Diversification helps brand value

In these most muddled of economic times, it sure pays to spread your risks. While US brands content to stick to their home turfs took a deeper hit on their market capitalisations, the likes of McDonald's, Nike and Coca-Cola were better off in resisting the challenges. In fact Coca-Cola even managed to reverse the decline noted in the Brand Finance Global 500 rankings from earlier in the year to be placed as the 11th most valuable brand. This shift creates a greater lead over Pepsi, which is placed 25th. This is according to an updated version of the Brand Finance listings, which track the correlation between a brand's standing and its market capitalisation. The latest brand barometer tracked performance up to late August. According to Brand Finance, the economic crisis spawned an erosion of $6.3 trillion (Dh23.13 trillion) in intangible asset values since January. "As stock markets around the world falter, we are seeing a drop in the amount of intangible value global businesses hold and the value of the individual brands," said David Haigh, CEO of Brand Finance. "The dramatic shifts that can be seen since the Brand Finance Global 500 launched earlier this year illustrate how vital it is for businesses to track the value of their brands. Even the world's biggest businesses are not immune to change." Despite the hammerings meted out by the stock markets, US brands took up the first five rankings, led by the tech behemoths Google, Apple, Microsoft and IBM followed by Wal-Mart. Vodafone was the highest ranked non-US brand, coming in at sixth. What's with the upsurge in tech brands? Are they showing a resilience that would make them double dip-proof?"The economic crisis has not led to a blanket reduction in brand value; technology and electronics brands are prospering," said the Brand Finance report. That also paved the way for Samsung to vault to the 12th spot and increasing the value of its brand to $26.6 billion, up 24 per cent. "The South Korean company has not experienced the supply chain disruptions by their Japanese competitors and is developing a stronger hold on both the TV and smartphone markets," the report noted. But judging the merits — or otherwise — of brands based purely on market capitalisation does seem a tad unjust, especially given the sort of gyrations global stock markets have been recording. But Kamal Dimachkie, regional managing director at Leo Burnett for the UAE, Kuwait and the Lower Gulf, says there is no getting around it. "Market capitalisation is the ultimate value gauge and report card for a brand or an organisation," he said. "This is where the market collectively sends a message to a brand of where it stands in their minds and pockets. "In fairness, the absoluteness of a market capitalisation reports not only a specific value associated with the respective brand or organisation, but also on a brand's relative value within an ecosystem and an economic environment. "So, when the market takes a hit for whatever reason, a brand's market cap is affected, but to find how much of that drop can be linked to the brand's actual value, one would need to look at the brand's relative ranking and how that was affected. "The former will indicate the overall ecosystem's effect and how it is faring, but the latter will point to how a brand's intrinsic performance and relevance are affected in such a climate."The updated Brand Finance standings attest to this. Banks and insurance company names have suffered in direct proportion to the sluggish market environment they operate in and amidst fears regarding exposure to sovereign debt. "Bank brands in the top 100 have lost $25.9 billion from their total brand value [7 per cent] since January 2011," said the Brand Finance report. While US brands took sizable hits, their counterparts in Japan saw an erosion of 3 per cent during the first-half of the year, while in Europe a moribund Spanish economy meant brands from that market were down 13 per cent. French brands felt the pinch to the extent of 5 per cent.However, emerging economies all put in strong performances. "In China the total brand value increased with two new brands entering the top 100; PetroChina and China Life Insurance Company," said Brand Finance, while the "Argricultural Bank of China increased brand value by $1.5 billion, rising from 99 to 71 in the league table. Similarly in India Tata moved up the league table with a new brand of $14.8 billion at position 41 (previously 50)." Blaming the markets for a tepid performance has almost become a default setting for brands. But Tanvir Kanji, who heads the Inca Tanvir agency network, is having none of that. "In my experience, brand erosion is invariably due to weak brand management, but is conveniently blamed on economic circumstances," he said. "Managements take their brands for granted during boom times and are lost when demand slows, competition is aggressive and consumers start to expect more ‘bang for their buck'." From / Gulf News