Brand power is a glorious thing—when it works. Consider the rise of Monster Beverage Corp., the best-performing Standard & Poor’s 500 stock of this century. The company’s share price has soared more than 60,000% since 2000, powered by a simple premise: Loads of caffeine! In a big, scary can!
The problem for investors is that shiny new megawinners like Monster are rare. Meanwhile, many venerable brands haven’t gained strength in recent years. They’ve lost it.
Big beer companies are giving up ground to craft breweries. Giant razor-blade makers are under assault from upstarts that mail consumers supplies of cheap blades. Even Kraft Dinner, the fluorescent-coloured staple of my student days, is being undermined by no-name rivals and supposedly healthier alternatives.
Investors should pay attention. The past decade shows how easily shifts in tastes or technology can subvert even iconic brands. People who bet on the continuing appeal of Bud, Kellogg's Corn Flakes and Heinz ketchup have had a miserable time.
Over the same period, newer brands like Monster Beverage, Lululemon and Canada Goose have built market share with surprising speed. One key to a winning portfolio is making sure you're on the right side of these brand shuffles.
The big consumer names that dominated the postwar era aren’t going to disappear, but they do seem likely to fade. They thrived at a time when buying an off-brand washing machine, beer or chewing gum was an adventure in the unknown.
People assumed any company that could afford a non-stop barrage of TV ads had to be top-notch, because, really, who knew?
That age is past. Any consumer who wants to check out a product today just has to click on Amazon, Yelp or dozens of specialized websites to get a fast read on quality. In an era of easy product comparisons and ubiquitous social media, fewer people are willing to pay a premium for the supposed reliability of a big brand name. More are willing to experiment.
Add in the usual business challenges, and brands are vulnerable. To gauge how quickly the ground is now shifting, look back on what Interbrand considered to be the 20 global brands of 2009.
At least seven of them—Nokia, General Electric, IBM, Hewlett Packard, CocaCola, Honda and Toyota—disappointed shareholders over the next decade by lagging significantly behind the market.
Another one, Marlboro, appears to be in long-term decline, given that niggling issue of how its product kills customers.
The brands that are now top of the global heap belong to the digital oligopoly. Apple, Google, Amazon and Microsoft topped Interbrand’s list in 2018, for obvious reasons. They all control powerful platforms that dominate parts of our lives.
The big consumer-brand winners of the past few years have tended to be companies that signal virtue, in one form or another. Maybe it's your habit of braving Arctic temperatures (Canada Goose), your dedication to noble-minded wellness (Lululemon) or your high-energy lifestyle (Monster Beverage). All these companies have isolated a feature that matters to consumers, marketed it aggressively and extract generous profit margins as a result.
Which areas are likely to generate the brands of the future? The big winners will, as always, be a surprise. But to my mind, three areas hold notable promise.
One is the home-sharing market. Airbnb, the giant in this area, is expected to go public later this year. Its competitors include Tripping.com, Booking.com and Marriott International. It’s an industry in flux, faced with political challenges, but someone will emerge as the big winner.
Another prime market for brand building is senior care, which is unsexy but vital, and challenging. Consumers find it hard to compare prices or trust anyone.
Finally, there is the growing market for fake meat—or plant-based proteins, as the jargon goes. The number of vegetarians in Canada has doubled over the past 15 years, and the trend is similar in other countries. Animal welfare concerns, environmental pressures and health benefits are likely to keep pushing more people away from meat.
Investors have several ways to play the vegetarian trend. Beyond Meat has just gone public. Its major rival, Impossible Foods, could follow suit. And other traditional companies, including Canada's Maple Leaf Foods, are trying to carve out a piece of the plant-based pie.
In all these areas, investors should remember there is no rush to pick winners. Anyone who missed out on the first post-millennial decade of Monster Beverage's epic journey, and jumped on board only at the start of 2010, would still have multiplied their money eightfold since then. Brands aren't built overnight—and, for investors, that can be a good thing.