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Celebrities turning investors for new-age brands: The pros, the cons, and is the trend long-lasting?

As per industry experts, the ongoing trend of celebrities becoming investors-cum-endorsers stems from the mutual agreement between the two counterparts after they see value in such association

Gone are the days when celebrities used to be roped in by brands just for endorsements, in the modern-day celebrities are investing in brands. The trend reveals that celebs are not just there for the fat pay checks but are genuine believers in the businesses and are in it for the long-haul.

The celebrities not only bring their immense fan-following to the brand but also the credibility factor which has always been a must for businesses. The brands, on the other hand, promise a better rate of return for the investments made by the celebs and try to ensure they will play a pivotal role in the days ahead.

Bollywood celebrities like Ranveer Singh, Deepika Padukone, Akshay Kumar, Alia Bhatt, etc in addition to sports celebrities like Virat Kohli, Sachin Tendulkar, Yuvraj Singh, Mahendra Singh Dhoni and Mahesh Bhupati among others, have hopped on the investor-cum-endorser bandwagon in the country.

Deepak Kumar

Commenting on the importance of such partnerships, Deepak Kumar, Country Head, The Story Lab, dentsu India, said, “It’s a mutual agreement as both brands and celebs see value in such association, as it involves far greater involvement on both fronts. While for the brands, it helps save in upfront payment to celebs and for the celeb, there is greater gain to be earned as the valuation will increase.”

As per Kumar, both celebrities and start-ups try to encash during their prime and thus they come together to form partnerships to bank on the goodwill of the celebrity. “For start-ups, the glory moments are their growth trajectory and hence cash inflow. For celebs, it ensures long-term financial stability, just in case, their career does not remain stable in future,” he added.

Sonu Tyagi

According to Sonu Tyagi, Director, Approach Entertainment, “When celebrities take stakes in any brand, it obviously creates an initial buzz and has an impact on the goodwill of the brand. But, later on, the brand should also have the resources and spends to make optimum use of the celebrity in marketing communications.”

Tyagi went on to add that sometimes the brands don't spend or tap the proper potential of celebrity association, while in some cases, it is the celebrity who loses interest in the long-term for the company.

“It's because of the potential in certain brands and their growth history that makes the celebrity back the brand with an investment. While it is a business decision and investment option, such partnerships help both parties- celebrities and brands, in terms of growing fast for the brand and visibility and for the celebrity in terms of multiplication of their investment, if the company grows and brand worth escalates over time,” he stated.

Recently, Sugar Cosmetics onboarded actors Ranveer Singh and Tamannaah Bhatia as equity partners and launched their first TVC featuring the duo. Commenting on his new partnership, Singh said, “Defying the conventional has been embedded in my DNA and I take pride in partnering with a brand that believes in empowering women. I have admired Sugar’s ability to build a tremendous fan following over the years and I’m excited to be a part of this journey and help the brand achieve its mission of providing Indian women access to premium and quality makeup products specially formulated for them.”

Similarly, Bollywood celeb, Varun Dhawan has also invested an undisclosed amount in the D2C start-up, Fast&Up, wherein he was appointed as a Good Vibes Officer along with Shilpa Shetty Kundra.

Upon being asked whether brands give out stakes to celebrities if they cannot afford to pay them for endorsements, Tyagi replied, “It's not always true but yes in some cases when a brand or company does not have the adequate funds, they try to rope in the celebrity as an investor. Hence, it is true to some extent but not all celebrities express their interest in investing in the brands, therefore, most of them go for direct endorsement deals.”

Story Lab’s Kumar also pointed out that celebrity investing in any brand is a punt that both parties are taking. “Since we are an idol-worshipping nation, adding a celeb as the investor has a better story than having a celeb as just the brand face,” he said.

He also went ahead to assert that a failure in such partnerships can arise if there is a breach of trust and deliverables from either side. He said, “In case of failure, there is always an exit clause that in all probability will ensure a smooth exit. It is extremely important to define the expectations clearly to avoid a debate breaking out in the open in front of the public.”

Meanwhile, throwing light on the implications faced by brands backed by B-town celebs, Tyagi stated, “If there is any controversy or negative thing about a celebrity, the brand can also face backlash and it has happened several times now. In some cases, even campaigns featuring particular celebrities had to be stopped.”

He further went on to point out that the entertainment world works on ‘the last hit’ formula and if a particular celebrity is not delivering hits or is facing a backlash due to his actions or other associations, the brand will definitely get impacted.

On the same topic, Story Lab’s Kumar added, “With social media platforms in a hyperactive mode, both brands and celebs need to be careful of content and conduct in the public domain. The best way out of misrepresentation or under-delivery is to make a graceful exit as per the legal contract agreed between the parties.”

“We follow our idols and, in our attempt, to show our love we try to ape all that they do. Every new film release brings in identical behaviour amongst fans. I don’t think that there is any brand in this country that has not used celebs/influencers in one or another format to connect with their consumers. Such association acts as a steroid in the brand’s life cycle,” Kumar said on a concluding note.

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