Brand equity linked to company value, study says
The value of a corporate brand is increasingly being recognised as a viable measure of market capitalisation - and none is working harder than the Coca-Cola brand - according to CoreBrand, which has published figures from its Q3 2006 Brand Equity Rankings. CoreBrand's Corporate Branding Index (CBI) has tracked 1,200 US brands across 47 industries for the past 16 years. Each quarter the company publishes a 'Directory of Brand Equity', which provides an indicator of the health and vitality of the top 500 tracked brands.
Top brand sectors Interestingly, 70% of the top 30 corporate brands contributing to a company's overall market capitalisation fall within the Consumer Cyclicals and Consumer Staples sectors. Most of the companies included in this group have leveraged the brand qualities of "familiarity" and "favourability" to build their brand's value. The companies within this group carry brands that contribute to the company's overall market capitalisation by 18% - 20%.
Coca-Cola's corporate brand contributes more than any other tracked company to the company's total market capitalisation. Coca-Cola holds the top position in CoreBrand's list, ranked by brand equity contribution to market capitalisation. This is an indication that the Coca-Cola brand is the hardest working brand tracked by the index, CoreBrand says.
Other leading sectors For Q3 2006 the food industry demonstrated that it knows how to make a brand work. Hershey, Campbell Soup, General Mills, Kellogg, and Del Monte are all within the top 30 brands that contributed significantly to the company's overall market capitalisation by 19% - 20%. The study particularly noted that:
- Hershey Foods, Campbell Soup, and FedEx are significantly smaller companies than Coke, Pepsi, and UPS, yet their brands are working just as hard to create value. Each company's brand is contributing approximately 20% to the total market capitalisation.
- Although FedEx has a market capitalisation that is approximate two-fifths the size of that of UPS, its brand is working just as hard as the UPS brand. Each company's brand contributes 20% to their respective overall market capitalisation.
- Although Wendy's and McDonald's have corporate brands that are working hard for them, Starbucks' brand leads the restaurant and fast food industry with a brand equity contributing a little over 19% to the company's market capitalisation.
According to CoreBrand, brand equity expressed as a percentage of market capitalisation gives an overall idea of the corporate brand's contribution to the company's overall value, and provides a metric for tracking a corporate brand's contribution over time and, perhaps more importantly, against its competitors.