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Financial Times: The increasing importance of brands in a competitive global economy

Sector-by-sector analysis, with full tables
By Andrew Baxter

Published: April 23 2007 02:52 | Last updated: April 23 2007 02:52

The increasing importance of brands in a competitive global economy, and their growing contribution to the value of the companies that own them, is illustrated in the detailed sector rankings produced by Millward Brown Optimor for today’s special report.

As Joanna Seddon, the company’s New York-based executive vice-president, points out, a new product or invention may end up copied by competitors very soon after its introduction, but what remains is the value added to the brand.

Some common themes run through many of the sectors: the ”rise of the East”, for example, is not only fuelling the growth of mainly European luxury brands but is also creating a home for new, indigenous brands to emerge. Across such emerging markets, says Dr Seddon, the brands that are first to become prominent tend to be “infrastructure-related” – that is, energy, banks and telecoms, with other areas such as consumer packaged goods following behind.

Other trends include the importance of the environment: “If your business has any connection with the automotive sector, positioning yourself ahead on environment issues strengthens your brand, and puts you in a good position to conquer new territory and to defend your existing businesses – it reduces your risk,” says Dr Seddon.

There is also the continuing power of ”jumbo brands” such as Wal-Mart and Microsoft – neither of which are necessarily beloved as brands but which score highly with consumers for other reasons; the value of brands in a business-to-business context, which can be just as important as in the business-to-consumer space – as illustrated by companies such as Goldman Sachs and Morgan Stanley; and the maturing of online brands, which need a unique brand and business proposition, says Dr Seddon – ”just being online doesn’t do it any more”.

Healthy living and eating trends are also forcing companies to reinvent themselves, says Dr Seddon, and nowhere more so than in fast food. But the rankings in this sector illustrate that powerful brands can cope with change in different ways, including a counter-intuitive approach. ”If you’ve got a really strong brand and you position yourself very clearly, it doesn’t matter whether you are following the trend of the day or running counter to it,” says Dr Seddon. ”Burger King would be an example, it has deliberately positioned itself as the quintessential traditional (i.e. non-healthy) burger.”

As Peter Walshe, Millward Brown’s global account director, notes, the sector was the fastest growing in terms of brand value last year, with brands that are both distinctive and distinguishing from each other. ”When their backs are against the wall, they turn things around,” he says.

Here are the main points from each of the 14 sectors, with “brand nuggets” and comments from Dr Seddon, Mr Walshe and Paolo Belotti, associate director of Millward Brown Optimor.

Motor fuel

■ BP and Shell lead the trend in repositioning their brands as global energy companies that confront the conflict between energy and environmental needs, and take actions beyond what is expected of an oil company

■ BRIC (Brazil, Russia, India and China) energy companies seem to have strong brands but this is largely due to their historical status as monopolies

■ Supermarket petrol retailers are gaining market share as customers take advantage of loyalty cards and combine various errands in one trip

■ Recent high crude oil prices are reflected in retail prices, but only marginally inform consumers’ purchase behaviour

Brand nuggets – BP: successful repositioning of the brand as innovative, progressive and environmentally responsible has not only improved brand perception but has also enabled additional retail opportunities (“beyond petroleum”); Shell: rebranding improved perception of brand as environmentally friendly; also, sales growth in rebranded stations

Comment – Seddon: “The top two brands happen to be the ones that have taken more of an environmental/corporate social responsibility position. BP, despite all the negative publicity, is still in first place, showing the strength of its brand. Shell’s brand value has grown more, but it did not have the same issues to contend with. Meanwhile the two new brands in the ranking illustrate how, in emerging markets, the first brands to become prominent are ‘infrastructure-related’ – oil, banks or telcos. With Petrochina the value is probably more in the size of the business than the excellence of the brand. Lukoil is a stage further ahead and is beginning to think about brand. It’s expanding quite aggressively outside Russia – there’s even some gas stations in New Jersey.”

For the other 13 sectors go to www.ft.com

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