has been startling,” says Fry. “It’s has gone from being a domestic, post-Soviet concern into a major international player in just four years.”

But it is the eagerness to reach out and communicate that has attracted international investors.

“We held a big investor day on 10 September,” says Fry. “The attendance of more than 100 was very encouraging and there was a major presence from Severstal’s management. It resulted in a double-page profile in The Times.”

According to Fry, the firm is very good at turning round its assets. But it also had the foresight to back that up with a visual identity.

“It has made great strides in how it communicates,” he says. “It’s heartening to see the lengths an overseas company will go to to engage with its audience.”None of this should overstate the influence branding has on the investment community, believes Bastin.

“A company’s visual identity has a value, but I’m not sure it’s critical to success,” he says. “Companies from these markets still need persuading that they should spend money on what they see as a luxury, rather than a necessity. After all, it’s not a major factor; it’s a minor boost. It’s not something that investors base their investment decisions on. They’d look beyond that.

“But if you’re a large, international company with aspirations to compete internationally and yet you have a logo that looks like something that’s stepped out of 1970s Belarus, that’s not very coherent.”