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28 November 2008 |  
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BRAND VALUES All for one, one for all"  By Jeremy Sampson . . . chairman of Interbrand Sampson |
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SA business publications are not known for showering readers with stories about the huge influence brands have on their everyday lives, nor of their value. Each year, Best Global Brands publishes league tables of the Top 100 brands by value. US CEOs regard the publication as a significant point in the year, and the global media feast on the data for months. In SA, however, it causes hardly a ripple. One excuse given is that SA and Africa have no brands in the top 100. Consider for a minute that the value of the most valuable global brand, Coca-Cola, is US$66,7bn. At the time of writing, that was equivalent to R533bn. Compare this with the market capitalisation of three of SA's top companies: SAB R228bn, MTN R201bn and Remgro R85bn. So you could buy all three with Coke's value, and still have a few billion in change. Reviewing the Top 10 brands, it becomes apparent that of their entire market cap, on average about one-third is brand value. This may vary slightly according to industry sector and other factors. The average age of these companies is 75 years. Countries with strong brand-owning companies potentially have more robust economies than those without. And companies owning strong brands will outperform those with no brands of significance, as they leverage the equity. In recent years there have been many examples of companies buying brands to fast-track their own growth. For example Lenovo, of China, bought IBM's laptop business. SABMiller, formerly SA Breweries, has bought hundreds of beer brands around the world in the past decade to grow its global footprint. The latest was the iconic Dutch beer, Grolsch, as part of a R9,9bn package. There has even been a brand sold off at public auction, creating an incredible return for its owners. Absolut vodka, partly owned by the Swedish government, was bought by Pernod Ricard for R71,9bn. Since brands may indeed be the most valuable of assets, their protection and management should be the top priority of the business. They are too important to be left in the hands of the marketing department. Nor should they be abandoned to the oblivion of media advertising pages. As I write this, the world economy is experiencing some of its most turbulent conditions ever. Traditional financial practices risk becoming irrelevant. In the US, established accounting systems don't allow seamless accounting, making it almost impossible to align the business results of global companies. So though brands that have been bought or sold may be reflected on a balance sheet, home-grown brands remain outcasts. As a result, a company like Diageo is able to record the value for Smirnoff Vodka but not for Johnnie Walker. Brands actually matter more in bad economic times. They are the trust mark. They reassure in times of confusion. They act as wayfinders. They can guarantee financial return. Regrettably some executives are slow to acknowledge the stability of demand strong brands can bring to a business. In tough times like these, they are tempted to slash marketing budgets. Understandable in some cases, this can also be short-sighted, as challenging times can also be times of opportunity for building competitive advantage. Another face of a strong brand is that it can act as a magnet to employees, assisting either in motivating or keeping staff loyal and attracting the right people. That alone should propel any CEO into investing in "his/her" brand. Recessionary times bring challenges but provide great opportunities. In 2003 we produced a paper specifically on managing brand values in a recession. Lessons it highlighted from the past provided guidance for the future. In updating the document for today, we found little has changed. The first principle: audit your brand portfolio. That, and the others, will ensure companies maintain focus.
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In companies with powerful brands, the brand and the business are all bound up together. Finding hard, fast lines of demarcation between the two is difficult," says Prof Nancy Koehn, of Harvard Business School, in the Interbrand publication Best Global Brands 2008.
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