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Coca-Cola brand value tops $58.2 bn, claims report

By Lindsey Partos , 13-May-2008

Strong brands drive business growth and beat market turmoil for food and drinks sector, as a new report on top 100 global brands confirms firms are recognizing that brands are among their most valuable assets.

Published last week by research agency Millward Brown Optimor, the third annual BrandZ Top 100 ranking revealed firms that own brands in the top 100 significantly outperformed the stock market when compared to the S&P 500. Coca-Cola (including Coke and Diet Coke) gained the number four slot in the 100 ranking- behind non-food brands Google, GE and Microsoft- with a brand value of $58.2 billion, a rise of 17 per cent on the previous year. "Strong brands generate superior returns and protect businesses from risk," said Dr Joanna Seddon, CEO of Millward Brown Optimor. Brand value depends on consumer sentiment - the power of the brand in the mind of the consumer - but is also intricately linked to the company's ability to translate that sentiment into shareholder value. According to the report, the combined value of all brands in the BrandZ top 100 2008, that includes Pepsi and Budweiser, increased by 21 per cent from $1.6 trillion in 2007 to $1.94 trillion in 2008, more than double the increase experienced the previous year. Brand Value is the financial value of a brand, defined as the sum of all earnings that a brand is expected to generate. For the BrandZ ranking, Millward Brown Optimor values brands in three steps. First, they establish a company's intangible earnings and allocate them to individual brands and countries of operation. The figures are based on publicly available financial data from Bloomberg, Datamonitor and Millward Brown Optimor's own research. Secondly, they determine the portion of intangible earnings attributable to brand alone, as opposed to other factors such as price. This metric, known as Brand Contribution, reflects the share of earnings from a product or service's most loyal consumers or users. For this second step, the research firm tapped its BrandZ database, a repository of brand equity data covering 50,000 brands, and based on more than one million consumer interviews. Thirdly, using data from BrandZ database, Bloomberg and Millward Brown Optimor's own research, they project the brand value forward based on market valuations, the brand's risk profile, and its growth potential. Using these growth inputs, Millward Brown Optimor creates the final metric available from the BrandZ ranking, Brand Momentum, the index of the brand's short-term growth potential. The Brandz ranking, that covers brands from 23 different categories spanning financial servies to technolgy, also includes beer, coffee, soft drinks, and bottled water. Soft Drinks The Pepsi brand (including Pepsi and Diet Pepsi) made it into the top 100, reaching the number 39 slot with a brand value of $15.4 billion, a 15 per cent rise on 2007. While the focus on healthy-eating in many parts of the world is impacting the soft drinks sector, a few über-brands continue to dominate the soft drinks sector. In the next three years the category is forecast to decline by 1 per cent in real terms and to drop by 13 per cent in volume, claims the report. Diet and low-calorie products that account for 40 per cent of the category are seeing better results, stated the Brandz report. In the cola sector, diet ranges outsell the full sugar versions and hold 53 per cent of the market. "Their substantial investment in promotions guarantees continued growth even if at a slower rate than before. Sporting events like the World Cup and the Olympics are a good opportunity for marketing soft drink brands," states the report. Beer Budweiser (including both Bud and Bud Light) reached the number 70 with a brand value of $10.8 billion, a 9 per cent rise on the previous year. According to the ranking, smoking bans, shrinking core markets, and competition from alternative alcoholic beverages weakened Western beer markets. In the US, the preference for imported premium beers and healthier options led to the development of a "luxury imported light" range whose sales were twice as strong as those of regular imported beers. Beer companies turned their focus to emerging markets that continue to drive substantial growth for the category. Domestic beer brands from emerging markets, such as Brazilian brands Skol and Brahma, are also growing. In developed markets, local beer brands faced stagnant volume sales as opposed to imported beers that experienced strong growth. As a whole, brewing companies are consolidating in order to retain market share at home and expand abroad, underlined the report. Coffee The global coffee sector has experienced slow but positive growth in 2007 leading to good results for most brands, claims the report. Innovation, a trend favoring premium ranges, and increased demand for Fairtrade products helped to keep the sector buoyant. According to the report, coffee consumers this year tended to shift away from instant towards ground coffee. Spirits A brand new category for the Brandz report, according to their findings the "premiumization" of spirits brands is driving growth for the category as many companies innovate and extend their brands upwards. Of particular note, the report highlights the fact that the European spirits sector is trading at a higher relative valuation today than in more than a decade. They afford this success to higher earnings and bigger marketing investment by spirits brands. In the US, the spirits sector also delivered growth in the premium segments. Furthermore, profits and sales of spirits brands are accelerating in emerging markets. According to the report, a challenge common to all brands in the spirits category is stricter advertising restrictions, particularly to young consumers. Bottled water Innovation is necessary for growth in this category as the Brandz 100 report claims brand contribution for the category dropped as a result of commoditization and lack of product differentiation. Growth in the bottled water category continues to be driven by a consumer focus on healthy-eating. A slice of this growth has been at the expense of the soft drinks sector. The report adds that this category is under the spotlight for environmental reasons. "The debate focuses on whether a primary resource that is pumped to our homes should be bottled and transported," claims Brandz Top 100 2008.

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