Top brands can be big win­ners — but it’s vi­tal to do re­search first

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE - Leona Ni­chol­son

IN­VESTORS are of­ten drawn to com­pa­nies which own strong and pop­u­lar brands. It’s im­por­tant how­ever that in­vestors look at the rep­u­ta­tion and track record of brands when de­cid­ing whether to in­vest in them or not.

The ear­li­est global con­sumer brand is Gil­lette. The growth of that brand was as­sisted by US and British troops trav­el­ling to the First World War. An­other pi­o­neer­ing brand was Hor­licks — which was first patented in the US in 1873 as a malted nu­tri­tious drink for in­fants by two British broth­ers. To­day its largest mar­ket is in In­dia.

There are some in­ter­est­ing trends oc­cur­ring in the emerg­ing mar­kets in the East which in­vestors should take note of.

Mck­in­sey es­ti­mates that if cur­rent trends hold, China’s ur­ban pop­u­la­tion will reach 1bn by 2030 or 70pc of its pop­u­la­tion — from 59pc to­day. Sim­i­lar trends are ex­pected in In­dia, al­beit from a lower ur­ban base. Many in­vestors are ac­cess­ing these grow­ing mar­kets by in­vest­ing in multi­na­tional com­pa­nies who de­rive a grow­ing por­tion of prof­its from this re­gion.

Chi­nese in­ter­net ti­tans Ten­cent and Alibaba have de­vel­oped their own ‘ walled gar­den’ of brands such as ‘Wechat’ and ‘Ali­pay’. How­ever Sam­sung, Huawei and Uniqlo are also re­minders that brands travel east to west. These grow­ing economies will play an in­creas­ingly im­por­tant role for brands and in­vestors over time.

There have also been in­ter­est­ing de­vel­op­ments in food and bev­er­ages, and in cars.

Nes­tle, for ex­am­ple, is the world’s largest food and bev­er­age com­pany with well-known brands such as Kitkat, Nescafe and Per­rier. Al­most 60pc of its sales come from the grow­ing economies of In­dia, China and Brazil. Nes­tle is a mar­ket leader in pet food, in­fant for­mula and of course cof­fee where it holds an es­ti­mated 25pc mar­ket share. The cof­fee mar­ket (fresh and in­stant) is worth $83bn (€73bn) and has grown 6pc a year in the last five years, ac­cord­ing to Euromon­i­tor. To build on the enor­mous suc­cess of Ne­spresso, Nes­tle has ex­panded its premium port­fo­lio with the ac­qui­si­tion of Blue Bot­tle — an up­mar­ket chain of hip­ster cof­fee shops with an av­er­age price of $5 per cup.

As­ton Martin de­scribes its niche lux­ury cars as ‘au­to­mo­tive art’. Its DB sports car has been ad­mired for its speed and tech­nol­ogy. As­ton Martin aims to dou­ble pro­duc­tion over the next five years by mov­ing into the SUV cat­e­gory. As­ton Martin has been res­cued from bank­ruptcy seven times since 1912 and has had mul­ti­ple own­ers, in­clud­ing Ford, but such is the strength of its mar­quee brand, it has just listed on the Lon­don Stock Ex­change with an eye-wa­ter­ing val­u­a­tion.

In­vestors must how­ever re­mem­ber that no brand is en­tirely safe and can fal­ter.

With a mar­ket cap close to $1trn, Ap­ple is the world’s most valu­able brand. How­ever, Steve Jobs re­vived it from the brink of bank­ruptcy in 1997. Fur­ther­more, even though we are tak­ing more pho­tos than ever, Ko­dak failed in its bid to rein­vent it­self. Toys R Us, once a cat­e­gory leader, re­cently filed for bank­ruptcy. Brand rein­ven­tion is clearly an im­por­tant way to stay rel­e­vant for con­sumers and at­trac­tive for in­vestors.

Whether look­ing east to the emerg­ing mar­kets (and their grow­ing pop­u­la­tions) or in­vest­ing in a lux­ury or in­no­va­tive brand, brands can and do win bring­ing a healthy re­turn for in­vestors. It’s cru­cial though that in­vestors do their re­search — and con­sider the dura­bil­ity of a brand — be­fore in­vest­ing in it. Leona Ni­chol­son is head of in­vest­ment man­age­ment at Bank of Ire­land In­vest­ment Mar­kets Any in­vest­ment com­men­tary in this col­umn is from the au­thor di­rectly and should not be seen as a rec­om­men­da­tion from The Sun­day In­de­pen­dent

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