Don’t brand your fingers
Do lists of top brands really have any value?
LET’S TAKE an unlikely scenario: You’ve raised a few bucks and Coca-Cola is ready to sell you its brand name – its most valuable asset. How much should you pay? Well, it’s no good adding up the value of all the bottling plants and distribution trucks – or even its secret formula – because that’s not where the brand resides. You could buy all of them and still not acquire the brand’s true value.
The brand – a mysterious amalgam of opinion, perception and reputation surrounding the brand name – is to be found in the minds of consumers. To value that, you have to go to a brand evaluation expert such as Interbrand, Millward Brown or Brand- Finance, to name but three. But they all put vastly different figures on the Coke brand. As a buyer, your best bet is BrandFinance, which values Coke at US$42bn. But Coke itself will no doubt hold out for Interbrand, which puts a figure of $67bn on a deal.
That difference is quite significant. At current exchange rates $25bn would buy you all of MTN and its tangible and intangible assets (based on market capitalisation), with a few cents to spare, or a couple of our leading banks.
But perhaps the key question is what’s the value of brand valuation when the practitioners can’t come even close to agreement? They don’t agree on which brand is
the most valuable, or the order in which to rank the top 10.
Interbrand puts Google 10th, while Millward Brown puts it first. BrandFinance rates WalMart first, while the other two can’t find a place for it in the top 10.
They don’t even agree on which brands make up the top 10, though there are some commonalities. Six brands are found on all three lists: Coke, IBM, Microsoft, GE, Nokia and Google. And on one thing they all agree: Microsoft is third.
The differences are explained by the different methodologies and exclusions adopted by each brand valuer. It’s too confusing to explain here, but each system has its own logic and no doubt claims to be the best.
Timing also has some role in explaining the differences. Millward Brown’s BrandZ ranking was conducted in April, Interbrand’s in September. The intervening period saw the global financial market meltdown. BrandFinance went so far as to produce two lists, one before (in March) and one after. According to that, the results of the financial crisis pushed WalMart from four to one and Coca-Cola from one to two.
So you’re left wondering: What real use are such lists of top brands? At one level the answer has less to do with the companies on the list and everything to do with the compilers. The value of the lists is to provide publicity for the compilers. It’s a PR exercise.