INSIDE BUSINESS: Premium on brands

Marketing: ASB plan puts pressure on firms to protect goodwill assets
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BRANDS remain a potent force in spite of the rise of supermarkets' own-label products and the development of tertiary brands, according to a new survey conducted by research company Infratest Burke. But growing competition and the prospect that the value of brands may soon be listed on company balance sheets means manufacturers must invest more heavily in cultivating and maintaining "superbrands" if they are to survive in the longer term.

Stephen Factor, chief executive of Infratest Burke, believes brands are more alive than ever, despite periodic panic among brand owners that they are dead. "More than three quarters of shoppers surveyed said they were more likely to buy branded goods than own-label in a supermarket and would even pay a premium to do so - of up to 32 per cent," he says.

Brand loyalty varied across the six commonly purchased product categories in the survey. Eighty-nine per cent of cola buyers claimed they would not purchase own-label cola; 30 per cent bought Coca-Cola most often, compared with only 3 per cent for Virgin Cola.

In contrast, the ice-cream sector emerged as the weakest for branding: only 61 per cent claimed they bought branded rather than own-label most often. Of those regularly buying ice-cream, 33 per cent bought own label most often; 26 per cent said they bought Wall's products.

The most successful "superbrands" are backed by companies prepared to give them long-term support, Mr Factor says. "Research shows that only one in four new brands launched is successful, which places a premium on considered brand investment and cultivation."

This view is endorsed by Michael Peters, chairman of design consultancy Identica. "There is now a closer link than ever between legal and marketing departments to protect the value of brand assets - how they are positioned and how they can be protected," he says.

It is an approach that will become increasingly important if Accounting Standards Board proposals issued in June are accepted. The ASB has published a discussion paper that suggests the redefinition of "goodwill" assets on a company's balance sheet. This would result in intangible assets such as brands, licences and patents being counted separately. The proposal follows a spate of company mergers and acquisitions in recent years, which - due to the haphazard inclusion of brands - have resulted in confusion for auditors.

When Grand Metropolitan bought Smirnoff, the company bought the vodka brand on the balance sheet; when Allied Distillers bought Beefeater Gin, it did not. Grand Metropolitan has now valued its acquired brands, such as Smirnoff and Haagen-Dazs, at pounds 2.7bn, and is expected to justify this in future financial accounts. Meanwhile, the Coca-Cola brand is worth $30bn (pounds 19bn) to its parent, the Coca-Cola Company, according to one US estimate.

If accepted, the ASB's proposal will make marketing and advertising agencies' performance and their impact on the value of brands more accountable. It will be able to show how well a company's advertising and marketing is working. And it will mean all companies must give a statement of a brand's value on the balance sheet at acquisition, which would be reassessed periodically.

Assessment of a brand's financial worth would be based on future value and earning potential, forcing brand owners to invest in marketing support for their assets or risk them withering, in public, on the balance sheet, according to Marcel Knobil, editor of the book Superbrands, who commissioned the Infratest Burke research.

Companies that have so far got it right include Heinz, Cadbury, Guinness, Marks & Spencer, British Airways and Haagen-Dazs, according to Superbrands.

These are brands that have become definitive with their market and which have come to own "the emotional heartland of [their] category", says John Hegarty, chairman and creative director of advertising agency Bartle Bogle Hegarty.

This is endorsed by Alison Canning, chief executive of the public relations group Burson-Marsteller. Recent research conducted by the company's parent, Young & Rubicam, covered 30,000 consumers and 4,500 brands in 19 countries.

"It showed superbrands share certain similarities, irrespective of origin or nationality," she says.

These products are different, their point of difference is relevant, and they are held in esteem by the consumer because of this, with the composite effect of perceived quality.

o 'Superbrands' is published by Special Event Books.