Death of brands greatly exaggerated

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So much for brands.

Everywhere you turn these days, there's another statistic foretelling the end of our planetary exercise in brand devotion: Spurred by the recession, grocery shoppers are trading down from premium brands to private labels and bulk buying, luxury purveyors are dying, and earlier this month, the futurist and marketing consultant Faith Popcorn told a reporter from New York magazine, "Brands are dead!" (She made an exception for her own brand.)

And now comes a report demonstrating through hard, empirical evidence that the value of brands is, indeed, diminishing.

But don't order the whisky for the wake quite yet. Yes, the tenth annual BusinessWeek-Interbrand 2009 Best Global Brands study shows that the top 100 global brands have fallen 4.6 per cent in value, and that companies as widespread as UPS, Avon, Rolex, Gap, Microsoft, Pizza Hut and Porsche have suffered drops.

"This is the first year in our 10 years that we've seen a decline," acknowledges Bev Tudhope, the chief executive officer of Interbrand's Canadian office in Toronto. In previous years, the top 100 usually gained an aggregate value of between five and eight per cent.

Still, there's another data point to consider: "If you look at stock market indices on which these brands are traded, they're down 40 to 50 per cent," he notes. "That supports our premise that brands are a very stable asset and they hold their value even in times of economic distress."

Interbrand, a global brand consultancy that has served dozens of the top 100 brands over the years, has a complex formula for determining what it calls "brand value," which is a function of the contributions to the bottom line made by the brand alone, discounted in part for the inherent riskiness of that brand's ability to maintain demand for its product.

By Interbrand's measure, Coca-Cola, which has placed No. 1 every year in the study's 10-year history, boasts a brand value of more than $68-billion (U.S.). Even Campbell's, which makes the list this year for the first time at the No. 100 spot, has a brand value calculated to be almost $3.1-billion.

Between Coke and Campbell's lies a story of wrenching upheaval on a historical scale. A number of companies in the new study have shed more brand value over the past year than any firm since Interbrand began publishing the numbers in 2000.

Not surprisingly, of the five most serious swoons tracked in the current report, four took place in the financial sector. Morgan Stanley's brand value fell 26 per cent in a year. American Express dropped 32 per cent. Citigroup? Down 49 per cent. Maybe a strange sort of congratulations is due UBS, then, for being the year's biggest loser, down a stunning 50 per cent.

The biggest winners are Google, up a full 25 per cent, and Amazon, which is up 22 per cent. Other companies have more modest but still noteworthy gains, including the popular women's clothing store Zara, which is up 14 per cent, Apple (12 per cent), H&M (11 per cent) and Ikea (10 per cent). "Any brand that has a really strong proposition around value has done well," Mr. Tudhope says.

The study is a snapshot based primarily on the companies' 2008 fiscal years, so it doesn't necessarily capture the strides many have made in the past eight months. But it still makes for instructive reading that reveals something fascinating about human nature.

Despite the chatter of other pundits, Mr. Tudhope says he doesn't see consumers eschewing branded products, even as they search for savings. "We call it the rise of the high-low consumer," he explains. "People have become very savvy about resource allocation. They're happy to buy things on sale, or discount brands in areas that are not really that critical to them, where there isn't the same sort of emotional need for a brand relationship. And the money that they can save by making those lower-cost purchases, that can apply in the areas that they really care about."

To Mr. Tudhope's eye, brands are becoming more important than ever, not just to the business world but to consumers as well. "Associating with brands and having an affinity with brands is just a fundamental human need," he suggests. "Brands define who we are. Our associations with them are important to us. They have meaning, emotional value. People seek them out." Time was, we told the world who we were with splashes of tribal paint. Now, we slap brands on our bodies instead.

A word of caution to companies thinking it is easy to capitalize on this instinct: While branding may not be dead, it is in the midst of upheaval. Branding, Mr. Tudhope says, used to be a function of the marketing department. "In the new paradigm, brand is fundamentally linked to your business strategy, and it informs all the functional areas of your business, because brand is really just another way for looking at your business through the lens of your customer."

"Apple, Nike, Zara, those are the ones that are thriving, because they are making that powerful experiential connection with customers at every touch-point. A brand is an aggregate of hundreds of experiences that you have with that entity, every day."

Canada has only a minor representation on the list, landing the same two companies this year as in 2008: BlackBerry is at No. 63, up 10 spots, with a reported rise in brand value of 7 per cent, to $5.1-billion. Thomson Reuters moved up four spots to No. 40, with a rise of 1 per cent, to $8.4-billion.

But, says Mr. Tudhope, there may be reason to hope for a bigger Canadian presence in future years. To make the list, companies have to earn at least 30 per cent of revenues outside of their home country. (That's one major reason Wal-Mart doesn't qualify.) Two domestic banks, RBC and TD, have made big moves south of the border that are starting to pay off in brand awareness. "As you know, Canadian financial services have held up better than any in the world," Mr. Tudhope says. "They're certainly under consideration at this point."

Still, he insists, neither he nor anyone else at Interbrand has any influence over who lands on the Top 100. But there are other homegrown players on their radar. "The ones that could almost qualify right now are Manulife and Sun Life, which have a pretty serious global footprint," Mr. Tudhope says. "We'd like to see them getting onto the list in the near term."

No word, though, on when Faith Popcorn might make the list.