BRANDS ARE AS­SETS

Finweek English Edition - - Letters - JEREMY SAMP­SON

READ GLOBAL busi­ness mag­a­zines and the is­sue of mar­ket­ing and brands is ad­dressed re­peat­edly. Read South African busi­ness mag­a­zines and they fo­cus on pol­i­tics, per­son­al­i­ties and share tips. Rarely are the words mar­ket­ing and brand­ing men­tioned and the word “ad­ver­tis­ing” is of­ten con­fused with both.

So it was with great in­ter­est that I read the ex­cel­lent re­port by Marc Hasenfuss – ad­mit­tedly as a side­bar to Vic de Klerk’s “The ul­ti­mate growth share” (5 April) – in which he set out five cri­te­ria for pitch­ing a growth stock. There at num­ber two was “Brand strength”. You could have knocked me over with a feather!

Hasenfuss wrote: “Small com­pa­nies must be in the process of build­ing strong brands or trade­marks…” He is, of course, ab­so­lutely cor­rect – al­though I’d ar­gue it ap­plies to all com­pa­nies, small or large. Also, it’s a process that never ends.

Of the top global brands the broad rule of thumb is that of the mar­ket cap­i­tal­i­sa­tion (num­ber of shares mul­ti­plied by share price), one third tan­gi­ble (net as­sets), one third brand(s) value and one third in­tel­lec­tual prop­erty.

In SA, as with other emerg­ing coun­tries, the tan­gi­ble el­e­ment makes up a much higher pro­por­tion and brand value of­ten makes up less than 10% to 15% of mar­ket cap.

Hence a rea­son why over­seas buy­ers some­times see SA com­pa­nies’ shares as un­der­val­ued.

In in­vest­ing in the shares of a com­pany, you’re in­vest­ing in the fu­ture po­ten­tial of that com­pany. With­out strong brands, most com­pa­nies have lit­tle fu­ture. And what are the main as­sets of com­pa­nies? In some cases they’ll be the brands.

One of your share tips is Co­mair, which as you point out is a bea­con to the suc­cess of private en­ter­prise com­pared to its main com­peti­tor, tes­ti­mony sadly to the in­com­pe­tence of many Sta­te­owned busi­nesses. But of­ten Gov­ern­ment fails to even recog­nise the value of brands they own. How­ever, you might have men­tioned that one of Co­mair’s main as­sets must surely be its own brand, to­gether with its other brand ku­l­ula.com, a sig­nif­i­cant fi­nan­cial as­set.

In the Naspers stable, Fin­week as a brand looks to be build­ing value all the time. The more the busi­ness world is sen­si­tised to the cru­cial role of mar­ket­ing and alerted to the cru­cial role of brands, the more com­pet­i­tive we’ll be­come as a na­tion.

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